10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended May 25, 2008
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from       to

Commission File Number 001-01185

GENERAL MILLS, INC.

(Exact name of registrant as specified in its charter)

Delaware	41-0274440
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
Number One General Mills Boulevard Minneapolis, Minnesota (Mail: P.O. Box 1113) (Address of principal executive offices)	55426 (Mail: 55440) (Zip Code)

(763) 764-7600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

	Name of each exchange
Title of each class	on which registered
Common Stock, $.10 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

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 þ     No o

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.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o

Non-accelerated filer  o  (Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o     No þ

Aggregate market value of Common Stock held by non-affiliates of the registrant, based on the closing price of $57.10 per share as reported on the New York Stock Exchange on November 23, 2007 (the last business day of the registrant’s most recently completed second fiscal quarter): $19,085.1 million.

Number of shares of Common Stock outstanding as of June 27, 2008: 336,202,897 (excluding 41,103,767 shares held in the treasury).

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for its 2008 Annual Meeting of Stockholders are incorporated by reference into Part III.

TABLE OF CONTENTS			Page
PART I
	Item 1.	Business		1
	Item 1A.	Risk Factors		6
	Item 1B.	Unresolved Staff Comments		11
	Item 2.	Properties		11
	Item 3.	Legal Proceedings		12
	Item 4.	Submission of Matters to a Vote of Security Holders		12
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		12
	Item 6.	Selected Financial Data		13
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		39
	Item 8.	Financial Statements and Supplementary Data		41
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		78
	Item 9A.	Controls and Procedures		78
	Item 9B.	Other Information		78
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance		79
	Item 11.	Executive Compensation		79
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		79
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		80
	Item 14.	Principal Accounting Fees and Services		80
PART IV
	Item 15.	Exhibits, Financial Statement Schedules		81
	Signatures			84
Fifth Amended and Restated Limited Liability Company Agreement
Computation of Ratio of Earnings to Fixed Charges
List of Subsidiaries
Consent of Independent Registered Public Accounting Firm
Certification of Chief Executive Officer Pursuant to Section 302
Certification of Chief Financial Officer Pursuant to Section 302
Certification of Chief Executive Officer Pursuant to Section 906
Certification of Chief Financial Officer Pursuant to Section 906

PART I

ITEM 1  Business

COMPANY OVERVIEW

General Mills, Inc. is a leading global manufacturer and marketer of branded consumer foods sold through retail stores. We are also a leading supplier of branded and unbranded food products to the foodservice and commercial baking industries. We manufacture our products in 16 countries and market them in more than 100 countries. Our joint ventures manufacture and market products in more than 130 countries and republics worldwide.

General Mills, Inc. was incorporated in Delaware in 1928. The terms “General Mills,” “Company,” “registrant,” “we,” “us,” and “our” mean General Mills, Inc. and all subsidiaries included in the Consolidated Financial Statements in Item 8 of this report unless the context indicates otherwise.

Certain terms used throughout this report are defined in a glossary in Item 8 of this report.

PRINCIPAL PRODUCTS

Our major product categories in the United States are ready-to-eat cereals, refrigerated yogurt, ready-to-serve soup, dry dinners, shelf stable and frozen vegetables, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza and pizza snacks, grain, fruit and savory snacks, microwave popcorn, and a wide variety of organic products including soup, granola bars, and cereal.

In Canada, our major product categories are ready-to-eat cereals, shelf stable and frozen vegetables, dry dinners, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza snacks, and grain, fruit and savory snacks.

In markets outside the United States and Canada, our major product categories include super-premium ice cream and frozen desserts, grain snacks, shelf stable and frozen vegetables, refrigerated and frozen dough products, and dry dinners.

TRADEMARKS AND PATENTS

Our products are marketed under trademarks and service marks that are owned by or licensed to us. The most significant trademarks and service marks used in our businesses are set forth in italics in this report. Some of the important trademarks used in our global operations include:

• Ready-to-eat cereals	Cheerios, Wheaties, Lucky Charms, Total, Trix, Golden Grahams, Chex, Kix, Fiber One, Reese’s Puffs, Cocoa Puffs, Nature Valley, Cookie Crisp, Cinnamon Toast Crunch, Clusters, Oatmeal Crisp, and Basic 4
• Refrigerated yogurt	Yoplait, Trix, Yoplait Kids, Go-GURT, Fiber One, Yo-Plus, Yoplait Whips!, and Colombo
• Refrigerated and frozen dough products	Pillsbury, the Pillsbury Doughboy character, Grands!, Golden Layers, Big Deluxe Classics, Toaster Strudel, Toaster Scrambles, Jus-Rol, Forno de Minas, Latina, Wanchai Ferry, V.Pearl, La Salteña, and Frescarini
• Dry dinners and shelf stable and frozen vegetable products	Betty Crocker, Hamburger Helper, Tuna Helper, Chicken Helper, Old El Paso, Green Giant, Potato Buds, Suddenly Salad, Bac*O’s, Betty Crocker Complete Meals, Valley Selections, Simply Steam, Wanchai Ferry, and Diablitos
• Grain, fruit, and savory snacks	Nature Valley, Fiber One, Betty Crocker, Fruit Roll-Ups, Fruit By The Foot, Gushers, Chex Mix, Gardetto’s, Bugles, and Lärabar
• Dessert and baking mixes	Betty Crocker, SuperMoist, Warm Delights, Bisquick, Gold Medal, and Creamy Deluxe
• Ready-to-serve soup	Progresso
• Ice cream and frozen desserts	Häagen-Dazs
• Frozen pizza and pizza snacks	Totino’s, Jeno’s, Pizza Rolls, Pillsbury Pizza Pops, and Pillsbury Pizza Minis
• Microwave popcorn	Pop•Secret
• Organic products	Cascadian Farm and Muir Glen

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Trademarks are vital to our businesses. To protect our ownership and rights, we register our trademarks with the Patent and Trademark Office in the United States, and we file similar registrations in foreign jurisdictions. Trademark registrations in the United States are generally for a term of 10 years, renewable every 10 years as long as the trademark is used in the regular course of business.

Some of our products are marketed under or in combination with trademarks that have been licensed from others, including:

• Yoplait for yogurt in the United States;

• Dora the Explorer, Blue’s Clues, and Diego for yogurt, Dora the Explorer for cereal, and Dora the Explorer, Diego and SpongeBob SquarePants for vegetables;

• Curves for snack bars, popcorn, and cereal;

• Caribou Coffee and Second Cup for snack bars;

• Reese’s Puffs for cereal;

• Hershey’s chocolate for a variety of products;

• Weight Watchers as an endorsement for soup;

• Best Life Diet for a variety of products;

• Macaroni Grill and Mario Batali for dry dinners;

• Sunkist for baking products and fruit snacks;

• Cinnabon for refrigerated dough, frozen pastries and baking products;

• Bailey’s for super-premium ice cream; and

• a variety of characters and brands for fruit snacks, including Tonka, My Little Pony, Transformers, Animal Planet, Care Bears, Teenage Mutant Ninja Turtles, Polly Pocket, Spider-Man, and various Warner Bros. characters.

We license all of our cereal trademarks to Cereal Partners Worldwide (CPW), our joint venture with Nestlé S.A. (Nestlé). Nestlé similarly licenses certain of its trademarks to CPW, including the Nestlé and Uncle Tobys trademarks. We also license our Green Giant trademark to a third party for use in connection with its sale of fresh produce in the United States. We own the Häagen-Dazs trademark and have the right to use the trademark outside of the United States and Canada. Nestlé has an exclusive royalty-free license to use the Häagen-Dazs trademark in the United States and Canada on ice cream and other frozen dessert products. We also license this trademark to our joint ventures in Japan and Korea. The J. M. Smucker Company holds an exclusive royalty-free license to use the Pillsbury brand and the Pillsbury Doughboy character in the dessert mix and baking mix categories in the United States and under limited circumstances in Canada and Mexico.

Given our focus on developing and marketing innovative, proprietary products, we consider the collective rights under our various patents, which expire from time to time, a valuable asset, but we do not believe that our businesses are materially dependent upon any single patent or group of related patents.

RAW MATERIALS AND SUPPLIES

The principal raw materials that we use are grains (wheat, oats, and corn), sugar, dairy products, vegetables, fruits, meats, vegetable oils, and other agricultural products. We also use substantial quantities of carton board, corrugated and plastic packaging materials, operating supplies, and energy. Most of these inputs for our domestic and Canadian operations are purchased from suppliers in the United States. In our international operations, inputs that are not locally available in adequate supply may be imported from other countries. The cost of these inputs may fluctuate widely due to government policy and regulation, weather conditions, or other unforeseen circumstances. We have some long-term fixed price contracts, but the majority of our inputs are purchased on the open market. We believe that we will be able to obtain an adequate supply of needed inputs. Occasionally and where possible, we make advance purchases of items significant to our business in order to ensure continuity of operations. Our objective is to procure materials meeting both our quality standards and our production needs at price levels that allow a targeted profit margin. Since these inputs generally represent the largest variable cost in manufacturing our products, to the extent possible, we often hedge the risk associated with adverse price movements for some inputs using a variety of risk management strategies. We also have a grain merchandising operation that provides us efficient access to, and more informed knowledge of, various commodity markets, principally wheat and oats. This operation holds physical inventories that are carried at fair market value and uses derivatives to hedge its net inventory position and minimize its market exposures.

RESEARCH AND DEVELOPMENT

Our principal research and development facilities are located in Minneapolis, Minnesota. Our research and development resources are focused on new product development, product improvement, process design and improvement, packaging, and

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exploratory research in new business areas. Research and development expenditures were $204.7 million in fiscal 2008, $191.1 million in fiscal 2007, and $178.4 million in fiscal 2006.

FINANCIAL INFORMATION ABOUT SEGMENTS

We review the financial results of our business under three operating segments – U.S. Retail, International, and Bakeries and Foodservice. See Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in Item 7 of this report for a description of our segments. For financial information by segment and geographic area, see Note 16 to the Consolidated Financial Statements in Item 8 of this report.

JOINT VENTURES

In addition to our consolidated operations, we participate in several joint ventures, including CPW and Häagen-Dazs ice cream joint ventures in Japan and Korea.

CUSTOMERS

Our primary customers are grocery stores, mass merchandisers, membership stores, natural food chains, drug, dollar and discount chains, commercial and noncommercial foodservice distributors and operators, restaurants, and convenience stores. We generally sell to these customers through our direct sales force. We use broker and distribution arrangements for certain products or to serve certain types of customers.

During fiscal 2008, Wal-Mart Stores, Inc. and its affiliates (Wal-Mart), accounted for 19 percent of our consolidated net sales and 27 percent of our net sales in the U.S. Retail segment. No other customer accounted for 10 percent or more of our consolidated net sales. Wal-Mart also represented 5 percent of our net sales in the International segment and 5 percent of our net sales in the Bakeries and Foodservice segment. As of May 25, 2008, Wal-Mart accounted for 23 percent of our U.S. Retail receivables, 4 percent of our International receivables, and 2 percent of our Bakeries and Foodservice receivables. The 5 largest customers in our U.S. Retail segment accounted for 57 percent of its fiscal 2008 net sales, the 5 largest customers in our International segment accounted for 26 percent of its fiscal 2008 net sales, and the 5 largest customers in our Bakeries and Foodservice segment accounted for 39 percent of its fiscal 2008 net sales. For further information on our customer credit and product return practices please refer to Note 2 to the Consolidated Financial Statements in Item 8 of this report.

COMPETITION

The consumer foods industry is highly competitive, with numerous manufacturers of varying sizes in the United States and throughout the world. The food categories in which we participate are very competitive. Our principal competitors in these categories all have substantial financial, marketing, and other resources. Competition in our product categories is based on product innovation, product quality, price, brand recognition and loyalty, effectiveness of marketing, promotional activity, and the ability to identify and satisfy consumer preferences. Our principal strategies for competing in each of our segments include effective customer relationships, superior product quality, innovative advertising, product promotion, product innovation, an efficient supply chain, and price. In most product categories, we compete not only with other widely advertised branded products, but also with generic and private label products that are generally sold at lower prices. Internationally, we compete with both multi-national and local manufacturers, and each country includes a unique group of competitors.

SEASONALITY

In general, demand for our products is evenly balanced throughout the year. However, within our U.S. Retail segment demand for refrigerated dough, frozen baked goods, and baking products is stronger in the fourth calendar quarter. Demand for Progresso soup and Green Giant canned and frozen vegetables is higher during the fall and winter months. Internationally, demand for Häagen-Dazs ice cream is higher during the summer months and demand for baking mix and dough products increases during winter months. Due to the offsetting impact of these demand trends, as well as the different seasons in the northern and southern hemispheres, our International segment net sales are generally evenly balanced throughout the year.

BACKLOG

Orders are generally filled within a few days of receipt and are subject to cancellation at any time prior to shipment. The backlog of any unfilled orders as of May 25, 2008, was not material.

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WORKING CAPITAL

A description of our working capital is included in the Liquidity section of MD&A in Item 7 of this report. Our product return practices are described in Note 2 to the Consolidated Financial Statements in Item 8 of this report.

EMPLOYEES

As of May 25, 2008, we had approximately 29,500 full- and part-time employees.

FOOD QUALITY AND SAFETY REGULATION

The manufacture and sale of consumer food products is highly regulated. In the United States, our activities are subject to regulation by various federal government agencies, including the Food and Drug Administration, Department of Agriculture, Federal Trade Commission, Department of Commerce, and Environmental Protection Agency, as well as various state and local agencies. Our business is also regulated by similar agencies outside of the United States.

ENVIRONMENTAL MATTERS

As of May 25, 2008, we were involved with four active cleanup sites associated with the alleged or threatened release of hazardous substances or wastes located in: Minneapolis, Minnesota; Sauget, Illinois; Moonachie, New Jersey; and Doolittle, Missouri. These matters involve several different actions, including administrative proceedings commenced by regulatory agencies and demand letters by regulatory agencies and private parties.

We recognize that our potential exposure with respect to any of these sites may be joint and several, but have concluded that our probable aggregate exposure is not material to our consolidated financial position or cash flows from operations. This conclusion is based upon, among other things: our payments and accruals with respect to each site; the number, ranking and financial strength of other potentially responsible parties; 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 our historical experience in negotiating and settling disputes with respect to similar sites.

Our operations are subject to the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation, and Liability Act, and the Federal Insecticide, Fungicide, and Rodenticide Act, and all similar state, local, and foreign environmental laws and regulations applicable to the jurisdictions in which we operate.

Based on current facts and circumstances, we believe that neither the results of our environmental proceedings nor our compliance in general with environmental laws or regulations will have a material adverse effect upon our capital expenditures, earnings, or competitive position.

EXECUTIVE OFFICERS

The section below provides information regarding our executive officers as of July 4, 2008:

Y. Marc Belton, age 49, is Executive Vice President, Worldwide Health, Brand and New Business Development. Mr. Belton joined General Mills in 1983 and has held various positions, including President of Snacks Unlimited from 1994 to 1997, New Ventures from 1997 to 1999, and Big G cereals from 1999 to 2002. He had oversight responsibility for Yoplait, General Mills Canada, and New Business Development from 2002 to May 2005, and has had oversight responsibility for Worldwide Health, Brand and New Business Development since May 2005. Mr. Belton was elected a Vice President of General Mills in 1991, a Senior Vice President in 1994, and an Executive Vice President in June 2006. He is a director of Navistar International Corporation.

Randy G. Darcy, age 57, is Executive Vice President, Worldwide Operations and Technology. Mr. Darcy joined General Mills in 1987, was named Vice President, Director of Manufacturing, Technology and Operations in 1989, served as Senior Vice President, Supply Chain from 1994 to 2003, and as Senior Vice President, Chief Technical Officer with responsibilities for Supply Chain, Research and Development, and Quality and Regulatory Operations from 2003 to 2005. He was named to his present position in May 2005. Mr. Darcy was employed by The Procter & Gamble Company from 1973 to 1987, serving in a variety of management positions. Mr. Darcy is retiring effective August 1, 2008.

Ian R. Friendly, age 48, is Executive Vice President and Chief Operating Officer, U.S. Retail. Mr. Friendly joined General Mills in 1983 and held various positions before becoming Vice President of CPW in 1994, President of Yoplait in 1998, Senior Vice

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President of General Mills in 2000, and President of the Big G cereals division in 2002. In May 2004, he was named Chief Executive Officer of CPW. Mr. Friendly was named to his present position in June 2006.

Richard O. Lund, age 58, is Vice President, Controller. Mr. Lund joined General Mills in 1981 and held various positions before becoming Vice President, Director of Financial Operations for the Gold Medal division in 1994. He was appointed Vice President, Corporate Financial Operations in 2000 and was elected to his present position in December 2007. Prior to joining General Mills, Mr. Lund spent 9 years with Coopers & Lybrand (now PricewaterhouseCoopers LLP).

Donal L. Mulligan, age 47, is Executive Vice President, Chief Financial Officer. Mr. Mulligan joined General Mills in 2001 from The Pillsbury Company. He served as Vice President, Financial Operations for our International division until 2004, when he was named Vice President, Financial Operations for Operations and Technology. Mr. Mulligan was appointed Treasurer of General Mills in January 2006, Senior Vice President, Financial Operations in July 2007, and was elected to his present position in August 2007. From 1987 to 1998, he held several international positions at PepsiCo, Inc. and YUM! Brands, Inc.

Christopher D. O’Leary, age 49, is Executive Vice President and Chief Operating Officer, International. Mr. O’Leary joined General Mills in 1997 as Vice President, Corporate Growth. He was elected a Senior Vice President in 1999 and President of the Meals division in 2001. Mr. O’Leary was named to his present position in June 2006. 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. Mr. O’Leary is a director of Telephone & Data Systems, Inc.

Roderick A. Palmore, age 56, is Executive Vice President, General Counsel, Chief Compliance and Risk Management Officer and Secretary. Mr. Palmore joined General Mills in this position in February 2008 from the Sara Lee Corporation where he spent 12 years, last serving as Executive Vice President and General Counsel.

Michael A. Peel, age 58, is Executive Vice President, Human Resources and Administrative Services. Mr. Peel joined General Mills as Senior Vice President, Human Resources and Corporate Services in 1991 from PepsiCo, Inc. where he spent 14 years, last serving as Senior Vice President, Human Resources, responsible for PepsiCo Worldwide Foods. He was named to his present position in December 2007. Mr. Peel is a director of Select Comfort Corporation.

Kendall J. Powell, age 54, was elected Chief Executive Officer of General Mills in September 2007 and Chairman in May 2008. Mr. Powell joined General Mills in 1979 and progressed through a variety of positions in the company before becoming a Vice President in 1990. He became President of Yoplait USA in 1996, President of the Big G cereal division in 1997, and Senior Vice President of General Mills in 1998. From 1999 to 2004, he served as Chief Executive Officer of CPW in Switzerland. He returned from CPW in 2004 and was elected Executive Vice President. In 2006, Mr. Powell was elected President and Chief Operating Officer of General Mills with overall global operating responsibility for the company. He is a director of Medtronic, Inc.

Jeffrey J. Rotsch, age 57, is Executive Vice President, Worldwide Sales and Channel Development. Mr. Rotsch joined General Mills in 1974 and served as the President of several divisions, including Betty Crocker and Big G cereals. He served as Senior Vice President from 1993 to 2005 and as President, Consumer Foods Sales from 1997 to 2005. Mr. Rotsch was named to his present position in May 2005.

Christina L. Shea, age 55, is Senior Vice President, External Relations and President, General Mills Foundation. Ms. Shea joined General Mills in 1977 and has held various positions in the Big G cereals, Yoplait, Gold Medal, Snacks, and Betty Crocker divisions. From 1994 to 1999, she was President of the Betty Crocker division and was named a Senior Vice President of General Mills in 1998. Ms. Shea became President of General Mills Community Action and the General Mills Foundation in 2002 and was named to her current position in May 2005.

Kenneth L. Thome, age 60, is Senior Vice President, Deputy Chief Financial Officer. Mr. Thome joined General Mills in 1969 and was named Vice President, Controller for the Convenience and International Foods Group in 1985. He became Vice President, Controller for International Foods in 1989, Vice President, Director of Information Systems in 1991, Senior Vice President, Financial Operations in 1993 and was elected to his present position in August 2007. Mr. Thome is retiring effective August 1, 2008.

AVAILABLE INFORMATION

Availability of Reports We are a reporting company under the Securities Exchange Act of 1934, as amended (1934 Act), and file

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reports, proxy statements, and other information with the Securities and Exchange Commission (SEC). The public may read and copy any of our filings at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at (800) 732-0330. Because we submit filings to the SEC electronically, you may access this information at the SEC’s internet website: www.sec.gov. This site contains reports, proxies, and information statements and other information regarding issuers that file electronically with the SEC.

Website Access Our website is www.generalmills.com.  We make available, free of charge in the “Investors” portion of this website, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the 1934 Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Reports of beneficial ownership filed pursuant to Section 16(a) of the 1934 Act are also available on our website.

ITEM 1A   Risk Factors

Our business is subject to various risks and uncertainties. Any of the risks described below could materially adversely affect our business, financial condition, and results of operations.

The food categories in which we participate are very competitive, and if we are not able to compete effectively, our results of operations could be adversely affected.

The food categories in which we participate are very competitive. Our principal competitors in these categories all have substantial financial, marketing, and other resources. In most product categories, we compete not only with other widely advertised branded products, but also with generic and private label products that are generally sold at lower prices. Competition in our product categories is based on product innovation, product quality, price, brand recognition and loyalty, effectiveness of marketing, promotional activity, and the ability to identify and satisfy consumer preferences. If our large competitors were to decrease their pricing or were to increase their promotional spending, we could choose to do the same, which could adversely affect our margins and profitability. If we did not do the same, our revenues and market share could be adversely affected. Our market share and revenue growth could also be adversely impacted if we are not successful in introducing innovative products in response to changing consumer demands or by new product introductions of our competitors. If we are unable to build and sustain brand equity by offering recognizably superior product quality, we may be unable to maintain premium pricing over generic and private label products.

We may be unable to maintain our profit margins in the face of a consolidating retail environment.

The 5 largest customers in our U.S. Retail segment accounted for 57 percent of its fiscal 2008 net sales, the 5 largest customers in our International segment accounted for 26 percent of its net sales for fiscal 2008, and the 5 largest customers in our Bakeries and Foodservice segment accounted for 39 percent of its net sales for fiscal 2008. The loss of any large customer for an extended length of time could adversely affect our sales and profits. There has been significant worldwide consolidation in the grocery industry in recent years and we believe that this trend is likely to continue. As the retail grocery trade continues to consolidate and mass market retailers become larger, our large retail customers may seek to use their position to improve their profitability through improved efficiency, lower pricing, increased emphasis on generic, private label and other economy brands, and increased promotional programs. If we are unable to use our scale, marketing expertise, product innovation, knowledge of consumers’ needs, and category leadership positions to respond to these demands, our profitability or volume growth could be negatively impacted.

Price changes for the commodities we depend on for raw materials, packaging, and energy may adversely affect our profitability.

The principal raw materials that we use are commodities that experience price volatility caused by external conditions such as weather and product scarcity, limited sources of supply,

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commodity market fluctuations, currency fluctuations, and changes in governmental agricultural and energy programs. Commodity price changes may result in unexpected increases in raw material, packaging, and energy costs. If we are unable to increase productivity to offset these increased costs or increase our prices, we may experience reduced margins and profitability. We do not fully hedge against changes in commodity prices, and the hedging procedures that we do use may not always work as we intend.

Volatility in the market value of derivatives we use to hedge exposures to fluctuations in commodity prices will cause volatility in our gross margins and net earnings.

We utilize derivatives to hedge price risk for some of our principal ingredient and energy costs, including grains (oats, wheat, and corn), oils (principally soybean), non-fat dry milk, natural gas, and diesel fuel. Changes in the values of these derivatives are recorded in earnings currently, resulting in volatility in both gross margin and net earnings. These gains and losses are reported in cost of sales in our Consolidated Statements of Earnings and in unallocated corporate items in our segment operating results until we utilize the underlying input in our manufacturing process, at which time the gains and losses are reclassified to segment operating profit. We also record our grain inventories at fair value. We may experience volatile earnings as a result of these accounting treatments.

If we are not efficient in our production, our profitability could suffer as a result of the highly competitive environment in which we operate.

Our future success and earnings growth depends in part on our ability to be efficient in the production and manufacture of our products in highly competitive markets. Gaining additional efficiencies may become more difficult over time. Our failure to reduce costs through productivity gains or by eliminating redundant costs resulting from acquisitions could adversely affect our profitability and weaken our competitive position. Many productivity initiatives involve complex reorganization of manufacturing facilities and production lines. Such manufacturing realignment may result in the interruption of production, which may negatively impact product volume and margins.

Disruption of our supply chain could adversely affect our business.

Our ability to make, move, and sell products is critical to our success. Damage or disruption to raw material supplies or our manufacturing or distribution capabilities due to weather, natural disaster, fire, terrorism, pandemic, strikes, import restrictions, or other factors could impair our ability to manufacture or sell our products. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, particularly when a product is sourced from a single supplier or location, could adversely affect our business and results of operations, as well as require additional resources to restore our supply chain.

Concerns with the safety and quality of food products could cause consumers to avoid certain food products or ingredients.

We could be adversely affected if consumers in our principal markets lose confidence in the safety and quality of certain food products or ingredients. Adverse publicity about these types of concerns, whether or not valid, may discourage consumers from buying our products or cause production and delivery disruptions.

If our food products become adulterated, misbranded, or mislabeled, we might need to recall those items and may experience product liability claims if consumers are injured.

We may need to recall some of our products if they become adulterated, misbranded, or mislabeled. A widespread product recall could result in significant losses due to the costs of a recall, the destruction of product inventory, and lost sales due to the unavailability of product for a period of time. We could also suffer losses from a significant product liability judgment against us. A significant product recall or product liability case could also result in adverse publicity, damage to our reputation, and a loss of consumer confidence in our food products, which could have a material adverse effect on our business results and the value of our brands.

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We may be unable to anticipate changes in consumer preferences and trends, which may result in decreased demand for our products.

Our success depends in part on our ability to anticipate the tastes and eating habits of consumers and to offer products that appeal to their preferences. Consumer preferences change from time to time and can be affected by a number of different trends. Our failure to anticipate, identify or react to these changes and trends, or to introduce new and improved products on a timely basis, could result in reduced demand for our products, which would in turn cause our revenues and profitability to suffer. Similarly, demand for our products could be affected by consumer concerns regarding the health effects of ingredients such as trans fats, sugar, processed wheat, or other product ingredients or attributes.

We may be unable to grow our market share or add products that are in faster growing and more profitable categories.

The food industry’s growth potential is constrained by population growth. Our success depends in part on our ability to grow our business faster than populations are growing in the markets that we serve. One way to achieve that growth is to enhance our portfolio by adding innovative new products in faster growing and more profitable categories. Our future results will also depend on our ability to increase market share in our existing product categories. If we do not succeed in developing innovative products for new and existing categories, our growth may slow, which could adversely affect our profitability.

Customer demand for our products may be limited in future periods as a result of increased purchases in response to promotional activity.

Our unit volume in the last week of each quarter can be higher than the average for the preceding weeks of the quarter in certain circumstances. In comparison to the average daily shipments in the first 12 weeks of a quarter, the final week of each quarter may have as much as two to four days’ worth of incremental shipments (based on a five-day week), reflecting increased promotional activity at the end of the quarter. This increased activity includes promotions to assure that our customers have sufficient inventory on hand to support major marketing events or increased seasonal demand early in the next quarter, as well as promotions intended to help achieve interim unit volume targets. If, due to quarter-end promotions or other reasons, our customers purchase more product in any reporting period than end-consumer demand will require in future periods, our sales level in future reporting periods could be adversely affected.

Economic downturns could limit consumer demand for our products.

The willingness of consumers to purchase our products depends in part on local economic conditions. In periods of economic uncertainty, consumers may purchase more generic, private label, and other economy brands and may forego certain purchases altogether. In those circumstances, we could experience a reduction in sales of higher margin products or a shift in our product mix to lower margin offerings. In addition, as a result of economic conditions or competitive actions, we may be unable to raise our prices sufficiently to protect margins. Consumers may also reduce the amount of food that they consume away from home at customers that purchase products from our Bakeries and Foodservice segment. Any of these events could have an adverse effect on our results of operations.

Our international operations are subject to political and economic risks.

In fiscal 2008, 19 percent of our consolidated net sales was generated outside of the United States. We are accordingly subject to a number of risks relating to doing business internationally, any of which could significantly harm our business. These risks include:

• political and economic instability;

• exchange controls and currency exchange rates;

• foreign tax treaties and policies; and

• restriction on the transfer of funds to and from foreign countries.

Our financial performance on a U.S. dollar denominated basis is subject to fluctuations in currency exchange rates. These fluctuations could cause material variations in our results of operations. Our principal exposures are to the Australian dollar, British pound

8

sterling, Canadian dollar, Chinese renminbi, euro, Japanese yen, and Mexican peso. From time to time, we enter into agreements that are intended to reduce the effects of our exposure to currency fluctuations, but these agreements may not be effective in significantly reducing our exposure.

New regulations or regulatory-based claims could adversely affect our business.

Food production and marketing are highly regulated by a variety of federal, state, local, and foreign agencies. Changes in laws or regulations that impose additional regulatory requirements on us could increase our cost of doing business or restrict our actions, causing our results of operations to be adversely affected. In addition, we advertise our products and could be the target of claims relating to alleged false or deceptive advertising under federal, state, and foreign laws and regulations and of new laws or regulations restricting our right to advertise products.

We have a substantial amount of indebtedness, which could limit financing and other options and in some cases adversely affect our ability to pay dividends.

As of May 25, 2008, we had total debt and minority interests of $7.2 billion. The agreements under which we have issued indebtedness do not prevent us from incurring additional unsecured indebtedness in the future. Our level of indebtedness may limit our:

• ability to obtain additional financing for working capital, capital expenditures, or general corporate purposes, particularly if the ratings assigned to our debt securities by rating organizations were revised downward; and

• flexibility to adjust to changing business and market conditions and may make us more vulnerable to a downturn in general economic conditions.

There are various financial covenants and other restrictions in our debt instruments and minority interests. If we fail to comply with any of these requirements, the related indebtedness (and other unrelated indebtedness) could become due and payable prior to its stated maturity, and our ability to obtain additional or alternative financing may also be adversely affected.

Our ability to make scheduled payments on or to refinance our debt and other obligations will depend on our operating and financial performance, which in turn is subject to prevailing economic conditions and to financial, business, and other factors beyond our control.

Volatility in the securities markets, interest rates, and other factors or changes in our employee base could substantially increase our defined benefit pension, other postretirement, and postemployment benefit costs.

We sponsor a number of defined benefit plans for employees in the United States, Canada, and various foreign locations, including defined benefit pension, retiree health and welfare, severance, directors’ life, and other postemployment benefit plans. Our major defined benefit pension plans are funded with trust assets invested in a globally diversified portfolio of securities and other investments. Changes in interest rates, mortality rates, health care costs, early retirement rates, investment returns, and the market value of plan assets can affect the funded status of our defined benefit pension, other postretirement, and postemployment benefit plans and cause volatility in the net periodic benefit cost and future funding requirements of the plans. Although the aggregate fair value of our defined benefit pension, other postretirement, and postemployment benefit plan assets exceeded the aggregate defined benefit pension, other postretirement, and postemployment benefit obligations as of May 25, 2008, a significant increase in our obligations or future funding requirements could have a negative impact on our results of operations and cash flows from operations.

Our business operations could be disrupted if our information technology systems fail to perform adequately.

The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage our business data, communications, supply chain, order entry and fulfillment, and other business processes. The failure of our information technology systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies, and the loss of sales and customers, causing our business and results of operations to suffer. In addition, our information technology systems may be vulnerable to damage or interruption from

9

circumstances beyond our control, including fire, natural disasters, systems failures, security breaches, and viruses. Any such damage or interruption could have a material adverse effect on our business.

If other potentially responsible parties (PRPs) are unable to contribute to remediation costs at certain contaminated sites, our costs for remediation could be material.

We are subject to various federal, state, local, and foreign environmental and health and safety laws and regulations. Under certain of these laws, namely the Comprehensive Environmental Response, Compensation, and Liability Act and its state counterparts, liability for investigation and remediation of hazardous substance contamination at currently or formerly owned or operated facilities or at third-party waste disposal sites is joint and several. We currently are involved in active remediation efforts at certain sites where we have been named a PRP. If other PRPs at these sites are unable to contribute to remediation costs, we could be held responsible for their portion of the remediation costs, and those costs could be material. We cannot assure that our costs in relation to these environmental matters or compliance with environmental laws in general will not exceed our reserves or otherwise have an adverse effect on our business and results of operations.

A change in the assumptions used to value our reporting units or our indefinite-lived intangible assets could negatively affect our consolidated results of operations and net worth.

Goodwill for each of our reporting units is tested for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. We compare the carrying value of the net assets of a reporting unit, including goodwill, to the fair value of the unit. If the fair value of the net assets of the reporting unit is less than the net assets including goodwill, impairment has occurred. Our estimates of fair value are determined based on a discounted cash flow model. Growth rates for sales and profits are determined using inputs from our annual long-range planning process. We also make estimates of discount rates, perpetuity growth assumptions, market comparables, and other factors. While we currently believe that our goodwill is not impaired, materially different assumptions regarding the future performance of our businesses could result in significant impairment losses.

We evaluate the useful lives of our intangible assets, primarily intangible assets associated with the Pillsbury, Totino’s, Progresso, Green Giant, Old El Paso, Häagen-Dazs, and Uncle Tobys brands, to determine if they are finite or indefinite-lived. Reaching a determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, known technological advances, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets.

Our indefinite-lived intangible assets are also tested for impairment annually and whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Our estimate of the fair value of the brands is based on a discounted cash flow model using inputs including: projected revenues from our annual long-range plan; assumed royalty rates which could be payable if we did not own the brands; and a discount rate. While we currently believe that the fair value of each indefinite-lived intangible asset exceeds its carrying value and that those intangibles so classified will contribute indefinitely to our cash flows, materially different assumptions regarding the future performance of our businesses could result in significant impairment losses and amortization expense.

Resolution of uncertain income tax matters could adversely affect our results of operations or cash flows from operations.

Our consolidated effective income tax rate is influenced by tax planning opportunities available to us in the various jurisdictions in which we operate. Management judgment is involved in determining our effective tax rate and in evaluating the ultimate resolution of any uncertain tax positions. We are periodically under examination or engaged in a tax controversy. We establish reserves in a variety of taxing jurisdictions when, despite our belief that our tax return positions are supportable, we believe that certain positions may be challenged and may need to be

10

revised. We adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit. Our effective income tax rate includes the impact of reserve provisions and changes to those reserves. We also record interest on these reserves at the appropriate statutory interest rate. These interest charges are also included in our effective tax rate. Reserve adjustments for individual issues have generally not exceeded 1 percent of earnings before income taxes and after-tax earnings from joint ventures annually.

During fiscal 2008, the Internal Revenue Service (IRS) concluded field examinations for our 2002 and 2003 federal tax years. These examinations included review of our determinations of cost basis, capital losses, and the depreciation of tangible assets and amortization of intangible assets arising from our acquisition of Pillsbury and the sale of minority interests in our General Mills Cereals, LLC subsidiary. The IRS has proposed adjustments related to a majority of the tax benefits associated with these items. We believe we have meritorious defenses and intend to vigorously defend our positions. Our potential liability for this matter is significant and, notwithstanding our reserves against this potential liability, an unfavorable resolution could have a material adverse impact on our results of operations or cash flows from operations.

ITEM 1B   Unresolved Staff Comments

None.

ITEM 2   Properties

We own our principal executive offices and main research facilities, which are located in the Minneapolis, Minnesota metropolitan area. We operate numerous manufacturing facilities and maintain many sales and administrative offices and warehouses, mainly in the United States. Other facilities are operated in Canada and elsewhere around the world.

As of May 25, 2008, we operated 79 facilities for the production of a wide variety of food products. Of these facilities, 49 are located in the United States, 12 in the Asia/Pacific region (8 of which are leased), 5 in Canada (2 of which are leased), 7 in Europe (3 of which are leased), 5 in Latin America and Mexico, and 1 in South Africa. The following is a list of the locations of our principal production facilities, which primarily support the segment noted:

U.S. Retail

• Carson, California	• Kansas City, Missouri
• Lodi, California	• Great Falls, Montana
• Covington, Georgia	• Vineland, New Jersey
• Belvidere, Illinois	• Albuquerque, New Mexico
• West Chicago, Illinois	• Buffalo, New York
• New Albany, Indiana	• Wellston, Ohio
• Carlisle, Iowa	• Murfreesboro, Tennessee
• Cedar Rapids, Iowa	• Milwaukee, Wisconsin
• Reed City, Michigan	• Irapuato, Mexico
• Hannibal, Missouri

International	Bakeries and Foodservice
• Rooty Hill, Australia	• Chanhassen, Minnesota
• Guangzhou, China	• Joplin, Missouri
• Arras, France	• Martel, Ohio
• San Adrian, Spain
• Berwick, United Kingdom
• Cagua, Venezuela

We also own or lease warehouse space totaling 13 million square feet, of which 10 million square feet are leased, that primarily supports our U.S. Retail segment. We own and lease a number of sales and administrative offices in the United States, Canada, and elsewhere around the world, totaling 3 million square feet (600,000 square feet of which are leased).

As part of our Häagen-Dazs business in our International segment, we operate 185 and franchise 451 branded ice cream parlors in various countries around the world, all outside of the United States and Canada. All shops we operate are leased, totaling 180,000 square feet.

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ITEM 3   Legal Proceedings

We are the subject of various pending or threatened legal actions in the ordinary course of our business. All such matters are subject to many uncertainties and outcomes that are not predictable with assurance. In our opinion, there were no claims or litigation pending as of May 25, 2008, that were reasonably likely to have a material adverse effect on our consolidated financial position or results of operations. See the information contained under the section entitled “Environmental Matters” in Item 1 of this report for a discussion of environmental matters in which we are involved.

ITEM 4   Submission of Matters to a Vote of Security Holders

None.

PART II

ITEM 5   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the New York Stock Exchange. On June 27, 2008, there were approximately 32,700 record holders of our common stock. Information regarding the market prices for our common stock and dividend payments for the two most recent fiscal years is set forth in Note 18 to the Consolidated Financial Statements in Item 8 of this report.

On May 20, 2008, we entered into an Agreement and Plan of Merger to acquire Humm Foods, Inc. The transaction closed on June 11, 2008. At the closing, we issued 892,535 shares of our common stock to the shareholders of Humm Foods, Inc. as consideration for the merger. Based on representations and warranties made by the selling shareholders, we issued our common stock in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2).

The following table sets forth information with respect to shares of our common stock that we purchased during the fiscal quarter ended May 25, 2008:

Issuer Purchases of Equity Securities

					Total Number of
					Shares Purchased as		Maximum Number of
			Average		Part of a Publicly		Shares that may yet
	Total Number of		Price Paid		Announced		be Purchased Under
Period	Shares Purchased(a)		Per Share		Program(b)		the Program(b)
Feb. 25, 2008- Mar. 30, 2008		35,158	$	56.97		35,158		42,833,451
Mar. 31, 2008- Apr. 27, 2008		15,762		60.76		15,762		42,817,689
Apr. 28, 2008- May 25, 2008		16,697		61.58		16,697		42,800,992
Total		67,617	$	58.99		67,617		42,800,992

(a)

The total number of shares purchased includes: (i) 64,972 shares purchased from the ESOP fund of our 401(k) savings plan; and (ii) 2,645 shares of restricted stock withheld for the payment of withholding taxes upon vesting of restricted stock. These amounts include 2,185 shares acquired at an average price of $61.09 for which settlement occurred after May 25, 2008.

(b)

On December 11, 2006, our Board of Directors approved and we announced an authorization for the repurchase of up to 75 million shares of our common stock. Purchases can be made in the open market or in privately negotiated transactions, including the use of call options and other derivative instruments, Rule 10b5-1 trading plans, and accelerated repurchase programs. The Board did not specify an expiration date for the authorization.

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ITEM 6   Selected Financial Data

The following table sets forth selected financial data for each of the fiscal years in the five-year period ended May 25, 2008:

	Fiscal Year
In Millions, Except per Share Data, Percentages and Ratios	2008			2007			2006			2005			2004
Operating data:
Net sales	$	13,652.1		$	12,441.5		$	11,711.3		$	11,307.8		$	11,122.2
Gross margin(a)		4,873.8			4,486.4			4,166.5			3,982.6			4,088.1
Selling, general, and administrative expenses		2,625.0			2,389.3			2,177.7			1,998.6			2,052.2
Segment operating profit(b)		2,405.5			2,260.1			2,111.6			2,016.4			2,052.9
After-tax earnings from joint ventures		110.8			72.7			69.2			93.9			78.5
Net earnings		1,294.7			1,143.9			1,090.3			1,240.0			1,055.2
Depreciation and amortization		459.2			417.8			423.9			443.1			399.0
Advertising and media expense		628.0			543.3			524.0			480.8			514.3
Research and development expense		204.7			191.1			178.4			165.3			157.6
Average shares outstanding:
Basic		333.0			346.5			357.7			371.2			374.7
Diluted		346.9			360.2			378.8			408.7			412.8
Net earnings per share:
Basic	$	3.86		$	3.30		$	3.05		$	3.34		$	2.82
Diluted		3.71			3.18			2.90			3.08			2.60
Operating ratios:
Gross margin as a percentage of net sales		35.7	%		36.1	%		35.6	%		35.2	%		36.8	%
Selling, general, and administrative expenses as a percentage of net sales		19.2	%		19.2	%		18.6	%		17.7	%		18.5	%
Segment operating profit as a percentage of net sales(b)		17.6	%		18.2	%		18.0	%		17.8	%		18.5	%
Effective income tax rate		34.4	%		34.3	%		34.5	%		36.6	%		35.0	%
Return on average total capital(a)(b)		12.1	%		11.1	%		10.5	%		11.4	%		10.0	%
Balance sheet data:
Land, buildings, and equipment	$	3,108.1		$	3,013.9		$	2,997.1		$	3,111.9		$	3,197.4
Total assets		19,041.6			18,183.7			18,075.3			17,924.0			18,330.9
Long-term debt, excluding current portion		4,348.7			3,217.7			2,414.7			4,255.2			7,409.9
Total debt(a)		6,999.5			6,206.1			6,049.3			6,193.1			8,226.0
Minority interests		242.3			1,138.8			1,136.2			1,133.2			299.0
Stockholders’ equity		6,215.8			5,319.1			5,772.3			5,676.4			5,247.6
Cash flow data:
Net cash provided by operating activities		1,729.9			1,751.2			1,843.5			1,785.9			1,521.0
Capital expenditures		522.0			460.2			360.0			434.0			653.0
Net cash provided (used) by investing activities		(442.4)			(597.1)			(370.0)			413.0			(530.0)
Net cash used by financing activities		1,093.0			1,398.1			1,404.3			2,385.0			943.0
Fixed charge coverage ratio		4.87			4.37			4.54			4.61			3.74
Operating cash flow to debt ratio(a)		24.7	%		28.2	%		30.5	%		28.8	%		18.5	%
Share data:
Low stock price	$	51.43		$	49.27		$	44.67		$	43.01		$	43.75
High stock price		62.50			61.11			52.16			53.89			49.66
Closing stock price		61.09			60.15			51.79			49.68			46.05
Cash dividends per common share		1.57			1.44			1.34			1.24			1.10

Fiscal 2004 was a 53-week year; all other fiscal years were 52 weeks.

In fiscal 2007, we adopted Statement of Financial Accounting Standards (SFAS) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans an amendment of Financial Accounting Standards Board (FASB) Statements No. 87, 88, 106 and 132(R)”, resulting in an after-tax reduction to stockholders’ equity of $440.4 million, and SFAS No. 123R, “Share Based Payment”, resulting in a decrease to fiscal 2007 net earnings of $42.9 million, and a decrease to fiscal 2007 cash flows from operations and corresponding decrease to cash flows used by financing activities of $73.1 million. See Notes 2 and 13 to the Consolidated Financial Statements in Item 8 of this report.

(a)	See Glossary in Item 8 of this report for definition.
(b)	See MD&A in Item 7 of this report for our discussion of these measures not defined by generally accepted accounting principles.

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ITEM 7   Management’s Discussion and Analysis of Financial Condition and Results of Operations

EXECUTIVE OVERVIEW

We are a global consumer foods company. We develop distinctive food products and market these value-added products under unique brand names. We work continuously to improve our established brands and to create new products that meet consumers’ evolving needs and preferences. In addition, we build the equity of our brands over time with strong consumer-directed marketing and innovative merchandising. We believe our brand-building strategy is the key to winning and sustaining leading share positions in markets around the globe.

Our fundamental business goal is to generate superior returns for our stockholders over the long term. We believe that increases in net sales, segment operating profits, earnings per share (EPS), and return on average total capital are the key measures of financial performance for our businesses. See the “Non-GAAP Measures” section below for our discussion of segment operating profit and return on average total capital, which are not defined by generally accepted accounting principles (GAAP). Our objectives are to consistently deliver:

• low single-digit annual growth in net sales;

• mid single-digit annual growth in total segment operating profit;

• high single-digit annual growth in EPS; and

• on average, at least a 50 basis point annual increase in return on average total capital.

We believe that this financial performance, coupled with an attractive dividend yield, should result in long-term value creation for stockholders. We also return a substantial amount of cash annually to stockholders through share repurchases.

For the fiscal year ended May 25, 2008, our net sales grew 9.7 percent, total segment operating profit grew 6.4 percent, diluted EPS grew 16.7 percent, and our return on average total capital improved by 100 basis points. These results met or exceeded our long-term targets. Diluted EPS for fiscal 2008 includes a $0.10 net gain from mark-to-market valuation of certain commodity positions and a $0.09 benefit associated with a favorable court decision on a discrete tax matter. Net cash provided by operations totaled $1.7 billion in fiscal 2008, enabling us to increase our annual dividend payments per share by 9.0 percent from fiscal 2007 and continue returning cash to stockholders through share repurchases, which totaled $1,384.6 million in fiscal 2008. We also made significant capital investments totaling $522.0 million in fiscal 2008, an increase of 13.4 percent from fiscal 2007, to support future growth and productivity.

We achieved each of our four key operating objectives for fiscal 2008:

• We generated broad-based growth in net sales across our businesses. All of our U.S. Retail divisions, International geographic regions, and Bakeries and Foodservice customer segments posted net sales gains in fiscal 2008. We generated 2.9 points of growth from volume, generated 5.3 points of growth from net price realization and product mix, and realized 1.5 points of foreign currency exchange benefit.

• Our cost savings initiatives helped to partially offset input cost inflation in fiscal 2008. We took steps to manage raw material costs, especially with significant commodity price increases in fiscal 2008, and we initiated several restructuring actions to rationalize and simplify our product portfolio, allowing us to focus on higher margin products.

• We invested a significant amount in media and other brand-building marketing programs, which contributed to sales growth across our businesses.

• We also recorded increases in EPS well above our target, even excluding the effects of non-cash, mark-to-market gains and a discrete tax item.

Details of our financial results are provided in the “Fiscal 2008 Consolidated Results of Operations” section below.

In fiscal 2009, input cost inflation will remain a challenge for us. We plan to offset a significant portion of this cost inflation with our holistic margin management (HMM) efforts, which include cost-savings initiatives, marketing spending efficiencies, and profitable sales mix strategies. We have also raised prices on a number of our product lines. We believe our HMM efforts help us keep our price increases moderate and expand our margins over the long term. In addition, our HMM savings generate resources for increased advertising and other brand-building consumer marketing initiatives. Our plans call for a high single digit increase in consumer marketing support in fiscal 2009. We believe this support is a key factor in generating net sales growth, as we believe it builds consumer loyalty, increases our market share, and defends against private-label offerings.

In addition to protecting and expanding our margins over time, and investing in brand-building marketing initiatives, our key operating objectives for fiscal 2009 include plans for introducing new products and extending existing brands to new markets. We

14

are exploring innovative ways to partner with customers including traditional food retailers, new retail formats, and various away-from-home channels. We will continue to grow our business in international markets, focusing on our core platforms of super-premium ice cream, world cuisine, and healthy snacking.

Our plans also call for $550 million of expenditures for capital projects and a significant amount of cash returned to stockholders through share repurchases and dividends. Our long-term objective is to reduce outstanding shares by a net 2 percent per year. We intend to continue repurchasing shares in fiscal 2009, with a goal of reducing average diluted shares outstanding a net 1 percent. On June 23, 2008, our Board of Directors approved a dividend increase to an annual rate of $1.72 per share. This represents a 9 percent compound annual growth rate in dividends from fiscal 2005 to fiscal 2009.

Certain terms used throughout this report are defined in a glossary in Item 8 of this report.

FISCAL 2008 CONSOLIDATED RESULTS OF OPERATIONS

For fiscal 2008, we reported diluted EPS of $3.71, up 16.7 percent from $3.18 per share earned in fiscal 2007. Earnings after tax were $1,294.7 million in fiscal 2008, up 13.2 percent from $1,143.9 million in fiscal 2007.

The components of net sales growth are shown in the following table:

Components of Net Sales Growth

	Fiscal 2008
	vs. 2007
Contributions from volume growth(a)		2.9 pts
Net price realization and product mix		5.3 pts
Foreign currency exchange		1.5 pts
Net sales growth		9.7 pts

(a) Measured in tons based on the stated weight of our product shipments.

Net sales for fiscal 2008 grew 9.7 percent to $13.7 billion, driven by 2.9 percentage points from volume growth, mainly in our U.S. Retail and International segments, and 5.3 percentage points of growth from net price realization and product mix across many of our businesses. In addition, foreign currency exchange effects added 1.5 percentage points of growth. During the second quarter of fiscal 2008, we voluntarily recalled all pepperoni varieties of Totino’s and Jeno’s frozen pizza manufactured on or before October 30, 2007 due to potential contamination. We also voluntarily recalled one flavor of Progresso soup during the third quarter of fiscal 2008. The frozen pizza and soup recalls did not significantly impact our net sales for fiscal 2008.

Cost of sales was up $823.2 million in fiscal 2008 versus fiscal 2007. Cost of sales as a percent of net sales increased from 63.9 percent in fiscal 2007 to 64.3 percent in fiscal 2008. Higher volume drove $206.9 million of this increase. Higher input costs and changes in mix increased cost of sales by $632.1 million. We recorded net mark-to-market gains of $59.6 million related to hedges on open commodity positions that will mitigate future input cost inflation, and a $2.6 million loss from the revaluation of certain grain inventories to market. We also recorded $18.5 million of charges to cost of sales, primarily accelerated depreciation on long-lived assets associated with previously announced restructuring actions. Our La Salteña pasta manufacturing plant in Argentina was destroyed by a fire resulting in a loss of $1.3 million, net of insurance proceeds, from the write off of inventory and property, plant, and equipment, and severance expense related to this event. Cost of sales for fiscal 2008 also includes $21.4 million of costs, including product write offs, logistics, and other costs related to the voluntary recalls.

Gross margin grew 8.6 percent in fiscal 2008 versus fiscal 2007, driven by higher volume, cost savings initiatives and net price realization. Gross margin as a percent of net sales declined 40 basis points from fiscal 2007 to fiscal 2008. This primarily reflects declines in our Bakeries and Foodservice segment, where we took price increases designed to offset cost increases on a dollar basis, but gross margin as a percent of net sales declined.

Selling, general, and administrative (SG&A) expenses increased by $235.7 million in fiscal 2008 versus fiscal 2007. The increase in SG&A expenses from fiscal 2007 was largely the result of a 13.2 percent increase in media and other consumer marketing spending consistent with our brand-building strategy, $30.1 million more foreign exchange losses than a year ago, higher levels of compensation and benefits, a 7.1 percent increase in research and development expense supporting our innovation initiatives, and $9.2 million of costs associated with the remarketing of the Class A and Series B-1 Interests in our subsidiary General Mills Cereals, LLC (GMC). SG&A expense as a percent of net sales was essentially flat compared to fiscal 2007.

Net interest for fiscal 2008 totaled $421.7 million, $4.8 million lower than fiscal 2007. Average interest-bearing instruments

15

increased $467.3 million leading to a $29.3 million increase in net interest, while average interest rates decreased 50 basis points generating a $34.1 million decrease in net interest. Net interest includes preferred distributions paid on minority interests. The average rate on our total outstanding debt and minority interests was 5.8 percent in fiscal 2008 compared to 6.3 percent in fiscal 2007.

Restructuring, impairment, and other exit costs totaled $21.0 million in fiscal 2008 as follows:

Expense (Income), In Millions
Closure of Poplar, Wisconsin plant	$	2.7
Closure and sale of Allentown, Pennsylvania frozen waffle plant		9.4
Closure of leased Trenton, Ontario frozen dough plant		10.9
Restructuring of production scheduling and discontinuation of cake product line at Chanhassen, Minnesota plant		1.6
Gain on sale of previously closed Vallejo, California plant		(7.1	)
Charges associated with restructuring actions previously announced		3.5
Total	$	21.0

We approved a plan to transfer Old El Paso production from our Poplar, Wisconsin facility to other plants and to close the Poplar facility to improve capacity utilization and reduce costs. This action affects 113 employees at the Poplar facility and resulted in a charge of $2.7 million consisting entirely of employee severance. Due to declining financial results, we decided to exit our frozen waffle product line (retail and foodservice) and to close our frozen waffle plant in Allentown, Pennsylvania, affecting 111 employees. We recorded a charge consisting of $3.5 million of employee severance and a $5.9 million non-cash impairment charge against long-lived assets at the plant. We also completed an analysis of the viability of our Bakeries and Foodservice frozen dough facility in Trenton, Ontario, and decided to close the facility, affecting 470 employees. We recorded a charge consisting of $8.4 million for employee expenses and $2.5 million in charges for shutdown and decommissioning costs. We lease the Trenton plant under an agreement expiring in fiscal 2013. We expect to make limited use of the plant during fiscal 2009 while we evaluate sublease or lease termination options. These actions, including the anticipated timing of the disposition of the plants we will close, are expected to be completed by the end of the third quarter of fiscal 2009. We also restructured our production scheduling and discontinued our cake production line at our Chanhassen, Minnesota Bakeries and Foodservice plant. These actions affected 125 employees, and we recorded a $3.0 million charge for employee severance, partially offset by a $1.4 million gain from the sale of long-lived assets during the fourth quarter of fiscal 2008. This action is expected to be completed by the end of the first quarter of fiscal 2009. Finally, we recorded additional charges of $3.5 million primarily related to previously announced Bakeries and Foodservice segment restructuring actions including employee severance for 38 employees.

Collectively, the charges we expect to incur with respect to these fiscal 2008 restructuring actions total $65 million, of which $43.3 million has been recognized in fiscal 2008. This includes a $17.7 million non-cash charge related to accelerated depreciation on long-lived assets at our plant in Trenton, Ontario and $0.8 million of inventory write offs at our plants in Chanhassen, Minnesota and Allentown, Pennsylvania. The accelerated depreciation charge is recorded in cost of sales in our Consolidated Statements of Earnings and in unallocated corporate items in our segment results.

Our consolidated effective income tax rate is influenced by tax planning opportunities available to us in the various jurisdictions in which we operate. The effective tax rate for fiscal 2008 was 34.4 percent compared to 34.3 percent for the same period of fiscal 2007. The 0.1 percentage point increase is the result of an increase in the state income tax rate due to more income in higher rate jurisdictions and lower foreign tax credits. These items were offset by a favorable U.S. Federal District Court decision on an uncertain tax matter that reduced our liability for uncertain tax positions and related accrued interest by $30.7 million. The IRS has appealed the District Court decision, and accordingly, its ultimate resolution is subject to change.

After-tax earnings from joint ventures totaled $110.8 million in fiscal 2008, compared to $72.7 million in fiscal 2007. In fiscal 2008, net sales for Cereal Partners Worldwide (CPW) grew 23.3 percent driven by higher volume, key new product introductions including Oats & More in the United Kingdom and Nesquik Duo across a number of regions, favorable foreign currency effects, and the benefit of a full year of sales from the Uncle Tobys acquisition, which closed in July 2006. Our fiscal 2008 after-tax earnings from joint ventures was benefited by $15.9 million for our share of a gain on the sale of a CPW property in the United Kingdom. Net sales for our Häagen-Dazs joint ventures in Asia increased 15.7 percent in fiscal 2008 as a result of favorable

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foreign exchange and introductory product shipments. During the third quarter of fiscal 2008, the 8th Continent soymilk business was sold. Our 50 percent share of the after-tax gain on the sale was $2.2 million. During fiscal 2008, we recognized $1.7 million of this gain in after-tax earnings from joint ventures. We will record an additional after-tax gain of up to $0.5 million in the first quarter of fiscal 2010 if certain conditions are satisfied.

Average diluted shares outstanding decreased by 13.3 million from fiscal 2007 due to our repurchase of 23.9 million shares of stock during fiscal 2008, partially offset by the issuance of 14.3 million shares to settle a forward purchase contract with an affiliate of Lehman Brothers, Inc. (Lehman Brothers), the issuance of shares upon stock option exercises, the issuance of annual stock awards, and the vesting of restricted stock units.

FISCAL 2008 CONSOLIDATED BALANCE SHEET ANALYSIS

Cash and cash equivalents increased $243.9 million from fiscal 2007, as discussed in the “Liquidity” section below.

Receivables increased $128.7 million from fiscal 2007, mainly driven by higher international sales levels and foreign exchange translation. The allowance for doubtful accounts was unchanged from fiscal 2007.

Inventories increased $193.4 million from fiscal 2007 due to an increase in the prices and levels of grain inventories, as well as a higher level of finished goods. These increases were partially offset by an increase in the reserve for the excess of first in, first out (FIFO) inventory costs over last in, first out (LIFO) inventory costs of $47.7 million.

Prepaid expenses and other current assets increased $67.5 million, as derivative and other receivables increased $91.3 million, partially offset by a $13.2 million decrease in interest rate swap receivables.

Land, buildings, and equipment increased $94.2 million, as capital expenditures of $522.0 million were partially offset by depreciation expense of $455.1 million, including accelerated depreciation charges against long-lived assets related to restructured facilities in Trenton, Ontario and Poplar, Wisconsin. In addition, our Lanus, Argentina plant was destroyed by fire and we sold facilities in Allentown, Pennsylvania and Vallejo, California in fiscal 2008.

Goodwill and other intangible assets increased $33.9 million from fiscal 2007 as increases from foreign currency translation of $170.5 million and the finalization of purchase accounting for the Saxby Bros. Limited and Uncle Tobys acquisitions of $15.3 million were partially offset by a $151.9 million decrease due to the adoption of Financial Accounting Standards Board (FASB) Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109” (FIN 48).

Other assets increased $163.5 million from fiscal 2007, driven by a $91.6 million increase in our prepaid pension asset following our annual update of assumptions and fiscal 2008 asset performance, and a $92.1 million increase in interest rate derivative receivables resulting from a decrease in interest rates.

Accounts payable increased $159.4 million to $937.3 million in fiscal 2008 from higher vendor payables associated with increases in inventories and payables for construction in progress, as well as foreign exchange translation.

Long-term debt, including current portion, and notes payable together increased $793.4 million from fiscal 2007 due to borrowings utilized for the repurchase of $843.0 million of Series B-1 limited membership interests in GMC.

The current and noncurrent portions of deferred income taxes increased $117.1 million to $1,483.0 million due to increases in our pension asset and the beneficial tax treatment for certain inventories and investments, partially offset by increases in our deferred compensation deferred tax asset. We also incurred $98.1 million of deferred income tax expense in fiscal 2008.

Other current liabilities decreased $839.0 million to $1,239.8 million, reflecting the adoption of FIN 48, which required us to reclassify $810.6 million of accrued taxes and related interest from current to noncurrent based on the expected timing of any required future payments.

Other liabilities increased $694.0 million, driven by increases to accrued taxes of $628.6 million from the adoption of FIN 48 and increases in interest rate swap liabilities of $66.6 million.

Our minority interests decreased by $896.5 million mainly as a result of our repurchase of the Series B-1 limited membership interests in GMC and the preferred stock of General Mills Capital, Inc., net of proceeds from the sale of additional Class A interests in GMC.

Retained earnings increased $765.4 million, reflecting fiscal 2008 net earnings of $1,294.7 million less dividends of $529.7 million. Treasury stock decreased $4,539.6 million due to the retirement of $5,080.8 million of treasury stock and a $581.8 million decrease related to the settlement of a forward purchase contract

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with Lehman Brothers, offset by share repurchases of $1,384.6 million. Additional paid in capital decreased $4,692.2 million due to a $5,068.3 million decrease from the treasury stock retirement, offset by increases of $168.2 million related to the Lehman Brothers contract and $133.2 million related to stock compensation expense recognized in fiscal 2008 earnings. Accumulated other comprehensive income (loss) increased by $296.4 million after-tax, driven by favorable foreign exchange translation of $246.3 million.

FISCAL 2007 CONSOLIDATED RESULTS OF OPERATIONS

For fiscal 2007, we reported diluted EPS of $3.18, up 9.7 percent from $2.90 per share earned in fiscal 2006. Earnings after tax were $1,143.9 million in fiscal 2007, up 4.9 percent from $1,090.3 million in fiscal 2006.

The components of net sales growth are shown in the following table:

Components of Net Sales Growth

	Fiscal 2007
	vs. 2006
Contributions from volume growth(a)		3.4 pts
Net price realization and product mix		2.2 pts
Foreign currency exchange		0.6 pts
Net sales growth		6.2 pts

(a) Measured in tons based on the stated weight of our product shipments.

Net sales for fiscal 2007 grew 6.2 percent to $12.4 billion, driven by 3.4 percentage points from volume growth, mainly in our U.S. Retail and International segments, and 2.2 percentage points of growth from net price realization and product mix across many of our businesses. In addition, foreign currency exchange effects added 0.6 percentage points of growth.

Cost of sales was up $410.3 million in fiscal 2007 versus fiscal 2006. Higher volume drove $264.4 million of this increase along with an increase of $145.9 million in input costs and changes in mix. Cost of sales as a percent of net sales decreased from 64.4 percent in fiscal 2006 to 63.9 percent in fiscal 2007 as $115.0 million of higher ingredient (mostly grains and dairy) and energy costs were more than offset by efficiency gains at our manufacturing facilities.

SG&A expenses increased by $211.6 million in fiscal 2007 versus fiscal 2006. SG&A expense as a percent of net sales increased from 18.6 percent in fiscal 2006 to 19.2 percent in fiscal 2007. The increase in SG&A expense from fiscal 2006 was largely the result of an 8.2 percent increase in media and brand-building consumer marketing spending and $68.8 million of incremental stock compensation expense resulting from our adoption of SFAS No. 123 (Revised), “Share-Based Payment” (SFAS 123R).

Net interest for fiscal 2007 totaled $426.5 million, $26.9 million higher than net interest for fiscal 2006. Higher interest rates caused nearly all of the increase. Net interest includes preferred distributions paid on minority interests. The average rate on our total outstanding debt and minority interests was 6.3 percent in fiscal 2007, compared to 5.8 percent in fiscal 2006.

Restructuring, impairment, and other exit costs totaled $39.3 million in fiscal 2007 as follows:

Expense (Income), In Millions
Non-cash impairment charge for certain Bakeries and Foodservice product lines	$	36.7
Gain from our previously closed plant in San Adrian, Spain		(7.3	)
Loss from divestitures of our par-baked bread and frozen pie product lines		9.6
Charges associated with restructuring actions previously announced		0.3
Total	$	39.3

In fiscal 2007, we concluded that the future cash flows generated by certain product lines in our Bakeries and Foodservice segment would not be sufficient to recover the net book value of the related long-lived assets, and we recorded a noncash impairment charge against these assets.

The effective income tax rate was 34.3 percent for fiscal 2007, including an increase of $29.4 million in benefits from our international tax structure and benefits from the settlement of tax audits. In fiscal 2006, our effective income tax rate was 34.5 percent, including the benefit of $11.0 million of adjustments to deferred tax liabilities associated with our International segment’s brand intangibles.

After-tax earnings from joint ventures totaled $72.7 million in fiscal 2007, compared to $69.2 million in fiscal 2006. In fiscal 2007, net sales for CPW grew 17.9 percent, including 5.5 points of incremental sales from the Uncle Tobys cereal business it acquired in Australia. In February 2006, CPW announced a restructuring of its manufacturing plants in the United Kingdom. Our after-tax earnings from joint ventures were reduced by

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$8.2 million in both fiscal 2007 and 2006 for our share of the restructuring costs, mainly accelerated depreciation and severance. Net sales for our Häagen-Dazs joint ventures in Asia declined 6.8 percent in fiscal 2007, reflecting a change in our reporting period for these joint ventures. We changed this reporting period to include results through March 31. In previous years, we included results for the twelve months ended April 30. Accordingly, fiscal 2007 included only 11 months of results from these joint ventures, compared to 12 months in fiscal 2006. The impact of this change was not material to our consolidated results of operations, so we did not restate prior periods for comparability.

Average diluted shares outstanding decreased by 18.6 million from fiscal 2006 due to our repurchase of 25.3 million shares of stock during fiscal 2007, partially offset by increases in diluted shares outstanding from the issuance of annual stock awards.

RESULTS OF SEGMENT OPERATIONS

Our businesses are organized into three operating segments: U.S. Retail; International; and Bakeries and Foodservice.

The following tables provide the dollar amount and percentage of net sales and operating profit from each reportable segment for fiscal years 2008, 2007, and 2006:

Net Sales

			Percent of					Percent of					Percent of
	Net Sales		Net Sales			Net Sales		Net Sales			Net Sales		Net Sales
	Fiscal Year
In Millions	2008					2007					2006
U.S. Retail	$	9,072.0		66.5	%	$	8,491.3		68.2	%	$	8,136.3		69.5	%
International		2,558.8		18.7	%		2,123.4		17.1	%		1,837.0		15.7	%
Bakeries and Foodservice		2,021.3		14.8	%		1,826.8		14.7	%		1,738.0		14.8	%
Total	$	13,652.1		100.0	%	$	12,441.5		100.0	%	$	11,711.3		100.0	%

Segment Operating Profit

			Percent of					Percent of					Percent of
	Segment		Segment			Segment		Segment			Segment		Segment
	Operating		Operating			Operating		Operating			Operating		Operating
	Profit		Profit			Profit		Profit			Profit		Profit
	Fiscal Year
In Millions	2008					2007					2006
U.S. Retail	$	1,971.2		81.9	%	$	1,896.6		84.0	%	$	1,801.4		85.3	%
International		268.9		11.2	%		215.7		9.5	%		193.9		9.2	%
Bakeries and Foodservice		165.4		6.9	%		147.8		6.5	%		116.3		5.5	%
Total	$	2,405.5		100.0	%	$	2,260.1		100.0	%	$	2,111.6		100.0	%

Segment operating profit excludes unallocated corporate items of $156.7 million for fiscal 2008, $163.0 million for fiscal 2007, and $122.8 million for fiscal 2006; and also excludes restructuring, impairment, and other exit costs because these items affecting operating profit are centrally managed at the corporate level and are excluded from the measure of segment profitability reviewed by our executive management.

U.S. Retail Segment Our U.S. Retail segment reflects business with a wide variety of grocery stores, mass merchandisers, membership stores, natural food chains, and drug, dollar and discount chains operating throughout the United States. Our major product categories in this business segment are ready-to-eat cereals, refrigerated yogurt, ready-to-serve soup, dry dinners, shelf stable and frozen vegetables, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza and pizza snacks, grain, fruit and savory snacks, microwave popcorn, and a wide variety of organic products including soup, granola bars, and cereal.

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The components of the changes in net sales are shown in the following table:

Components of U.S. Retail Net Sales Growth

	Fiscal 2008		Fiscal 2007
	vs. 2007		vs. 2006
Contributions from volume growth(a)		3.3 pts		2.3 pts
Net price realization and product mix		3.5 pts		2.1 pts
Change in Net Sales		6.8 pts		4.4 pts

(a) Measured in tons based on the stated weight of our product shipments.

In fiscal 2008, net sales for our U.S. Retail segment were $9.1 billion, up 6.8 percent from fiscal 2007. This growth in net sales was the result of a 3.5 percentage point benefit from net price realization and product mix as well as a 3.3 percentage point increase in volume, led by strong growth in our grain snacks and yogurt businesses.

Net sales for this segment totaled $8.5 billion in fiscal 2007 and $8.1 billion in fiscal 2006. Volume increased 2.3 percentage points in fiscal 2007 versus fiscal 2006, led by strong growth in our grain snacks business as well as volume increases in our Yoplait, Meals, and Pillsbury divisions. The volume increase was largely driven by higher levels of consumer marketing spending and new product innovation, resulting in higher sales to key customers.

All of our U.S. Retail divisions experienced net sales growth in fiscal 2008 as shown in the tables below:

U.S. Retail Net Sales by Division

	Fiscal Year
In Millions	2008		2007		2006
Big G	$	2,028.0	$	1,932.9	$	1,902.3
Meals		2,006.1		1,909.2		1,815.4
Pillsbury		1,673.4		1,591.4		1,549.8
Yoplait		1,293.1		1,170.7		1,099.4
Snacks		1,197.6		1,066.5		967.3
Baking Products		723.3		666.7		650.2
Small Planet Foods and Other		150.5		153.9		151.9
Total	$	9,072.0	$	8,491.3	$	8,136.3

U.S. Retail Change in Net Sales by Division

	Fiscal 2008			Fiscal 2007
	vs. 2007			vs. 2006
Big G		4.9	%		1.6	%
Meals		5.1			5.2
Pillsbury		5.2			2.7
Yoplait		10.5			6.5
Snacks		12.3			10.3
Baking Products		8.5			2.5
Small Planet Foods		6.3			21.3
Total		6.8	%		4.4	%

In fiscal 2008, Big G cereals net sales grew 4.9 percent, driven by strong performance in core brands including Cheerios varieties and Fiber One cereals. Net sales for Meals grew by 5.1 percent led by Progresso ready-to-serve soups. Pillsbury net sales increased 5.2 percent led by Totino’s frozen pizza and hot snacks and Pillsbury refrigerated baked goods. Yoplait net sales grew 10.5 percent due to strong performance by Yoplait Light yogurt and new products including Yo-Plus and Fiber One yogurt. Net sales for Snacks grew 12.3 percent led by continued strong sales for Nature Valley grain snacks and Fiber One bars. Baking Products net sales grew 8.5 percent due to increases in Betty Crocker cookie mixes, Gold Medal flour, and the launch of Warm Delights Minis.

For fiscal 2007, Big G cereals net sales grew 1.6 percent as a result of new product launches such as Fruity Cheerios and Nature Valley cereals, and continued strong performance of the Cheerios franchise. Net sales for Meals grew 5.2 percent led by the introduction of Progresso reduced sodium soups and Hamburger Helper Microwave Singles and the continued strong performance of our other Hamburger Helper and Progresso offerings. Net sales for Pillsbury increased 2.7 percent as core refrigerated dough products, Totino’s Pizza Rolls pizza snacks, and Toaster Strudel pastries all generated solid growth. Yoplait net sales grew 6.5 percent due to strong performance by Yoplait Light, Go-GURT, and Yoplait Kids yogurt. Net sales for Snacks grew 10.3 percent led by continuing growth for Nature Valley granola bars and the introduction of Fiber One bars. Baking Products net sales grew 2.5 percent reflecting greater focus on product lines such as Bisquick baking mix and Warm Delights microwaveable desserts.

Segment operating profit of $2.0 billion in fiscal 2008 improved $74.6 million, or 3.9 percent, over fiscal 2007. Net price realization increased segment operating profit by $317.0 million and volume growth increased segment operating profit by $95.4 million.

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These were offset by increased supply chain input costs of $181.0 million, higher administrative costs, and an 11.7 percent increase in consumer marketing expense consistent with our brand-building strategy. Voluntary product recalls reduced segment operating profit by $24.0 million.

Segment operating profit of $1.9 billion in fiscal 2007 improved $95.2 million, or 5.3 percent, over fiscal 2006. Unit volume increased segment operating profit by $90.3 million, and inflation in ingredients (mostly grains and dairy), energy, and labor costs was more than offset by efficiency gains at our manufacturing facilities resulting from cost-saving capital projects, changes to product formulations, and continued actions to reduce low-turning products. These increases in segment operating profit were partially offset by a 5.7 percent increase in brand-building consumer marketing spending.

International Segment In Canada, our major product categories are ready-to-eat cereals, shelf stable and frozen vegetables, dry dinners, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza snacks, and grain, fruit and savory snacks. In markets outside North America, our product categories include super-premium ice cream, grain snacks, shelf stable and frozen vegetables, dough products, and dry dinners. Our International segment also includes products manufactured in the United States for export, mainly to Caribbean and Latin American markets, as well as products we manufacture for sale to our international joint ventures. Revenues from export activities are reported in the region or country where the end customer is located. These international businesses are managed through 34 sales and marketing offices.

The components of net sales growth are shown in the following table:

Components of International Net Sales Growth

	Fiscal 2008		Fiscal 2007
	vs. 2007		vs. 2006
Contributions from volume growth(a)		5.9 pts		7.5 pts
Net price realization and product mix		5.6 pts		3.9 pts
Foreign currency exchange		9.0 pts		4.2 pts
Net sales growth		20.5 pts		15.6 pts

(a) Measured in tons based on the stated weight of our product shipments.

For fiscal 2008, net sales for our International segment were $2.6 billion, up 20.5 percent from fiscal 2007. Net sales totaled $2.1 billion in fiscal 2007, up 15.6 percent from $1.8 billion in fiscal 2006.

Net sales growth for our International segment by geographic region is shown in the following tables:

International Net Sales by Geographic Region

	Fiscal Year
In Millions	2008		2007		2006
Europe	$	898.5	$	756.3	$	628.3
Canada		697.0		610.4		565.9
Asia/Pacific		577.4		462.0		404.5
Latin America and South Africa		385.9		294.7		238.3
Total	$	2,558.8	$	2,123.4	$	1,837.0

International Change in Net Sales by Geographic Region

	Fiscal 2008			Fiscal 2007
	vs. 2007			vs. 2006
Europe		18.8	%		20.4	%
Canada		14.2			7.9
Asia/Pacific		25.0			14.2
Latin America and South Africa		30.9			23.7
Total		20.5	%		15.6	%

In fiscal 2008, net sales in Europe increased 18.8 percent reflecting strong performance from Old El Paso and Häagen-Dazs in the United Kingdom. Continued success from the launch of Nature Valley granola bars in several European markets and favorable foreign exchange also contributed to the region’s growth. Net sales in Canada increased 14.2 percent including favorable foreign exchange. In the Asia/Pacific region, net sales increased 25.0 percent led by double-digit growth for Häagen-Dazs ice cream and Wanchai Ferry dumplings and meal kits in China. In Latin America and South Africa, net sales increased 30.9 percent led by Diablitos canned meat spread in Venezuela and pricing actions taken in other countries.

In fiscal 2007, net sales in Europe grew 20.4 percent reflecting 14.6 percent growth in net sales of Häagen-Dazs ice cream and continued strong performance from Old El Paso and Green Giant across the region, and especially in the United Kingdom. The acquisition of Saxby Bros. Limited, a chilled pastry company in the

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United Kingdom, contributed less than 1 point of net sales growth. Net sales in Canada increased 7.9 percent, led by 34.8 percent net sales growth on Nature Valley snack bars, 6.0 percent net sales growth in cereals, and 10.6 percent net sales growth on Old El Paso products. Asia/Pacific net sales increased 14.2 percent led by 16.5 percent net sales growth for Häagen-Dazs in China. Latin America and South Africa net sales increased 23.7 percent led by 19.6 percent growth in our Diablitos product line and the re-launch of Häagen-Dazs in Latin America.

Segment operating profit for fiscal 2008 grew to $268.9 million, up 24.7 percent from fiscal 2007, with foreign currency exchange contributing 9.1 points of that growth. Segment operating profit increased by $37.5 million mainly from higher volumes. Net price realization more than offset higher supply chain input costs, a 21.7 percent increase in consumer marketing expense, and administrative cost increases.

Segment operating profit for fiscal 2007 grew to $215.7 million, up 11.2 percent from fiscal 2006, with foreign currency exchange contributing 4.5 points of that growth. The growth was led by a $45.6 million increase from higher volumes driven by increases in consumer marketing spending. Net price realization offset supply chain and administrative cost increases.

Bakeries and Foodservice Segment In our Bakeries and Foodservice segment we sell branded ready-to-eat cereals, snacks, dinner and side dish products, refrigerated and soft-serve frozen yogurt, frozen dough products, branded baking mixes, and custom food items. Our customers include foodservice distributors and operators, convenience stores, vending machine operators, quick service and other restaurant operators, and business and school cafeterias in the United States and Canada. In addition, we market mixes and unbaked and fully baked frozen dough products throughout the United States and Canada to retail, supermarket, and wholesale bakeries.

The components of the change in net sales are shown in the following table:

Components of Bakeries and Foodservice Net Sales Growth

	Fiscal 2008			Fiscal 2007
	vs. 2007			vs. 2006
Contributions from volume growth on continuing businesses(a)		(1	.3) pts		3	.9 pts
Net price realization and product mix		15	.8 pts		3	.1 pts
Divested product lines		(3	.9) pts		(1	.9) pts
Net sales growth		10	.6 pts		5	.1 pts

(a) Measured in tons based on the stated weight of our product shipments.

For fiscal 2008, net sales for our Bakeries and Foodservice segment increased 10.6 percent to $2.0 billion. The growth in fiscal 2008 net sales was driven mainly by 15.8 percentage points of benefit from net price realization and product mix, as we took price increases to offset higher supply chain input costs. This was partially offset by a 1.3 percentage point decline in volume on continuing businesses, mainly in the distributors and restaurants customer channel, and a 3.9 percentage point decline due to the effects of divested product lines.

Net sales increased 5.1 percent from fiscal 2006 to fiscal 2007. Fiscal 2007 volume grew 3.9 percentage points compared to fiscal 2006, driven by: increased sales of higher margin, branded products and the introduction of new products to customers such as schools, hotels, restaurants, and convenience stores; improved innovation in foodservice products; and favorable net price realization.

Net sales growth for our Bakeries and Foodservice segment by customer segment is shown in the following tables:

Bakeries and Foodservice Net Sales by Customer Segment

	Fiscal Year
In Millions	2008		2007		2006
Distributors and restaurants	$	902.0	$	864.8	$	887.0
Bakery channels		927.8		780.5		688.1
Convenience stores and vending		191.5		181.5		162.9
Total	$	2,021.3	$	1,826.8	$	1,738.0

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Bakeries and Foodservice Change in Net Sales by Customer Segment

	Fiscal 2008			Fiscal 2007
	vs. 2007			vs. 2006
Distributors and restaurants		4.3	%		(2.5	)%
Bakery channels		18.9			13.4
Convenience stores and vending		5.5			11.4
Total		10.6	%		5.1	%

In fiscal 2008, segment operating profits were $165.4 million, up 11.9 percent from $147.8 million in fiscal 2007. The increase for the year was driven by grain merchandising activities and benefits from prior restructuring activities. Net price realization offset higher supply chain input costs and a decrease in volume.

Segment operating profits were $147.8 million in fiscal 2007, up 27.1 percent from $116.3 million in fiscal 2006. The business was able to offset high levels of input cost inflation with a combination of pricing actions, sourcing productivity, and manufacturing improvements.

Unallocated Corporate Items Unallocated corporate items include variances to planned corporate overhead expenses, variances to planned domestic employee benefits and incentives, all stock compensation costs, annual contributions to the General Mills Foundation, and other items that are not part of our measurement of segment operating performance. This includes restructuring, impairment, and other exit costs, as well as gains and losses from mark-to-market valuation of certain commodity positions until passed back to our operating segments in accordance with our internal hedge documentation as discussed in Note 7 of the Consolidated Financial Statements in Item 8 of this report.

For fiscal 2008, unallocated corporate items totaled $156.7 million of expense compared to $163.0 million for the same period last year. During fiscal 2008, we recognized a net gain of $59.6 million related to the mark-to-market valuation of certain commodity positions and a previously deferred gain of $10.8 million on the sale of a corporate investment. These gains were offset by $25.6 million of unfavorable foreign exchange, $18.5 million of charges to cost of sales, primarily accelerated depreciation on long-lived assets associated with previously announced restructuring actions, and $9.2 million of expense related to the remarketing of minority interests in our GMC subsidiary.

Unallocated corporate items were $163.0 million in fiscal 2007 compared to $122.8 million in fiscal 2006. Fiscal 2007 included $68.8 million of incremental expense relating to the impact of the adoption of SFAS 123R, and fiscal 2006 included $32.7 million of charges related to increases in environmental reserves and a write-down of the asset value of a low-income housing investment. Excluding these items, unallocated corporate items were essentially unchanged from fiscal 2006.

Joint Ventures In addition to our consolidated operations, we participate in several joint ventures.

International Joint Ventures We have a 50 percent equity interest in CPW, which manufactures and markets ready-to-eat cereal products in more than 130 countries and republics outside the United States and Canada. CPW also markets cereal bars in several European countries and manufactures private label cereals for customers in the United Kingdom. Results from our CPW joint venture are reported for the 12 months ended March 31. On July 14, 2006, CPW acquired the Uncle Tobys cereal business in Australia for $385.6 million. We funded our 50 percent share of the purchase price by making additional advances to and equity contributions in CPW totaling $135.1 million (classified as investments in affiliates, net on the Consolidated Statements of Cash Flows) and by acquiring a 50 percent undivided interest in certain intellectual property for $57.7 million (classified as acquisitions on the Consolidated Statements of Cash Flows). We funded the advances to and our equity contribution in CPW from cash generated by our international operations, including our international joint ventures.

We have 50 percent equity interests in Häagen-Dazs Japan, Inc. and Häagen-Dazs Korea Company. These joint ventures manufacture, distribute, and market Häagen-Dazs ice cream products and frozen novelties. In fiscal 2007, we changed the reporting period for the Häagen-Dazs joint ventures. Accordingly, fiscal 2007 includes only 11 months of results from these joint ventures compared to 12 months in fiscal 2008 and fiscal 2006.

Domestic Joint Venture During fiscal 2008, the 8th Continent soy milk business was sold, and our 50 percent share of the after-tax gain on the sale was $2.2 million, of which $1.7 million was recorded in fiscal 2008. We will record an additional gain in

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the first quarter of fiscal 2010 if certain conditions related to the sale are satisfied.

Our share of after-tax joint venture earnings increased from $72.7 million in fiscal 2007 to $110.8 million in fiscal 2008. This growth was largely driven by strong sales growth, favorable foreign exchange, and our share of the gain from the sale of a property.

Our after-tax share of CPW restructuring, impairment, and other exit costs pursuant to approved plans during fiscal 2008 and prior years was as follows:

	Fiscal Year
Expense (Income), In Millions	2008			2007		2006
Gain on sale of property	$	(15.9	)	$	–	$	–
Accelerated depreciation charges and severance associated with previously announced restructuring actions		4.5			8.2		8.0
Other charges resulting from fiscal 2008 restructuring actions		3.2			–		–
Total	$	(8.2	)	$	8.2	$	8.0

Our share of after-tax joint venture earnings increased from $69.2 million in fiscal 2006 to $72.7 million in fiscal 2007. This growth was largely driven by strong core brand volume and organic net sales growth, new product innovation, and increases in brand-building consumer marketing spending, partially offset by a $2.0 million impact of the change in reporting period for the Häagen-Dazs joint ventures and a $8.2 million restructuring charge in 2007.

The change in net sales for each joint venture is set forth in the following table:

Joint Ventures Change in Net Sales

	Fiscal 2008			Fiscal 2007
	vs. 2007			vs. 2006
CPW		23.3	%		17.9	%
Häagen-Dazs (11 months in fiscal 2007 and 12 months in fiscal 2008 and fiscal 2006)		15.7			(6.8	)
8th Continent		NM			2.5
Joint Ventures		20.6	%		12.6	%

For fiscal 2008, CPW net sales grew by 23.3 percent reflecting higher volume, key new product introductions including Oats & More in the United Kingdom and Nesquik Duo across a number of regions, favorable foreign currency effects, and the benefit of a full year of sales from the fiscal 2007 Uncle Tobys acquisition. Net sales for our Häagen-Dazs joint ventures increased 15.7 percent from fiscal 2007, as a result of favorable foreign exchange and introductory product shipments.

For fiscal 2007, CPW net sales grew by 17.9 percent reflecting the introduction of new products and favorable currency translation. The acquisition of Uncle Tobys in Australia also contributed 5.5 points of CPW’s net sales growth. Net sales for our Häagen-Dazs joint ventures declined 6.8 percent from fiscal 2006, reflecting the change in our reporting period for these joint ventures.

Selected cash flows from our joint ventures are set forth in the following table:

Selected Cash Flows from Joint Ventures

	Fiscal Year
Inflow (Outflow), In Millions	2008			2007			2006
Advances to joint ventures	$	(20.6	)	$	(141.4	)	$	(7.0	)
Repayments of advances		95.8			38.0			–
Dividends received		108.7			45.2			77.4

IMPACT OF INFLATION

We have experienced strong levels of input cost inflation since fiscal 2006. Our gross margin performance in fiscal 2008 reflects the impact of significant input cost inflation, primarily from commodities and energy inputs.

For fiscal 2009, we expect inflationary trends to accelerate, with input costs (fuel, energy, commodities, and employee benefits) forecasted to be 9 percent higher than fiscal 2008 levels. We expect to mitigate this inflationary pressure through cost saving initiatives and pricing.

We attempt to minimize the effects of inflation through appropriate planning and operating practices. Our risk management practices are discussed in Item 7A of this report.

LIQUIDITY

The primary source of our liquidity is cash flow from operations. Over the most recent three-year period, our operations have generated $5.3 billion in cash. A substantial portion of this operating cash flow has been returned to stockholders annually through share repurchases and dividends. We also use this source of liquidity to fund our annual capital expenditures. We typically

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use a combination of available cash, notes payable, and long-term debt to finance acquisitions and major capital expansions.

Cash Flows from Operations

	Fiscal Year
In Millions	2008			2007			2006
Net earnings	$	1,294.7		$	1,143.9		$	1,090.3
Depreciation and amortization		459.2			417.8			423.9
After-tax earnings from joint ventures		(110.8	)		(72.7	)		(69.2	)
Stock-based compensation		133.2			127.1			44.6
Deferred income taxes		98.1			26.0			25.9
Distributions of earnings from joint ventures		108.7			45.2			77.4
Tax benefit on exercised options		(55.7	)		(73.1	)		40.9
Pension, other postretirement, and postemployment benefit costs		(24.8	)		(53.6	)		(74.2	)
Restructuring, impairment, and other exit costs (income)		(1.7	)		39.1			29.8
Changes in current assets and liabilities		(126.7	)		149.1			183.9
Other, net		(44.3	)		2.4			70.2
Net cash provided by operating activities	$	1,729.9		$	1,751.2		$	1,843.5

Our cash flow from operations decreased $21.3 million from fiscal 2007 to fiscal 2008 as a $150.8 million increase in net earnings and the $72.1 million effect of changes in deferred income taxes were more than offset by an increase of $275.8 million in working capital compared to the prior year. Accounts receivable was a $69.9 million increased use of cash, partially offset by a $37.3 million increase in cash from accounts payable, and inventory was a $49.1 million increased use of cash in fiscal 2008. Working capital also includes $59.6 million of mark-to-market gains on our commodity derivatives. In addition, other current liabilities had a $173.1 million reduction to the source of cash driven by cash taxes paid in fiscal 2008.

We strive to grow a key measure, core working capital, at or below our growth in net sales. For fiscal 2008, core working capital grew 12.1 percent, more than our net sales growth of 9.7 percent, largely driven by the effect of increases in commodity prices on inventories and an increase in accounts receivable. In fiscal 2007, core working capital grew 4.2 percent, less than net sales growth of 6.2 percent, and in fiscal 2006, core working capital grew 5.0 percent and net sales grew 3.6 percent.

The $92.3 million decrease in cash flows from operations from fiscal 2006 to fiscal 2007 was the result of a reduction in our cash flows from working capital and a decrease in distributions of earnings from joint ventures, offset by an increase in net earnings.

Cash Flows from Investing Activities

	Fiscal Year
In Millions	2008			2007			2006
Purchases of land, buildings, and equipment	$	(522.0	)	$	(460.2	)	$	(360.0	)
Acquisitions		0.6			(83.4	)		(26.5	)
Investments in affiliates, net		64.6			(100.5	)		0.3
Proceeds from disposal of land, buildings, and equipment		25.9			13.8			11.3
Proceeds from disposal of product lines		–			13.5			–
Other, net		(11.5	)		19.7			4.9
Net cash used by investing activities	$	(442.4	)	$	(597.1	)	$	(370.0	)

In fiscal 2008, cash used by investing activities decreased by $154.7 million from fiscal 2007 when we funded our share of CPW’s acquisition of the Uncle Tobys cereal business in Australia (reflected in acquisitions and investments in affiliates, net), acquired Saxby Bros. Limited, and acquired our master franchisee of Häagen-Dazs shops in Greece. During fiscal 2008, we sold our former production facilities in Vallejo, California and Allentown, Pennsylvania, while in fiscal 2007 we sold our frozen pie product line, including a plant in Rochester, New York, and our par-baked bread product line, including plants in Chelsea, Massachusetts and Tempe, Arizona. Capital investment for land, buildings, and equipment increased by $61.8 million, as we continued to increase manufacturing capacity for our snack bars and yogurt products and began consolidating manufacturing for our Old El Paso business. We expect capital expenditures to increase to approximately $550 million in fiscal 2009, including initiatives that will: increase manufacturing capacity for Yoplait yogurt, Nature Valley bars, and Progresso soup; increase productivity throughout the supply chain; and continue upgrades to our International segment’s information technology systems.

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Cash Flows from Financing Activities

	Fiscal Year
In Millions	2008			2007			2006
Change in notes payable	$	946.6		$	(280.4	)	$	1,197.4
Issuance of long-term debt		1,450.0			2,650.0			–
Payment of long-term debt		(1,623.4	)		(2,323.2	)		(1,386.0	)
Settlement of Lehman Brothers forward purchase contract		750.0			–			–
Repurchase of Series B-1 limited membership interests in GMC		(843.0	)		–			–
Repurchase of General Mills Capital, Inc. preferred stock		(150.0	)		–			–
Proceeds from sale of Class A limited membership interests in GMC		92.3			–			–
Common stock issued		191.4			317.4			157.1
Tax benefit on exercised options		55.7			73.1			–
Purchases of common stock for treasury		(1,432.4	)		(1,320.7	)		(884.8	)
Dividends paid		(529.7	)		(505.2	)		(484.9	)
Other, net		(0.5	)		(9.1	)		(3.1	)
Net cash used by financing activities	$	(1,093.0	)	$	(1,398.1	)	$	(1,404.3	)

Net cash used by financing activities decreased by $305.1 million in fiscal 2008. Further details for fiscal 2008 and fiscal 2007 financing actions are described in Note 8 to the Consolidated Financial Statements in Item 8 of this report.

On April 11, 2007, we issued $1.15 billion aggregate principal amount of floating-rate convertible senior notes. On April 11, 2008, the holders of those notes put $1.14 billion of the aggregate principal amount to us for repurchase. We issued commercial paper to fund the repurchase.

On March 17, 2008, we sold $750.0 million of 5.2 percent fixed-rate notes due March 17, 2015 and on August 29, 2007, we sold $700.0 million of 5.65 percent fixed-rate notes due September 10, 2012. The proceeds of the notes were used to repay outstanding commercial paper. Interest on the notes is payable semi-annually in arrears. The notes may be redeemed at our option at any time for a specified make-whole amount. The notes are senior unsecured, unsubordinated obligations and contain a change of control provision, as defined in the instruments governing the notes.

On October 15, 2007, we settled the forward contract established with Lehman Brothers in October 2004 in conjunction with the issuance by Lehman Brothers of $750.0 million of notes that were mandatorily exchangeable for shares of our common stock. In settlement of that forward contract, we issued 14.3 million shares of our common stock and received $750.0 million in cash from Lehman Brothers. We used the cash received to reduce outstanding commercial paper balances.

On August 7, 2007, we repurchased for a net amount of $843.0 million all of the outstanding Series B-1 Interests in GMC as part of a required remarketing of those interests. The purchase price reflected the Series B-1 Interests’ original capital account balance of $835.0 million and $8.0 million of capital account appreciation attributable and paid to the third party holder of the Series B-1 Interests. The capital appreciation paid to the third party holder of the Series B-1 Interests was recorded as a reduction to retained earnings, a component of stockholders’ equity, on the Consolidated Balance Sheets, and reduced net earnings available to common stockholders in our basic and diluted EPS calculations.

We and the third party holder of all of GMC’s outstanding Class A limited membership interests (Class A Interests) agreed to reset, effective on June 28, 2007, the preferred rate of return applicable to the Class A Interests to the sum of three- month LIBOR plus 65 basis points. On June 28, 2007, we sold $92.3 million of additional Class A Interests to the same third party. There was no gain or loss associated with these transactions. As of May 25, 2008, the carrying value of all outstanding Class A Interests on our Consolidated Balance Sheets was $242.3 million, and the capital account balance of the Class A Interests upon which preferred distributions are calculated was $248.1 million.

On June 28, 2007, we repurchased for $150.0 million all of the outstanding Series A preferred stock of our subsidiary General Mills Capital, Inc. using proceeds from the sale of the Class A Interests and commercial paper. There was no gain or loss associated with this repurchase.

During fiscal 2008, we repurchased 23.6 million shares of our common stock for an aggregate purchase price of $1,368.0 million, of which $0.1 million settled after the end of our fiscal year. In fiscal 2007, our Board of Directors authorized the repurchase of up to 75 million shares of our common stock. Purchases under the authorization can be made in the open market or in privately negotiated transactions, including the use of call options and other derivative instruments, Rule 10b5-1 trading plans, and accelerated repurchase programs. The authorization has no specified termination date. During fiscal 2007, we repurchased 25.3 million shares for an aggregate purchase price of $1,385.2 million, of

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which $64.5 million settled after the end of our fiscal year. In fiscal 2006, we repurchased 18.8 million shares of common stock for an aggregate purchase price of $892.3 million.

Dividends paid in fiscal 2008 totaled $529.7 million, or $1.57 per share, a 9.0 percent per share increase from fiscal 2007. Dividends paid in fiscal 2007 totaled $505.2 million, or $1.44 per share, a 7.5 percent per share increase from fiscal 2006 dividends of $1.34 per share. Our Board of Directors approved a quarterly dividend increase from $0.40 per share to $0.43 per share effective with the dividend payable on August 1, 2008.

CAPITAL RESOURCES

	May 25,		May 27,
In Millions	2008		2007
Notes payable	$	2,208.8	$	1,254.4
Current portion of long-term debt		442.0		1,734.0
Long-term debt		4,348.7		3,217.7
Total debt		6,999.5		6,206.1
Minority interests		242.3		1,138.8
Stockholders’ equity		6,215.8		5,319.1
Total capital	$	13,457.6	$	12,664.0

The following table details the fee-paid committed credit lines we had available as of May 25, 2008:

In Billions	Amount
Credit facility expiring:
October 2010	$	1.1
October 2012		1.9
Total committed credit facilities	$	3.0

Commercial paper is a continuing source of short-term financing. We can issue commercial paper in the United States, Canada, and Europe. Our commercial paper borrowings are supported by $3.0 billion of fee-paid committed credit lines and $403.8 million in uncommitted lines. As of May 25, 2008, there were no amounts outstanding on the fee-paid committed credit lines and $133.8 million was drawn on the uncommitted lines, all by our international operations.

In October 2007, we entered into a new five-year credit agreement with an initial aggregate revolving commitment of $1.9 billion which is scheduled to expire in October 2012. Concurrent with the execution of the new credit agreement, we terminated our five-year credit agreement dated January 20, 2004, which provided $750.0 million of revolving credit and was scheduled to expire in January 2009, and our amended and restated credit agreement dated October 17, 2006, which provided $1.1 billion of revolving credit and was scheduled to expire in October 2007. We then terminated our credit agreement dated August 3, 2007, which provided an aggregate revolving commitment of $750.0 million and was scheduled to expire on December 6, 2007.

Our credit facilities, certain of our long-term debt agreements, and our minority interests contain restrictive covenants. As of May 25, 2008, we were in compliance with all of these covenants.

We have $442.0 million of long-term debt maturing in the next 12 months that is classified as current, including $109.5 million of notes that may mature based on the put rights of the note holders. We also have classified $150.6 million of long-term debt as current based on our intention to redeem the debt within the next 12 months. We believe that cash flows from operations, together with available short- and long-term debt financing, will be adequate to meet our liquidity and capital needs for at least the next 12 months.

As of May 25, 2008, our total debt, including the impact of derivative instruments designated as hedges, was 65.7 percent in fixed-rate and 34.3 percent in floating-rate instruments compared to 50.0 percent each in fixed-rate and floating-rate instruments as of May 27, 2007. The change in the fixed-rate and floating-rate percentages were driven by the refinancing of $1.5 billion of commercial paper and minority interests with fixed-rate notes, and the new swap of $500.0 million of floating-rate debt to fixed-rate during fiscal 2008.

The Board of Directors approved the retirement of 125.0 million shares of common stock in treasury effective December 10, 2007. This action reduced common stock by $12.5 million, reduced additional paid-in capital by $5,068.3 million, and reduced common stock in treasury by $5,080.8 million on our Consolidated Balance Sheets.

We have an effective shelf registration statement on file with the Securities and Exchange Commission (SEC) covering the sale of debt securities, common stock, preference stock, depository shares, securities warrants, purchase contracts, purchase units, and units. As of May 25, 2008, $2.2 billion remained available under the shelf registration for future use.

We believe that growth in return on average total capital is a key performance measure. Return on average total capital improved from 11.1 percent in fiscal 2007 to 12.1 percent in fiscal

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2008 due to higher operating results, the impact of net mark-to-market gains on certain commodity positions, and the effect of a discrete tax item. We also believe important measures of financial strength are the ratio of fixed charge coverage and the ratio of operating cash flow to debt. Our fixed charge coverage ratio in fiscal 2008 was 4.87 compared to 4.37 in fiscal 2007. The measure increased from fiscal 2007 as earnings before income taxes and after-tax earnings from joint ventures increased by $174.8 million and fixed charges decreased by $2.2 million. Our operating cash flow to debt ratio decreased 3.5 percent to 24.7 percent in fiscal 2008, driven by a slight decrease in cash flows from operations and an increase in our year end debt balance.

Currently, Standard and Poor’s (S&P) has ratings of BBB+ on our publicly held long-term debt and A-2 on our commercial paper. Moody’s Investors Services (Moody’s) has ratings of Baa1 for our long-term debt and P-2 for our commercial paper. Fitch Ratings (Fitch) rates our long-term debt BBB+ and our commercial paper F-2. These ratings are not a recommendation to buy, sell or hold securities, are subject to revision or withdrawal at any time by the rating organization, and should be evaluated independently of any other rating. We intend to manage our financial condition and ratios to maintain these ratings levels for the foreseeable future.

In April 2002, we contributed assets with an aggregate fair market value of $4.2 billion to our subsidiary GMC. The contributed assets consist primarily of manufacturing assets and intellectual property associated with the production and retail sale of Big G cereals, Progresso soups, and Old El Paso products in the United States. In exchange for the contribution of these assets, GMC issued its managing membership interest and its limited preferred membership interests to certain of our wholly owned subsidiaries. We continue to hold the entire managing membership interest, and therefore direct the operations of GMC. Other than the right to consent to certain actions, holders of the limited preferred membership interests do not participate in the management of GMC. We currently hold all interests in GMC other than the Class A Interests.

The terms of the Class A Interests are described in the Fifth Amended and Restated Limited Liability Company Agreement of GMC (the LLC Agreement). The holder of the Class A Interests receives quarterly preferred distributions from available net income based on the application of a floating preferred return rate, currently equal to the sum of three-month LIBOR plus 65 basis points, to the holder’s capital account balance established in the most recent mark-to-market valuation (currently $248.1 million). The LLC Agreement requires that the preferred return rate of the Class A Interests be adjusted every five years through a negotiated agreement between the Class A Interest holder and GMC, or through a remarketing auction. The next remarketing is scheduled to occur in June 2012 and thereafter in five year intervals. Upon a failed remarketing, the preferred return rate over three-month LIBOR will be increased by 75 basis points until the next remarketing, which will occur in 3 month intervals until a successful remarketing occurs or the managing member purchases the Class A Interests. The managing member may at any time elect to purchase all of the Class A Interests for an amount equal to the holder’s capital account balance (as adjusted in a mark-to-market valuation), plus any accrued but unpaid preferred returns and the prescribed make-whole amount.

Holders of the Class A Interests may initiate a liquidation of GMC under certain circumstances, including, without limitation, the bankruptcy of GMC or its subsidiaries, GMC’s failure to deliver the preferred distributions on the Class A Interests, GMC’s failure to comply with portfolio requirements, breaches of certain covenants, lowering of our senior debt rating below either Baa3 by Moody’s or BBB- by S&P, and a failed attempt to remarket the Class A Interests as a result of GMC’s failure to assist in such remarketing. In the event of a liquidation of GMC, each member of GMC will receive the amount of its then current capital account balance. The managing member may avoid liquidation by exercising its option to purchase the Class A Interests.

For financial reporting purposes, the assets, liabilities, results of operations, and cash flows of GMC are included in our Consolidated Financial Statements. The return to the third party investor is reflected in net interest in the Consolidated Statements of Earnings. The third party investor’s interests in GMC are classified as minority interests on our Consolidated Balance Sheets. As discussed above, we may exercise our option to purchase the Class A Interests for consideration equal to the then current capital account value, plus any unpaid preferred return and the prescribed make-whole amount. If we purchase these interests, any change in the unrelated third party investor’s capital account from its original value will be charged directly to retained earnings and will increase or decrease the net earnings used to calculate EPS in that period.

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OFF-BALANCE SHEET ARRANGEMENTS AND
CONTRACTUAL OBLIGATIONS

As of May 25, 2008, we have issued guarantees and comfort letters of $670.1 million for the debt and other obligations of consolidated subsidiaries, and guarantees and comfort letters of $340.3 million for the debt and other obligations of non-consolidated affiliates, mainly CPW. In addition, off-balance sheet arrangements are generally limited to the future payments under noncancelable operating leases, which totaled $315.3 million as of May 25, 2008.

As of May 25, 2008, we had invested in 3 variable interest entities (VIEs). We have an interest in a contract manufacturer at our former facility in Geneva, Illinois. We are the primary beneficiary (PB) and have consolidated this entity as of May 25, 2008. This entity had property and equipment with a carrying value of $31.0 million and long-term debt of $31.8 million as of May 25, 2008. We also have an interest in a contract manufacturer in Greece that is a VIE. Although we are the PB, we have not consolidated this entity because it is not material to our results of operations, financial condition, or liquidity as of and for the year ended May 25, 2008. This entity had assets of $4.2 million and liabilities of $0.9 million as of May 25, 2008. We are not the PB of the remaining VIE. Our maximum exposure to loss from the 3 VIEs is limited to the $31.8 million of long-term debt of the contract manufacturer in Geneva, Illinois and our $1.1 million equity investment in the VIE of which we are not the PB.

On August 17, 2006, the Pension Protection Act (PPA) became law in the United States. The PPA revised the basis and methodology for determining defined benefit plan minimum funding requirements as well as maximum contributions to and benefits paid from tax-qualified plans. Most of these provisions are first applicable to our domestic defined benefit pension plans in fiscal 2009 on a phased-in basis. The PPA may ultimately require us to make additional contributions to our domestic plans. However, due to our historical funding practices and current funded status, we do not expect to have significant statutory or contractual funding requirements for our major defined benefit plans during the next several years. No fiscal 2009 domestic plan contributions are currently expected. Actual fiscal 2009 contributions could exceed our current projections, and may be influenced by our decision to undertake discretionary funding of our benefit trusts versus other competing investment priorities, or by future changes in government requirements. Additionally, our projections concerning timing of the PPA funding requirements are subject to change and may be influenced by factors such as general market conditions affecting trust asset performance, interest rates, and our future decisions regarding certain elective provisions of the PPA.

The following table summarizes our future estimated cash payments under existing contractual obligations, including payments due by period:

	Payments Due by Fiscal Year
									2014 and
In Millions	Total		2009		2010–11		2012–13		Thereafter
Long-term debt(a)	$	4,789.8	$	437.6	$	511.4	$	2,058.3	$	1,782.5
Accrued interest		146.8		146.8		–		–		–
Operating leases		315.3		94.3		120.7		80.7		19.6
Capital leases		23.7		5.7		8.0		7.0		3.0
Purchase obligations(b)		2,770.9		2,324.1		279.8		112.7		54.3
Total	$	8,046.5	$	3,008.5	$	919.9	$	2,258.7	$	1,859.4

(a)	Excludes $19.8 million related to capital leases and $18.9 million of bond premium and original issue discount.
(b)	Subsequent to May 25, 2008, we entered into sourcing contracts with contractual obligations of $391.1 million in 2009, $782.2 million in 2010-11, and $22.8 million in 2012-13.

Principal payments due on long-term debt are based on stated contractual maturities or put rights of certain note holders. The majority of the purchase obligations represent commitments for raw material and packaging to be utilized in the normal course of business and for consumer marketing spending commitments that support our brands. The fair value of our interest rate and equity swaps with a payable position to the counterparty was $220.1 million as of May 25, 2008, based on fair market values as of that date. Future changes in market values will impact the amount of cash ultimately paid or received to settle those instruments in the future. Other long-term obligations mainly consist of liabilities for uncertain income tax positions, accrued compensation and benefits, including the underfunded status of certain of our defined benefit pension, other postretirement benefit, and postemployment benefit plans, and miscellaneous liabilities. We expect to pay $16.6 million of benefits from our unfunded postemployment benefit plans in fiscal 2009. Further information on

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all of these plans is included in Note 13 to the Consolidated Financial Statements in Item 8 of this report.

SIGNIFICANT ACCOUNTING ESTIMATES

For a complete description of our significant accounting policies, see Note 2 to the Consolidated Financial Statements in Item 8 of this report. Our significant accounting estimates are those that have meaningful impact on the reporting of our financial condition and results of operations. These estimates include our accounting for promotional expenditures, intangible assets, stock compensation, income taxes, and defined benefit pension, other postretirement and postemployment benefits.

Promotional Expenditures Our promotional activities are conducted through our customers and directly or indirectly with end consumers. These activities include: payments to customers to perform merchandising activities on our behalf, such as advertising or in-store displays; discounts to our list prices to lower retail shelf prices and payments to gain distribution of new products; coupons, contests, and other incentives; and media and advertising expenditures. The media and advertising expenditures are recognized as expense when the advertisement airs. The cost of payments to customers and other consumer activities are recognized as the related revenue is recorded, which generally precedes the actual cash expenditure. The recognition of these costs requires estimation of customer participation and performance levels. These estimates are made based on the forecasted customer sales, the timing and forecasted costs of promotional activities, and other factors. Differences between estimated expenses and actual costs are normally insignificant and are recognized as a change in management estimate in a subsequent period. Our accrued trade, coupon, and consumer marketing liabilities were $446.0 million as of May 25, 2008, and $410.1 million as of May 27, 2007. Because our total promotional expenditures (including amounts classified as a reduction of revenues) are significant, if our estimates are inaccurate we would have to make adjustments that could have a material effect on our results of operations.

Valuation of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows from the operation and disposition of the asset group are less than the carrying amount of the asset group. Asset groups have identifiable cash flows independent of other asset groups. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value. Fair value is measured using discounted cash flows or independent appraisals, as appropriate.

Intangible Assets Goodwill is not subject to amortization and is tested for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. Impairment testing is performed for each of our reporting units. We compare the carrying value of a reporting unit, including goodwill, to the fair value of the unit. Carrying value is based on the assets and liabilities associated with the operations of that reporting unit, which often requires allocation of shared or corporate items among reporting units. If the carrying amount of a reporting unit exceeds its fair value, we revalue all assets and liabilities of the reporting unit, excluding goodwill, to determine if the fair value of the net assets is greater than the net assets including goodwill. If the fair value of the net assets is less than the net assets including goodwill, impairment has occurred. Our estimates of fair value are determined based on a discounted cash flow model. Growth rates for sales and profits are determined using inputs from our annual long-range planning process. We also make estimates of discount rates, perpetuity growth assumptions, market comparables, and other factors.

We evaluate the useful lives of our other intangible assets, mainly intangible assets associated with the Pillsbury, Totino’s, Progresso, Green Giant, Old El Paso, Häagen-Dazs and Uncle Tobys brands, to determine if they are finite or indefinite-lived. Reaching a determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, known technological advances, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets.

Our indefinite-lived intangible assets, mainly brands, are also tested for impairment annually and whenever events or changes in circumstances indicate that their carrying value may not be

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recoverable. We performed our fiscal 2008 assessment of our brand intangibles as of December 1, 2007. Our estimate of the fair value of the brands was based on a discounted cash flow model using inputs which included: projected revenues from our annual long-range plan; assumed royalty rates that could be payable if we did not own the brands; and a discount rate. All brand intangibles had fair values in excess of their carrying values by at least 20 percent, except for the Pillsbury brand, which we estimated had a fair value 3 percent higher than its carrying value. This brand comprises nearly one-half of our total indefinite-lived intangible assets.

If the growth rate for the global revenue from all uses of the Pillsbury brand decreases 50 basis points from the current planned growth rate, fair value would be reduced by approximately $150 million, assuming all other components of the fair value estimate remain unchanged. If the assumed royalty rate for all uses of the Pillsbury brand decreases by 50 basis points, fair value would be reduced by approximately $130 million, assuming all other components of the fair value estimate remain unchanged. If the applicable discount rate increases by 50 basis points, fair value of the Pillsbury brand would be reduced by approximately $170 million, assuming all other components of the fair value estimate remain unchanged. As of May 25, 2008, we reviewed each of the assumptions used in the annual impairment assessment performed as of December 1, 2007, and found them to still be appropriate.

As of May 25, 2008, we had $10.6 billion of goodwill and indefinite-lived intangible assets. While we currently believe that the fair value of each intangible exceeds its carrying value and that those intangibles so classified will contribute indefinitely to our cash flows, materially different assumptions regarding future performance of our businesses could result in significant impairment losses and amortization expense.

Stock Compensation Effective May 29, 2006, we adopted SFAS 123R, which changed the accounting for compensation expense associated with stock options, restricted stock awards, and other forms of equity compensation. We elected the modified prospective transition method as permitted by SFAS 123R; accordingly, results from prior periods were not restated. Under this method, stock-based compensation expense for fiscal 2007 was $127.1 million, which included amortization related to the remaining unvested portion of all equity compensation awards granted prior to May 29, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), and amortization related to all equity compensation awards granted on or subsequent to May 29, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. The incremental effect on net earnings in fiscal 2007 of our adoption of SFAS 123R was $68.8 million of expense ($42.9 million after-tax). All our stock compensation expense is recorded in SG&A expense in the Consolidated Statements of Earnings.

Prior to May 29, 2006, we used the intrinsic value method for measuring the cost of compensation paid in our common stock. No compensation expense for stock options was recognized in our Consolidated Statements of Earnings prior to fiscal 2007, as the exercise price was equal to the market price of our stock at the date of grant. Expense attributable to other types of share-based awards was recognized in our results under SFAS 123. The estimated weighted-average fair values of stock options granted and the assumptions used for the Black-Scholes option-pricing model were as follows:

	Fiscal Year
	2008			2007			2006
Estimated fair values of stock options granted		$10.55			$10.74			$8.04
Assumptions:
Risk-free interest rate		5.1	%		5.3	%		4.3	%
Expected term		8.5 years			8.0 years			7.0 years
Expected volatility		15.6	%		19.7	%		20.0	%
Dividend yield		2.7	%		2.8	%		2.9	%

The valuation of stock options is a significant accounting estimate which requires us to use judgments and assumptions that are likely to have a material impact on our financial statements. Annually, we make predictive assumptions regarding future stock price volatility, employee exercise behavior, and dividend yield.

We estimate our future stock price volatility using the historical volatility over the expected term of the option, excluding time periods of volatility we believe a marketplace participant would exclude in estimating our stock price volatility. For the fiscal 2008 grants, we have excluded historical volatility for fiscal 2002 and prior, primarily because volatility driven by our acquisition of The

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Pillsbury Company in fiscal 2002 does not reflect what we believe to be expected future volatility. We also have considered, but did not use, implied volatility in our estimate, because trading activity in options on our stock, especially those with tenors of greater than 6 months, is insufficient to provide a reliable measure of expected volatility. If all other assumptions are held constant, a one percentage point increase in our fiscal 2008 volatility assumption would increase the grant-date fair value of our fiscal 2008 option awards by 4.3 percent.

For fiscal 2007 and all prior periods, our estimate of expected stock price volatility is based on historical volatility determined on a daily basis over the expected term of the options. We considered but did not use implied volatility because we believed historical volatility provided an appropriate expectation for our volatility in the future.

Our expected term represents the period of time that options granted are expected to be outstanding based on historical data to estimate option exercise and employee termination within the valuation model. Separate groups of employees have similar historical exercise behavior and therefore were aggregated into a single pool for valuation purposes. The weighted-average expected term for all employee groups is presented in the table above. An increase in the expected term by 1 year, leaving all other assumptions constant, would change the grant date fair value by significantly less than 1 percent. Our valuation model assumes that dividends and our share price increase in line with earnings, resulting in a constant dividend yield. The risk-free interest rate for periods during the expected term of the options is based on the U.S. Treasury zero-coupon yield curve in effect at the time of grant.

To the extent that actual outcomes differ from our assumptions, we are not required to true up grant-date fair value-based expense to final intrinsic values. However, these differences can impact the classification of cash tax benefits realized upon exercise of stock options, as explained in the following two paragraphs. Furthermore, historical data has a significant bearing on our forward-looking assumptions. Significant variances between actual and predicted experience could lead to prospective revisions in our assumptions, which could then significantly impact the year-over-year comparability of stock-based compensation expense.

SFAS 123R also provides that any corporate income tax benefit realized upon exercise or vesting of an award in excess of that previously recognized in earnings (referred to as a “windfall tax benefit”) is presented in the Consolidated Statements of Cash Flows as a financing (rather than an operating) cash flow. For fiscal 2008 and fiscal 2007, the windfall tax benefits classified as financing cash flow were $55.7 million and $73.1 million. The actual impact on future years’ financing cash flow will depend, in part, on the volume of employee stock option exercises during a particular year and the relationship between the exercise-date market value of the underlying stock and the original grant-date fair value previously determined for financial reporting purposes.

Realized windfall tax benefits are credited to additional paid-in capital within the Consolidated Balance Sheet. Realized shortfall tax benefits (amounts which are less than that previously recognized in earnings) are first offset against the cumulative balance of windfall tax benefits, if any, and then charged directly to income tax expense, potentially resulting in volatility in our consolidated effective income tax rate. We calculated a cumulative amount of windfall tax benefits from post-1995 fiscal years for the purpose of accounting for future shortfall tax benefits and currently have sufficient cumulative windfall tax benefits to absorb projected arising shortfalls, such that we do not currently expect future earnings to be affected by this provision. However, as employee stock option exercise behavior is not within our control, it is possible that materially different reported results could occur if different assumptions or conditions were to prevail.

Income Taxes We adopted the provisions of FIN 48 as of the beginning of fiscal 2008. Prior to adoption, our policy was to establish reserves that reflected the probable outcome of known tax contingencies. The effects of final resolution, if any, were recognized as changes to the effective income tax rate in the period of resolution. FIN 48 requires application of a more likely than not threshold to the recognition and derecognition of uncertain tax positions. FIN 48 permits us to recognize the amount of tax benefit that has a greater than 50 percent likelihood of being ultimately realized upon settlement. It further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the quarter of such change.

Annually we file more than 350 income tax returns in approximately 100 global taxing jurisdictions. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or

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the timing of resolution of any particular uncertain tax position, we believe that our reserves for income taxes reflect the most likely outcome. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular position would usually require the use of cash.

The number of years with open tax audits varies depending on the tax jurisdiction. Our major taxing jurisdictions include the United States (federal and state) and Canada. We are no longer subject to United States federal examinations by the IRS for fiscal years before 2002. During fiscal 2008, we received a favorable District Court decision on an uncertain tax matter related to the fiscal years prior to 2002 and reduced our liability for uncertain tax positions by $21.0 million and related accrued interest by $9.7 million. The IRS has appealed the District Court decision, and accordingly, its ultimate resolution is subject to change. During the fiscal 2008, we also concluded various matters for fiscal years 1998-2001 which included a payment of $31.7 million. The IRS recently concluded field examinations for our 2002 and 2003 fiscal years. A payment of $24.8 million was made to cover the additional tax liability plus interest related to all agreed adjustments for this audit cycle. The IRS also proposed additional adjustments for the 2002-2003 audit cycle including several adjustments to the tax benefits associated with the sale of minority interests in our GMC subsidiary. We believe we have meritorious defenses and intend to vigorously defend our position. Our potential liability for this matter is significant and, notwithstanding our reserves against this potential liability, an unfavorable resolution could have a material adverse impact on our results of operations and cash flows from operations. We do not expect the amount of our tax reserves for these issues to materially change in the next 12 months. The IRS initiated its audit of our fiscal 2004 through 2006 tax years during fiscal 2008.

Various tax examinations by United States state taxing authorities could be conducted for any open tax year, which vary by jurisdiction, but are generally from 3 to 5 years. Currently, several state examinations are in progress. The Canada Revenue Agency is conducting an audit of our income tax returns in Canada for fiscal years 2003 (which is our earliest tax year still open for examination) through 2005. We do not anticipate that any United States state tax or Canadian tax adjustments will have a significant impact on our financial position or results of operations.

Defined Benefit Pension, Other Postretirement, and Postemployment Benefit Plans We have defined benefit pension plans covering most domestic, Canadian, and United Kingdom employees. Benefits for salaried employees are based on length of service and final average compensation. Benefits for hourly employees include various monthly amounts for each year of credited service. Our funding policy is consistent with the requirements of applicable laws. We made $14.2 million of voluntary contributions to these plans in fiscal 2008. Our principal domestic retirement plan covering salaried employees has a provision that any excess pension assets would vest if the plan is terminated within five years of a change in control.

We also sponsor plans that provide health care benefits to the majority of our domestic and Canadian 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. We did not make voluntary contributions to these plans in fiscal 2008.

Under certain circumstances, we also provide accruable benefits to former or inactive employees in the United States, Canada, and Mexico, and members of our Board of Directors, including severance and certain other benefits payable upon death. We recognize an obligation for any of these benefits that vest or accumulate with service. Postemployment benefits that do not vest or accumulate with service (such as severance based solely on annual pay rather than years of service) are charged to expense when incurred. Our postemployment benefit plans are unfunded.

We recognize benefits provided during retirement or following employment over the plan participants’ active working life. Accordingly, we make various assumptions to predict and measure costs and obligations many years prior to the settlement of our obligations. Assumptions that require significant management judgment and have a material impact on the measurement of our net periodic benefit expense or income and accumulated benefit obligations include the long-term rates of return on plan assets, the interest rates used to discount the obligations for our benefit plans, and the health care cost trend rates.

Expected Rate of Return on Plan Assets Our expected rate of return on plan assets is determined by our asset allocation, our historical long-term investment performance, our estimate of future long-term returns by asset class (using input from our

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actuaries, investment services, and investment managers), and long-term inflation assumptions. We review this assumption annually for each plan, however, our annual investment performance for one particular year does not, by itself, significantly influence our evaluation.

The investment objective for our defined benefit pension and other postretirement benefit plans is to secure the benefit obligations to participants at a reasonable cost to us. Our goal is to optimize the long-term return on plan assets at a moderate level of risk. The defined benefit pension and other postretirement portfolios are broadly diversified across asset classes. Within asset classes, the portfolios are further diversified across investment styles and investment organizations. For the defined benefit pension and other postretirement benefit plans, the long-term investment policy allocations are: 30 percent to equities in the United States; 20 percent to international equities; 10 percent to private equities; 30 percent to fixed income; and 10 percent to real assets (real estate, energy and timber). The actual allocations to these asset classes may vary tactically around the long-term policy allocations based on relative market valuations.

Our historical investment returns (compound annual growth rates) for our United States defined benefit pension and other postretirement plan assets were 4 percent, 15 percent, 10 percent, 11 percent, and 12 percent for the 1, 5, 10, 15, and 20 year periods ended May 25, 2008.

For fiscal 2008, we assumed, on a weighted-average basis for all defined benefit plans, a rate of return of 9.4 percent. For fiscal 2007, we assumed, on a weighted-average basis for all defined benefit plans, a rate of return of 9.4 percent. For fiscal 2006, we assumed, on a weighted-average basis for all defined benefit plan assets, a rate of return of 9.6 percent. Our principal defined benefit pension and other postretirement plans in the United States have an expected return on plan assets of 9.6 percent. During fiscal 2007, we lowered the expected rate of return on one of our other postretirement plans in the United States based on costs associated with insurance contracts owned by that plan.

Lowering the expected long-term rate of return on assets by 50 basis points would increase our net pension and postretirement expense by $21 million for fiscal 2009. A 50 basis point shortfall between the assumed and actual rate of return on plan assets for fiscal 2009 would result in a similar amount of arising asset-experience loss. Any arising asset-experience loss is recognized on a market-related valuation basis, which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recorded. Our outside actuaries perform these calculations as part of our determination of annual expense or income.

Discount Rates Our discount rate assumptions are determined annually as of the last day of our fiscal year for all of our defined benefit pension, other postretirement, and postemployment benefit plan obligations. Those same discount rates also are used to determine defined benefit pension, other postretirement, and postemployment benefit plan income and expense for the following fiscal year. We work with our actuaries to determine the timing and amount of expected future cash outflows to plan participants and, using the top quartile of AA-rated corporate bond yields, to develop a forward interest rate curve, including a margin to that index based on our credit risk. This forward interest rate curve is applied to our expected future cash outflows to determine our discount rate assumptions.

Our weighted-average discount rates were as follows:

Weighted-Average Discount Rates

	Defined			Other
	Benefit			Postretirement			Postemployment
	Pension			Benefit			Benefit
	Plans			Plans			Plans
Obligation as of May 25, 2008, and fiscal 2009 expense		6.88	%		6.90	%		6.64	%
Obligation as of May 27, 2007, and fiscal 2008 expense		6.18	%		6.15	%		6.05	%
Fiscal 2007 expense		6.45	%		6.50	%		6.44	%

Lowering the discount rates by 50 basis points would increase our net defined benefit pension, other postretirement, and postemployment benefit plan expense for fiscal 2009 by approximately $18 million. All obligation-related experience gains and losses are amortized using a straight-line method over the average remaining service period of active plan participants.

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Health Care Cost Trend Rates We review our health care trend rates annually. Our review is based on data we collect about our health care claims experience and information provided by our actuaries. This information includes recent plan experience, plan design, overall industry experience and projections, and assumptions used by other similar organizations. Our initial health care cost trend rate is adjusted as necessary to remain consistent with this review, recent experiences, and short-term expectations. Our initial health care cost trend rate assumption is 10.25 percent for retirees age 65 and over and 9.25 percent for retirees under age 65. These rates are graded down annually until the ultimate trend rate of 5.2 percent is reached in 2016 for all retirees. The trend rates are applicable for calculations only if the retirees’ benefits increase as a result of health care inflation. The ultimate trend rate is adjusted annually, as necessary, to approximate the current economic view on the rate of long-term inflation plus an appropriate health care cost premium. Assumed trend rates for health care costs have an important effect on the amounts reported for the other postretirement benefit plans.

A one percentage point change in the health care cost trend rate would have the following effects:

	One		One
	Percentage		Percentage
	Point		Point
In Millions	Increase		Decrease
Effect on the aggregate of the service and interest cost components in fiscal 2009	$	7.6	$	(6.6	)
Effect on the other postretirement accumulated benefit obligation as of May 25, 2008		84.2		(74.3	)

Any arising health care claims cost-related experience gain or loss is recognized in the calculation of expected future claims. Once recognized, experience gains and losses are amortized using a straight-line method over 15 years, resulting in at least the minimum amortization required being recorded.

Financial Statement Impact In fiscal 2008, we recorded net defined benefit pension, other postretirement, and postemployment benefit plan expense of $18.9 million compared to $36.2 million in fiscal 2007 and $29.7 million in fiscal 2006. As of May 25, 2008, we had cumulative unrecognized actuarial net losses of $276.8 million on our defined benefit pension plans, $115.6 million on our other postretirement benefit plans, and $8.0 million on our postemployment benefit plans, mainly as the result of decreases in our discount rate assumptions. These unrecognized actuarial net losses will result in decreases in our future pension income and increases in postretirement expense since they currently exceed the corridors defined by GAAP.

We use the Retirement Plans (RP) 2000 Mortality Table projected forward to our plans’ measurement dates for calculating the year end defined benefit pension, other postretirement, and postemployment benefit obligations and annual expense.

Actual future net defined benefit pension, other postretirement, and postemployment benefit plan income or expense will depend on investment performance, changes in future discount rates, changes in health care trend rates, and various other factors related to the populations participating in these plans.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2008, the FASB finalized Staff Position No. 142-3, “Determination of the Useful Life of Intangible Assets” (FSP 142-3). This position amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”. FSP 142-3 applies to intangible assets that are acquired individually or with a group of other assets and both intangible assets acquired in business combinations and asset acquisitions. This position is effective for fiscal years beginning after December 15, 2008, which for us is the first quarter of fiscal 2010. We are evaluating the impact of FSP 142-3 on our results of operations and financial condition.

In March 2008, the FASB approved the issuance of Emerging Issues Task Force Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (EITF 07-5). EITF 07-5 defines when adjustment features within contracts are considered to be equity-indexed and will be effective for us in the first quarter of fiscal 2010. We are evaluating the impact of EITF 07-5 on our results of operations and financial condition.

In December 2007, the FASB approved the issuance of Statement of Financial Accounting Standards (SFAS) No. 141 (revised 2007), “Business Combinations” (SFAS 141R). SFAS 141R establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from

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a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R applies to business combinations for which the acquisition date is on or after December 15, 2008. SFAS 141R also changes the accounting for acquisition-related tax contingencies, requiring all such changes in these contingency reserves to be recorded in earnings after the effective date. We have significant unrecognized tax positions related to our acquisition of Pillsbury. Adjustments to these liabilities after the adoption of SFAS 141R could be material to our net earnings.

In December 2007, the FASB approved the issuance of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment to ARB No. 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards that require the ownership interest in subsidiaries held by parties other than the parent be clearly identified and presented in the Consolidated Balance Sheets within equity, but separate from the parent’s equity; the amount of consolidated net income attributable to the parent and the noncontrolling interest be clearly identified and presented on the face of the Consolidated Statement of Earnings; and changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently. This statement is effective for fiscal years beginning on or after December 15, 2008, which for us is the first quarter of fiscal 2010. We are evaluating the impact of SFAS 160 on our results of operations and financial condition.

In June 2007, the FASB approved the issuance of Emerging Issues Task Force Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (EITF 06-11). EITF 06-11 requires that tax benefits from dividends paid on unvested restricted shares be charged directly to stockholders’ equity instead of benefiting income tax expense. EITF 06-11, which will be effective for us in the first quarter of fiscal 2009, is expected to increase our effective income tax rate by 20 basis points, or from 34.4 percent to 34.6 percent based on our actual 2008 effective tax rate.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of SFAS No. 115” (SFAS 159). This statement provides companies with an option to measure, at specified election dates, many financial instruments and certain other items at fair value that are not currently measured at fair value. A company that adopts SFAS 159 will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. This statement is effective for fiscal years beginning after November 15, 2007, which for us is the first quarter of fiscal 2009. We do not believe that the adoption of SFAS 159 will have a material impact on our results of operations or financial condition.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS 157). This statement provides a single definition of fair value, a framework for measuring fair value, and expanded disclosures concerning fair value. Previously, different definitions of fair value were contained in various accounting pronouncements creating inconsistencies in measurement and disclosures. SFAS 157 applies under those previously issued pronouncements that prescribe fair value as the relevant measure of value, except SFAS 123R and related interpretations and pronouncements that require or permit measurement similar to fair value but are not intended to measure fair value. This pronouncement is effective for fiscal years beginning after November 15, 2007, which for us is the first quarter of fiscal 2009. However, SFAS 157 as it relates to fair value measurement requirements for non-financial assets and liabilities that are not remeasured at fair value on a recurring basis is effective for fiscal years beginning after November 15, 2008, which for us is the first quarter of fiscal 2010. We are evaluating the impact of SFAS 157 on our results of operations and financial condition.

NON-GAAP MEASURES

We have included in this report measures of financial performance that are not defined by GAAP. For each of these non-GAAP financial measures, we are providing below a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure, an explanation of why our management or the Board of Directors believes the non-GAAP measure provides useful information to investors, and any additional purposes for which our management or Board of Directors uses the non-GAAP measure. These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable GAAP measure.

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Total Segment Operating Profit This non-GAAP measure is used in reporting to our executive management and as a component of the Board of Directors’ measurement of our performance for incentive compensation purposes. Management and the Board of Directors believe that this measure provides useful information to investors because it is the profitability measure we use to evaluate segment performance. A reconciliation of this measure to operating profit, the relevant GAAP measure, is included in Note 16 to the Consolidated Financial Statements in Item 8 of this report.

Return on Average Total Capital This ratio is not defined by GAAP, and is used in internal management reporting and as a component of the Board of Directors’ rating of our performance for incentive compensation purposes. Management and the Board of Directors believe that this measure provides useful information to investors because it is important for assessing the utilization of capital.

	Fiscal Year
In Millions	2008			2007			2006			2005			2004			2003
Net earnings	$	1,294.7		$	1,143.9		$	1,090.3		$	1,240.0		$	1,055.2
Interest, net, after-tax		276.4			280.1			261.7			288.3			330.2
Earnings before interest, after-tax	$	1,571.1		$	1,424.0		$	1,352.0		$	1,528.3		$	1,385.4
Current portion of long-term debt	$	442.0		$	1,734.0		$	2,131.5		$	1,638.7		$	233.5		$	105.4
Notes payable		2,208.8			1,254.4			1,503.2			299.2			582.6			1,235.8
Long-term debt		4,348.7			3,217.7			2,414.7			4,255.2			7,409.9			7,515.9
Total debt		6,999.5			6,206.1			6,049.4			6,193.1			8,226.0			8,857.1
Minority interests		242.3			1,138.8			1,136.2			1,133.2			299.0			299.9
Stockholders’ equity		6,215.8			5,319.1			5,772.3			5,676.4			5,247.6			4,175.3
Total capital		13,457.6			12,664.0			12,957.9			13,002.7			13,772.6			13,332.3
Less:
Accumulated other comprehensive income (loss)		176.7			(119.7	)		125.4			8.1			(144.2	)		(342.3	)
Adjusted total capital	$	13,280.9		$	12,783.7		$	12,832.5		$	12,994.6		$	13,916.8		$	13,674.6
Adjusted average total capital	$	13,032.3		$	12,808.1		$	12,913.6		$	13,455.7		$	13,795.7
Return on average total capital		12.1	%		11.1	%		10.5	%		11.4	%		10.0	%

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report contains or incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations and assumptions. We also may make written or oral forward-looking statements, including statements contained in our filings with the SEC and in our reports to stockholders.

The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “plan,” “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 results and those currently anticipated or projected. We wish to caution you not to place undue reliance on any such forward-looking statements.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that could affect our financial performance and could cause our actual results in future periods to differ materially from any current opinions or statements.

Our future results could be affected by a variety of factors, such as: competitive dynamics in the consumer foods industry and the markets for our products, including new product introductions, advertising activities, pricing actions, and promotional activities of our competitors; economic conditions, including changes in inflation rates, interest rates, or tax rates; product development and innovation; consumer acceptance of new products and product improvements; consumer reaction to pricing actions and

37

changes in promotion levels; acquisitions or dispositions of businesses or assets; changes in capital structure; changes in laws and regulations, including labeling and advertising regulations; impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets; changes in accounting standards and the impact of significant accounting estimates; product quality and safety issues, including recalls and product liability; changes in consumer demand for our products; effectiveness of advertising, marketing, and promotional programs; changes in consumer behavior, trends, and preferences, including weight loss trends; consumer perception of health-related issues, including obesity; consolidation in the retail environment; changes in purchasing and inventory levels of significant customers; fluctuations in the cost and availability of supply chain resources, including raw materials, packaging, and energy; disruptions or inefficiencies in the supply chain; volatility in the market value of derivatives used to hedge price risk for certain commodities; benefit plan expenses due to changes in plan asset values and discount rates used to determine plan liabilities; failure of our information technology systems; resolution of uncertain income tax matters; foreign economic conditions, including currency rate fluctuations; and political unrest in foreign markets and economic uncertainty due to terrorism or war.

You should also consider the risk factors that we identify in Item 1A of this report, which could also affect our future results.

We undertake no obligation to publicly revise any forward-looking statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events.

38

ITEM 7A   Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk stemming from changes in interest rates, foreign exchange rates, commodity prices, and equity 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 established policies that place clear controls on these activities. The counterparties in these transactions are generally highly rated institutions. We establish credit limits for each counterparty. Our hedging transactions include but are not limited to a variety of derivative financial instruments.

INTEREST RATE RISK

We are exposed to interest rate volatility with regard to future issuances of fixed-rate debt, and existing and future issuances of floating-rate debt. Primary exposures include U.S. Treasury rates, LIBOR, and commercial paper rates in the United States and Europe. We use interest rate swaps and forward-starting interest rate swaps to hedge our exposure to interest rate changes, to reduce the volatility of our financing costs, and to achieve a desired proportion of fixed- versus floating-rate debt, based on current and projected market conditions. 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. As of May 25, 2008, we had $4.1 billion of aggregate notional principal amount outstanding, with a net notional amount of $425.4 million that converts floating-rate notes to fixed-rates. This includes notional amounts of offsetting swaps that neutralize our exposure to interest rates on other interest rate swaps.

FOREIGN EXCHANGE RISK

Foreign currency fluctuations affect our net investments in foreign subsidiaries and foreign currency cash flows related to third party purchases, intercompany loans, and product shipments. We are also exposed to the translation of foreign currency earnings to the U.S. dollar. Our principal exposures are to the Australian dollar, British pound sterling, Canadian dollar, Chinese renminbi, euro, Japanese yen, and Mexican peso. We mainly use foreign currency forward contracts to selectively hedge our foreign currency cash flow exposures. We generally do not hedge more than 12 months forward and generally do not hedge intercompany transactions. We also have many net investments in foreign subsidiaries that are denominated in euros. We hedge a portion of these net investments by issuing euro-denominated commercial paper. As of May 25, 2008, we had issued $472.9 million of euro-denominated commercial paper and foreign exchange forward contracts that we have designated as a net investment hedge and thus deferred net foreign currency transaction losses of $69.6 million to accumulated other comprehensive income (loss).

COMMODITY PRICE RISK

Many commodities we use in the production and distribution of our products are exposed to market price risks. We utilize derivatives to hedge price risk for our principal ingredient and energy costs, including grains (oats, wheat, and corn), oils (principally soybean), non-fat dry milk, natural gas, and diesel fuel. We manage our exposures through a combination of purchase orders, long-term contracts with suppliers, exchange-traded futures and options, and over-the-counter options and swaps. We offset our exposures based on current and projected market conditions, and generally seek to acquire the inputs at as close to our planned cost as possible. As of May 25, 2008, the net notional value of commodity derivatives was $784.8 million, of which $524.8 million relates to agricultural positions and $260.0 million relates to energy positions. These hedges relate to inputs that generally will be utilized within the next 12 months.

EQUITY INSTRUMENTS

Equity price movements affect our compensation expense as certain investments owned by our employees related to our deferred compensation plan are revalued. We use equity swaps to manage this market risk.

VALUE AT RISK

The estimates in the table below are intended to measure the maximum potential fair value we could lose in one day from adverse changes in market interest rates, foreign exchange rates, commodity prices, and equity prices under normal market conditions. A Monte Carlo 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 and equity prices from the past

39

year to estimate the potential volatility and correlation of these rates in the future. The market data were drawn from the RiskMetrics^tm data set. The calculations are not intended to represent actual losses in fair value that we expect to incur. Further, since the hedging instrument (the derivative) inversely correlates with the underlying exposure, we would expect that any loss or gain in the fair value of our derivatives would be generally offset by an increase or decrease in the fair value of the underlying exposures. The positions included in the calculations were: debt; investments; interest rate swaps; foreign exchange forwards; commodity swaps, futures and options; and equity instruments. 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 VAR arising from a one-day loss in fair value for our interest rate, foreign currency, commodity, and equity market-risk-sensitive instruments outstanding as of May 25, 2008, and May 27, 2007, and the average fair value impact during the year ended May 25, 2008.

	Fair Value Impact
			Average
	May 25,		During		May 27,
In Millions	2008		Fiscal 2008		2007
Interest rate instruments	$	18.9	$	14.0	$	10.1
Foreign currency instruments		5.0		4.1		3.5
Commodity instruments		6.3		4.7		4.0
Equity instruments		1.2		1.0		0.9

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ITEM 8   Financial Statements and Supplementary Data

REPORT OF MANAGEMENT RESPONSIBILITIES

The management of General Mills, Inc. is responsible for the fairness and accuracy of the consolidated financial statements. The statements have been prepared in accordance with accounting principles that are generally accepted in the United States, using management’s best estimates and judgments where appropriate. The financial information throughout this Annual Report on Form 10-K is consistent with our consolidated financial statements.

Management has established a system of internal controls that provides reasonable assurance that assets are adequately safeguarded and transactions are recorded accurately in all material respects, in accordance with management’s authorization. We maintain a strong audit program that independently evaluates the adequacy and effectiveness of internal controls. Our internal controls provide for appropriate separation of duties and responsibilities, and there are documented policies regarding use of our assets and proper financial reporting. These formally stated and regularly communicated policies demand highly ethical conduct from all employees.

The Audit Committee of the Board of Directors meets regularly with management, internal auditors, and our independent auditors to review internal control, auditing, and financial reporting matters. The independent auditors, internal auditors, and employees have full and free access to the Audit Committee at any time.

The Audit Committee reviewed and approved the Company’s annual financial statements. The Audit Committee recommended, and the Board of Directors approved, that the consolidated financial statements be included in the Annual Report. The Audit Committee also appointed KPMG LLP to serve as the Company’s independent registered public accounting firm for fiscal 2009, subject to ratification by the stockholders at the annual meeting.

K. J. Powell Chairman of the Board and Chief Executive Officer	D. L. Mulligan Executive Vice President and Chief Financial Officer

July 10, 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
General Mills, Inc.:

We have audited the accompanying consolidated balance sheets of General Mills, Inc. and subsidiaries as of May 25, 2008, and May 27, 2007, and the related consolidated statements of earnings, stockholders’ equity and comprehensive income, and cash flows for each of the fiscal years in the three-year period ended May 25, 2008. In connection with our audits of the consolidated financial statements, we also have audited the accompanying financial statement schedule. We also have audited General Mills Inc.’s internal control over financial reporting as of May 25, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). General Mills, Inc.’s management is responsible for these consolidated financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered

41

necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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 25, 2008, and May 27, 2007, and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended May 25, 2008, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the accompanying 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. Also in our opinion, General Mills, Inc. maintained, in all material respects, effective internal control over financial reporting as of May 25, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In fiscal 2008, as disclosed in Note 14 to the consolidated financial statements, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” on May 28, 2007. In fiscal 2007, as disclosed in Notes 1 and 2 to the consolidated financial statements, the Company changed its classification of shipping costs, changed its annual goodwill impairment assessment date to December 1, and adopted SFAS No. 123 (Revised), “Share-Based Payment”, and SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R)”.

Minneapolis, Minnesota

July 10, 2008

42

Consolidated Statements of Earnings

GENERAL MILLS, INC. AND SUBSIDIARIES

	Fiscal Year
In Millions, Except per Share Data	2008		2007		2006
Net sales	$	13,652.1	$	12,441.5	$	11,711.3
Cost of sales		8,778.3		7,955.1		7,544.8
Selling, general, and administrative expenses		2,625.0		2,389.3		2,177.7
Restructuring, impairment, and other exit costs		21.0		39.3		29.8
Operating profit		2,227.8		2,057.8		1,959.0
Interest, net		421.7		426.5		399.6
Earnings before income taxes and after-tax earnings from joint ventures		1,806.1		1,631.3		1,559.4
Income taxes		622.2		560.1		538.3
After-tax earnings from joint ventures		110.8		72.7		69.2
Net earnings	$	1,294.7	$	1,143.9	$	1,090.3
Earnings per share – basic	$	3.86	$	3.30	$	3.05
Earnings per share – diluted	$	3.71	$	3.18	$	2.90
Dividends per share	$	1.57	$	1.44	$	1.34

See accompanying notes to consolidated financial statements.

43

Consolidated Balance Sheets

GENERAL MILLS, INC. AND SUBSIDIARIES

	May 25,			May 27,
In Millions	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	661.0		$	417.1
Receivables		1,081.6			952.9
Inventories		1,366.8			1,173.4
Prepaid expenses and other current assets		510.6			443.1
Deferred income taxes		–			67.2
Total current assets		3,620.0			3,053.7
Land, buildings, and equipment		3,108.1			3,013.9
Goodwill		6,786.1			6,835.4
Other intangible assets		3,777.2			3,694.0
Other assets		1,750.2			1,586.7
Total assets	$	19,041.6		$	18,183.7
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	937.3		$	777.9
Current portion of long-term debt		442.0			1,734.0
Notes payable		2,208.8			1,254.4
Other current liabilities		1,239.8			2,078.8
Deferred income taxes		28.4			–
Total current liabilities		4,856.3			5,845.1
Long-term debt		4,348.7			3,217.7
Deferred income taxes		1,454.6			1,433.1
Other liabilities		1,923.9			1,229.9
Total liabilities		12,583.5			11,725.8
Minority interests		242.3			1,138.8
Stockholders’ equity:
Common stock, 377.3 and 502.3 shares issued, $0.10 par value		37.7			50.2
Additional paid-in capital		1,149.1			5,841.3
Retained earnings		6,510.7			5,745.3
Common stock in treasury, at cost, shares of 39.8 and 161.7		(1,658.4	)		(6,198.0	)
Accumulated other comprehensive income (loss)		176.7			(119.7	)
Total stockholders’ equity		6,215.8			5,319.1
Total liabilities and equity	$	19,041.6		$	18,183.7

See accompanying notes to consolidated financial statements.

44

Consolidated Statements of Stockholders’ Equity and Comprehensive Income

GENERAL MILLS, INC. AND SUBSIDIARIES

	$.10 Par Value Common Stock
	(One Billion Shares Authorized)
	Issued									Treasury
							Additional															Accumulated Other
				Par			Paid-In												Unearned			Comprehensive
In Millions, Except per Share Data	Shares			Amount			Capital			Shares			Amount			Retained Earnings			Compensation			Income (Loss)			Total
Balance as of May 29, 2005		502.3		$	50.2		$	5,690.3			(132.6	)	$	(4,459.9	)	$	4,501.2		$	(113.5	)	$	8.1		$	5,676.4
Comprehensive income:
Net earnings																	1,090.3									1,090.3
Other comprehensive income, net of tax:
Net change on hedge derivatives and securities																							20.4			20.4
Foreign currency translation																							72.9			72.9
Minimum pension liability adjustment																							24.0			24.0
Other comprehensive income																							117.3			117.3
Total comprehensive income																										1,207.6
Cash dividends declared ($1.34 per share)																	(484.9	)								(484.9	)
Stock compensation plans (includes income tax benefits of $40.9)								46.3			5.5			189.3												235.6
Shares purchased											(18.8	)		(892.4	)											(892.4	)
Unearned compensation related to restricted stock awards																				(17.0	)					(17.0	)
Earned compensation and other																				47.0						47.0
Balance as of May 28, 2006		502.3			50.2			5,736.6			(145.9	)		(5,163.0	)		5,106.6			(83.5	)		125.4			5,772.3
Comprehensive income:
Net earnings																	1,143.9									1,143.9
Other comprehensive income, net of tax:
Net change on hedge derivatives and securities																							22.3			22.3
Foreign currency translation																							193.8			193.8
Minimum pension liability adjustment																							(20.8	)		(20.8	)
Other comprehensive income																							195.3			195.3
Total comprehensive income																										1,339.2
Adoption of SFAS No. 123R								(83.5	)											83.5						–
Adoption of SFAS No. 158																							(440.4	)		(440.4	)
Cash dividends declared ($1.44 per share)																	(505.2	)								(505.2	)
Stock compensation plans (includes income tax benefits of $73.1)								164.6			9.2			339.4												504.0
Shares purchased											(25.3	)		(1,385.1	)											(1,385.1	)
Unearned compensation related to restricted stock awards								(95.0	)																	(95.0	)
Issuance of shares to settle conversion of zero coupon debentures, net of tax								(10.7	)		0.3			10.7
Earned compensation and other								129.3																		129.3
Balance as of May 27, 2007		502.3			50.2			5,841.3			(161.7	)		(6,198.0	)		5,745.3			–			(119.7	)		5,319.1
Comprehensive income:
Net earnings																	1,294.7									1,294.7
Other comprehensive income, net of tax:
Net change on hedge derivatives and securities																							(1.8	)		(1.8	)
Foreign currency translation																							246.3			246.3
Amortization of losses and prior service costs																							12.5			12.5
Minimum pension liability adjustment																							39.4			39.4
Other comprehensive income																							296.4			296.4
Total comprehensive income																										1,591.1
Cash dividends declared ($1.57 per share)																	(529.7	)								(529.7	)
Stock compensation plans (includes income tax benefits of $55.7)								121.0			6.5			261.6												382.6
Shares purchased											(23.9	)		(1,384.6	)											(1,384.6	)
Retirement of treasury shares		(125.0	)		(12.5	)		(5,068.3	)		125.0			5,080.8												–
Shares issued under forward purchase contract								168.2			14.3			581.8												750.0
Unearned compensation related to restricted stock awards								(104.1	)																	(104.1	)
Adoption of FIN 48								57.8									8.4									66.2
Capital appreciation paid to holders of Series B-1 limited membership interests in General Mills Cereals, LLC (GMC)																	(8.0	)								(8.0	)
Earned compensation								133.2																		133.2
Balance as of May 25, 2008		377.3		$	37.7		$	1,149.1			(39.8	)	$	(1,658.4	)	$	6,510.7		$	–		$	176.7		$	6,215.8

See accompanying notes to consolidated financial statements.

45

Consolidated Statements of Cash Flows

GENERAL MILLS, INC. AND SUBSIDIARIES

	Fiscal Year
In Millions	2008			2007			2006
Cash Flows – Operating Activities
Net earnings	$	1,294.7		$	1,143.9		$	1,090.3
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		459.2			417.8			423.9
After-tax earnings from joint ventures		(110.8	)		(72.7	)		(69.2	)
Stock-based compensation		133.2			127.1			44.6
Deferred income taxes		98.1			26.0			25.9
Distributions of earnings from joint ventures		108.7			45.2			77.4
Tax benefit on exercised options		(55.7	)		(73.1	)		40.9
Pension, other postretirement, and postemployment benefit costs		(24.8	)		(53.6	)		(74.2	)
Restructuring, impairment, and other exit costs (income)		(1.7	)		39.1			29.8
Changes in current assets and liabilities		(126.7	)		149.1			183.9
Other, net		(44.3	)		2.4			70.2
Net cash provided by operating activities		1,729.9			1,751.2			1,843.5
Cash Flows – Investing Activities
Purchases of land, buildings, and equipment		(522.0	)		(460.2	)		(360.0	)
Acquisitions		0.6			(83.4	)		(26.5	)
Investments in affiliates, net		64.6			(100.5	)		0.3
Proceeds from disposal of land, buildings, and equipment		25.9			13.8			11.3
Proceeds from disposal of product lines		–			13.5			–
Other, net		(11.5	)		19.7			4.9
Net cash used by investing activities		(442.4	)		(597.1	)		(370.0	)
Cash Flows – Financing Activities
Change in notes payable		946.6			(280.4	)		1,197.4
Issuance of long-term debt		1,450.0			2,650.0			–
Payment of long-term debt		(1,623.4	)		(2,323.2	)		(1,386.0	)
Settlement of Lehman Brothers forward purchase contract		750.0			–			–
Repurchase of Series B-1 limited membership interests in GMC		(843.0	)		–			–
Repurchase of General Mills Capital, Inc. preferred stock		(150.0	)		–			–
Proceeds from sale of Class A limited membership interests in GMC		92.3			–			–
Common stock issued		191.4			317.4			157.1
Tax benefit on exercised options		55.7			73.1			–
Purchases of common stock for treasury		(1,432.4	)		(1,320.7	)		(884.8	)
Dividends paid		(529.7	)		(505.2	)		(484.9	)
Other, net		(0.5	)		(9.1	)		(3.1	)
Net cash used by financing activities		(1,093.0	)		(1,398.1	)		(1,404.3	)
Effect of exchange rate changes on cash and cash equivalents		49.4			13.7			4.9
Increase (decrease) in cash and cash equivalents		243.9			(230.3	)		74.1
Cash and cash equivalents – beginning of year		417.1			647.4			573.3
Cash and cash equivalents – end of year	$	661.0		$	417.1		$	647.4
Cash Flow from Changes in Current Assets and Liabilities
Receivables	$	(94.1	)	$	(24.2	)	$	8.9
Inventories		(165.1	)		(116.0	)		(5.6	)
Prepaid expenses and other current assets		(65.9	)		(44.9	)		(35.7	)
Accounts payable		125.1			87.8			(27.5	)
Other current liabilities		73.3			246.4			243.8
Changes in current assets and liabilities	$	(126.7	)	$	149.1		$	183.9

See accompanying notes to consolidated financial statements.

46

Notes to Consolidated Financial Statements

GENERAL MILLS, INC. AND SUBSIDIARIES

NOTE 1. BASIS OF PRESENTATION AND RECLASSIFICATIONS

Basis of Presentation Our Consolidated Financial Statements include the accounts of General Mills, Inc. and all subsidiaries in which we have a controlling financial interest. Intercompany transactions and accounts are eliminated in consolidation.

Our fiscal year ends on the last Sunday in May. Fiscal years 2008, 2007, and 2006 each consisted of 52 weeks. Financial results for our International segment, with the exception of Canada, its export operations, and its United States and Latin American headquarters are reported as of and for the 12 calendar months ended April 30.

Reclassifications During fiscal 2007, we made certain changes in our reporting of financial information. The effects of these reclassifications on our historical Consolidated Financial Statements are reflected herein and had no impact on our consolidated net earnings or earnings per share (EPS).

We made a change in accounting principle to classify shipping costs associated with the distribution of finished products to our customers as cost of sales. We previously recorded these costs in selling, general, and administrative (SG&A) expense. We made this change in principle because we believe the classification of these shipping costs in cost of sales better reflects the cost of producing and distributing our products and aligns our external financial reporting with the results we use internally to evaluate segment operating performance. The impact of this change in principle was an increase to cost of sales of $474.4 million in fiscal 2006, and a corresponding decrease to SG&A expense in the same period.

We shifted sales responsibility for several customers from our Bakeries and Foodservice segment to our U.S. Retail segment. Net sales and segment operating profit for these two segments have been adjusted to report the results from shifted businesses within the appropriate segment. The impact of this shift was a decrease in net sales of our Bakeries and Foodservice segment and an increase in net sales of our U.S. Retail segment of $55.0 million in fiscal 2006. The impact of this shift was a decrease of Bakeries and Foodservice segment operating profit and an increase of U.S. Retail segment operating profit of $22.1 million in fiscal 2006.

We also reclassified (i) certain trade-related costs and customer allowances as cost of sales or SG&A expense (previously recorded as reductions of net sales), (ii) certain liabilities, including trade and consumer promotion accruals, from accounts payable to other current liabilities, (iii) certain distributions from joint ventures as operating cash flows (previously reported as investing cash flows), (iv) royalties from a joint venture to after-tax earnings from joint ventures (previously recorded as a reduction of SG&A expense), (v) certain receivables, including accrued interest, derivatives, and other miscellaneous receivables that were historically included in receivables, to other current assets, and (vi) valuation allowances related to deferred income tax assets between current and noncurrent classification. These reclassifications were not material individually or in the aggregate. We have reclassified previously reported Consolidated Balance Sheets, Consolidated Statements of Earnings, and Consolidated Statements of Cash Flows to conform to the fiscal 2007 presentation.

In addition, certain reclassifications to our previously reported financial information have been made to conform to the current period presentation.

Change in Reporting Period In fiscal 2007, we changed the reporting period for our Häagen-Dazs joint ventures in Asia to include results through March 31. In previous years, we included results for the twelve months ended April 30. Accordingly, fiscal 2007 results include only 11 months of results from these joint ventures compared to 12 months in fiscal 2008 and fiscal 2006. The impact of this change was not material to our results of operations, thus we did not restate prior period financial statements for comparability.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents We consider all investments purchased with an original maturity of three months or less to be cash equivalents.

Inventories All inventories in the United States other than grain and certain organic products are valued at the lower of cost, using the last-in, first-out (LIFO) method, or market. Grain inventories and all related cash contracts and derivatives are valued at market with all net changes in value recorded in earnings currently. Inventories outside of the United States are valued at the

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lower of cost, using the first-in, first-out (FIFO) method, or market.

Shipping costs associated with the distribution of finished product to our customers are recorded as cost of sales and are recognized when the related finished product is shipped to and accepted by the customer.

Land, Buildings, Equipment, and Depreciation Land is recorded at historical cost. Buildings and equipment, including capitalized interest and internal engineering costs, are recorded at cost and depreciated over estimated useful lives, primarily using the straight-line method. Ordinary maintenance and repairs are charged to cost of sales. Buildings are usually depreciated over 40 to 50 years, and equipment, furniture, and software are usually depreciated over 3 to 15 years. Fully depreciated assets are retained in buildings and equipment until disposal. 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 in earnings. As of May 25, 2008, assets held for sale were insignificant.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows from the operation and disposition of the asset group are less than the carrying amount of the asset group. Asset groups have identifiable cash flows and are largely independent of other asset groups. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value. Fair value is measured using a discounted cash flow model or independent appraisals, as appropriate.

Goodwill and Other Intangible Assets Goodwill is not amortized, and is tested for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. Impairment testing is performed for each of our reporting units. We compare the carrying value of a reporting unit, including goodwill, to the fair value of the unit. Carrying value is based on the assets and liabilities associated with the operations of that reporting unit, which often requires allocation of shared or corporate items among reporting units. If the carrying amount of a reporting unit exceeds its fair value, we revalue all assets and liabilities of the reporting unit, excluding goodwill, to determine if the fair value of the net assets is greater than the net assets including goodwill. If the fair value of the net assets is less than the net assets including goodwill, impairment has occurred. Our estimates of fair value are determined based on a discounted cash flow model. Growth rates for sales and profits are determined using inputs from our annual long-range planning process. We also make estimates of discount rates, perpetuity growth assumptions, market comparables, and other factors.

We evaluate the useful lives of our other intangible assets, primarily intangible assets associated with the Pillsbury, Totino’s, Progresso, Green Giant, Old El Paso, Häagen-Dazs, and Uncle Tobys brands, to determine if they are finite or indefinite-lived. We determine useful lives by considering future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, known technological advances, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets.

Our indefinite-lived intangible assets, primarily brands, also are tested for impairment annually, and whenever events or changes in circumstances indicate that their carrying value may not be recoverable. We performed our fiscal 2008 assessment of our brand intangibles as of December 1, 2007. Our estimate of the fair value of the brands was based on a discounted cash flow model using inputs which included: projected revenues from our annual long-range plan; assumed royalty rates that could be payable if we did not own the brands; and a discount rate.

Investments in Joint Ventures Our investments in companies over which we have the ability to exercise significant influence are stated at cost plus our share of undistributed earnings or losses. We receive royalty income from certain joint ventures, incur various expenses (primarily research and development), and record the tax impact of certain joint venture operations that are structured as partnerships. In addition, we make advances to our joint ventures in the form of loans or capital investments. We also sell certain raw materials, semi-finished goods, and finished goods to the joint ventures, generally at market prices.

Variable Interest Entities As of May 25, 2008, we invested in 3 variable interest entities (VIEs). We have an interest in a contract

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manufacturer at our former facility in Geneva, Illinois. We are the primary beneficiary (PB) and have consolidated this entity as of May 25, 2008. This entity had property and equipment with a carrying value of $31.0 million and long-term debt of $31.8 million as of May 25, 2008. We also have an interest in a contract manufacturer in Greece that is a VIE. Although we are the PB, we have not consolidated this entity because it is not material to our results of operations, financial condition, or liquidity as of and for the year ended May 25, 2008. This entity had assets of $4.2 million and liabilities of $0.9 million as of May 25, 2008. We are not the PB of the remaining VIE. Our maximum exposure to loss from the 3 VIEs is limited to the $31.8 million of long-term debt of the contract manufacturer in Geneva, Illinois and our $1.1 million equity investment in the VIE of which we are not the PB.

Revenue Recognition We recognize sales revenue when the shipment is accepted by our customer. Sales include shipping and handling charges billed to the customer and are reported net of consumer coupon redemption, trade promotion and other costs, including estimated allowances for returns, unsalable product, and prompt pay discounts. Sales, use, value-added, and other excise taxes are not recognized in revenue. Coupons are recorded when distributed, based on estimated redemption rates. Trade promotions are recorded based on estimated participation and performance levels for offered programs at the time of sale. We generally do not allow a right of return. However, on a limited case-by-case basis with prior approval, we may allow customers to return product. In limited circumstances, product returned in saleable condition is resold to other customers or outlets. Receivables from customers generally do not bear interest. Terms and collection patterns vary around the world and by channel. The allowance for doubtful accounts represents our estimate of probable non-payments and credit losses in our existing receivables, as determined based on a review of past due balances and other specific account data. Account balances are written off against the allowance when we deem the amount is uncollectible.

Environmental Environmental costs relating to existing conditions caused by past operations that do not contribute to current or future revenues are expensed. Reserves for liabilities for anticipated remediation costs are recorded on an undiscounted basis when they are probable and reasonably estimable, generally no later than the completion of feasibility studies or our commitment to a plan of action.

Advertising Production Costs We expense the production costs of advertising the first time that the advertising takes place.

Research and Development All expenditures for research and development (R&D) are charged against earnings in the year incurred. R&D includes expenditures for new product and manufacturing process innovation, and the annual expenditures are comprised primarily of internal salaries, wages, consulting, and other supplies attributable to time spent on R&D activities. Other costs include depreciation and maintenance of research facilities, including assets at facilities that are engaged in pilot plant activities.

Foreign Currency Translation For all significant foreign operations, the functional currency is the local currency. Assets and liabilities of these operations are translated at the period-end exchange rates. Income statement accounts are translated using the average exchange rates prevailing during the year. Translation adjustments are reflected within accumulated other comprehensive income (loss) in stockholders’ equity. Gains and losses from foreign currency transactions are included in net earnings for the period except for gains and losses on investments in subsidiaries for which settlement is not planned for the foreseeable future and foreign exchange gains and losses on instruments designated as net investment hedges. These gains and losses are recorded in accumulated other comprehensive income (loss).

Derivative Instruments Application of hedge accounting under Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (SFAS 133), requires significant resources, recordkeeping, and analytical systems. As a result of the rising compliance costs and the complexity associated with the application of hedge accounting, we elected to discontinue the use of hedge accounting for all commodity derivative positions entered into after the beginning of fiscal 2008. Accordingly, the changes in the values of these derivatives are recorded currently in cost of sales in our Consolidated Statements of Earnings.

Regardless of designation for accounting purposes, we believe all our commodity derivatives are economic hedges of our risk

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exposures, and as a result we consider these derivatives to be hedges for purposes of measuring segment operating performance. Thus, these gains and losses are reported in unallocated corporate items outside of segment operating results until such time that the exposure we are hedging affects earnings. At that time we reclassify the hedge gain or loss from unallocated corporate items to segment operating profit, allowing our operating segments to realize the economic effects of the hedge without experiencing any resulting mark-to-market volatility, which remains in unallocated corporate items.

We also use derivatives to hedge our exposure to changes in foreign exchange rates and interest rates. All derivatives are recognized on the Consolidated Balance Sheets at fair value based on quoted market prices or management’s estimate of their fair value and are recorded in either current or noncurrent assets or liabilities based on their maturity. Changes in the fair values of derivatives are recorded in net earnings or other comprehensive income, based on whether the instrument is designated as a hedge transaction and, if so, the type of hedge transaction. Gains or losses on derivative instruments reported in accumulated other comprehensive income (loss) are reclassified to earnings in the period the hedged item affects earnings. If the underlying hedged transaction ceases to exist, any associated amounts reported in accumulated other comprehensive income (loss) are reclassified to earnings at that time. Any ineffectiveness is recognized in earnings in the current period.

Stock-Based Compensation Effective May 29, 2006, we adopted SFAS No. 123 (Revised), “Share-Based Payment” (SFAS 123R), which changed the accounting for compensation expense associated with stock options, restricted stock awards, and other forms of equity compensation. We elected the modified prospective transition method as permitted by SFAS 123R; accordingly, results from prior periods have not been restated. Under this method, stock-based compensation expense for fiscal 2007 was $127.1 million, which included amortization related to the remaining unvested portion of all equity compensation awards granted prior to May 29, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), and amortization related to all equity compensation awards granted on or subsequent to May 29, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. The incremental effect on net earnings in fiscal 2007 of our adoption of SFAS 123R was $68.8 million of expense ($42.9 million after-tax). All of our stock compensation expense is recorded in SG&A expense in the Consolidated Statements of Earnings and in unallocated corporate items in our segment results.

SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as previously required, thereby reducing net operating cash flows and increasing net financing cash flows in periods following adoption.

Certain equity-based compensation plans contain provisions that accelerate vesting of awards upon retirement, disability, or death of eligible employees and directors. SFAS 123R specifies that a stock-based award is vested when the employee’s retention of the award is no longer contingent on providing subsequent service. Accordingly, beginning in fiscal 2007, we prospectively revised our expense attribution method so that the related compensation cost is recognized immediately for awards granted to retirement-eligible individuals or over the period from the grant date to the date retirement eligibility is achieved, if less than the stated vesting period. For fiscal 2006, we generally recognized stock compensation expense over the stated vesting period of the award, with any unamortized expense recognized immediately if an acceleration event occurred.

Prior to May 29, 2006, we used the intrinsic value method for measuring the cost of compensation paid in our common stock. No compensation expense for stock options was recognized in our Consolidated Statements of Earnings prior to fiscal 2007, as the exercise price was equal to the market price of our stock at the date of grant. Expense attributable to other types of share-based awards was recognized in our results under SFAS 123.

The following table illustrates the pro forma effect on net earnings and EPS for fiscal 2006 if we had applied the fair value

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recognition provisions of SFAS 123 to all employee stock-based compensation, net of estimated forfeitures:

In Millions, Except per Share Data
Net earnings, as reported	$	1,090.3
Add: After-tax stock-based employee compensation expense included in reported net earnings		28.5
Deduct: After-tax stock-based employee compensation expense determined under fair value requirements of SFAS 123		(48.1	)
Pro forma net earnings	$	1,070.7
Earnings per share:
Basic – as reported	$	3.05
Basic – pro forma	$	2.99
Diluted – as reported	$	2.90
Diluted – pro forma	$	2.84

Defined Benefit Pension, Other Postretirement, and Postemployment Benefit Plans We sponsor several domestic and foreign defined benefit plans to provide pension, health care, and other welfare benefits to retired employees. Under certain circumstances, we also provide accruable benefits to former or inactive employees in the United States and Canada and members of our Board of Directors, including severance and certain other benefits payable upon death. We recognize an obligation for any of these benefits that vest or accumulate with service. Postemployment benefits that do not vest or accumulate with service (such as severance based solely on annual pay rather than years of service) are charged to expense when incurred. Our postemployment benefit plans are unfunded.

We recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income (loss), which is a component of stockholders’ equity.

Use of Estimates Preparing our Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from our estimates.

Other New Accounting Standards In fiscal 2008, we adopted Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108). SAB 108 provides interpretive guidance on the process and diversity in practice of quantifying financial statement misstatements resulting in the potential carryover of improper amounts on the balance sheet. The SEC believes that registrants should quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. The adoption of SAB 108 did not have a material impact on our results of operations or financial condition.

Also in fiscal 2008, we adopted SFAS No. 155, “Hybrid Instruments” (SFAS 155). SFAS 155 amends SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS 155 is effective for all financial instruments acquired or issued after May 27, 2007. The adoption of SFAS 155 did not have any impact on our results of operations or financial condition.

In September 2006, the Financial Accounting Standards Board (FASB) ratified the consensus of Emerging Issues Task Force Issue No. 06-5, “Accounting for Purchases of Life Insurance-Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4” (EITF 06-5). EITF 06-5 requires that a policyholder consider any additional amounts included in the contractual terms of the policy in determining the amount that could be realized under the insurance contract on a policy by policy basis. We adopted EITF 06-5 in fiscal 2008, and it did not have any impact on our results of operations or financial condition.

In June 2006, the FASB ratified the consensus of Emerging Issues Task Force Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (EITF 06-3). EITF 06-3 concluded that the presentation of taxes imposed on revenue-producing transactions (sales, use, value added, and excise taxes) on either a gross (included in revenues and costs) or a net (excluded from revenues) basis is an accounting policy that should be disclosed. We adopted EITF 06-3 in fiscal 2007, and it did not have any impact on our results of operations or financial condition.

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In fiscal 2007, we adopted SFAS No. 151, “Inventory Costs – An Amendment of ARB No. 43, Chapter 4” (SFAS 151). SFAS 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). The adoption of SFAS 151 did not have any impact on our results of operations or financial condition.

In fiscal 2006, we adopted SFAS No. 153, “Exchanges of Nonmonetary Assets – An Amendment of APB Opinion No. 29” (SFAS 153). SFAS 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial substance. The adoption of SFAS 153 did not have any impact on our results of operations or financial condition.

In March 2005, the FASB issued FASB Interpretation No. (FIN) 47, “Accounting for Conditional Asset Retirement Obligations” (FIN 47). FIN 47 requires that liabilities be recognized for the fair value of a legal obligation to perform asset retirement activities that are conditional on a future event if the amount can be reasonably estimated. We adopted FIN 47 in fiscal 2006, and it did not have a material impact on our results of operations or financial condition.

NOTE 3. ACQUISITIONS AND DIVESTITURES

Subsequent to our fiscal 2008 year-end, we acquired Humm Foods, Inc. (Humm), the maker of Lärabar fruit-and-nut energy bars. We issued 0.9 million shares of our common stock to the shareholders of Humm as consideration for the acquisition.

During fiscal 2008, the 8th Continent soymilk business was sold. Our 50 percent share of the after-tax gain on the sale was $2.2 million, of which we recognized $1.7 million in after-tax earnings from joint ventures in fiscal 2008. We will record an additional after-tax gain of up to $0.5 million in the first quarter of fiscal 2010 if certain conditions are satisfied. Also during fiscal 2008, we acquired a controlling interest in HD Distributors (Thailand) Company Limited. Prior to acquiring the controlling interest, we accounted for our investment as a joint venture. The purchase price, net of cash acquired, resulted in a $1.3 million cash inflow classified in acquisitions on the Consolidated Statements of Cash Flows.

During fiscal 2007, we sold our Bakeries and Foodservice frozen pie product line, including a plant in Rochester, New York. We received $1.2 million in proceeds and recorded a $3.6 million loss on the sale. We also sold our Bakeries and Foodservice par-baked bread product line, including plants in Chelsea, Massachusetts and Tempe, Arizona. We received $12.5 million in proceeds and recorded a $6.0 million loss on the sale in fiscal 2007, including the write off of $6.2 million of goodwill.

During fiscal 2007, we completed the acquisition of Saxby Bros. Limited, a chilled pastry company in the United Kingdom, for approximately $24.1 million. This business, which had sales of $23.8 million in calendar 2006, complements our existing frozen pastry business in the United Kingdom. In addition, we completed an acquisition in Greece for $2.8 million.

During fiscal 2007, our 50 percent joint venture Cereal Partners Worldwide (CPW) completed the acquisition of the Uncle Tobys cereal business in Australia for $385.6 million. We funded our 50 percent share of the purchase price by making additional advances to and equity contributions in CPW totaling $135.1 million (classified as investments in affiliates, net, on the Consolidated Statements of Cash Flows) and by acquiring a 50 percent undivided interest in certain intellectual property for $57.7 million (classified as acquisitions on the Consolidated Statements of Cash Flows). During fiscal 2008, we completed the allocation of our purchase price and reclassified $16.3 million from goodwill to other intangible assets on our Consolidated Balance Sheets.

During fiscal 2006, we acquired Elysées Consult SAS, the franchise operator of a Häagen-Dazs shop in France, and Croissant King, a producer of frozen pastry products in Australia. We also acquired a controlling financial interest in Pinedale Holdings Pte. Limited, an operator of Häagen-Dazs cafes in Singapore and Malaysia. The aggregate purchase price of our fiscal 2006 acquisitions was $26.5 million.

NOTE 4. RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS

We view our restructuring activities as a way to meet our long-term growth targets. Activities we undertake must meet internal rate of return and net present value targets. Each restructuring action normally takes one to two years to complete. At completion (or as each major stage is completed in the case of multi-year programs), the project begins to deliver cash savings and/or reduced depreciation. These activities result in various restructuring costs, including asset write offs, exit charges including severance, contract termination fees, and decommissioning and other costs.

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In fiscal 2008, we recorded restructuring, impairment, and other exit costs pursuant to approved plans as follows:

Expense (Income), in Millions
Closure of Poplar, Wisconsin plant	$	2.7
Closure and sale of Allentown, Pennsylvania frozen waffle plant		9.4
Closure of leased Trenton, Ontario frozen dough plant		10.9
Restructuring of production scheduling and discontinuation of cake product line at Chanhassen, Minnesota plant		1.6
Gain on sale of previously closed Vallejo, California plant		(7.1	)
Charges associated with restructuring actions previously announced		3.5
Total	$	21.0

We approved a plan to transfer Old El Paso production from our Poplar, Wisconsin facility to other plants and close the Poplar facility to improve capacity utilization and reduce costs. This action affects 113 employees at the Poplar facility and resulted in a charge of $2.7 million consisting entirely of employee severance. Due to declining financial results, we decided to exit our frozen waffle product line (retail and foodservice) and to close our frozen waffle plant in Allentown, Pennsylvania, affecting 111 employees. We recorded a charge consisting of $3.5 million of employee severance and a $5.9 million non-cash impairment charge against long-lived assets at the plant. We also completed an analysis of the viability of our Bakeries and Foodservice frozen dough facility in Trenton, Ontario, and decided to close the facility, affecting 470 employees. We recorded a charge consisting of $8.4 million for employee severance and $2.5 million in charges for shutdown and decommissioning costs. We lease the Trenton plant under an agreement expiring in fiscal 2013. We expect to make limited use of the plant during fiscal 2009 while we evaluate sublease or lease termination options. These actions, including the anticipated timing of the disposition of the plants we will close, are expected to be completed by the end of the third quarter of fiscal 2009. We also restructured our production scheduling and discontinued our cake production line at our Chanhassen, Minnesota Bakeries and Foodservice plant. These actions affected 125 employees, and we recorded a $3.0 million charge for employee severance that was partially offset by a $1.4 million gain from the sale of long-lived assets during the fourth quarter of fiscal 2008. This action is expected to be completed by the end of the first quarter of fiscal 2009. Finally, we recorded additional charges of $3.5 million primarily related to previously announced Bakeries and Foodservice segment restructuring actions including employee severance for 38 employees.

Collectively, the charges we expect to incur with respect to these fiscal 2008 restructuring actions total $65 million, of which $43.3 million has been recognized in fiscal 2008. This includes a $17.7 million non-cash charge related to accelerated depreciation on long-lived assets at our plant in Trenton, Ontario and $0.8 million of inventory write offs at our plants in Chanhassen, Minnesota and Allentown, Pennsylvania. The accelerated depreciation charge is recorded in cost of sales in our Consolidated Statements of Earnings and in unallocated corporate items in our segment results.

During fiscal 2008, we received $16.2 million in proceeds from the sale of our Allentown, Pennsylvania plant and our previously closed Vallejo, California plant.

In fiscal 2007, we recorded restructuring, impairment, and other exit costs pursuant to approved plans as follows:

Expense (Income), in Millions
Non-cash impairment charge for certain Bakeries and Foodservice product lines	$	36.7
Gain from our previously closed plant in San Adrian, Spain		(7.3	)
Loss from divestitures of our par-baked bread and frozen pie product lines		9.6
Charges associated with restructuring actions previously announced		0.3
Total	$	39.3

As part of our long-range planning process, we determined that certain product lines in our Bakeries and Foodservice segment were underperforming. In late May 2007, we concluded that the future cash flows generated by these product lines will be insufficient to recover the net book value of the related long-lived assets. Accordingly, we recorded a non-cash impairment charge of $36.7 million against these assets in the fourth quarter of fiscal 2007.

In fiscal 2006, we recorded restructuring, impairment, and other exit costs pursuant to approved plans as follows:

Expense, in Millions
Closure of our Swedesboro, New Jersey plant	$	12.9
Closure of a production line at our Montreal, Quebec plant		6.3
Restructuring actions at our Allentown, Pennsylvania plant		3.5
Asset impairment charge at our Rochester, New York plant		3.2
Charges associated with restructuring actions previously announced		3.9
Total	$	29.8

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The fiscal 2006 initiatives were undertaken to increase asset utilization and reduce manufacturing costs. The actions included decisions to: close our leased frozen dough foodservice plant in Swedesboro, New Jersey, affecting 101 employees; shut down a portion of our frozen dough foodservice plant in Montreal, Quebec, affecting 77 employees; realign and modify product and manufacturing capabilities at our frozen waffle plant in Allentown, Pennsylvania, affecting 72 employees; and complete the fiscal 2005 initiative to relocate our frozen baked goods line from our plant in Chelsea, Massachusetts, affecting 175 employees.

The roll forward of our restructuring and other exit cost reserves, included in other current liabilities, is as follows:

				Other
In Millions	Severance			Exit Costs			Total
Reserve balance as of May 29, 2005	$	8.9		$	8.9		$	17.8
2006 charges		6.9			2.7			9.6
Utilized in 2006		(7.7	)		(5.0	)		(12.7	)
Reserve balance as of May 28, 2006		8.1			6.6			14.7
2007 charges		–			(0.9	)		(0.9	)
Utilized in 2007		(4.7	)		(4.8	)		(9.5	)
Reserve balance as of May 27, 2007		3.4			0.9			4.3
2008 charges		20.9			–			20.9
Utilized in 2008		(16.7	)		(0.6	)		(17.3	)
Reserve balance as of May 25, 2008	$	7.6		$	0.3		$	7.9

NOTE 5. INVESTMENTS IN JOINT VENTURES

We have a 50 percent equity interest in CPW which manufactures and markets ready-to-eat cereal products in more than 130 countries and republics outside the United States and Canada. CPW also markets cereal bars in several European countries and manufactures private label cereals for customers in the United Kingdom. We have guaranteed a portion of CPW’s debt and its pension obligation in the United Kingdom. Results from our CPW joint venture are reported as of and for the 12 months ended March 31.

We have 50 percent equity interests in Häagen-Dazs Japan, Inc. and Häagen-Dazs Korea Company Limited. These joint ventures manufacture, distribute, and market Häagen-Dazs ice cream products and frozen novelties. In fiscal 2007, we changed their reporting period to include results through March 31. In previous years, we included results for the twelve months ended April 30. Accordingly, fiscal 2007 results include only 11 months of results from these joint ventures compared to 12 months in fiscal 2008 and fiscal 2006. The impact of this change was not material to our consolidated results of operations, so we did not restate prior periods for comparability.

During the third quarter of fiscal 2008, the 8th Continent soymilk business was sold. Our 50 percent share of the after-tax gain on the sale was $2.2 million, of which we recognized $1.7 million in after-tax earnings from joint ventures in fiscal 2008. We will record an additional after-tax gain of up to $0.5 million in the first quarter of fiscal 2010 if certain conditions are satisfied.

In February 2006, CPW announced a restructuring of its manufacturing plants in the United Kingdom. Our after-tax share of CPW restructuring, impairment, and other exit costs pursuant to approved plans during fiscal 2008 and prior years was as follows:

	Fiscal Year
Expense (Income), in Millions	2008			2007		2006
Gain on sale of property	$	(15.9	)	$	–	$	–
Accelerated depreciation charges and severance associated with previously announced restructuring actions		4.5			8.2		8.0
Other charges resulting from fiscal 2008 restructuring actions		3.2			–		–
Total	$	(8.2	)	$	8.2	$	8.0

During the first quarter of fiscal 2007, CPW acquired the Uncle Tobys cereal business in Australia for $385.6 million. We funded advances and an equity contribution to CPW from cash generated from our international operations, including our international joint ventures.

Our cumulative investment in these joint ventures was $278.6 million at the end of fiscal 2008 and $294.6 million at the end of fiscal 2007. We also have goodwill of $577.0 million associated with our joint ventures. Our investments in these joint ventures include aggregate advances of $124.4 million as of May 25, 2008 and $157.1 million as of May 27, 2007. Our sales to these joint ventures were $12.8 million in fiscal 2008, $31.8 million in fiscal 2007, and $34.8 million in fiscal 2006. We had a net return of capital from the joint ventures of $75.2 million in fiscal 2008 and made net investments of $103.4 million in fiscal 2007 and $7.0 million in fiscal 2006. We received dividends from the joint ventures of $108.7 million in fiscal 2008, $45.2 million in fiscal 2007, and $77.4 million in fiscal 2006.

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Summary combined financial information for the joint ventures on a 100 percent basis follows:

	Fiscal Year
In Millions	2008		2007		2006
Net sales	$	2,404.2	$	2,016.3	$	1,795.2
Gross margin		1,008.4		835.4		770.3
Earnings before income taxes		231.7		167.3		157.4
Earnings after income taxes		190.4		132.0		120.9

In Millions		May 25, 2008		May 27, 2007
Current assets	$	1,021.5	$	815.3
Noncurrent assets		1,002.0		898.1
Current liabilities		1,592.6		1,227.8
Noncurrent liabilities		75.9		81.7

NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS

The components of goodwill and other intangible assets are as follows:

	May 25,			May 27,
In Millions	2008			2007
Goodwill	$	6,786.1		$	6,835.4
Other intangible assets:
Intangible assets not subject to amortization:
Brands		3,745.6			3,681.9
Intangible assets subject to amortization:
Patents, trademarks, and other finite-lived intangibles		44.0			19.2
Less accumulated amortization		(12.4	)		(7.1	)
Total intangible assets subject to amortization		31.6			12.1
Total other intangible assets		3,777.2			3,694.0
Total goodwill and other intangible assets	$	10,563.3		$	10,529.4

The changes in the carrying amount of goodwill for fiscal 2006, 2007, and 2008 are as follows:

							Bakeries
	U.S.						and			Joint
In Millions	Retail			International			Foodservice			Ventures			Total
Balance as of May 29, 2005	$	5,001.8		$	152.2		$	1,201.1		$	329.2		$	6,684.3
Acquisitions		–			15.3			–			–			15.3
Deferred tax adjustment related to Pillsbury acquisition		(41.8	)		–			–			–			(41.8	)
Other activity, primarily foreign currency translation		–			(29.9	)		–			24.1			(5.8	)
Balance as of May 28, 2006		4,960.0			137.6			1,201.1			353.3			6,652.0
Reclassification for customer shift		216.0			–			(216.0	)		–			–
Acquisitions		–			23.4			–			15.0			38.4
Deferred tax adjustment resulting from tax audit settlement		13.1			0.2			3.6			1.1			18.0
Divestitures		–			–			(6.9	)		–			(6.9	)
Other activity, primarily foreign currency translation		13.8			(19.0	)		–			139.1			133.9
Balance as of May 27, 2007		5,202.9			142.2			981.8			508.5			6,835.4
Finalization of purchase accounting		–			(0.3	)		–			(16.3	)		(16.6	)
Adoption of FIN 48		(110.9	)		(10.6	)		(30.4	)		–			(151.9	)
Other activity, primarily foreign currency translation		15.0			15.1			4.3			84.8			119.2
Balance as of May 25, 2008	$	5,107.0		$	146.4		$	955.7		$	577.0		$	6,786.1

During fiscal 2007 as part of our annual goodwill and brand intangible impairment assessments, we reviewed our goodwill and other intangible asset allocations by country within the International segment and our joint ventures. The resulting reallocation of these balances across the countries within this segment and to our joint ventures caused changes in the foreign currency translation of the balances. As a result of these changes in foreign currency translation, we increased goodwill by

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$136.2 million, other intangible assets by $18.1 million, deferred income taxes by $9.2 million, and accumulated other comprehensive income (loss) by the net of these amounts.

At the beginning of fiscal 2007, we shifted selling responsibility for several customers from our Bakeries and Foodservice segment to our U.S. Retail segment. Goodwill of $216.0 million previously reported in our Bakeries and Foodservice segment as of May 28, 2006 has now been recorded in the U.S. Retail segment.

Future purchase price adjustments to goodwill may occur upon the resolution of certain income tax accounting matters.

The changes in the carrying amount of other intangible assets for fiscal 2006, 2007, and 2008 are as follows:

In Millions	U.S. Retail			International		Joint Ventures			Total
Balance as of May 29, 2005	$	3,178.5		$	341.2	$	12.4		$	3,532.1
Other activity, primarily foreign currency translation		(3.0	)		79.0		(1.0	)		75.0
Balance as of May 28, 2006		3,175.5			420.2		11.4			3,607.1
Other intangibles acquired		–			1.3		44.5			45.8
Other activity, primarily foreign currency translation		(0.3	)		39.4		2.0			41.1
Balance as of May 27, 2007		3,175.2			460.9		57.9			3,694.0
Finalization of purchase accounting		–			15.6		16.3			31.9
Other activity, primarily foreign currency translation		–			42.3		9.0			51.3
Balance as of May 25, 2008	$	3,175.2		$	518.8	$	83.2		$	3,777.2

NOTE 7. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT ACTIVITIES

Financial Instruments The carrying values of cash and cash equivalents, receivables, accounts payable, other current liabilities, derivative instruments, and notes payable approximate fair value. Marketable securities are carried at fair value. As of May 25, 2008 and May 27, 2007, a comparison of cost and market values of our marketable debt and equity securities is as follows:

	Cost				Market Value				Gross Gains				Gross Losses
	Fiscal Year				Fiscal Year				Fiscal Year				Fiscal Year
In Millions		2008		2007		2008		2007		2008		2007		2008	2007
Available for sale:
Debt securities	$	20.5	$	17.6	$	20.7	$	17.9	$	0.2	$	0.3		$–	$–
Equity securities		6.1		4.5		14.0		10.4		7.9		5.8		–	–
Total	$	26.6	$	22.1	$	34.7	$	28.3	$	8.1	$	6.1		$–	$–

Earnings include insignificant realized gains from sales of available-for-sale marketable securities. Gains and losses are determined by specific identification. Classification of marketable securities as current or noncurrent is dependent upon management’s intended holding period, the security’s maturity date, or both. The aggregate unrealized gains and losses on available-for-sale securities, net of tax effects, are classified in accumulated other comprehensive income (loss) within stockholders’ equity. Scheduled maturities of our marketable securities are as follows:

	Available for Sale
In Millions		Cost		Market Value
Under 1 year (current)	$	13.0	$	13.3
From 1 to 3 years		0.3		0.3
From 4 to 7 years		1.6		1.5
Over 7 years		5.6		5.6
Equity securities		6.1		14.0
Total	$	26.6	$	34.7

Marketable securities with a market value of $12.6 million as of May 25, 2008 were pledged as collateral for certain derivative contracts.

The fair values and carrying amounts of long-term debt, including the current portion, were $4,926.3 million and $4,790.7 million as of May 25, 2008, and $4,977.8 million and $4,951.7 million as of May 27, 2007. The fair value of long-term debt was estimated using discounted cash flows based on our current incremental borrowing rates for similar types of instruments.

Risk Management Activities As a part of our ongoing operations, we are exposed to market risks such as changes in interest rates,

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foreign currency exchange rates, and commodity prices. To manage these risks, we may enter into various derivative transactions (e.g., futures, options, and swaps) pursuant to our established policies.

Interest Rate Risk We are exposed to interest rate volatility with regard to future issuances of fixed-rate debt, and existing and future issuances of floating-rate debt. Primary exposures include U.S. Treasury rates, London Interbank Offered Rates (LIBOR), and commercial paper rates in the United States and Europe. We use interest rate swaps and forward-starting interest rate swaps to hedge our exposure to interest rate changes, to reduce the volatility of our financing costs, and to achieve a desired proportion of fixed-rate versus floating-rate debt, based on current and projected market conditions. 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.

Floating Interest Rate Exposures – Except as discussed below, floating-to-fixed interest rate swaps are accounted for as cash flow hedges, as are all hedges of forecasted issuances of debt. Effectiveness is assessed based on either the perfectly effective hypothetical derivative method or changes in the present value of interest payments on the underlying debt. Amounts deferred to accumulated other comprehensive income (loss) are reclassified into earnings over the life of the associated debt. The amount of hedge ineffectiveness was less than $1 million in each of fiscal 2008, 2007, and 2006.

Fixed Interest Rate Exposures – Fixed-to-floating interest rate swaps are accounted for as fair value hedges with effectiveness assessed based on changes in the fair value of the underlying debt, using incremental borrowing rates currently available on loans with similar terms and maturities. Effective gains and losses on these derivatives and the underlying hedged items are recorded as net interest. The amount of hedge ineffectiveness was less than $1 million in each of fiscal 2008, 2007, and 2006.

In anticipation of the Pillsbury acquisition and other financing needs, we entered into pay-fixed interest rate swap contracts during fiscal 2001 and 2002 totaling $7.1 billion to lock in our interest payments on the associated debt. As of May 25, 2008, we still owned $1.75 billion of Pillsbury-related pay-fixed swaps that were previously neutralized with offsetting pay-floating swaps in fiscal 2002.

In advance of a planned debt financing in fiscal 2007, we entered into $700.0 million pay-fixed, forward-starting interest rate swaps with an average fixed rate of 5.7 percent. All of these forward-starting interest rate swaps were cash settled for $22.5 million coincident with our $1.0 billion 10-year fixed-rate note debt offering on January 17, 2007. As of May 25, 2008, $19.4 million pre-tax loss remained in accumulated other comprehensive income (loss), which will be reclassified to earnings over the term of the underlying debt.

The following table summarizes the notional amounts and weighted-average interest rates of our interest rate swaps. As discussed above, we have neutralized all of our Pillsbury-related pay-fixed swaps with pay-floating swaps; however, we cannot present them on a net basis in the following table because the offsetting occurred with different counterparties. Average floating rates are based on rates as of the end of the reporting period.

	May 25,			May 27,
In Millions	2008			2007
Pay-floating swaps – notional amount	$	1,879.5		$	1,914.5
Average receive rate		5.8	%		5.8	%
Average pay rate		2.5	%		5.3	%
Pay-fixed swaps – notional amount	$	2,250.0		$	1,762.3
Average receive rate		2.6	%		5.3	%
Average pay rate		6.4	%		7.3	%

The swap contracts mature at various dates from 2009 to 2016 as follows:

	Fiscal Year
	Maturity Date
			Pay
In Millions	Pay Floating		Fixed
2009	$	20.2	$	–
2010		18.9		500.0
2011		17.6		–
2012		1,753.3		1,000.0
2013		14.6		750.0
Beyond 2013		54.9		–
Total	$	1,879.5	$	2,250.0

Foreign Exchange Risk Foreign currency fluctuations affect our net investments in foreign subsidiaries and foreign currency cash flows related primarily to third-party purchases, intercompany loans, and product shipments. We are also exposed to the translation of foreign currency earnings to the U.S. dollar. Our principal

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exposures are to the Australian dollar, British pound sterling, Canadian dollar, Chinese renminbi, euro, Japanese yen and Mexican peso. We primarily use foreign currency forward contracts to selectively hedge our foreign currency cash flow exposures. We generally do not hedge more than 12 months forward. The amount of hedge ineffectiveness was $1 million or less in each of fiscal 2008, 2007, and 2006. We also have many net investments in foreign subsidiaries that are denominated in euros. We hedge a portion of these net investments by issuing euro-denominated commercial paper and foreign exchange forward contracts. As of May 25, 2008, we have issued $472.9 million of euro-denominated commercial paper and foreign exchange forward contracts that we have designated as a net investment hedge and thus deferred net foreign currency transaction losses of $69.6 million to accumulated other comprehensive income (loss).

Commodity Price Risk Many commodities we use in the production and distribution of our products are exposed to market price risks. We use derivatives to hedge price risk for our principal raw materials and energy input costs including grains (wheat, oats, and corn), oils (principally soybean), non-fat dry milk, natural gas, and diesel fuel. We also operate a grain merchandising operation, primarily for wheat and oats. This operation uses futures and options to hedge its net inventory position to minimize market exposure. We manage our exposures through a combination of purchase orders, long-term contracts with suppliers, exchange-traded futures and options, and over-the-counter options and swaps. We offset our exposures based on current and projected market conditions, and generally seek to acquire the inputs at as close to our planned cost as possible. As discussed in Note 2, beginning in fiscal 2008 we do not document our commodity derivatives as accounting hedges and accordingly we record all volatility in unallocated corporate items until we take delivery of the underlying input, when we then transfer the gain or loss on the hedge to segment operating profit. Pursuant to this policy, unallocated corporate items for fiscal 2008 included:

In Millions
Mark-to-market net gains on commodity derivative positions, primarily from agricultural derivatives	$	115.3
Net realized gains on hedge positions reclassified to segment operating profit, primarily agricultural derivatives		(55.7	)
Net gain recognized in unallocated corporate items	$	59.6

As of May 25, 2008, the net notional value of commodity derivatives was $784.8 million, of which $524.8 million relates to agricultural positions and $260.0 million relates to energy positions. These hedges relate to inputs that generally will be utilized within the next 12 months.

Amounts Recorded in Accumulated Other Comprehensive Income (Loss) Unrealized losses from interest rate cash flow hedges recorded in accumulated other comprehensive income (loss) as of May 25, 2008, totaled $39.2 million after tax. These deferred losses are primarily related to interest rate swaps we entered into in contemplation of future borrowings and other financing requirements and are being reclassified into net interest over the lives of the hedged forecasted transactions. As of May 25, 2008, we had no amounts from commodity derivatives recorded in accumulated other comprehensive income (loss). Unrealized losses from foreign currency cash flow hedges recorded in accumulated other comprehensive income (loss) as of May 25, 2008, were less than $1.0 million after-tax. The net amount of pre-tax gains and losses in accumulated other comprehensive income (loss) as of May 25, 2008, that is expected to be reclassified into net earnings within the next 12 months is $16.1 million of expense.

Concentrations of Credit Risk We enter into interest rate, foreign exchange, and certain commodity and equity derivatives, primarily with a diversified group of highly rated counterparties. We continually monitor our positions and the credit ratings of the counterparties involved and, by policy, limit the amount of credit exposure to any one party. These transactions may expose us to potential losses due to the credit risk of nonperformance by these counterparties; however, we have not incurred a material loss and do not anticipate incurring any such material losses. We also enter into commodity futures transactions through various regulated exchanges.

During fiscal 2008, Wal-Mart Stores, Inc. and its affiliates (Wal-Mart), accounted for 19 percent of our consolidated net sales and 27 percent of our sales in the U.S. Retail segment. No other customer accounted for 10 percent or more of our consolidated net sales. Wal-Mart also represented 5 percent of our sales in the International segment and 5 percent of our sales in the Bakeries and Foodservice segment. As of May 25, 2008, Wal-Mart accounted for 23 percent of our U.S. Retail receivables, 4 percent of our International receivables, and 2 percent of our

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Bakeries and Foodservice receivables. The 5 largest customers in our U.S. Retail segment accounted for 57 percent of its fiscal 2008 net sales, the 5 largest customers in our International segment accounted for 26 percent of its fiscal 2008 net sales, and the 5 largest customers in our Bakeries and Foodservice segment accounted for 39 percent of its fiscal 2008 net sales.

NOTE 8. DEBT

Notes Payable The components of notes payable and their respective weighted-average interest rates at the end of the periods were as follows:

	May 25, 2008					May 27, 2007
			Weighted-					Weighted-
			Average					Average
	Notes		Interest			Notes		Interest
In Millions	Payable		Rate			Payable		Rate
U.S. commercial paper	$	687.5		2.9	%	$	476.9		5.4	%
Euro commercial paper		1,386.3		3.4			639.0		5.4
Financial institutions		135.0		9.6			138.5		9.8
Total notes payable	$	2,208.8		3.6	%	$	1,254.4		5.8	%

To ensure availability of funds, we maintain bank credit lines sufficient to cover our outstanding short-term borrowings. Our commercial paper borrowings are supported by $3.0 billion of fee-paid committed credit lines and $403.8 million in uncommitted lines. As of May 25, 2008, there were no amounts outstanding on the fee-paid committed credit lines and $133.8 million was drawn on the uncommitted lines, all by our international operations. Our committed lines consist of a $1.9 billion credit facility expiring in October 2012 and a $1.1 billion credit facility expiring in October 2010.

On October 9, 2007, we entered into a new five-year credit agreement with an initial aggregate revolving commitment of $1.9 billion which is scheduled to expire in October 2012. Concurrent with the execution of the new credit agreement, we terminated our five-year credit agreement dated January 20, 2004, which provided $750.0 million of revolving credit and was scheduled to expire in January 2009, and our amended and restated credit agreement dated October 17, 2006, which provided $1.1 billion of revolving credit and was scheduled to expire in October 2007. We then terminated our credit agreement dated August 3, 2007, which provided an aggregate revolving commitment of $750.0 million and was scheduled to expire on December 6, 2007.

Long-Term Debt On April 11, 2007, we issued $1.15 billion aggregate principal amount of floating-rate convertible senior notes. On April 11, 2008, the holders of those notes put $1.14 billion of the aggregate principal amount to us for repurchase. We issued commercial paper to fund the repurchase.

On March 17, 2008, we sold $750.0 million of 5.2 percent fixed-rate notes due March 17, 2015 and on August 29, 2007, we sold $700.0 million of 5.65 percent fixed-rate notes due September 10, 2012. The proceeds of the notes were used to repay outstanding commercial paper. Interest on the notes is payable semi-annually in arrears. The notes may be redeemed at our option at any time for a specified make-whole amount. The notes are senior unsecured, unsubordinated obligations and contain a change of control provision, as defined in the instruments governing the notes.

On April 25, 2007, we redeemed or converted all of our zero coupon convertible debentures due 2022 for a redemption price equal to the accreted value of the debentures, which was $734.45 per $1,000 principal amount of the debentures at maturity. The redemption price was settled in cash. For the debentures that were converted, we delivered cash equal to the accreted value of the debentures, including $23.3 million of accreted original issue discount, and issued 284,000 shares of our common stock worth $17.0 million to settle the conversion value in excess of the accreted value. This premium was recorded as a reduction to stockholders’ equity, net of the applicable tax benefit. There was no gain or loss associated with the redemption or conversions. We used proceeds from the issuance of commercial paper to fund the redemption and conversions of the debentures.

In January 24, 2007, we issued $1.0 billion of 5.7 percent fixed-rate notes due February 15, 2017 and $500.0 million of floating-rate notes due January 22, 2010. The proceeds of these notes were used to retire $1.5 billion of fixed-rate notes that matured in February 2007. The floating-rate notes bear interest equal to three-month LIBOR plus 0.13 percent, subject to quarterly reset. Interest on the floating-rate notes is payable quarterly in arrears. The floating-rate notes cannot be called by us prior to maturity. Interest on the fixed-rate notes is payable semi-annually in arrears. The fixed-rate notes may be called by us at any time for cash equal to the greater of the principal amounts of the notes and a specified make-whole amount, plus, in each case, accrued

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and unpaid interest. The notes are senior unsecured, unsubordinated obligations. We had previously entered into $700.0 million of pay-fixed, forward-starting interest rate swaps with an average fixed rate of 5.7 percent in anticipation of the fixed-rate note offering.

Our credit facilities and certain of our long-term debt agreements contain restrictive covenants. As of May 25, 2008, we were in compliance with all of these covenants.

As of May 25, 2008, the $61.7 million pre-tax loss recorded in accumulated other comprehensive income (loss) associated with our previously designated interest rate swaps will be reclassified to net interest over the remaining lives of the hedged transactions. The amount expected to be reclassified from accumulated other comprehensive income (loss) to net interest in fiscal 2009 is $16.1 million pre-tax.

A summary of our long-term debt is as follows:

	May 25,			May 27,
In Millions	2008			2007
6% notes due February 15, 2012	$	1,240.3		$	1,240.3
5.7% notes due February 15, 2017		1,000.0			1,000.0
5.2% notes due March 17, 2015		750.0			–
5.65% notes due September 10, 2012		700.0			–
Floating-rate notes due January 22, 2010		500.0			500.0
Medium-term notes, 4.8% to 9.1%, due 2008 to 2078(a)		327.3			327.3
Zero coupon notes, yield 11.1%(b)		150.6			134.8
Debt of contract manufacturer consolidated under FIN 46R		31.8			36.8
Floating-rate convertible senior notes due April 11, 2037		9.5			1,150.0
3.875% notes due November 30, 2007		–			336.3
3.901% notes due November 30, 2007		–			135.0
8.2% ESOP loan guaranty, due June 30, 2007		–			1.4
Other, including capital leases		81.2			89.8
		4,790.7			4,951.7
Less amount due within one year		(442.0	)		(1,734.0	)
Total long-term debt	$	4,348.7		$	3,217.7

(a)	$100.0 million of our medium-term notes may mature in fiscal 2009 based on the put rights of the note holders.
(b)	We are redeeming these notes on August 15, 2008. The final payment on that date will be $154.3 million.

We guaranteed the debt of our Employee Stock Ownership Plan. Therefore, the guaranteed debt was reflected on our Consolidated Balance Sheets as long-term debt, with a related offset in additional paid-in capital in stockholders’ equity. The debt underlying the guarantee was repaid on June 30, 2007.

Principal payments due on long-term debt in the next five years based on stated contractual maturities, our intent to redeem, or put rights of certain note holders are $442.0 million in fiscal 2009, $508.7 million in fiscal 2010, $9.0 million in fiscal 2011, $1,249.5 million in fiscal 2012, and $815.0 million in fiscal 2013.

NOTE 9. MINORITY INTERESTS

In April 2002, we contributed assets with an aggregate fair market value of $4.2 billion to our subsidiary GMC. The contributed assets consist primarily of manufacturing assets and intellectual property associated with the production and retail sale of Big G cereals, Progresso soups, and Old El Paso products in the United States. In exchange for the contribution of these assets, GMC issued its managing membership interest and its limited preferred membership interests to certain of our wholly owned subsidiaries. We continue to hold the managing membership interest, and therefore direct the operations of GMC. Other than the right to consent to certain actions, holders of the limited preferred membership interests do not participate in the management of GMC.

In May 2002, we sold 150,000 Class A Limited Membership Interests (Class A Interests) in GMC to an unrelated third-party investor for $150.0 million. In June 2007, we sold an additional 88,851 Class A Interests to the same unrelated third-party investor for $92.3 million. As of May 25, 2008, the carrying value of all outstanding Class A Interests on our Consolidated Balance Sheets was $242.3 million.

In October 2004, we sold 835,000 Series B-1 Limited Membership Interests (Series B-1 Interests) in GMC to a different unrelated third-party investor for $835.0 million. In August 2007, General Mills Sales, Inc., our wholly owned subsidiary, purchased for a net amount of $843.0 million all of the outstanding Series B-1 Interests as part of a required remarketing of those interests. The purchase price reflected the Series B-1 Interests’ original capital account balance of $835.0 million and $8.0 million of capital account appreciation attributable and paid to the third party holder of the Series B-1 Interests. The capital appreciation paid to the third party holder of the Series B-1 Interests was recorded as a reduction to retained earnings, a component of stockholders’ equity, on the Consolidated Balance Sheets, and reduced net earnings available to common stockholders in our basic and diluted EPS calculations.

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We currently hold all interests in GMC other than the Class A Interests. The terms of the Class A Interests are described in the Fifth Amended and Restated Limited Liability Company Agreement of GMC (the LLC Agreement).

The holder of the Class A Interests receives quarterly preferred distributions from available net income based on the application of a floating preferred return rate, currently equal to the sum of three-month LIBOR plus 65 basis points, to the holder’s capital account balance established in the most recent mark-to-market valuation (currently $248.1 million). The LLC Agreement requires that the preferred return rate of the Class A Interests be adjusted every five years through a negotiated agreement between the Class A Interest holder and GMC, or through a remarketing auction. The next remarketing is scheduled to occur in June 2012 and thereafter in five year intervals. Upon a failed remarketing, the preferred return rate over three-month LIBOR will be increased by 75 basis points until the next remarketing, which will occur in 3 month intervals until a successful remarketing occurs or the managing member purchases the Class A Interests. The managing member may at any time elect to purchase all of the Class A Interests for an amount equal to the holder’s capital account balance (as adjusted in a mark-to-market valuation), plus any accrued but unpaid preferred returns and the prescribed make-whole amount.

Holders of the Class A Interests may initiate a liquidation of GMC under certain circumstances, including, without limitation, the bankruptcy of GMC or its subsidiaries, GMC’s failure to deliver the preferred distributions on the Class A Interests, GMC’s failure to comply with portfolio requirements, breaches of certain covenants, lowering of our senior debt rating below either Baa3 by Moody’s Investors Service or BBB- by Standard & Poor’s, and a failed attempt to remarket the Class A Interests as a result of GMC’s failure to assist in such remarketing. In the event of a liquidation of GMC, each member of GMC will receive the amount of its then current capital account balance. The managing member may avoid liquidation by exercising its option to purchase the Class A Interests.

For financial reporting purposes, the assets, liabilities, results of operations, and cash flows of GMC are included in our Consolidated Financial Statements. The return to the third party investor is reflected in net interest in the Consolidated Statements of Earnings. The third party investor’s interests in GMC are classified as minority interests on our Consolidated Balance Sheets. As discussed above, we may exercise our option to purchase the Class A Interests for consideration equal to the then current capital account value, plus any unpaid preferred return and the prescribed make-whole amount. If we purchase these interests, any change in the unrelated third party investor’s capital account from its original value will be charged directly to retained earnings and will increase or decrease the net earnings used to calculate EPS in that period.

Our minority interests contain restrictive covenants. As of May 25, 2008, we were in compliance with all of these covenants.

General Mills Capital, Inc. was formed in July 2002 for the purpose of purchasing and collecting our receivables and previously sold $150.0 million of its Series A preferred stock to an unrelated third-party investor. In June 2007, we redeemed all of the Series A preferred stock. We used commercial paper borrowings and proceeds from the sale of the additional Class A Interests in GMC to fund the redemption. There was no gain or loss associated with this transaction.

NOTE 10. STOCKHOLDERS’ EQUITY

Cumulative preference stock of 5.0 million shares, without par value, is authorized but unissued.

On December 10, 2007, our Board of Directors approved the retirement of 125.0 million shares of common stock in treasury effective December 10, 2007. This action reduced common stock by $12.5 million, reduced additional paid-in capital by $5,068.3 million, and reduced common stock in treasury by $5,080.8 million on our Consolidated Balance Sheets.

In fiscal 2007, our Board of Directors approved an authorization to repurchase up to 75 million shares of our common stock. This replaced a prior authorization, which permitted us to repurchase shares up to a treasury share balance of 170 million. Purchases under the new authorization can be made in the open market or in privately negotiated transactions, including the use of call options and other derivative instruments, Rule 10b5-1 trading plans, and accelerated repurchase programs. The authorization has no pre-established termination date. During fiscal 2008, we repurchased 23.9 million shares for an aggregate purchase price of $1.4 billion, of which $0.1 million settled after the end of our fiscal year. During fiscal 2007, we repurchased 25.3 million shares for an aggregate purchase price of $1.4 billion, of which $64.4 million settled after the end of our fiscal year. In fiscal 2006, we repurchased 18.8 million shares of common stock for an aggregate purchase price of

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$892.4 million. A total of 39.8 million shares were held in treasury as of May 25, 2008.

In October 2004, Lehman Brothers Holdings Inc. (Lehman Brothers) issued $750.0 million of notes, which were mandatorily exchangeable for shares of our common stock. In connection with the issuance of those notes, an affiliate of Lehman Brothers entered into a forward purchase contract with us, under which we were obligated to deliver to such affiliate between 14.0 million and 17.0 million shares of our common stock, subject to adjustment under certain circumstances. We delivered 14.3 million shares in October 2007, in exchange for $750.0 million in cash from Lehman Brothers. We used the cash to reduce outstanding commercial paper balances.

The forward purchase contract was considered an equity instrument. The $42.6 million fee we paid for the forward purchase contract was recorded as a reduction to stockholders’ equity in fiscal 2005.

The following table provides details of other comprehensive income:

In Millions	Pretax			Tax			Net
Fiscal 2006:
Foreign currency translation	$	72.9		$	–		$	72.9
Minimum pension liability		37.7			(13.7	)		24.0
Other fair value changes:
Securities		2.3			(0.8	)		1.5
Hedge derivatives		(14.5	)		5.4			(9.1	)
Reclassification to earnings:
Hedge derivatives		44.1			(16.1	)		28.0
Other comprehensive income	$	142.5		$	(25.2	)	$	117.3
Fiscal 2007:
Foreign currency translation	$	193.8		$	–		$	193.8
Minimum pension liability		(33.5	)		12.7			(20.8	)
Other fair value changes:
Securities		2.0			(0.7	)		1.3
Hedge derivatives		11.4			(4.9	)		6.5
Reclassification to earnings:
Hedge derivatives		22.8			(8.3	)		14.5
Other comprehensive income	$	196.5		$	(1.2	)	$	195.3
Fiscal 2008:
Foreign currency translation	$	246.3		$	–		$	246.3
Minimum pension liability		61.4			(22.0	)		39.4
Other fair value changes:
Securities		1.5			(0.6	)		0.9
Hedge derivatives		59.6			(21.3	)		38.3
Reclassification to earnings:
Hedge derivatives		(64.5	)		23.5			(41.0	)
Amortization of losses and prior service costs		20.6			(8.1	)		12.5
Other comprehensive income	$	324.9		$	(28.5	)	$	296.4

Except for reclassifications to earnings, changes in other comprehensive income are primarily noncash items.

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Accumulated other comprehensive income (loss) balances, net of tax effects, were as follows:

	May 25,			May 27,
In Millions	2008			2007
Foreign currency translation adjustments	$	648.4		$	402.1
Unrealized gain (loss) from:
Securities		4.8			3.9
Hedge derivatives		(39.2	)		(36.5	)
Pension, other postretirement, and postemployment benefits:
Net actuarial loss		(400.4	)		(448.5	)
Prior service costs		(36.9	)		(40.7	)
Accumulated other comprehensive income (loss)	$	176.7		$	(119.7	)

NOTE 11. STOCK PLANS

We use broad-based stock plans to help ensure that management’s interests are aligned with those of our stockholders. As of May 25, 2008, a total of 10,310,361 shares were available for grant in the form of stock options, restricted shares, restricted stock units, and shares of common stock under the 2007 Stock Compensation Plan (2007 Plan) and the 2006 Compensation Plan for Non-Employee Directors (2006 Director Plan). On September 24, 2007, our stockholders approved the 2007 Plan, replacing the 2005 Stock Compensation Plan (2005 Plan). Restricted shares and restricted stock units may also be granted under our Executive Incentive Plan (EIP) through September 25, 2010. Stock-based awards now outstanding include some granted under the 1993, 1995, 1996, 1998 (senior management), 1998 (employee), 2001, 2003, and 2005 stock plans, under which no further awards may be granted. The stock plans provide for full vesting of options, restricted shares, and restricted stock units upon completion of specified service periods or in certain circumstances, following a change of control. As of May 25, 2008, a total of 5,150,669 restricted shares and restricted stock units were outstanding under all plans.

Stock Options The estimated weighted-average fair values of stock options granted and the assumptions used for the Black-Scholes option-pricing model were as follows:

	Fiscal Year
	2008			2007			2006
Estimated fair values of stock options granted		$10.55			$10.74			$8.04
Assumptions:
Risk-free interest rate		5.1	%		5.3	%		4.3	%
Expected term		8.5 years			8.0 years			7.0 years
Expected volatility		15.6	%		19.7	%		20.0	%
Dividend yield		2.7	%		2.8	%		2.9	%

The valuation of stock options is a significant accounting estimate which requires us to use judgments and assumptions that are likely to have a material impact on our financial statements. Annually, we make predictive assumptions regarding future stock price volatility, employee exercise behavior, and dividend yield.

We estimate our future stock price volatility using the historical volatility over the expected term of the option, excluding time periods of volatility we believe a marketplace participant would exclude in estimating our stock price volatility. For the fiscal 2008 grants, we have excluded historical volatility for fiscal 2002 and prior, primarily because volatility driven by the acquisition of Pillsbury does not reflect what we believe to be expected future volatility. We also have considered, but did not use, implied volatility in our estimate, because trading activity in options on our stock, especially those with tenors of greater than 6 months, is insufficient to provide a reliable measure of expected volatility.

Our expected term represents the period of time that options granted are expected to be outstanding based on historical data to estimate option exercise and employee termination within the valuation model. Separate groups of employees have similar historical exercise behavior and therefore were aggregated into a single pool for valuation purposes. The weighted-average expected term for all employee groups is presented in the table above. Our valuation model assumes that dividends and our share price increase in line with earnings, resulting in a constant dividend yield. The risk-free interest rate for periods during the expected term of the options is based on the U.S. Treasury zero-coupon yield curve in effect at the time of grant.

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Any corporate income tax benefit realized upon exercise or vesting of an award in excess of that previously recognized in earnings (referred to as a “windfall tax benefit”) is presented in the Consolidated Statements of Cash Flows as a financing (rather than an operating) cash flow.

Realized windfall tax benefits are credited to additional paid-in capital within the Consolidated Balance Sheets. Realized shortfall tax benefits (amounts which are less than that previously recognized in earnings) are first offset against the cumulative balance of windfall tax benefits, if any, and then charged directly to income tax expense, potentially resulting in volatility in our consolidated effective income tax rate. We calculated a cumulative memo balance of windfall tax benefits from post-1995 fiscal years for the purpose of accounting for future shortfall tax benefits.

Options may be priced at 100 percent or more of the fair market value on the date of grant, and generally vest four years after the date of grant. Options generally expire within 10 years and one month after the date of grant. Under the 2006 Director Plan, through fiscal 2008 each nonemployee director received upon election and re-election to the Board of Directors options to purchase 10,000 shares of common stock that generally vest one year, and expire within 10 years, after the date of grant. The stock options granted to directors will generally vest one year, and expire within 10 years, after the grant date. Beginning in fiscal 2009, each director will receive stock options valued at $90,000 upon their appointment and each re-election.

Information on stock option activity follows:

			Weighted-					Weighted-
			Average					Average
	Options		Exercise		Options			Exercise
	Exercisable		Price		Outstanding			Price
	(Thousands)		per Share		(Thousands)			per Share
Balance as of May 29, 2005		36,506.1	$	36.08		64,259.4		$	40.68
Granted(a)						135.8			46.56
Exercised						(5,572.5	)		32.99
Forfeited or expired						(619.6	)		45.67
Balance as of May 28, 2006		42,071.9		39.93		58,203.1			41.45
Granted						5,284.9			51.34
Exercised						(9,382.2	)		37.41
Forfeited or expired						(332.6	)		46.11
Balance as of May 27, 2007		39,505.9		41.16		53,773.2			43.09
Granted						5,499.4			58.76
Exercised						(6,135.1	)		37.50
Forfeited or expired						(116.3	)		50.42
Balance as of May 25, 2008		38,194.6	$	42.46		53,021.2		$	45.35

(a) In fiscal 2005, we changed the timing of our annual stock option grant from December to June. As a result, we did not make an annual stock option grant during fiscal 2006.

Stock-based compensation expense related to stock option awards was $52.8 million in fiscal 2008 and $54.0 million in fiscal 2007.

Net cash proceeds from the exercise of stock options less shares used for withholding taxes and the intrinsic value of options exercised were as follows:

	Fiscal Year
In Millions	2008		2007		2006
Net cash proceeds	$	192.0	$	307.0	$	163.2
Intrinsic value of options exercised		134.4		177.3		95.7

Restricted Stock and Restricted Stock Units Stock and units settled in 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 2007 Plan. Restricted shares and restricted stock units, up to 50 percent of the value of an individual’s cash incentive award,

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may also be granted through the EIP. Certain restricted stock and restricted stock unit awards require the employee to deposit personally owned shares (on a one-for-one basis) with us during the restricted period. Restricted stock and restricted stock units generally vest and become unrestricted four years after the date of grant. Participants are entitled to cash dividends on such awarded shares and units, but the sale or transfer of these shares and units is restricted during the vesting period. Participants holding restricted stock, but not restricted stock units, are entitled to vote on matters submitted to holders of common stock for a vote. Under the 2006 Director Plan, through fiscal 2008 each nonemployee director received 1,000 restricted stock units each time he or she was elected to the Board. These units generally vest one year after the date of grant. Beginning in fiscal 2009, each director will receive $90,000 in restricted stock units upon their appointment and each re-election based on the closing stock price of our common stock on the date of the grant.

Information on restricted stock unit activity follows:

				Weighted-Average
	Units (Thousands)			Grant-Date Fair Value
Non-vested as of May 27, 2007		4,785.9		$	48.74
Granted		1,952.2			58.62
Vested		(1,397.9	)		46.92
Forfeited or expired		(189.5	)		53.19
Non-vested as of May 25, 2008		5,150.7		$	52.81

	Fiscal Year
	2008		2007		2006
Number of units granted (thousands)(a)		1,952.2		1,771.2		629.9
Weighted average price per unit	$	58.62	$	51.71	$	49.75

(a) In fiscal 2005, we changed the timing of our annual restricted stock unit grant from December to June.

The total grant-date fair value of restricted stock unit awards that vested during fiscal 2008 was $65.6 million. The total grant-date fair value of restricted stock unit awards that vested during fiscal 2007 was $22.7 million.

As of May 25, 2008, unrecognized compensation costs related to non-vested stock options and restricted stock units was $172.9 million. This cost will be recognized as a reduction of earnings over 22 months, on average.

Stock-based compensation expense related to restricted stock awards was $80.4 million for fiscal 2008, $73.1 million for fiscal 2007, and $44.6 million for fiscal 2006.

NOTE 12. EARNINGS PER SHARE

Basic and diluted EPS were calculated using the following:

	Fiscal Year
In Millions, Except Per Share Data	2008			2007		2006
Net earnings – as reported	$	1,294.7		$	1,143.9	$	1,090.3
Capital appreciation paid on Series B-1 interests in GMC(a)		(8.0	)		–		–
Interest on zero coupon contingently convertible debentures, after tax(b)		–			–		8.6
Net earnings for diluted EPS calculation	$	1,286.7		$	1,143.9	$	1,098.9
Average number of common shares – basic EPS		333.0			346.5		357.7
Incremental share effect from:
Stock options(c)		10.6			10.7		6.1
Restricted stock, restricted stock units, and other(c)		2.8			2.0		2.1
Forward purchase contract(d)		0.5			1.0		–
Zero coupon contingently convertible debentures(b)		–			–		12.9
Average number of common shares – diluted EPS		346.9			360.2		378.8
EPS – Basic	$	3.86		$	3.30	$	3.05
EPS – Diluted	$	3.71		$	3.18	$	2.90

(a)	See Note 9.
(b)	Shares from contingently convertible debentures are reflected using the if-converted method. On December 12, 2005, we completed a consent solicitation and entered into a supplemental indenture related to our zero coupon convertible debentures. We also made an irrevocable election: (i) to satisfy all future obligations to repurchase debentures solely in cash and (ii) to satisfy all future conversions of debentures (a) solely in cash up to an amount equal to the accreted value of the debentures and (b) at our discretion, in cash, stock, or a combination of cash and stock to the extent the conversion value of the debentures exceeds the accreted value. As a result of these actions, no shares of common stock underlying the debentures were considered outstanding after December 12, 2005, for purposes of calculating our diluted EPS. All outstanding debentures were redeemed or converted as of April 25, 2007.
(c)	Incremental shares from stock options, restricted stock, and restricted stock units are computed by the treasury stock method. Stock options and restricted stock units excluded from our computation of diluted EPS because they were not dilutive were as follows:

	Fiscal Year
In Millions	2008		2007		2006
Anti-dilutive stock options and restricted stock units		4.7		6.0		8.1

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(d) On October 15, 2007, we settled a forward purchase contract with Lehman Brothers by issuing 14.3 million shares of common stock.

NOTE 13. RETIREMENT AND POSTEMPLOYMENT BENEFITS

Defined Benefit Pension Plans We have defined benefit pension plans covering most domestic, Canadian, and United Kingdom employees. Benefits for salaried employees are based on length of service and final average compensation. Benefits for hourly employees include various monthly amounts for each year of credited service. Our funding policy is consistent with the requirements of applicable laws. We made $14.2 million of voluntary contributions to these plans in fiscal 2008. Our principal domestic 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.

Other Postretirement Benefit Plans We sponsor plans that provide health-care benefits to the majority of our domestic and Canadian 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. We did not make voluntary contributions to these plans in fiscal 2008. Assumed health care cost trend rates are as follows:

	Fiscal Year
	2008		2007
Health care cost trend rate for next year		9.25% and 10.25%		10.0% and 11.0%
Rate to which the cost trend rate is assumed to decline (ultimate rate)		5.2%		5.2%
Year that the rate reaches the ultimate trend rate		2016		2014/2015

We review our health care cost trend rates annually. Our review is based on data we collect about our health care claims experience and information provided by our actuaries. This information includes recent plan experience, plan design, overall industry experience and projections, and assumptions used by other similar organizations. Our initial health care cost trend rate is adjusted as necessary to remain consistent with this review, recent experiences, and short term expectations. Our current health care cost trend rate assumption is 10.25 percent for retirees age 65 and over and 9.25 percent for retirees under age 65. These rates are graded down annually until the ultimate trend rate of 5.2 percent is reached in 2016 for all retirees. The trend rates are applicable for calculations only if the retirees’ benefits increase as a result of health care inflation. The ultimate trend rate is adjusted annually, as necessary, to approximate the current economic view on the rate of long-term inflation plus an appropriate health care cost premium. Assumed trend rates for health care costs have an important effect on the amounts reported for the other postretirement benefit plans.

A one percentage point change in the health care cost trend rate would have the following effects:

	One		One
	Percentage		Percentage
	Point		Point
In Millions	Increase		Decrease
Effect on the aggregate of the service and interest cost components in fiscal 2009	$	7.6	$	(6.6	)
Effect on the other postretirement accumulated benefit obligation as of May 25, 2008		84.2		(74.3	)

We use our fiscal year end as the measurement date for all our defined benefit pension and other postretirement benefit plans.

Postemployment Benefit Plans Under certain circumstances we also provide accruable benefits to former or inactive employees in the United States, Canada, and Mexico and members of our Board of Directors, including severance and certain other benefits payable upon death. We recognize an obligation for any of these benefits that vest or accumulate with service. Postemployment benefits that do not vest or accumulate with service (such as severance based solely on annual pay rather than years of service) are charged to expense when incurred. Our postemployment benefit plans are unfunded.

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Summarized financial information about defined benefit pension, other postretirement, and postemployment benefits plans is presented below:

							Other
	Defined Benefit						Postretirement						Postemployment
	Pension Plans						Benefit Plans						Benefit Plans
	Fiscal Year						Fiscal Year						Fiscal Year
In Millions	2008			2007			2008			2007			2008			2007
Change in Plan Assets:
Fair value at beginning of year	$	4,097.8		$	3,620.3		$	391.0		$	329.1
Actual return on assets		181.1			625.9			1.9			54.8
Employer contributions		14.2			10.6			–			50.0
Plan participant contributions		3.6			2.8			10.4			9.8
Divestitures/acquisitions		–			2.4			–			–
Benefit payments		(168.0	)		(164.2	)		(53.7	)		(52.7	)
Fair value at end of year	$	4,128.7		$	4,097.8		$	349.6		$	391.0
Change in Projected Benefit Obligation:
Benefit obligation at beginning of year	$	3,257.5		$	2,916.4		$	980.9		$	950.1		$	95.7		$	92.6
Service cost		80.1			73.1			16.4			16.3			5.4			4.8
Interest cost		196.7			185.6			58.8			58.3			3.7			3.9
Plan amendment		1.9			0.2			–			–			–			–
Curtailment/other		(0.6	)		(0.4	)		(0.3	)		–			2.3			11.1
Plan participant contributions		3.6			2.8			10.4			9.8			–			–
Medicare Part D reimbursements		–			–			4.6			5.4			–			–
Actuarial loss (gain)		(147.1	)		244.0			(100.8	)		(4.7	)		11.6			(0.1	)
Benefits payments		(168.0	)		(164.2	)		(58.7	)		(54.3	)		(14.1	)		(16.6	)
Projected benefit obligation at end of year	$	3,224.1		$	3,257.5		$	911.3		$	980.9		$	104.6		$	95.7
Plan assets in excess of (less than) benefit obligation as of fiscal year end	$	904.6		$	840.3		$	(561.7	)	$	(589.9	)	$	(104.6	)	$	(95.7	)

The accumulated benefit obligation for all defined benefit plans was $2,914.8 million as of May 25, 2008 and $3,006.6 million as of May 27, 2007.

Amounts recognized in accumulated other comprehensive income (loss) are as follows:

	Defined Benefit						Other Postretirement						Postemployment
	Pension Plans						Benefit Plans						Benefit Plans						Total
	Fiscal Year						Fiscal Year						Fiscal Year						Fiscal Year
In Millions	2008			2007			2008			2007			2008			2007			2008			2007
Net actuarial loss	$	(276.8	)	$	(280.9	)	$	(115.6	)	$	(166.3	)	$	(8.0	)	$	(1.3	)	$	(400.4	)	$	(448.5	)
Prior service (costs) credits		(34.7	)		(38.5	)		6.9			7.7			(9.1	)		(9.9	)		(36.9	)		(40.7	)
Amounts recorded in accumulated other comprehensive income (loss)	$	(311.5	)	$	(319.4	)	$	(108.7	)	$	(158.6	)	$	(17.1	)	$	(11.2	)	$	(437.3	)	$	(489.2	)

Plans with accumulated benefit obligations in excess of plan assets are as follows:

	Defined Benefit				Other Postretirement				Postemployment
	Pension Plans				Benefit Plans				Benefit Plans
	Fiscal Year				Fiscal Year				Fiscal Year
In Millions	2008		2007		2008		2007		2008		2007
Projected benefit obligation	$	219.2	$	182.4	$	–	$	–	$	–	$	–
Accumulated benefit obligation		185.0		162.7		911.3		980.9		104.6		95.7
Plan assets at fair value		18.9		6.0		349.6		391.0		–		–

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Components of net periodic benefit (income) costs are as follows:

	Defined Benefit									Other Postretirement									Postemployment
	Pension Plans									Benefit Plans									Benefit Plans
	Fiscal Year									Fiscal Year									Fiscal Year
In Millions	2008			2007			2006			2008			2007			2006			2008			2007			2006
Service cost	$	80.1		$	73.1		$	76.0		$	16.4		$	16.3		$	18.1		$	5.4		$	4.8		$	2.6
Interest cost		196.7			185.6			167.1			58.8			58.3			50.0			3.7			3.9			1.5
Expected return on plan assets		(360.6	)		(335.2	)		(323.0	)		(30.3	)		(27.2	)		(24.0	)		–			–			–
Amortization of losses(gains)		22.7			12.5			37.2			15.3			15.6			18.9			(0.2	)		(0.2	)		(0.1	)
Amortization of prior service costs (credits)		7.5			7.8			5.3			(1.4	)		(1.6	)		(1.5	)		2.2			2.2			–
Other adjustments		–			0.2			(0.3	)		–			–			1.9			2.3			19.9			–
Settlement or curtailment losses		0.3			0.2			–			–			–			–			–			–			–
Net (income) expense	$	(53.3	)	$	(55.8	)	$	(37.7	)	$	58.8		$	61.4		$	63.4		$	13.4		$	30.6		$	4.0

We expect to recognize the following amounts in net periodic benefit (income) costs in fiscal 2009:

	Defined Benefit		Other Postretirement			Postemployment
In Millions	Pension Plans		Benefit Plans			Benefit Plans
Amortization of losses	$	7.5	$	7.3		$	1.0
Amortization of prior service costs (credits)		7.4		(1.4	)		2.2

Assumptions Weighted-average assumptions used to determine fiscal year end benefit obligations are as follows:

							Other
	Defined Benefit						Postretirement						Postemployment
	Pension Plans						Benefit Plans						Benefit Plans
	Fiscal Year						Fiscal Year						Fiscal Year
	2008			2007			2008			2007			2008			2007
Discount rate		6.88	%		6.18	%		6.90	%		6.15	%		6.64	%		6.05	%
Rate of salary increases		4.93			4.39			–			–			4.93			4.40

Weighted-average assumptions used to determine fiscal year net periodic benefit (income) costs are as follows:

	Defined Benefit									Other Postretirement									Postemployment
	Pension Plans									Benefit Plans									Benefit Plans
	Fiscal Year									Fiscal Year									Fiscal Year
	2008			2007			2006			2008			2007			2006			2008			2007			2006
Discount rate		6.18	%		6.45	%		5.55	%		6.15	%		6.50	%		5.50	%		6.05	%		6.44	%		5.55	%
Rate of salary increases		4.39			4.40			4.40			–			–			–			4.40			–			–
Expected long-term rate of return on plan assets		9.43			9.40			9.60			9.31			9.30			9.60			–			–			–

Our discount rate assumptions are determined annually as of the last day of our fiscal year for all of the defined benefit pension, other postretirement, and postemployment benefit obligations. Those same discount rates also are used to determine defined benefit pension, other postretirement, and postemployment benefit income and expense for the following fiscal year. We work with our actuaries to determine the timing and amount of expected future cash outflows to plan participants and, using top quartile AA-rated corporate bond yields, to develop a forward interest rate curve, including a margin to that index based on our credit risk. This forward interest rate curve is applied to our expected future cash outflows to determine our discount rate assumptions.

Our expected rate of return on plan assets is determined by our asset allocation, our historical long-term investment performance, our estimate of future long-term returns by asset class (using input from our actuaries, investment services, and investment managers), and long-term inflation assumptions. We review this assumption annually for each plan, however, our annual investment performance for one particular year does not, by itself, significantly influence our evaluation.

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Weighted-average asset allocations for the past two fiscal years for our defined benefit pension and other postretirement benefit plans are as follows:

	Defined Benefit						Other Postretirement
	Pension Plans						Benefit Plans
	Fiscal Year						Fiscal Year
	2008			2007			2008			2007
Asset category:
United States equities		29.1	%		28.6	%		32.6	%		33.6	%
International equities		22.9			23.5			19.1			18.3
Private equities		12.2			10.9			8.9			7.7
Fixed income		24.2			25.7			29.3			30.8
Real assets		11.6			11.3			10.1			9.6
Total		100.0	%		100.0	%		100.0	%		100.0	%

The investment objective for our domestic defined benefit pension and other postretirement benefit plans is to secure the benefit obligations to participants at a reasonable cost to us. Our goal is to optimize the long-term return on plan assets at a moderate level of risk. The defined benefit pension and other postretirement benefit plan portfolios are broadly diversified across asset classes. Within asset classes, the portfolios are further diversified across investment styles and investment organizations. For the defined benefit pension and other postretirement benefit plans, the long-term investment policy allocations are: 30 percent to United States equities; 20 percent to international equities; 10 percent to private equities; 30 percent to fixed income; and 10 percent to real assets (real estate, energy, and timber). The actual allocations to these asset classes may vary tactically around the long-term policy allocations based on relative market valuations.

Contributions and Future Benefit Payments We expect to make contributions of $28.1 million to our defined benefit, other postretirement, and postemployment benefits plans in fiscal 2009. Actual 2009 contributions could exceed our current projections, as influenced by our decision to undertake discretionary funding of our benefit trusts versus other competing investment priorities and future changes in government requirements. Estimated benefit payments, which reflect expected future service, as appropriate, are expected to be paid from fiscal 2009-2018 as follows:

	Defined		Other
	Benefit		Postretirement		Medicare			Postemployment
	Pension		Benefit Plans		Subsidy			Benefit
In Millions	Plans		Gross Payments		Receipts			Plans
2009	$	176.3	$	56.0	$	(6.1	)	$	16.6
2010		182.5		59.9		(6.7	)		17.5
2011		189.8		63.3		(7.3	)		18.1
2012		197.5		67.0		(8.0	)		18.8
2013		206.6		71.7		(8.7	)		19.4
2014 – 2018		1,187.3		406.8		(55.3	)		106.3

Defined Contribution Plans The General Mills Savings Plan is a defined contribution plan that covers salaried and nonunion employees. It had net assets of $2,309.9 million as of May 25, 2008 and $2,303.0 million as of May 27, 2007. This plan is a 401(k) savings plan that includes a number of investment funds and an Employee Stock Ownership Plan (ESOP). We sponsor another savings plan for certain hourly employees with net assets of $16.0 million as of May 25, 2008. Our total recognized expense related to defined contribution plans was $61.9 million in fiscal 2008, $48.3 million in fiscal 2007, and $45.5 million in fiscal 2006.

The ESOP originally purchased our common stock principally with funds borrowed from third parties and guaranteed by us. The ESOP shares are included in net shares outstanding for the purposes of calculating EPS. The ESOP’s third-party debt was repaid on June 30, 2007. The ESOP’s only assets are our common stock and temporary cash balances. The ESOP’s share of the total defined contribution expense was $52.3 million in fiscal 2008, $40.1 million in fiscal 2007, and $37.6 million in fiscal 2006. The ESOP’s expense was calculated by the “shares allocated” method.

The ESOP used our common stock to convey benefits to employees and, through increased stock ownership, to further align employee interests with those of stockholders. We matched a percentage of employee contributions to the General Mills Savings Plan with a base match plus a variable year end match that depended on annual results. Employees received our match in the form of common stock.

Our cash contribution to the ESOP was calculated so as to pay off enough debt to release sufficient shares to make our match. The ESOP used our cash contributions to the plan, plus the dividends received on the ESOP’s leveraged shares, to make

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principal and interest payments on the ESOP’s debt. As loan payments were made, shares became unencumbered by debt and were committed to be allocated. The ESOP allocated shares to individual employee accounts on the basis of the match of employee payroll savings (contributions), plus reinvested dividends received on previously allocated shares. The ESOP incurred net interest of less than $1.0 million in each of fiscal 2007 and 2006. The ESOP used dividends of $2.5 million in fiscal 2007 and $3.9 million in 2006, along with our contributions of less than $1.0 million in each of fiscal 2007 and 2006 to make interest and principal payments.

The number of shares of our common stock allocated to participants in the ESOP was 5.2 million as of May 25, 2008 and 5.4 million as of May 27, 2007.

NOTE 14. INCOME TAXES

The components of earnings before income taxes and after-tax earnings from joint ventures and the corresponding income taxes thereon are as follows:

	Fiscal Year
In Millions	2008		2007			2006
Earnings before income taxes and after-tax earnings from joint ventures:
United States	$	1,624.5	$	1,453.8		$	1,372.5
Foreign		181.6		177.5			186.9
Total earnings before income taxes and after-tax earnings from joint ventures	$	1,806.1	$	1,631.3		$	1,559.4
Income taxes:
Currently payable:
Federal	$	447.7	$	447.7		$	392.2
State and local		52.9		44.4			56.3
Foreign		23.5		42.0			63.9
Total current		524.1		534.1			512.4
Deferred:
Federal		65.9		27.9			38.5
State and local		24.2		9.1			(4.2	)
Foreign		8.0		(11.0	)		(8.4	)
Total deferred		98.1		26.0			25.9
Total income taxes	$	622.2	$	560.1		$	538.3

The following table reconciles the United States statutory income tax rate with our effective income tax rate:

	Fiscal Year
	2008			2007			2006
United States statutory rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefits		3.5			2.6			2.6
Foreign rate differences		(1.2	)		(2.7	)		(0.9	)
U.S. Federal District Court decision, including related interest		(1.7	)		–			–
Other, net		(1.2	)		(0.6	)		(2.2	)
Effective income tax rate		34.4	%		34.3	%		34.5	%

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows:

	May 25,		May 27,
In Millions	2008		2007
Accrued liabilities	$	143.4	$	233.3
Restructuring, impairment, and other exit charges		2.1		4.0
Compensation and employee benefits		526.3		499.2
Unrealized hedge losses		23.8		17.7
Unrealized losses, capital losses, and net operating losses		518.0		611.1
Other		99.2		25.5
Gross deferred tax assets		1,312.8		1,390.8
Valuation allowance		521.5		611.9
Net deferred tax assets		791.3		778.9
Brands		1,279.1		1,277.3
Depreciation		271.9		264.1
Prepaid pension asset		430.3		372.5
Intangible assets		85.8		82.1
Tax lease transactions		74.0		77.0
Other		133.2		71.8
Gross deferred tax liabilities		2,274.3		2,144.8
Net deferred tax liability	$	1,483.0	$	1,365.9

Of the total valuation allowance of $521.5 million, $205.4 million relates to a deferred tax asset for losses recorded as part of the Pillsbury acquisition. In the future, when tax benefits related to these losses are finalized, the reduction in the valuation allowance, if any, will be allocated to reduce goodwill. The change in the valuation allowance was entirely offset by an equal adjustment to the underlying deferred tax asset; however, certain capital losses were recognizable with a similar offset to the valuation allowance as a result of this change. Of the remaining valuation allowance, $219.5 million relates to capital loss carryforwards and

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$93.2 million relates to state and foreign operating loss carryforwards. In the future, if tax benefits are realized related to the operating losses, the reduction in the valuation allowance will generally reduce tax expense. If tax benefits are realized related to capital losses, the amounts will reduce goodwill. As of May 25, 2008, we believe it is more likely than not that the remainder of our deferred tax asset is realizable.

The carryforward periods on our foreign loss carryforwards are as follows: $39.5 million do not expire; $5.0 million expire between fiscal 2009 and fiscal 2010; $26.7 million expire between fiscal 2011 and fiscal 2016; and $18.1 million expire in fiscal 2018.

We have not recognized a deferred tax liability for unremitted earnings of $2.2 billion from our foreign operations because we do not expect those earnings to become taxable to us in the foreseeable future.

We adopted the provisions of FIN 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109,” (FIN 48) as of the beginning of fiscal 2008. Prior to adoption, our policy was to establish reserves that reflected the probable outcome of known tax contingencies. The effects of final resolution, if any, were recognized as changes to the effective income tax rate in the period of resolution. FIN 48 requires application of a more likely than not threshold to the recognition and derecognition of uncertain tax positions. FIN 48 requires us to recognize the amount of tax benefit that has a greater than 50 percent likelihood of being ultimately realized upon settlement. It further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the quarter of such change.

As a result of adoption, we recorded a $218.1 million reduction to accrued tax liabilities, a $151.9 million reduction to goodwill, a $57.8 million increase to additional paid in capital, and an $8.4 million increase to retained earnings at the beginning of fiscal 2008.

The following table sets forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for fiscal 2008. Approximately $157.0 million of this total represents the amount that, if recognized, would affect our effective income tax rate in future periods. This amount differs from the gross unrecognized tax benefits presented in the table because the majority of the liabilities below are the result of acquisition-related tax contingencies. We also would record a decrease in U.S. federal income taxes upon recognition of the state tax benefits included therein.

In Millions
Balance as of May 28, 2007	$	464.9
Tax positions related to current year:
Additions		69.6
Reductions		–
Tax positions related to prior years:
Additions		54.7
Reductions		(36.0	)
Settlements		–
Lapses in statutes of limitations		(18.6	)
Balance as of May 25, 2008	$	534.6

As of May 25, 2008, we have classified approximately $0.4 million of the unrecognized tax benefits as a current liability as these amounts are expected to be paid within the next 12 months. The remaining amount of our unrecognized tax liability was classified in other liabilities.

We report accrued interest and penalties related to unrecognized tax benefits in income tax expense. For fiscal 2008, we recognized a net $15.6 million of tax-related net interest and penalties, and had $107.3 million of accrued interest and penalties as of May 25, 2008.

Annually we file more than 350 income tax returns in approximately 100 global taxing jurisdictions. Management judgment is involved in determining our effective tax rate and in evaluating the ultimate resolution of any uncertain tax positions. We are periodically under examination or engaged in a tax controversy. We establish reserves in a variety of taxing jurisdictions when, despite our belief that our tax return positions are supportable, we believe that certain positions may be challenged and may need to be revised. We adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit. Our effective income tax rate includes the impact of reserve provisions and changes to those reserves. We also provide interest on these reserves at the appropriate statutory interest rate. These interest charges are also included in our effective tax rate.

We do not expect that the amount of our tax reserves will materially change in the next 12 months other than the payment of the amount noted above which is identified as a current liability.

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The number of years with open tax audits varies depending on the tax jurisdiction. Our major taxing jurisdictions include the United States (federal and state) and Canada. We are no longer subject to U.S. federal examinations by the Internal Revenue Service (IRS) for fiscal years before 2002. During fiscal 2008, we received a favorable District Court decision on an uncertain tax matter related to the fiscal years prior to 2002 and reduced our liability for uncertain tax positions by $21.0 million and related accrued interest by $9.7 million. The IRS has appealed the District Court decision, and accordingly, its ultimate resolution is subject to change. During fiscal 2008, we also concluded various matters for fiscal years 1998-2001 which included a payment of $31.7 million. The IRS recently concluded field examinations for our 2002 and 2003 fiscal years. A payment of $24.8 million was made during the first quarter of fiscal 2008 to cover the additional tax liability plus interest related to all agreed adjustments for this audit cycle. The IRS also proposed additional adjustments for the 2002-2003 audit cycle including several adjustments to the tax benefits associated with the sale of minority interests in our GMC subsidiary. We believe we have meritorious defenses and intend to vigorously defend our position. Our potential liability for this matter is significant and, notwithstanding our reserves against this potential liability, an unfavorable resolution could have a material adverse impact on our results of operations and cash flows from operations. The IRS initiated its audit of our fiscal 2004 through 2006 tax years during the first quarter of fiscal 2008.

Various examinations by United States state taxing authorities could be conducted for any open tax year, which vary by jurisdiction, but are generally from 3 to 5 years. Currently, several state examinations are in progress. The Canada Revenue Agency is conducting an audit of our income tax returns in Canada for fiscal years 2003 (which is the earliest tax year still open for examination) through 2005. We do not anticipate that any United States state tax or Canadian tax adjustments will have a significant impact on our financial position, cash flows, or results of operations.

NOTE 15. LEASES AND OTHER COMMITMENTS

An analysis of rent expense by type of property for operating leases follows:

	Fiscal Year
In Millions	2008		2007		2006
Warehouse space	$	49.9	$	46.6	$	43.8
Equipment		28.6		26.7		27.1
Other		43.2		33.8		35.4
Total rent expense	$	121.7	$	107.1	$	106.3

Some operating 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	Operating Leases		Capital Leases
2009	$	94.3	$	5.7
2010		69.4		4.1
2011		51.3		3.9
2012		43.8		3.5
2013		36.9		3.5
After 2013		19.6		3.0
Total noncancelable future lease commitments	$	315.3		23.7
Less: interest				(3.9	)
Present value of obligations under capital leases			$	19.8

These future lease commitments will be partially offset by estimated future sublease receipts of $26.1 million. Depreciation on capital leases is recorded as depreciation expense in our results of operations.

We are contingently liable under guarantees and comfort letters for $670.1 million for the debt and other obligations of consolidated subsidiaries. We also are contingently liable under guarantees and comfort letters of $340.3 million for the debt and other obligations of non-consolidated affiliates, primarily CPW.

We are involved in various claims, including environmental matters, arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters, either individually or in aggregate, will not have a material adverse effect on our financial position or results of operations.

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NOTE 16. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

We operate in the consumer foods industry. We have three operating segments by type of customer and geographic region as follows: U.S. Retail, 66.5 percent of our fiscal 2008 consolidated net sales; International, 18.7 percent of our fiscal 2008 consolidated net sales; and Bakeries and Foodservice, 14.8 percent of our fiscal 2008 consolidated net sales.

Our U.S. Retail segment reflects business with a wide variety of grocery stores, mass merchandisers, membership stores, natural food chains and drug, dollar and discount chains operating throughout the United States. Our major product categories in the United States are ready-to-eat cereals, refrigerated yogurt, ready-to-serve soup, dry dinners, shelf stable and frozen vegetables, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza and pizza snacks, grain, fruit and savory snacks, microwave popcorn, and a wide variety of organic products including soup, granola bars, and cereal.

Our International segment is made up of retail businesses outside of the United States. In Canada, our major product categories are ready-to-eat cereals, shelf stable and frozen vegetables, dry dinners, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza snacks, and grain, fruit and savory snacks. In markets outside the United States and Canada, our product categories include super-premium ice cream, granola and grain snacks, shelf stable and frozen vegetables, dough products, and dry dinners. Our International segment also includes products manufactured in the United States for export, primarily to Caribbean and Latin American markets, as well as products we manufacture for sale to our joint ventures. Revenues from export activities are reported in the region or country where the end customer is located.

In our Bakeries and Foodservice segment, we sell branded cereals, snacks, dinner and side dish products, refrigerated and soft-serve frozen yogurt, frozen dough products, branded baking mixes, and custom food items. Our customers include foodservice distributors and operators, convenience stores, vending machine operators, quick service chains and other restaurants, and business, school and healthcare cafeterias in the United States and Canada. In addition, mixes and unbaked and fully baked frozen dough products are marketed throughout the United States and Canada to retail, supermarket, and wholesale bakeries.

Operating profit for these segments excludes unallocated corporate items, including variances to planned corporate overhead expenses, variances to planned domestic employee benefits and incentives, all stock compensation costs, annual contributions to the General Mills Foundation, and other items that are not part of our measurement of segment operating performance. These include restructuring, impairment, and other exit costs, as well as gains and losses arising from the revaluation of certain grain inventories and gains and losses from mark-to-market valuation of certain commodity positions until passed back to our operating segments in accordance with our internal hedge documentation as discussed in Note 7. These items affecting operating profit are centrally managed at the corporate level and are excluded from the measure of segment profitability reviewed by executive management. Under our supply chain organization, our manufacturing, warehouse, and distribution activities are substantially integrated across our operations in order to maximize efficiency and productivity. As a result, fixed assets and depreciation and amortization expenses are neither maintained nor available by operating segment.

	Fiscal Year
In Millions	2008		2007		2006
Net sales:
U.S. Retail	$	9,072.0	$	8,491.3	$	8,136.3
International		2,558.8		2,123.4		1,837.0
Bakeries and Foodservice		2,021.3		1,826.8		1,738.0
Total	$	13,652.1	$	12,441.5	$	11,711.3
Operating profit:
U.S. Retail	$	1,971.2	$	1,896.6	$	1,801.4
International		268.9		215.7		193.9
Bakeries and Foodservice		165.4		147.8		116.3
Total segment operating profit		2,405.5		2,260.1		2,111.6
Unallocated corporate items		156.7		163.0		122.8
Restructuring, impairment, and other exit costs		21.0		39.3		29.8
Operating profit	$	2,227.8	$	2,057.8	$	1,959.0

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The following table provides financial information by geographic area:

	Fiscal Year
In Millions	2008		2007		2006
Net sales:
United States	$	11,036.7	$	10,258.7	$	9,810.6
Non-United States		2,615.4		2,182.8		1,900.7
Total	$	13,652.1	$	12,441.5	$	11,711.3

	May 25,		May 27,
In Millions	2008		2007
Land, buildings, and equipment:
United States	$	2,617.1	$	2,576.5
Non-United States		491.0		437.4
Total	$	3,108.1	$	3,013.9

NOTE 17. SUPPLEMENTAL INFORMATION

The components of certain Consolidated Balance Sheet accounts are as follows:

	May 25,			May 27,
In Millions	2008			2007
Receivables:
From customers	$	1,098.0		$	969.3
Less allowance for doubtful accounts		(16.4	)		(16.4	)
Total	$	1,081.6		$	952.9

	May 25,			May 27,
In Millions	2008			2007
Inventories:
Raw materials and packaging	$	265.0		$	242.1
Finished goods		1,012.4			898.0
Grain		215.2			111.4
Excess of FIFO or weighted-average cost over LIFO cost(a)		(125.8	)		(78.1	)
Total	$	1,366.8		$	1,173.4

(a) Inventories of $806.4 million as of May 25, 2008, and $805.9 million as of May 27, 2007, were valued at LIFO.

	May 25,		May 27,
In Millions	2008		2007
Prepaid expenses and other current assets:
Prepaid expenses	$	193.5	$	172.3
Accrued interest receivable, including interest rate swaps		103.5		116.7
Derivative receivables, primarily commodity-related		78.2		54.9
Other receivables		105.6		37.6
Current marketable securities		13.3		6.5
Miscellaneous		16.5		55.1
Total	$	510.6	$	443.1

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	May 25,			May 27,
In Millions	2008			2007
Land, buildings, and equipment:
Land	$	61.2		$	60.7
Buildings		1,550.4			1,518.6
Equipment		4,216.4			3,991.7
Assets under capital lease		64.7			23.9
Capitalized software		234.8			225.1
Construction in progress		343.8			275.7
Total land, buildings, and equipment		6,471.3			6,095.7
Less accumulated depreciation		(3,363.2	)		(3,081.8	)
Total	$	3,108.1		$	3,013.9

	May 25,		May 27,
In Millions	2008		2007
Other assets:
Pension assets	$	1,110.1	$	1,018.5
Investments in and advances to joint ventures		278.6		294.6
Life insurance		92.3		92.6
Noncurrent derivative receivables		126.2		34.1
Miscellaneous		143.0		146.9
Total	$	1,750.2	$	1,586.7

	May 25,		May 27,
In Millions	2008		2007
Other current liabilities:
Accrued payroll	$	364.1	$	355.7
Accrued interest		146.8		165.5
Accrued trade and consumer promotions		446.0		410.1
Accrued taxes		66.9		861.2
Derivatives payable		8.1		2.6
Accrued customer advances		17.3		6.8
Miscellaneous		190.6		276.9
Total	$	1,239.8	$	2,078.8

	May 25,		May 27,
In Millions	2008		2007
Other noncurrent liabilities:
Interest rate swaps	$	218.4	$	151.8
Accrued compensation and benefits, including payables for underfunded other postretirement and postemployment benefit plans		1,000.6		988.3
Accrued taxes		628.6		–
Miscellaneous		76.3		89.8
Total	$	1,923.9	$	1,229.9

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Certain Consolidated Statements of Earnings amounts are as follows:

	Fiscal Year
In Millions	2008		2007		2006
Depreciation and amortization	$	459.2	$	417.8	$	423.9
Research and development expense		204.7		191.1		178.4
Advertising and media expense (including production and communication costs)		628.0		543.3		524.0

The components of interest, net are as follows:

	Fiscal Year
Expense (Income), in Millions	2008			2007			2006
Interest expense	$	432.0		$	396.6		$	367.0
Distributions paid on preferred stock and interests in subsidiaries		22.0			63.8			60.5
Capitalized interest		(5.0	)		(2.5	)		(1.1	)
Interest income		(27.3	)		(31.4	)		(26.8	)
Interest, net	$	421.7		$	426.5		$	399.6

Certain Consolidated Statements of Cash Flows amounts are as follows:

	Fiscal Year
In Millions	2008		2007		2006
Cash interest payments	$	436.6	$	406.8	$	378.2
Cash paid for income taxes		444.4		368.8		321.1

NOTE 18. QUARTERLY DATA (UNAUDITED)

Summarized quarterly data for fiscal 2008 and fiscal 2007 follows:

	First Quarter				Second Quarter				Third Quarter				Fourth Quarter
	Fiscal Year				Fiscal Year				Fiscal Year				Fiscal Year
In Millions, Except per Share Amounts	2008		2007		2008		2007		2008		2007		2008		2007
Net sales	$	3,072.0	$	2,860.4	$	3,703.4	$	3,466.6	$	3,405.6	$	3,053.6	$	3,471.1	$	3,060.9
Gross margin		1,156.2		1,063.7		1,331.2		1,279.6		1,354.2		1,071.7		1,032.2		1,071.4
Net earnings		288.9		266.9		390.5		385.4		430.1		267.5		185.2		224.1
EPS:
Basic	$	0.85	$	0.76	$	1.19	$	1.12	$	1.28	$	0.77	$	0.55	$	0.65
Diluted	$	0.81	$	0.74	$	1.14	$	1.08	$	1.23	$	0.74	$	0.53	$	0.62
Dividends per share	$	0.39	$	0.35	$	0.39	$	0.35	$	0.39	$	0.37	$	0.40	$	0.37
Market price of common stock:
High	$	61.52	$	54.21	$	59.67	$	57.25	$	61.40	$	59.23	$	62.50	$	61.11
Low	$	54.17	$	49.27	$	55.52	$	51.50	$	51.43	$	55.51	$	54.50	$	54.57

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Glossary

Average total capital. Notes payable, long-term debt including current portion, minority interests, and stockholders’ equity, excluding accumulated other comprehensive income (loss). The average is calculated using the average of the beginning of fiscal year and end of fiscal year Consolidated Balance Sheet amounts for these line items.

Core working capital. Accounts receivable plus inventories less accounts payable, all as of the last day of our fiscal year.

Derivatives. Financial instruments such as futures, swaps, options, and forward contracts that we use to manage our risk arising from changes in commodity prices, interest rates, foreign exchange rates, and stock prices.

Fixed charge coverage ratio. The sum of earnings before income taxes and fixed charges (before tax), divided by the sum of the fixed charges (before tax) and interest.

Generally Accepted Accounting Principles (GAAP). Guidelines, procedures, and practices that we are required to use in recording and reporting accounting information in our audited financial statements.

Goodwill. The difference between the purchase price of acquired companies and the related fair values of net assets acquired.

Gross margin. Net sales less cost of sales.

Hedge accounting. Accounting for qualifying hedges that allows changes in a hedging instrument’s fair value to offset corresponding changes in the hedged item in the same reporting period. Hedge accounting is permitted for certain hedging instruments and hedged items only if the hedging relationship is highly effective, and only prospectively from the date a hedging relationship is formally documented.

Interest bearing instruments. Notes payable, long-term debt, including current portion, minority interests, cash and cash equivalents, and certain interest bearing investments classified within prepaid expenses and other current assets and other assets.

LIBOR. London Interbank Offered Rate.

Mark-to-market. The act of determining a value for financial instruments, commodity contracts, and related assets or liabilities based on the current market price for that item.

Minority interests. Interests of subsidiaries held by third parties.

Net mark-to-market gains related to hedges on open commodity positions. Realized and unrealized gains and losses on derivative contracts that will be allocated to segment operating profit when the exposure we are hedging affects earnings.

Net price realization. The impact of list and promoted price changes, net of trade and other price promotion costs.

Notional principal amount. The principal amount on which fixed-rate or floating-rate interest payments are calculated.

Operating cash flow to debt ratio. Net cash provided by operating activities, divided by the sum of notes payable and long-term debt, including current portion.

Product rationalization. The elimination of low margin or low demand products in order to direct resources to higher margin or higher demand products.

Reporting unit. An operating segment or a business one level below an operating segment.

Return on average total capital. Net earnings, excluding after-tax net interest, divided by average total capital.

Segment operating profit margin. Segment operating profit divided by net sales.

Supply chain input costs. Costs incurred to produce and deliver product including ingredient and conversion costs, inventory management, logistics, warehousing, and others.

Total debt. Notes payable and long-term debt, including current portion.

Transaction gains and losses. The impact on our Consolidated Financial Statements of foreign exchange rate changes arising from specific transactions.

Translation adjustments. The impact of the conversion of our foreign affiliates’ financial statements to U.S. dollars for the purpose of consolidating our financial statements.

Variable interest entities (VIEs). A legal structure that is used for business purposes that either (1) does not have equity investors that have voting rights and share in all the entity’s profits and losses or (2) has equity investors that do not provide sufficient financial resources to support the entity’s activities.

77

ITEM 9   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A   Controls and Procedures

We, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the 1934 Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of May 25, 2008, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the 1934 Act is (1) recorded, processed, summarized, and reported within the time periods specified in applicable rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the 1934 Act) during our fiscal quarter ended May 25, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of General Mills, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the 1934 Act. The Company’s internal control system was designed to provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial statements. Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of May 25, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.

Based on our assessment using the criteria set forth by COSO in Internal Control – Integrated Framework, management concluded that our internal control over financial reporting was effective as of May 25, 2008.

KPMG LLP, our independent registered public accounting firm, has issued a report on the effectiveness of the Company’s internal control over financial reporting.

K. J. Powell Chairman of the Board and Chief Executive Officer	D. L. Mulligan Executive Vice President and Chief Financial Officer

July 10, 2008

ITEM 9B   Other Information

None.

78

PART III

ITEM 10   Directors, Executive Officers and Corporate Governance

The information contained in the sections entitled “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” contained in our definitive Proxy Statement for our 2008 Annual Meeting of Stockholders is incorporated herein by reference.

Information regarding our executive officers is set forth in Item 1 of this report.

The information regarding our Audit Committee, including the members of the Audit Committee and audit committee financial experts, set forth in the section entitled “Board Committees and Their Functions” contained in our definitive Proxy Statement for our 2008 Annual Meeting of Stockholders, is incorporated herein by reference.

We have adopted a Code of Conduct applicable to all employees, including our principal executive officer, principal financial officer, and principal accounting officer. A copy of the Code of Conduct is available on our website at www.generalmills.com. We intend to post on our website any amendments to our Code of Conduct and any waivers from our Code of Conduct for principal officers.

ITEM 11   Executive Compensation

The information contained in the sections entitled “Executive Compensation” and “Director Compensation and Benefits” in our definitive Proxy Statement for our 2008 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 12   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information contained in the section entitled “Ownership of General Mills Common Stock by Directors, Officers and Certain Beneficial Owners” in our definitive Proxy Statement for our 2008 Annual Meeting of Stockholders is incorporated herein by reference.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides certain information as of May 25, 2008 with respect to our equity compensation plans.

						Number of
						Securities
						Remaining
						Available for
	Number of					Future Issuance
	Securities to					Under Equity
	be Issued upon			Weighted-Average		Compensation
	Exercise of			Exercise Price of		Plans (Excluding
	Outstanding Options,			Outstanding Options,		Securities Reflected
	Warrants and Rights			Warrants and Rights		in Column (a))
Plan Category	(a)			(b)(1)		(c)
Equity compensation plans approved by security holders		43,998,783	(2)	$	46.39		10,310,361	(4)
Equity compensation plans not approved by security holders		14,896,188	(3)	$	42.63		–
Total		58,894,971		$	45.35		10,310,361

79

(1)	Weighted-average exercise prices identified in column (b) do not take into account restricted stock awards or units. Weighted-average term of outstanding options is 4.58 years.
(2)	Includes 38,309,432 stock options, 5,150,669 restricted stock awards or units, and 538,682 restricted stock awards or units that have vested and been deferred. These awards were granted under the following active stockholder-approved plans: 2007 Stock Compensation Plan, 2006 Compensation Plan for Non-Employee Directors, and Executive Incentive Plan; and the following stockholder-approved plans which have been discontinued: 1990 Stock Plan for Non-Employee Directors, Stock Option and Long-Term Incentive Plan of 1993, 1995 Salary Replacement Stock Option Plan, 1996 Compensation Plan for Non-Employee Directors, 1998 Senior Management Stock Plan, 2001 Compensation Plan for Non-Employee Directors, 2003 Stock Compensation Plan, and 2005 Stock Compensation Plan. No future awards may be granted under any of the discontinued plans.
(3)	Includes 14,711,793 stock options and 184,395 restricted stock awards or units that have vested and been deferred. These awards include stock options granted to a broad group of employees in fiscal 2000 and 2002, and grants in lieu of salary increases and certain other compensation and benefits. These awards were granted under our 1998 Employee Stock Plan, which provided for the issuance of stock options, restricted stock and restricted stock units to attract and retain employees, and to align their interests with those of stockholders. The 1998 Employee Stock Plan was discontinued in September 2003, and no future awards may be granted thereunder.
(4)	Includes stock options, restricted stock, restricted stock units, and stock appreciation rights that may be awarded under our 2007 Stock Compensation Plan, which had 9,874,361 shares available for grant at fiscal year end. Also includes stock options and restricted stock units that may be awarded under our 2006 Compensation Plan for Non-Employee Directors, which had 436,000 shares available for grant at fiscal year end. Excludes shares that would be available under the Executive Incentive Plan, based on Company and individual performance subject to certain limits.

ITEM 13   Certain Relationships and Related Transactions, and Director Independence

The information set forth in the sections entitled “Board Independence and Composition” and “Certain Relationships and Related Transactions” contained in our definitive Proxy Statement for our 2008 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 14   Principal Accounting Fees and Services

The information contained in the section entitled “Independent Registered Public Accounting Firm Fees” in our definitive Proxy Statement for our 2008 Annual Meeting of Stockholders is incorporated herein by reference.

80

PART IV

ITEM 15   Exhibits, Financial Statement Schedules

1.    Financial Statements:

The following financial statements are included in Item 8 of this report:

Consolidated Statements of Earnings for the fiscal years ended May 25, 2008, May 27, 2007, and May 28, 2006.

Consolidated Balance Sheets as of May 25, 2008 and May 27, 2007.

Consolidated Statements of Cash Flows for the fiscal years ended May 25, 2008, May 27, 2007, and May 28, 2006.

Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the fiscal years ended May 25, 2008, May 27, 2007, and May 28, 2006.

Notes to Consolidated Financial Statements.

Report of Management Responsibilities.

Report of Independent Registered Public Accounting Firm.

2.    Financial Statement Schedule:

For the fiscal years ended May 25, 2008, May 27, 2007, and May 28, 2006:

II – Valuation and Qualifying Accounts

3.    Exhibits:

Exhibit
No.			Description
	3	.1	Restated Certificate of Incorporation of the Registrant, as amended (incorporated herein by reference to Exhibit 3.1 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 26, 2002).
	3	.2	By-laws of the Registrant, as amended (incorporated herein by reference to Exhibit 3 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 25, 2007).
	4	.1	Indenture, dated as of February 1, 1996, between the Registrant and U.S. Bank Trust National Association (f/k/a First Trust of Illinois, National Association) (incorporated herein by reference to Exhibit 4.1 to Registrant’s Registration Statement on Form S-3 filed February 6, 1996 (File no. 333-00745)).
	4	.2	Indenture, dated as of April 11, 2007, between the Registrant and The Bank of New York Trust Company, N.A. (incorporated herein by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed April 11, 2007).
	4	.3	Fifth Amended and Restated Limited Liability Company Agreement of General Mills Cereals, LLC, dated as of May 25, 2008, by and among GM Cereals Operations, Inc., RBDB, Inc., General Mills Sales, Inc., and GM Cereals Holdings, Inc.

81

Exhibit
No.			Description
	10	.1*	Annual Retainer for Directors (incorporated herein by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed December 16, 2005).
	10	.2*	1998 Employee Stock Plan, as amended (incorporated herein by reference to Exhibit 10.2 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.3*	Amended and Restated Executive Incentive Plan, as amended (incorporated herein by reference to Exhibit 10.3 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.4*	Separation Pay and Benefits Program for Officers, as amended (incorporated herein by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 24, 2008).
	10	.5*	Supplemental Retirement Plan, as amended (incorporated herein by reference to Exhibit 10.6 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 28, 2000).
	10	.6*	Amendment to Supplemental Retirement Plan (incorporated herein by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 26, 2006).
	10	.7*	Executive Survivor Income Plan, as amended (incorporated herein by reference to Exhibit 10.6 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 29, 2005).
	10	.8*	Executive Health Plan, as amended (incorporated herein by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 24, 2002).
	10	.9*	Supplemental Savings Plan, as amended (incorporated herein by reference to Exhibit 10.9 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 28, 2000).
	10	.10*	Amendment to Supplemental Savings Plan (incorporated herein by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 26, 2006).
	10	.11*	1996 Compensation Plan for Non-Employee Directors, as amended (incorporated herein by reference to Exhibit 10.9 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.12*	1995 Salary Replacement Stock Option Plan, as amended (incorporated herein by reference to Exhibit 10.10 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.13*	Deferred Compensation Plan, as amended (incorporated herein by reference to Exhibit 10.11 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.14*	Supplemental Benefits Trust Agreement, amended and restated as of September 26, 1988, between the Registrant and Norwest Bank Minnesota, N.A. (incorporated herein by reference to Exhibit 10.12 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 29, 2005).
	10	.15*	Supplemental Benefits Trust Agreement, dated as of September 26, 1988, between the Registrant and Norwest Bank Minnesota, N.A. (incorporated herein by reference to Exhibit 10.13 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 29, 2005).
	10	.16	Agreements, dated November 29, 1989, by and between the Registrant and Nestle S.A. (incorporated herein by reference to Exhibit 10.15 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 28, 2000).
	10	.17	Protocol and Addendum No. 1 to Protocol of Cereal Partners Worldwide, dated November 21, 1989, between the Registrant and Nestle S.A. (incorporated herein by reference to Exhibit 10.16 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2001).
	10	.18	Addendum No. 2 to the Protocol of Cereal Partners Worldwide, dated March 16, 1993, between the Registrant and Nestle S.A. (incorporated herein by reference to Exhibit 10.18 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 30, 2004).
	10	.19	Addendum No. 3 to the Protocol of Cereal Partners Worldwide, effective as of March 15, 1993, between the Registrant and Nestle S.A. (incorporated herein by reference to Exhibit 10.2 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 28, 2000).
	10	.20*	1990 Salary Replacement Stock Option Plan, as amended (incorporated herein by reference to Exhibit 10.18 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.21*	Stock Option and Long-Term Incentive Plan of 1993, as amended (incorporated herein by reference to Exhibit 10.19 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.22*	1998 Senior Management Stock Plan, as amended (incorporated herein by reference to Exhibit 10.20 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.23*	2001 Compensation Plan for Non-Employee Directors, as amended (incorporated herein by reference to Exhibit 10.21 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).

82

Exhibit
No.			Description
	10	.24*	2003 Stock Compensation Plan, as amended (incorporated herein by reference to Exhibit 10.22 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.25	Five-Year Credit Agreement, dated as of October 21, 2005, among the Registrant, the several financial institutions from time to time party to the agreement, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed October 25, 2005).
	10	.26	Amendment No. 1, dated as of October 9, 2007, to Five-Year Credit Agreement, dated as of October 21, 2005, among the Registrant, the several financial institutions from time to time party to the agreement, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed October 15, 2007).
	10	.27	Five-Year Credit Agreement, dated as of October 9, 2007, among the Registrant, the several financial institutions from time to time party to the agreement, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed October 15, 2007).
	10	.28	Amendment to Credit Agreements, dated as of October 31, 2007, among the Registrant, various financial institutions, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 25, 2007).
	10	.29*	2005 Stock Compensation Plan, as amended (incorporated herein by reference to Exhibit 10.27 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.30*	2006 Compensation Plan for Non-Employee Directors, as amended (incorporated herein by reference to Exhibit 10.30 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.31*	2007 Stock Compensation Plan (incorporated herein by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed September 28, 2007).
	10	.32*	Aircraft Time Sharing Agreement, dated December 12, 2007, between General Mills Sales, Inc. and Kendall J. Powell (incorporated herein by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed December 14, 2007).
	10	.33	Yoplait Manufacturing and Distribution License Agreement, dated September 9, 1977, between the Registrant and Société de Développements et d’Innovations des Marchés Agricoles et Alimentaires, as amended (incorporated herein by reference to Exhibit 10.32 to Registrant’s Annual Report on Form 10-K for the fiscal year ended May 27, 2007).
	10	.34	Ninth Amendment to the Yoplait Manufacturing and Distribution License Agreement, dated December 3, 2007, between SODIMA and the Registrant (incorporated herein by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 24, 2008).
	12	.1	Computation of Ratio of Earnings to Fixed Charges.
	21	.1	List of Subsidiaries of the Registrant.
	23	.1	Consent of Independent Registered Public Accounting Firm.
	31	.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15 of Form 10-K.

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of certain instruments defining the rights of holders of our long-term debt are not filed and, in lieu thereof, we agree to furnish copies to the SEC upon request.

83

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: July 10, 2008	By: /s/  Roderick A. Palmore
	Name:	Roderick A. Palmore
	Title:	Executive Vice President, General Counsel and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  Kendall J. Powell Kendall J. Powell	Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)	July 10, 2008
/s/  Donal L. Mulligan Donal L. Mulligan	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	July 10, 2008
/s/  Richard O. Lund Richard O. Lund	Vice President, Controller (Principal Accounting Officer)	July 10, 2008
/s/  Bradbury H. Anderson Bradbury H. Anderson	Director	July 7, 2008
/s/  Paul Danos Paul Danos	Director	July 9, 2008
/s/  William T. Esrey William T. Esrey	Director	July 7, 2008
/s/  Raymond V. Gilmartin Raymond V. Gilmartin	Director	July 7, 2008
/s/  Judith Richards Hope Judith Richards Hope	Director	July 4, 2008
/s/  Heidi G. Miller Heidi G. Miller	Director	July 7, 2008
/s/  Hilda Ochoa-Brillembourg Hilda Ochoa-Brillembourg	Director	July 7, 2008

84

Signature	Title	Date
/s/  Steve Odland Steve Odland	Director	July 4, 2008
/s/  Lois E. Quam Lois E. Quam	Director	July 9, 2008
/s/  Michael D. Rose Michael D. Rose	Director	July 8, 2008
/s/  Robert L. Ryan Robert L. Ryan	Director	July 7, 2008
/s/  A. Michael Spence A. Michael Spence	Director	July 4, 2008
/s/  Dorothy A. Terrell Dorothy A. Terrell	Director	July 9, 2008

85

GENERAL MILLS, INC. AND SUBSIDIARIES

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

	Fiscal Year
In Millions	2008			2007			2006
Allowance for doubtful accounts:
Balance at beginning of year	$	16.4		$	18.0		$	18.9
Additions charged to expense		12.7			1.9			2.0
Bad debt write-offs		(12.8	)		(1.5	)		(2.9	)
Other adjustments and reclassifications		0.1			(2.0	)		–
Balance at end of year	$	16.4		$	16.4		$	18.0
Valuation allowance for deferred tax assets:
Balance at beginning of year	$	611.9		$	857.7		$	855.4
Additions (benefits) charged to expense and deferred tax asset		8.0			(2.8	)		14.8
Adjustments to acquisition, translation amounts, and other		(98.4	)		(243.0	)		(12.5	)
Balance at end of year	$	521.5		$	611.9		$	857.7
Reserve for restructuring and other exit charges:
Balance at beginning of year	$	4.3		$	14.7		$	17.8
Additions (benefits) charged to expense		20.9			(0.9	)		9.6
Net amounts utilized for restructuring activities		(17.3	)		(9.5	)		(12.7	)
Balance at end of year	$	7.9		$	4.3		$	14.7
Reserve for LIFO valuation:
Balance at beginning of year	$	78.1		$	61.9		$	44.6
Increment		47.7			16.2			17.3
Balance at end of year	$	125.8		$	78.1		$	61.9

86

Exhibit Index

Exhibit No.		Description
	4.3	Fifth Amended and Restated Limited Liability Company Agreement of General Mills Cereals, LLC, dated as of May 25, 2008, by and among GM Cereals Operations, Inc., RBDB, Inc., General Mills Sales, Inc., and GM Cereals Holdings, Inc.
	12.1	Computation of Ratio of Earnings to Fixed Charges.
	21.1	List of Subsidiaries of the Registrant.
	23.1	Consent of Independent Registered Public Accounting Firm.
	31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-4.3

EXHIBIT 4.3

FIFTH AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

GENERAL MILLS CEREALS, LLC,

a Delaware Limited Liability Company

TABLE OF CONTENTS

	Page
TABLE OF CONTENTS		i
SECTION 1. THE COMPANY		1
1.1 Formation; Amendment of Original Limited Liability Company Agreement		1
1.2 Name		3
1.3 Purpose; Powers		3
1.4 Principal Place of Business		4
1.5 Term		4
1.6 Filings; Agent for Service of Process		4
1.7 Title to Assets		5
1.8 Payments of Individual Obligations		5
1.9 Independent Activities; Transactions with Affiliates		5
1.10 Definitions		6
1.11 Other Terms		45
SECTION 2. MEMBERS’ CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS		46
2.1 Initial Capital Contribution		46
2.2 Additional Contributions		48
2.3 Other Matters		48
SECTION 3. ALLOCATIONS		49
3.1 Profits		49
3.2 Losses		51
3.3 Special Allocations		51
3.4 Curative Allocations		57
3.5 Other Allocation Rules		57
3.6 Tax Allocations: Code Section 704(c)		58
3.7 Adjustment of Allocations Upon Conversion of Class A Limited Membership Interests		59
SECTION 4. DISTRIBUTIONS		59
4.1 Amounts Distributed		59
4.2 Amounts Withheld		62
4.3 Limitations on Distributions		62
4.4 Distributions and Payments to Members		62
SECTION 5. MANAGEMENT		62
5.1 Authority of the Managing Member		62
5.2 Duties and Obligations of the Managing Member		63
5.3 Restrictions on Authority of Managing Member		67
5.4 Compensation; Expenses		70
5.5 Indemnification of the Managing Member		70
5.6 Withdrawal		72
5.7 SPE Covenant re Status of Managing Member; Independent Director and Management Limitations		72
5.8 Indemnification by the Managing Member		74
5.9 Portfolio Requirements		74
5.10 Board of Directors		75

i 

	Page
SECTION 6. ROLE OF MEMBERS		76
6.1 Rights or Powers		76
6.2 Voting Rights		76
6.3 Meetings and Consents of the Members		76
6.4 Procedure for Consent		77
6.5 Withdrawal/Resignation		78
6.6 Member Compensation		78
6.7 Indemnification of Limited Members		78
6.8 Members’ Liability		78
6.9 Partition		79
6.10 Transactions Between a Member and the Company		79
SECTION 7. PREFERRED RETURN RESETS AND REMARKETINGS		79
7.1 Class A Preferred Return Rate Reset		79
7.2 Class B Remarketings		83
SECTION 8. REPRESENTATIONS AND WARRANTIES; COVENANTS		88
8.1 In General		88
8.2 Representations and Warranties		88
8.3 Covenant Regarding Tax Matters		91
SECTION 9. ACCOUNTING, BOOKS, AND RECORDS		92
9.1 Accounting, Books, and Records		92
9.2 Reports		93
9.3 Tax Matters		98
SECTION 10. AMENDMENTS		99
10.1 Amendments		99
SECTION 11. TRANSFERS; PURCHASE		100
11.1 Restriction on Transfers		100
11.2 Permitted Transfers		101
11.3 Conditions to Permitted Transfers		102
11.4 Prohibited Transfers		110
11.5 Rights of Unadmitted Assignees		110
11.6 Admission as Substituted Members		111
11.7 Distributions and Allocations in Respect of Transferred Membership Interests		112
11.8 Class A Limited Membership Interest Purchase Option		112
11.9 Purchase of Class B Limited Membership Interests		115
11.10 Form and Transfers of Class B Limited Membership Interests		116
SECTION 12. POWER OF ATTORNEY		117
12.1 Managing Member as Attorney-In-Fact		117
12.2 Nature of Special Power		118
SECTION 13. DISSOLUTION AND WINDING UP		118
13.1 Liquidating Events		118
13.2 Winding Up		119
13.3 Compliance With Certain Requirements of Regulations; Deficit Capital Accounts		120
13.4 Deemed Contribution and Distribution		121
13.5 Rights of Members		121
13.6 Notice of Dissolution		121
13.7 Guaranteed Payments During Period of Liquidation		121

ii 

	Page
13.8 Allocations and Distributions During Period of Liquidation		122
13.9 Character of Liquidating Distributions		122
13.10 The Liquidator		122
13.11 Mark-to-Market Methodology		123
SECTION 14. CLASS A NOTICE EVENTS; PURCHASE OPTIONS		124
14.1 Class A Notice Events		124
14.2 Liquidation Notice		125
SECTION 15. MISCELLANEOUS		125
15.1 Notices		125
15.2 Binding Effect		126
15.3 Construction		126
15.4 Time		126
15.5 Headings		126
15.6 Severability		126
15.7 Incorporation by Reference		126
15.8 Governing Law		127
15.9 Consent to Jurisdiction		127
15.10 WAIVER OF JURY TRIAL		127
15.11 Counterpart Execution		127
15.12 Specific Performance		127
15.13 No Material Impairment		127
15.14 Entire Agreement		128
15.15 No Third Party Beneficiaries		128
15.16 Waiver		128
Valuation of Fixed Assets		2
Valuation of Intellectual Property		3

iii 

EXHIBITS

Exhibit A	Finance Note
Exhibit B	GMI Guaranty
Exhibit C	Permitted Intellectual Property License Agreement
Exhibit D	Permitted PP&E License Agreement
Exhibit E	Transferor Certificate
Exhibit F	Transferee Certificate
Exhibit G	Purchaser’s Letter
Exhibit H	Series B-1 Preferred Certificate
Exhibit I	Series B-2 Preferred Certificate
Exhibit J	Budgeted Capital Expenditures

SCHEDULES

Schedule A	Membership Registry
Schedule B	Baseline Amount
Schedule C	Permitted Liens
Schedule D	Valuation Methodology

iv 

FIFTH AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

GENERAL MILLS CEREALS, LLC

     This FIFTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) is entered into as of the 25^th day of May 2008, by and among GM CEREALS OPERATIONS, INC., a Delaware corporation (“GMCO”), as the Managing Member, RBDB, INC., a Delaware corporation (“RBDB”), as the Class A Limited Member, GENERAL MILLS SALES, INC., a Delaware corporation (“GM Sales”), as a Class B Limited Member, and GM CEREALS HOLDINGS, INC., a Delaware corporation (“Cereals Holdings”), as a Class B Limited Member, pursuant to the provisions of the Act, on the following terms and conditions (capitalized terms used herein without definition shall have the meanings specified in Section 1.10):

SECTION 1.

THE COMPANY

     1.1 Formation; Amendment of Original Limited Liability Company Agreement.

     General Mills Operations, Inc., a Delaware corporation (“GMOI”), The Pillsbury Company, a Delaware corporation (“TPC”), and Cereals Holdings (collectively, the “Original Members”) formed General Mills Cereals, LLC (the “Company”) as a limited liability company under and pursuant to the provisions of the Act and upon the terms and conditions set forth in the Limited Liability Company Agreement of the Company, dated as of April 2, 2002 (the “Original LLC Agreement”). The fact that the Certificate of Formation is on file in the office of the Secretary of State of the State of Delaware shall constitute notice that the Company is a limited liability company. Pursuant to Section 18-201(d) of the Act, the Original LLC Agreement was effective as of the date of the filing of the Certificate of Formation. Simultaneously with the execution of the Original LLC Agreement and the formation of the Company, each of the Original Members was admitted as a member of the Company, and GMOI was admitted as the manager (within the meaning of the Act) of the Company.

     The Original LLC Agreement was amended and restated in its entirety in connection with the sale by TPC to RBDB of a portion of TPC’s Class A Limited Membership Interests, pursuant to the Amended and Restated Limited Liability Company Agreement of General Mills Cereals, LLC, dated as of May 24, 2002 (the “Amended and Restated LLC Agreement”). In addition, GMOI Transferred to GMCO, 100% of the Managing Membership Interest of the Company and GMCO became the manager (within the meaning of the Act) of the Company, as evidenced by that certain Transferor Certificate dated May 24, 2002 by GMOI and that certain Transferee Certificate dated May 24, 2002 by GMCO. Pursuant to the Signature Page Addendum to the Amended and Restated Limited Liability Company Agreement of General Mills Cereals, LLC dated as of May 24, 2002, GMCO became a party to the Amended and Restated LLC Agreement.

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     Pursuant to the First Amendment to the Amended and Restated Limited Liability Company Agreement of General Mills Cereals, LLC dated as of July 24, 2002 (the “First Amendment”), the Amended and Restated LLC Agreement was amended to make technical corrections to certain definitions contained therein. Pursuant to the Second Amendment to the Amended and Restated Limited Liability Company Agreement of General Mills Cereals, LLC entered into as of November 28, 2003 (the “Second Amendment”), the Amended and Restated LLC Agreement was further amended to amend and restate Section 13.1(a)(i).

     The Amended and Restated LLC Agreement was amended and restated in its entirety pursuant to the Second Amended and Restated Limited Liability Company Agreement of General Mills Cereals, LLC, dated as of October 6, 2004 (the “Second Amended and Restated LLC Agreement”) to (i) make further changes to the Amended and Restated LLC Agreement, (ii) convert a portion of the Class A Limited Membership Interests held by TPC into Series B-1 Limited Membership Interests, and (iii) convert the Class B Limited Membership Interests held by Cereals Holdings into Series B-1 Limited Membership Interests and Series B-2 Limited Membership Interests.

     As evidenced by (i) that certain Transferor Certificate dated October 7, 2004 by Cereals Holdings and that certain Transferee Certificate dated October 7, 2004 by GM Class B, (ii) that certain Transferor Certificate dated October 7, 2004 by TPC and that certain Transferee Certificate dated October 7, 2004 by GM Class B, and (iii) Signature Page Addendum to the Second Amended and Restated LLC Agreement, dated as of October 7, 2004, executed by GM Class B, Cereals Holdings and TPC Transferred all of the Series B-1 Limited Membership Interests of the Company to GM Class B and GM Class B was admitted to the Company as a Series B-1 Limited Member and became a party to the Second Amended and Restated LLC Agreement. In order to facilitate the sale by GM Class B of all of the Series B-1 Limited Membership Interests held by GM Class B, the Second Amended and Restated LLC Agreement was amended and restated in its entirety pursuant to the Third Amended and Restated Limited Liability Company Agreement of General Mills Cereals, LLC, dated as of October 8, 2004 (the “Third Amended and Restated LLC Agreement”).

     As evidenced by (i) that certain Purchase Agreement dated October 8, 2004 by GMI, the Company, GM Class B and LBSFI, as amended by that certain Amendment No. 1 to the Purchase Agreement dated October 8, 2004 by GMI, the Company, GM Class B and LBSFI, (ii) that certain Transferor Certificate dated October 8, 2004 by GM Class B and that certain Transferee Certificate dated October 8, 2004 by LBSFI, and (iii) Signature Page Addendum to the Third Amended and Restated LLC Agreement, dated as of October 8, 2004, executed by LBSFI, GM Class B Transferred all of the Series B-1 Limited Membership Interests of the Company to LBSFI and LBSFI was admitted to the Company as a Series B-1 Limited Member and became a party to the Third Amended and Restated LLC Agreement.

     As evidenced by (i) that certain Deposit Trust Agreement dated October 7, 2004 by LBSFI, The Bank of New York (Delaware), and The Bank of New York, as amended by that certain Amendment to the Deposit Trust Agreement, dated as of October 8, 2004, (ii) that certain Transferee Certificate dated October 8, 2004 by Capital Trust, a statutory trust organized under Delaware Law (“Capital Trust”), and (iii) Signature Page Addendum to the Third Amended and Restated LLC Agreement, dated as of October 8, 2004, executed by Capital Trust, LBSFI

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Transferred all of the Series B-1 Limited Membership Interests of the Company to Capital Trust and Capital Trust was admitted to the Company as a Series B-1 Limited Member and became a party to the Third Amended and Restated LLC Agreement.

     As evidenced by that certain Rate Reset Agreement dated May 29, 2007 by the Company, GMCO, RBDB and TPC, the Class A Limited Members agreed upon the Class A Preferred Return Rate for the June 28, 2007 initial Class A Reset Date as required by Section 7.1(b) of the Third Amended and Restated LLC Agreement and made certain related amendments to the Third Amended and Restated LLC Agreement.

     As evidenced by (i) that certain Securities Purchase Agreement dated June 28, 2007 by GMI, TPC, Cereals Holdings, GMOI, GMCO, the Company, IP Holdings I, IP Holdings II, Cereals Properties and RBDB and (ii) that certain Transferor Certificate dated June 28, 2007 by TPC and that certain Transferee Certificate dated June 28, 2007 by RBDB, TPC Transferred all of its Class A Limited Membership Interests to RBDB and RBDB was admitted to the Company in respect of such Class A Limited Membership Interests.

     In order to incorporate the provisions of the Rate Reset Agreement and make certain agreed upon changes to the terms of the Series B-1 Limited Membership Interests, and to make certain other changes to the Third Amended and Restated LLC Agreement, the Third Amended and Restated LLC Agreement was amended and restated in its entirety pursuant to the Fourth Amended and Restated Limited Liability Company Agreement of General Mills Cereals, LLC, dated August 1, 2007 (the “Fourth Amended and Restated LLC Agreement”).

     As evidenced by (i) that certain Transferee Certificate dated August 7, 2007 by GM Sales and (ii) Signature Page Addendum to the Fourth Amended and Restated LLC Agreement, dated as of August 7, 2007, executed by GM Sales, Capital Trust Transferred all of the Series B-1 Limited Membership Interests of the Company to GM Sales and GM Sales was admitted to the Company as a Series B-1 Limited Member and became a party to the Fourth Amended and Restated LLC Agreement.

     In order to reflect the admission of GM Sales to the Company as a Series B-1 Limited Member and make certain other changes to the Fourth Amended and Restated LLC Agreement, the Members have agreed to amend and restate the Fourth Amended and Restated LLC Agreement as set forth in this Agreement. From the date hereof, the rights and liabilities of the Members and Managing Member shall be as provided under the Act, the Certificate of Formation, and this Agreement.

     1.2 Name.

     The name of the Company shall continue to be GENERAL MILLS CEREALS, LLC and all business of the Company shall be conducted in such name or, with the affirmative written consent of all of the Members, under any other name.

     1.3 Purpose; Powers.

     (a) The purposes of the Company are:

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          (i) to acquire, either directly or from the Members, and to own, hold, vote, manage, protect, conserve, assign, sell, or otherwise dispose of, either directly, or indirectly through one or more wholly owned Subsidiaries, the Permitted Assets, all in accordance with this Agreement and the other Transaction Documents;

          (ii) to conduct the Permitted Lines of Business;

          (iii) to receive and, subject to Sections 4 and 13.2, distribute to the Members (A) the proceeds of any sale, lease, license, or any other disposition of the Company’s Permitted Assets received by the Company or (B) any distributions or payments received by the Company; and

          (iv) to do such other things and engage in any other activities that the Managing Member of the Company determines to be necessary, convenient, or incidental to any of the foregoing purposes.

     (b) The Company has the power to do any and all acts necessary, appropriate, proper, advisable, incidental, or convenient to, and in furtherance of, the purposes of the Company set forth in this Section 1.3 and has, without limitation, any and all powers that may be exercised on behalf of the Company by the Managing Member pursuant to Section 5.

     1.4 Principal Place of Business.

     The principal place of business of the Company shall be at c/o GMI, Number One General Mills Boulevard, Minneapolis, Minnesota, 55426. The Managing Member may change the principal place of business of the Company to any other place within or without the State of Delaware with the affirmative written consent of all of the Members. The initial registered office of the Company in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware, 19801.

     1.5 Term.

     The term of the Company commenced on the date the Certificate of Formation was filed in the office of the Secretary of State of the State of Delaware in accordance with the Act and shall continue until the dissolution and the completion of the winding up of the Company in accordance with Section 13. The existence of the Company as a separate legal entity and this Agreement shall continue until the cancellation of the Certificate of Formation in accordance with the Act.

     1.6 Filings; Agent for Service of Process.

     (a) GMOI, or an agent of GMOI, was authorized to execute and cause the Certificate of Formation to be filed in the office of the Secretary of State of the State of Delaware as an authorized person within the meaning of, and otherwise in accordance with, the Act. The Managing Member shall take any and all other actions reasonably necessary to perfect and maintain the status of the Company as a limited liability company under the laws of the State of Delaware, including the preparation, execution, and filing of such amendments to the Certificate

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of Formation and such other assumed name certificates, documents, instruments, and publications as may be required by law, including action to reflect:

          (i) A change in the Company name;

          (ii) A correction of false or erroneous statements in the Certificate of Formation or the desire of the Members to make a change in any statement therein in order that it shall accurately represent the agreement among the Members; or

          (iii) A change in the time for dissolution of the Company as stated in the Certificate of Formation and in this Agreement.

     (b) The Managing Member shall execute and cause to be filed original or amended certificates and shall take any and all other actions as may be reasonably necessary to perfect and maintain the status of the Company as a limited liability company or similar type of entity under the laws of any other jurisdictions in which the Company engages in business.

     (c) The registered agent for service of process on the Company in the State of Delaware shall be The Corporation Trust Company or any successor as appointed by the Members in accordance with the Act.

     (d) Upon the dissolution and completion of the winding up of the Company in accordance with Section 13, the Liquidator, as an authorized person within the meaning of the Act, shall promptly execute and cause to be filed a Certificate of Cancellation in accordance with the Act and the laws of any other jurisdictions in which the Liquidator deems such filing or any similar filing to be necessary or advisable.

     1.7 Title to Assets.

     All Property owned by the Company shall be owned by the Company as an entity, and all Property owned by any Subsidiary of the Company shall be owned by such Subsidiary, and no Member shall have any ownership interest in such assets in its individual name. Each Member’s Interest in the Company shall be personal property for all purposes. The Company shall hold title to all of its assets in the name of the Company, and each Subsidiary of the Company shall hold title to all of its assets in the name of such Subsidiary, and in each case not in the name of any Member.

     1.8 Payments of Individual Obligations.

     The Company’s credit and assets shall be used solely for the benefit of the Company and its Subsidiaries, and no asset of the Company or its Subsidiaries shall be Transferred in satisfaction of, or encumbered for, or in payment of, any individual obligation of any Member.

     1.9 Independent Activities; Transactions with Affiliates.

     (a) The Managing Member (and any Director) shall be required to devote such time to the affairs of the Company as may be necessary properly to manage and operate the Company, but

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otherwise shall be free to serve any other Person or enterprise in any capacity that it may deem appropriate in its discretion.

     (b) Subject to clause (c) of this Section 1.9, insofar as permitted by applicable law, neither this Agreement nor any activity undertaken pursuant hereto shall prevent any Member or its Affiliates from engaging in whatever activities they choose; provided that any such activities may be undertaken without having or incurring any obligation to offer any interest in such activities to the Company or any Member, or require any Member to permit the Company or any other Member or its Affiliates to participate in any such activities, and as a material part of the consideration for the execution of this Agreement by each Member, each Member hereby waives, relinquishes, and renounces any such right or claim of participation.

     (c) Notwithstanding clause (b) of this Section 1.9, the Managing Member shall not, and shall procure that no GMI Entity shall, carry on or be engaged or interested economically or otherwise in any manner whatsoever (whether alone or jointly with another and whether directly or indirectly) in any business which competes with the Cereals Business or the Pet Business.

     (d) To the extent permitted by applicable law, but subject to the provisions of this Agreement and the Transaction Documents, in furtherance of the purposes of the Company set forth in Section 1.3, the Managing Member is hereby authorized to cause the Company to purchase, lease, and license Property (whether real, personal, or mixed) from, sell, lease, and license Property to, or otherwise deal with in ways contemplated by the Transaction Documents, any Member, acting on its own behalf, or any Affiliate of any Member; provided that any such purchase, sale, lease, license, or other transaction shall be made on terms and conditions that are no less favorable to the Company than if the purchase, sale, lease, license, or other transaction had been made with an independent third party.

     (e) Notwithstanding any provision in this Agreement, including Section 1.9(d) and Section 5, the Managing Member or any officer of the Company, on behalf of the Company, is hereby authorized to cause the Company to execute and deliver, and perform its obligations under, the Transaction Documents to which the Company is a party, all without any further action, consent, or approval of any Person.

     1.10 Definitions.

     Unless otherwise specifically stated, the capitalized terms used in this Agreement shall have the following meanings:

     “Act” means the Delaware Limited Liability Company Act, 6 Del. Code Ann. § 18-101, et seq., as amended from time to time (or any corresponding provisions of succeeding law).

     “Adjustable Rate” means, for any Class B Distribution Period during a Floating Rate Period, a rate equal to the highest of LIBOR, the 10-year Treasury CMT and the 30-year Treasury CMT for such Class B Distribution Period.

     “Adjusted Capital Account” means, with respect to any Member, the balance in such Member’s Capital Account as of the end of the relevant Allocation Year, after giving effect to the following adjustments:

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          (i) Credit to such Capital Account any amounts which such Member is deemed obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

          (ii) Debit to such Capital Account the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).

     The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

     “Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Adjusted Capital Account as of the end of the relevant Allocation Year.

     “Affiliate” means, with respect to any specified Person, (i) any Person directly or indirectly controlling, controlled by, or under common control with such specified Person, (ii) any Person, directly or indirectly, owning or controlling ten percent (10%) or more of the outstanding voting interests or other ownership interests of such specified Person, (iii) any Person ten percent (10%) of the outstanding voting stock or other ownership interests of which is, directly or indirectly, owned or controlled by such specified Person, (iv) any officer, director, general partner, managing member or manager, trustee of, or Person serving in a similar capacity with respect to, such specified Person, or (v) any Person who is an officer, director, general partner, managing member or manager, trustee, or holder of ten percent (10%) or more of the voting interests or other ownership interests of any Person described in clauses (i), (ii), (iii), or (iv) of this sentence. For purposes of this definition, the terms “controlling”, “controlled by,” or “under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person or entity, whether through the ownership of voting securities, by contract, or otherwise.

     “Agreement” has the meaning set forth in the preamble.

     “Albuquerque Documents” means (i) the Lease Agreement, dated as of January 15, 1991, by and between the City of Albuquerque, New Mexico and GMI, which has been assigned to GMOI pursuant to the Assignment Agreement (the “First Albuquerque Assignment”), dated May 27, 1996, by and between GMI and GMOI, and which has been further assigned by GMOI to Cereal Properties pursuant to the Second Assignment, dated April 3, 2002, by and between GMOI and Cereals Properties (the “Second Albuquerque Assignment”), (ii) the Indenture, dated January 15, 1991, among the City of Albuquerque, New Mexico, General Mills Products Corp., and Norwest Bank Minnesota, N.A., which has been assigned to GMOI pursuant to the Assignment Agreement, and which has been further assigned to Cereals Properties pursuant to the Second Albuquerque Assignment, and (iii) the Bond Purchase Agreement, dated January 30, 1991, among the City of Albuquerque, New Mexico, General Mills Products, Inc., and GMI, which has been assigned to GMOI pursuant to the First Albuquerque Assignment, and which has been further assigned to Cereals Properties pursuant to the Second Albuquerque Assignment.

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     “Allocation Year” means (i) the period commencing on May 24, 2002 and ending on May 26, 2002, (ii) any subsequent twelve (12) month period commencing on the day after the last day of the prior Allocation Year and ending on the last Sunday of May of each subsequent year, or (iii) any portion of the period described in clauses (i) or (ii) for which the Company is required to allocate Profits, Losses, and other items of Company income, gain, loss, or deduction pursuant to Section 3.

     “Amended and Restated Contract Marketing Agreement” means the Amended and Restated Contract Marketing Agreement, dated May 24, 2002, between the Company and General Mills Marketing, Inc., as (i) amended May 1, 2003 in accordance with the terms thereof and the terms of the Amended and Restated LLC Agreement and (ii) the same may be further amended from time to time in accordance with the terms thereof and hereof.

     “Amended and Restated Contract Operating Agreement” means the Amended and Restated Contract Operating Agreement, dated May 24, 2002, between the Company and GMOI, as the same may be amended from time to time in accordance with the terms thereof and hereof.

     “Amended and Restated Contract Sales Agreement” means the Amended and Restated Contract Sales Agreement, dated May 24, 2002, between the Company and General Mills Sales, Inc., as the same may be amended from time to time in accordance with the terms thereof and hereof.

     “Amended and Restated Employee Seconding Agreement” means the Amended and Restated Employee Seconding Agreement, dated as of May 24, 2002, between the Company and GMI, as the same may be amended from time to time in accordance with the terms thereof and hereof.

     “Amended and Restated LLC Agreement” has the meaning set forth in Section 1.1.

     “Amended and Restated Receivables Purchase and Sale Agreement” means the Second Amended and Restated Receivables Purchase and Sale Agreement, dated as of June 28, 2007, by and between the Company and General Mills Finance, Inc., as the same may be amended from time to time in accordance with the terms thereof and hereof.

     “Amended and Restated Services Agreement” means the Second Amended and Restated Services Agreement, dated as of July 24, 2002, by and among GMI, General Mills Sales, Inc., GMOI, General Mills Services, Inc., General Mills Direct Marketing, Inc., General Mills Missouri, Gardetto’s Bakery, Inc., Lloyd’s Barbeque Company, Small Planet Foods, Inc., General Mills Finance, Inc., General Mills Factoring, LLC, General Mills Marketing, Inc., General Mills Entertainment, Inc., General Mills Properties, Inc., The Pillsbury Company, HDIP, Inc., HD JV Holding Company, The Haagen Dazs Shoppe Company, Inc., The Haagen Dazs International Shoppe Company, Inc., Pet, Progresso Quality Foods Company, TPC-RF, Inc., Roush Products Company, Inc., IP Holdings I, IP Holdings II, Cereals Holdings, Cereals Properties, Cereals Operations, General Mills Capital, Inc., and the Company, as (i) amended on May 1, 2003 in accordance with the terms thereof and the terms of the Amended and Restated LLC Agreement and (ii) the same may be further amended from time to time in accordance with the terms thereof and hereof.

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     “Applicable Class B Credit Spread” means, with respect to the Series B-1 Limited Membership Interests and the Series B-2 Limited Membership Interests, (i) prior to the first successful Class B Optional Remarketing, 1.61% and (ii) thereafter, the percentage determined by the Class B Remarketing Agent in connection with the most recent successful Class B Optional Remarketing.

     “Applicable Tax Rate” means, with respect to any Limited Member for any Allocation Year, the aggregate tax rate (expressed as a percentage) described in clause (i) of Section 8.3(c) hereof.

     “Appraiser 1” has the meaning set forth in Section 13.11(b).

     “Appraiser 2” has the meaning set forth in Section 13.11(b).

     “Appraiser 3” has the meaning set forth in Section 13.11(b).

     “A-Rated Securities” means commercial paper and publicly traded bonds, debentures, or other debt obligations (including municipal bonds and other tax-exempt obligations) of issuers, other than GMI or any of its Affiliates, organized under the laws of the United States or any State that are: (i) commercial paper or other short-term debt rated A-1+ by S&P and P-1 by Moody’s; (ii) medium or long-term debt rated at least A by S&P and A2 by Moody’s; or (iii) readily marketable (A) direct obligations of the Government of the United States, (B) direct obligations of any agency or instrumentality thereof rated AAA by S&P and Aaa by Moody’s, or (C) non-callable, non-amortizing U.S. Dollar-denominated senior debt securities of fixed maturity in book entry form, issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and rated AAA by S&P and Aaa by Moody’s; provided, that all obligations and securities described in clauses (i) through (iii) above (1) are eligible for public sale or other distribution without registration under the Securities Act, (2) will not include any obligations or securities denominated in currency other than Dollars, (3) will not include any obligations or securities the payment or repayment of principal in respect of which is in an amount determined by reference to any formula or index, or which is subject to any contingency, (4) will not include any obligations or securities that require the holder thereof to make advances to, or to purchase additional obligations or securities issued by, the issuer of such obligations or securities after the original date of issuance of such obligations or securities, and (5) have a remaining maturity of not more than one (1) year.

     “Bankruptcy” means, with respect to any Person, a “Voluntary Bankruptcy” or an “Involuntary Bankruptcy.” A “Voluntary Bankruptcy” means, with respect to any Person (i) the inability of such Person generally to pay its debts as such debts become due, or an admission in writing by such Person of its inability to pay its debts generally or a general assignment by such Person for the benefit of creditors, (ii) the filing of any petition or answer by such Person seeking to adjudicate itself as bankrupt or insolvent, or seeking for itself any liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of such Person or its debts under any law relating to bankruptcy, insolvency, or reorganization or relief of debtors, or seeking, consenting to, or acquiescing in the entry of an order for relief or the appointment of a receiver, trustee, custodian, or other similar official for such Person or for any substantial part of its property, or (iii) action taken by such Person to

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authorize any of the actions set forth above. An “Involuntary Bankruptcy” means, with respect to any Person, without the consent or acquiescence of such Person, the entering of an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or other similar relief under any present or future bankruptcy, insolvency, or similar statute, law, or regulation, or the filing of any such petition against such Person, which petition shall not be dismissed within sixty (60) days, or without the consent or acquiescence of such Person, the entering of an order appointing a trustee, custodian, receiver, or liquidator of such Person or of all or any substantial part of the property of such Person, which order shall not be dismissed within sixty (60) days. The foregoing is intended to supersede and replace the events listed in Sections 18-101 and 18-304 of the Act with respect to any Member.

     “Benchmark Rates” means, collectively, the LIBOR, the 10-year Treasury CMT and the 30-year CMT.

     “Bid” means an irrevocable offer to purchase in any Class A Remarketing all but not a portion of the outstanding Class A Limited Membership Interests at a price per Class A Limited Membership Interest equal to the Class A Mandatory Purchase Price with the applicable Class A Preferred Return Rate equal to the Bid Rate specified in such Bid.

     “Bid Rate” means a rate per annum equal to (i) the LIBOR in effect from time to time plus (ii) a spread, where such spread is proposed by bidders in connection with a Class A Remarketing and made with respect to the Preferred Return Capital amount set forth in the Class A Remarketing Notice.

     “Board of Directors” has the meaning set forth in Section 5.10(a).

     “Board Triggering Event” has the meaning set forth in Section 5.10(a).

     “Budgeted Capital Expenditures” means the capital expenditures set forth on Exhibit J.

     “Buffalo Lease” means the Master Lease Agreement, dated as of April 2, 2002, by and between General Mills Properties, Inc., as lessor, and the Company, as lessee, as amended pursuant to the First Amendment to Master Lease Agreement, dated as of May 24, 2002, by and between General Mills Properties, Inc. and the Company.

     “Business Day” means any day that is not a Saturday, a Sunday, or a day on which banking institutions located in New York, New York, or Minneapolis, Minnesota are authorized or obligated by law to close.

     “Calendar Period” means a period of 180 calendar days.

     “Capital Account” means, with respect to any Member of the Company, the Capital Account maintained for such Member in accordance with the following provisions:

          (i) To each Member’s Capital Account there shall be credited (A) such Member’s Capital Contributions, (B) such Member’s distributive share of Profits and any items in the nature of income or gain that are specially allocated to such Member pursuant to

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Sections 3.3 or 3.4, and (C) the amount of any Company liabilities assumed by such Member or that are secured by any Property distributed to such Member;

          (ii) To each Member’s Capital Account there shall be debited (A) the amount of Cash and the Gross Asset Value of any Company Property distributed to such Member pursuant to any provision of this Agreement, (B) such Member’s distributive share of Losses and any items in the nature of deduction, expense, or loss which are specially allocated to such Member pursuant to Sections 3.3 or 3.4, and (C) the amount of any liabilities of such Member assumed by the Company or that are secured by any Property contributed by such Member to the Company;

          (iii) In the event an Interest is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the Transferred Interest; and

          (iv) In determining the amount of any liability for purposes of subparagraphs (i) and (ii) above there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations.

     The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Managing Member shall determine in good faith and on a commercially reasonable basis that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto are computed in order to comply with such Regulations, the Managing Member may make such modification; provided that the Managing Member shall promptly give each other Member written notice of such modification. The Managing Member also shall, in good faith and on a commercially reasonable basis, (i) make any adjustments to the Capital Accounts that are necessary or appropriate to maintain equality between the aggregate Capital Accounts of the Members and the amount of capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate modifications to the Capital Accounts in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).

     “Capital Contributions” means, with respect to any Member of the Company, the amount of Cash and the initial Gross Asset Value of any Property (other than Cash) contributed to the Company by such Member.

     “Capital Lease Obligations” means, with respect to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

     “Capital Trust” means the trust established pursuant to that certain Deposit Trust Agreement (the “Capital Trust Agreement”), dated as of October 8, 2004, among Lehman

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Brothers Special Financing Inc., as Depositor, Lehman Brothers Inc., as Broker-Dealer, The Bank of New York (Delaware), as Delaware trustee, and The Bank of New York, as Owner Trustee.

     “Capital Trust Agreement” has the meaning set forth in the definition of “Capital Trust.”

     “Cash” means funds denominated in United States currency.

     “Cash Available for Distribution” means, for any Class A Distribution Period, Class B Distribution Period, or Managing Member Distribution Period, the gross Cash proceeds of the Company less the portion thereof used to pay or establish reasonable reserves for all Company Expenses (including Taxes), all as determined by the Managing Member in good faith and in its commercially reasonable judgment. Cash Available for Distribution will not be reduced by Depreciation or similar non-Cash allowances, and will be increased by any reductions of reserves previously established pursuant to the first sentence of this definition.

     “Cash Equivalents” shall mean Cash and any of the following: (i) readily marketable (x) direct obligations of the Government of the United States or (y) direct obligations of any agency or instrumentality thereof rated AAA by S&P and Aaa by Moody’s or (ii) insured certificates of deposit of or time or demand deposits with any commercial bank that is a member of the Federal Reserve System, the parent of which issues commercial paper rated P-1 (or the then equivalent grade) by Moody’s and A-1+ (or the then equivalent grade) by S&P, is organized under the laws of the United States or any State thereof and the long term unsecured debt of which is rated A2 or better by Moody’s and A or better by S&P; provided that all obligations and securities described in clauses (i) and (ii) above (1) will not have an original maturity of longer than ninety (90) days, (2) will not include any obligations or securities denominated in a currency other than Dollars, (3) will not include any obligations or securities that provide for the extension of the original stated maturity thereof without the consent of any holder thereof affected thereby, (4) will not include any obligations or securities the payment or repayment of principal in respect of which is an amount determined by reference to any formula or index, or which is subject to any contingency, (5) will not include any obligations or securities that require the holder thereof to make advances to, or to purchase additional obligations or securities issued by, the issuer of such obligations or securities after the original date of issuance of such obligations or securities, and (6) will not include any obligation of or security issued by GMI or any of its Affiliates.

     “Cash Flow” means, for any period with respect to the Company and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) the excess, if any, of (i) the sum of (A) net income (or net loss) and (B) the sum of (1) Taxes deducted in determining net income (or net loss) under GAAP, (2) interest expense deducted (net of interest income received) in determining net income (or net loss) under GAAP, (3) depreciation and amortization expense and other non-cash expenses, and (4) decreases in working capital, over (ii) the sum of (A) Taxes actually paid and (B) capital expenditures, charitable contributions, and increases in working capital.

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     “Cereals Business” means the manufacture and sale by the Company and its Subsidiaries of packaged cereals products, other than organic cereal products, for sale in the United States, directly or indirectly, to consumers, other than in connection with the Food Service Business.

     “Cereals Holdings” has the meaning set forth in the preamble.

     “Cereals Properties” means General Mills Cereals Properties, LLC, a Delaware limited liability company.

     “Cereals Properties Interest” means 100% of the limited liability company interest in Cereals Properties.

     “Certificate of Cancellation” means a certificate filed in accordance with 6 Del. Code Ann. § 18-203.

     “Certificate of Formation” means the Certificate of Formation filed with the Secretary of State of the State of Delaware pursuant to the Act to form the Company, as originally executed and as amended, modified, supplemented, or restated from time to time, as the context requires.

     “Class A Adjustment Factor” means (a) for any Class A Distribution Period or portion thereof occurring during the period beginning on and including May 24, 2002 and ending on and including the day before the initial Class A Reset Date, (i) 96.5%, in the case of Class A Limited Membership Interests owned by RBDB during any such Class A Distribution Period and (ii) 100.0%, in the case of the Class A Limited Membership Interests owned by TPC during any such Class A Distribution Period and (b) thereafter, 100.0%.

     “Class A Distribution Date” means the last Business Day of any Fiscal Quarter occurring prior to the Fiscal Quarter in which a Liquidating Event occurs.

     “Class A Distribution Period” means the applicable period from (and including) a Class A Distribution Date to (but excluding) the next subsequent Class A Distribution Date.

     “Class A Limited Member” means (i) RBDB (unless it has ceased to be a Class A Limited Member) (ii) TPC (during the period it was a Class A Limited Member), and (iii) any Person who has become a substituted Class A Limited Member pursuant to the terms of this Agreement and has not ceased to be a Class A Limited Member.

     “Class A Limited Member Preferred Return” means, with respect to any Class A Limited Member, the return that will accrue during each Class A Distribution Period or portion thereof (if such Class A Distribution Period is a Floating Rate Period, computed using the actual number of days elapsed over a 360 day year, and if such Class A Distribution Period is a Fixed Rate Period, computed on the basis of a 360-day year of twelve 30-day months) on the amount of such Class A Limited Member’s Preferred Return Capital during such Class A Distribution Period, at a rate per annum equal to the applicable Class A Preferred Return Rate.

     “Class A Limited Membership Interests” has the meaning set forth in Section 2.1(a).

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     “Class A Mandatory Purchase Price” means, with respect to a Class A Remarketing, an amount per Class A Limited Membership Interest determined pursuant to Section 7.1(d)(i) and set forth in the Class A Remarketing Notice.

     “Class A Mandatory Remarketing” has the meaning set forth in Section 7.1(b).

     “Class A Mandatory Remarketing Date” means the date on which a Class A Mandatory Remarketing is conducted.

     “Class A Notice Events” has the meaning set forth in Section 14.1.

     “Class A Preferred Return Rate” means, with respect to the Class A Limited Membership Interests,

          (i)  for any Class A Distribution Period or portion thereof occurring during the period beginning May 24, 2002 and ending on the initial Class A Reset Date and during which the Class A Limited Preferred Return is stated herein to accrue, a rate per annum equal to (a) the sum of (x) the LIBOR for the Fiscal Quarter or portion thereof constituting such Class A Distribution Period or portion thereof plus (y) the Class A Spread then in effect, divided by (b) the Class A Adjustment Factor, and

          (ii)  for any Class A Distribution Period or portion thereof occurring after the initial Class A Reset Date during which the Class A Limited Member Preferred Return is stated herein to accrue, a rate per annum equal to the sum of (a) the LIBOR for the Fiscal Quarter or portion thereof constituting such Class A Distribution Period or portion thereof plus (b) the Class A Spread then in effect.

     “Class A Purchase” means a purchase of the Class A Limited Membership Interests pursuant to Section 11.8.

     “Class A Purchase Date” has the meaning set forth in Section 11.8(d)(ii)(A).

     “Class A Purchase Election Date” has the meaning set forth in Section 11.8(b).

     “Class A Purchase Notice” has the meaning set forth in Section 11.8(a).

     “Class A Purchase Option” has the meaning set forth in Section 11.8(a).

     “Class A Purchase Premium” means amounts that would have accrued as Class A Limited Member Preferred Return on the Preferred Return Capital attributable to the Class A Limited Membership Interests being purchased (without regard to Undistributed Preferred Return included therein) for the period from and including the Class A Purchase Date to but excluding the next occurring Class A Reset Date if such amounts were to accrue at a rate per annum equal to 0.25% (computed on the basis of a year of 360 days and actual days elapsed).

     “Class A Purchase Price” has the meaning set forth in Section 11.8(c).

     “Class A Purchase Valuation Date” has the meaning set forth in Section 11.8(c).

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     “Class A Remarketing” means a Class A Mandatory Remarketing or a Class B Interim Remarketing.

     “Class A Remarketing Agent” means, with respect to any Class A Remarketing, a remarketing agent selected by the Company that would qualify as a Reference Corporate Dealer.

     “Class A Remarketing Agreement” means a remarketing agreement to be entered into by the Company and the Class A Remarketing Agent on such terms as are customary in the remarketing of securities such as the Class A Limited Membership Interests, and including a Class A Remarketing Fee acceptable to the Company.

     “Class A Remarketing Fee” means the fee due to the Class A Remarketing Agent under the Class A Remarketing Agreement.

     “Class A Remarketing Notice” has the meaning set forth in Section 7.1(c)(i).

     “Class A Reset Date” means, with respect to the Class A Limited Membership Interests, (i) June 28, 2007 and (ii) thereafter, July 15, 2012 and each 60-month anniversary of such date; provided that if such anniversary is not a Business Day, the Class A Reset Date shall be the first Business Day preceding such anniversary.

     “Class A Spread” means (i) for any Class A Distribution Period or portion thereof occurring during the period beginning on and including October 6, 2004 and ending on and including the day before the initial Class A Reset Date, a rate per annum equal to 0.90%, (ii) for any Class A Distribution Period or portion thereof occurring during the period beginning on and including the initial Class A Reset Date and ending on and including the day before the second Class A Reset Date, a rate per annum equal to 0.65%, and (iii) for any subsequent Class A Distribution Period, the rate per annum determined pursuant to Section 7.1.

     “Class B Distribution Date” means January 15, April 15, July 15 and October 15 of each year; provided that, if such Class B Distribution Date is not a Business Day, payment shall be made on the next succeeding Business Day; and, provided, further, that no Class B Distribution Date shall occur after the date on which a Liquidating Event occurs.

     “Class B Distribution Period” means the applicable period from (and including) a Class B Distribution Date to (but excluding) the next subsequent Class B Distribution Date.

     “Class B Exchange” means any exchange of Class B Limited Membership Interests for preferred stock of GMI pursuant to the terms of the Exchange Agreement.

     “Class B Limited Member” means a Series B-1 Limited Member or a Series B-2 Limited Member, as the case may be.

     “Class B Limited Member Preferred Return” means the Series B-1 Limited Member Preferred Return or the Series B-2 Limited Member Preferred Return, as the case may be.

     “Class B Limited Membership Interests” has the meaning set forth in Section 2.1(a).

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     “Class B Mandatory Purchase Price” means, with respect to a Class B Remarketing of any Series of Class B Limited Membership Interests held by any Class B Limited Member, an amount per Class B Limited Membership Interest being remarketed determined pursuant to Section 7.2(b) and set forth in the Class B Remarketing Notice.

     “Class B Interim Remarketing” has the meaning set forth in Section 7.2(a).

     “Class B Notice of Election” has the meaning set forth in Section 7.2(c)(i).

     “Class B Optional Remarketing” has the meaning set forth in Section 7.2(a).

     “Class B Optional Remarketing Date” means any date on which a Class B Optional Remarketing is conducted.

     “Class B Preferred Distribution” means any amount distributable to a Class B Limited Member pursuant to Section 4.1(a)(ii) with respect to any Series of Class B Limited Membership Interests.

     “Class B Purchase” means a purchase of Class B Limited Membership Interests pursuant to Section 11.9.

     “Class B Purchase Date” has the meaning set forth in Section 11.9(d).

     “Class B Purchase Election Date” has the meaning set forth in Section 11.9(b).

     “Class B Purchase Notice” has the meaning set forth in Section 11.9(a).

     “Class B Purchase Option” has the meaning set forth in Section 11.9(a).

     “Class B Purchase Price” has the meaning set forth in Section 11.9(c).

     “Class B Purchase Valuation Date” has the meaning set forth in Section 11.9(c).

     “Class B Remarketing” means a Class B Optional Remarketing or a Class B Interim Remarketing.

     “Class B Remarketing Agent” means (1) solely with respect to the initial Class B Optional Remarketing, Lehman Brothers Inc. as exclusive remarketing agent until such time as Lehman Brothers Inc. resigns or is removed in accordance with the Class B Remarketing Agreement entered into by Lehman Brothers Inc. and the Company, and (ii) with respect to any other Class B Remarketing, any Person that would qualify as a Reference Corporate Dealer, selected by the Company with the consent of holders of Series B-1 Limited Membership Interests representing at least two-thirds of any outstanding Series B-1 Limited Membership Interests that are held by holders other than GMI and its Affiliates.

     “Class B Remarketing Agreement” means a remarketing agreement to be entered into by the Company and the Class B Remarketing Agent on such terms as are customary in the

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remarketing of securities such as the Series B-1 Limited Membership Interests, and including a Class B Remarketing Fee acceptable to the Company.

     “Class B Remarketing Date” means any Business Day no later than the third Business Day prior to any Class B Settlement Date.

     “Class B Remarketing Election Date” has the meaning set forth in Section 7.2(b).

     “Class B Remarketing Fee” means the fee due to the Class B Remarketing Agent under the Class B Remarketing Agreement.

     “Class B Remarketing Notice” has the meaning set forth in Section 7.2(b).

     “Class B Reset Date” has the meaning set forth in Section 7.2(a).

     “Class B Settlement Date” has the meaning set forth in Section 7.2(b).

     “Code” means the United States Internal Revenue Code of 1986, as amended from time to time or any successor legislation.

     “Combined Receivables Purchase and Sale Agreement” means the Receivables Purchase and Sale Agreement, dated as of July 24, 2002, by and among General Mills Finance, Inc., General Mills Sales, Inc., and the Company, as the same may be amended from time to time in accordance with the terms thereof and hereof.

     “Company” has the meaning set forth in Section 1.1.

     “Company Minimum Gain” has the same meaning as “partnership minimum gain” set forth in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

     “Conveyance Agreements” means (i) the Stock Transfer Agreement, dated as of April 2, 2002, by and between GMI and Popcorn Distributors, Inc., (ii) the Contribution Agreement, dated as of April 2, 2002, by and between GMI and IP Holdings I, (iii) the Contribution Agreement, dated as of April 2, 2002, by and between GMI and IP Holdings II, (iv) the Contribution Agreement, dated as of April 2, 2002, by and between GMOI and Cereals Properties, (v) the Subscription Agreement, dated as of April 2, 2002, by and between GMI and Cereals Holdings, (vi) the Transfer Agreement, dated as of April 2, 2002, by and among GMI, Popcorn Distributors, Inc., and GMOI, (vii) the Contribution Agreement, dated as of April 2, 2002, by and among GMOI, TPC, Cereals Holdings, and the Company, and (viii) the Contribution Agreement, dated as of April 5, 2002, by and between GMI and General Mills Rights Holdings, LLC, in each case, as the same may be amended from time to time in accordance with the terms thereof and hereof.

     “Corporate SPE” has the meaning set forth in Section 5.7(a).

     “Custodial Agreement” has the meaning set forth in Section 5.2(c)(i).

     “Custodian” has the meaning set forth in Section 5.2(c)(i).

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     “Damages” means, without duplication, claims, demands, damages, costs, and Expenses (including reasonable fees and disbursements of counsel), liabilities, Liens, losses, fines, penalties, charges and administrative, judicial and arbitration awards, judgments, settlement payments, and deficiencies or other charges.

     “Depreciation” means, for each Allocation Year, an amount equal to the depreciation, amortization, depletion or other cost recovery deduction allowable with respect to an asset for such Allocation Year for federal income tax purposes, except that (i) with respect to any asset whose Gross Asset Value differs from its adjusted tax basis for federal income tax purposes and which difference is being eliminated by use of the “remedial allocation method” defined by Regulations Section 1.704-3(d), Depreciation for such Allocation Year shall be the amount of book basis recovered for such Fiscal Year under the rules prescribed by Regulations Section 1.704-3(d)(2), and (ii) with respect to any other asset whose Gross Asset Value differs from its adjusted basis for federal income tax purposes at the beginning of such Allocation Year, Depreciation shall be an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Allocation Year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Allocation Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing Member.

     “Designee” has the meaning set forth in Section 7.2(c)(i).

     “Director” has the meaning set forth in Section 5.10(b).

     “Dollars” means United States dollars.

     “11.8(a)(i) Purchase Date” has the meaning set forth in Section 11.8(d)(i).

     “11.8(a)(ii) Purchase Date” has the meaning set forth in Section 11.8(d)(ii)(A).

     “Estimated Profits and Losses” means:

          (i)  With respect to any Reset Valuation Allocation Year, the estimated Profits or Losses for such Reset Valuation Allocation Year. Such estimate shall be made by the Managing Member in consultation with a nationally recognized accounting firm selected in accordance with Section 9.1(d) and based on the actual results of operations through the end of the third Fiscal Quarter of such Reset Valuation Allocation Year, as reasonably extrapolated through the end of the Reset Valuation Allocation Year.

          (ii)  With respect to any Purchase Valuation Allocation Year, the estimated Profits or Losses for such Purchase Valuation Allocation Year. Such estimate shall be made by the Managing Member in consultation with a nationally recognized accounting firm selected in accordance with Section 9.1(d) and based on the actual results of operations through the end of the Fiscal Quarter in which the Purchase Valuation Date occurs, as reasonably extrapolated through the end of the Purchase Valuation Allocation Year.

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          (iii)  With respect to any Exchange Valuation Allocation Year, the estimated Profits or Losses for such Exchange Valuation Allocation Year. Such estimate shall be made by the Managing Member in consultation with a nationally recognized accounting firm selected in accordance with Section 9.1(d) and based on the actual results of operations through the end of the third Fiscal Quarter immediately preceding the Fiscal Quarter in which the Exchange Valuation Date occurs, as reasonably extrapolated through the end of the Exchange Valuation Allocation Year.

     “Excess Cash Flow” means, for any period with respect to the Company and its Subsidiaries (determined on a consolidated basis in accordance with GAAP), the excess, if any, of (i) the sum of (A) Cash Flow for such period plus (B) capital expenditures for such period in excess of Budgeted Capital Expenditures for such period over (i) the sum of (A) all interest paid in cash during such period on Indebtedness (net of interest income received in cash during such period) plus (B) the aggregate amount of principal repayments of long-term Indebtedness scheduled to be paid during such period.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

     “Exchange Agreement” means the Amended and Restated Exchange Agreement dated as of November 29, 2004 and effective as of October 8, 2004 by and among GMI and LBSFI, as amended by the Amendment to the Amended and Restated Exchange Agreement dated as of August 1, 2007.

     “Exchange Valuation Allocation Year” means, with respect to any Allocation Year in which an Exchange Valuation Date occurs, the period beginning on the first day of such Allocation Year and ending on the Exchange Valuation Date.

     “Exchange Valuation Date” means, with respect to a Class B Exchange, the last day of the Fiscal Quarter immediately prior to the Fiscal Quarter in which such exchange occurs.

     “Expenses” means any and all costs, liabilities, obligations, losses, Damages, penalties, interest, Taxes, claims (including, but not limited to negligence, strict or absolute liability, liability in tort and liabilities arising out of violation of laws or regulatory requirements of any kind), actions, suits, costs, expenses, and disbursements (including, without duplication, reasonable legal fees and expenses).

     “Failed Class A Remarketing” has the meaning set forth in Section 7.1(c)(iv).

     “Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

     “Finance Note” has the meaning specified in the definition of Permitted Loans.

     “Financial Covenant” means any covenant in any agreement or instrument that relates to information included or required to be included in the balance sheet, statement of income, stockholders’ equity, or cash flows of any Person (excluding any such covenant relating solely to the delivery of financial information).

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     “First Baseline Amount” means, with respect to any Allocation Year, an amount equal to the sum of (i) the amount set forth opposite such Allocation Year on Schedule B plus (ii) the amount of interest income included in Profits for such Allocation Year.

     “First Tier Factor” means, with respect to the Permitted Operating Assets for any relevant Measurement Period, as of any date of determination, 1.05 to the x power where x is equal to the quotient of (i) the number of days from the date on which any such Permitted Operating Assets were acquired by the Company to the date of determination divided by (ii) 360. If the Consumer Price Index during the period described in (i) increased at an annual rate greater than five percent (5%), then the amount by which such increase exceeded five percent (5%) (expressed as a decimal) shall be added to 1.05. For example, if the annual increase in the Consumer Price Index for the relevant period is six percent (6%), the amount added to 1.05 is .01, and the x power set forth in clause (i) shall be applied to 1.06. For purposes of this definition of “First Tier Factor,” the acquisition date of all Permitted Operating Assets shall be deemed to be the first day of the relevant Measurement Period except to the extent such Permitted Operating Assets were acquired by the Company subsequent to such date in connection with a significant expansion or acquisition of one of the Permitted Lines of Business, in which case the acquisition date shall be the date of such expansion or acquisition.

     “First Tier Growth Value” means, with respect to all Permitted Assets as of any date of determination during any relevant Measurement Period, the sum of (i) the sum of the products derived by multiplying the initial Gross Asset Value of each Permitted Operating Asset times the applicable First Tier Factor, plus (ii) the aggregate Gross Asset Value of all Permitted Financial Assets. For purposes of this definition of “First Tier Growth Value,” (x) the acquisition date of all Permitted Operating Assets shall be deemed to be the first day of such Measurement Period except to the extent such Permitted Operating Assets were acquired by the Company subsequent to such date in connection with a significant expansion or acquisition of one of the Permitted Lines of Business, in which case the acquisition date shall be the date of such expansion or acquisition and (y) the initial Gross Asset Value of each Permitted Operating Asset held by the Company on the first day of such Measurement Period shall be (1) with respect to the initial Measurement Period beginning on May 24, 2002 the initial Gross Asset Value of such Permitted Operating Asset on such date and (2) with respect to any subsequent Measurement Period, the Mark-to-Market Value of such Permitted Operating Asset as of such day. The initial Gross Asset Value of any Permitted Operating Asset not held by the Company on the first day of any Measurement Period shall be determined in accordance with subparagraph (i) of the definition of “Gross Asset Value”; provided that, for purposes of this definition of “First Tier Growth Value,” the initial Gross Asset Value of Inventory shall be deemed to equal the Gross Asset Value of Inventory at the end of the immediately preceding Fiscal Year.

     “Fiscal Quarter” means (i) the period commencing on May 24, 2002 and ending on May 26, 2002 and (ii) each subsequent three-month period commencing on the day after the last day of the prior Fiscal Quarter and ending on the last Sunday in August, November, February, and May next to occur, through the date on which all Company Property is distributed to the Members pursuant to Section 13.

     “Fiscal Year” means (i) the period commencing on May 24, 2002 and ending on May 26, 2002 and (ii) each subsequent twelve-month period commencing on the day after the last day of

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the prior Fiscal Year and ending on the last Sunday in May, through the date on which all Company Property is distributed to the Members pursuant to Section 13.

     “Five-Year Credit Agreement” means the Five-year Credit Agreement, dated as of October 21, 2005, among GMI, JPMorgan Chase Bank, as Administrative Agent, and the several financial institutions party thereto, as amended, replaced, or modified from time to time; provided that (i) if any replacement shall fail to provide for extensions of credit (or commitments to extend credit) in an amount at least equal to $500 million, then “Five-Year Credit Agreement” shall mean the relevant credit agreement as in effect immediately prior to such replacement and (ii) if the Five-Year Credit Agreement shall be amended or otherwise modified in contemplation of any termination or expiration of commitments to extend credit thereunder or any material voluntary reduction in the aggregate amount of extensions of credit (or commitments to extend credit) thereunder, then “Five-Year Credit Agreement” shall mean the relevant credit agreement as in effect immediately prior to such amendment or other modification. Any reference herein to “Offshore Rate” or “Applicable Margin” as defined in the Five-Year Credit Agreement shall, in the case of any replacement Five-Year Credit Agreement, refer to the comparable defined terms in such replacement Five-Year Credit Agreement (and, if there is no such comparable defined term, to the Five-Year Credit Agreement in effect prior to such replacement (subject to the foregoing provisos)).

     “Fixed Rate” means, with respect to any Series of Class B Limited Membership Interests, a Fixed Rate of return determined in accordance with Section 7.2.

     “Fixed Rate Period” means, with respect to any Series of Class B Limited Membership Interests, a Fixed Rate Period determined in accordance with Section 7.2.

     “Floating Rate” means, for any Floating Rate Period for any Series of Class B Limited Membership Interests, the Adjustable Rate plus the Applicable Class B Credit Spread then in effect. In the event that the Company determines in good faith that for any reason:

          (i) any one of the Benchmark Rates cannot be determined for any Class B Distribution Period, the Adjustable Rate for such distribution period will be equal to the higher of whichever two of such rates can be so determined;

          (ii) only one of the Benchmark Rates can be determined for any Class B Distribution Period, the Adjustable Rate for such distribution period will be equal to whichever such rate can be so determined; or

          (iii) none of the Benchmark Rates can be determined for any Class B Distribution Period, the Adjustable Rate for the preceding Class B Distribution Period will be continued for such distribution period.

          “Floating Rate Period” means any Class B Distribution Period for which a Floating Rate is in effect pursuant to Section 7.2.

          “Flow-Through Entity” has the meaning set forth in Section 11.3(c).

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     “Food Service Business” means the manufacture and sale by GMI Entities of products marketed to retail and wholesale bakeries and offered to the commercial and non-commercial foodservice sectors throughout the United States and Canada, such as restaurants and school cafeterias.

     “Fourth Amended and Restated LLC Agreement” has the meaning set forth in Section 1.1.

     “GAAP” means generally accepted accounting principles in the United States in effect from time to time.

     “Gardetto’s” means Gardetto’s Bakery, Inc., a Wisconsin corporation.

     “Gardetto’s Stock” means 100% of the issued and outstanding capital stock of Gardetto’s.

     “General Mills Missouri” means General Mills Missouri, Inc., a Minnesota corporation.

     “General Mills Missouri Stock” means 100% of the issued and outstanding capital stock of General Mills Missouri.

     “GM Class B” means GM Class B, Inc., a Delaware corporation.

     “GMCO” has the meaning set forth in the preamble.

     “GMI” means General Mills, Inc., a Delaware corporation.

     “GMI Entity” means GMI or any of its Subsidiaries (other than the Company and its Subsidiaries).

     “GMI Event” means there shall have occurred and remain continuing (i) a default by any GMI Entity (individually or collectively) in making one or more payments on the due date thereof under or in respect of any Permitted Loan (subject to the satisfaction of any applicable notice requirement and the lapse of any applicable grace period), (ii) a default, event of default, or other similar condition or event (however described) in respect of any GMI Entity under one or more agreements or instruments relating to Indebtedness of any of them (individually or collectively) in an aggregate principal amount of not less than $50,000,000 which has resulted in such Indebtedness becoming, or in the case of any Financial Covenant becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable, (iii) a default by any GMI Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate principal amount of not less than $50,000,000 under such agreements or instruments (subject to the satisfaction of any applicable notice requirement and the lapse of any applicable grace period), or (iv) a Bankruptcy occurs with respect to GMI or any of its Material Subsidiaries.

     “GMI Guaranty” means an unconditional guaranty by GMI, in the form of Exhibit B, of the obligations of any other GMI Entity under any Transaction Document.

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     “GMI Member” means GMCO, TPC, Cereals Holdings, and any other Affiliate of GMI that may from time to time own an Interest hereunder.

     “GMOI” has the meaning set forth in Section 1.1.

     “Government Obligations” means readily marketable direct obligations of (i) the Government of the United States, (ii) any agency or instrumentality thereof rated AAA by S&P and Aaa by Moody’s, or (iii) the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association rated AAA by S&P and Aaa by Moody’s.

     “Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

          (i) The initial Gross Asset Value of any Property contributed by a Member to the Company shall be the gross fair market value of such asset as agreed to by each Member or, in the absence of any such agreement, as determined pursuant to the methodology set forth in Section 13.11; provided that the initial Gross Asset Values of the Property contributed to the Company on April 2, 2002 shall be as set forth in Section 2.1(b);

          (ii) The Gross Asset Values of all items of Property shall be adjusted to equal their respective Mark-to-Market Value as determined in accordance with Section 13.11 as of the following times: (A) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution (other than pursuant to Section 2.2(a) or 2.2(b)), (B) the distribution by the Company to a Member of more than a de minimis amount of Property as consideration for an interest in the Company, and (C) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);

          (iii) The Gross Asset Value of any item of Property distributed to any Member shall be adjusted to equal the Mark-to-Market Value of such item on the date of distribution as determined in accordance with Section 13.11; and

          (iv) The Gross Asset Value of each item of Property shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Sections 734(b) or 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition of “Profits” and “Losses"; provided, however, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to the extent that an adjustment pursuant to subparagraph (ii) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv).

     If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (i), (ii), or (iv), such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset, for purposes of computing Profits and Losses. For the purposes of this definition of “Gross Asset Value,” a Capital Contribution or distribution shall be considered de minimis if its value is less than $250,000.

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     “Guarantee” means a guarantee, an endorsement, a contingent agreement to purchase or to furnish funds for the payment or maintenance of, or otherwise to be or become contingently liable under or with respect to, the Indebtedness, other obligations, net worth, working capital, or earnings of any Person, or a guarantee of the payment of dividends or other distributions upon the shares or equity interests of any Person, or an agreement to purchase, sell, or lease (as lessee or lessor) property, products, materials, supplies, or services primarily for the purpose of enabling a debtor to make payment of such debtor’s obligations or an agreement to assure a creditor against loss, and including, without limitation, causing a bank or other financial institution to issue a letter of credit or other similar instrument for account of the guaranteeing Person for the benefit of another Person, but excluding endorsements for collection or deposit in the ordinary course of business. The words “Guarantee” and “Guaranteed” used as a verb shall have a correlative meaning.

     “Immateriality Exception” means any threshold, exclusion, exception, or qualification to, or limitation on, any representation and warranty, or any covenant, which threshold, exclusion, exception, qualification, or limitation is qualified by use of the term “Material Adverse Effect.”

     “Indebtedness” means, with respect to a specified Person, (i) all indebtedness of such Person for borrowed money, (ii) all obligations of such Person for the deferred purchase price of property or services, (iii) all obligations of such Person evidenced by bonds, notes, debentures, or other similar instruments, (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement (whether or not the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as leases, including Capital Lease Obligations, (vi) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (vii) all obligations of such Person to purchase, redeem, retire, defease, or otherwise acquire for value any partnership interests of such Person, and (viii) all Indebtedness referred to in clauses (i) through (vii) above guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered), or (D) otherwise to assure (i) through (vii) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for payment of such Indebtedness.

     “Indemnified Taxes” has the meaning set forth in Section 8.3(b).

     “Indemnitee” has the meaning set forth in Section 5.5(d)(i).

     “Indemnitor” has the meaning set forth in Section 5.5(d)(i).

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     “Independent Director” has the meaning set forth in Section 5.7(a).

     “Initial Fixed Rate Period” means the period commencing on October 8, 2004 to and including the initial Scheduled Reset Date.

     “Initial GMI Intangibles” means (i) the patents, trademarks and other Intellectual Property Rights conveyed by GMI to IP Holdings I and IP Holdings II pursuant to the Contribution Agreement, dated as of April 2, 2002, between GMI and IP Holdings I, and the Contribution Agreement, dated as of April 2, 2002, between GMI and IP Holdings II, in each case, as the same may be amended from time to time in accordance with the terms thereof and hereof, (ii) the Old El Paso Patents and Progresso Patents, and (iii) the other Pet Intangibles.

     “Initial PP&E” means (i) the property, plant and equipment and all other interests, rights, duties, and obligations (including under the Albuquerque Documents) conveyed by GMOI to Cereals Properties pursuant to the Contribution Agreement, dated as of April 2, 2002, between GMOI and Cereals Properties and (ii) the leasehold interests of the company under the Buffalo Lease.

     “Initial Series B-1 Preferred Distribution Rate” means four and one-half percent (4.5%) per annum.

     “Initial Series B-2 Preferred Distribution Rate” means four and one-half percent (4.5%) per annum.

     “Intellectual Property Rights” means patents, trademarks, service marks, logos, trade dress, trade names, internet domain names, rights in designs, inventions and discoveries (whether patentable or not), copyrights and moral rights, database rights, trade secrets, semi-conductor topography rights, utility models, rights in know-how and other intellectual property rights, in each case whether registered or unregistered and including applications for registration, any and all continuations, continuations-in-part, divisions, reissues, re-examinations, extensions and renewals and all rights or forms of protection having equivalent or similar effect anywhere in the world.

     “Interest” means any limited liability company interest in the Company authorized by Section 2.1(a) representing the Capital Contributions made by a Member or its predecessors in interest, and including, except as set forth in Section 11.5, any and all benefits to which the holder of such an interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. Each Interest and a certificate, if any, representing such Interest shall constitute a “security” within the meaning of (i) Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to time in the States of Delaware and New York and (ii) the Uniform Commercial Code of any other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws (as amended in 1999 by the American Law Institute and the National Conference of Commissioners on Uniform State Laws). In its capacity as issuer of the “securities” constituting Interests, the “issuer’s

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jurisdiction” (within the meaning of Section 8-110(d) of the Uniform Commercial Code) is the State of Delaware.

     “Inventory” means any work in process consumed in, and any finished goods produced or sold in, any Permitted Line of Business.

     “Investment Company Act” means the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.

     “Involuntary Bankruptcy” has the meaning set forth in the definition of “Bankruptcy.”

     “IP Holdings I” means General Mills IP Holdings I, LLC, a Delaware limited liability company.

     “IP Holdings II” means General Mills IP Holdings II, LLC, a Delaware limited liability company.

     “IP Holdings I Interest” means 100% of the limited liability company interest in IP Holdings I.

     “IP Holdings II Interest” means 100% of the limited liability company interest in IP Holdings II.

     “LBSFI” means Lehman Brothers Special Financing Inc, a Delaware corporation.

     “LBSFI Purchase Agreement” means the Purchase Agreement dated October 4, 2004 by and among LBSFI, the Company, GMI, and GM Class B.

     “LIBOR” means, for any Fiscal Quarter or other period during which the Limited Member Preferred Return is stated herein to accumulate, the rate for deposits in Dollars for a period of three months which appears on the Telerate Page 3750 (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purpose of displaying comparable rates) as of 11:00 a.m., London time, on the day that is two (2) London Banking Days preceding the first day of such Fiscal Quarter or other period; provided that, if such rate does not appear on Telerate Page 3750 (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purpose of displaying comparable rates), the rate for such date will be determined on the basis of the rates at which deposits in Dollars are offered by four (4) major banks in the London interbank market selected in good faith by the Managing Member at approximately 11:00 a.m., London time, on the day that is two (2) London Banking Days preceding the first day of such Fiscal Quarter or other period to prime banks in the London interbank market for a period of three months commencing on the first day of such Fiscal Quarter or other period and in an amount of $10,000,000.

     “Lien” means, with respect to any asset, (i) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge, or security interest in, on or of such asset, (ii) the interest of a vendor or a lessor under any conditional sale agreement, capital lease, or title retention agreement (or any financing lease having substantially the same economic effect as any of the

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foregoing) relating to such asset, and (iii) in the case of securities, any purchase option, call, or similar right of a third party with respect to such securities.

     “Limited Member” means any Person who is a Class A Limited Member or a Class B Limited Member.

     “Limited Member Indemnitee” has the meaning set forth in Section 6.7(a).

     “Limited Member Preferred Return” means the Class A Limited Member Preferred Return and the Class B Limited Member Preferred Return, as applicable.

     “Limited Membership Interests” means (A) the Class A Limited Membership Interests and (B) the Class B Limited Membership Interests, as applicable.

     “Liquidating Event” has the meaning set forth in Section 13.1(a).

     “Liquidation Notice” has the meaning set forth in Section 14.2.

     “Liquidation Period” has the meaning set forth in Section 13.7.

     “Liquidation Period Guaranteed Payment” has the meaning set forth in Section 13.7.

     “Liquidation Period Guaranteed Payment Date” means, with respect to the (i) Class A Limited Members, the last day of each Fiscal Quarter occurring during the Liquidation Period and on the date on which all of the assets of the Company are distributed to the Members, and (ii) Class B Limited Members, each January 15, April 15, July 15, and August 15 occurring during the Liquidation Period and on the date on which all of the assets of the Company are distributed to the Members.

     “Liquidator” has the meaning set forth in Section 13.10(a).

     “LLC SPE” has the meaning set forth in Section 5.7(d).

     “London Banking Day” means any day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) in London.

     “Losses” has the meaning set forth in the definition of “Profits” and “Losses.”

     “Managing Member” means GMCO so long as it continues to serve in such capacity and has not been replaced by a successor Managing Member in accordance with Section 5.6 and shall also refer to any Person that is admitted to the Company as a successor Managing Member of the Company in accordance with Section 5.6, in its capacity as a manager of the Company.

     “Managing Member Distribution Date” means any date on which the Managing Member makes (or proposes to make) a distribution to itself pursuant to Section 4.1(c)(i).

     “Managing Member Distribution Period” means the applicable period from (and including) a Managing Member Distribution Date to (but excluding) the next subsequent Managing Member Distribution Date.

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     “Managing Member Indemnitee” has the meaning set forth in Section 5.5(a).

     “Managing Membership Interest” has the meaning set forth in Section 2.1(a).

     “Mark-to-Market Capital Account” means the Capital Account determined with respect to each Limited Membership Interest pursuant to (i) with respect to a Class A Reset Date, Section 7.1(d)(ii), and (ii) with respect to a Scheduled Reset Date, Section 7.2(b)(iii).

     “Mark-to-Market Valuation” has the meaning set forth in Section 13.11(a).

     “Mark-to-Market Value” has the meaning set forth in Section 13.11(a).

     “Material Adverse Effect” means, with respect to any Person, a material adverse effect on (i) the business, operations, properties, or condition (financial or otherwise) of such Person and its Subsidiaries taken as a whole, (ii) the ability of such Person to perform its obligations under any of the Transaction Documents to which it is a party, or (iii) any of the rights or remedies available against such Person under any of the Transaction Documents to which such Person is a party.

     “Material Subsidiary” means (i) in the case of the Company, any Subsidiary of the Company and (ii) in the case of GMI, any Subsidiary of GMI that as of such time meets the definition of “significant subsidiary” contained as of the date of the Amended and Restated LLC Agreement in Regulation S-X of the Securities and Exchange Commission; provided that notwithstanding the foregoing, each GMI Entity (other than GMI) that is a party to any Transaction Document shall be deemed to be a “Material Subsidiary.”

     “Measurement Period” means (i) the period commencing on May 24, 2002 and ending on May 27, 2007 and (ii) each subsequent five (5) year period commencing on the day after the last day of the prior Measurement Period and ending on the last Sunday in May in the fifth year of such five (5) year period.

     “Member” means a Limited Member or the Managing Member. A Member is a “member” of the Company for purposes of the Act.

     “Member Indemnitee” has the meaning set forth in Section 5.8(a).

     “Membership Interests” means the Limited Membership Interests and the Managing Membership Interest.

     “Member Nonrecourse Debt” has the same meaning as the term “partner nonrecourse debt” set forth in Regulations Section 1.704-2(b)(4).

     “Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).

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     “Member Nonrecourse Deductions” has the same meaning as the term “partner nonrecourse deductions” set forth in Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2).

     “Membership Registry” means the registry of the Company containing the names and addresses of the Members, as such registry is revised from time to time, and as attached hereto as Schedule A.

     “Minimum Transfer Amount” means 10,000 Series B-1 Limited Membership Interests.

     “Moody’s” means Moody’s Investor Service, Inc. or its successor.

     “Nonrecourse Deductions” has the meaning set forth in Regulations Sections 1.704-2(b)(1) and 1.704-2(c).

     “Nonrecourse Liability” has the meaning set forth in Regulations Section 1.704-2(b)(3).

     “Old El Paso Patents” means the Old El Paso patents used in the sale of packaged food products in the United States and identified in the Intellectual Property License Agreement, dated May 24, 2002, by and between the Company, as licensor, and GMI, as licensee, as (i) amended on May 1, 2003 in accordance with the terms thereof and the terms of the Amended and Restated LLC Agreement and (ii) the same may be further amended from time to time in accordance with the terms thereof and hereof.

     “Original LLC Agreement” has the meaning set forth in Section 1.1.

     “Original Members” has the meaning set forth in Section 1.1.

     “Other GMI Entity Agreement” means any agreement entered into after the date of the Amended and Restated LLC Agreement by and between the Company or any of its Subsidiaries and any GMI Entity.

     “Other Lines of Business” means any line of business that is not a Permitted Line of Business.

     “Other Products” means any products, other than the products manufactured, marketed, imported, distributed, or sold by, or on behalf of, the Company or any of its Subsidiaries or otherwise relating to the Cereals Business or the Pet Business.

     “Permitted Assets Requirement” means the requirement of the Company to hold only assets that are Permitted Assets.

     “Permitted Assets” means:

(i)	Permitted Intangible Assets;
(ii)	Permitted PP&E Assets;
(iii)	Raw Materials;

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(iv)	Inventory;
(v)	Permitted Intellectual Property Licenses;
(vi)	Permitted PP&E Licenses;
(vii)	Permitted Loans;
(viii)	the Pet Stock;
(ix)	the Cereals Properties Interest;
(x)	the IP Holdings I Interest;
(xi)	the IP Holdings II Interest;
(xii)	the General Mills Missouri Stock;
(xiii)	the Gardetto’s Stock;
(xiv)	Cash and Cash Equivalents; and
(xv)	A-Rated Securities.

     “Permitted Financial Assets” means all Permitted Assets other than Permitted Operating Assets.

     “Permitted Indebtedness” means Indebtedness of the Company or any Subsidiary (i) existing on May 24, 2002 and set forth on Schedule D of the Amended and Restated LLC Agreement, or (ii) incurred to finance the acquisition, construction, or improvement of any fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals, and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that, with respect to clause (ii), that (x) such Indebtedness is incurred prior to or within ninety (90) days after such acquisition or the completion of such construction or improvement, (y) the aggregate principal amount of all such Indebtedness shall not exceed $100 million at any time outstanding, and (z) the aggregate principal amount of such Indebtedness does not exceed 100% of the cost of such fixed or capital assets.

     “Permitted Intangible Assets” means the Initial GMI Intangibles and any other patents, trademarks or other Intellectual Property Rights (or a 100% interest in any limited liability company holding such patents, trademarks, or other Intellectual Property Rights) contributed to the Company by any GMI Member or purchased or created by the Company or any of its Subsidiaries and (i) used by the Company or any of its Subsidiaries in a Permitted Line of Business or (ii) licensed to GMI, consolidated Subsidiaries of GMI, or to third parties for use in an Other Lines of Business pursuant to a Permitted Intellectual Property License.

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     “Permitted Intellectual Property License Agreements” means (i) a license agreement substantially in the form attached hereto as
Exhibit  C-1 pursuant to which Permitted Intangible Assets may be licensed to GMI and its consolidated Subsidiaries or to third parties for use in connection with the production and sale of Other Products, (ii) a license agreement substantially in the form attached hereto as Exhibit C-1 pursuant to which Permitted Intangible Assets may be licensed to GMI and its consolidated Subsidiaries or to third parties for use in connection with the research and development of materials and products related to a Permitted Line of Business, and (iii) license agreements in the form attached hereto as Exhibit C-2 related to Intellectual Property Rights with respect to the PET Business used outside the United States.

     “Permitted Intellectual Property Licenses” means the intellectual property licenses that are the subject of the Permitted Intellectual Property License Agreements.

     “Permitted Liens” means any of the following:

          (i) any Lien existing on the Property of the Company or its Subsidiaries existing on May 24, 2002 and set forth on Schedule C securing Indebtedness outstanding on such date;

          (ii) Liens for taxes, fees, assessments, or other governmental charges that are not delinquent or are being contested in good faith by appropriate proceedings and against which adequate reserves have been established in accordance with GAAP;

          (iii) mechanics’, workmen’s, repairmen’s, materialmen’s, carrier’s, warehousemen’s, vendors’ Liens, and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than thirty (30) days;

          (iv) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance, and other social security laws or regulations;

          (v) good faith deposits in connection with bids, tenders, contracts (other than for the payment of money), or leases to which the Company or any Subsidiary is a party, or deposits to secure public or statutory obligations of the Company or any Subsidiary, or deposits in connection with obtaining or maintaining self-insurance, or to obtain the benefits of any law, regulation, or arrangement pertaining to unemployment insurance, old age pensions, social security, or similar matters, or deposits of cash or obligations of the United States of America to secure surety, appeal, or customs bonds to which the Company or any Subsidiary is a party, in each case, made in the ordinary course of business and not securing any Indebtedness;

          (vi) easements, rights-of-way, zoning restrictions, restrictions on the use of real property, and defects and irregularities in the title thereto, landlords’ liens, and other similar liens and encumbrances none of which (A) secure Indebtedness, (B) interfere materially with the use of the property covered thereby in the ordinary course of the business of the Company or such Subsidiary or (C) materially detract from the value of such properties;

          (vii) Liens on any fixed or capital assets, including Capital Lease Obligations, acquired, constructed, or improved by the Company or any Subsidiary after May 24, 2002 that

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are created or assumed contemporaneously with such acquisition, construction, or improvement, or within ninety (90) days after the completion thereof, to secure or provide for the payment of all or any part of the cost of such acquisition, construction, or improvement (including related expenditures capitalized for Federal income tax purposes in connection therewith) incurred after the date of the Amended and Restated LLC Agreement, provided that (A) such Liens secure Permitted Indebtedness and (B) such Liens do not apply to any other property or assets of the Company or any of its Subsidiaries;

          (viii) Liens created by or resulting from any litigation or other proceeding which is being contested in good faith by appropriate proceedings, including Liens arising out of judgments or awards against the Company or any Subsidiary with respect to which the Company or such Subsidiary is in good faith prosecuting an appeal or proceedings for review; or Liens incurred by the Company or any Subsidiary for the purpose of obtaining a stay or discharge in the course of any litigation or other proceeding to which the Company or such Subsidiary is a party; provided that the aggregate amount of obligations or potential obligations secured by such Liens shall not exceed $10,000,000;

          (ix) Liens on any property created, assumed, or otherwise brought into existence in contemplation of the sale or other disposition of the underlying property, whether directly or indirectly, by way of disposition of limited liability company membership interests or otherwise; provided that (A) 180 days from the creation of such Liens the Company or the relevant Subsidiary must have disposed of such property and (B) any Indebtedness secured by such Lien shall be without recourse to the Company or any Subsidiary;

          (x) any extension, renewal, or replacement (or successive extensions, renewals, or replacements), as a whole or in part, of any Lien existing on the date of the Amended and Restated LLC Agreement or of any Lien referred to in the foregoing clauses (i), (vi) and (viii); provided that (1) such extension, renewal, or replacement Lien shall be limited to all or a part of the same property, limited liability company membership interests, shares of stock, or Indebtedness that secured the Lien extended, renewed or replaced (plus improvements on such property) and (2) the Indebtedness secured by such Lien at such time is not increased; and

          (xi) Liens granted to General Mills Finance, Inc. and General Mills Capital, Inc. pursuant to the Receivables Purchase and Sale Agreements.

     “Permitted Lines of Business” means the Pet Business and Cereals Business.

     “Permitted Loans” means loans that: (i) are arm’s length, Dollar-denominated, demand loans made by the Company or General Mills Missouri, to any GMI Entity or any other Person chosen by the Managing Member and, with respect to loans made other than to any GMI Entity, approved by the unanimous written consent of the Class A Limited Members and the Required Class B Limited Members, (ii) bear interest, at any given time, at a floating rate of interest per annum equal to the Offshore Rate plus the Applicable Margin (such terms having the meaning specified in the Five-Year Credit Agreement); (iii) evidenced by a note substantially in the form attached hereto as Exhibit A (the “Finance Note”); (iv) are eligible to be Transferred to any “qualified institutional buyer” under and in accordance with Rule 144A under the Securities Act;

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and (v) in the case of loans to any GMI Entity (other than GMI), are unconditionally guaranteed by GMI pursuant to a GMI Guaranty.

     “Permitted Operating Assets” means all Permitted Assets other than those described in clauses (vii), (xiv), and (xv) of the definition of “Permitted Assets.”

     “Permitted PP&E Assets” means the Initial PP&E and any other property, plant, and equipment (or a 100% sole limited liability company interest in any limited liability company holding such property, plant, and equipment) contributed to the Company by any GMI Member or purchased or constructed by the Company or any of its Subsidiaries and (i) used by the Company or any of its Subsidiaries in a Permitted Line of Business or (ii) leased to GMI, consolidated Subsidiaries of GMI, or third parties for use in an Other Line of Business pursuant to a Permitted PP&E License.

     “Permitted PP&E License Agreement” means a license agreement substantially in the form attached hereto as Exhibit D, pursuant to which Permitted PP&E Assets may be licensed to GMI and its consolidated Subsidiaries or to third parties for use in connection with the production and sale of Other Products.

     “Permitted PP&E Licenses” means the permitted property, plant, and equipment licenses that are the subject of the Permitted PP&E License Agreements.

     “Permitted Transfer” has the meaning set forth in Section 11.2(d).

     “Permitted Transferee” has the meaning set forth in Section 11.2(d).

     “Person” means any individual, partnership (whether general or limited), limited liability company, corporation, trust, estate, association, nominee, or other entity.

     “Pet” means Pet Incorporated, a Delaware corporation.

     “Pet Business” means the manufacture and sale by the Company and its Subsidiaries of packaged food products, other than organic food products, for sale, directly or indirectly, to consumers under the “Progresso” and “Old El Paso” brand names (or any variation thereof), other than in connection with the Food Service Business.

     “Pet Intangibles” means all Intellectual Property Rights owned by Pet.

     “Pet Stock” means 100% of the capital stock of Pet.

     “Portfolio Compliance Certificate” means a written certificate of the Managing Member signed by a Responsible Officer stating whether or not, as of the date stated therein and for the period covered thereby, the Company satisfied the Permitted Assets Requirement and the Portfolio Requirements (showing all calculations necessary to determine such compliance); provided that, with respect to the certification regarding the asset coverage ratio set forth in Section 5.9(a)(i), such certificate shall be based on the Managing Member’s determination as to the fair market value of the Company’s Permitted Assets in a manner consistent with the Mark-to-Market Valuation methodology set forth in Section 13.11.

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     “Portfolio Requirements” has the meaning set forth in Section 5.9(a).

     “Portfolio Value” has the meaning set forth in Section 5.9(b).

     “Preferred Return Capital” means:

          (i) with respect to a Class A Limited Member, (A) for the initial Preferred Return Period, the sum of (1) such Class A Limited Member’s initial Capital Account; provided that the initial Capital Account of TPC with respect to its Class A Limited Membership Interest for purposes of this clause (a) shall be, (I) prior to October 6, 2004, $392,151,000 and (II) on an after October 6, 2004, $88,851,000, plus (2) Undistributed Preferred Return, and (B) for any subsequent Preferred Return Period, the sum of (1) the product of (a) the amount of the Mark-to-Market Capital Account per Class A Limited Membership Interest determined in connection with the relevant Reset Valuation Date with respect to the Class A Reset Date constituting the first day of such Preferred Return Period (increased or decreased to the extent necessary to account for any adjustments described in the proviso at the end of Section 9.2(d)), times (b) the number of Class A Limited Membership Interests held by such Class A Limited Member, plus (2) Undistributed Preferred Return; and

          (ii) with respect to any Class B Limited Member and for any Series of Class B Limited Membership Interests held by such Member (A) for the initial Preferred Return Period, the sum of (1) such Class B Limited Member’s initial Capital Account attributable to such Series of Interests; provided that, for purposes of this definition of Preferred Return Capital, TPC’s Capital Contributions shall equal (i) prior to October 6, 2004, zero, and (ii) on an after October 6, 2004, $303,300,000, plus (2) Undistributed Preferred Return, (B) for any subsequent Preferred Return Period, the sum (1) the product of (a) the amount of the Mark-to-Market Capital Account per Class B Limited Membership Interest determined in connection with the Class B Optional Remarketing of such Series of Class B Limited Membership Interests as of the Reset Valuation Date with respect to the Class B Optional Remarketing Date constituting the first day of such Preferred Return Period (increased or decreased to the extent necessary to account for any adjustments described in the proviso at the end of Section 9.2(e)), times (b) the number of Class B Limited Membership Interests of such Series held by such Member, plus (2) Undistributed Preferred Return.

     In the event Class A Limited Membership Interests or Class B Limited Membership Interests are Transferred in accordance with the terms of this Agreement (other than in a Class A Remarketing or a Class B Remarketing), the transferee shall succeed to the Preferred Return Capital of the transferor to the extent it relates to the Transferred Interests.

     The aggregate Preferred Return Capital of the Class A Members as of the initial Class A Reset Date is $248,120,718. The aggregate Preferred Return Capital of the Series B-1 Limited Members as of the first Scheduled Reset Date will be $849,348,230. The aggregate Preferred Return Capital of the Series B-2 Limited Members as of the first Scheduled Reset Date will be $1,080,838,853.

     “Preferred Return Period” means:

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          (i) with respect to the Class A Limited Membership Interests, (a) the period commencing on and including May 24, 2002 and ending on and including the day before the first Class A Reset Date and (ii) each subsequent five (5) year period commencing on and including the day after the last day of the prior Preferred Return Period and ending on and including the day before the next Class A Reset Date; and

          (ii) with respect to the Class B Limited Membership Interests, (a) the period commencing on and including May 24, 2002 and ending on and including the day before the initial Scheduled Reset Date and (ii) each subsequent five (5) year period commencing on and including the day after the last day of the prior Preferred Return Period and ending on and including the day before the next Scheduled Reset Date.

     “Preferred Securities” means any preferred securities represented by the Limited Membership Interests.

     “Profits” and “Losses” mean, for each Allocation Year, an amount equal to the Company’s taxable income or loss for such Allocation Year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments (without duplication):

          (i) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition of “Profits” and “Losses” shall be added to such taxable income or loss;

          (ii) Any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to this definition of “Profits” and “Losses” shall be subtracted from such taxable income or loss;

          (iii) In the event the Gross Asset Value of any item of Property is adjusted pursuant to subparagraph (ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Gross Asset Value of the item of Property) or an item of loss (if the adjustment decreases the Gross Asset Value of the item of Property) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses;

          (iv) Gain or loss resulting from any disposition of any Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the item of Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its Gross Asset Value;

          (v) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Allocation Year, computed in accordance with the definition of “Depreciation”;

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          (vi) To the extent an adjustment to the adjusted tax basis of any item of Property pursuant to Code Sections 734(b) or 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member’s Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the item of Property) or loss (if the adjustment decreases such basis) from the disposition of such item of Property and shall be taken into account for purposes of computing Profits or Losses; and

          (vii) Notwithstanding any other provision of this definition, any items that are specially allocated pursuant to Section 3.3 or 3.4 shall not be taken into account in computing Profits or Losses.

     The amounts of the items of Company income, gain, loss, or deduction available to be specially allocated pursuant to Section 3.3 or 3.4 shall be determined by applying rules analogous to those set forth in subparagraphs (i) through (vii) above.

     “Progresso Patents” means the Progresso patents used in the sale of packaged food products in the United States and owned by Pet and licensed by Pet to the Company pursuant to the Intellectual Property License Agreement, dated May 24, 2002, by and between the Company, as licensor, and GMI, as licensee.

     “Property” means all real and personal property acquired by the Company and its Subsidiaries, including Cash, and any improvements thereto, and shall include both tangible and intangible property.

     “PTP” means a “publicly traded partnership,” as defined in Code Section 7704, taxable as a corporation for U.S. federal income tax purposes.

     “Public Utility Holding Company Act” means the Public Utility Holding Company Act of 1935, as amended, and the rules and regulations promulgated thereunder.

     “Purchase Valuation Allocation Year” means, with respect to any Allocation Year in which a Purchase Valuation Date occurs, the period beginning on the first day of such Allocation Year and ending on the Purchase Valuation Date.

     “Purchase Valuation Date” means a Class A Purchase Valuation Date or a Class B Purchase Valuation Date, as applicable.

     “Purchaser’s Letter” has the meaning set forth in Section 11.3(f).

     “Rating Agency” means Moody’s or S&P, as the case may be.

     “Raw Materials” means raw materials, including, without limitation, ingredients and packaging materials used in any Permitted Line of Business.

     “RBDB” has the meaning set forth in the preamble.

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     “Receivables Purchase and Sale Agreements” means the Amended and Restated Receivables Purchase and Sale Agreement and the Combined Receivables Purchase and Sale Agreement.

     “Reconstitution Period” has the meaning set forth in Section 13.1(b).

     “Regulations” means the Income Tax Regulations, including Temporary Regulations, promulgated under the Code, as such regulations are amended from time to time.

     “Regulatory Allocations” has the meaning set forth in Section 3.4.

     “Reference Corporate Dealer” means a leading dealer of publicly traded debt securities selected by the Company, which dealer shall be a Qualified Institutional Buyer (as defined in Rule 144A under the Securities Act).

     “Required Class A Limited Members” means the holder or holders of more than fifty percent (50%) of any outstanding Class A Limited Membership Interests. If, at any relevant time, some but not all of the outstanding Class A Limited Membership Interests are owned by GMI or any of its Affiliates, then in determining whether holders of the requisite percentage of the Class A Limited Membership Interests have given any request, demand, authorization, direction, notice, consent, or waiver hereunder, the Class A Limited Membership Interests owned by GMI or any of its Affiliates shall be disregarded and deemed not to be outstanding.

     “Required Class B Limited Members” means (i) the holder or holders representing more than two-thirds of any outstanding Series B-1 Limited Membership Interests and (ii) the holder or holders representing more than two-thirds of any outstanding Series B-2 Limited Membership Interests. If, at any relevant time, some but not all of the outstanding Class B Limited Membership Interests, or any Series of Class B Limited Membership Interests, are owned by GMI or any of its Affiliates, then in determining whether holders of the requisite percentage of the Class B Limited Membership Interests have given any request, demand, authorization, direction, notice, consent, or waiver hereunder, the Class B Limited Membership Interests owned by GMI or any of its Affiliates shall be disregarded and deemed not to be outstanding.

     “Reset Valuation Allocation Year” means any Allocation Year ending on a Reset Valuation Date.

     “Reset Valuation Date” means (i) the last day of the Fiscal Year ending in May 2007, and (ii) the last day of each fifth Fiscal Year thereafter.

     “Responsible Officer” means an executive officer of the Managing Member familiar with the financial affairs of the Company.

     “S&P” means Standard & Poor’s Rating Services, a division of The McGraw-Hill Corporation or its successor.

     “Scheduled Reset Date” means, with respect to the Class B Interests, (i) August 7, 2007, and (ii) each 60-month anniversary of such date; provided that if such anniversary is not a

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Business Day, the Scheduled Reset Date shall be the first Business Day preceding such anniversary.

     “Second Amended and Restated LLC Agreement” has the meaning set forth in Section 1.1.

     “Second Amendment” has the meaning set forth in Section 1.1.

     “Secondary Purchase Agreement” means an agreement containing customary terms and conditions to be dated as of the applicable Class A Reset Date (or such other date permitted by applicable law) among the Company, the Selling Class A Holders, the Class A Remarketing Agent, and the Secondary Purchasers (selected in the manner provided in Section 7.1(c)) providing for the purchase of the Class A Limited Membership Interests by the Secondary Purchasers; provided that (i) the only representations by a holder will be due authorization, power and authority, validity, enforceability, no approval, and good and marketable title to the Class A Limited Membership Interests, (ii) the only obligation of a Selling Class A Holder shall be to sell the Class A Limited Membership Interests pursuant to a successful Class A Remarketing and (iii) such agreement is otherwise acceptable to the Selling Class A Holders.

     “Secondary Purchasers” has the meaning set forth in Section 7.1(c)(ii).

     “Second Baseline Amount” means, with respect to any Allocation Year, an amount equal to the sum of (i) the amount set forth opposite such Allocation Year on Schedule B plus (ii) the amount of interest income included in Profits for such Allocation Year.

     “Second Tier Factor” means, with respect to any Permitted Operating Asset for any relevant Measurement Period, as of any date of determination, 1.06 to the x power where x is equal to the quotient of (i) the number of days from the date on which any such Permitted Operating Assets were acquired by the Company to the date of determination divided by (ii) 360. If the Consumer Price Index during the period described in (i) increased at an annual rate greater than five percent (5%), then the amount by which such increase exceeded five percent (5%) (expressed as a decimal) shall be added to 1.06. For example, if the annual increase in the Consumer Price Index for the relevant period is six percent (6%), the amount added to 1.06 is .01, and the x power set forth in clause (i) shall be applied to 1.07. For purposes of this definition of “Second Tier Factor,” the acquisition date of all Permitted Operating Assets shall be deemed to be the first day of the relevant Measurement Period except to the extent such Permitted Operating Assets were acquired by the Company subsequent to such date in connection with a significant expansion or acquisition of one of the Permitted Lines of Business, in which case the acquisition date shall be the date of such expansion or acquisition.

     “Second Tier Growth Value” means, with respect to all Permitted Assets as of any date of determination during any relevant Measurement Period, the sum of (i) the sum of the products derived by multiplying the initial Gross Asset Value of each Permitted Operating Asset times the applicable Second Tier Factor, plus (ii) the aggregate Gross Asset Value of all Permitted Financial Assets. For purposes of this definition of “Second Tier Growth Value,” (x) the acquisition date of all Permitted Operating Assets shall be deemed to be the first day of such Measurement Period except to extent such Permitted Operating Assets were acquired by the

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Company subsequent to such date in connection with a significant expansion or acquisition of one of the Permitted Lines of Business, in which case the acquisition date shall be the date of such expansion or acquisition and (y) the initial Gross Asset Value of each Permitted Operating Asset held by the Company on the first day of such Measurement Period shall be (1) with respect to the initial Measurement Period beginning on May 24, 2002 the initial Gross Asset Value of such Permitted Operating Asset on such date and (2) with respect to any subsequent Measurement Period, the Mark-to-Market Value of such Permitted Operating Asset as of such day. The initial Gross Asset Value of any Permitted Operating Asset not held by the Company on the first day of any Measurement Period shall be determined in accordance with subparagraph (i) of the definition of “Gross Asset Value"; provided that, for purposes of this definition of “Second Tier Growth Value,” the initial Gross Asset Value of Inventory shall be deemed to equal the Gross Asset Value of Inventory at the end of the immediately preceding Fiscal Year.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

     “Securities Purchase Agreements” means (i) the securities purchase agreement dated as of May 24, 2002, by and among the Company and its Subsidiaries, GMI and certain of its Affiliates and RBDB and (ii) the securities purchase agreement dated as of June 28, 2007, by and among GMI, TPC, Cereals Holdings, GMOI, GMCO, the Company, IP Holdings I, IP Holdings II, Cereals Properties and RBDB.

     “Selling Class A Holders” has the meaning set forth in Section 7.1(c)(iii).

     “Series” has the meaning set forth in Section 2.1(a).

     “Series B-1 Limited Membership Interests” has the meaning set forth in Section 2.1(b)(iii).

     “Series B-2 Limited Membership Interests” has the meaning set forth in Section 2.1(b)(iii).

     “Series B-1 Limited Members” means (i) GM Sales (unless it has ceased to be a Series B-1 Limited Member) and (ii) any Person who has become a substituted Series B-1 Limited Member pursuant to the terms of this Agreement and has not ceased to be a Series B-1 Limited Member.

     “Series B-2 Limited Members” means (i) Cereals Holdings (unless it has ceased to be a Series B-2 Limited Member) and (ii) any Person who has become a substituted Series B-2 Limited Member pursuant to the terms of this Agreement and has not ceased to be a Series B-2 Limited Member.

     “Series B-1 Limited Member Preferred Return” means, with respect to any Series B-1 Limited Member, the return that will accrue during each Class B Distribution Period or portion thereof (if such Class B Distribution Period is a Fixed Rate Period, computed on the basis of a 360-day year of twelve 30-day months, and if such Class B Distribution Period is a Floating Rate Period, computed using the actual number of days elapsed, including the first and excluding the

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last days thereof, over a 360 day year) on the amount of such Series B-1 Limited Member’s Preferred Return Capital during such Class B Distribution Period, at a rate per annum equal to the applicable Series B-1 Preferred Return Rate.

     “Series B-2 Limited Member Preferred Return” means, with respect to any Series B-2 Limited Member, the return that will accrue during each Class B Distribution Period or portion thereof (if such Class B Distribution Period is a Fixed Rate Period, computed on the basis of a 360-day year of twelve 30-day months, and if such Class B Distribution Period is a Floating Rate Period, computed using the actual number of days elapsed, including the first and excluding the last days thereof, over a 360 day year) on the amount of such Series B-2 Limited Member’s Preferred Return Capital during such Class B Distribution Period, at a rate per annum equal to the applicable Series B-2 Preferred Return Rate.

     “Series B-1 Preferred Certificate” means a certificate substantially in the form of Exhibit H hereto, evidencing the Series B-1 Limited Membership Interests held by a Series B-1 Limited Member.

     “Series B-2 Preferred Certificate” means a certificate substantially in the form of Exhibit I hereto, evidencing the Series B-2 Limited Membership Interests held by a Series B-2 Limited Member.

     “Series B-1 Preferred Return Rate” means, with respect to the Series B-1 Limited Membership Interests (i) during the Initial Fixed Rate Period, the Initial Series B-1 Preferred Distribution Rate and (ii) thereafter, such Fixed Rate or Floating Rate as shall be determined in accordance with Section 7.2.

     “Series B-2 Preferred Return Rate” means, with respect to the Series B-2 Limited Membership Interests (i) during the Initial Fixed Rate Period, the Initial Series B-2 Preferred Distribution Rate and (ii) thereafter, such Fixed Rate or Floating Rate as shall be determined in accordance with Section 7.2.

     “Special Securities” means securities which can, at the option of the holder, be surrendered at face value in payment of any Federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were originally issued at a deep or substantial discount.

     “Specified Financial Assets” means: (i) Permitted Loans, (ii) Cash and Cash Equivalents, and (iii) A-Rated Securities.

     “Specified Financial Investment Level” means $600,000,000.

     “Subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association, or other entity, the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association, or other entity (i) of which securities or other ownership interests representing more than fifty percent (50%) of the equity or more than fifty percent (50%) of the ordinary voting power or, in the case

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of a partnership, more than fifty percent (50%) of the general partnership interests are, as of such date, owned, Controlled, or held or (ii) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent. For this purpose, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract, or otherwise, and “Controlled” has a meaning correlative thereto.

     “Taxes” means any and all taxes (including net income, gross income, franchise, ad valorem, gross receipts, sales, use, property, and stamp taxes), levies, imposts, duties, charges, assessments, or withholdings of any nature whatsoever, general or special, ordinary or extraordinary, now existing or hereafter created or adopted, together with any and all penalties, fines, additions to tax, and interest thereon.

     “Tax Matters Member” has the meaning set forth in Section 9.3(a).

     “Telerate Page 3750” means the display designated on page 3750 on Bridge Telerate Inc. (or such other page as may replace the 3750 page on the service or such other service as may be nominated by the British Bankers’ Association for the purpose of displaying London interbank offered rates for Dollars deposits).

     “10-year Average Yield” means the average yield to maturity for actively traded marketable U.S. fixed interest rate securities (adjusted to constant maturities of 10 years).

     “10-year Treasury CMT” for each Class A Distribution Period or Class B Distribution Period, the arithmetic average of the two most recent weekly per annum 10-year Average Yields (as defined below) (or the total weekly per annum 10-year Average Yields, if less than two such yields are published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately preceding the Class A Distribution Period or Class B Distribution Period for which the Preferred Return Rate on the Preferred Securities is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum 10-year Average Yield during any such Calendar Period, the 10-year Treasury CMT for such Class A Distribution Period or Class B Distribution Period will be the arithmetic average of the two most recent weekly per annum 10-year Average Yields (or the total weekly per annum 10-year Average Yields if less than two such yields are published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Company. In the event that a per annum 10-year Average Yield is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, the 10-year Treasury CMT for such Class A Distribution Period or Class B Distribution Period will be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the total weekly per annum average yields to maturity, if less than two such yields are published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having remaining maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Company. In the event that the Company

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cannot determine the 10-year Treasury CMT for any Class A Distribution Period or Class B Distribution Period as provided above in this paragraph, then the 10-year Treasury CMT for such Class A Distribution Period or Class B Distribution Period will be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight nor more than twelve years from the date of each such quotation, as chosen and quoted daily for each business day during such Calendar Period in New York City (or less frequently if daily quotations are not generally available) to the Company by at least three recognized dealers in U.S. Government securities selected by the Company. The 10-year Treasury CMT shall be rounded to the nearest hundredth of a percent.

     “Third Amended and Restated LLC Agreement” has the meaning set forth in Section 1.1.

     “Third Tier Factor” means, with respect to any Permitted Operating Assets for any relevant Measurement Period, as of any date of determination, 1.08 to the x power where x is equal to the quotient of (i) the number of days from the date on which any such Permitted Operating Assets were acquired by the Company to the date of determination divided by (ii) 360. If the Consumer Price Index during the period described in (i) increased at an annual rate greater than five percent (5%), then the amount by which such increase exceeded five percent (5%) (expressed as a decimal) shall be added to 1.08. For example, if the annual increase in the Consumer Price Index for the relevant period is six percent (6%), the amount added to 1.08 is .01, and the x power set forth in clause (i) shall be applied to 1.09. For purposes of this definition of “Third Tier Factor,” the acquisition date of all Permitted Operating Assets shall be deemed to be the first day of the relevant Measurement Period except to the extent such Permitted Operating Assets were acquired by the Company subsequent to such date in connection with a significant expansion or acquisition of one of the Permitted Lines of Business, in which case the acquisition date shall be the date of such expansion or acquisition.

     “Third Tier Growth Value” means, with respect to all Permitted Assets as of any date of determination during any relevant Measurement Period, the sum of (i) the sum of the products derived by multiplying the initial Gross Asset Value of each Permitted Operating Asset times the applicable Third Tier Factor, plus (ii) the aggregate Gross Asset Value of all Permitted Financial Assets. For purposes of this definition of “Third Tier Growth Value,” (x) the acquisition date of all Permitted Operating Assets shall be deemed to be the first day of such Measurement Period except to extent such Permitted Operating Assets were acquired by the Company subsequent to such date in connection with a significant expansion or acquisition of one of the Permitted Lines of Business, in which case the acquisition date shall be the date of such expansion or acquisition and (y) the initial Gross Asset Value of each Permitted Operating Asset held by the Company on the first day of such Measurement Period shall be (1) with respect to the initial Measurement Period beginning on May 24, 2002 the initial Gross Asset Value of such Permitted Operating Asset on such date and (2) with respect to any subsequent Measurement Period, the Mark-to-Market Value of such Permitted Operating Asset as of such day. The initial Gross Asset Value of any Permitted Operating Asset not held by the Company on the first day of any Measurement Period shall be determined in accordance with subparagraph (i) of the definition of “Gross Asset Value"; provided that, for purposes of this definition of “Third Tier Growth Value,” the initial

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Gross Asset Value of Inventory shall be deemed to equal the Gross Asset Value of Inventory at the end of the immediately preceding Fiscal Year.

     “30-year Average Yield” means the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of 30 years).

     “30-year Treasury CMT” for each Class A Distribution Period or Class B Distribution Period, the arithmetic average of the two most recent weekly per annum 30-year Average Yields (as defined below) (or the total weekly per annum 30-Year Average Yields, if less than two such yields are published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately preceding the Class A Distribution Period or Class B Distribution Period for which the Preferred Return Rate on the Preferred Securities is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum 30-year Average Yield during any such Calendar Period, the 30-year Treasury CMT for such Class A Distribution Period or Class B Distribution Period will be the 30-year Average Yield (or total weekly per annum 30-year Average Yields, if less than two such yields are published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum 30-year Average Yield is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, the 30-year Treasury CMT for such Class A Distribution Period or Class B Distribution Period will be the arithmetic average of the two most recent weekly per annum average yields to maturity (or total weekly per annum average yields to maturity, if less than two such yields are published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having remaining maturities of not less than 28 nor more than 30 years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Company. In the event that the Company determines in good faith that for any reason the Company cannot determine the 30-year treasury CMT for any Class A Distribution Period or Class B Distribution Period as provided above in this paragraph, then the 30-year Treasury CMT for such Class A Distribution Period or Class B Distribution Period will be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date of not less than 28 nor more than 30 years from the date of each such quotation, as chosen and quoted daily for each business day during such Calendar Period in New York City (or less frequently if daily quotations are not generally available) to the Company by at least three recognized dealers in U.S. Government securities selected by the Company. The 30-year Treasury CMT shall be rounded to the nearest hundredth of a percent.

     “TPC” has the meaning set forth in Section 1.1.

     “Transaction Documents” means, collectively, this Agreement, the Conveyance Agreements, the Limited Liability Company Agreement of Cereals Properties, dated as of April

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2, 2002, the Limited Liability Company Agreement of IP Holdings I, dated as of April 2, 2002, the Limited Liability Company Agreement of IP Holdings II, dated as of April 2, 2002, the Contribution Agreement between the Company and General Mills Missouri, dated as of May 25, 2008, the Securities Purchase Agreements, the LBSFI Purchase Agreement, the Conveyance Agreements, the Buffalo Lease, the Master Lease Agreement between Cereals Properties and the Company, dated as of April 2, 2002, the Amended and Restated Employee Seconding Agreement, the Amended and Restated Contract Marketing Agreement, the Amended and Restated Contract Operating Agreement, the Amended and Restated Contract Sales Agreement, the Amended and Restated Services Agreement, the Receivables Purchase and Sale Agreement, the Finance Notes, the Other GMI Entity Agreements, the Permitted Intellectual Property License Agreements, the Permitted PP&E Licenses, the GMI Guarantees, the Class A Remarketing Agreement, and each assignment, transfer, license or other agreement, document or certificate referred to or contemplated therein. Each of such documents shall constitute a “Transaction Document” at such time as such document is executed and delivered by all of the necessary parties thereto.

     “Transfer” means, as a noun, any voluntary or involuntary transfer, sale, exchange, any instrument that seeks to transfer an economic interest, or other disposition, and any hypothecation, pledge or other encumbrance, and, as a verb, voluntarily or involuntarily to transfer, sell, exchange, enter into any instrument that seeks to transfer an economic interest, or otherwise dispose of, and, except when used in reference to any Interest, to hypothecate, pledge or otherwise encumber. The word “Transferred” has a meaning correlative thereto. For purposes of Sections 11.3(b), 11.3(c), 11.3(d), 11.3(e), 11.3(f) and 11.3(g), the term “Transfer” shall include the use of a participation, derivative (such as a total return swap, credit linked note or credit default swap), financial instrument or similar contract the value of which is determined in whole or in part by reference to some or all of the Limited Membership Interests for the purpose of either (i) transferring the benefit of gain and/or risk of loss on such Limited Membership Interests or (ii) hedging such Limited Membership Interests.

     “Transfer Agent” means Wells Fargo Shareowner Services or its successor.

     “Transferee Certificate” has the meaning set forth in Section 11.3(e).

     “Transferor Certificate” has the meaning set forth in Section 11.3(e).

     “Undistributed Preferred Return” means, with respect to any Class A Limited Member, Series B-1 Limited Member or Series B-2 Limited Member, the aggregate amount of Class A Limited Member Preferred Return, Series B-1 Limited Member Preferred Return, or Series B-2 Limited Member Preferred Return, as applicable, not distributed on a Class A Distribution Date or Class B Distribution Date, as applicable, pursuant to Section 4.1(a) and, with respect to any Class B Limited Member Preferred Return, without regard to whether the distribution of such Class B Limited Member Preferred Return was prohibited pursuant to the proviso set forth in Section 4.1(a)(ii); provided that such amounts shall be included in Undistributed Preferred Return only during the period from the date such distribution was required to be made to the date such distribution is made.

     “Valuation Methodology” has the meaning set forth in Schedule D.

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     “Voluntary Bankruptcy” has the meaning set forth in the definition of “Bankruptcy.”

     “Wholly-Owned Affiliate” of any Person means an Affiliate of such Person (i) one hundred percent (100%) of the voting stock or beneficial ownership interests of which is owned directly by such Person, or by any Person who, directly or indirectly, owns one hundred percent (100%) of the voting stock or beneficial ownership interests of such Person, (ii) an Affiliate to such Person who, directly or indirectly, owns one hundred percent (100%) of the voting stock or beneficial ownership interests of such Person, and (iii) any Wholly-Owned Affiliate of any Affiliate described in clause (i) or clause (ii).

     “Winning Bid Rate” has the meaning set forth in Section 7.1(c)(i).

     1.11 Other Terms.

     Unless the content shall require otherwise:

     (a) Words importing the singular number or plural number shall include the plural number and singular number respectively;

     (b) Words importing the masculine gender shall include the feminine and neuter genders and vice versa;

     (c) Reference to “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation”; and

     (d) Reference in this Agreement to “herein,” “hereby,” “hereof,” or “hereunder,” or any similar formulation, shall be deemed to refer to this Agreement; provided that such reference shall be deemed to include exhibits, schedules, annexes, or appendices only as provided in Section 15.14.

     (e) Except as otherwise expressly provided for herein with respect to the Required Class A Limited Members or Required Class B Limited Members, references in this Agreement to the consent of the “Limited Members” or to the consent of the “Class A Limited Members” or “Class B Limited Members” shall be deemed to be a reference to the consent of each Limited Member or each Member holding a Class A Limited Membership Interest or Class B Limited Membership Interest, as the case may be.

     (f) All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context requires otherwise.

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SECTION 2.

MEMBERS’ CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS

     2.1 Initial Capital Contribution.

     (a) The Company is authorized to issue three classes of Interests. One such Interest shall be designated as the “Managing Membership Interest,” the second such Interest shall be designated as the “Class A Limited Membership Interests,” and the third such Interest shall be designated as the “Class B Limited Membership Interests.” The Class A Limited Membership Interests and the Class B Limited Membership Interests may be issued in one or more series (“Series”), each having such rights, powers, preferences and designations as shall be set forth herein or as shall be otherwise approved from time to time by the Managing Member, the Required Class A Limited Members and the Required Class B Limited Members. The Class B Limited Membership Interests are divided into two Series known as “Series B-1 Limited Membership Interests” and “Series B-2 Limited Membership Interests” and having the respective rights, powers, preferences and designations set forth in this Agreement.

     (b) (i) On April 2, 2002, (A) GMOI contributed the Cereals Properties Interest, with an initial Gross Asset Value of $998,606,146, subject to debt of $132,255,351, the IP Holdings II Interest, with an initial aggregate Gross Asset Value of $808,423,000, the General Mills Missouri Stock, with an initial aggregate Gross Asset Value of $280,329,000, and all the Inventory located at any of the Initial PP&E, having an initial aggregate Gross Asset Value of $204,712,513, solely in exchange for all of the Managing Membership Interest and was admitted to the Company as the Managing Member, (B) TPC contributed the Pet Stock, the Old El Paso Patents, and the Progresso Patents, with an initial aggregate Gross Asset Value of $542,151,000 solely in exchange for all of the Class A Limited Membership Interests and was admitted to the Company as a Class A Limited Member, and (C) Cereals Holdings contributed the IP Holdings I Interest, with an initial aggregate Gross Asset Value of $1,594,280,000, solely in exchange for all of the Class B Limited Liability Company Interests and was admitted to the Company as a Class B Limited Member.

          (ii) On May 24, 2002, (A) RBDB purchased from TPC 150,000 Class A Limited Membership Interests and was admitted to the Company as a Class A Limited Member, immediately whereafter TPC withdrew in respect thereof and (B) GMOI Transferred to GMCO, as a capital contribution, 100% of the Managing Membership Interest and GMCO was admitted to the Company as the Managing Member, immediately whereafter GMOI withdrew in respect thereof.

          (iii) On October 6, 2004, (A) a portion of the Class A Limited Membership Interests then owned by TPC were converted into 303,300 Series B-1 Limited Membership Interests, all of which were designated as Series B-1 Limited Membership Interests, and (B) the Class B Limited Membership Interests owned by Cereals Holdings were converted into 531,700 Series B-1 Limited Membership Interests and 1,062,580 Series B-2 Limited Membership Interests. On October 7, 2004, TPC and Cereals Holdings transferred all of their respective Series B-1 Limited Membership Interests to GM Class B.

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          (iv) On October 8, 2004, LBSFI purchased from GM Class B all of its 835,000 Class B Limited Membership Interests, all of which constituted Series B-1 Limited Membership Interests, and LBSFI was admitted to the Company as a Class B Limited Member, immediately whereafter GM Class B withdrew as a Member of the Company.

          (v) On October 8, 2004, LBSFI contributed to Capital Trust all of its 835,000 Class B Limited Membership Interests, all of which constituted Series B-1 Limited Membership Interests, and Capital Trust was admitted to the Company as a Class B Limited Member, immediately whereafter LBSFI withdrew as a Member of the Company.

          (vi) On June 28, 2007, RBDB purchased from TPC all of its 88,851 Class A Limited Membership Interests, and RBDB was admitted to the Company as a Class A Limited Member in respect thereof, immediately whereafter TPC withdrew as a Member of the Company.

          (vii) On August 7, 2007, GM Sales purchased from Capital Trust all of its 835,000 Class B Limited Membership Interests, all of which constituted Series B-1 Limited Membership Interests, and GM Sales was admitted to the Company as a Class B Limited Member in respect thereof, immediately whereafter Capital Trust withdrew as a Member of the Company.

          (viii) As of the date hereof, the name, address, and Membership Interests of each Member is as follows:

Name and Address	Membership Interests
GM Cereals Operations, Inc. Number One General Mills Blvd. Minneapolis, Minnesota 55426	Managing Membership Interest
RBDB, Inc. c/o Rabobank New York 245 Park Avenue New York, NY 10167	238,851 Class A Limited Membership Interests
General Mills Sales, Inc. Number One General Mills Blvd. Minneapolis, Minnesota 55426	835,000 Class B Limited Membership Interests, all of which constitute Series B-1 Limited Membership Interests

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Name and Address	Membership Interests
GM Cereals Holdings, Inc. Number One General Mills Blvd. Minneapolis, Minnesota 55426	1,062,580 Class B Limited Membership Interests, all of which constitute Series B-2 Limited Membership Interests

     2.2 Additional Contributions.

     (a) Each GMI Member may, at any time it owns an Interest hereunder, contribute from time to time such additional Cash or other property as it may determine; provided that any Capital Contribution made by any GMI Member pursuant to this Section 2.2 shall consist of Permitted Assets and the Company shall at all times satisfy, both before and after giving effect to the additional contribution, the Portfolio Requirements.

     (b) At such times as a GMI Member contributes assets consisting of Permitted Assets (other than Cash), such GMI Member shall enter into an additional contribution agreement substantially similar to the Conveyance Agreements; provided that the representations and warranties set forth in such additional contribution agreement shall be substantially the same as the representations and warranties contained in the Conveyance Agreements, and such GMI Member shall indemnify the Company and hold it wholly harmless for any Expenses or losses incurred by the Company resulting from or attributable to any representation or warranty made by such GMI Member pursuant to this Section 2.2(b) proving to have been incorrect in any material respect when made.

     (c) The Managing Member shall be required to contribute $250,000 of Cash to the capital of the Company on the Business Day immediately preceding (i) the initial Class A Reset Date and (ii) thereafter, the last Business Day of the Fiscal Year ending in May 2012 and the last Business Day of each fifth Fiscal Year thereafter.

     2.3 Other Matters.

     (a) Except as otherwise provided in Sections 4, 7, 11, and 13, or in the Act, no Member shall demand or receive a return of its Capital Contributions or withdraw from the Company without the consent of all Members. Under circumstances requiring a return of any Capital Contributions, no Member shall have the right to receive property other than Cash except as may be specifically provided in this Agreement.

     (b) No Member shall receive any interest or draw with respect to its Capital Contributions or its Capital Account, except as otherwise provided in this Agreement.

     (c) The Members shall not be liable for the debts, liabilities, contracts, or any other obligations of the Company. Except as otherwise provided by mandatory provisions of applicable state law and except with respect to the obligation of the Members to return to the Company a distribution made to any Member in violation of the Act at a time when such Member knew the distribution would violate the Act, such Member shall be liable only to make its Capital Contribution and shall not be required to lend any funds to the Company or, after its Capital Contribution has been made, to make any additional Capital Contributions to the Company.

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Except as otherwise provided in Section 9.2(f), the Managing Member shall not have any personal liability for the repayment of any Capital Contributions of the Members.

SECTION 3.

ALLOCATIONS

     3.1 Profits.

     After giving effect to the special allocations set forth in Sections 3.3 and 3.4, Profits for any Allocation Year shall be allocated in the following order and priority:

     (a) First, to the Class A Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (i) the cumulative amount of the Class A Limited Member Preferred Return for each such Class A Limited Member from May 24, 2002 through the last day of such Allocation Year, over (ii) the cumulative Profits allocated to such Class A Limited Member pursuant to this Section 3.1(a) for all prior Allocation Years;

     (b) Second, to the Class A Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (i) the excess, if any, of (A) the cumulative Depreciation specially allocated to each such Class A Limited Member pursuant to Section 3.3(h) for the current and all prior Allocation Years during the then current Measurement Period, over (B) the cumulative items of gain specially allocated to such Class A Limited Member pursuant to Section 3.3(j)(v)(1) for the current and all prior Allocation Years during the then current Measurement Period, over (ii) the cumulative Profits allocated to such Class A Limited Member pursuant to this Section 3.1(b) for all prior Allocation Years during the then current Measurement Period;

     (c) Third, to the Class B Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (i) the cumulative amount of each such Class B Limited Member Preferred Return from May 24, 2002 through the last day of such Allocation Year, over (ii) the cumulative Profits allocated to such Class B Limited Member pursuant to this Section 3.1(c) for all prior Allocation Years;

     (d) Fourth, to the Class B Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (i) the excess, if any, of (A) the cumulative Depreciation specially allocated to each such Class B Limited Member pursuant to Section 3.3(h) for the current and all prior Allocation Years during the then current Measurement Period, over (B) the cumulative items of gain specially allocated to such Class B Limited Member pursuant to Section 3.3(j)(v)(2) for the current and all prior Allocation Years during the then current Measurement Period, over (ii) the cumulative Profits allocated to such Class B Limited Member pursuant to this Section 3.1(d) for all prior Allocation Years during the then current Measurement Period;

     (e) Fifth, to the Class A Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (i) the cumulative Losses allocated to each such Class A Limited Member pursuant to Sections 3.2(d), 3.2(e), and 3.2(f) for all prior Allocation Years during the then current Measurement Period, over (ii) the cumulative Profits allocated to such

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Class A Limited Member pursuant to this Section 3.1(e) for all prior Allocation Years during the then current Measurement Period;

     (f) Sixth, to the Class B Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (i) the cumulative Losses allocated to each such Class B Limited Member pursuant to Sections 3.2(d) and 3.2(e) for all prior Allocation Years during the then current Measurement Period, over (ii) the cumulative Profits allocated to such Class B Limited Member pursuant to this Section 3.1(f) for all prior Allocation Years during the then current Measurement Period;

     (g) Seventh, to the Managing Member in an amount equal to the excess, if any, of (i) the First Baseline Amount for the Allocation Year, over (ii) the cumulative Profits allocated pursuant to Section 3.1(a) through (f), inclusive, for the current Allocation Year;

     (h) Eighth, 95% to the Managing Member, 0.57% to the Class A Limited Members in proportion to their Preferred Return Capital, and 4.43% to the Class B Limited Members in proportion to their Preferred Return Capital in an amount equal to the excess, if any, of (i) the Second Baseline Amount for the Allocation Year, over (ii) the First Baseline Amount for the Allocation Year; provided that, for the Allocation Year beginning on May 31, 2004 and ending on May 29, 2005, the Profits allocable pursuant to this Section 3.1(h) shall be allocated as follows:

          (i) An amount equal to the product of (x) such Profits times (y) a fraction, the numerator of which is the number of days from (and including) the first day of such Allocation Year to (but excluding) October 6, 2004, and the denominator of which is the total number of days in such Allocation Year, shall be specially allocated 95% to the Managing Member, 1.3% to the Class A Limited Members in proportion to their Preferred Return Capital, and 3.7% to the Class B Limited Members in proportion to their Preferred Return Capital; and

          (ii) An amount equal to the excess of (x) the amount of such Profits over (y) the amount of such Profits allocated pursuant to clause (i) above, shall be specially allocated 95% to the Managing Member, 0.57% to the Class A Limited Members in proportion to their Preferred Return Capital, and 4.43% to the Class B Limited Members in proportion to their Preferred Return Capital; and

     (i) Ninth, the balance, if any, 96% to the Managing Member, 0.46% to the Class A Limited Members in proportion to their Preferred Return Capital, and 3.54% to the Class B Limited Members in proportion to their Preferred Return Capital provided that, for the Allocation Year beginning on May 31, 2004 and ending on May 29, 2005, the Profits allocable pursuant to this Section 3.1(i) shall be allocated as follows:

          (i) An amount equal to the product of (x) such Profits times (y) a fraction, the numerator of which is the number of days from (and including) the first day of such Allocation Year to (but excluding) October 6, 2004, and the denominator of which is the total number of days in such Allocation Year, shall be specially allocated 96% to the Managing Member, 1.04% to the Class A Limited Members in proportion to their Preferred Return Capital, and 2.96% to the Class B Limited Members in proportion to their Preferred Return Capital; and

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          (ii) An amount equal to the excess of (x) the amount of such Profits over (y) the amount of such Profits allocated pursuant to clause (i) above, shall be specially allocated 96% to the Managing Member, 0.46% to the Class A Limited Members in proportion to their Preferred Return Capital, and 3.54% to the Class B Limited Members in proportion to their Preferred Return Capital.

     3.2 Losses.

     After giving effect to the special allocations set forth in Sections 3.3 and 3.4, Losses for any Allocation Year shall be allocated in the following order and priority:

     (a) First, to the Members in proportion to, and to extent of, an amount equal to the excess, if any, of (i) the cumulative Profits allocated to each such Member pursuant to Section 3.1(i) for all prior Allocation Years during the then current Measurement Period, over (ii) the cumulative Losses allocated to such Member pursuant to this Section 3.2(a) for all prior Allocation Years during the then current Measurement Period;

     (b) Second, to the Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (i) the cumulative Profits allocated to each such Member pursuant to Section 3.1(h) for all prior Allocation Years during the then current Measurement Period, over (ii) the cumulative Losses allocated to such Member pursuant to this Section 3.2(b) for all prior Allocation Years during the then current Measurement Period;

     (c) Third, to the Managing Member in an amount equal to the excess, if any, of (i) the cumulative Profits allocated to the Managing Member pursuant to Section 3.1(g) for all prior Allocation Years during the then current Measurement Period, over (ii) the cumulative Losses allocated to the Managing Member pursuant to this Section 3.2(c) for all prior Allocation Years during the then current Measurement Period;

     (d) Fourth, 98% to the Managing Member, 1% to the Class A Limited Members in proportion to their Preferred Return Capital, and 1% to the Class B Limited Members in proportion to their Preferred Return Capital until the Adjusted Capital Account of the Managing Member is equal to zero;

     (e) Fifth, 99% to the Class B Limited Members in proportion to their Preferred Return Capital and 1% to the Class A Limited Members in proportion to their Preferred Return Capital until the Adjusted Capital Account of each Class B Limited Member is equal to zero;

     (f) Sixth, 100% to the Class A Limited Members in proportion to their Preferred Return Capital until the Adjusted Capital Account of each Class A Limited Member is equal to zero; and

     (g) Seventh, 100% to the Managing Member.

     3.3 Special Allocations.

     The following special allocations shall be made in the following order:

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     (a) Minimum Gain Chargeback. Except as otherwise provided in Regulations Section 1.704-2(f), notwithstanding any other provision of this Section 3, if there is a net decrease in Company Minimum Gain during any Allocation Year, each Member shall be specially allocated items of Company income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 3.3(a) is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

     (b) Member Minimum Gain Chargeback. Except as otherwise provided in Regulations Section 1.704-2(i)(4), notwithstanding any other provision of this Section 3, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Allocation Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years) in an amount equal to such Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 3.3(b) is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

     (c) Qualified Income Offset. In the event that any Member unexpectedly receives any adjustments, allocations, or distributions described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible; provided that an allocation pursuant to this Section 3.3(c) shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Section 3 have been tentatively made as if this Section 3.3(c) were not in this Agreement.

     (d) Gross Income Allocation. In the event that any Member has an Adjusted Capital Account Deficit at the end of any Allocation Year, each such Member shall be allocated items of Company income and gain in the amount of such deficit as quickly as possible; provided that an allocation pursuant to this Section 3.3(d) shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Section 3 have been tentatively made as if Section 3.3(c) and this Section 3.3(d) were not in this Agreement.

     (e) Nonrecourse Deductions. Nonrecourse Deductions for any Allocation Year shall be specially allocated 90% to the Managing Member, 1.1% to the Class A Limited Members in

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proportion to their Preferred Return Capital, and 8.9% to the Class B Limited Members in proportion to their Preferred Return Capital; provided that, for the Allocation Year beginning on May 31, 2004 and ending on May 29, 2005, Nonrecourse Deductions shall be allocated as follows:

          (i) An amount equal to the product of (x) the Nonrecourse Deductions for such Allocation Year times (y) a fraction, the numerator of which is the number of days from (and including) the first day of such Allocation Year to (but excluding) October 6, 2004, and the denominator of which is the total number of days in such Allocation Year, shall be specially allocated 90% to the Managing Member, 2.5% to the Class A Limited Members in proportion to their Preferred Return Capital, and 7.5% to the Class B Limited Members in proportion to their Preferred Return Capital; and

          (ii) An amount equal to the excess of (x) the amount of Nonrecourse Deductions for such Allocation Year over (y) the amount of Nonrecourse Deductions for such Allocation Year allocated pursuant to clause (i) above, shall be specially allocated 90% to the Managing Member, 1.1% to the Class A Limited Members in proportion to their Preferred Return Capital, and 8.9% to the Class B Limited Members in proportion to their Preferred Return Capital.

     (f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Allocation Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(1).

     (g) Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Company asset, pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of such Member’s Interest, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

     (h) Depreciation. All items of Depreciation of the Company shall be specially allocated 90% to the Managing Member, 1.1% to the Class A Limited Members in proportion to their Preferred Return Capital, and 8.9% to the Class B Limited Members in proportion to their Preferred Return Capital; provided that, for the Allocation Year beginning on May 31, 2004 and ending on May 29, 2005, Nonrecourse Deductions shall be allocated as follows:

          (i) An amount equal to the product of (x) the Depreciation for such Allocation Year times (y) a fraction, the numerator of which is the number of days from (and including) the first day of such Allocation Year to (but excluding) October 6, 2004, and the denominator of which is the total number of days in such Allocation Year, shall be specially allocated 90% to the Managing Member, 2.5% to the Class A Limited Members in proportion to their Preferred

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Return Capital, and 7.5% to the Class B Limited Members in proportion to their Preferred Return Capital; and

          (ii) An amount equal to the excess of (x) the amount of Depreciation for such Allocation Year over (y) the amount of Depreciation for such Allocation Year allocated pursuant to clause (i) above, shall be specially allocated 90% to the Managing Member, 1.1% to the Class A Limited Members in proportion to their Preferred Return Capital, and 8.9% to the Class B Limited Members in proportion to their Preferred Return Capital.

     (i) Interest Income. Ninety percent (90%) of the interest income attributable to the Permitted Loans made by the Company to GMI or its Affiliates shall be specially allocated to the Managing Member, and the remaining 10% of such interest income shall be allocated under Sections 3.1 and 3.2.

     (j) Gain from Disposition of All or Substantially All of Permitted Assets. In the event that, in any Allocation Year, the Company realizes, or is deemed to realize, gain from the sale, disposition, or adjustment to the Gross Asset Value of all or substantially all of its Permitted Assets, such gain shall be specially allocated as follows:

          (i) First, 100% to the Managing Member in an amount equal to the excess, if any, of (A) the cumulative loss specially allocated to the Managing Member pursuant to Section 3.3(k)(viii) for all prior Allocation Years during the then current Measurement Period, over (B) the cumulative gain specially allocated to the Managing Member pursuant to this Section 3.3(j)(i) for all prior Allocation Years during the then current Measurement Period;

          (ii) Second, 100% to the Class A Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (A) the cumulative loss specially allocated to each such Class A Limited Member pursuant to Sections 3.3(k)(v), 3.3(k)(vi), and 3.3(k)(vii) for all prior Allocation Years during the then current Measurement Period, over (B) the cumulative gain specially allocated to such Class A Limited Member pursuant to this Section 3.3(j)(ii) for all prior Allocation Years during the then current Measurement Period;

          (iii) Third, 100% to the Class B Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (A) the cumulative loss specially allocated to each such Class B Limited Member pursuant to Sections 3.3(k)(v) and 3.3(k)(vi) for all prior Allocation Years during the then current Measurement Period, over (B) the cumulative gain specially allocated to such Class B Limited Member pursuant to this Section 3.3(j)(iii) for all prior Allocation Years during the then current Measurement Period;

          (iv) Fourth, 100% to the Managing Member in an amount equal to the excess, if any, of (A) the cumulative loss specially allocated to the Managing Member pursuant to Section 3.3(k)(v) for all prior Allocation Years during the then current Measurement Period, over (B) the cumulative gain specially allocated to the Managing Member pursuant to this Section 3.3(j)(iv) for all prior Allocation Years during the then current Measurement Period;

          (v) Fifth, an amount equal to the excess, if any, of (A) the aggregate initial Gross Asset Value of such Permitted Assets, over (B) the aggregate Gross Asset Value of such Permitted Assets shall be allocated:

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          (1) first, 100% to the Class A Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (x) the cumulative Depreciation specially allocated to each such Class A Limited Member pursuant to Section 3.3(h) for the current and all prior Allocation Years during the then current Measurement Period, over (y) the sum of (i) the cumulative Profits allocated to such Class A Limited Member pursuant to Section 3.1(b) for all prior Allocation Years during the then current Measurement Period plus (ii) the cumulative gain specially allocated to such Class A Limited Member pursuant to this Section 3.3(j)(v)(1) for all prior Allocation Years during the then current Measurement Period;

          (2) second, 100% to the Class B Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (x) the cumulative Depreciation specially allocated to each such Class B Limited Member pursuant to Section 3.3(h) for the current and all prior Allocation Years during the then current Measurement Period, over (y) the sum of (i) the cumulative Profits allocated to such Class B Limited Member pursuant to Section 3.1(d) for all prior Allocation Years during the then current Measurement Period plus (ii) the cumulative gain specially allocated to such Class B Limited Member pursuant to this Section 3.3(j)(v)(2) for all prior Allocation Years during the then current Measurement Period; and

          (3) third, the balance, if any, 100% to the Managing Member;

          (vi) Sixth, 98.7% to the Managing Member, 0.29% to the Class A Limited Members in proportion to their Preferred Return Capital, and 1.01% to the Class B Limited Members in proportion to their Preferred Return Capital in an amount equal to the excess, if any, of (A) the aggregate First Tier Growth Value for such Permitted Assets, over (B) the aggregate Gross Asset Value of such Permitted Assets determined as of the beginning of the then current Measurement Period in a manner consistent with the calculation of the First Tier Growth Value;

          (vii) Seventh, 96% to the Managing Member, 0.88% to the Class A Limited Members in proportion to their Preferred Return Capital, and 3.12% to the Class B Limited Members in proportion to their Preferred Return Capital in an amount equal to the excess, if any, of (A) the lesser of (x) the amount realized or deemed realized from disposition of such Permitted Assets or (y) the Second Tier Growth Value for such Permitted Assets, over (B) the First Tier Growth Value for such Permitted Assets;

          (viii) Eighth, 95% to the Managing Member, 1.1% to the Class A Limited Members in proportion to their Preferred Return Capital, and 3.9% to the Class B Limited Members in proportion to their Preferred Return Capital in an amount equal to the excess, if any, of (A) the lesser of (x) the amount realized or deemed realized from the disposition of such Permitted Assets or (y) the Third Tier Growth Value for such Permitted Assets, over (B) the Second Tier Growth Value of such Permitted Assets; and

          (ix) Ninth, the balance, if any, 98.7% to the Managing Member, 0.29% to the Class A Limited Members in proportion to their Preferred Return Capital, and 1.01% to the Class B Limited Members in proportion to their Preferred Return Capital.

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     (k) Loss from Disposition of All or Substantially All of Permitted Assets. In the event that, in any Allocation Year, the Company realizes, or is deemed to realize, a loss from the sale, disposition, or adjustment to the Gross Asset Value of all or substantially all of its Permitted Assets, such loss shall be specially allocated as follows:

          (i) First, to the Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (A) the cumulative gain specially allocated to each such Member pursuant to Section 3.3(j)(ix) for the current and all prior Allocation Years during the then current Measurement Period, over (B) the cumulative loss specially allocated to such Member pursuant to this Section 3.3(k)(i) for all prior Allocation Years during the then current Measurement Period;

          (ii) Second, to the Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (A) the cumulative gain specially allocated to each such Member pursuant to Section 3.3(j)(viii) for the current and all prior Allocation Years during the then current Measurement Period, over (B) the cumulative loss specially allocated to such Member pursuant to this Section 3.3(k)(ii) for all prior Allocation Years during the then current Measurement Period;

          (iii) Third, to the Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (A) the cumulative gain specially allocated to each such Member pursuant to Section 3.3(j)(vii) for the current and all prior Allocation Years during the then current Measurement Period, over (B) the cumulative loss specially allocated to such Member pursuant to this Section 3.3(k)(iii) for all prior Allocation Years during the then current Measurement Period;

          (iv) Fourth, to the Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (A) the cumulative gain specially allocated to each such Member pursuant to Section 3.3(j)(vi) for the current and all prior Allocation Years during the then current Measurement Period, over (B) the cumulative loss specially allocated to such Member pursuant to this Section 3.3(k)(iv) for all prior Allocation Years during the then current Measurement Period;

          (v) Fifth, 98% to the Managing Member, 1% to the Class A Limited Members in proportion to their Preferred Return Capital and 1% to the Class B Limited Members in proportion to their Preferred Return Capital until the Adjusted Capital Account of the Managing Member is equal to zero;

          (vi) Sixth, 99% to the Class B Limited Members in proportion to their Preferred Return Capital and 1% to the Class A Limited Members in proportion to their Preferred Return Capital until the Adjusted Capital Account of each Class B Limited Member is equal to zero;

          (vii) Seventh, 100% to the Class A Limited Members in proportion to their Preferred Return Capital until the Adjusted Capital Account of each Class A Limited Member is equal to zero; and

          (viii) Eighth, 100% to the Managing Member.

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     (l) Loss from Other Dispositions of Permitted Assets. In the event that, in any Allocation Year, the Company realizes a loss from (i) the sale or disposition of any Permitted Asset (other than Inventory) in the ordinary course of the Company’s business or (ii) a bulk sale or general liquidation of Inventory (other than in connection with the sale of all or substantially all of the Company’s Permitted Assets), such loss shall be specially allocated to the Managing Member.

     (m) Charitable Contribution Expenses. All items of Expense attributable to charitable contributions made by the Company during any Allocation Year shall be specially allocated 100% to the Managing Member.

     (n) Tax Indemnity Payments. In the event that, in any Allocation Year, the Company makes a tax indemnity payment pursuant to Section 8.3, the deduction attributable to such payment shall be specially allocated to the Managing Member.

     3.4 Curative Allocations.

     The allocations set forth in Sections 3.3(a), 3.3(b), 3.3(c), 3.3(d), 3.3(e), 3.3(f), and 3.3(g) (the “Regulatory Allocations”) are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent possible, the Regulatory Allocations shall be offset either with special allocations of other items of Company income, gain, loss, or deduction pursuant to this Section 3.4. Therefore, notwithstanding any other provision of this Section 3 (other than the Regulatory Allocations), the Managing Member shall make such offsetting special allocations of Company income, gain, loss, or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of this Agreement and all Company items were allocated pursuant to Sections 3.1, 3.2, and 3.3 (other than the Regulatory Allocations). In exercising its discretion under this Section 3.4, the Managing Member shall take into account future Regulatory Allocations under Sections 3.3(a) and 3.3(b) that, although not yet made, are likely to offset other Regulatory Allocations previously made under Sections 3.3(e) and 3.3(f).

     3.5 Other Allocation Rules.

     (a) Profits, Losses, and any other items of income, gain, loss, or deduction shall be allocated to the Members pursuant to this Section 3 as of the last day of each Fiscal Year; provided that Profits, Losses, and such other items shall also be allocated at such times as the Gross Asset Values of the Company’s assets are adjusted pursuant to subparagraph (ii) of the definition of “Gross Asset Value” in Section 1.10.

     (b) Allocations made for the Allocation Year beginning on May 31, 2004 and ending on May 29, 2005 shall take into account the conversion of a portion of TPC’s Class A Limited Membership Interest into 303,300 Series B-1 Limited Membership Interests.

     (c) In the event that, for any Allocation Year, (i) one or more Limited Members have been allocated an amount of Estimated Profits and Losses, and other items of Company income, gain, loss, or deduction in connection with a Class A Remarketing, Class B Purchase, Class B

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Remarketing, or Class B Exchange and (ii) the amount so allocated (the “Estimated Allocation”) differed from the amount actually allocated (the “Actual Allocation”) to such Limited Members pursuant to Sections 3.1 or 3.2 and Section 3.3 for such Allocation Year, the Managing Member shall be allocated an amount of Profits or Losses, as applicable, otherwise allocable to such Limited Members equal to the difference between the Estimated Allocation and the Actual Allocation, and the Actual Allocation made to such Limited Members shall be adjusted accordingly. Any amounts reallocated pursuant to this Section 3.5(c) shall be deemed for all purposes hereunder to have been actually allocated to the Managing Member and not allocated to such Limited Members.

     (d) For purposes of determining the Profits, Losses, or any other items allocable to any period, Profits, Losses, and any such other items shall be determined on a daily proration basis by the Managing Member under Code Section 706 and the Regulations thereunder.

     (e) The Members are aware of the income tax consequences of the allocations made by this Section 3 and hereby agree to be bound by the provisions of this Section 3 in reporting their shares of Company income and loss for income tax purposes, except as otherwise required by law.

     3.6 Tax Allocations: Code Section 704(c).

     In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction with respect to any Property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such Property to the Company for federal income tax purposes and its initial Gross Asset Value (computed in accordance with the definition of Gross Asset Value). Such allocation shall be made in accordance with the remedial allocation method described by Regulations Section 1.704-3(d). Notwithstanding any provision in this Agreement to the contrary, in the event that any such Property is subject to the “anti-churning” rules of Code Section 197(f)(9), no remedial allocations of income or deduction shall be made to any Member with respect to such Property until such time at which such asset is sold by the Company.

     In the event the Gross Asset Value of any Property is adjusted pursuant to subparagraph (ii) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss, and deduction with respect to such Property shall take account of any variation between the adjusted basis of such Property for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder. Such allocation shall be made in accordance with the remedial allocation method described by Regulations Section 1.704-3(d).

     Any elections or other decisions relating to such allocations shall be made by the Managing Member in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 3.6 are solely for purposes of federal, state, and local Taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Profits, Losses, other items, or distributions pursuant to any provision of this Agreement.

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     3.7 Adjustment of Allocations Upon Conversion of Class A Limited Membership Interests.

     In the event that any Class A Limited Membership Interests are converted into Class B Limited Membership Interests at any time in the future, the sharing percentages set forth in Sections 3.1(h), 3.1(i), 3.3(e), 3.3(h), 3.3(j)(vi), 3.3(j)(vii), 3.3(j)(viii), and 3.3(j)(ix) shall be adjusted to reflect such conversion in accordance with this Section 3.7. The percentage of Profits, Losses, gain, or loss otherwise allocated to the Class A Limited Members pursuant to any of the above listed provisions shall be reduced by subtracting from the relevant pre-conversion percentage an amount (expressed as a percentage) equal to the product of (i) the relevant pre-conversion percentage, times (ii) a fraction (expressed as a percentage), the numerator of which is the Preferred Return Capital attributable to the Class A Limited Member ship Interests being converted, and the denominator of which is the aggregate Preferred Return Capital of the Class A Limited Members immediately prior to such conversion. The amount derived in the preceding sentence shall be added to the relevant pre-conversion percentage applicable to the Class B Limited Membership Interests. By way of example, if Class A Limited Membership Interests with an aggregate Preferred Return Capital of $50 million were converted into Class B Limited Membership Interests at a time when the aggregate Preferred Return Capital of all Class A Limited Membership Interests was $200 million, the percentage of Profits allocated to the Class A Limited Members pursuant to Section 3.1(h) hereof subsequent to the conversion would be reduced from 0.57% to 0.43% (i.e., 0.57% - [0.57 x ($50 million ¸ $200 million]).

SECTION 4.

DISTRIBUTIONS

     4.1 Amounts Distributed.

     (a) Preferred Return Distributions. Except as otherwise provided in Section 13, the Managing Member shall cause the Company to distribute Cash Available for Distribution (determined as of the time such distributions are required to be made pursuant to this Section 4.1(a)) to the Limited Members as follows:

          (i) First, on each Class A Distribution Date, to the Class A Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (i) the cumulative amount of the Class A Limited Member Preferred Return accrued during the period from and including May 24, 2002 to but excluding the last day of the Fiscal Quarter ending on or immediately following such Class A Distribution Date for each such Class A Limited Member, over (ii) the cumulative amount of Cash previously distributed to such Class A Limited Member pursuant to this Section 4.1(a)(i); and

          (ii) Second, on each Class B Distribution Date, commencing January 15, 2005, to the Class B Limited Members in proportion to, and to the extent of, an amount equal to the excess, if any, of (i) the cumulative amount of the Class B Limited Member Preferred Return accrued during the period from and including the May 24, 2002 to but excluding Class B Distribution Date, over (ii) the cumulative amount of Cash previously distributed to such Class B

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Limited Member pursuant to this Section 4.1(a)(ii); provided that no distributions shall be made pursuant to this Section 4.1(a)(ii) unless (A) at the time such distribution is otherwise required to be made and as of the immediately preceding Class A Distribution Date, Cash Available for Distribution was at least equal to the sum of (x) the amounts required to be distributed on such preceding Class A Distribution Date pursuant to Section 4.1(a)(i) plus (y) the amounts required to be distributed on the current Class B Distribution Date pursuant this Section 4.1(a)(ii); (B) Profits of the Company for the current Allocation Year through such Class B Distribution Date (calculated as if such date were the last day of the Allocation Year) equal or exceed the amounts required to be distributed pursuant to Section 4.1(a)(i) and (a)(ii) as of such Class B Distribution Date; and (C) at the time of such distribution no Class A Notice Event, Liquidating Event or other event or condition that, but for the requirement that time elapse or notice be given, or both, would constitute a Class A Notice Event or Liquidating Event has occurred and is continuing.

     Distributions pursuant to this Section 4.1(a) (including any distributions made subsequent to the Class A Distribution Date or Class B Distribution Date, as applicable, on which they were required to be made but prior to the succeeding Class A Distribution Date or Class B Distribution Date, as applicable, on which distributions are required to be made) shall be made to Members of record fifteen (15) days prior to the relevant Class A Distribution Date or Class B Distribution Date, as applicable. Notwithstanding any provision to the contrary in this Section 4.1(a), the Managing Member shall cause, to the extent there is sufficient Cash Available for Distribution, there to be distributed to the Limited Members as constituted immediately prior to the sale by GM Class B of all of its Series B-1 Limited Membership Interests, any accrued but undistributed Limited Member Preferred Return with respect to such Limited Membership Interests and such distributions shall for all purposes of this Agreement be deemed to have been made pursuant to Section 4.1(a).

     (b) Annual Distribution of Certain Profits and Gains. Except as otherwise provided in Section 13 and provided all distributions required to be made pursuant to Section 4.1 have been made, the Managing Member shall cause the Company to notify, within 150 days after the end of each Allocation Year, each Member of the amount to be distributed to it pursuant to this Section 4.1(b), and to distribute Cash Available for Distribution no later than 180 days after the end of each Allocation Year, such distribution to be made, except as otherwise provided in Section 4.1(e) with respect to the Series B-1 Limited Membership Interests, to the Members of record during such Allocation Year in proportion to the number of days such Members held their respective Limited Membership Interests during such Allocation Year, in the following order and priority:

          (i) First, to the Class A Limited Members and any other Person that was a Class A Limited Member during the relevant Allocation Year in an amount equal to the sum of (x) the Profits, if any, allocated to such Class A Limited Member or other Person pursuant to Sections 3.1(h) and 3.1(i) for such Allocation Year, plus (y) if the Company sold or disposed of all or substantially all of its Permitted Assets during the Allocation Year, the aggregate amount of gain, if any, from such sales or dispositions that was allocated to such Class A Limited Member or other Person pursuant to Sections 3.3(j)(vi), 3.3(j)(vii), 3.3(j)(viii), and 3.3(j)(ix) for such Allocation Year; and

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          (ii) Second, to the Class B Limited Members and any other Person that was a Class B Limited Member during the relevant Allocation Year in an amount equal to the sum of (x) the Profits, if any, allocated to such Class B Limited Member or other Person pursuant to Sections 3.1(h) and 3.1(i) for such Allocation Year plus (y) if the Company sold or disposed of all or substantially all of its Permitted Assets during the Allocation Year, the aggregate amount of gain, if any, from such sales or dispositions that was allocated to such Class B Limited Member or other Person pursuant to Sections 3.3(j)(vi), 3.3(j)(vii), 3.3(j)(viii), and 3.3(j)(ix) for such Allocation Year;

provided that any distributions of Cash Available for Distribution required to be made to a GMI Member pursuant to this Section 4.1(b) shall be made at such times as are determined by the Managing Member in its sole discretion and any amounts otherwise distributable to a GMI Member pursuant to this Section 4.1(b) that are deferred by the Managing Member shall be added to the distribution to which such GMI Member is entitled to receive at such times as the Managing Member makes distribution to the GMI Member pursuant to this Section 4.1(b); provided, further, that any such deferred distributions shall not be made until all distributions otherwise required to be made pursuant to this Section 4.1(b) have been made. To the extent there is insufficient Cash Available for Distribution to make the distributions required by this Section 4.1(b), the amount not distributed shall be distributed as soon as there is sufficient Cash Available for Distribution, such distributions to be made after any distributions required pursuant to Section 4.1(a) but prior to any other distributions required under this Section 4.

     (c) Requirements Regarding Undistributed Cash. Cash Available for Distribution that is not distributed pursuant to Sections 4.1(a) and 4.1(b) shall, unless used by the Company to satisfy a requirement set forth herein, either be (i) distributed to the Managing Member on a weekly basis, or at such other times as are determined by the Managing Member, in such amounts as are determined by the Managing Member; provided that no distributions shall be made pursuant to this Section 4.1(c)(i) unless (A) at the time such distribution is otherwise permitted to be made, Cash Available for Distribution is at least equal to the sum of (x) the amounts required to be distributed on the following Class A Distribution Date pursuant to Section 4.1(a)(i) plus (y) the amounts required to be distributed on the following Class B Distribution Date pursuant to Section 4.1(a)(ii) plus (z) the amounts proposed to be distributed to the Managing Member on the current Managing Member Distribution Date pursuant this Section 4.1(c)(i); (B) Profits of the Company for the current Allocation Year through such Managing Member Distribution Date (calculated as if such date were the last day of the Allocation Year) equal or exceed the amounts required to be distributed pursuant to Section 4.1(a)(i) and (a)(ii) as of such Managing Member Distribution Date; and (C) at the time of such distribution no Class A Notice Event, Liquidating Event or other event or condition that, but for the requirement that time elapse or notice be given, or both, would constitute a Class A Notice Event or Liquidating Event has occurred and is continuing or would result from any such distribution, or (ii) invested in Permitted Assets.

     (d) Limitation. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution to a Member on account of its Membership Interests if such distribution would violate the Act or other applicable law.

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     4.2 Amounts Withheld.

     All amounts properly withheld pursuant to the Code or any provision of any state, local, or foreign tax law with respect to any payment, distribution, or allocation to the Company or the Members shall be treated as amounts paid or distributed, as the case may be, to the Members with respect to which such amount was withheld pursuant to this Section 4.2 for all purposes under this Agreement. The Company is authorized to withhold from payments and distributions, or with respect to allocations, to the Members, and to pay over to any federal, state, and local government or any foreign government, any amounts required to be so withheld pursuant to the Code or any provisions of any other federal, state, or local law or any foreign law, and shall allocate any such amounts to the Members with respect to which such amount was withheld.

     4.3 Limitations on Distributions.

     The Company shall make no distributions to the Members except (i) as provided in this Section 4 and Section 13, or (ii) to the extent not inconsistent with Section 4 and Section 13 or with the provisions of any of the Transaction Documents, as agreed to by all of the Members.

     4.4 Distributions and Payments to Members.

     It is the intent of the Members that no distribution or payment to any Member (including distributions under Sections 4.1 and 13.2) shall be deemed a return of money or other property in violation of the Act. The payment or distribution of any such money or property to a Member shall be deemed to be a compromise within the meaning of Section 18-502(b) of the Act, and the Member receiving any such money or property shall not be required to return any such money or property to the Company, any creditor of the Company or any other Person. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Member is obligated to return such money or property, such obligation shall be the obligation of such Member and not of the Company, any other Member or the Managing Member. Any amounts required to be paid under such obligation shall be treated as a permitted additional Capital Contribution pursuant to Section 2.2.

SECTION 5.

MANAGEMENT

     5.1 Authority of the Managing Member.

     The Managing Member constitutes a “manager” of the Company for purposes of the Act. The Members acknowledge that the Company shall be managed by the Managing Member, in its capacity as a manager of the Company, in accordance with Section 18-402 of the Act and subject to any restrictions set forth in the Certificate of Formation or this Agreement, all powers to control and manage the business and affairs of the Company and to bind the Company shall be exclusively vested in the Managing Member, in such capacity, and the Managing Member may exercise all powers of the Company and do all such lawful acts as are not by statute, the Certificate of Formation or this Agreement directed or required to be exercised or done by the Members and in so doing shall have the right and authority to take all actions that the Managing Member deems necessary, useful, or appropriate for the management and conduct of the

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Company’s business and affairs and in the pursuit of the purposes of the Company, including delegating the right and authority to take such actions to employees of the Managing Member as are designated by the Managing Member or officers or employees of the Company (whether employed directly or seconded from another GMI Entity); provided, however that any officers of the Company shall have the authority to enter into the Transaction Documents or any other document as may be contemplated from time to time. The Managing Member and each such employee or officer and any other “manager,” including the Independent Director, if any, shall be an “authorized person” on behalf of the Company, as such term is used in the Act.

     5.2 Duties and Obligations of the Managing Member.

     (a) The Managing Member shall take all actions that may be necessary or appropriate for the (i) continuation of the Company’s and the Subsidiaries’ valid existence as a limited liability company or corporation, as applicable, under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Members or to enable the Company to conduct the business in which it is engaged, (ii) accomplishment of the Company’s and the Subsidiaries’ purposes, including the acquisition, development, maintenance, and preservation of the Permitted Assets, and operation of Property in accordance with the provisions of this Agreement, the Transaction Documents and applicable laws and regulations, (iii) provision or arrangement for all of the Company’s and the Subsidiaries’ management, reporting, legal, and tax services, (iv) causation of the Company’s and the Subsidiaries’ business and assets to be maintained separate and apart from the business and assets of each of the Members and their Affiliates and any other Person, and (v) the making available of the books and records of the Company and the Subsidiaries for the Members’ inspection.

     (b) Except as provided in Section 1.9(c), the Managing Member shall be under a fiduciary duty to conduct the affairs of the Company and its Subsidiaries in the best interests of the Company and of the Members, including the safekeeping and use of all of the Property and the use thereof for the exclusive benefit of the Company. Without limiting the foregoing, the Managing Member agrees to perform its duties hereunder in good faith and in accordance with prudent industry practices for the consumer food business (and in any event using a degree of skill and attention no less than which GMI exercises with respect to assets of such character that it manages for itself). The Managing Member shall not take any affirmative action, and shall not fail to take any action required of it under this Agreement or any Transaction Document, that would result in a breach or violation by the Company or any of its Subsidiaries of, or conflict with, any provision of any Transaction Document.

     (c) The Managing Member shall cause the Company and its Subsidiaries to conduct the business and operations of the Company and its Subsidiaries separate and apart from that of any Member, any Affiliates of the Company and its Subsidiaries, and any other Person. The Managing Member shall take any action necessary to cause the Company and its Subsidiaries to satisfy the foregoing obligations, including:

          (i) Segregating the assets of the Company and its Subsidiaries and not allowing funds or other assets of the Company and its Subsidiaries to be commingled with the funds or other assets of, held by, or registered in the name of, any Member, any Affiliates of the Company and its Subsidiaries, or any other Person, and maintaining the assets of the Company

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and its Subsidiaries such that the assets of the Company and its Subsidiaries are readily identifiable as assets of the Company and its Subsidiaries and not those of any other Person, including maintaining bank accounts of the Company and its Subsidiaries separate from any other Person and maintaining a custodial account with a financial institution (the “Custodian”) whose unsecured and unsupported long-term debt or other similar obligations is at all times rated “A2” or better by Moody’s and “A” or better by S&P or that is a wholly owned subsidiary of a bank holding company whose unsecured and unsupported long-term debt or other similar obligations is at all times rated “A2” or better by Moody’s and “A” or better by S&P pursuant to a custodial agreement regularly employed by the Custodian (the “Custodial Agreement”) pursuant to which the Company shall, upon acquiring any interest in a Finance Note, promptly cause the instrument evidencing such Finance Note to be delivered to the Custodian to be held by the Custodian subject to and in accordance with the Custodial Agreement, provided that the Managing Member shall cause the Custodial Agreement to provide that all Finance Notes held by the Custodian shall be delivered to the Liquidator upon its request;

          (ii) Maintaining books and financial statements and records of the Company and its Subsidiaries separate from the books and financial statements and records of any Member, any Affiliates of the Company and its Subsidiaries, or any other Person, and observing all procedures and organizational formalities of the Company and its Subsidiaries, including those required by this Agreement or the Act, including maintaining minutes of meetings of the Company and its Subsidiaries and acting on behalf of the Company and its Subsidiaries only pursuant to due authorization of the managers or directors of the Company and its Subsidiaries or the Members, as applicable;

          (iii) Maintaining the A-Rated Securities and other certificated ownership securities and interests of the Company and its Subsidiaries to be held in a custodial account at a reputable financial institution located in the United States established for the safekeeping of such certificated ownership securities and interests and separate from the certificated ownership securities and interests of any Member, any Affiliates of the Company and its Subsidiaries or the Members, as applicable;

          (iv) Conducting their dealings with third parties, including the Members and Affiliates of the Company and its Subsidiaries, and otherwise holding the Company and its Subsidiaries out to the public, in the Company’s and its Subsidiaries own name, as separate and independent entities;

          (v) Using separate telephone numbers and separate stationery, invoices, and checks or, in the case of invoices, (A) purchase invoices which clearly distinguish the obligations of the Company and its Subsidiaries from the obligations of any other Person and (B) sales invoices which clearly distinguish products sold by the Company and its Subsidiaries from products sold by any other Person, and, to the extent reasonably required in light of its contemplated business operations, maintaining offices separate from the offices of any Affiliate of the Company and its Subsidiaries or other Person and conspicuously identifying such office as offices of the Company and its Subsidiaries;

          (vi) Conducting their dealings with third parties, including the Members and Affiliates of the Company and its Subsidiaries, on an arm-length’s basis by, among other things,

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paying to any such third party fair value for shared overhead or for any services or leased premises provided by such third party or any of their employees or agents;

          (vii) For purposes of transacting business on an arm’s-length basis with a GMI Entity, (x) maintain and periodically update transfer pricing schedules in accordance with the principles outlined in Code Section 482 and the corresponding Regulations and (y) incorporate rates prescribed in such schedules in such business; provided that such actions cannot reasonably be anticipated to, and do not, (a) cause a decrease in the revenue or an increase in the expense of more than 10% in the underlying intercompany transaction or (b) cause or result in any Class A Notice Event, Liquidating Event or other event or condition that, but for the requirement that time elapse or notice be given, or both, would constitute a Class A Notice Event or Liquidating Event;

          (viii) Filing their own tax returns, if any, as may be required under applicable law, to the extent not part of a consolidated group or treated as a division of another taxpayer;

          (ix) Paying liabilities of the Company and its Subsidiaries out of the funds of the Company and its Subsidiaries and not paying the liabilities of any other Person out of the funds of the Company and its Subsidiaries;

          (x) Not guaranteeing, becoming obligated on, holding itself out as being obligated or available to satisfy, acquiring or assuming the liabilities of any Member, any Affiliates of the Company and its Subsidiaries, or any other Person, or pledging the assets of the Company and its Subsidiaries for the benefit of any Member, any Affiliate of the Company and its Subsidiaries, or any other Person;

          (xi) Correcting any known misunderstanding regarding the Company’s and its Subsidiaries’ separate and distinct legal identity and refraining from engaging in any activity that compromises the separate legal identity of the Company and its Subsidiaries or the separateness of the assets;

          (xii) Not forming, or causing to be formed, any Subsidiaries, except wholly owned Subsidiaries engaged in a Permitted Line of Business or wholly owned Subsidiaries that hold Permitted Assets;

          (xiii) Ensuring that the Company at all times controls each of its Subsidiaries and that the Managing Member at all times has the authority to act on behalf of each of the Company’s Subsidiaries for purposes of this Section 5.2;

          (xiv) Ensuring that its capitalization is adequate in light of its business and purpose;

          (xv) Allocating fairly and reasonably the salaries of, and the expenses related to providing the benefits of, officers or other employees shared with any Member or any other Affiliate of the Company and its Subsidiaries;

          (xvi) If the business of the Company and its Subsidiaries is so limited as to reasonably be conducted from the premises of an Affiliate of the Company and its Subsidiaries,

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allocating fairly and reasonably any overhead for office space shared with any Member or any other Affiliate of the Company and its Subsidiaries;

          (xvii) Not identifying itself as being a division or a part of any other Person other than for purposes of consolidated financial reporting under GAAP, and, except to the extent such characterization is required for purposes of GAAP financial reporting of another Person, not permitting any Person to identify the Company and its Subsidiaries as being a division or a part of such Person;

          (xviii) Not acquiring any securities or obligations of any Affiliate of the Company and its Subsidiaries, other than as contemplated by this Agreement and the Transaction Documents;

          (xix) Causing the financial statements of the Company and its Subsidiaries to be prepared in accordance with GAAP in a manner that indicates the separate existence of the Company and its Subsidiaries and the assets and liabilities, including marking in any consolidated financial statements of any Member or any Affiliate of the Company and its Subsidiaries that includes the financial statements of the Company and its Subsidiaries with notes that clearly state that the Company and its Subsidiaries are separate legal entities and that the assets will be available first and foremost to satisfy the claims of the creditors of the Company and its Subsidiaries; and

          (xx) Not being bound by the business decisions of its Members or its managers unless such business decisions have been approved in accordance with the governance procedures set forth herein; provided that failure by the Company and its Subsidiaries to comply with any of the foregoing shall not affect the status of the Company and its Subsidiaries as separate legal entities.

     (d) The Managing Member shall notify the Members of the occurrence of any Class A Notice Event or Liquidating Event or any event which with notice or lapse of time or both would constitute a Class A Notice Event or Liquidating Event and the action which the Managing Member has taken or proposes to take with respect thereto, promptly but no later than five (5) Business Days, after the Managing Member has actual knowledge of such occurrence.

     (e) The Managing Member has provided to the Company a certificate of an officer or authorized representative naming the Responsible Officer that will be responsible for the management and operations of the Company in accordance with this Section 5 until such time as the Managing Member has provided to the Company another certificate naming others of its officers or authorized representatives to be Responsible Officers, and the Managing Member hereby covenants and agrees that such Responsible Officers shall maintain the separateness of the Company’s operations and otherwise comply with all of the terms of this Agreement.

     (f) The Managing Member shall, upon the request of a Class A Limited Member, convert such Member’s Class A Limited Membership Interests to Series B-2 Limited Membership Interests or a new Series of Class B Limited Membership Interests. Any amendments to this Agreement necessary to effect such a conversion shall be subject to the provisions of Section 10.

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     5.3 Restrictions on Authority of Managing Member

     (a) Notwithstanding any other provision of this Agreement, without the consent of all of the Class A Limited Members (and, in the case of clauses (v), (ix), (xiv), (xv), (xvi) and (xvii) below, without the consent of the Independent Director, if any), the Company shall not, and the Managing Member shall not be authorized to, nor shall the Managing Member permit or cause the Company to, nor shall the Company permit or cause any of its Subsidiaries to, take any of the following actions:

          (i) Any act that would be in contravention of the Agreement or any Transaction Document or, if on behalf of the Company or any of its Subsidiaries, inconsistent with the purposes of the Company or any of its Subsidiaries;

          (ii) Any act that would, to the Managing Member’s knowledge, make it impossible to carry on the normal business of the Company or any of its Subsidiaries;

          (iii) Possess or assign rights in the Property for other than a purpose of the Company or any of its Subsidiaries;

          (iv) Perform any act that would subject any Member to liability for the liabilities or obligations of the Company or any of its Subsidiaries;

          (v) Cause or permit the Company or any of its Subsidiaries to incur, assume, Guarantee, or otherwise become liable for any Indebtedness (other than Permitted Indebtedness) or create any Liens (other than Permitted Liens) on any Property;

          (vi) Make any loan or other advance of money to any Person (other than Permitted Loans) or Guarantee obligations of any Person;

          (vii) Acquire, by purchase or contribution: (A) any assets other than Permitted Assets, (B) any Permitted Asset that is in default at the time of its acquisition, (C) the capital stock issued by any Subsidiary other than a direct or indirect wholly owned Subsidiary, or (D) in the case of any Subsidiary of the Company, Permitted Assets described in clauses (vii) through (xii) and clause (xv) of the definition of “Permitted Assets”;

          (viii) Make, purchase or acquire by contribution any Permitted Loans unless (A) the borrowing evidenced by such Permitted Loan has been duly authorized by all required corporate action, such action has been duly certified by the secretary or assistant secretary of the borrower, and such certification has been delivered to the Company together with certificates as to incumbency and due authorization of the officers of the borrower authorized to execute and deliver such Permitted Loan, (B) such Permitted Loan is legal, valid, binding and enforceable in accordance with its terms against the borrower, and (C) the GMI Guaranty with respect to such Permitted Loan, if any (1) has been duly authorized by all required corporate action, such action has been duly certified by the secretary or assistant secretary of GMI and such certification has been delivered to the Company together with certificates as to incumbency and due authorization of the officers of GMI authorized to execute and deliver such guaranty, (2) ranks at least pari passu with all other unsecured Indebtedness of GMI, and (3) is legal, valid, binding, and enforceable in accordance with its terms against GMI;

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          (ix) Commit or authorize any act of Voluntary Bankruptcy with respect to the Company or any of its Subsidiaries, acquiesce in any act of Involuntary Bankruptcy with respect to the Company or any of its Subsidiaries, or cause or permit the Company or any of its Subsidiaries to admit in writing its inability to pay its debts generally;

          (x) Cause the Company to distribute to any Member any asset, other than as provided in this Agreement and in the course of the liquidation of the Company;

          (xi) Cause or permit the Company or any of its Subsidiaries to merge, consolidate, or engage in any other business consolidation with, or sell all or any substantial part of its assets to, any Person; provided that the foregoing restriction shall not apply to transactions between any Subsidiary of the Company and the Company or any other Subsidiary of the Company;

          (xii) Cause or permit the admission of any Member other than in accordance with Sections 2, 7, or 11, issue any Membership Interests that rank senior to or pari passu with the Class A Limited Membership Interests, or issue any ownership interests in any Subsidiary of the Company to any Person other than the Company or any other Subsidiary of the Company;

          (xiii) Except as otherwise provided in Section 5.2(c)(vii), cause or consent to any amendment to, modification of, or waiver of any of the rights and obligations of the Company or any of its Subsidiaries under, or any termination of, or any assignment or delegation by any Person other than the Company or any of its Subsidiaries of such Person’s rights or obligations under, or give any consent or make any election under, or fail to enforce any of the material rights or remedies of the Company or any of its Subsidiaries under, any Transaction Document; provided that any such amendment, modification, waiver, consent, or election may be made without the consent of the Class B Limited Members, in respect of any of the Amended and Restated Employee Seconding Agreement, the Amended and Restated Contract Marketing Agreement, the Amended and Restated Contract Operating Agreement, the Amended and Restated Contract Sales Agreement, the Amended and Restated Services Agreement, the Permitted Intellectual Property License Agreements, the Permitted PP&E License Agreement, the Receivables Purchase and Sale Agreements, and the Other GMI Entity Agreements so long as no such amendment, modification, waiver, consent, or election, either individually or in the aggregate, would have a Material Adverse Effect with respect to the Company or any of its Subsidiaries;

          (xiv) Make discretionary distributions to the Members, except as expressly permitted herein;

          (xv) Change its independent accountants to other than a “Big Four” accounting firm;

          (xvi) Adopt or change a significant tax or accounting practice or principle, make any significant tax or accounting election, or adopt any position for purposes of any tax return that will have a Material Adverse Effect or a material adverse effect on any Limited Member (unless the making of such election is expressly contemplated by this Agreement);

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          (xvii) To the fullest extent permitted by law, cause or permit the dissolution, winding up or termination of the Company;

          (xviii) Cause or permit the Company to change its Fiscal Year;

          (xix) Fail to preserve and maintain the legal name, permits, licenses, approvals, privileges, and franchises of the Company or any of its Subsidiaries or fail to comply with the requirements of any applicable laws, rules, regulations, and orders of governmental or regulatory authorities, if such failure, either individually or in the aggregate, has or could reasonably be expected to have a Material Adverse Effect with respect to the Company;

          (xx) Lease, sublease, assign, license, or grant any other rights with respect to any of the Properties (except as otherwise provided in the Transaction Documents); or

          (xxi) Enter into any Other GMI Entity Agreement without receiving a GMI Guaranty with respect to such Other GMI Entity Agreement.

          (xxii) Without limiting the foregoing, cause or permit General Mills Missouri to (A) incur, assume, Guarantee, or otherwise become liable for any Indebtedness or create any Liens or (B) acquire, by purchase or contribution, any asset other than Permitted Loans.

     (b) Notwithstanding any other provision of this Agreement, without the consent of the Required Class B Limited Members, the Company shall not, and the Managing Member shall not be authorized to, nor shall the Managing Member permit or cause the Company to, nor shall the Company permit or cause any of its Subsidiaries to, take any of the following actions:

          (i) Amend, modify or waive the Permitted Assets Requirement;

          (ii) Amend, modify or waive the Portfolio Requirements;

          (iii) Amend, modify or waive any of GMI’s obligations under the Exchange Agreement, provided that the consent of the Required Class B Limited Members shall be determined solely with reference to the holder or holders of the Series B-1 Limited Membership Interests for purposes of this Section 5.3(b)(iii);

          (iv) Convert the Managing Membership Interest into any other Class or Series of Membership Interests;

          (v) Make, purchase or acquire any Permitted Loans, other than Permitted Loans to GMI Entities;

          (vi) Issue any Membership Interests that rank senior to or pari passu with the Class B Limited Membership Interests, provided that notwithstanding the foregoing, (x) additional Membership Interests may be issued regardless of the ranking of such Membership Interests if such issuance does not cause a downgrade of the credit ratings by Moody’s or S&P of the Series B-1 Limited Membership Interests and (y) Class A Limited Membership Interests may be converted pursuant to Section 5.2(f);

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          (vii) Issue any Membership Interests or sell or authorize or consent to the sale of any Membership Interests if such action would cause the number of holders of Membership Interests, excluding the holders of the Series B-1 Memberships Interests, to exceed thirty-five.

          (viii) Sell or authorize or consent to the sale of any Series B-2 Limited Membership Interests currently outstanding to any Person that is not GMI or an Affiliate of GMI or another GMI Entity if, subsequent to such sale, such Series B-2 Limited Membership Interests rank senior to the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests; provided that notwithstanding this clause (viii), to the extent not otherwise prohibited by this Agreement, currently outstanding Membership Interests may be sold regardless of the ranking of such Membership Interests subsequent to such sale if such sale does not cause a downgrade of the credit ratings by Moody’s or S&P of the Series B-1 Limited Membership Interests; and

          (ix) Issue any Indebtedness to third Persons in excess of an amount equal to fifteen percent (15%) of the Capital Account of the Managing Member.

     (c) The Managing Member shall not amend Section 5.3(a) without the consent of all of the Members. The Managing Member shall not amend Section 5.3(b) without the consent of the Required Class B Limited Members and any amendment of Section 5.3(b) that is consented to by the Required Class B Limited Members shall not require the consent of the Class A Limited Members.

     5.4 Compensation; Expenses.

     (a) Except as otherwise provided in Sections 5.4(b) and 5.5, the Managing Member shall not receive any salary, fee, or draw for services rendered to, or on behalf of, the Company or any of its Subsidiaries or otherwise in its capacity as a manager of the Company or a Member, nor shall the Managing Member be reimbursed for any Expenses incurred by the Managing Member on behalf of the Company or any of its Subsidiaries or otherwise in its capacity as a manager of the Company or a Member.

     (b) The Managing Member will be paid an annual fee not to exceed $100,000 as compensation for providing administrative and managerial services to the Company. The Managing Member may charge the Company, and shall be reimbursed, for all reasonable out-of-pocket operating expenses necessary for running the business of the Company and its Subsidiaries. Such reimbursement shall be treated as operating expenses of the Company and its Subsidiaries and shall not be deemed to constitute distributions to any Member of profit, loss, or capital of the Company or any of its Subsidiaries.

     5.5 Indemnification of the Managing Member.

     (a) Subject to Section 5.5(b), the Company, its receiver, or its trustee (in the case of its receiver or trustee, to the extent of the Company’s assets) shall indemnify, save harmless, and pay any and all reasonable out-of-pocket expenses incurred by the Managing Member or any officers, directors, employees, or agents (each, a “Managing Member Indemnitee”) of the Managing Member in connection with (i) the performance under this Agreement of its obligations as the

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manager of the Company, or (ii) for any extraordinary liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever by reason of any act performed or omitted to be performed by the Managing Member Indemnitee in connection with the business of the Company including attorneys’ fees incurred by a Managing Member Indemnitee, in connection with the defense of any action based on any such act or omission, which attorneys’ fees may be paid as incurred; provided that any payment for indemnification owed by the Company to such Managing Member Indemnitee shall be subordinate in right of payments to the payment in full of the Limited Member Preferred Return and any amount owing or distributable to the Limited Members upon any liquidation of the Company.

     (b) Section 5.5(a) shall be enforced only to the maximum extent permitted by law and no Managing Member Indemnitee shall be indemnified (i) for any liability for the fraud, bad faith, willful misconduct, gross negligence, or failure to perform in accordance with this Agreement, of itself or any of its Affiliates, (ii) for any Taxes or (iii) for any expenses, obligations, losses, damages, penalties, actions, judgments, suits, costs or disbursements arising from or in connection with any matter described in clause (d), (e) or (f) in Section 14.1.

     (c) Notwithstanding anything to the contrary in this Agreement, in no event will any indemnification obligation of the Company or a receiver or trustee to indemnify, save harmless, or pay all Expenses set forth in this Section 5.5 subject any Member to personal liability.

     (d) Indemnification Procedures.

          (i) In the event any claim is made by a third party against the Company, the Managing Member, a Class A Limited Member, a Class B Limited Member, the Independent Director, the Liquidator, or any affiliate, officer, director, agent, employee, successor or assign of any of them (each of them being referred to as an “Indemnitee”), with respect to an actual or potential liability for which any such Person is otherwise entitled to be indemnified under any provisions of Sections 5.5(a), 5.8(a), 6.7(a), and 13.10(b), and any such Person wishes to be indemnified with respect thereto, such Person shall promptly notify the appropriate indemnitor(s) as provided in each such Section (the “Indemnitor”); provided that the failure of any such Person to notify any Indemnitor shall not relieve such Indemnitor from any liability which it otherwise may have to such Person hereunder.

          (ii) Each Indemnitee may by notice to the Indemnitor take control of all aspects of the investigation and defense of all claims asserted against it and may employ counsel of its choice and at the expense of the Indemnitor; provided that (A) the amount of any settlement such Indemnitee may enter into must be consented to by the Indemnitor, and no Indemnitee may in connection with any such investigation, defense or settlement, without the consent of the Indemnitor, require the Indemnitor or any of its Subsidiaries to take or refrain from taking any action (other than payment of such a settlement amount) or to make any public statement, which such Person reasonably considers to materially adversely affect its interest, (B) such Indemnitee may not take control of any investigation, defense or settlement which could entail a risk of criminal liability to the Indemnitor or any of its Subsidiaries, and (C) no Indemnitor may take control of any investigation, defense or settlement, without the consent of any Indemnitee, if the liabilities involved in such proceedings involve any material risk of the

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sale, forfeiture or loss of, or the creation of any Lien on, any property of such Indemnitee. Upon the request of any Indemnitee, the Indemnitor shall use its best efforts to keep such Indemnitee reasonably apprised of the status of those aspects of such investigation and defense controlled by such Indemnitor and shall provide such information with respect thereto as such Indemnitee may reasonably request. The Indemnitees shall cooperate with the Indemnitor in all reasonable respects with respect thereto.

     5.6 Withdrawal.

     (a) The Managing Member may at any time deliver to the Members written notice of the Managing Member’s intent to withdraw as a manager of the Company (within the meaning of the Act).

     (b) In the event that the Managing Member seeks to withdraw as a manager of the Company, the Managing Member shall remain as a manager until a successor manager is appointed. A successor manager shall be appointed by the Managing Member; provided that (i) any successor manager shall be an Affiliate of GMI, (ii) at least 30 days’ written notice of such appointment is given to all the Class A Limited Members and Class B Limited Members, and (iii) the Required Class A Limited Members and the Required Class B Limited Members have approved of such appointment.

     (c) Any withdrawal of the Managing Member as a manager shall not affect the status of such Managing Member as a Member, except to the extent otherwise provided in this Agreement, including, without limitation, Section 11.

     Notwithstanding the foregoing, while GMI or any of its Subsidiaries is the Managing Member, upon any Transfer by the Managing Member of all or any portion of the Managing Membership Interest to GMI or any of its Subsidiaries satisfying the requirements set forth in Section 11.2(a), such Permitted Transferee may, at the election of the Managing Member, succeed to the rights of the Managing Member hereunder to be the manager of the Company (within the meaning of the Act), without obtaining the consent of the Required Class A Limited Members and Required Class B Limited Members and, in such event, such successor shall be deemed admitted to the Company as a manager (within the meaning of the Act) and shall have all rights of the Managing Member hereunder.

     5.7 SPE Covenant re Status of Managing Member; Independent Director and Management Limitations.

     (a) The Managing Member covenants that, unless the Required Class A Limited Members otherwise consent, it shall at all times be a special purpose bankruptcy remote entity (an “SPE”) that is, except as otherwise provided in subsection (e) below, a corporation (a “Corporate SPE”) whose articles of incorporation: (1) limit the activities of the Corporate SPE to acting as the Managing Member of the Company; (2) contain separateness covenants and limitations on activities substantially similar to those set forth in Section 5.2(c); (3) require that one member of its board of directors be an Independent Director; and (4) require the affirmative vote of the Independent Director to approve, with respect to the Corporate SPE or the Company, any Bankruptcy, sale of substantially all of the assets, merger or consolidation, change of accountants,

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or adoption or change of significant tax or accounting principle. The “Independent Director” shall at all times be a Person who at the time of such appointment, at any time during the preceding five (5) years, or at any time thereafter while serving as the Independent Director is not (i) other than serving as an Independent Director or director of the Managing Member, a director, officer, or employee of any Member or any Affiliate thereof, or of any creditor, customer or supplier thereof that, in the case of a customer, accounted for more than a de minimis amount (not to exceed 5%) of such Member’s or Affiliate’s gross revenues or, in the case of a creditor or supplier, received more than a de minimis amount (not to exceed 5% of its gross revenues from payments for goods and services sold to such Member or Affiliate, (ii) the direct or indirect legal or beneficial owner of more than a de minimis amount (not to exceed 5% of ownership interests in any Member or any Affiliate thereof, or (iii) any member of the immediate family of a Person described in clause (i) or (ii). For purposes of this Agreement, any action that requires the affirmative written consent of the Independent Director shall refer also to the consent of the Corporate SPE or the LLC SPE, as appropriate, with the affirmative written consent of the Independent Director. To the fullest extent permitted by applicable law, the Independent Director shall consider only the interests of the Company, including, whether or not the Company is insolvent, its respective creditors, in acting or otherwise voting on the matters referred to in Section 5.3(a).

     (b) The Managing Member covenants that, unless the Required Class A Limited Members have consented to it no longer being an SPE, its governing documents will provide that the Independent Director shall have no duties or functions except as expressly provided in this Agreement or pursuant to the certificate of incorporation of the Managing Member. In the event that the Managing Member or any other Member approves of any action set forth in Section 5.3(a), or any other action described in this Agreement, expressly requiring the consent or approval of the Independent Director, it shall be a condition precedent to the taking of any such action that the Independent Director approves such action. Unless any such proposed action is duly approved by the Independent Director, the approval by the Managing Member or any other Member of such action shall have no force or effect and the Company and such Members shall be prohibited from taking any action to implement, or give effect to, such action. In the event that any such proposed action is adopted by the Company or such Members, but is not approved by the Independent Director as provided herein, and the Managing Member or any other Member or the Company takes any action to implement, or give effect to, such action, the Independent Director shall have full power and authority to enforce the provisions of this Agreement prohibiting the Company from implementing, or giving effect to, such action; provided, however, that the Independent Director shall not have a duty, or be under an obligation, to seek such enforcement.

     (c) The Managing Member covenants that, unless the Required Class A Limited Members have consented to it no longer being an SPE, its governing documents will provide that (i) the Independent Director may not delegate its duties, authorities, or responsibilities herein and (ii) no resignation, retirement, or removal of the Independent Director, and no appointment of a successor Independent Director, shall be effective until the successor Independent Director shall have accepted his or her appointment.

     (d) The Managing Member may, if it so elects, convert to a limited liability company (the “LLC SPE”) formed under the laws of the State of Delaware in which one of the members of the

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limited liability company is a Corporate SPE and whose limited liability agreement: (1) limits the activities of the LLC SPE to acting as the Managing Member of the Company; (2) contains separateness covenants and limitations on activities substantially similar to those set forth in Section 5.2(c); and (3) requires the affirmative vote of the Independent Director of the Corporate SPE to approve, with respect to the LLC SPE or the Company, any Bankruptcy, sale of substantially all of the assets, merger, or consolidation, change of accountants, or adoption or change of significant tax or accounting principle.

     5.8 Indemnification by the Managing Member.

     (a) Subject to Section 5.8(b), the Managing Member shall indemnify, save harmless, and pay all Expenses of any Member, or any members, managers, partners, stockholders, officers, directors, employees, and agents of such Member (each, a “Member Indemnitee”) against any reasonable out-of-pocket costs paid directly by such Member or Member Indemnitee (including the reasonable costs of investigation and litigation and of enforcing this Section 5.8) and resulting from any of the activities of the Company. The indemnification contemplated by this Section 5.8(a) shall not include any items of Loss allocated to any Limited Member in accordance with the Allocations.

     (b) Section 5.8(a) shall be enforced only to the maximum extent permitted by law and the Members shall not be indemnified from any liability for fraud, bad faith, willful misconduct, gross negligence, or a failure to perform in accordance with this Agreement.

     5.9 Portfolio Requirements.

     (a) Portfolio Requirements. The Company and, with respect to clause (iii) below, its Subsidiaries (on a consolidated basis) shall at all times comply with the requirements of this Section 5.9(a) (the “Portfolio Requirements”).

          (i) Asset Coverage. The (x) ratio of the aggregate Mark-to-Market Values of the Permitted Assets held by the Company to the aggregate Preferred Return Capital of the Class A Limited Members shall not, as of any given day, be less than 2:1 and (y) the ratio of the Portfolio Values (as determined pursuant to Section 5.9(b)) of the Permitted Assets held by the Company to the aggregate Preferred Return Capital of the Limited Members shall not, as of any given day, be less than 2:1.

          (ii) Financial Assets. The aggregate Mark-to-Market Value of Specified Financial Assets held by the Company shall at all times be at least equal to the Specified Financial Investment Level at such time; provided that the aggregate Mark-to-Market Value of Specified Financial Assets (other than (i) Government Obligations and (ii) obligations issued or fully and unconditionally guaranteed by GMI) held by the Company that are obligations of or issued by any single issuer or any of its Affiliates shall not at any time exceed 5% of the aggregate Mark-to-Market Value of Specified Financial Assets held by the Company at such time.

          (iii) Cash Flow. The ratio of the Cash Flow of the Company and its Subsidiaries for the four most recent Fiscal Quarters to the Limited Member Preferred Return for the same four Fiscal Quarters shall not be less than 1.5:1.

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          (iv) Profits. As of the end of each Fiscal Quarter, the ratio of (A) the Profits of the Company for the current Allocation Year to such date (calculated as if such date were the last day of the Allocation Year) to (B) the Limited Member Preferred Return for such period shall not be less than 1:1.

     (b) Determination of Portfolio Values. For purposes of this Section 5.9, the Managing Member shall determine a value (“Portfolio Value”) for each Permitted Asset held by the Company in a manner reasonably consistent with the Mark-to-Market Methodology set forth in Section 13.11.

     (c) Sale or Pledge of the Permitted Assets. Subject to the limitations set forth in Section 5.2, the Company and the Company’s Subsidiaries may sell or transfer Permitted Assets, or cause any Permitted Assets to be sold or transferred on its or their behalf, to the extent such sale or Transfer is permitted under the Transaction Documents and provided that (i) the proceeds of such sale or Transfer are promptly reinvested in Permitted Assets and (ii) after giving effect to any such sale or Transfer the Portfolio Requirements shall be satisfied.

     5.10 Board of Directors.

     (a) Board Triggering Events. In the event that, notwithstanding the proviso in Section 4.1(a)(ii) prohibiting distributions of Class B Limited Member Preferred Return in certain circumstances, the Company fails for six consecutive Class B Distribution Periods to distribute the full amount of Series B-1 Limited Member Preferred Return for such Class B Distribution Period; (a “Board Triggering Event”), the Managing Member will cause the Company to create a board of directors (the “Board of Directors”).

     (b) Directors. The Board of Directors shall consist of up to nine (9) directors (each, a “Director”) or such other number of Directors as the Members shall agree upon, of which: (i) the Required Class A Limited Members, voting as a separate class, will have the right (but not the obligation) to appoint one (1) Director; (ii) the holders of two-thirds of any outstanding Series B-1 Limited Membership Interests that are held by holders other than GMI and its Affiliates, voting as a separate class, will have the right (but not the obligation) to appoint one (1) Director; (iii) the holders of two-thirds of any outstanding Series B-2 Limited Membership Interests that are held by holders other than GMI and its Affiliates, voting as a separate class, will have the right (but not the obligation) to appoint two (2) Directors; and (iv) the Managing Member will appoint five (5) Directors or as many Directors as shall be necessary to provide the Managing Member with a majority of the votes on the Board of Directors. No individual Director shall constitute a “manager” within the meaning of the Act.

     (c) Management Responsibilities. Following the creation of a Board of Directors, the Board of Directors will automatically succeed to all of the Managing Member’s management responsibilities under this Agreement (other than under this Section 5.10) and shall have all of the rights of the Managing Member under this Section 5 including, without limitation, the right to delegate the right and authority to manage and conduct the Company’s business and affairs to officers or employees (whether employed directly or seconded from another GMI Entity) of the Company. The responsibilities and authority of the Board of Directors shall be subject to the limitations and restrictions on the authority of the Managing Member (including the restrictions

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set forth in Section 5.3). All actions taken by the Board of Directors shall require the affirmative vote of a majority of its Directors.

     (d) Meetings of the Board of Directors. The Board of Directors shall meet at such times and places as shall be determined by the Board of Directors at its initial meeting. The Board of Directors also shall determine notice, quorum, voting, and meeting requirements and procedures at the initial meeting.

     (e) Compensation. Each Director who is not an Affiliate of GMI or Company or otherwise associated with any of the Company’s Affiliates or service providers will be paid a modest fee for attendance at meetings of the Board of Directors, such amount to be determined by the Board of Directors in accordance with customary market practices.

     (f) Indemnification. Each Director shall be indemnified to the same extent as the Managing Member and for such purposes, each Director shall be deemed to be a “Managing Member Indemnitee” for purposes of Section 5.5.

     (g) Dissolution. Upon the determination by the Board of Directors of the satisfaction of the Board Triggering Event that gave rise to the creation of a Board of Directors, the Board of Directors shall be dissolved, each Director shall be removed, and all management responsibilities and restrictions under this Agreement shall revert back to the Managing Member.

SECTION 6.

ROLE OF MEMBERS

     6.1 Rights or Powers.

     Other than the rights and powers expressly granted to the Managing Member pursuant to Section 5 and the rights expressly granted to the Members pursuant to Section 5.10, the Members, in their capacities as members of the Company, hereby agree not to exercise any right or power to take part in the management or control of the Company or its business and affairs and shall not have any right or power to act for or bind the Company in any way. Without limiting the generality of the foregoing, the Members, in such capacities, have all of the rights and powers specifically set forth in this Agreement and, to the extent not inconsistent with this Agreement, in the Act.

     6.2 Voting Rights.

     No Member has any voting right except with respect to those matters specifically reserved for a Member vote that are set forth in this Agreement and as required in the Act.

     6.3 Meetings and Consents of the Members.

     (a) Meetings of the Members may be called by the Managing Member and shall be called upon the written request of the Required Class A Limited Members or the Required Class B Limited Members. The call shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Members not less than five (5) Business Days nor more than

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thirty (30) days prior to the date of such meeting; provided that the Members may agree in writing to a shorter notice period than five (5) Business Days. Members may vote in person, by proxy or by telephone at such meeting and may waive advance notice of such meeting. Whenever the vote or consent of Members is permitted or required under this Agreement, such vote or consent may be given at a meeting of the Members or may be given in accordance with the procedure prescribed in Section 6.4. Except as otherwise expressly provided in this Agreement, the unanimous vote or consent of the Members (or any Class or Series of Limited Membership Interests) shall be required to constitute the act of the Members (or any Class or Series of Limited Membership Interests) or the consent of the Members (or any Class or Series of Limited Membership Interests).

     (b) For the purpose of determining the Members entitled to vote on, or to vote at, any meeting of the Members or any adjournment thereof, the Managing Member or the Member requesting such meeting may fix, in advance, a date as the record date for any such determination. Such date shall not be more than thirty (30) days nor less than five (5) Business Days before any such meeting.

     (c) Each Member may vote in any manner permitted under the Act. Each Member may authorize any Person or Persons to act for it by proxy on all matters in which a Member is entitled to participate, including waiving notice of any meeting, or voting, or participating at a meeting. Every proxy must be signed by the Member or its attorney-in-fact or delivered by means of electronic communication. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Member executing it.

     (d) Each meeting of Members shall be conducted by the Managing Member or such other individual Person as the Managing Member deems appropriate pursuant to such rules for the conduct of the meeting as the Managing Member or such other Person deems appropriate.

     6.4 Procedure for Consent.

     In any circumstances requiring the agreement, approval, or consent of the Members specified in this Agreement, such agreement, approval, or consent may, except where a standard for such agreement, approval, or consent is provided for expressly in this Agreement and notwithstanding any provisions of law or in equity to the contrary, be given or withheld in the sole and absolute discretion of the Members in any manner permitted under the Act, and each Member shall be entitled to consider only such factors and interests as it desires, including its own interests, and shall have, to the fullest extent permitted by applicable law, no duty or obligation to give any consideration to any interest of or factors affecting the Company or any other Person. If the Managing Member receives the necessary agreement, approval, or consent of the Members to such action, the Managing Member shall be authorized and empowered to implement such action without further authorization by the Members. Such agreement, approval, or consent must be obtained in writing or by facsimile or electronic communication.

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     6.5 Withdrawal/Resignation.

     Except as otherwise provided in Sections 4, 7, 11, and 13, no Member shall demand or receive a return on or of its Capital Contributions or withdraw or resign as a Member from the Company without the affirmative written consent of all Members. If any Member resigns or withdraws from the Company in breach of this Section 6.5, such resigning or withdrawing Member shall not be entitled to receive any distribution under this Agreement. Under circumstances requiring a return of any Capital Contribution, no Member has the right to receive Property other than Cash except as may be specifically provided herein.

     6.6 Member Compensation.

     No Member shall receive any interest, salary, or draw for services rendered on behalf of the Company, or otherwise, in its capacity as a Member, except as otherwise provided in Section 5.4(b).

     6.7 Indemnification of Limited Members.

     (a) Subject to Section 6.7(b), the Company, its receiver or its trustee (in the case of its receiver or trustee, to the extent of Property) shall indemnify, save harmless, and pay all Expenses of any Limited Member, and any members, managers, partners, stockholders, officers, directors, employees, or agents of such Limited Member (each, a “Limited Member Indemnitee”) relating to any liability or damage incurred by reason of any act performed or omitted to be performed by such Limited Member or Limited Member Indemnitee in connection with the business of the Company, including attorneys’ fees incurred by such Limited Member or Limited Member Indemnitee in connection with the defense of any action based on any such act or omission, which attorneys’ fees may be paid as incurred, including all such liabilities under federal and state securities laws (including the Securities Act) as permitted by law.

     (b) Section 6.7(a) shall be enforced only to the maximum extent permitted by law and the Limited Members shall not be indemnified from any liability for fraud, bad faith, willful misconduct, gross negligence, or a failure to perform in accordance with this Agreement.

     6.8 Members’ Liability.

     (a) Except as otherwise provided herein and by applicable law, no Member shall be liable under a judgment, decree, or order of a court, or in any other manner for any other obligations or liabilities of the Company solely by reason of being a Member. A Member shall be liable only to make its Capital Contribution pursuant to Section 2.1 and shall not be required to restore a deficit balance in its Capital Account (other than pursuant to Section 13.3) or to lend any funds to the Company or, after its Capital Contribution has been made pursuant to Section 2.1, to make any additional contributions, assessments, or payments to the Company; provided that a Member may be required to repay distributions made to it as provided in the Act, subject to Section 4.4.

     (b) Notwithstanding anything to the contrary in this Agreement, in no event will any indemnification obligation of the Company or a receiver or trustee to indemnify, save harmless, or pay all Expenses set forth in Section 6.7 subject any Member to personal liability.

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     6.9 Partition.

     While the Company remains in effect or is continued and prior to the occurrence of a Liquidating Event, each Member agrees not to have any Property partitioned or file a complaint or institute any suit, action, or proceeding at law or in equity to have any Property partitioned, and each Member, on behalf of itself, its successors, and its assigns hereby waives any such right.

     6.10 Transactions Between a Member and the Company.

     (a) Except as otherwise provided by applicable law, any Member may, but shall not be obligated to, enter into the transactions described in Sections 1.9(c) and 1.9(d) and transact other business contemplated by the Transaction Documents with the Company and have the same rights and obligations when transacting such business with the Company as a Person or entity who is not a Member. A Member, any Affiliate thereof or an employee, stockholder, agent, director, manager, or officer of a Member or any Affiliate thereof, may also be an employee or a manager of the Company.

     (b) No Member shall, or shall permit its Affiliates to, guarantee any liabilities of the Company or become obligated on, or hold itself out as being obligated or available to satisfy, any liabilities of the Company.

SECTION 7.

PREFERRED RETURN RESETS AND REMARKETINGS

     7.1 Class A Preferred Return Rate Reset.

     (a) In General. The Class A Preferred Return Rate is subject to reset as provided herein on each Class A Reset Date on which any Class A Membership Interests are outstanding; provided that (i) in the case of a Failed Class A Mandatory Remarketing (as defined below) on any Class A Reset Date, a reset date shall occur on the three (3) month anniversary of such Class A Reset Date; and provided, further, that, notwithstanding any provision to the contrary in this Section 7.1(a)(i), in the event of a Failed Class A Mandatory Remarketing that occurs as a result of any failure of (i) the Class A Remarketing Agent to completely perform its obligations under the Class A Remarketing Agreement or (ii) a Secondary Purchaser to settle the purchase and sale of the Class A Limited Membership Interests on or before the relevant Class A Reset Date, the Company shall cause a new Class A Mandatory Remarketing to be held as soon as practicable (and, in no event, more than 10 Business Days) after such Failed Class A Mandatory Remarketing. The Class A Preferred Return Rate so determined on such Class A Reset Date shall remain in effect until the following Class A Reset Date. In connection with each Class A Reset Date, the Capital Accounts of all the Members (including the Class A Limited Members) shall be redetermined as set forth in Section 7.1(d).

     (b) Class A Reset Procedure. During the period commencing ninety (90) days and ending forty-five (45) days prior to each Class A Reset Date, the Company and the holders of all the Class A Limited Membership Interests shall consult with one another to determine whether they are able to agree upon a Class A Preferred Return Rate in advance of such Class A Reset

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Date. In the event agreement is reached at least forty-five (45) days before such Class A Reset Date, the Class A Preferred Return Rate will be reset as of such Class A Reset Date pursuant to such agreement and will remain in effect until the following Class A Reset Date. In the event no agreement pursuant to this Section 7.1(b) is reached at least forty-five (45) days before the relevant Class A Reset Date, the Company shall, on a date no later than such Class A Reset Date, conduct an auction or mandatory remarketing (a “Class A Mandatory Remarketing”) to set the applicable Class A Preferred Return Rate pursuant to Section 7.1(c)(i). In the event of any Class A Mandatory Remarketing, each holder of Class A Limited Membership Interests hereby agrees that the Company shall have the right to, and the Company shall, enter into a Class A Remarketing Agreement with the Class A Remarketing Agent to effect the sale of the Class A Limited Membership Interests to the Person or Persons providing the Winning Bid Rate in such Class A Mandatory Remarketing, and each holder of Class A Limited Membership Interests shall be bound by the Class A Remarketing Agreement; provided that any Class A Remarketing Agreement shall not obligate any holder to make or provide any representation, warranty, or covenant, or take any action or enter into an agreement other than to sell the Class A Limited Membership Interests, pursuant to a Secondary Purchase Agreement, if there is a successful Class A Mandatory Remarketing.

     (c) Class A Remarketing Procedure. Any Class A Mandatory Remarketing of the Class A Limited Membership Interests shall be conducted pursuant to the provisions of this Section 7.1(c).

          (i) In the event that any such Class A Mandatory Remarketing occurs, the Company shall, by notice (the “Class A Remarketing Notice”) delivered to the Class A Remarketing Agent and the Class A Members no later than five (5) Business Days prior to the relevant Class A Mandatory Remarketing Date, select and specify three (3) Reference Corporate Dealers. The Class A Remarketing Notice shall set forth such information as is necessary to facilitate the Class A Mandatory Remarketing, including, without limitation, the Class A Remarketing Date and the Class A Mandatory Purchase Price and Preferred Return Capital per Class A Limited Membership Interest. The Class A Remarketing Agent shall request that Bids be received from such Reference Corporate Dealers and all other bidders by 3:00 p.m., New York City time, on the Business Day immediately preceding the relevant Class A Mandatory Remarketing Date. The Company, any holder of Class A Limited Membership Interests, the Class A Remarketing Agent, or an Affiliate of any such Person may, at its option, enter a Bid but shall have no obligation to do so. The Class A Remarketing Agent shall disclose to the Company the Bids obtained and determine the lowest single Bid Rate at which the Class A Remarketing Agent will be able to remarket all of the Class A Limited Membership Interests at a purchase price equal to the Class A Mandatory Purchase Price to at least one (1), but in no event more than ten (10), purchasers (the “Winning Bid Rate”), from among the Bids obtained by 3:00 p.m., New York City time, on the Business Day immediately preceding the relevant Class A Mandatory Remarketing Date; provided that in connection with any sale to such bidders, the Class A Limited Membership Interests held by RBDB shall be deemed at all times to be held by ten (10) Persons. The Winning Bid Rate determined by the Class A Remarketing Agent, absent manifest error, shall be binding and conclusive upon the Company and all holders of the Class A Limited Membership Interests; provided that each of the holders of the Class A Limited Membership Interests shall have the option to decline to accept the Winning Bid Rate and may

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continue to hold their Class A Limited Membership Interests with the current Class A Preferred Return Rate remaining in effect until the following Class A Reset Date.

          (ii) On the Business Day immediately preceding the relevant Class A Mandatory Remarketing Date, the Class A Remarketing Agent, in consultation with the Company, shall designate as the Secondary Purchasers (the “Secondary Purchasers”) the Persons providing Bids at the Winning Bid Rate. If the Winning Bid Rate is specified in Bids submitted by two or more bidders, the Class A Remarketing Agent shall, in consultation with the Company, designate such bidders as it deems appropriate to be the Secondary Purchasers; provided, however, that there may not be more than ten (10) Secondary Purchasers and such purchases must be made in accordance with the conditions of Transfer set forth in this Agreement. If any holder of the Class A Limited Membership Interests submitted a Bid containing the Winning Bid Rate, it shall continue to hold the Class A Limited Membership Interests with the Preferred Return Rate equal to the Winning Bid Rate; provided that the provisions of Section 7.1(c)(iii) shall not apply to such holder. Settlement of the sale of the Class A Limited Membership Interests to the Secondary Purchaser shall occur on the relevant Class A Reset Date, all as provided in Section 7.1(c)(iii).

          (iii) On or before the Class A Mandatory Remarketing Date, each Secondary Purchaser shall enter into a Secondary Purchase Agreement for the purchase by such Secondary Purchaser, at the Class A Mandatory Purchase Price, of the applicable number of Class A Limited Membership Interests with a Class A Preferred Return Rate equal to the Winning Bid Rate. If, for any reason, (i) a successful Class A Mandatory Remarketing does not occur, (ii) a successful Class A Mandatory Remarketing shall have occurred pursuant to this Section 7.1(c) but settlement of the purchase and sale of any Class A Limited Membership Interest does not occur on or before the corresponding Class A Reset Date, or (iii) a Class A Limited Member is not provided reasonable opportunity to enter a Bid in connection with the relevant Class A Mandatory Remarketing, then, in any such case, a Failed Class A Mandatory Remarketing shall be deemed to have occurred on such Class A Mandatory Remarketing Date. To consummate the settlement of the purchase and sale of the Class A Limited Membership Interests, each Secondary Purchaser shall on the relevant Class A Reset Date pay to the holders selling the applicable Class A Limited Membership Interests (the “Selling Class A Holders”) an amount in Dollars and immediately available funds equal to the Class A Mandatory Purchase Price for such Class A Limited Membership Interests. Delivery of the Class A Limited Membership Interests shall be made on a delivery when payment is made basis. Any outstanding Class A Limited Membership Interests purchased on the relevant Class A Reset Date shall be deemed to be Transferred to each of the applicable Secondary Purchasers; provided that payment has been timely received from all such Secondary Purchasers pursuant to this Section 7.1(c)(iii). Upon consummation of the purchase and sale of the Class A Limited Membership Interests, the Secondary Purchasers shall be admitted as Class A Limited Members with respect to the Class A Limited Membership Interests purchased pursuant to the Secondary Purchase Agreements, and the Selling Class A Holders shall be deemed to have withdrawn with respect to such Class A Limited Membership Interests, and the Company shall cause the Membership Registry attached hereto as Schedule A to reflect the Secondary Purchasers’ ownership of the Class A Limited Membership Interests that they purchased pursuant to the Secondary Purchase Agreements.

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          (iv) If for any reason (including failure of the Class A Remarketing Agent to receive a Bid from any of the three (3) Reference Corporate Dealers) settlement of the purchase and sale of all of the Class A Limited Membership Interests as provided in Section 7.1(c)(iii) does not occur on or before the corresponding Class A Reset Date (a “Failed Class A Remarketing”), the holders of the Class A Limited Membership Interests shall continue to hold their Class A Limited Membership Interests and the Class A Spread shall be increased by 0.75% until the next Class A Reset Date.

          (v) The Company shall be responsible for payment of the Class A Remarketing Fee and all other fees associated with any Class A Remarketing, including customary fees for trust companies and brokers, as well as any placement fee required in respect of the first Class A Remarketing.

     (d) Purchase Price; Capital Accounts.

          (i) Class A Mandatory Remarketing. In connection with any Class A Remarketing that is a Class A Mandatory Remarketing, the purchase price per Class A Limited Membership Interest being remarketed (the “Class A Mandatory Purchase Price”) shall be equal to the amount derived by dividing (x) sum of (1) the aggregate Capital Accounts of the Class A Limited Members determined pursuant to Section 7.1(d)(ii)), plus (2) any accrued but undistributed Class A Limited Member Preferred Return with respect to such Class A Limited Membership Interest from and including the relevant Reset Valuation Date to but excluding the relevant Class A Reset Date, by (y) the number of Class A Limited Membership Interests then outstanding; provided that if, at the time of the Class A Mandatory Remarketing, there are any amounts owing to the Selling Class A Holders from the Company, then the amount of the Class A Mandatory Purchase Price shall include such amounts and the Secondary Purchasers shall succeed to all rights of the Selling Class A Holders to receive such amounts from the Company. In the event the Class A Limited Membership Interests are being remarketed to more than one purchaser, the Class A Mandatory Purchase Price shall be appropriately apportioned among such purchasers based on the relative number of Class A Limited Membership Interests being purchased by each such purchaser.

          (ii) Determination of Capital Account. For purposes of this Section 7.1(d), the Class A Limited Members’ Capital Accounts shall be determined as of the applicable Reset Valuation Date by (x) determining the Mark-to-Market Value of the Company’s Permitted Assets pursuant to Section 13.11 as of the last day of the Fiscal Quarter preceding the Fiscal Quarter in which the Reset Valuation Date occurs and adjusting the Gross Asset Values of all the Company’s Property pursuant to subparagraph (ii) of the definition of “Gross Asset Value” in Section 1.10 as of the Reset Valuation Date (assuming, for purposes of this Section 7.1(d)(ii), that, except as otherwise provided in this Section 7.1(d)(ii), such Mark-to-Market Value remained unchanged since the last day of such preceding Fiscal Quarter as of the applicable Reset Valuation Date and that the Mark-to-Market Value of any Inventory or any asset acquired during the Fiscal Quarter in which the Reset Valuation Date occurs is equal to the Gross Asset Value of such asset on the Reset Valuation Date), and (y) allocating the Estimated Profits and Losses, and other items of Company income, gain, loss, or deduction for the relevant Reset Valuation Allocation Year pursuant to Section 3; provided that any amount included in the Capital Account of a Class A Limited Member as a result of an allocation pursuant to Sections 3.1(h), 3.1(i), or 3.3(j) for

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which such Class A Limited Member is entitled to receive a distribution pursuant to Section 4.1(b)(i) shall be deemed to have been distributed to such Class A Limited Member for purposes this Section 7.1(d)(ii). Notwithstanding the provisions of the parenthetical in clause (x) of the immediately preceding sentence, the Mark-to-Market Value of the Company’s Permitted Assets shall take into account any financial activity during the Fiscal Quarter in which the Reset Valuation Date occurs to the extent necessary to account for (i) any asset dispositions during such Fiscal Quarter and (ii) with respect to any Subsidiary of the Company that is a “subchapter C” corporation under the Code, any earnings and profits of such Subsidiary during such Fiscal Quarter. In the event that a Class A Mandatory Remarketing is held, as provided in Section 7.1(a), on the three (3) month anniversary of any Class A Reset Date with respect to which a Failed Class A Mandatory Remarketing occurred or subsequent to a Failed Mandatory Remarketing that occurred as a result of any failure of (i) the Class A Remarketing Agent to completely perform its obligations under the Class A Remarketing Agreement or (ii) a Secondary Purchaser to settle the purchase and sale of the Class A Limited Membership Interests on or before the relevant Class A Reset Date, the Capital Accounts of the Members shall be deemed to equal the amount determined pursuant to this Section 7.1(d)(ii) in connection with such Failed Class A Mandatory Remarketing.

     7.2 Class B Remarketings.

     (a) In General. If the Managing Member or its designee does not elect to purchase the Series B-1 Limited Membership Interests on a Scheduled Reset Date (including the initial Scheduled Reset Date) pursuant to Section 11.9, the Managing Member may, but is not required, to conduct a remarketing (a “Class B Optional Remarketing”) of the Series B-1 Limited Membership Interests to reset the Series B-1 Preferred Return Rate on such Scheduled Reset Date. If the Managing Member elects not to remarket any Series of Class B Limited Membership Interests, distributions on the applicable Series of Class B Limited Membership Interests will be made at the Floating Rate until such time as Class B Limited Membership Interests are purchased pursuant to Section 11.9 or successfully remarketed in a Class B Interim Remarketing or a Class B Optional Remarketing at the next Scheduled Reset Date. Notwithstanding any provision to the contrary herein, if the Managing Member does not elect to purchase the Series B-1 Limited Membership Interests on the initial Scheduled Reset Date, then the Managing Member shall elect to conduct a Class B Optional Remarketing to reset the Series B-1 Preferred Return Rate on the initial Scheduled Reset Date. At any time during a Floating Rate Period, the Managing Member may elect to reset the Class B Preferred Return with respect to any Series of Class B Limited Membership Interests by remarketing such Series (a “Class B Interim Remarketing”). A Fixed Rate that is determined pursuant to a Class B Remarketing shall be in effect on the first day after the expiration of the then current Fixed Rate Period or Floating Rate Period (in each case, a “Class B Reset Date”).

     (b) Election to Remarket; Determination of Preferred Return Capital and Mandatory Purchase Price. If the Managing Member elects to reset the Class B Preferred Return Rate with respect to any Series of Class B Limited Membership Interests to a new Fixed Rate on an applicable Class B Reset Date, the Managing Member shall provide written notice (a “Class B Remarketing Notice”) of a remarketing of such Series of Class B Limited Membership Interests to the applicable Class B Remarketing Agent, and each holder of the Series of Class B Interests being remarketed, not more than thirty-five (35) Business Days nor less than twenty

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(20) Business Days prior to the proposed Class B Remarketing Date. Such Class B Remarketing Notice will: (1) describe the remarketing; (2) indicate that the new Fixed Rate Period will begin on (and include) the applicable Class B Reset Date and end on (but exclude) the next occurring Scheduled Reset Date; (3) indicate the proposed Class B Remarketing Date, which shall be a date not more than thirty (30) Business Days nor less than one (1) Business Day prior to the related Class B Reset Date; provided that, in the case of the first Class B Optional Remarketing, the Class B Remarketing Date shall occur three (3) Business Days prior to the first Scheduled Reset Date and settlement shall occur on such Scheduled Reset Date; (4) set forth the Class B Mandatory Purchase Price per Class B Interest being remarketed, as determined pursuant to (1) in the case of a Class B Optional Remarketing, Section 7.2(b)(i), and (2) in the case of a Class B Interim Remarketing, Section 7.2(b)(ii); (5) indicate the Preferred Return Capital per Class B Interest being remarketed determined as of the Reset Valuation Date; (6) indicate that the remarketing settlement date (the “Class B Settlement Date”) shall be on the applicable Class B Reset Date; and (7) specify a date not more than five (5) Business Days prior to the Class B Remarketing Date (the “Class B Remarketing Election Date”) by which the holders of the applicable Class B Limited Membership Interests must deliver a Class B Notice of Election (as defined below). The Managing Member shall be permitted to terminate any such Class B Remarketing (other than the Class B Optional Remarketing required to be held with respect to the initial Scheduled Reset Date) at any time prior to the Class B Remarketing Election Date by providing notice of such termination to the applicable Class B Remarketing Agent; provided that the Class B Mandatory Purchase Price and Preferred Return Capital per Class B Limited Membership Interest set forth in the Class B Remarketing Notice may be estimated so long as a supplemental Class B Remarketing Notice with the final Class B Mandatory Purchase Price and Preferred Return Capital per Class B Limited Membership Interest is delivered no later than ten (10) Business Days prior the proposed Class B Remarketing Date.

          (i) Class B Optional Remarketing. In connection with any Class B Remarketing of a Series of Class B Limited Membership Interests that is a Class B Optional Remarketing, the purchase price per Class B Limited Membership Interest being remarketed (the “Class B Mandatory Purchase Price”) shall be equal to the amount derived by dividing (x) the sum of (1) the aggregate Capital Accounts of the Class B Limited Members with respect to such Series determined pursuant to Section 7.2(b)(iii), plus (2) any accrued but undistributed Class B Limited Member Preferred Return with respect to such Class B Limited Membership Interests from and including the Reset Valuation Date to but excluding the Class B Optional Remarketing Date, by (y) the number of Class B Limited Membership Interests of such Series then outstanding; provided that, in the case of the Class B Optional Remarketing of the Series B-1 Limited Membership Interests required to be held with respect to the initial Scheduled Reset Date, if the Class B Mandatory Purchase Price is less than the amount derived by dividing (x) the sum of (1) ninety percent of the initial Capital Account for such Series B-1 Limited Membership Interests, plus (2) any accrued but undistributed Class B Limited Member Preferred Return with respect to such Series B-1 Limited Membership Interests from and including the Reset Valuation Date to but excluding the Class B Optional Remarketing Date by (y) the number of Series B-1 Limited Membership Interests, the Class B Remarketing Agent shall terminate such Class B Optional Remarketing and it shall be deemed for all purposes to constitute a failed remarketing.

          (ii) Class B Interim Remarketing. In connection with any Class B Interim Remarketing, the Class B Mandatory Purchase Price per Class B Limited Membership Interest of

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a Series being remarketed shall be equal to the amount derived by dividing (x) the then aggregate Preferred Return Capital of the Class B Limited Members with respect to such Series (or if less, the aggregate Capital Accounts of the Class B Limited Members with respect to such Series determined in accordance with Section 7.2(b)(iii) as if the Class B Interim Remarketing were a Class B Optional Remarketing), by (y) the number of Class B Limited Membership Interests with respect to such Series then outstanding. If the Preferred Return Capital per Class B Limited Membership Interest of a Series being remarketed is the amount set forth in the parenthetical in clause (x)(1) of the second preceding sentence, the Managing Member must deliver a certificate issued by an appraiser of national standing selected in good faith by the Managing Member stating that if the Capital Accounts of the Class B Limited Members with respect to the Series of Class B Limited Membership Interests being remarketed were determined pursuant to Section 7.2(b)(iii), the aggregate amount of such Capital Accounts so determined would be less than the then aggregate Preferred Return Capital of the Class B Limited Members with respect to the Series of Class B Limited Membership Interests being remarketed. The Preferred Return Capital per Class B Limited Membership Interest being remarketed shall be equal to the amount derived by dividing (x) the then aggregate Preferred Return Capital of the Class B Limited Members with respect to such Series being remarketed, by (y) the number of Class B Limited Membership Interests of such Series then outstanding.

          (iii) Determination of Capital Account. For purposes of this Section 7.2(b), the Class B Limited Members’ Capital Accounts with respect to the Series of Class B Limited Membership Interests being remarketed shall be determined as of the Reset Valuation Date by (x) determining the Mark-to-Market Value of the Company’s Permitted Assets pursuant to Section 13.11 as of the last day of the Fiscal Quarter preceding the Fiscal Quarter in which the Reset Valuation Date occurs and adjusting the Gross Asset Values of all the Company’s Property pursuant to subparagraph (ii) of the definition of “Gross Asset Value” in Section 1.10 as of the Reset Valuation Date (assuming, for purposes of this Section 7.2(b)(iii), that, except as otherwise provided in this Section 7.2(b)(iii), such Mark-to-Market Value remained unchanged since the last day of such preceding Fiscal Quarter as of the Reset Valuation Date and that the Mark-to-Market Value of any Inventory or any asset acquired during the Fiscal Quarter in which the Reset Valuation Date occurs is equal to the Gross Asset Value of such asset on the Reset Valuation Date), and (y) allocating the Estimated Profits and Losses, and other items of Company income, gain, loss, or deduction for the relevant Reset Valuation Allocation Year pursuant to Section 3; provided that any amount included in the Capital Account of a Class B Limited Member as a result of an allocation pursuant to Sections 3.1(h), 3.1(i), or 3.3.(j) for which such Class B Limited Member is entitled to receive a distribution pursuant to Section 4.1(b)(ii) shall be deemed to have been distributed to such Class B Limited Member for purposes this Section 7.1(b)(iii). Notwithstanding the provisions of the parenthetical in clause (x) of the immediately preceding sentence, the Mark-to-Market Value of the Company’s Permitted Assets shall take into account any financial activity during the Fiscal Quarter in which the Reset Valuation Date occurs to the extent necessary to account for (i) any asset dispositions during such Fiscal Quarter and (ii) with respect to any Subsidiary of the Company that is a “subchapter C” corporation under the Code, any earnings and profits of such Subsidiary during such Fiscal Quarter. In the event a Class B Limited Member holds a Series of Class B Limited Membership Interests other than the Series being remarketed, the calculations described in this Section 7.2(b)(iii) shall be performed in a manner that determines the Capital Account solely with respect to the Series being remarketed.

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     (c) Remarketing Procedures.

          (i) Upon receipt of a Class B Remarketing Notice, each holder of Class B Limited Membership Interests subject to such Class B Remarketing Notice shall have until 3:00 p.m., New York City time, on the Class B Remarketing Election Date, to deliver to the applicable Class B Remarketing Agent or such other Person as is provided for in the applicable Class B Remarketing Agreement (a “Designee”), notice of such holder’s election (“Class B Notice of Election”) to either (i) retain and not have all or any portion of the applicable Class B Limited Membership Interests held by such holder remarketed in the remarketing or (ii) to retain a portion and tender a portion of the applicable Class B Limited Membership Interests held by such holder for purchase in the remarketing; provided that it shall not tender, nor retain, less than the Minimum Transfer Amount. Any applicable Class B Limited Membership Interest for which no Class B Notice of Election is delivered on or prior to the Class B Remarketing Election Date will be deemed tendered for purchase in such Class B Remarketing. Each Class B Notice of Election shall be irrevocable and shall not be conditioned upon the level at which the Fixed Rate is established in the remarketing. Any holder of Class B Limited Membership Interests subject to a Class B Remarketing Notice that desires to continue to retain a number of such Class B Limited Membership Interests (but not less than the Minimum Transfer Amount), but only if the Fixed Rate is not less than a specified rate per annum, should submit a Class B Notice of Election to tender such Class B Limited Membership Interests and separately notify the Class B Remarketing Agent or its Designee of its interest at the telephone number set forth in the Class B Remarketing Notice. If such holder so notifies the Class B Remarketing Agent or its Designee, the Class B Remarketing Agent or such Designee will give priority to such holder’s purchase of such number of Class B Limited Membership Interests providing that the Fixed Rate is not less than such specified rate; provided that the Class B Remarketing Agent shall not (nor shall it be obligated to) give priority to such holder’s purchase if doing so would cause the Company to be classified as a PTP; and provided, further, that if such holder purchases such Class B Limited Membership Interests pursuant to this Section 7.2(c)(i), it shall be deemed for all purposes to have continued as a Class B Limited Member to the extent of the Class B Limited Membership Interests so purchased.

          (ii) All applicable Class B Limited Membership Interests for which the holders thereof have properly and timely delivered Class B Notices of Election stating that such Class B Limited Membership Interests will be tendered for purchase in the remarketing will be deemed tendered for purchase in the remarketing, notwithstanding any failure by any such holders to properly and timely deliver to the Class B Remarketing Agent or its Designee such Class B Limited Membership Interests for purchase in the Class B Remarketing.

          (iii) Promptly after 4:30 p.m., New York City time, on each Class B Remarketing Election Date, the Class B Remarketing Agent or its Designee will notify the Managing Member of the number of applicable Class B Limited Membership Interests to be retained by the Class B Limited Members and the number of applicable Class B Limited Membership Interests to be tendered for purchase in the Class B Remarketing.

          (iv) If all of the holders of Class B Limited Membership Interests subject to a Class B Remarketing Notice deliver Class B Notices of Election indicating that they wish to retain all of such Class B Limited Membership Interests, the new Fixed Rate will be the rate

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determined by the Remarketing Agent or its Designee, in its sole discretion, as the rate that would have been established with respect to the Preferred Return Capital set forth in the Class B Remarketing Notice had a Class B Remarketing been held on the applicable Class B Remarketing Date.

          (v) On each Class B Remarketing Date, the Class B Remarketing Agent or its Designee will use commercially reasonable efforts to remarket, at a price equal to the Class B Mandatory Purchase Price at a Fixed Rate determined with respect to the Preferred Return Capital set forth in the Class B Remarketing Notice, the applicable Class B Limited Membership Interests tendered or deemed tendered for purchase. If, as a result of such efforts, the Class B Remarketing Agent or its Designee determines that it will be able to remarket all of the applicable Class B Limited Membership Interests tendered or deemed tendered for purchase in such Class B Remarketing at a Fixed Rate and at the Class B Mandatory Purchase Price, then prior to 3:00 p.m., New York City time, on such Class B Remarketing Date, the Class B Remarketing Agent or its Designee will determine (i) the Fixed Rate, which will be the rate per annum (rounded to the nearest one-thousandth (0.001) of one percent per annum) which the Class B Remarketing Agent or its Designee determines, in its sole judgment, to be the lowest fixed rate per annum, if any, that will enable it to remarket all of the applicable Class B Limited Membership Interests tendered or deemed tendered for remarketing at the Class B Mandatory Repurchase Price and (ii) the Applicable Class B Credit Spread.

          (vi) If the Class B Remarketing Agent or its Designee is unable to remarket by 4:00 p.m., New York City time, on the third Business Day prior to the Class B Settlement Date, all of the applicable Class B Limited Membership Interests tendered or deemed tendered for purchase at the Class B Mandatory Purchase Price, the Class B Preferred Return Rate for the applicable Series of Class B Limited Membership Interests shall be the Floating Rate. In such case, none of the applicable Class B Limited Membership Interests will be sold in the Class B Remarketing and each holder thereof will continue to hold such Class B Limited Membership Interests at the Floating Rate.

          (vii) If any holder selling Class B Limited Membership Interests in a Class B Remarketing fails to deliver such Class B Limited Membership Interests, then the selling holder shall be deemed to not have tendered any of its Class B Limited Membership Interests, such sale and purchase shall fail, and such holder shall be solely liable for any damages suffered by its purchaser or purchasers as a result of such failure to deliver.

          (viii) Neither the Class B Remarketing Agent nor its Designee is obligated to purchase any Class B Limited Membership Interests that would otherwise remain unsold in a remarketing. Neither the Class B Remarketing Agent nor its Designee will be obligated in any case to provide funds to make payment upon tender of Class B Limited Membership Interests for a Class B Remarketing.

          (ix) The right of each holder of Class B Limited Membership Interests subject to a Class B Remarketing Notice shall be limited to the extent that: (i) the Class B Remarketing Agent or its Designee conducts a Class B Remarketing pursuant to the terms of the applicable Class B Remarketing Agreement; (ii) the applicable Class B Limited Membership Interests have not been called for purchase pursuant to Section 11.9; (iii) the Class B Remarketing Agent or its

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Designee is able to find a purchaser or purchasers for all of the tendered Class B Limited Membership Interests; (iv) the number of such purchasers will not cause the Company to be classified as a PTP; and (v) such purchaser or purchasers deliver the purchase price and the Purchaser’s Letter therefor to the Class B Remarketing Agent or its Designee.

          (x) Upon a successful Class B Remarketing, the new Fixed Rate so established will be in effect for the applicable Fixed Rate Period, which Fixed Rate Period shall begin on the applicable Class B Reset Date and end on the day before the next Scheduled Reset Date but in no event shall such Fixed Rate Period be less than 6 months in duration. Class B Preferred Distributions with respect to the applicable Series of Class B Limited Membership Interests will be made quarterly in arrears determined based on the Class B Remarketing Date.

          (xi) If the Managing Member elects not to remarket any Series of Class B Limited Membership Interests to a new Fixed Rate on any Class B Reset Date occurring at the end of any Fixed Rate Period (other than the Initial Fixed Rate Period), or if the Company is unable to successfully remarket all of the Class B Limited Membership Interests tendered for sale in a Class B Remarketing, distributions on the applicable Series of Class B Limited Membership Interests will thereafter be made at the Floating Rate, subject to the right of the Company to subsequently remarket such Series of Class B Limited Membership Interests. The Company may elect to remarket such Series of Class B Limited Membership Interests prior to any Class B Distribution Date in order to again establish a Fixed Rate for a Fixed Rate Period (to be in effect after the expiration of the then current Class B Distribution Period).

     (d) The Company shall be responsible for payment of the Class B Remarketing Fee and all other fees associated with any Class B Remarketing, including customary fees for trust companies, brokers and counsel to the Class B Remarketing Agent.

SECTION 8.

REPRESENTATIONS AND WARRANTIES; COVENANTS

     8.1 In General.

     Each Member hereby severally makes each of the representations and warranties applicable to such Member (but as to no other Member) as set forth in Section 8.2, and such representations and warranties shall survive the execution of this Agreement.

     8.2 Representations and Warranties.

     (a) Due Formation or Incorporation; Authorization of Agreement. Each Member hereby represents and warrants that such Member is a corporation, partnership, or limited liability company duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization and has the organizational power and authority to own its property and carry on its business as owned and carried on as of the date hereof and as of May 24, 2002. Each Member hereby represents and warrants that such Member is duly licensed or qualified to do business and is in good standing in each of the jurisdictions in which the failure to be so licensed or qualified, either individually or in the aggregate with all other Immateriality Exceptions, has or could reasonably be expected to have, a Material Adverse Effect. Each

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Member hereby represents and warrants that such Member has the organizational power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Each Member hereby represents and warrants that the execution, delivery, and performance by such Member of this Agreement have been duly authorized by all necessary organizational action. Each Member hereby represents and warrants that this Agreement constitutes the legal, valid, and binding obligation of such Member and is enforceable against such Member in accordance with its terms (except to the extent that enforcement is affected by laws pertaining to bankruptcy, reorganization, insolvency, and creditors’ rights and by the availability of injunctive relief, specific performance, and other equitable remedies).

     (b) No Conflict with Restrictions; No Default. Each Member hereby represents and warrants that neither the execution and delivery by each Member of this Agreement nor such Member’s performance and compliance with the terms and provisions hereof, (i) will conflict with, violate or result in a breach of any of the terms, covenants, conditions, or provisions of any law or governmental regulation in effect on the date hereof applicable to, or any order, writ, injunction, decree, determination or award of any court, governmental department, board, agency or instrumentality, domestic or foreign, or arbitrator directed to or binding on such Member or any of its Material Subsidiaries which conflict, violation, or breach, either individually or in the aggregate with all other Immateriality Exceptions, has or could reasonably be expected to have, a Material Adverse Effect, (ii) will conflict with, violate, result in a breach of, or constitute a default under any agreement or instrument to which such Member is a party or by which such Member is or may be bound or to which any of its properties or assets is subject which conflict, violation, breach or default, either individually or in the aggregate with all other Materiality Exceptions, has or could reasonably be expected to have, a Material Adverse Effect, or any of the terms or provisions of the limited liability company agreement, certificate of incorporation or bylaws of such Member or any of its Material Subsidiaries, (iii) will conflict with, violate, result in a breach of, constitute a default under (whether with notice or lapse of time or both), accelerate or permit the acceleration of the performance required by, or require any consent, authorization, or approval under any of the terms or provisions of any material indenture, mortgage, lease, agreement, or instrument to which such Member is a party or by which such Member or such Member’s property or assets is or may be bound, or (iv) will result in the creation or imposition of any material Lien upon any of the properties or assets of such Member or any of its Material Subsidiaries.

     (c) Existence of the Company. Each Member hereby represents and warrants to the Company and each other Member that prior to the time that the Certificate of Formation was filed, such Member neither represented to third parties the existence of the Company nor held himself or herself out as a member or manager of the Company.

     (d) Governmental Authorizations. Each Member hereby represents and warrants that no registration, declaration or filing with, or consent, approval, license, permit, or other authorization or order by, any governmental or regulatory authority, domestic or foreign, is required in connection with the valid execution, delivery, and performance by such Member of this Agreement, which, if not obtained, either individually or in the aggregate with all other Immateriality Exceptions, has or could reasonably be expected to have, a Material Adverse Effect.

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     (e) Litigation. Each Member hereby represents and warrants that (i) there are no actions, suits, proceedings, or investigations pending or, to the knowledge of such Member, threatened against or affecting such Member or any of its Material Subsidiaries or any of their respective properties, assets, rights or businesses, in any court or before or by any governmental department, board, agency or instrumentality, domestic or foreign, or any arbitrator which could (or, in the case of an investigation, could lead to any action, suit or proceeding, which could) reasonably be expected to impair such Member’s ability to perform its obligations under this Agreement or to have a Material Adverse Effect or bring into question the validity of this Agreement or the transactions contemplated hereby; and (ii) no Member or any of its Material Subsidiaries has received any currently effective notice of any default, and such Member is not in default, under any applicable order, writ, injunction, decree, permit, determination or award of any court, any governmental department, board, agency or instrumentality, domestic or foreign, or any arbitrator which could reasonably be expected to impair its ability to perform its obligations under this Agreement or to have a Material Adverse Effect.

     (f) Investment Company Act; Public Utility Holding Company Act. Each Member hereby represents and warrants that such Member is a “qualified purchaser” within the meaning given to such term under Section 2(a)(51) of the Investment Company Act and the rules of the Securities and Exchange Commission thereunder. Each Member hereby represents and warrants that such Member is not a “holding company,” “an affiliate of a holding company,” or a “subsidiary of a holding company” as defined in, or subject to regulation under, the Public Utility Holding Company Act.

     (g) Investigation; Intent. Each Member hereby represents and warrants that (i) such Member acquired and continues to hold its Membership Interests based upon its own investigation, and the exercise by such Member of its rights and the performance of its obligations under this Agreement will be based upon its own investigation, analysis and expertise, (ii) its acquisition of its Membership Interests was made and continues to be made for its own account for investment, and not with a view to the sale or distribution thereof, and (iii) it intends to continue to participate as a member in a Delaware limited liability company in accordance with this Agreement for the purpose of making an economic profit from the transactions entered into or proposed to be entered into by the Company.

     (h) Sole Owner. Each Member hereby represents and warrants that it acquired its Membership Interests for its own account and is, and will remain, the sole beneficial owner of such Membership Interests at all times unless and until it Transfers ownership of all, or some part, of such Membership Interests in accordance with and only to the extent permitted under Section 11.2.

     (i) No Intent to Avoid PTP Rules. Each Member hereby represents and warrants that (i) it is not, and will not become, a trust, estate, partnership, or “S corporation” (within the meaning of Code Section 1361(a)) for U.S. federal income tax purposes or (ii) if it is, or if it becomes, a trust, estate, partnership, or S corporation for such purposes, then (x) less than 50% of the value of any direct or indirect equity or other beneficial interest in such trust, estate, partnership or S corporation is, and will at all times continue to be, attributable to its Membership Interests or any other Interest in the Company and (y) the principal purpose of the purchase of the Membership Interests was not to permit the Company or any entity of which the Company is a

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direct or indirect partner to satisfy the 100 partner limitation set forth in Treasury Regulation Section 1.7704-1(h)(1)(ii).

     (j) No Sales on Established Securities Market. Each Member agrees that it will not sell, market, transfer, assign, participate, pledge, or otherwise dispose of its Membership Interests (or any interest therein) on or through an “established securities market” within the meaning of Code Section 7704(b)(1) and the Treasury Regulations promulgated thereunder, including, without limitation, an over-the-counter market or an interdealer quotation system that regularly disseminates firm buy or sell quotations.

     8.3 Covenant Regarding Tax Matters.

     (a) Character of Company Items. The Managing Member hereby covenants to the Limited Members that, for U.S. federal, state, and local income tax purposes, the Company’s items of income, gain, deduction, and loss will consist solely of (i) ordinary income from the sale of goods manufactured by the Company, (ii) interest income, (iii) dividends paid by any Subsidiary of the Company, (iv) rent received with respect to any Permitted PP&E Licenses, (v) royalties received with respect to Permitted Intellectual Property Licenses, (vi) Code Section 162 ordinary and necessary expenses paid or incurred in connection with carrying on the trade or business of the Company, (vii) Code Section 1231 gain or loss from the disposition of property used in the trade or business of the Company, (viii) depreciation and amortization deductions under Code Sections 167, 168, and 197, and (ix) capital gain or loss from the sale of A-Rated Securities, the Pet Stock, or the General Mills Missouri Stock, and will not include expenditures described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i).

     (b) Cash and Taxable Income of Limited Members. The Managing Member hereby covenants to the Limited Members that, for U.S. federal, state, and local income tax purposes, the net taxable income includible by each such Limited Member with respect to its Limited Membership Interests (excluding, for the avoidance of doubt, any such income solely attributable to a sale or disposition of such Limited Membership Interests) will not exceed the amount of Cash distributed to such Limited Member with respect to such Allocation Year (disregarding for this purpose any allocations of (x) loss pursuant to Section 3.3 and (y) Profits pursuant to Sections 3.1(h) and 3.1(i); provided that, the covenant set forth herein shall not apply to a Class B Limited Member to the extent the net taxable income described in this Section 8.3(b) is attributable to gain (including income arising from remedial allocations associated with such gain) allocated to the Capital Account of a Member pursuant to Sections 7.1(d)(ii) or 7.2(b)(iii) in connection with a successful Class B Optional Remarketing and such Member elected not to sell its Class B Limited Membership Interests in such Class B Optional Remarketing. The product of (i) any excess described in the previous sentence times (ii) the Applicable Tax Rate shall be the Limited Member’s “Indemnified Taxes.”

     (c) Indemnification. The Company and the Managing Member, jointly and severally, shall indemnify each Limited Member who held a Limited Membership Interest during any Allocation Year for any breach or falsity of the covenant set forth in this Section 8.3 on the basis that (i) such Limited Member is subject to tax on its net income at the highest marginal federal income tax rate, the highest generally applicable state and local rates in the jurisdiction where

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such Limited Member has its primary place of business, and any actually applicable foreign tax rates, and (ii) such Limited Member has no available items of loss, capital gain, or other tax attributes not attributable to its investment in the Company, and any charitable contribution deductions or expenses of the Company are nondeductible expenses for U.S. federal income tax purposes.

     (d) Automatic Indemnification Payment. In the event that the information provided on U. S. Internal Revenue Service K-1 to Form 1065 for a Limited Member (or successor form or similar state or local form) is inconsistent with the covenant set forth in Section 8.3(b) with respect to any Allocation Year, the Managing Member shall (i) make a written request of each Limited Member within 150 days after such Allocation Year that each such Limited Member provide the Managing Member with a certificate setting forth the Applicable Tax Rate described in clause (i) of Section 8.3(c), and (ii) cause the Company to pay to each Limited Member, no later than 180 days after such Allocation Year or, if later, 10 days after such Limited Member has provided the information timely requested pursuant to clause (i), an amount equal to the quotient of (i)  Indemnified Taxes, divided by (ii) 100% minus the Applicable Tax Rate.

     (e) Other Indemnification Payments.  The Company and the Managing Member, jointly and severally, shall indemnify each Limited Member for any (i) U.S. federal, state, and local income taxes incurred by such Limited Member as a result of a breach of the covenants set forth in Sections 8.3(a) and 8.3(b) (to the extent not previously paid pursuant to Section 8.3(d)) and (ii) any interest and penalties incurred by such Limited Member in connection with taxes indemnified for pursuant to this Section 8.3. The Company or the Managing Member shall pay any amounts indemnified for pursuant to this Section 8.3(e) not later than 30 days after a Limited Member has provided a statement and detailed calculation of the amounts required to be paid under this Section 8.3(e).  Any such indemnity shall include interest on such amounts described in clauses (i) and (ii) above required to be paid by a Limited Member at a rate equal to the applicable Limited Member Preferred Return as in effect from time to time from the date the amounts indemnified for were paid by the Limited Member through the date payment under this Section 8.3(e) is received by the Limited Member.

SECTION 9.

ACCOUNTING, BOOKS, AND RECORDS

     9.1 Accounting, Books, and Records.

     (a) The Company shall keep on site at its principal place of business each of the following:

          (i) Separate books of account for the Company and its Subsidiaries which shall show a true and accurate record in Dollars of all costs and Expenses incurred, all charges made, all credits made and received, and all income derived in connection with the conduct of the Company and its Subsidiaries and the operation of their business in accordance with GAAP;

          (ii) Separate books of account that reflect the Capital Accounts of the Members as maintained pursuant to the provisions of this Agreement;

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          (iii) The Membership Registry and a list of the full name and last known business, residence, or mailing address of each past and present Member;

          (iv) A copy of the Certificate of Formation and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any amendment has been executed;

          (v) A copy of the Company’s federal, state, and local income tax returns and reports, if any, for the six most recent years;

          (vi) A copy of this Agreement;

          (vii) A copy of any writings permitted or required under Section 18-502 of the Act regarding the obligation of a Member to perform any enforceable promise to contribute Cash or property or to perform services as consideration for such Member’s Membership Interests; and

          (viii) Any written consents obtained from the Members pursuant to Section 6.3 of this Agreement and Section 18-302(d) of the Act regarding action taken by the Members without a meeting.

     (b) The Company shall use the accrual method of accounting in preparation of its financial reports and for tax purposes and shall keep its books and records accordingly.

     (c) Any Member or its designated representative has the right at the Company’s cost and expense, upon reasonable notice, to have access to and inspect and copy the contents of the books or records of the Company or any of its Subsidiaries and to make inquiries with regard to the contents of the books or records at any time and on as many occasions as such Member reasonably considers necessary or desirable; provided that so long as no Class A Notice Event shall have occurred and be continuing, the Company shall only be required to bear the cost and expense of (i) one such inspection per Fiscal Year requested by any Class A Limited Member and (ii) one such inspection per Fiscal Year requested by any Class B Limited Member.

     (d) The books of account and records of the Company and its Subsidiaries shall be audited as of the end of each Fiscal Year by a “Big Four” independent certified public accounting firm designated from time to time by the Managing Member.

     9.2 Reports.

     (a) In General. The Managing Member shall be responsible for the preparation of financial reports of the Company and the coordination of financial matters of the Company with the Company’s accountants. Each report delivered by the Company to the Members pursuant to this Section 9 shall be accompanied by a written certification of the Company executed by a Responsible Officer familiar with the affairs of the Company that (x) such report has been prepared and fairly stated in all material respects in accordance with GAAP or, to the extent inconsistent therewith, in accordance with this Agreement and (y) with respect to the reports described in Sections 9.2(b) and (c), no Liquidating Event or Class A Notice Event or event that with notice or lapse of time or both would constitute a Liquidating Event or Class A Notice Event

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has occurred and is continuing or, if any such event has occurred and is continuing, the action that the Managing Member has taken or proposes to take with respect thereto.

     (b) Annual Reports. Within 120 days after the end of each Fiscal Year (or in the case of clause (vi) below, 180 days after the end of each taxable year of the Company), the Managing Member shall cause to be prepared and furnished to each Member the following:

          (i) A balance sheet as of the last day of such Fiscal Year and an income statement and statement of cash flows for the Company and its consolidated Subsidiaries for such Fiscal Year and notes associated with each;

          (ii) A statement of the Members’ Capital Accounts and changes therein for such Fiscal Year;

          (iii) A Portfolio Compliance Certificate for such Fiscal Year;

          (iv) A certificate of a nationally recognized accounting firm selected in accordance with Section 9.1(d) stating that the statements referred to in clause (ii) above have been prepared in accordance with the Agreement;

          (v) A report by a nationally recognized accounting firm selected in accordance with Section 9.1(d) (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that the unconsolidated and consolidated financial statements in clause (i) above present fairly in all material respects the financial position and results of operations of the Company on an unconsolidated basis, and the financial condition and results of operations of the Company and its Subsidiaries on a consolidated basis, in accordance with GAAP consistently applied; and

          (vi) The information required to be provided on a U.S. Internal Revenue Service Schedule K-1 to Form 1065 for each Limited Member, provided that the Managing Member shall, upon the request of any Limited Member, provide to any such Limited Member any information reasonably necessary for such Limited Member to compute its estimated income tax payments.

     (c) Quarterly Reports. Within sixty (60) days after the close of each of the first three Fiscal Quarters of each year, the Managing Member shall cause to be prepared and each Limited Member to be furnished with (i) a balance sheet for the Company and its consolidated Subsidiaries as of the end of such Fiscal Quarter, (ii) a related income statement and statement of cash flows of the Company and its consolidated Subsidiaries for such Fiscal Quarter and for the Fiscal Year to date, and (iii) a Portfolio Compliance Certificate for such Fiscal Quarter; provided that such Certificate is not required to include any statement regarding the asset coverage ratio described in Section 5.9(a)(i).

     (d) Class A Remarketing Reports; Reset Reports. Simultaneously with the Company’s delivery of a Class A Remarketing Notice, the Managing Member shall cause to be delivered to the Class A Limited Members and the Class A Remarketing Agent a statement setting forth the Preferred Return Capital and Class A Mandatory Purchase Price for each Class A Limited Membership Interest being remarketed in the Class A Remarketing, together with a certificate of

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a nationally recognized accounting firm selected in accordance with Section 9.1(d) stating that such statement has been prepared in accordance with this Agreement (such statement, together with such certificate, being the “Class A Remarketing Report”).

     In the event that, on any Class A Reset Date, a Class A Mandatory Remarketing is not required to be conducted, the Managing Member shall cause to be delivered to each Class A Member a statement setting forth the Capital Account for each Class A Limited Member as determined pursuant to Section 7.1(d)(ii) and the Preferred Return Capital for each Class A Limited Member, in each case as of such Class A Reset Date, together with a certificate of a nationally recognized accounting firm selected in accordance with Section 9.1(d) stating that such statement has been prepared in accordance with this Agreement; provided that, if (i) the amount of Estimated Profits and Losses, and other items of Company income, gain, loss, or deduction included in the determination of such Capital Account and Preferred Return Capital differs from the actual amount of Profits and Losses, and other items of Company income, gain, loss, or deduction for the relevant Reset Valuation Allocation Year and (ii) such difference results in the Capital Accounts and Preferred Return Capital of the Class A Limited Members differing from that set forth in the aforementioned statement, then the Managing Member shall deliver to each Class A Limited Member a revised statement of the Capital Account and Preferred Return Capital of each Class A Limited Member within five (5) Business Days after the determination of such actual amounts.

     (e) Class B Remarketing Reports; Reset Reports. Simultaneously with the Company’s delivery of a Class B Remarketing Notice, the Managing Member shall cause to be delivered to the Class B Limited Members and the Class B Remarketing Agent a statement setting forth the Preferred Return Capital and Class B Mandatory Purchase Price for each Class B Limited Membership Interest being remarketed in the Class B Remarketing, together with a certificate of a nationally recognized accounting firm selected in accordance with Section 9.1(d) stating that such statement has been prepared in accordance with this Agreement. A Class B Remarketing Report prepared in accordance with this Section 9.2(e) shall be prepared and delivered to the Class B Limited Members on each Class B Optional Remarketing Date irrespective of whether or not the Class B Optional Remarketing on such Class B Optional Remarketing Date is, in fact, held or is successful.

     In the event that, on any Scheduled Reset Date, a Class B Optional Remarketing is not conducted, the Managing Member shall cause to be delivered to each Class B Limited Member a statement setting forth the Capital Account for each Class B Limited Member as determined pursuant to Section 7.2(b)(iii) and the Preferred Return Capital for each Class B Limited Member, in each case as of such Scheduled Reset Date, together with a certificate of a nationally recognized accounting firm selected in accordance with Section 9.1(d) stating that such statement has been prepared in accordance with this Agreement; provided that, if (i) the amount of Estimated Profits and Losses, and other items of Company income, gain, loss, or deduction included in the determination of such Capital Account and Preferred Return Capital differs from the actual amount of Profits and Losses, and other items of Company income, gain, loss, or deduction for the relevant Reset Valuation Allocation Year and (ii) such difference results in the Capital Accounts and Preferred Return Capital of the Class B Limited Members differing from that set forth in the aforementioned statement, then the Managing Member shall deliver to each Class B Limited Member a revised statement of the Capital Account and Preferred Return

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Capital of each Class B Limited Member within five (5) Business Days after the determination of such actual amounts.

     (f) Class A Purchase Option Reports. Simultaneously with the Managing Member’s delivery of a Class A Purchase Notice in connection with a Class A Purchase on a date other than a Class A Reset Date, the Managing Member shall deliver to each Class A Limited Member whose Class A Limited Membership Interests are being purchased a statement of the balance in the Capital Account of such Class A Limited Member determined in accordance with this Section 9.2(f), together with a certificate of a nationally recognized accounting firm selected in accordance with Section 9.1(d) stating that such statement has been prepared in accordance with this Agreement; provided that, if the Class A Purchase Notice is delivered within the ten (10) day period prior to the effectiveness of a Liquidation Notice, the report required by this Section 9.2(f) shall be delivered not later than fifty (50) days after the Class A Purchase Election Date. If such nationally recognized accounting firm determines that the balance of the Class A Limited Member’s Capital Account is greater than that determined by the Managing Member, then the Managing Member shall pay the difference between such determinations to such Class A Limited Member in immediately available funds within five (5) Business Days of the Managing Member’s receipt of such accounting firm’s determination.

     For purposes of this Section 9.2(f), the Class A Limited Members’ Capital Accounts shall be determined as of the Class A Purchase Valuation Date by taking into account the adjustments that would result from (x) determining the Mark-to-Market Value of the Company’s Permitted Assets pursuant to Section 13.11 as of the Class A Purchase Valuation Date and (y) allocating the Profits and Losses, and other items of Company income, gain, loss, or deduction for the relevant Purchase Valuation Allocation Year pursuant to Section 3. Such Capital Accounts shall reflect all distributions made to such Class A Limited Members during or with respect to such period.

     (g) Class B Purchase Option Reports. Simultaneously with the Managing Member’s delivery of a Class B Purchase Notice in connection with a Class B Purchase on a Distribution Date during a Floating Rate Period (but not in connection with a Class B Purchase on a Scheduled Reset Date), the Managing Member shall deliver to each Class B Limited Member whose Class B Limited Membership Interests are being purchased a statement of the balance in the Capital Account of such Class B Limited Member determined in accordance with this Section 9.2(g), together with a certificate of a nationally recognized accounting firm selected in accordance with Section 9.1(d) stating that such statement has been prepared in accordance with this Agreement.

     For purposes of this Section 9.2(g), the Class B Limited Members’ Capital Accounts shall be determined as of the Class B Purchase Valuation Date by taking into account the adjustments that would result from (x) determining the Mark-to-Market Value of the Company’s Permitted Assets pursuant to Section 13.11 as of the Class B Purchase Valuation Date and (y) allocating the Estimated Profits and Losses, and other items of Company income, gain, loss, or deduction for such Purchase Valuation Allocation Year pursuant to Section 3. Such Capital Accounts shall reflect all distributions made to such Class B Limited Members during or with respect to such period.

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     (h) Default Date Reports. Promptly but in any event within five (5) Business Days of a Responsible Officer obtaining actual knowledge of any event resulting in a fifty percent (50%) or greater reduction in the Gross Asset Value for any Permitted Asset having a Gross Asset Value of $25,000,000 or more immediately prior to such event, the Managing Member shall cause to be prepared a Class A Portfolio Compliance Certificate applicable to the period ending on the day after the occurrence of such event.

     (i) Class A Notice Event Reports. In the event that during any Fiscal Year a Class A Notice Event described in Section 14.1(b) occurs and the Members have not delivered a Liquidation Notice to the Managing Member prior to the date on which a certification would otherwise be required to be delivered to the Class A Limited Members pursuant to this Section 9.2; on or before the later to occur of (i) the date on which reports are furnished to the Class A Limited Members pursuant to Section 9 for the immediately preceding Fiscal Year or (ii) sixty (60) days after receipt by the Managing Member of a request from the Class A Limited Members, the Managing Member shall cause to be prepared and the Members furnished with a certification by a nationally recognized accounting firm to be selected in accordance with Section 9.1(d) that the statements furnished to the Class A Limited Members for such immediately preceding Fiscal Year pursuant to Section 9 were prepared in accordance with this Agreement.

     (j) Liquidation Date Reports. On the date on which final distributions are made to the Members pursuant to Section 13.2, the Liquidator shall cause to be prepared and each Member furnished with each of the following statements:

          (i) A Balance Sheet as of the date of such distribution setting forth as individual line items the aggregate Mark-to-Market Capital Values for each Permitted Asset held by the Company;

          (ii) A statement of the Members’ Capital Accounts as adjusted immediately prior to such distribution pursuant to Section 13.2; and

          (iii) Not later than sixty (60) days after the distributions referred to in this Section 9.2(j) have been made, a certificate of a nationally recognized accounting firm selected in accordance with Section 9.1(d) shall have been prepared and delivered to the Members stating that the statement in clause (i) above has been prepared in accordance with this Agreement.

     (k) Class B Exchange Date Reports. No later than the date on which Class B Limited Membership Interests will be exchanged for securities of GMI or one of its Affiliates pursuant to the terms of the Exchange Agreement, the Managing Member shall cause to be prepared and each Class B Limited Member furnished with each of the following statements:

          (i) a statement of the Class B Limited Members’ Capital Accounts specially determined pursuant to this Section 9.2(k); and

          (ii) a certificate of a nationally recognized accounting firm selected in accordance with Section 9.1(d) stating that the statement in clause (i) above has been prepared in accordance with this Agreement.

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For purposes of this Section 9.2(k), the Class B Limited Members’ Capital Accounts shall be determined as of the Exchange Valuation Date by taking into account the adjustments that would result from (x) determining the Mark-to-Market Value of the Company’s Permitted Assets pursuant to Section 13.11 as of the last day of the Fiscal Quarter preceding the Fiscal Quarter in which the Exchange Valuation Date occurs and adjusting the Gross Asset Values of all the Company’s Property pursuant to subparagraph (ii) of the definition of “Gross Asset Value” in Section 1.10 as of the Exchange Valuation Date (assuming, for purposes of this Section 9.2(k), that, except as otherwise provided in this Section 9.2(k), such Mark-to-Market Value remains unchanged since the last day of such prior Fiscal Quarter as of the Exchange Valuation Date and that the Mark-to-Market Value of any Inventory or any asset acquired during the Fiscal Quarter in which the Exchange Valuation Date occurs is equal to the Gross Asset Value of such asset on the Exchange Valuation Date), and (y) allocating the Estimated Profits and Losses, and other items of Company income, gain, loss, or deduction for the Exchange Valuation Year pursuant to Section 3. Notwithstanding the provisions of the parenthetical in clause (x) of the immediately preceding sentence, the Mark-to-Market Value of the Company’s Permitted Assets shall take into account any financial activity during the Fiscal Quarter in which the any Exchange Valuation Date occurs to the extent necessary to account for (i) any asset dispositions during such Fiscal Quarter and (ii) with respect to any Subsidiary of the Company that is a “subchapter C” corporation under the Code, any earnings and profits of such Subsidiary during such Fiscal Quarter. In addition, for purposes of this Section 9.2(k), the Class B Limited Members’ Capital Accounts shall include the amount of any Class B Limited Member Preferred Return that has accrued since the last Class B Distribution Date occurring prior to the date on which the Class B Exchange occurs but that has not been distributed (whether or not the distribution of such Class B Limited Member Preferred Return was prohibited pursuant to the proviso set forth in Section 4.1(a)(ii)). If a Class B Limited Member owns more than one Series of Class B Limited Membership Interests, the capital account determined for such Class B Limited Member pursuant to this Section 9.2(k) shall be determined with respect to each Series of Class B Limited Membership Interests being exchanged by such Class B Limited Member.

     (l) GMI Events. Promptly but in any event within five (5) Business Days of a Responsible Officer obtaining actual knowledge of (A) any notice from Moody’s or S&P that such Rating Agency is considering lowering the senior unsecured debt rating of GMI below “Baa3” with respect to Moody’s or “BBB-” with respect to S&P, (B) the lowering of the senior unsecured debt rating of GMI below “Baa3” by Moody’s or “BBB-” by S&P, (C) any event resulting in a reduction of the Mark-to-Market Value of any Permitted Loan under which GMI or one of its Affiliates is a borrower or (D) any GMI Event, the Managing Member shall deliver to each of the other Members a notice of the occurrence of such event.

     (m) Rule 144A Information. At the request of any Member or any prospective Member, the Managing Member shall provide, with respect to the Company, the information required by Rule 144A(d)(4)(i) under the Securities Act.

     9.3 Tax Matters.

     (a) The Managing Member is specifically authorized to act as the “Tax Matters Member” under the Code and in any similar capacity under state or local law. The Tax Matters Member shall have the authority without any further consent of the Members being required

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(except as specifically required herein, and provided that reasonable notice is provided to Members): (i) to make any and all elections for federal, state, local, and foreign tax purposes including any election, if permitted by applicable law (A) provided for in Code Section 6231(a)(1)(B)(ii), (B) to adjust the basis of the Company’s assets pursuant to Code Sections 754, 734(b), and 743(b), or comparable provisions of state, local, or foreign law, in connection with Transfers of Interests and Company distributions, and (C) to extend the statute of limitations for assessment of tax deficiencies with respect to adjustments to the Company’s federal, state, local, or foreign tax returns; (ii) to determine the appropriate forum in which any potential tax controversy shall be litigated; (iii) to the extent provided in Code Sections 6221 through 6231 and similar provisions of federal, state, local, or foreign law, to appear before taxing authorities or courts of competent jurisdiction in tax matters with respect to the Company’s federal, state, local or foreign tax returns; and (iv) to file any tax returns and execute any agreements or other documents relating to or affecting such tax matters. The Company has made a valid election under Code Section 754 and such election has not been and will not be revoked.

     (b) No Member shall make any election under Treasury Regulations Section 301.7701-3 to cause the Company to be treated as a corporation for federal income tax purposes. To the extent permitted by applicable law and regulation at the relevant time, each Member will (i) treat the Membership Interests as representing equity interests in the Company for all U.S. federal income tax purposes and for all relevant state and local income, franchise, and other similar tax purposes, (ii) treat the Company as a partnership for U.S. federal income tax purposes that is not taxable as an association or a PTP, and (iii) take no position on any tax return or with any taxing or other governmental authority that is inconsistent with such treatment.

     (c) Other than such information delivered pursuant to Section 9.2(b)(vii), all other necessary tax information shall be delivered to each Member as soon as practicable after the end of each Fiscal Year of the Company but not later than eight (8) months after the end of each Fiscal Year.

SECTION 10.

AMENDMENTS

     10.1 Amendments.

     (a) Amendments to this Agreement may be proposed by the Managing Member, a Class A Limited Member, or upon a written request from the holders of at least 25% of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests. Following such proposal, the Managing Member shall submit to the Members a verbatim statement of any proposed amendment, and the Managing Member shall include in any such submission a recommendation as to the proposed amendment. The Managing Member shall seek the affirmative written consent of the Members on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. Except as expressly provided in Section 5.3(c), a proposed amendment shall be adopted and be effective as an amendment hereto if it receives the affirmative written consent or vote of (i) the Required Class A Limited Members, (ii) holders of Series B-1 Limited Membership Interests representing

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at least two-thirds of any outstanding Series B-1 Limited Membership Interests that are held by holders other than GMI and its Affiliates, (iii) holders of Series B-2 Limited Membership Interests representing at least two-thirds of any outstanding Series B-2 Limited Membership Interests that are held by holders other than GMI and its Affiliates, and (iv) the Managing Member; provided that, with respect to any amendment that solely concerns the right and obligations of a Class A Limited Member under this Agreement, such amendment shall only require the consent the Managing Member and the Required Class A Limited Members, and provided, further, that, so long as the consent of the Required Class B Limited Members is not otherwise required pursuant to Section 5.3(b), the approval of the holders of the Class B Limited Membership Interests shall not be required for any amendment that is executed in connection with, and in order to give effect to, (i) the sale of the Series B-2 Limited Membership Interests held by Cereals Holdings to any Person that is not GMI or an Affiliate of GMI or another GMI Entity, (ii) the issuance of additional Membership Interests, or (iii) the conversion of the Class A Limited Membership Interests; and provided, further, that the form of the Series B-1 Preferred Certificate or Series B-2 Preferred Certificate and any provision of this Agreement may be at any time and from time to time be amended, without the consent of the holders of the Class B Limited Membership Interests, to the extent that such amendment shall cure any ambiguity, defect, or inconsistency or shall be of a ministerial or technical nature.

     (b) Any provision herein to the contrary notwithstanding, in connection with a sale of the Series B-2 Limited Membership Interests currently outstanding to any Person that is not GMI or an Affiliate of GMI or another GMI Entity, the provisions herein with respect to the Series B-2 Preferred Return Rate, the Initial Fixed Rate Period and Class B Distribution Period with respect to the Series B-2 Limited Membership Interests may be amended without the consent of the holders of the Series B-1 Limited Membership Interests; provided that such amendments are in accordance with then current market terms for comparable securities.

     (c) Notwithstanding the foregoing, Section 4.1(b) shall not be amended without the consent of any former Limited Member whose right to receive a distribution pursuant to Section 4.1(b), or the amount or timing of such distribution, would be affected by such amendment.

SECTION 11.

TRANSFERS; PURCHASE

     11.1 Restriction on Transfers.

     (a) Except as otherwise permitted by this Agreement, no Member shall Transfer all or any portion of its Membership Interests. In the event any Member pledges or otherwise encumbers its Interest as security for the payment of a liability, any such pledge or hypothecation shall be made pursuant to a pledge or hypothecation agreement that requires the pledgee or secured party to be bound by all of the terms and conditions of this Section 11.

     (b) Notwithstanding any other provisions of this Agreement (including without limitation, Sections 11.2, 11.3(a), 11.3(c), and 11.6), (i) the Class A Limited Members may Transfer their respective Class A Limited Membership Interests to the Managing Member (or its designee) pursuant to the Class A Purchase Option as set forth in Section 11.8, and upon such Transfers,

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the Managing Member (or its designee) shall be admitted as the Class A Limited Member and the prior Class A Limited Members shall be deemed withdrawn as Class A Limited Members with respect to such Transferred Class A Limited Membership Interests and (ii) the Class B Limited Members may Transfer their respective Class B Limited Membership Interests to the Managing Member (or its designee) pursuant to the Class B Purchase Option as set forth in Section 11.9, and upon any such Transfers, the Managing Member (or its designee) shall be admitted as a Class B Limited Member of the applicable Series and the prior Class B Limited Members shall be deemed withdrawn as Class B Limited Members with respect to such Transferred Class B Limited Membership Interests.

     11.2 Permitted Transfers.

     (a) Managing Member. Subject to the conditions and restrictions set forth in Section 11.3 and Section 5.6, the Managing Member may at any time Transfer all or any portion of its Managing Membership Interest (i) while GMI or any of its Subsidiaries is the Managing Member, to GMI or any of its Subsidiaries (so long as, in the case of a Transfer to a Subsidiary, its obligations as Managing Member are fully guaranteed pursuant to a GMI Guaranty) or (ii) any other Person approved by all the Members; provided that (A) the indemnification obligation of the Managing Member shall be unaffected by such Transfer and (B) in the event that any such transferee (other than GMI) ceases to be a Subsidiary of GMI, such transferee shall Transfer back to GMI or to another Subsidiary of GMI any such Managing Membership Interest immediately prior to such transferee ceasing to be a Subsidiary of GMI.

     (b) Class A Limited Members. Subject to the conditions and restrictions set forth in Section 11.3: (i) without the consent of any other Member, a Class A Limited Member may (A) pledge all (but not less than all) of its Class A Limited Membership Interests to a single lender as a bona fide pledge in connection with financing obtained to purchase such Class A Limited Membership Interests and transfer such Class A Limited Membership Interests to such lender in connection with any foreclosure of such pledge, (B) Transfer all (but not less than all) of its Class A Limited Membership Interests to (1) any other Member, (2) any wholly owned Subsidiary or any entity of which it is a wholly owned Subsidiary, and (3) any Person(s) pursuant to a Class A Remarketing, and (C) Transfer all or any portion of its Class A Limited Membership Interests to any Person upon the occurrence of a continuing Liquidating Event; and (ii) with the unanimous written consent of the other Members, which consent shall not be unreasonably withheld, a Class A Limited Member may Transfer its Class A Limited Membership Interests to any other Person.

     (c) Class B Limited Members. Subject to the conditions and restrictions set forth in Section 11.3: (i) without the consent of any other Member, a Class B Limited Member may (A) pledge all (but not less than all) of its Class B Limited Membership Interests to a single lender as a bona fide pledge in connection with financing obtained to purchase such Class B Limited Membership Interests and Transfer such Class B Limited Membership Interests to such lender in connection with the foreclosure of such, (B) Transfer all of its Class B Limited Membership Interests to (1) any other Member, (2) any wholly owned Subsidiary or any entity of which it is a wholly owned Subsidiary, and (3) GMI or any Affiliate of GMI in exchange for securities of GMI or an Affiliate of GMI, (C) Transfer all or any portion of its Class B Limited Membership Interests to any Person pursuant to a Class B Remarketing, and (D) in the case of

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Series B-1 Limited Membership Interests, Transfer such Interests in accordance with Section 11.3(k); and (ii) with the written consent of the Managing Member and Required Class A Limited Members, which consent shall not be unreasonably withheld, a Class B Limited Member may Transfer its Class B Limited Membership Interests to any other Person. In addition, subject to the conditions and restrictions set forth in Section 11.3, Cereals Holdings may Transfer the Series B-2 Limited Membership Interests to one or more purchasers and, upon such Transfer, such purchasers will be admitted as Class B Limited Members, immediately whereafter, Cereals Holdings shall be deemed withdrawn in respect of the Series B-2 Limited Membership Interests so Transferred.

     (d) Any Transfer permitted by this Section 11.2 shall be referred to in this Agreement as a “Permitted Transfer,” and the Person to which the Interest is Transferred shall be a “Permitted Transferee.”

     11.3 Conditions to Permitted Transfers.

     A Transfer shall not be treated as a Permitted Transfer under Sections 11.2 unless and until the following conditions are satisfied:

     (a) The transferee shall execute and deliver to the Company such documents and instruments of conveyance as may be reasonably required to effect such Transfer and to confirm the agreement of the transferee to be bound by the provisions of this Agreement applicable to the relevant Member.

     (b) In the case of any Transfer by a Class A Limited Member of any portion of its Class A Limited Membership Interests, such Transfer shall not cause (i) the Class A Limited Membership Interests to be owned by more than 10 persons as determined in accordance with Regulations Section 1.7704-1(h) or (ii) as a result of such Transfer, the Company to otherwise be treated as a “publicly traded partnership” within the meaning of Code Section 7704 and the Regulations promulgated thereunder, assuming for purposes of this Section 11.3(b)(ii) that the Class B Limited Membership Interests are held by 90 Persons. Any purported Transfer of any Class A Limited Membership Interest that does not comply with the conditions set forth in this Section 11.3(b) shall be null and void and of no force or effect whatsoever.

     (c) In the case of any Transfer of a Class A Limited Membership Interest, the transferee represents and agrees in a written certification, unless such requirement is waived in writing by Managing Member in its sole discretion, that either (A) it is not, for U.S. federal income tax purposes, a partnership, grantor trust, or “S corporation” (each a “Flow-Through Entity") or (B) it is a Flow-Through Entity but, after giving effect to such purchase of the Class A Limited Membership Interest, less than 50% of the value of any beneficial owner’s interest in the Flow-Through Entity is attributable to the Flow-Through Entity’s direct or indirect interest in the Company or a principal purpose in using the Flow-Through Entity to purchase the Class A Limited Membership Interests is not to permit the Company to have more than 10 owners of the Class A Membership Interests or to have more than 100 “partners” within the meaning of Regulations Section 1.7704-1(h)(1)(ii).

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     (d) In the case of any Transfer by a Series B-1 Limited Member of any portion of its Series B-1 Limited Membership Interests (including any beneficial interest therein), such Transfer shall not cause (i) the Series B-1 Limited Membership Interests to be owned by more than 83 persons as determined in accordance with Regulations Section 1.7704-1(h) or (ii) as a result of such Transfer, the Company to otherwise be treated as a “publicly traded partnership” within the meaning of Code Section 7704 and the Regulations promulgated thereunder, assuming for purposes of this Section 11.3(d)(ii) that the Class A Limited Membership Interests are held by 10 Persons and the Series B-2 Limited Membership Interests are held by 6 Persons. Any purported Transfer of any Series B-1 Limited Membership Interest that does not comply with the conditions set forth in this Section 11.3(d) shall be null and void and of no force or effect whatsoever.

     (e) In the case of any Transfer of a Series B-1 Limited Membership Interest, the transferee represents and agrees in a written certification that either (A) it is not, for U.S. federal income tax purposes, a Flow-Through Entity or (B) it is a Flow-Through Entity but, after giving effect to such purchase of the Series B-1 Limited Membership Interest, less than 50% of the value of any beneficial owner’s interest in the Flow-Through Entity is attributable to the Flow-Through Entity’s direct or indirect interest in the Company or a principal purpose in using the Flow-Through Entity to purchase the Series B-1 Limited Membership Interests is not to permit the Company to have more than 83 owners of the Series B-1 Membership Interests or to have more than 100 “partners” within the meaning of Regulations Section 1.7704-1(h)(1)(ii).

     (f) In the case of any Transfer by a Series B-2 Limited Member of any portion of its Series B-2 Limited Membership Interests (including any beneficial interest therein), such Transfer shall not cause (i) the Series B-2 Limited Membership Interests to be owned by more than 6 persons as determined in accordance with Regulations Section 1.7704-1(h) or (ii) as a result of such Transfer, the Company to otherwise be treated as a “publicly traded partnership” within the meaning of Code Section 7704 and the Regulations promulgated thereunder, assuming for purposes of this Section 11.3(f)(ii) that the Class A Limited Membership Interests are held by 10 Persons and the Series B-1 Limited Membership Interests are held by 83 Persons. Any purported Transfer of any Series B-2 Limited Membership Interest that does not comply with the conditions set forth in this Section 11.3(f) shall be null and void and of no force or effect whatsoever.

     (g) In the case of any Transfer of a Series B-2 Limited Membership Interest, the transferee represents and agrees in a written certification that either (A) it is not, for U.S. federal income tax purposes, a Flow-Through Entity or (B) it is a Flow-Through Entity but, after giving effect to such purchase of the Series B-2 Limited Membership Interest, less than 50% of the value of any beneficial owner’s interest in the Flow-Through Entity is attributable to the Flow-Through Entity’s direct or indirect interest in the Company or a principal purpose in using the Flow-Through Entity to purchase the Series B-2 Limited Membership Interests is not to permit the Company to have more than 6 owners of the Series B-2 Limited Membership Interests or to have more than 100 “partners” within the meaning of Regulations Section 1.7704-1(h)(1)(ii).

     (h) The transferor and transferee shall furnish the Company with the transferee’s taxpayer identification number, sufficient information to determine the transferee’s initial tax basis in the Interest Transferred, and any other information reasonably necessary to permit the Company to

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file all required federal and state tax returns and other legally required information statements or returns. Without limiting the generality of the foregoing, the Company shall not be required to make any distribution otherwise provided for in this Agreement with respect to any Transferred Interest until it has received such information.

     (i) The transferee shall represent and warrant to the Company that the transferee: (1) is an institutional “accredited investor” (as such term is defined in Rule 501(a) promulgated under the Securities Act); (2) has sufficient knowledge and experience in financial and investment matters to be capable of evaluating the risks and merits involved in acquiring such Interest, understands the risks and merits applicable to such Interest (including, without limitation, any legal, tax, and accounting issues inherent therein) and is financially able to bear such risks; (3) has sufficient knowledge of, and experience with, financial markets that it is able to determine that its acquiring such Interest is suitable for its financial and investment objectives; and (4) understands that the Interest is not registered or entitled to be registered under the Securities Act or any state securities law or other applicable federal securities or other similar law.

     (j) Each transferor and transferee of Class A Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, shall execute certificates substantially similar to the certificates (the “Transferor Certificate” and Transferee Certificate”) attached hereto as Exhibit E and Exhibit F, respectively.

     (k) In the case of a transferee of any of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, unless waived by the Managing Member and the Required Class A Limited Members, each prospective purchaser will be required to sign and deliver to the Company a purchaser’s letter (a “Purchaser’s Letter”) substantially similar to the form attached hereto as Exhibit G, and will be deemed to have acknowledged, represented and agreed that:

          (i) It understands and acknowledges that the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, have not been registered under the Securities Act or any other applicable securities law and, unless so registered, may not be re-offered, resold, pledged or otherwise Transferred except in compliance with the registration requirements of the Securities Act or any other applicable securities law, or pursuant to an exemption therefrom or in a transaction not subject thereto, and in each case, in compliance with the conditions for Transfer set forth in paragraph (vii) below.

          (ii) It is a Qualified Institutional Buyer (QIB) within the meaning of Rule 144A under the Securities Act and is aware that any sale of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, to it will be made in reliance on Rule 144A. Such acquisition will be for its own account or for the account of another QIB.

          (iii) It agrees that it will give to each Person to whom it Transfers the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, notice of any restrictions on Transfer of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable.

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          (iv) It acknowledges that as a purchaser of either Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, it will be holding membership interests in a limited liability company, it will be admitted to the Company as a member, and therefore, it will be subject to rights and obligations as set forth in this Agreement.

          (v) It acknowledges that prior to any proposed Transfer of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, (other than pursuant to an effective registration statement) it may be required to provide certification or other documentation relating to the Transfer as provided in this Agreement and may be required to provide to the Company any information required by Regulations Section 1.743-1(k)(2).

          (vi) It acknowledges that none of the Company, any Class A Limited Member, any Class B Limited Member, the Class B Remarketing Agent, or GMI or the Person representing any such Person, has made any representation to it with respect to the Company, any Class B Limited Member, GMI, or the offering of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable. It has had access to such financial and other information concerning the Company, Cereals Holdings, GMI, and the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, as it deemed necessary in connection with its decision to purchase any of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, including an opportunity to ask questions and request information from the Company, Cereals Holdings, and GMI.

          (vii) It is purchasing the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, for its own account, or for one or more investor accounts (each beneficial owner of which shall have executed a Purchaser’s Letter) for which it is acting as a fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, subject to any requirement of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control and subject to its or their ability to resell such Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, pursuant to Rule 144A or any exemption from registration available under the Securities Act. It agrees on its own behalf and on behalf of any investor account for which it is purchasing the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, and each subsequent holder of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, by its acceptance thereof will agree, to offer, sell or otherwise Transfer such Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, are eligible for resale pursuant to Rule 144A, to a Person it reasonably believes is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the Transfer is being made in reliance on Rule 144A, or (d) pursuant to another available exemption from the registration requirements of the Securities Act and, in each case, in accordance with the applicable securities laws of any state of the United States or any other applicable jurisdiction and, subject to any requirement of law that the

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disposition of its property or the property of such investor account or accounts be at all times within its or their control. Each purchaser acknowledges that the Company reserves the right prior to any offer, sale or other Transfer pursuant to clause (d) above to require the delivery of an opinion of counsel, certifications or other information acceptable to the Company in form and substance. Each purchaser agrees on its own behalf and on behalf of any investor account for which it is purchasing the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, and each subsequent holder of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, by its acceptance thereof will agree, to offer, sell or otherwise transfer such Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, only to a purchaser who signs and delivers a Purchaser’s Letter to a Broker-Dealer. Each purchaser acknowledges that each Series B-1 Preferred Certificate or Series B-2 Preferred Certificate, as applicable, will contain a legend, to which such purchaser hereby agrees, substantially to the following effect:

     “THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF GENERAL MILLS CEREALS, LLC AND GENERAL MILLS, INC. THAT: (i) IT HAS ACQUIRED A “RESTRICTED” SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSE (II)(D) IS SUBJECT TO THE RIGHT OF THE COMPANY TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO IT IN FORM AND SUBSTANCE.

     THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS CONSISTING OF NOT LESS THAN 10,000 SECURITIES. A TRANSFEROR OF

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THE SECURITIES MAY NOT RETAIN SECURITIES UNLESS IT RETAINS AT LEAST 10,000 SECURITIES. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK CONSISTING OF LESS THAN 10,000 SECURITIES SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON SUCH SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.

     SO LONG AS THE SECURITIES ARE “RESTRICTED SECURITIES” (AS SUCH TERM IS DEFINED IN RULE 144(a)(3) UNDER THE SECURITIES ACT), THE COMPANY AGREES TO MAKE AVAILABLE TO EACH HOLDER AND EACH PROSPECTIVE PURCHASER OF THE SECURITIES DESIGNATED BY A HOLDER, UPON REQUEST, THE INFORMATION REQUIRED TO BE PROVIDED PURSUANT TO RULE 144A(d)(4) UNDER THE SECURITIES ACT.

     EACH HOLDER AND SUBSEQUENT TRANSFEREE OF THE SECURITIES WILL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT: (i) IT IS NOT USING THE ASSETS OF ANY PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) OR OTHER PROVISIONS OF FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS OR REGULATIONS THAT CONTAIN ONE OR MORE PROVISIONS THAT ARE SIMILAR TO ANY OF THE PROHIBITED TRANSACTION PROVISIONS THAT ARE CONTAINED IN TITLE I OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAWS”), OR ANY ENTITY WHOSE UNDERLYING ASSETS ARE CONSIDERED TO INCLUDE “PLAN ASSETS” OF ANY SUCH PLAN, ACCOUNT OR ARRANGEMENT; OR (II) ITS ACQUISITION AND HOLDING OF SUCH SECURITIES OR ANY INTEREST THEREIN WILL NOT CONSTITUTE A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, OR A VIOLATION OF ANY SIMILAR LAW.

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER FOR THE PURPOSE OF PREVENTING THE COMPANY FROM BEING CLASSIFIED AS A PUBLICLY TRADED PARTNERSHIP UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) AND FOR THE PURPOSE OF PREVENTING TRANSFERS TO NON-U.S. PERSONS. ANY ATTEMPTED TRANSFER OF SECURITIES THAT WOULD CAUSE THE COMPANY TO BE CLASSIFIED AS A PUBLICLY TRADED PARTNERSHIP OR ANY ATTEMPTED TRANSFER OF SECURITIES TO NON-U.S. PERSONS SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

     EACH HOLDER AND SUBSEQUENT TRANSFEREE OF THE SECURITIES, SHALL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT (I) IS NOT, AND WILL NOT BECOME, A PARTNERSHIP, A SUBCHAPTER S CORPORATION OR A GRANTOR TRUST, IN EACH CASE, AS DESCRIBED IN THE CODE (EACH A “FLOW-THROUGH ENTITY”) OR (II) IS A FLOW-THROUGH ENTITY, BUT LESS THAN 50% OF

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THE VALUE OF ANY BENEFICIAL OWNER’S INTEREST IN THE FLOW-THROUGH ENTITY IS ATTRIBUTABLE TO THE FLOW-THROUGH ENTITY’S DIRECT OR INDIRECT INTEREST IN THE COMPANY OR A PRINCIPAL PURPOSE IN USING THE FLOW-THROUGH ENTITY TO PURCHASE THE SERIES B-1 LIMITED MEMBERSHIP INTERESTS IS NOT TO PERMIT THE COMPANY TO HAVE MORE THAN 83 OWNERS OF THE SERIES B-1 LIMITED MEMBERSHIP INTERESTS, TO HAVE MORE THAN 6 OWNERS OF THE SERIES B-2 LIMITED MEMBERSHIP INTERESTS OR TO HAVE MORE THAN 100 “PARTNERS” WITHIN THE MEANING OF REGULATIONS SECTION 1.7704-1(h)(1)(ii).

     ALL CAPITALIZED TERMS IN THIS LEGEND HAVE THE MEANINGS DEFINED IN GENERAL MILLS CEREALS, LLC’S LIMITED LIABILITY COMPANY AGREEMENT AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER, WILL BE SENT WITHOUT CHARGE TO EACH HOLDER OF SECURITIES WHO SO REQUESTS.

          (viii) If it is acquiring any Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgments and agreements on behalf of each such account.

          (ix) (A) It is not using the assets of any plan, individual retirement account or other arrangement subject to Title I of ERISA, Section 4975 of the Code or any Similar Law, or any entity whose underlying assets are considered to include “plan assets” of any such plan, account or arrangement; or (B) its acquisition and holding of such Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, or any interest therein will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, or a violation of any Similar Law. The purchaser acknowledges, represents and agrees that any attempt to Transfer any Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, to such a plan or arrangement or to any Person acting on behalf of or using the assets of such a plan or arrangement in violation of this restriction shall be null and void.

          (x) It understands and acknowledges that if the Managing Member is, at any time and in good faith, of the opinion that ownership of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, has or may become widely disseminated to an extent that may cause us to qualify as a PTP, then the Managing Member will have the power to prevent the Transfer of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable. It also acknowledges that upon any Transfer of its Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, the prospective transferee will be required to execute a Purchaser’s Letter.

          (xi) It understands and acknowledges that it may not Transfer any Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, or any portion thereof (including any beneficial interest therein) if such Transfer would cause (i) the

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Series B-1 Limited Membership Interests to be owned by more than 83 Persons or the Series B-2 Limited Membership Interests to be owned by more than 6 Persons (in each case, as determined in accordance with Treasury Regulations promulgated under Section 7704 of the Code) or (ii) the Company to otherwise be treated as a PTP assuming that, in the case of the Series B-1 Limited Membership Interests, the Class A Limited Membership Interests are held by 10 Persons and the Series B-2 Limited Membership Interests are held by 6 Persons and, in the case of the Series B-2 Limited Membership Interests, the Class A Limited Membership Interests are held by 10 Persons and the Series B-1 Limited Membership Interests are held by 83 Persons. It also understands and acknowledges that any purported Transfer of any Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, or any portion thereof (including any beneficial interest therein) that does not comply with this condition shall be null and void and of no force or effect whatsoever.

          (xii) It understands and acknowledges that Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, may not be purchased by or Transferred to any non-U.S. Person. Allocations to non-U.S. Persons would require the Company to pay withholding taxes, at the highest effective tax rate applicable to taxpayers of the relevant type. The Company, therefore, will not allow any non-U.S. Person to acquire its membership interests.

          (xiii) It represents and covenants that (A) it is not, and will not become, a Flow-Through Entity or (B) it is a Flow-Through Entity, but less than 50% of the value of any beneficial owner’s interest in the Flow-Through Entity is attributable to the Flow-Through Entity’s direct or indirect interest in the Company or a principal purposes in using the Flow-Through Entity to purchase the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, is not to permit the Company to have more than 83 owners of the Series B-1 Interests or to have more than 6 owners of the Series B-2 Interests or to have more than 100 “Partners” within the meaning of Regulations Section 1.7704-1(h)(1)(ii).

          (xiv) It represents and covenants that it will not market, Transfer, assign, participate, pledge or otherwise dispose of its Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, (or any interest therein) on or through an “established securities market” within the meaning of Section 7704(b)(1) of the Code (and the Treasury Regulations promulgated thereunder), including, without limitation, an over-the-counter market or an inter-dealer quotation system that regularly disseminates firm buy or sell quotations.

          (xv) It acknowledges that as a purchaser of either the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, it will be subject to the rights and obligations set forth in, and bound by the terms and provisions of, the Exchange Agreement or other documents to which the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, are bound.

          (xvi) It acknowledges that the Company, Cereals Holdings, GMI, and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements and agrees that if any of the acknowledgments, representations and agreements deemed to have been made by purchase of the Series B-1 Limited Membership Interests or

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Series B-2 Limited Membership Interests, as applicable, are no longer accurate, it will promptly notify the Company.

          (xvii) It acknowledges that as a purchaser of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable, it is required, pursuant to Regulations Section 1.743-1(k)(2), to provide the Company with the following information within 30 days of its purchase of the Series B-1 Limited Membership Interests or Series B-2 Limited Membership Interests, as applicable: (i) the names and addresses of the transferee and (if ascertainable) of the transferor; (ii) the taxpayer identification numbers of the transferee and (if ascertainable) of the transferor; (iii) the relationship (if any) between the transferee and the transferor; (iv) the date of the Transfer; and (v) the consideration for the Transferred Interest.

     (l) Paragraphs (a) through (j) of this Section 11.3 shall not be applicable to any pledge described in Section 11.2(b)(i)(A) or Section 11.2(c)(i)(A). As set forth in Section 11.1(a), the pledgee or secured party is subject to the terms and conditions of this Section 11.

     (m) A Transfer of Series B-1 Preferred Certificates shall not be a Permitted Transfer if fewer than 10,000 Series B-1 Preferred Certificates are Transferred. A Transfer of any Membership Interests other than a Series B-1 Limited Membership Interests shall not be a Permitted Transfer if such Transfer would result in there being more than 17 beneficial owners of the Membership Interests, excluding the owners of the Series B-1 Limited Membership Interests.

     11.4 Prohibited Transfers.

     Any purported Transfer of a Membership Interest that is not a Permitted Transfer shall be null and void and of no effect whatsoever; provided that, if the Company is required to recognize a Transfer that is not a Permitted Transfer, the Membership Interest Transferred shall be strictly limited to the transferor’s rights to allocations and distributions as provided by this Agreement with respect to the Transferred Membership Interest, which allocations and distributions may be applied (without limiting any other legal or equitable rights of the Company) to satisfy any debts, obligations, or liabilities for damages that the transferor or transferee of such Membership Interest may have to the Company. In the case of a Transfer or attempted Transfer of a Membership Interest that is not a Permitted Transfer, the parties engaging or attempting to engage in such Transfer shall be liable to indemnify and hold harmless the Company and the other Members from all cost, liability, and damage that any of such indemnified Persons may incur (including, without limitation, incremental tax liability and lawyers’ fees and expenses) as a result of such Transfer or attempted Transfer and efforts to enforce the indemnity granted hereby. Notwithstanding any provision in this Agreement to the contrary, the Managing Member shall prohibit (i) any Transfer that would result in the Company being treated as a PTP or (ii) any Transfer (other than a Transfer by RBDB) that would result in a violation of the requirements of Section 11.3(b).

     11.5 Rights of Unadmitted Assignees.

     (a) In General. A Person who acquires one or more Interests but who is not admitted as a substituted Member pursuant to Section 11.6 shall be entitled only to allocations and distributions with respect to such Membership Interests in accordance with this Agreement, but shall have no

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right to any information or accounting of the affairs of the Company, shall not be entitled to inspect the books or records of the Company, and shall not have any of the rights of a Managing Member or a Limited Member under the Act or this Agreement.

     (b) Managing Member. A transferee who acquires a Membership Interest from the Managing Member under this Agreement by means of a Transfer that is permitted under this Section 11, but who is not admitted as the Managing Member, shall have no authority to act for or bind the Company, to inspect the Company books, or otherwise to be treated as a Managing Member. Following such a Transfer, the transferor shall not cease to be the Managing Member of the Company and shall continue to be the Managing Member until such time as the transferee is admitted as the Managing Member.

     (c) Limited Members. Following a Transfer to a transferee who acquires a Membership Interest from a Limited Member under this Agreement by means of a Transfer that is permitted under this Section 11, but who is not admitted as a Limited Member, the transferor shall not cease to be a Limited Member of the Company and shall continue to be a Limited Member until such time as the transferee is admitted as a Limited Member under this Agreement.

     11.6 Admission as Substituted Members.

     (a) A Person shall be admitted to the Company as a Class B Limited Member without execution of this Agreement upon the acquisition of a Series B-1 Preferred Certificate or Series B-2 Preferred Certificate in a Permitted Transfer.

     (b) Subject to the other provisions of this Section 11, a transferee of Membership Interests may be admitted to the Company as a substituted Member only upon satisfaction of the conditions set forth below in this Section 11.6:

          (i) The Membership Interests with respect to which the transferee is being admitted were acquired by means of a Permitted Transfer;

          (ii) The transferee of a Class A Limited Membership Interest or the Managing Membership Interest becomes a party to this Agreement as a Member and executes such documents and instruments as the Managing Member may reasonably request (including, without limitation, amendments to the Certificate of Formation) as may be necessary or appropriate to confirm such transferee as a Member in the Company and such transferee’s agreement to be bound by the terms and conditions of this Agreement;

          (iii) Unless the requirements of this Section 11.6(b)(iii) have been waived by the Managing Member, the transferee pays or reimburses the Company for all reasonable legal, filing, and publication costs that the Company incurs in connection with the admission of the transferee as a Member with respect to the Transferred Interests;

          (iv) Unless the requirements of this Section 11.6(b)(iv) have been waived by the Members, the transferee of a Class A Limited Membership Interest or the Managing Membership Interest provides the Company with evidence satisfactory to counsel for the Company that such transferee has made representations equivalent to those contained in Section 8.2 as of the date of the Transfer; and

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          (v) In the event that the transferee of a Membership Interest from any Member is admitted under this Agreement, such transferee shall be deemed admitted to the Company as a substituted Member immediately prior to the Transfer, and with respect to the transferee of the Managing Member, such transferee shall continue the business of the Company without dissolution.

     11.7 Distributions and Allocations in Respect of Transferred Membership Interests.

     If any Membership Interest is Transferred during any Allocation Year in compliance with the provisions of this Section 11, Profits, Losses, each item thereof, and all other items attributable to the Transferred Interest for such Allocation Year shall be divided and allocated between the transferor and the transferee by taking into account their varying Membership Interests during the Fiscal Year in accordance with Code Section 706(d), using the daily proration convention. Notwithstanding the date of such Transfer, all distributions shall be made to the holder of record as of the relevant date as set forth in Section 4.1. The Company shall recognize a Permitted Transfer of Series B-1 Limited Membership Interests, as of the date of such Permitted Transfer, when it receives the Purchaser’s Letter with respect to such Permitted Transfer. The Company shall recognize a Permitted Transfer of any other Membership Interests not later than the end of the calendar month during which it is given notice of a Permitted Transfer; provided that, if the Company is given notice of such a Permitted Transfer at least fourteen (14) Business Days prior to the Transfer, the Company shall recognize a Permitted Transfer as of the date of such Permitted Transfer; and provided, further, that if the Company does not receive a notice stating the date such Interest was Transferred and such other information as the Managing Member may reasonably require within thirty (30) days after the end of the Allocation Year during which the Permitted Transfer occurs, then all such items shall be allocated, and all distributions shall be made, to the Person who, according to the books and records of the Company, was the owner of the Interest on the last day of such Allocation Year. Neither the Company nor the Managing Member shall incur any Liability for making allocations and distributions in accordance with the provisions of this Section 11.7, whether or not the Managing Member or the Company has knowledge of any Transfer of ownership of any Interest.

     11.8 Class A Limited Membership Interest Purchase Option.

     (a) Class A Purchase Option. The Managing Member or, in the sole discretion of the Managing Member, its designee (for purposes of this Section 11.8, references to the Managing Member shall, as the context requires, include such designee) may, by delivery of a written notice to the Class A Limited Members (a “Class A Purchase Notice"), elect to purchase (the “Class A Purchase Option") (x) with respect to subparagraph (i) below, all of the Class A Limited Membership Interests of any Class A Limited Member and (y) with respect to subparagraphs (ii) below, all the Class A Limited Membership Interests then outstanding at the following times:

          (i) At any time prior to the delivery of a Liquidation Notice to the Managing Member pursuant to Section 14.2; provided that, other than a purchases on a Class A Reset Date, the Capital Account of such Class A Limited Member calculated as of the Class A Purchase Valuation Date as determined pursuant to Section 9.2(f) is not less than such Class A Limited Member’s Preferred Return Capital; or

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          (ii) Within the ten (10) day period prior to the effectiveness of any Liquidation Notice delivered to the Managing Member pursuant to Section 14.2; provided that the Required Class A Limited Members have not rescinded such Liquidation Notice during such ten (10) day period; and provided, further, that no GMI Event shall have occurred and be continuing.

     Upon consummation of the Class A Purchase Option, the Managing Member shall be admitted as a Class A Limited Member with respect to the Class A Limited Membership Interests purchased pursuant to the Class A Purchase Option, and the Class A Limited Members from whom such Class A Limited Membership Interests were purchased shall be deemed withdrawn with respect to such Class A Limited Membership Interests.

     (b) Class A Purchase Election Date. The “Class A Purchase Election Date” shall be the day on which the Managing Member delivers the Class A Purchase Notice; provided that, if the Managing Member elects to purchase all of the Class A Limited Membership Interests then outstanding during the ten (10) day period following the delivery of a Liquidation Notice, the Class A Purchase Election Date shall be the day on which such Liquidation Notice is delivered to the Managing Member. Except as provided in Section 14.2 with respect to a rescinded Liquidation Notice, a Class A Purchase Notice given pursuant to this Section 11.8 shall be irrevocable and binding on the Managing Member.

     (c) Class A Purchase Price. The purchase price (the “Class A Purchase Price”) for each Class A Limited Member’s Limited Membership Interest being purchased on a Class A Reset Date shall equal the Class A Mandatory Purchase Price that would be payable in connection with a Class A Mandatory Remarketing held with respect to such Class A Reset Date (determined in accordance with Section 7.1(d)(ii)); provided that, if (i) the amount of Estimated Profits and Losses, and other items of Company income, gain, loss, or deduction included in the determination of such Class A Mandatory Purchase Price differs from the actual amount of Profits and Losses, and other items of Company income, gain, loss, or deduction for the relevant Reset Valuation Allocation Year and (ii) such difference would have resulted in the Class A Mandatory Purchase Price differing from the Class A Purchase Price, then (x) if the revised Class A Mandatory Purchase Price would have exceeded the Class A Purchase Price paid to the Class A Members, the Managing Member (or its designee) shall pay an amount equal to such excess to each Class A Limited Member within five (5) Business Days after the final determination of such Mandatory Purchase Price, or (y) if the Class A Purchase Price paid to the Class A Members exceeded such revised Class A Mandatory Purchase Price, the Class A Members shall pay to the Managing Member (or its designee) an amount equal to such excess within five (5) Business Days after receipt of the final determination of such Mandatory Purchase Price.

     The Class A Purchase Price for each Class A Limited Member’s Limited Membership Interests being purchased on any other date shall be equal to the excess, if any, of (i) the sum of (x) the balance in such Class A Limited Member’s Capital Account determined pursuant to Section 9.2(f) as of the last day of the Fiscal Quarter preceding the Fiscal Quarter in which the Class A Purchase Election Date occurs (the “Class A Purchase Valuation Date”), plus (y) an amount equal to such Class A Limited Member’s accrued but undistributed Class A Limited Member Preferred Return for the period from and including the Class A Purchase Valuation Date to but excluding the Class A Purchase Date, plus (z) the Class A Purchase Premium, if any, over

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(ii) any amounts distributed to such Class A Limited Member from and including the Class A Purchase Valuation Date to but excluding the Class A Purchase Date.

     (d) Purchase.

          (i) Single Payment. In the case of a Class A Purchase Option exercised in any case not described in Section 11.8(a)(ii), the Class A Purchase Price shall be paid in Dollars and immediately available funds on the last Business Day of the Fiscal Quarter during which the Class A Purchase Election Date occurs or, if such last Business Day of such Fiscal Quarter is less than five Business Days after the Election Date, the last Business Day of the following Fiscal Quarter (the “11.8(a)(i) Purchase Date”) in accordance with Section 11.8(e).

          (ii) Installments. In the case of a Class A Purchase Option exercised in any case described in Section 11.8(a)(ii), the Class A Purchase Price shall be payable in two (2) installments, each in Dollars and immediately available funds:

               (A) The first installment shall be made on the date specified in the Purchase Notice, which date shall be a Business Day that is on or before the fortieth (40^th) day following the Class A Purchase Election Date (such date of payment being the “11.8(a)(ii) Purchase Date,” together with the 11.8(a)(i) Purchase Date, each a “Class A Purchase Date”) and shall be equal to applicable Class A Limited Member’s Preferred Return Capital as of the Class A Purchase Valuation Date. In the event that, on the Class A Purchase Date, the rating assigned to the senior unsecured and unsupported long-term debt obligations of a Class A Limited Member is below A- by S&P or A3 by Moody’s, then such Class A Limited Member will be required, unless its repayment obligation under clause (b) below is guaranteed by a Person whose debt obligations are so rated, to hold in escrow any amount of the first installment remaining after payment of its obligations to its creditors; and

               (B) If the Class A Purchase Price is greater than the first installment, to the extent that the first installment was required to be held in an escrow account pursuant to clause (A) above, the balance in the escrow account shall be released to the applicable Class A Limited Member and the second installment shall be made as soon as practicable after the Capital Account statements described in Section 9.2(f) are received by the Class A Limited Members, but in no event later than sixty (60) days following the Class A Purchase Election Date. The second installment shall be equal to the excess, if any, of the Class A Purchase Price over the amount of the first installment. If the first installment exceeds the Class A Purchase Price, an amount equal to the lesser of (1) such excess or (2) the balance in the escrow account shall be returned to the Managing Member.

     (e) Closing. The closing of the purchase contemplated by this Section 11.8 shall occur on the Class A Purchase Date at such place as is mutually agreeable to the Members, or upon the failure to agree, at the principal place of business of the Company. At the closing, the Class A Limited Members shall deliver to the Managing Member good title, free and clear of any Liens, claims, encumbrances, security interests, or options, to its Class A Limited Membership Interests thus purchased other than such Liens, claims, encumbrances, security interest or options permitted hereunder. The reasonable costs of such Transfer and closing, including, without limitation, attorneys’ fees and filing expenses, shall be paid by the Managing Member. At the

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closing, the Class A Limited Members shall execute such documents and instruments of conveyance as may be reasonably necessary to effectuate the transaction contemplated hereby, including the Transfer of the Class A Limited Membership Interests.

     (f) Treatment as Purchase Under Section 741. The Class A Limited Members agree to treat the Transfer of the Class A Limited Membership Interests to the Managing Member pursuant to this Section 11.8 as a purchase and sale under Code Section 741 and not as a retirement under Code Section 736.

     11.9 Purchase of Class B Limited Membership Interests.

     (a) Class B Purchase Option. The Managing Member or, in the sole discretion of the Managing Member, its designee (for purposes of this Section 11.9, references to the Managing Member shall, as the context requires, include its designee) may, by delivery of a written notice complying with the requirements set forth in Section 11.9(e) (a “Class B Purchase Notice”), elect to purchase (the “Class B Purchase Option”) all (but not less than all) of the Series B-1 Limited Membership Interests and/or the Series B-2 Limited Membership Interests (i) during any Fixed Rate Period, on any Scheduled Reset Date and (ii) during any Floating Rate Period, on a Class B Distribution Date. Any such purchases shall be in Cash, unless otherwise consented to by the Class B Limited Members whose interests are being purchased.

     Upon consummation of the Class B Purchase Option, the Managing Member shall be admitted as a Class B Limited Member with respect to the Class B Limited Membership Interests purchased pursuant to the Class B Purchase Option, and the Class B Limited Members from whom such Class B Limited Membership Interests were purchased shall be deemed withdrawn with respect to such Class B Limited Membership Interests.

     (b) Class B Purchase Election Date. The “Class B Purchase Election Date” shall be the day on which the Managing Member delivers the Class B Purchase Notice. A Class B Purchase Notice given pursuant to this Section 11.9 shall be irrevocable and binding on the Managing Member.

     (c) Class B Purchase Price. The purchase price (the “Class B Purchase Price”) for each Class B Limited Member’s Limited Membership Interests being purchased on a Scheduled Reset Date shall equal the Class B Mandatory Purchase Price that would be payable in connection with a Class B Optional Remarketing held with respect to such Scheduled Reset Date (determined in accordance with Section 7.2(b)(iii).

     The Class B Purchase Price for each Class B Limited Member’s Limited Membership Interests being purchased on a Class B Distribution Date during a Floating Rate Period shall be equal to the excess, if any, of (i) the sum of (x) the balance in such Class B Limited Member’s Capital Account determined pursuant to Section 9.2(g) as of the last day of the Fiscal Quarter preceding the Fiscal Quarter in which the Class B Purchase Election Date occurs (the “Class B Purchase Valuation Date”), over (ii) any amounts distributed to such Class B Limited Member from and including the Class B Purchase Valuation Date to but excluding the Class B Purchase Date. In the event a Class B Limited Member holds a Series of Class B Limited Membership Interests other than the Series being purchased pursuant to this Section 11.9, the calculations

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described in this Section 11.9(c) shall be performed by the Managing Member in a manner that determines the Class B Purchase Price solely with respect to the Series being purchased. Notwithstanding the two preceding sentences, if the Managing Member elects to purchase all (but not less than all) the Series B-1 Limited Membership Interests on the first Scheduled Reset Date, then the Class B Purchase Price for the purchase of a specific Series B-1 Limited Member’s Series B-1 Limited Membership Interests shall be equal to the greater of (i) the Mandatory Purchase Price that would be payable to such Series B-1 Limited Member in connection with a Class B Optional Remarketing held with respect to such Scheduled Reset Date (determined in accordance with Section 7.2(b)(iii)), and (ii) the sum of ninety percent of such Series B-1 Limited Member’s initial Capital Account, plus an amount equal to such Series B-1 Limited Member’s accrued but undistributed Class B Limited Member Preferred Return as of the day before the Class B Purchase Date.

     (d) Purchase. The Class B Purchase Price shall be paid in Dollars and immediately available funds on the last Business Day of the Fiscal Quarter during which the Class B Purchase Election Date occurs (the “Class B Purchase Date”) in accordance with Section 11.9(e). Provided that, if the Managing Member elects to purchase all (but not less than all) of the Series B-1 Limited Membership Interests on the first Scheduled Reset Date, then the Class B Purchase Price shall be paid in immediately available funds on such Scheduled Reset Date.

     (e) Closing. In the event that the Managing Member has elected to purchase any Series of Class B Limited Membership Interests from a Class B Limited Member pursuant to Section 11.9(a), then such Member’s Class B Limited Membership Interests shall be purchased, at 11:00 a.m., New York City time, on the Class B Purchase Date (which shall be specified in the Class B Purchase Notice), which date shall not be less than thirty (30) Days or more than sixty (60) Days after the date on which such Class B Purchase Notice was given pursuant to Section 11.9(a); provided, however, that the failure to give such Class B Purchase Notice or any defect in such Class B Purchase Notice or in the mailing of such Class B Purchase Notice will not effect the validity of the proceeding for the purchase of any Class B Limited Membership Interests to be purchased except as to a Member to whom the Company has failed to give such notice or except as to a Member to whom notice was defective. A Class B Purchase Notice will be sent to each Member whose Class B Limited Membership Interests are being called for purchase at such Member’s address as it appears in the Membership Registry. Each Class B Purchase Notice will state: (i) the applicable Class B Purchase Date; (ii) the applicable Class B Purchase Price as determined under Section 11.9(c); and (iii) the place or places where certificates, if any, for the Membership Interests are to be surrendered for payment of the Class B Purchase Price.

     (f) Treatment as Purchase Under Section 741. The Class B Limited Members agree to treat the Transfer of the Class A Limited Membership Interests to the Managing Member pursuant to this Section 11.9 as a purchase and sale under Code Section 741 and not as a retirement under Code Section 736.

     11.10 Form and Transfers of Class B Limited Membership Interests

     (a) The Series B-1 Preferred Certificates and Series B-2 Preferred Certificates (except with respect to any Class B Limited Membership Interests held by GMI or one of its affiliates,

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which shall not be certificated) shall be issued substantially in the form set forth in Exhibits H and I, respectively. No such certificate shall be valid for any purpose unless it shall have been executed on behalf of the Company by the manual or facsimile signature of an officer of the Company.

     (b) All requests for removal of legends on definitive certificates indicating restrictions on Transfer shall be accompanied by an opinion of counsel addressed to the Transfer Agent stating that such legends may be removed and all such requests for removal of legends on definitive certificates indicating restrictions on Transfer shall be accompanied by an opinion of counsel addressed to the Transfer Agent stating that such legends may be removed and the Series B-1 Preferred Certificates represented thereby freely Transferred in compliance with the federal securities laws. No legend may be removed without the consent of the Managing Member and the Required Class A Limited Members.

     (c) The Transfer Agent shall issue and register replacement certificates for certificates represented to have been lost, stolen or destroyed upon the fulfillment of such requirements as shall be deemed appropriate by the Transfer Agent, subject at all times to provisions of law. The Transfer Agent may issue new certificates in exchange for and upon the cancellation of mutilated certificates. Any request by a holder to the Transfer Agent to issue a replacement or new certificate pursuant to this Section shall be deemed to be a representation and warranty by the holder to the Transfer Agent that such issuance will comply with such provisions of law.

     (d) Any Transfer shall be automatically void if such Transfer was effected through an established securities market (within the meaning of Treasury Regulation § 1.7704-1(b)).

SECTION 12.

POWER OF ATTORNEY

     12.1 Managing Member as Attorney-In-Fact.

     Each Limited Member hereby makes, constitutes, and appoints the Managing Member, each successor Managing Member, and the Liquidator, severally, with full power of substitution and resubstitution, its true and lawful attorney-in-fact for it and in its name, place, and stead and for its use and benefit, to sign, execute, certify, acknowledge, swear to, file, publish, and record (i) all certificates of formation, amended name or similar certificates, and other certificates and instruments (including counterparts of this Agreement) which the Managing Member or Liquidator may deem necessary to be filed by the Company under the laws of the State of Delaware or any other jurisdiction in which the Company is doing or intends to do business; (ii) any and all amendments, restatements, or changes to this Agreement and the instruments described in clause (i), as now or hereafter amended, which the Managing Member may deem necessary to effect a change or modification of the Company in accordance with the terms of this Agreement, including amendments, restatements, or changes to reflect (A) the admission of any additional or substituted Member and (B) the disposition by any Member of its Membership Interests; (iii) all certificates of cancellation and other instruments which the Liquidator reasonably deems necessary or appropriate to effect the dissolution and termination of the Company pursuant to the terms of this Agreement; and (iv) any other instrument which is now or

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may hereafter be required by law to be filed on behalf of the Company to carry out fully the provisions of this Agreement in accordance with its terms; provided that nothing in this Section 12.1 shall authorize such attorney-in-fact to take any action that could reasonably be anticipated to have an adverse effect on a Limited Member or the Company.

     12.2 Nature of Special Power.

     The power of attorney granted to the Managing Member pursuant to this Section 12:

     (a) Is a special power of attorney coupled with an interest and is irrevocable; provided, however, that, with respect to the power of attorney granted to the Managing Member, such power shall terminate upon the appointment of the Liquidator;

     (b) May be exercised by such attorney-in-fact with the single signature of any such attorney-in-fact acting as attorney-in-fact for such Members; and

     (c) Shall survive and not be affected by the subsequent Bankruptcy, insolvency, dissolution, or cessation of existence of a Limited Member and shall survive the delivery of an assignment by a Limited Member of the whole or a portion of its Membership Interests (except that where the assignment is of such Limited Member’s entire Membership Interests and the assignee, with the affirmative written consent of the other Members, is admitted as a substituted Limited Member, the power of attorney shall survive the delivery of such assignment for the sole purpose of enabling any such attorney-in-fact to effect such substitution) and shall extend to such Limited Member’s or assignee’s successors and assigns.

SECTION 13.

DISSOLUTION AND WINDING UP

     13.1 Liquidating Events.

     (a) The Company shall dissolve and shall commence winding up and liquidation upon the first to occur of any of the following (each, a “Liquidating Event”):

          (i) The date upon which a Liquidation Notice becomes effective to cause a Class A Notice Event to become a Liquidating Event;

          (ii) The Bankruptcy of the Company or any of its Subsidiaries or any GMI Member then owning an Interest hereunder;

          (iii) The unanimous vote or consent of the Members to dissolve, wind up, and liquidate the Company;

          (iv) In the event the Managing Member has elected pursuant to the Class A Purchase Option to purchase all of the Class A Limited Membership Interests, (x) the failure of the Managing Member, or its designee, to pay the Class A Purchase Price in Cash in the amount and at such times as are required pursuant to Section 11.8 or (y) the occurrence of any GMI Event;

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          (v) The happening of any other event which makes it unlawful, impossible, or impractical to carry on the business of the Company;

          (vi) GMCO, another consolidated Subsidiary of GMI, or another Managing Member approved by the Limited Members ceases to be the Managing Member; or

          (vii) The entry of a decree of judicial dissolution of the Company under Section 18-802 of the Act.

     The Members hereby agree that, notwithstanding any provision of the Act, the Company shall not dissolve prior to the occurrence of a Liquidating Event.

     (b) Reconstitution. If it is determined, by a court of competent jurisdiction, that the Company has dissolved prior to the occurrence of a Liquidating Event, then within an additional ninety (90) days after such determination (the “Reconstitution Period”), all of the Members may elect to reconstitute the Company and continue its business on the same terms and conditions set forth in this Agreement by forming a new limited liability company on terms identical to those set forth in this Agreement. Unless such an election is made within the Reconstitution Period, the Company shall dissolve and wind up its affairs in accordance with Section 13.2. If such an election is made within the Reconstitution Period, then:

          (i) The reconstituted limited liability company shall continue until the occurrence of a Liquidating Event as provided in Section 13.1(a); and

          (ii) Unless otherwise agreed to by all of the Members, the Certificate of Formation, and this Agreement shall, subject to any requirement under the Act to file a new certificate of formation, automatically constitute the certificate of formation and agreement of such new Company. All of the assets and liabilities of the dissolved Company shall be deemed to have been automatically assigned, assumed, conveyed, and transferred to the new Company. No bond, collateral, assumption, or release of any Member’s or the Company’s liabilities shall be required; provided that the right of the Members to select successor managers and to reconstitute and continue the business of the Company shall not exist and may not be exercised unless the Company has received an opinion of counsel that the exercise of the right would not result in the loss of limited liability of any Member and neither the Company nor the reconstituted limited liability company would cease to be treated as a partnership for federal income tax purposes upon the exercise of such right to continue.

     (c) Notwithstanding any other provision of this Agreement, the Bankruptcy of a Member shall not cause such Member to cease to be a Member.

     13.2 Winding Up.

     Upon the occurrence of a (i) Liquidating Event or (ii) the determination by a court of competent jurisdiction that the Company has dissolved prior to the occurrence of a Liquidating Event (unless the Company is reconstituted pursuant to Section 13.1(b)), the Company shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Members, and no Member shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the

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Company’s business and affairs; provided that, to the extent not inconsistent with the foregoing, all covenants contained in this Agreement and obligations provided for in this Agreement shall continue to be fully binding upon the Members until such time as the Property has been distributed pursuant to this Section 13.2 and the Certificate of Formation has been canceled pursuant to the Act. The Liquidator shall be responsible for overseeing the winding up and dissolution of the Company, which winding up and dissolution shall be completed within ninety (90) days of the occurrence of the Liquidating Event and within ninety (90) days after the last day on which the Company may be reconstituted pursuant to Section 13.1(b). The Liquidator shall take full account of the Company’s liabilities and Property and shall cause the Property or the proceeds from the sale thereof (as determined pursuant to Section 13.11), to the extent sufficient therefor, to be applied and distributed, to the maximum extent permitted by law, in the following order:

     (a) First, to creditors in satisfaction of all of the Company’s debts and other liabilities (whether by payment or the making of reasonable provision for payment thereof to the extent required by Section 18-804 of the Act), other than the liabilities for distribution to Members under Section 18-601 or 18-604 of the Act;

     (b) Second, to the Members and former Members of the Company in satisfaction of liabilities for distribution under Sections 18-601 or 18-604 of the Act; and

     (c) Third, the balance, if any, to the Members in accordance with the positive balance in their Capital Accounts, after giving effect to a Mark-to-Market Valuation pursuant to Section 13.11 and a determination and allocation of all Profits, Losses, and other items of the Company’s income, gain, loss or deduction pursuant to Section 3.

     No Member shall receive additional compensation for any services performed pursuant to this Section 13.

     13.3 Compliance With Certain Requirements of Regulations; Deficit Capital Accounts.

     In the event the Company is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Section 13 to the Members who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Member has a deficit balance in such Member’s Capital Account, determined after debiting and crediting such Member’s Capital Account for all income, gain, and loss allocations and distributions occurring prior to dissolution, such Member shall have no obligation to make any contribution to the capital of the Company with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or to any other Person for any purpose whatsoever. In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise be made to the Members pursuant to this Section 13 may be:

     (a) Distributed to a trust established for the benefit of the Members for the purposes of liquidating Company assets, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company. The assets of any such trust shall be distributed to the Members from time to time, in the reasonable discretion of the

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Liquidator, in the same proportions as the amount distributed to such trust by the Company would otherwise have been distributed to the Members pursuant to Section 13.2; or

     (b) Withheld to provide a reasonable reserve for Company liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Company; provided that such withheld amounts shall be distributed to the Members as soon as practicable.

     13.4 Deemed Contribution and Distribution.

     Notwithstanding any other provision of this Section 13, in the event the Company is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Property shall not be liquidated, the Company’s liabilities shall not be paid or discharged, and the Company’s affairs shall not be wound up. Instead, solely for federal income tax purposes, the Company shall be deemed to have contributed all its Property and liabilities to a new limited liability company in exchange for an interest in such new company and, immediately thereafter, the Company will be deemed to liquidate by distributing interests in the new company to the Members.

     13.5 Rights of Members.

     Except as otherwise provided in this Agreement, each Member shall look solely to the Property of the Company for the return of its Capital Contributions and has no right or power to demand or receive Property other than Cash from the Company. If the assets of the Company remaining after payment or discharge of the Indebtedness or liabilities of the Company are insufficient to return such Capital Contributions, the Members shall have no recourse against the Company, the Managing Member, or any other Member, except as expressly set forth in Section 5.8 or in any other Transaction Document.

     13.6 Notice of Dissolution.

     In the event a Liquidating Event occurs or an event occurs that would, but for provisions of Section 13.1, result in a dissolution of the Company, the Managing Member shall, within thirty (30) days thereafter, provide written notice thereof to each of the Members and to all other parties with whom the Company regularly conducts business (as determined in the discretion of the Managing Member) and shall publish notice thereof in a newspaper of general circulation in each place in which the Company regularly conducts business (as determined in the discretion of the Managing Member).

     13.7 Guaranteed Payments During Period of Liquidation.

     During the period commencing on the first day of the Fiscal Quarter during which a Liquidating Event occurs and ending on the date on which all of the assets of the Company have been distributed to the Members pursuant to Section 13.2 (the “Liquidation Period”), the Company shall pay to each Limited Member no less frequently than on each Liquidation Period Guaranteed Payment Date, Cash in an amount (the “Liquidation Period Guaranteed Payment”) equal to the Limited Member Preferred Return on such Limited Member’s Preferred Return Capital determined as of (i) with respect to the Class A Limited Members, the last Class A

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Distribution Date occurring prior to the Liquidation Period, and (ii) with respect to the Class B Limited Members, the last Class B Distribution Date occurring prior to the Liquidation Period, in each case after giving effect to any distributions made pursuant to Section 4.1 on such Class A Distribution Date or Class B Distribution Date. For purposes of this Section 13.7, the Limited Member Preferred Return shall be determined as if the last Class A Distribution Date and Class B Distribution Date occurring prior to the Liquidation Period and each Liquidation Period Guaranteed Payment Date constituted a Class A Distribution Date or Class B Distribution Date, as the case may be.

     13.8 Allocations and Distributions During Period of Liquidation.

     During the period commencing on the first day of the Fiscal Quarter during which a Liquidating Event occurs and ending on the date on which all of the assets of the Company have been distributed to the Members pursuant to Section 13.2, the Members shall continue to share Profits, Losses, gain, loss, and other items of Company income, gain, loss, or deduction in the manner provided in Section 3 (other than pursuant to Sections 3.1(a) and 3.1(c)) but no distributions shall be made pursuant to Section 4.

     13.9 Character of Liquidating Distributions.

     (a) All payments made in liquidation of the Membership Interests of a Member in the Company shall be made in exchange for the Membership Interests of such Member in the Company Property pursuant to Code Section 736(b)(1), including the interest of such Member in Company goodwill.

     (b) For purposes of making distributions required by Section 13.2, the Liquidator may determine whether to distribute all or any portion of the Property in-kind or to sell all or any portion of such assets and distribute the proceeds therefrom; provided that the Liquidator shall not distribute Property other than Cash to a Limited Member without such Limited Member’s consent and the Liquidator shall be required to reduce Property to Cash to the extent necessary to make distributions in Cash to the Limited Member pursuant to Section 13.2.

     13.10 The Liquidator.

     (a) The “Liquidator” shall be the Managing Member or any other Person appointed by the Managing Member, unless (i) such liquidation arises as a result of (1) the Bankruptcy of the Company or the Managing Member, (2) a Liquidating Event described in clauses 13.1(a)(iv) or (vi) or (3) a Class A Notice Event described in clause (c), (d), or (f) of Section 14.1 occurs, (ii) final liquidating distributions have not been made by the ninetieth (90^th) day following the date of the Liquidating Event, or (iii) a GMI Event has occurred and is continuing, in which case, the holder or holders of more than 50% of the Class A Limited Membership Interests may appoint the Liquidator.

     (b) The Company is authorized to pay such reasonable compensation to the Liquidator for its services performed pursuant to this Section 13 as shall be agreed upon by the Liquidator and the Limited Members and to reimburse the Liquidator for its reasonable costs and Expenses incurred in performing those services.

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     13.11 Mark-to-Market Methodology.

     (a) For purposes of determining the amount of any adjustment to the Gross Asset Values of the Company’s Property pursuant to paragraphs (ii) or (iii) of the definition of “Gross Asset Value” in Section 1.10, the values of each of the Company’s Permitted Assets must be determined (such value being the “Mark-to-Market Value,” and any calculation of such Mark-to-Market Value, the “Mark-to-Market Valuation”). The Gross Asset Value and Mark-to-Market Value of the Company’s Permitted Assets shall be determined in accordance with the Valuation Methodology described on Schedule D hereto.

     (b) In the event that it is necessary to determine the Mark-to-Market Value of the Company’s Permitted Assets pursuant to this Section 13.11, such Mark-to-Market Valuation shall be performed by any nationally recognized independent accounting firm or other appraiser of national standing selected by the Managing Member and, if RBDB retains any of its Class A Limited Membership Interests, approved by RBDB; provided that any appraiser appointed hereunder shall be disinterested and qualified to appraise property similar to the Permitted Assets being appraised; and provided, further, that, solely for purposes of determining compliance with the Portfolio Requirements, the Mark-to-Market Valuation of all Permitted Loans that are obligations of any GMI Entity may be performed by the Managing Member. In the event the parties cannot agree on one appraiser, then the Managing Member shall select an appraiser (“Appraiser 1”) and the Required Class A Limited Members shall jointly select an appraiser (“Appraiser 2”) and the two appraisers shall jointly select a third appraiser (“Appraiser 3”). The value arrived at by appraisal shall be determined by Appraiser 1 and Appraiser 2 submitting their separate appraisals to Appraiser 3. Appraiser 3 shall independently review the appraisals and shall select one appraisal between the two appraisals submitted as the appraisal that, in the opinion of Appraisal 3, best represents the value of the Permitted Assets. Where the appraisal process provided by this Section 13.11 is invoked, the parties and the appraisers shall all act promptly and diligently so as to determine the value of the Permitted Assets in a commercially reasonable period. The cost of all appraisals shall be borne by the Company.

     (c) The Gross Asset Value and Mark-to-Market Value of all Permitted Loans owned by the Company or any of its Subsidiaries that are obligations of any GMI Entity shall be equal to their stated principal amount; provided that, solely for the purposes of determining compliance with the Portfolio Requirements, if there has occurred and is continuing any GMI Event, the Gross Asset Value and Mark-to-Market Value of such Permitted Loans shall be equal to zero.

     (d) The Gross Asset Value and Mark-to-Market Value of any Cash Equivalents shall be determined by reference to their face value, less unamortized discount, if any, and plus unamortized premium, if any.

     (e) Except as provided above, the Gross Asset Value and Mark-to-Market Value of any A-Rated Securities shall be determined by reference to their average of the bid-side, market prices quoted by three investment or commercial banks of recognized standing.

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SECTION 14.

CLASS A NOTICE EVENTS; PURCHASE OPTIONS

     14.1 Class A Notice Events.

     In the event that any of the following events (“Class A Notice Events") shall occur, the Class A Limited Members shall have the rights described in Section 14.2; provided that with respect to a Class A Notice Event pursuant to Section 14.1(h), only the holders of the Class A Limited Membership Interests other than GMI or any of its Affiliates shall have such rights described in Section 14.2:

     (a) The failure of the Company to distribute to the Class A Limited Members in immediately available funds on the last Business Day of each Fiscal Quarter an amount equal to the cumulative Class A Limited Member Preferred Return and such failure continues for a period of three (3) Business Days;

     (b) The failure of the Company to comply with the Class A Portfolio Requirements at any time and solely with respect to a failure to comply with clause 5.9(a)(iii) or clause 5.9(a)(iv)) such failure continues unabated for five (5) Business Days;

     (c) The failure of the Company to dispose of any asset that ceases to be a Permitted Asset within five (5) Business Days after the date on which such asset ceases to be a Permitted Asset;

     (d) The Managing Member or any Affiliate of the Managing Member fails to (i) be in compliance with its obligations to deal with the Company on an arm’s length basis and as a separate entity, (ii) observe or perform any covenant, condition, or agreement contained in Sections 5.2(b), 5.2(c), 5.2(d), and 5.3 of this Agreement, or (iii) observe or perform any other covenant, condition, or agreement contained in the Agreement or any other Transaction Document and such failure continues for a period of ten (10) Business Days after notice from either Limited Member;

     (e) Any representation or warranty made or deemed made by the Managing Member, the Company, or any of its Subsidiaries, GMI, or any Affiliate of GMI under or in connection with this Agreement or any Transaction Document shall prove to have been incorrect in any material respect when made or deemed made except for the covenant in Section 8.3;

     (f) The failure of the Managing Member, in the event that there is a default, event of default or any similar condition or event (however described) with respect to any GMI Entity under any Transaction Document to which any GMI Entity is a party to give prompt notice thereof to the Limited Members, to declare due and payable and collect any amount owing under the relevant Transaction Document (subject to the satisfaction of any applicable notice requirement and the lapse of any grace period) or to preserve, protect and enforce the Company’s rights with respect to such Transaction Document;

     (g) One or more judgments for the payment of money in an aggregate amount in excess of $1,000,000 shall be rendered against the Company or any of its Subsidiaries or any combination thereof and the same shall remain undischarged for a period of thirty (30)

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consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach to or levy upon any assets of the Company or any of its Subsidiaries to enforce any such judgment;

     (h) The senior unsecured debt rating of GMI falls below either Baa3 by Moody’s or BBB- by S&P;

     (i) A Failed Class A Mandatory Remarketing shall have occurred as a result of any failure of the Company to completely perform its obligations under the Class A Remarketing Agreement; or

     (j) A Class A Limited Member is not provided a reasonable opportunity to enter a Bid in connection with a Class A Mandatory Remarketing.

     The Managing Member shall be obligated to notify the Limited Members of the occurrence of any Class A Notice Event when an officer of the Managing Member has actual knowledge of such occurrence.

     14.2 Liquidation Notice.

     At any time on or after the occurrence of a Class A Notice Event, the Required Class A Limited Members may elect to cause such Class A Notice Event to result in a Liquidating Event by delivering to the Managing Member a notice (a “Liquidation Notice”) of such election; provided that: (i) such Class A Notice Event shall not result in a Liquidating Event until the expiration of ten (10) days following such delivery, (ii) the Required Class A Limited Members may rescind such Liquidation Notice by delivering to the Managing Member a notice prior to such tenth (10th) day, and (iii) a Liquidation Notice automatically will be deemed rescinded upon the irrevocable election within such ten (10) day period by the Managing Member or its designee pursuant to the Class A Purchase Option to purchase all of the Class A Limited Membership Interests.

SECTION 15.

MISCELLANEOUS

     15.1 Notices.

     Any notice, payment, demand, or communication required or permitted to be given by any provision of this Agreement shall be in writing and shall be deemed to have been delivered, given, and received for all purposes (i) as of the date so delivered, if delivered personally to the Person or to an officer of the Person to whom the same is directed or (ii) when the same is actually received, if sent either by overnight courier, registered or certified mail, postage and charges prepaid, or by facsimile, if such facsimile is followed by a hard copy of the facsimile communication sent promptly thereafter by overnight courier, charges prepaid and addressed as follows, or to such other address as such Person may from time to time specify by notice to the Members:

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     (a) If to the Company, to the principal place of business address set forth in Section 1.4; and

     (b) If to a Member, to the address set forth in Section 2.1 or, in the case of a Permitted Transferee who becomes a Member, the address specified by such Member.

     15.2 Binding Effect.

     Except as otherwise provided in this Agreement, every covenant, term, and provision of this Agreement shall be binding upon and inure to the benefit of the Members and their respective successors, transferees, and assigns.

     15.3 Construction.

     It is the intent of the parties hereto that every covenant, term, and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any Member. The terms of this Agreement are intended to embody the economic relationship among the Members and shall not be subject to modification by, or be conformed with, any actions by the Internal Revenue Service except as this Agreement may be explicitly so amended and except as may relate specifically to the filing of tax returns.

     15.4 Time.

     In computing any period of time pursuant to this Agreement, the day of the act, event, or default from which the designated period of time begins to run shall be included.

     15.5 Headings.

     Section and other headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision hereof.

     15.6 Severability.

     Except as otherwise provided in the succeeding sentence, every provision of this Agreement is intended to be severable, and, if any term or provision of this Agreement is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity or legality of the remainder of this Agreement. The preceding sentence of this Section 15.6 shall be of no force or effect if the consequence of enforcing the remainder of this Agreement without such illegal or invalid term or provision would be to cause any Member to lose the material benefit of its economic bargain.

     15.7 Incorporation by Reference.

     No exhibit, schedule, or other appendix attached to this Agreement and referred to herein is incorporated in this Agreement by reference unless this Agreement expressly otherwise provides.

126

     15.8 Governing Law.

     The laws of the State of Delaware, without application of the conflicts of laws principles thereof, shall govern the validity of this Agreement, the construction of its terms, and the interpretation of the rights and duties arising hereunder.

     15.9 Consent to Jurisdiction.

     Each Member (i) irrevocably submits to the non-exclusive jurisdiction of any New York State or Delaware State court or Federal court sitting in New York County or Wilmington, Delaware, in any action arising out of this Agreement, (ii) agrees that all claims in such action may be decided in such court, (iii) waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum, and (iv) consents, to the fullest extent it may effectively do so, to the service of process by mail in accordance with Section 15.1. A final judgment in any such action shall be conclusive and may be enforced in other jurisdictions. Nothing herein shall affect the right of any party to serve legal process in any manner permitted by law or affect its right to bring any action in any other court.

     15.10 WAIVER OF JURY TRIAL.

     EACH OF THE MEMBERS IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY AND ALL RIGHTS TO IMMUNITY BY SOVEREIGNTY OR OTHERWISE IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

     15.11 Counterpart Execution.

     This Agreement may be executed in any number of counterparts with the same effect as if all of the Members had signed the same document. All counterparts shall be construed together and shall constitute one agreement.

     15.12 Specific Performance.

     Each Member agrees with the other Members that the other Members would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that monetary damages would not provide an adequate remedy in such event. Accordingly, it is agreed that, in addition to any other remedy to which the nonbreaching Members may be entitled, at law or in equity, the nonbreaching Members shall be entitled to injunctive relief to prevent breaches of the provisions of this Agreement and specifically to enforce the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction thereof.

     15.13 No Material Impairment.

     No Member shall take any action that could impair materially such Member’s ability to perform its duties and obligations under this Agreement.

127

     15.14 Entire Agreement.

     This Agreement and the Transaction Documents and the Annexes, Exhibits and Schedules hereto and thereto constitute the entire agreement among the parties hereto and their respective Affiliates and contain all of the agreements among such parties with respect to the subject matter hereof and thereof. This Agreement and the Transaction Documents and the Annexes, Exhibits and Schedules hereto and thereto supersede any and all other agreements, either oral or written, between such parties with respect to the subject matter hereof and thereof.

     15.15 No Third Party Beneficiaries.

     Except as otherwise provided herein (including, without limitation, Section 10.1(c)), no Person other than a party hereto shall have any rights or remedies under this Agreement. Without limiting the foregoing, any obligations of the Members to satisfy their respective obligations to make Capital Contributions under this Agreement is an agreement only among the Members and no other Person shall have any rights to enforce such obligations.

     15.16 Waiver.

     Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement if, as to any party, it is authorized in writing by an authorized representative of such party. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.

[Signature Page Follows]

128

     IN WITNESS WHEREOF, the parties have executed and entered into this Agreement of the Company as of the day first above set forth.

MANAGING MEMBER: GM CEREALS OPERATIONS, INC., as Managing Member
By:	/s/ Daralyn K. Peifer
	Name:	Daralyn K. Peifer
	Title:	Treasurer
CLASS A LIMITED MEMBER: RBDB, INC., as a Class A Limited Member
By:	/s/ Andrew Sherman
	Name:	Andrew Sherman
	Title:	Assistant Secretary
By:	/s/ Kevin Moclair
	Name:	Kevin Moclair
	Title:	Assistant Treasurer
CLASS B LIMITED MEMBERS: GENERAL MILLS SALES, INC., as a Class B Limited Member
By:	/s/ Daralyn K. Peifer
	Name:	Daralyn K. Peifer
	Title:	Treasurer
GM CEREALS HOLDINGS, INC., as a Class B Limited Member
By:	/s/ Daralyn K. Peifer
	Name:	Daralyn K. Peifer
	Title:	Treasurer

EX-12.1

EXHIBIT 12.1

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

	Fiscal Year
In Millions, Except Ratios	2008			2007		2006		2005		2004
Earnings before income taxes and after-tax earnings from joint ventures	$	1,806.1		$	1,631.3	$	1,559.4	$	1,807.6	$	1,502.3
Distributed income of equity investees		108.7			45.2		77.4		83.0		60.0
Plus: Fixed charges(1)		494.6			496.8		462.8		524.1		569.0
Plus: amortization of capitalized interest, net of interest capitalized		(2.0	)		–		1.7		0.9		(4.6	)
Earnings available to cover fixed charges	$	2,407.4		$	2,173.3	$	2,101.3	$	2,415.6	$	2,126.7
Ratio of earnings to fixed charges		4.87			4.37		4.54		4.61		3.74
(1) Fixed charges:
Interest and minority interest expense	$	454.0		$	460.4	$	427.5	$	488.3	$	537.0
Rentals (1/3)		40.6			36.4		35.3		35.8		32.0
Total fixed charges	$	494.6		$	496.8	$	462.8	$	524.1	$	569.0

For purposes of computing the ratio of earnings to fixed charges, earnings represent earnings before income taxes and after-tax earnings of joint ventures, distributed income of equity investees, fixed charges, and amortization of capitalized interest, net of interest capitalized. Fixed charges represent gross interest expense (excluding interest on taxes) and subsidiary preferred distributions to minority interest holders, plus one-third (the proportion deemed representative of the interest factor) of rent expense.

EX-21.1

Exhibit 21.1

List of Subsidiaries of the Registrant

Company Name	Jurisdiction
AESR, LLC	Delaware
BOURNAZI PASTRIES S.A.	Greece
CEREAL PARTNERS FRANCE B.V.	Netherlands
CEREALES PARTNERS COLOMBIA LTDA.	Colombia
CEREALES PARTNERS L.L.C. — UTE	Argentina
CEREALES PARTNERS LATIN AMERICA LLC	Delaware
COLOMBO, INC.	Delaware
CROISSANT KING PTY LIMITED	Australia
D.H. AUSTRAL (URUGUAY) SOCIEDAD ANONIMA	Uruguay
ELYSEES CONSULT SAS	France
GARDETTO’S BAKERY, INC.	Delaware
GCF SERVICIOS DE MEXICO S. DE R.L. DE C.V.	Mexico
GENERAL MILLS (GIBRALTAR) LIMITED	Gibraltar
GENERAL MILLS (SUISSE) SVE SARL	Switzerland
GENERAL MILLS ARGENTINA L.S., LLC	Delaware
GENERAL MILLS ARGENTINA S.A.	Argentina
GENERAL MILLS ASIA PACIFIC LIMITED	Hong Kong
GENERAL MILLS ASIA PTE. LTD.	Singapore
GENERAL MILLS AUSTRALIA PTY LTD	Australia
GENERAL MILLS BAKERY & FOOD SERVICE PTY LTD	Australia
GENERAL MILLS BAKERY AND FOODSERVICE MANUFACTURING PTY LIMITED	Australia
GENERAL MILLS BELGIUM, SNC	Belgium
GENERAL MILLS BERWICK LIMITED	Scotland
GENERAL MILLS BRASIL LTDA	Brazil
GENERAL MILLS CANADA B.V.	Netherlands
GENERAL MILLS CANADA CORPORATION	Canada
GENERAL MILLS CAPITAL, INC.	Nevada

Company Name	Jurisdiction
GENERAL MILLS CEREALS HOLDING (AUSTRALIA) PTY LIMITED	Australia
GENERAL MILLS CEREALS PROPERTIES, LLC	Delaware
GENERAL MILLS CEREALS, LLC	Delaware
GENERAL MILLS CHINA HOLDINGS LIMITED	Mauritius
GENERAL MILLS CHINA LIMITED	Hong Kong
GENERAL MILLS COLOMBIA LTDA	Colombia
GENERAL MILLS CONTINENTAL SA	Chile
GENERAL MILLS CONTINENTAL, INC.	Delaware
GENERAL MILLS DE MEXICO, S. DE R.L. DE C.V.	Mexico
GENERAL MILLS DE VENEZUELA, C.A.	Venezuela
GENERAL MILLS DIRECT MARKETING, INC.	Delaware
GENERAL MILLS DL GP	Delaware
GENERAL MILLS EASTERN EUROPE s.r.o.	Czech Republic
GENERAL MILLS ESPANA B.V.	Netherlands
GENERAL MILLS FINANCE, INC.	Delaware
GENERAL MILLS FINCO, LIMITED	Bermuda
GENERAL MILLS FOODS (NANJING) CO. LTD.	China
GENERAL MILLS FOODS ASIA LIMITED	Hong Kong
GENERAL MILLS FOODS, INC.	Philippines
GENERAL MILLS FOUNDATION	Minnesota
GENERAL MILLS FRANCE (SAS)	France
GENERAL MILLS FROZEN FOODS (GUANGZHOU) LIMITED	Hong Kong
GENERAL MILLS FROZEN FOODS (SHANGHAI) LIMITED	Hong Kong
GENERAL MILLS GLOBAL FINANCE LTD.	Bermuda
GENERAL MILLS GLOBAL HOLDINGS ONE GP	Bermuda
GENERAL MILLS GLOBAL HOLDINGS TWO GP	Bermuda
GENERAL MILLS GMBH	Germany
GENERAL MILLS GUAM, INC.	Guam
GENERAL MILLS HD JAPAN B.V.	Netherlands
GENERAL MILLS HELLAS S.A.	Greece
GENERAL MILLS HH LLC	Delaware
GENERAL MILLS HOLDING (AUSTRALIA) PTY LIMITED	Australia
GENERAL MILLS HOLDING (FRANCE) SAS	France

Company Name	Jurisdiction
GENERAL MILLS HOLDING (SPAIN) ETVE, S.L.	Spain
GENERAL MILLS HOLDING (U.K.) LIMITED	United Kingdom
GENERAL MILLS HOLDING A (NETHERLANDS) B.V.	Netherlands
GENERAL MILLS HOLDING B (NETHERLANDS) B.V.	Netherlands
GENERAL MILLS HOLDING B.V.	Netherlands
GENERAL MILLS HOLDING ONE (GERMANY) GmbH	Germany
GENERAL MILLS HOLLAND B.V.	Netherlands
GENERAL MILLS HONG KONG LIMITED	Hong Kong
GENERAL MILLS IBERICA, S.A. UNIPERSONAL	Spain
GENERAL MILLS ICF SARL	Switzerland
GENERAL MILLS INDIA PRIVATE LIMITED	India
GENERAL MILLS INTERNATIONAL (FRANCE) SAS	France
GENERAL MILLS INTERNATIONAL A, INC.	Delaware
GENERAL MILLS INTERNATIONAL B, INC.	Delaware
GENERAL MILLS INTERNATIONAL BUSINESSES TWO, INC.	Delaware
GENERAL MILLS INTERNATIONAL BUSINESSES, INC.	Delaware
GENERAL MILLS INTERNATIONAL FINANCE, LLC	Delaware
GENERAL MILLS INTERNATIONAL HOLDINGS, LLC	Delaware
GENERAL MILLS INTERNATIONAL LIMITED	Delaware
GENERAL MILLS INTERNATIONAL SARL	Switzerland
GENERAL MILLS INTERNATIONAL Y COMPANIA S. EN N.C. DE C.V.	Mexico
GENERAL MILLS IP HOLDINGS I, LLC	Delaware
GENERAL MILLS IP HOLDINGS II, LLC	Delaware
GENERAL MILLS ISRAEL LTD	Israel
GENERAL MILLS ITALIA SRL	Italy
GENERAL MILLS KOREA CO., LTD.	Korea
GENERAL MILLS LANDES (SAS)	France
GENERAL MILLS LEBANON S.A.L.	Lebanon
GENERAL MILLS LUXEMBOURG S.A.R.L.	Luxembourg
GENERAL MILLS MAARSSEN HOLDING, INC.	Delaware
GENERAL MILLS MAGHREB SARL	Morocco
GENERAL MILLS MALAYSIA SDN. BHD.	Malaysia
GENERAL MILLS MANUFACTURING AUSTRALIA PTY LIMITED	Australia

Company Name	Jurisdiction
GENERAL MILLS MARKETING, INC.	Delaware
GENERAL MILLS MAURITIUS, INC.	Mauritius
GENERAL MILLS MIDDLE EAST & NORTH AFRICA FZE	United Arab Emirates
GENERAL MILLS MIDDLE EAST SAL	Lebanon
GENERAL MILLS MISSOURI, INC.	Minnesota
GENERAL MILLS N.A., N.V.	Netherlands Antilles
GENERAL MILLS NETHERLANDS B.V.	Netherlands
GENERAL MILLS NEW ZEALAND LIMITED	New Zealand
GENERAL MILLS NOVA SCOTIA COMPANY	Canada
GENERAL MILLS OPERATIONS, LLC	Delaware
GENERAL MILLS PENSION TRUSTEE LIMITED	United Kingdom
GENERAL MILLS PRODUCTS CORP.	Delaware
GENERAL MILLS PROPERTIES, INC.	New York
GENERAL MILLS RH, INC.	Delaware
GENERAL MILLS RIGHTS HOLDINGS, LLC	Delaware
GENERAL MILLS RUSSIA HOLDING, INC.	Delaware
GENERAL MILLS SALES, INC.	Delaware
GENERAL MILLS SAN ADRIAN, S.L. UNIPERSONAL	Spain
GENERAL MILLS SCANDINAVIA AB	Sweden
GENERAL MILLS SERVICES (UK) LTD.	United Kingdom
GENERAL MILLS SERVICES, INC.	Delaware
GENERAL MILLS SNACKS HOLDING B.V.	Netherlands
GENERAL MILLS SOUTH AFRICA (PROPRIETARY) LIMITED	South Africa
GENERAL MILLS SPECIALTY PRODUCTS, LLC	Delaware
GENERAL MILLS SWISS ONE GMBH	Switzerland
GENERAL MILLS SWISS TWO GMBH	Switzerland
GENERAL MILLS TAIWAN LIMITED	Taiwan
GENERAL MILLS TRADING (SHANGHAI) CO. LIMITED	China
GENERAL MILLS UK LIMITED	United Kingdom
GENERAL MILLS VENEZUELA B.V.	Netherlands
GENERAL MILLS VENTAS DE MEXICO, S. DE R.L. DE C.V.	Mexico
GENERAL MILLS, INC.	Delaware
GIGANTE VERDE, INC.	Delaware

Company Name	Jurisdiction
GIGANTE VERDE, S de RL de CV	Mexico
GLOBAL HOLDINGS ONE MANAGEMENT LLC	Delaware
GM CEREALS HOLDINGS, INC.	Delaware
GM CEREALS OPERATIONS, INC.	Delaware
GM CLASS B, INC.	Delaware
GMEAF SNC	France
GMSNACKS, SCA	France
GREEN GIANT ASIA PACIFIC LTD.	Taiwan
GREEN GIANT INTERNATIONAL, INC.	Minnesota
GUANGZHOU PILLSBURY V. PEARL FOODS CO., LTD.	China
HAAGEN-DAZS ARRAS SNC	France
HAAGEN-DAZS BELGIUM (S.A. N.V.)	Belgium
HAAGEN-DAZS INTERNATIONAL SHOPPE COMPANY, INC.	Minnesota
HAAGEN-DAZS NEDERLAND N.V.	Netherlands
HANGZHOU H.D. FOOD COMPANY LTD	China
HD CHINA B.V.	Netherlands
HD DISTRIBUTORS (THAILAND) CO., LTD.	Thailand
HD MARKETING & DISTRIBUTION PHILIPPINES, INC.	Philippines
HD MARKETING & DISTRIBUTION SDN. BHD.	Malaysia
HDIP, INC.	Delaware
INMOBILIARIA SELENE, S.A. DE C.V.	Mexico
INO FITA GMBH	Germany
KAMPOS ESTIASI S.A.	Greece
KIFISSIA PASTRIES S.A.	Greece
LA SALTENA S.A.	Argentina
MILLS ONLINE, INC.	Delaware
NORTHGATE PARTNERS L.L.C.	North Dakota
OLD EL PASO FOODS B.V.	Netherlands
PET INCORPORATED	Delaware
PILLSBURY FROZEN FOODS HOLDINGS (GUANGZHOU) LIMITED	Virgin Islands, British
PILLSBURY FROZEN FOODS HOLDINGS (SHANGHAI) LIMITED	Virgin Islands, British
PILLSBURY MEXICO, S.A. DE C.V.	Mexico
PILLSBURY PHILIPPINES INTERNATIONAL, INC.	Philippines

Company Name	Jurisdiction
PILLSBURY PUERTO RICO, INC.	Puerto Rico
PILLSBURY SHANGHAI FROZEN FOODS, LIMITED	China
PINEDALE HOLDINGS PTE LIMITED	Singapore
PINEDALE TRADING PTE LIMITED	Singapore
RDL COAL LLC	Delaware
SAXBY BROS LIMITED	England and Wales
SERETRAM (SAS)	France
SHANGHAI H.D. FOOD COMPANY LIMITED	China
SHANGHAI HAAGEN-DAZS FOOD TRADING CO., LTD.	China
SMALL PLANET FOODS, INC.	Washington
SUPER FITNESS INTERNATIONAL S.A.	Panama
SWEETGRASS GRAIN PARTNERSHIP	Montana
THE PILLSBURY COMPANY, LLC	Delaware
WASHBURN INVESTMENT OFFICE INCORPORATED	Delaware
WIN/WIN RADIO, INC.	Delaware
YOPLAIT USA, INC.	Delaware
JOINT VENTURES
C.P. HELLAS EEIG	Greece
C.P.A. CEREAL PARTNERS HANDELSGESELLSCHAFT m.b.H & Co. OHG	Austria
C.P.A. CEREAL PARTNERS HANDELSGESELLSCHAFT m.b.H.	Austria
C.P.D. CEREAL PARTNERS DEUTSCHLAND GmbH & Co. oHG	Germany
C.P.D. CEREAL PARTNERS DEUTSCHLAND VERWALTUNGSGESELLSCHAFT mbH	Germany
C.P.W. MEXICO S. de R.L. de C.V.	Mexico
CEREAL ASSOCIADOS PORTUGAL, A.E.I.E.	Portugal
CEREAL PARTNERS (MALAYSIA) SDN. BHD.	Malaysia
CEREAL PARTNERS (THAILAND) LIMITED	Thailand
CEREAL PARTNERS AUSTRALIA PTY LIMITED	Australia
CEREAL PARTNERS CZECH REPUBLIC, s.r.o.	Czech Republic
CEREAL PARTNERS ESPANA, A.E.I.E.	Spain
CEREAL PARTNERS FRANCE, SNC	France
CEREAL PARTNERS GIDA TICARET LIMITED SIRKETI	Turkey

Company Name	Jurisdiction
CEREAL PARTNERS HUNGARIA TRADING LIMITED LIABILITY COMPANY	Hungary
CEREAL PARTNERS LLC	Russia
CEREAL PARTNERS MEXICO, S.A. DE C.V.	Mexico
CEREAL PARTNERS POLAND TORUN-PACIFIC Sp. z.o.o.	Poland
CEREAL PARTNERS SLOVAK REPUBLIC, s.r.o.	Slovakia
CEREAL PARTNERS TRADING, LLC	Russia
CEREAL PARTNERS U.K.	United Kingdom
CEREAL PARTNERS VENEZUELA	Venezuela
CEREALES C.P.W. BOLIVIA S.R.L.	Bolivia
CEREALES C.P.W. CHILE LIMITADA (SRL)	Chile
CEREALES CPW PERU LIMITADA	Peru
CP COLOMBIA ACP	Colombia
CP MIDDLE EAST FZCO	United Arab Emirates
CP SUISSE	Switzerland
CPW AUSTRALIA	Australia
CPW BRASIL LTDA.	Brazil
CPW DOMINICAN REPUBLIC	Dominican Republic
CPW ECUADOR	Ecuador
CPW HONG KONG LIMITED	Hong Kong
CPW NEW ZEALAND	New Zealand
CPW OPERATIONS S.A.R.L.	Switzerland
CPW PARAGUAY S.R.L.	Paraguay
CPW PHILIPPINES, INC.	Philippines
CPW ROMANIA	Romania
CPW S.A.	Switzerland
CPW SINGAPORE (PTE.) LTD.	Singapore
CPW TIANJIN LIMITED	China
CPW TRINIDAD AND TOBAGO, LTD.	Trinidad and Tobago
CPW URUGUAY S.A.	Uruguay
HAAGEN-DAZS JAPAN, INC.	Japan
HAAGEN-DAZS KOREA CO., LTD.	Korea
MESI FUEL STATION NO. 1, L.L.C.	Ohio
PT CEREAL PARTNERS INDONESIA	Indonesia

EX-23.1

EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
General Mills, Inc.:

We consent to the incorporation by reference in the Registration Statements (Nos. 33-75808, 333-102675, 333-116779, 333-145358, and 333-151048) on Form S-3 and Registration Statements (Nos. 2-13460, 2-50327, 2-53523, 2-95574, 33-27628, 33-32059, 33-50337, 333-13089, 333-32509, 333-65311, 333-65313, 333-90010, 333-90012, 333-102695, 333-109050, 333-131195, 333-139997, and 333-148820) on Form S-8 of General Mills, Inc. of our report dated July 10, 2008, relating to the consolidated balance sheets of General Mills, Inc. and subsidiaries as of May 25, 2008 and May 27, 2007 and the related consolidated statements of earnings, stockholders’ equity and comprehensive income, cash flows, and the financial statement schedule for each of the fiscal years in the three-year period ended May 25, 2008 and the effectiveness of internal control over financial reporting as of May 25, 2008 which report is included in the May 25, 2008 annual report on Form 10-K of General Mills, Inc.

Our report refers to the adoption of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” on May 28, 2007. It also refers to a change during fiscal 2007 in the classification of shipping costs, a change in the Company’s annual goodwill impairment assessment date to December 1, and the adoption of Statement of Financial Accounting Standards No. 123 (Revised), “Share-Based Payment” on May 29, 2006 and Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans an amendment of FASB Statements No. 87, 88, 106 and 132 (R)” on May 27, 2007.

/s/ KPMG LLP

Minneapolis, Minnesota
July 10, 2008

EX-31.1

EXHIBIT 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Kendall J. Powell, certify that:

1.	I have reviewed this annual report on Form 10-K of General Mills, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 10, 2008

/s/ Kendall J. Powell

Kendall J. Powell
Chairman of the Board and
Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Donal L. Mulligan, certify that:

1.	I have reviewed this annual report on Form 10-K of General Mills, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 10, 2008

/s/ Donal L. Mulligan

Donal L. Mulligan
Executive Vice President and
Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Kendall J. Powell, Chairman of the Board and Chief Executive Officer of General Mills, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1)	the Annual Report on Form 10-K of the Company for the fiscal year ended May 25, 2008 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 10, 2008

/s/ Kendall J. Powell

Kendall J. Powell
Chairman of the Board and
Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Donal L. Mulligan, Executive Vice President and Chief Financial Officer of General Mills, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1)	the Annual Report on Form 10-K of the Company for the fiscal year ended May 25, 2008 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 10, 2008

/s/ Donal L. Mulligan

Donal L. Mulligan
Executive Vice President and
Chief Financial Officer