<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 1998
REGISTRATION NO. 333-42075
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
KEEBLER FOODS COMPANY
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 2052 36-1894790
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or
organization)
</TABLE>
------------------------
677 LARCH AVENUE
ELMHURST, ILLINOIS 60126
(630) 833-2900
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
------------------------
THOMAS E. O'NEILL
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
KEEBLER FOODS COMPANY
677 LARCH AVENUE
ELMHURST, ILLINOIS 60126
(630) 833-2900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<C> <C>
Bruce A. Toth Stephen L. Burns
John L. MacCarthy Cravath, Swaine & Moore
Winston & Strawn Worldwide Plaza
35 West Wacker Drive 825 Eighth Avenue
Chicago, Illinois 60601 New York, New York 10019
(312) 558-5600 (212) 474-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an underwritten offering in the United States and Canada
(the "U.S. Prospectus"), and one to be used in a concurrent international
offering (the "International Prospectus"), of the Common Stock, par value $.01
per share, of Keebler Foods Company. The U.S. Prospectus follows immediately
after this Explanatory Note. After the U.S. Prospectus are the alternate pages
for the International Prospectus. A copy of the complete U.S. Prospectus and
International Prospectus in the exact forms in which they are to be used after
effectiveness will be filed with the Securities and Exchange Commission pursuant
to Rule 424(b) under the Securities Act.
<PAGE> 3
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE AMENDED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE RELATED REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR ANY APPLICABLE STATE SECURITIES
COMMISSION BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS
NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 23, 1998
11,465,000 Shares
KEEBLER FOODS COMPANY
KEEBLER LOGO
Common Stock
KEEBLER ELF
------------------
This is an initial public offering of shares of common stock of Keebler
Foods Company. Selling stockholders identified in this prospectus are offering
all of the shares to be sold in the offering. Keebler will not receive any of
the proceeds from the offering. After the offering, Flowers Industries, Inc.
will own approximately 55% of the outstanding shares of common stock. There is
currently no public market for the common stock. Keebler expects that the public
offering price in the offering will be between $21.00 and $24.00 per share.
Keebler will list the common stock on the New York Stock Exchange under the
symbol "KBL."
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to the Selling Stockholders........................ $ $
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SBC WARBURG DILLON READ INC.
Prospectus dated , 1998
<PAGE> 4
DESCRIPTION OF PICTURES APPEARING ON
INSIDE COVER PAGE:
ERNIE THE ELF
APPEARING BEFORE
A SAMPLE OF KEEBLER PRODUCTS
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 7
Forward-Looking Statements; Certain Defined Terms; Market
Share Data................................................ 10
Dividend Policy............................................. 11
Capitalization.............................................. 12
Unaudited Pro Forma Consolidated Financial Information...... 13
Selected Historical Financial Data.......................... 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 19
Business.................................................... 29
Management.................................................. 37
Principal and Selling Stockholders.......................... 45
Certain Related Transactions................................ 46
Description of Certain Indebtedness......................... 49
Description of Capital Stock................................ 51
Certain United States Federal Tax Considerations For
Non-U.S. Holders of Common Stock.......................... 53
Shares Eligible for Future Sale............................. 55
Underwriting................................................ 57
Notice to Canadian Residents................................ 59
Legal Matters............................................... 60
Experts..................................................... 61
Available Information....................................... 61
Index to Financial Statements............................... F-1
</TABLE>
------------------------------------
Keebler's principal executive offices are located at 677 Larch Avenue,
Elmhurst, Illinois 60126, (630) 833-2900.
Unless otherwise stated herein, all information contained in this
prospectus assumes no exercise of the over-allotment option to purchase up to
1,719,750 shares of common stock granted to the underwriters for the U.S.
portion of the offering (the "U.S. Underwriters") and the managers for the
international portion of the offering (the "Managers").
For the definition of certain capitalized terms and an explanation of
certain market share data, see "Forward-Looking Statements; Certain Defined
Terms; Market Share Data."
<PAGE> 6
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and may not contain all of the information that you
should consider before investing in the common stock. You should read the entire
prospectus carefully. Keebler's operations are comprised of the Keebler
business, which was acquired in January 1996, and the Sunshine business, which
was acquired in June 1996. Unless stated otherwise, market share information is
based on supermarket sales, measured in pounds, for the fifty-two week period
ended November 30, 1997 as reported by IRI. IRI is a company that provides
Keebler with sales data gathered from scanners in supermarkets with annual sales
of $2.0 million or more. Unless stated otherwise, this IRI data excludes sales
through channels other than supermarkets. Keebler has a lower market share in
these other channels. Therefore, the data may overstate Keebler's share of the
overall cookie and cracker market. All information in this prospectus has been
adjusted to reflect a 57.325-for-1 stock split of the common stock effected on
January 22, 1998.
KEEBLER
Keebler is the second largest cookie and cracker manufacturer in the United
States with annual net sales of $2.0 billion and a 24.2% share of the U.S.
cookie and cracker market. Keebler markets a majority of its products under
well-recognized brands such as Keebler, Cheez-It and Carr's. In the United
States, Keebler is the number two manufacturer of branded cookies and crackers,
the number one manufacturer of private label cookies and the number one
manufacturer of cookies and crackers for the foodservice market. Keebler is the
number one manufacturer of retail branded ice cream cones in the United States.
In addition, Keebler is a major producer of retail branded pie crusts. Keebler
also produces custom-baked products for other marketers of branded food
products.
BRANDED PRODUCTS. Keebler's branded cookie and cracker products accounted
for 81% of its net sales in the first forty weeks of 1997. Keebler produces
eight of the twenty-five best-selling cookies and ten of the twenty-five
best-selling crackers in the United States based on dollar sales. Keebler's
branded cookie and cracker products include, among others, the following:
<TABLE>
<CAPTION>
KEEBLER BRAND CHEEZ-IT BRAND OTHER BRANDS
------------- -------------- ------------
<S> <C> <C>
Chips Deluxe cookies Cheez-It snack crackers Carr's
Pecan Sandies cookies Cheez-It party mix Vienna Fingers
Fudge Shoppe cookies Nacho Cheez-It Hydrox
Town House crackers Sunshine Krispy
Club crackers Hi-Ho
Graham Selects crackers
Wheatables crackers
Zesta crackers
</TABLE>
DSD DISTRIBUTION SYSTEM. Keebler distributes its branded cookie and cracker
products to approximately 30,000 retail locations through its own national
direct to store sales and distribution system, which is known as a "DSD
distribution system". With this DSD distribution system, Keebler services
substantially all supermarkets in the United States. Keebler is one of only two
cookie and cracker companies that owns and operates a national DSD distribution
system. Keebler believes its DSD distribution system provides it with certain
competitive advantages. Sales employees of Keebler's DSD distribution system
visit supermarkets on average 2.8 times each week. These employees stock and
arrange Keebler's products on store shelves and build end-aisle and
free-standing product displays. This frequent presence of Keebler employees in
supermarkets provides Keebler with a high level of control over the availability
and presentation of its products. Keebler believes that this control allows it
to maintain shelf space, better execute in-store promotions and more effectively
introduce new products. In-store promotions are important because Keebler
believes that purchases of cookies and crackers are often impulse driven.
1
<PAGE> 7
INDUSTRY OVERVIEW
The U.S. cookie and cracker industry had 1996 retail sales of $8.1 billion,
with cookie sales of $4.8 billion and cracker sales of $3.3 billion. Since 1992,
consumption per person of cookies and crackers in the United States has remained
stable. The cookie and cracker industry is comprised of distinct product
segments. Cookie segments include, among others, sandwich cookies, chocolate
chip cookies and fudge-covered cookies. Cracker segments include, among others,
saltine crackers, graham crackers and snack crackers.
Supermarkets accounted for 78% of 1996 retail sales in the cookie and
cracker industry with mass merchandisers, such as Target; convenience stores;
and drug stores accounting for the balance. Since 1992, U.S. annual dollar
supermarket sales of cookies and crackers have increased an average of 1.5% per
year. Moreover, Keebler believes that non-supermarket channels of distribution
are becoming increasingly important.
Keebler and Nabisco are the two largest national participants in the cookie
and cracker industry. Keebler and Nabisco have a combined market share of 58.4%,
with Keebler having 24.2% and Nabisco having 34.2%. Other participants in the
industry generally operate only in certain regions of the United States or only
participate in a limited number of segments of the industry.
STRATEGY
Since the acquisition of the Keebler business in January 1996, Keebler's
new management began implementing a business strategy designed to capitalize on
its competitive strengths, which include Keebler's strong national brands and
its national DSD distribution system. The acquisition of Sunshine in June 1996
enables Keebler to further develop this business strategy. The key elements of
Keebler's strategy are:
BUILD ON THE KEEBLER BRAND. Keebler is one of the few packaged food brands
that generates over $1 billion in annual sales. The Keebler brand is recognized
in approximately 98% of U.S. households and is used in approximately two-thirds
of U.S. households. This brand awareness has been developed over many years of
marketing "Elfin Magic" imagery and "Uncommonly Good" Keebler products. Keebler
intends to continue to invest in advertising and promoting the Keebler brand.
Keebler's marketing will emphasize the well known images of Ernie and the other
Keebler Elves and Keebler's Hollow Tree.
TAKE ADVANTAGE OF PRODUCT SEGMENTATION AND KEEBLER BRAND STRENGTH ACROSS
PRODUCT SEGMENTS. As described above, the cookie and cracker industry has many
distinct product segments. Keebler believes that many well known cookie and
cracker brands are only associated with one product segment, such as the
chocolate chip cookie segment, making it difficult for these brands to be used
to market products in other segments. In contrast, Keebler believes the strength
of the Keebler brand is its consumer identity across a wide variety of product
segments. Keebler's strategy is to target product segments where it already has
a strong position or that are not dominated by a strong branded product. In
addition, Keebler plans to continue to use the Keebler brand to cost
effectively:
- introduce new products;
- create new product segments; and
- compete in smaller product segments.
EXPAND THE CHEEZ-IT BRAND. Keebler's Cheez-It brand crackers are the number
one selling snack cracker in the United States. Annual retail sales of Cheez-It
brand products exceed $200 million. Keebler began to distribute Cheez-It brand
products through its DSD distribution system in Fall 1996. For the first
forty-eight weeks of 1997, retail sales of Cheez-It brand products increased by
over 30% compared to the first forty-eight weeks of 1996 when they were not
distributed through Keebler's DSD distribution system. The Cheez-It brand has a
distinctive image with consumers. Keebler intends to maintain and build on this
distinctiveness through new products, advertising and packaging.
2
<PAGE> 8
EXPAND NON-SUPERMARKET SALES. In 1996, 22% of retail cookie and cracker
sales were through mass merchandisers, convenience stores and drug stores.
Keebler believes that its total share of sales to these and other
non-supermarket channels, including club stores, such as Costco Wholesale, and
vending distributors, is less than half of its share of sales to supermarkets.
Following the acquisition of Keebler in January 1996, Keebler's new management
began focusing resources on non-supermarket channels. Keebler has developed, and
continues to develop, products, packaging and distribution tailored to
non-supermarket channels. As a result of these efforts, Keebler's
non-supermarket sales have grown significantly. For example, Keebler's retail
sales through mass merchandisers increased 30% in the first forty-eight weeks of
1997 compared to the first forty-eight weeks of 1996.
INCREASE THE EFFICIENCY OF ITS OPERATIONS. Since the Keebler acquisition,
Keebler's new management has lowered annual costs by approximately $120 million
principally by closing plants, reducing overhead and combining the Keebler and
Sunshine sales forces. The relocation of production resulting from the closing
of plants increased Keebler's use of capacity at its manufacturing facilities
from 72% to 82%. Keebler intends to continue to increase the efficiency of its
operations and reduce costs. For example, Keebler plans to reduce costs by
making capital expenditures to further automate its facilities. Keebler also is
focusing on moving products more efficiently through its DSD distribution system
and its other distribution systems.
PURSUE ACQUISITIONS. Approximately 27% of cookie and cracker supermarket
sales are attributable to regional or smaller brands, some of which have strong
positions and retail relationships in their core markets. Keebler intends to
pursue acquisitions that complement or provide further opportunities to use its
existing brands, product lines or distribution systems.
RECENT KEEBLER HISTORY
On January 26, 1996, the current controlling stockholders acquired the
Keebler business, which is referred to as the "Keebler acquisition." In June
1996, Keebler acquired Sunshine, the third largest cookie and cracker
manufacturer in the United States, which is referred to as the "Sunshine
acquisition." By the end of 1996, Keebler completed its planned integration of
Sunshine's operations into those of Keebler. The combination of Sunshine and
Keebler allowed Keebler to achieve efficiencies in administration, purchasing,
production, marketing, sales and distribution. In particular, Keebler
incorporated the sales and distribution of Sunshine retail branded products into
Keebler's DSD distribution system which had excess capacity. Filling this excess
capacity with Sunshine products made Keebler's DSD distribution system more
efficient and allowed Keebler to focus its sales and marketing efforts on its
more profitable retail branded products.
Other initiatives that Keebler has implemented since the Keebler
acquisition include:
- refocusing Keebler on its core cookie and cracker business;
- decentralizing management and tying compensation to profitability rather
than sales volume;
- significantly reducing costs; and
- focusing resources in those segments of the cookie and cracker market
where Keebler believes it has a competitive advantage.
In 1996, Artal, Flowers and certain of Keebler's management formed INFLO to
acquire Keebler. Artal is a private investment company. Flowers, a New York
Stock Exchange-listed company, is one of the country's largest manufacturers and
marketers of fresh and frozen baked goods. After the Keebler acquisition,
additional shares and options were issued to Keebler's management. In connection
with the Sunshine acquisition, GFI acquired shares of common stock and warrants
which it later transferred to its parent Bermore. Immediately prior to the
closing of the offering, Flowers will acquire shares of common stock from Artal
and Bermore so that its ownership of the outstanding common stock will increase
from approximately 45% to approximately 55%. Flowers will pay the selling
stockholders an amount per share of common stock equal to approximately 115% of
the price per share to be paid by investors in the offering. See "Certain
Related Transactions -- Flowers Control Purchase."
3
<PAGE> 9
THE OFFERING
Common Stock offered:
U.S. Offering................. 9,172,000 Shares
International Offering........ 2,293,000 Shares
----------
Total(a)................. 11,465,000 Shares
==========
Selling Stockholders............ Artal and Bermore.
Use of Proceeds................. Keebler will not receive any proceeds from
the sale of common stock in the offering.
Dividend Policy................. Keebler currently intends to retain all
future earnings to fund the development and
growth of its business. Therefore, Keebler
does not currently anticipate paying cash
dividends. See "Dividend Policy."
Proposed New York Stock Exchange
symbol.......................... KBL
- ---------------------------------------------
(a) If the underwriters for the U.S. portion of the offering and the managers
for the international portion of the offering exercise the option granted to
them in connection with the offering to purchase additional shares of common
stock from Artal and Bermore to cover over-allotments, the total number of
shares to be offered would increase by up to 1,719,750 shares.
4
<PAGE> 10
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
The summary unaudited pro forma financial information below has
been derived from the Pro Forma Financial Information, as defined
under "Unaudited Pro Forma Consolidated Financial Information,"
included elsewhere in this prospectus. The operating and other
data give effect to the Acquisitions, as defined under "Unaudited
Pro Forma Consolidated Financial Information," as if they each had
occurred at the beginning of the period presented. The actual
operating and other data for the forty-week period ended October
4, 1997 is included below for comparative purposes only, and does
not include any pro forma adjustments. The summary unaudited pro
forma financial information below does not represent what
Keebler's results of operations would have been if the
Acquisitions had occurred on the date indicated or Keebler's
results of operations for any future period. The information below
should be read together with the Pro Forma Financial Information
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
KEEBLER
--------------------------------------------------
FORTY WEEKS ENDED
FISCAL YEAR ----------------------------------
1996 OCTOBER 5, 1996 OCTOBER 4, 1997
PRO FORMA PRO FORMA ACTUAL
------------ --------------- ---------------
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING DATA:
Net sales................................... $1,974.4 $1,500.3 $1,542.2
Gross profit................................ 1,027.9 767.3 873.7
Restructuring charges (gains)............... (9.1) (9.1) --
Income from continuing operations........... 48.7 13.6 96.1
Net income (loss)........................... 2.2 (12.9) 36.4
Net income (loss) per share................. $0.03 $(0.17) $0.45
Weighted average shares outstanding(a)...... 79.4 77.5 81.6
OTHER DATA:
EBITDA, as adjusted(b)...................... $ 99.4 $ 47.9 $ 141.6
Depreciation and amortization (excluding
items related to discontinued
operations)............................... 59.8 43.4 45.5
Capital expenditures (excluding expenditures
related to discontinued operations)....... 35.6 24.2 26.1
</TABLE>
--------------------------------------------------
(a) After giving effect to the issuance of shares upon the
exercise of all outstanding options issued by the Company,
accounted for under the treasury stock method, and the
exercise of warrants to purchase 6,135,781 shares of common
stock held by Bermore upon the closing of the offering, the
number of shares outstanding will be 89,929,176.
(b) EBITDA, as adjusted, is defined as income from continuing
operations before interest, taxes, depreciation, amortization
and restructuring charges (gains). EBITDA, as adjusted, is
presented as additional information because Keebler believes
it to be a useful indicator of a company's ability to meet
debt service and capital expenditure requirements. It is not,
however, intended as an alternative measure of operating
results or cash flow from operations (as determined in
accordance with generally accepted accounting principles).
5
<PAGE> 11
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA
The summary consolidated historical financial data below has
been derived from the consolidated financial statements of Keebler
and UB Investments US Inc. (the "Predecessor Company") included
elsewhere in this prospectus, which have been audited by Coopers &
Lybrand L.L.P., independent public accountants. The summary
consolidated historical financial data below of the Predecessor
Company as of and for the fiscal year ended January 1, 1994 has
been derived from the consolidated financial statements of the
Predecessor Company that are not included in this prospectus. The
summary consolidated historical financial data below of Keebler as
of and for the thirty-six weeks ended October 5, 1996 and the
forty-weeks ended October 4, 1997 have been derived from unaudited
financial statements of Keebler included elsewhere in this
prospectus and, in the opinion of Keebler, include all adjustments
(consisting only of normal recurring adjustments) necessary for a
fair presentation thereof. The results of operations below are not
necessarily indicative of results to be expected for any future
period. The information below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY KEEBLER
------------------------------------------------------ ----------------------------------------
YEAR ENDED FOUR FORTY-EIGHT THIRTY-SIX FORTY
---------------------------------------- WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED
JANUARY 1, DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28, OCTOBER 5, OCTOBER 4,
1994 1994 1995 1996 1996(A) 1996(A) 1997
---------- ------------ ------------ ----------- ------------ ----------- -----------
(IN MILLIONS) (IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales...................... $1,650.1 $1,599.7 $1,578.6 $101.7 $1,645.5 $1,171.4 $1,542.2
Gross profit................... 931.5 894.2 831.8 46.8 871.3 610.7 873.7
Nonrecurring charges(b)........ 120.1 -- 86.5 -- -- -- --
Income (loss) from continuing
operations................... (67.6) 46.4 (137.9) (25.5) 70.1 35.0 96.1
Income (loss) from continuing
operations before
extraordinary item and
cumulative effect of
accounting changes........... (126.9) (26.9) (165.7) (25.4) 17.7 2.6 39.1
Discontinued operations(c)..... 0.6 3.4 7.4 18.9 -- -- --
Extraordinary item(d).......... -- -- -- -- 1.9 1.9 2.7
Cumulative effect of accounting
changes, net of tax.......... (20.9) 0.5 -- -- -- -- --
Net income (loss).............. (147.2) (23.0) (158.3) (6.5) 15.8 0.7 36.4
Net income (loss) per share.... -- -- -- -- $ 0.21 $ 0.01 $ 0.45
Weighted average shares
outstanding.................. -- -- -- -- 76.6 75.5 81.6
OTHER DATA:
EBITDA, as adjusted(e)......... $ 98.4 $ 89.5 $ (93.3) $(23.5) $ 119.6 $ 68.1 $ 141.6
Depreciation and amortization
(excluding items related to
discontinued operations)..... 45.9 43.1 44.6 2.0 49.5 33.1 45.5
Capital expenditures (excluding
expenditures related to
discontinued operations)..... 30.6 54.6 54.2 3.2 29.4 18.0 26.1
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
------------------------------------------------------ ----------------------------------------
JANUARY 1, DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28, OCTOBER 5, OCTOBER 4,
1994 1994 1995 1996 1996 1996 1997
---------- ------------ ------------ ----------- ------------ ---------- ----------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..... $ 6.4 $ 12.5 $ 3.0 $ 2.1 $ 12.0 $ 4.4 $ 61.1
Total assets.................. 1,043.0 1,001.2 926.9 849.1 1,102.1 1,119.6 1,116.1
Due to affiliate.............. 872.7 551.6 108.0 105.0 -- -- --
Total debt.................... 263.8 333.2 437.6 371.4 457.9 484.0 401.8
Shareholders' equity
(deficit)................... (511.9) (234.9) 51.8 45.3 165.1 149.5 201.5
</TABLE>
Note: Net sales and cost of sales were $1.7 billion and $735 million,
respectively, for the year ended January 2, 1993.
- ------------------------------------
(a) Includes the operating results of Sunshine from the acquisition date of June
4, 1996 through the end of the period presented. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(b) Year ended January 1, 1994 includes a restructuring charge of $120.1 million
and year ended December 30, 1995 includes the loss on the impairment of the
Predecessor Company's Salty Snacks business of $86.5 million.
(c) Includes income from operations of the discontinued Frozen Food businesses,
net of tax, of $0.6 million, $3.4 million, and $7.4 million for the years
ended January 1, 1994, December 31, 1994 and December 30, 1995. Includes a
$18.9 million gain on the disposal of the discontinued Frozen Food
businesses, net of tax, for the four weeks ended January 26, 1996.
(d) Extraordinary item relates to losses on the early extinguishment of debt,
net of tax.
(e) EBITDA, as adjusted, is defined as income (loss) from continuing operations
before interest, taxes, depreciation, amortization, and restructuring
charges (gains). EBITDA, as adjusted, is presented as additional information
because Keebler believes it to be a useful indicator of a company's ability
to meet debt service and capital expenditure requirements. It is not,
however, intended as an alternative measure of operating results or cash
flow from operations (as determined in accordance with generally accepted
accounting principles).
6
<PAGE> 12
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to invest in shares of common stock.
ADVERSE EFFECTS OF COMPETITION ON KEEBLER'S PERFORMANCE
The cookie and cracker market and the other markets in which Keebler
operates are mature and highly competitive. Competition in these markets takes
many forms, including the following:
- establishing favorable brand recognition;
- developing products sought by consumers;
- implementing appropriate pricing;
- providing strong marketing support; and
- obtaining access to retail outlets and sufficient shelf space.
In many of Keebler's markets, there are competitors that are larger and
have greater financial resources than Keebler, including Keebler's primary
competitor, Nabisco. Keebler may not be able to compete successfully with such
competitors. Competition could cause Keebler to lose market share, increase
expenditures or reduce pricing which could have a material adverse effect on
Keebler's business or financial results.
INCREASES IN PRICES OF MAIN INGREDIENTS AND OTHER MATERIALS
The main ingredients that Keebler uses to manufacture its products are
flour, sugar, chocolate, shortening and milk. Keebler also uses paper products,
such as corrugated cardboard, as well as films and plastics, to package its
products. The prices of these materials have been, and Keebler expects them to
continue to be, subject to significant volatility. Keebler may not be able to
pass price increases in these materials on to its customers. Although Keebler
has mitigated the effects of such price increases in the past through its
hedging programs, Keebler may not be successful in protecting itself from
increases in the future. See "Business -- Raw Materials."
IMPLEMENTATION OF BUSINESS STRATEGY
Keebler intends to pursue a business strategy of increasing sales and
earnings by fully utilizing its existing brands and distribution systems.
Keebler may not be successful in implementing this strategy. Keebler also may
pursue a business strategy of growth through acquisitions. Keebler may not be
successful in pursuing acquisition opportunities and any businesses acquired may
not perform as well as expected. If Keebler is unable to successfully implement
its business strategy, this inability could have a material adverse effect on
Keebler's business or financial results. See "Business -- Strategy."
DEPENDENCE ON KEY PERSONNEL
Keebler believes that its ability to successfully implement its business
strategy and to operate profitably depends on the continued employment of its
senior management team led by Mr. Sam K. Reed. If Mr. Reed or other members of
the management team become unable or unwilling to continue in their present
positions, Keebler's business and financial results could be materially
adversely affected. See "Management."
MAJORITY CONTROL OF KEEBLER BY A SINGLE STOCKHOLDER; CONSENT RIGHTS
Following the offering, Flowers will own approximately 55% of the
outstanding common stock. Accordingly, Flowers will control Keebler and have the
power to elect a majority of the directors, appoint management and approve
certain actions requiring the approval of a majority of Keebler's stockholders.
Concurrent with the offering, Artal will enter into an agreement which will give
Artal the right to consent to certain actions which could otherwise be approved
by a majority of Keebler's directors or stockholders. For example, Artal will
have the right to consent to any acquisition or disposition by Keebler in excess
of $250 million, to a sale of Keebler or
7
<PAGE> 13
substantially all of its assets other than for cash and, with some exceptions,
to issuances of capital stock by Keebler. The interests of Flowers and/or Artal
could conflict with the interests of the other stockholders of Keebler. See
"Certain Related Transactions -- Flowers Control Purchase."
IMPACT OF GOVERNMENTAL REGULATION ON KEEBLER'S OPERATIONS
Keebler's operations and properties are subject to regulation by various
federal, state and local government entities and agencies. As a producer of food
products, Keebler's operations are subject to stringent production, packaging,
quality, labeling and distribution standards, including the Federal Food and
Drug Act. The operations of Keebler's production and distribution facilities are
subject to various federal, state and local environmental laws and workplace
regulations. These laws and regulations include the Occupational Safety and
Health Act, the Fair Labor Standards Act, the Clean Air Act and the Clean Water
Act. Keebler believes that its current legal and environmental compliance
programs adequately address such concerns and that it is in substantial
compliance with applicable laws and regulations. However, compliance with, or
any violation of, current and future laws or regulations could require material
expenditures by Keebler or otherwise adversely effect Keebler's business or
financial results. See "Business -- Regulation; -- Environmental."
TRADEMARKS AND OTHER PROPRIETARY RIGHTS
Keebler believes that its trademarks and other proprietary rights are
important to its success and its competitive position. Accordingly, Keebler
devotes substantial resources to the establishment and protection of its
trademarks and proprietary rights. However, the actions taken by Keebler to
establish and protect its trademarks and other proprietary rights may be
inadequate to prevent imitation of its products by others or to prevent others
from claiming violations of their trademarks and proprietary rights by Keebler.
In addition, others may assert rights in Keebler's trademarks and other
proprietary rights. See "Business -- Intellectual Property."
PRODUCT LIABILITY; PRODUCT RECALLS
Keebler may be liable if the consumption of any of its products cause
injury, illness or death. Keebler also may be required to recall certain of its
products that become contaminated or are damaged. Keebler's current management
is not aware of any material product liability judgment against Keebler or
product recall by Keebler. However, a product liability judgment against Keebler
or a product recall could have a material adverse effect on Keebler's business
or financial results.
RESTRICTIVE DEBT COVENANTS
Keebler's existing debt agreements, which will remain in effect after the
offering, contain a number of significant covenants. These covenants limit
Keebler's ability to, among other things, borrow additional money, make capital
expenditures and other investments and pay dividends. These covenants also
require Keebler to meet certain financial tests. If Keebler is unable to meet
its debt service obligations or comply with these covenants, there would be a
default under its existing debt agreements. Such a default, if not waived, could
result in acceleration of Keebler's indebtedness and the bankruptcy of Keebler.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
REQUIRED OFFER TO PURCHASE SENIOR SUBORDINATED NOTES
The offering will result in a "Change of Control" under Keebler's 10 3/4%
Senior Subordinated Notes due 2006 (the "Senior Subordinated Notes"). Under the
terms of the Senior Subordinated Notes, within 15 days after a Change of
Control, Keebler is required to offer to purchase the Senior Subordinated Notes
at 101% of their principal amount plus accrued interest. Given current trading
prices for the Senior Subordinated Notes, Keebler does not anticipate holders
tendering their Senior Subordinated Notes for purchase by Keebler. However,
circumstances occurring
8
<PAGE> 14
subsequent to the consummation of the offering may cause holders of the Senior
Subordinated Notes to tender them or the holders of Senior Subordinated Notes
may tender them for other reasons. In the event Keebler is required to purchase
any Senior Subordinated Notes, it will obtain the funds to make such purchases
out of internally generated funds or by draws under its existing senior credit
facility.
RESTRICTIONS ON PAYMENT OF DIVIDENDS ON COMMON STOCK
Keebler's ability to pay dividends on its common stock is limited under the
terms of its existing debt agreements. Keebler does not currently intend to pay
any cash dividends. See "Dividend Policy" and "Description of Certain
Indebtedness."
SHARES ELIGIBLE FOR FUTURE SALE
The market price of the common stock could drop as a result of sales of a
large number of shares of common stock in the market after the offering, or the
perception that such sales could occur. These factors also could make it more
difficult for Keebler to raise funds through future offerings of common stock.
There will be 83,730,994 shares of common stock outstanding immediately
after the offering. Of these shares, the shares sold in the offering will be
freely transferable without restriction or further registration under the
Securities Act, except for any shares purchased by "affiliates" of Keebler, as
defined in Rule 144 under the Securities Act. The remaining 72,265,994 shares of
common stock outstanding, including the 46,197,466 shares held by Flowers, will
be "restricted securities" as defined in Rule 144. These shares may be sold in
the future without registration under the Securities Act to the extent permitted
by Rule 144 or an exemption under the Securities Act. Artal will also have
registration rights allowing it to cause Keebler to register under the
Securities Act Artal's and, in some circumstances, Bermore's shares for sale.
See "Certain Related Transactions -- Flowers Control Purchase."
In connection with the offering, Keebler, its executive officers and
directors and certain of its stockholders have agreed that, with certain
exceptions, they will not sell any shares of common stock without the consent of
Credit Suisse First Boston Corporation for 180 days after the date of this
prospectus.
LACK OF PUBLIC MARKET FOR COMMON STOCK; DETERMINATION OF PUBLIC OFFERING PRICE
There has not been a public market for the common stock. Keebler is
applying to list the common stock for trading on the New York Stock Exchange
(the "NYSE"). Keebler does not know the extent to which investor interest in
Keebler will lead to the development of a trading market or how liquid that
market might be. The initial public offering price for the shares of common
stock will be determined through negotiations among the Selling Stockholders,
the U.S. Underwriters and the Managers. Investors may not be able to resell
their shares at or above the initial public offering price. See "Underwriting."
CERTAIN ANTI-TAKEOVER PROVISIONS; PREFERRED STOCK
Certain provisions of the Certificate of Incorporation could make it more
difficult for a third party to acquire control of Keebler, even if such change
in control would be beneficial to stockholders. The Certificate of Incorporation
allows Keebler to issue preferred stock without stockholder approval. Such
issuances could make it more difficult for a third party to acquire Keebler. See
"Description of Capital Stock."
9
<PAGE> 15
FORWARD-LOOKING STATEMENTS;
CERTAIN DEFINED TERMS; MARKET SHARE DATA
Certain statements incorporated by reference or made in this prospectus
under the captions "Prospectus Summary," "Risk Factors," "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and elsewhere in this prospectus are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). These statements are subject to the safe harbor provisions of the
Reform Act. Such forward-looking statements include, without limitation,
statements about the competitiveness of the cookie and cracker industry, the
future availability and prices of certain materials, potential regulatory
obligations and Keebler's strategies and other statements contained herein that
are not historical facts. When used in this prospectus, the words "anticipate,"
"believe," "estimate" and similar expressions are generally intended to identify
forward-looking statements. Because such forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements, including but not limited to changes in general
economic and business conditions (including in the cookie and cracker industry),
actions of competitors, Keebler's ability to recover its material costs in the
pricing of its products, the extent to which Keebler is able to develop new
products and markets for its products, the time required for such development,
the level of demand for such products, changes in the Keebler's business
strategies and other factors discussed under "Risk Factors."
-------------------------
As used in this prospectus (this "Prospectus"), unless the context requires
otherwise, (i) "Keebler" or the "Company" means Keebler Foods Company (the
surviving corporation of the merger (the "Merger") between INFLO Holdings
Corporation ("INFLO") and Keebler Corporation, which merger occurred on November
20, 1997) and its predecessors and consolidated subsidiaries and (ii) "Sunshine"
means Sunshine Biscuits, Inc. and its consolidated subsidiaries. As used herein,
"Artal" means Artal Luxembourg S.A.; "Bermore" means Bermore, Limited; "Flowers"
means Flowers Industries, Inc.; "GFI" means G.F. Industries, Inc.; "Nabisco"
means Nabisco, Inc.; "Common Stock" means the common stock, $.01 par value per
share, of Keebler; "Offering" means the offering of Common Stock contemplated by
this Prospectus; "Selling Stockholders" means Artal and Bermore, collectively;
and "Securities Act" means the Securities Act of 1933, as amended.
Unless stated otherwise, market share data included herein is based on
supermarket sales (measured in pounds) for the fifty-two week period ended
November 30, 1997 as reported by Information Resources, Inc. ("IRI"). In those
instances where market share data included herein is stated to be based on
dollar sales, those dollar sales represent supermarket sales for the fifty-two
week period ended November 30, 1997 as reported by IRI. Retail sales data
included herein for the U.S. cookie and cracker industry includes sales through
supermarkets, mass merchandisers, convenience stores and drug stores as reported
by IRI. Sales to club stores and vending distributors are not included in this
data. With respect to ice cream cone sales, market share data included herein is
based on dollar sales for the fifty-two week period ended December 7, 1997 as
reported by IRI. With respect to the foodservice industry, market share data
included herein is based on sales (measured in pounds) for the nine-month period
ended September 30, 1997 as reported by the International Foodservice
Manufacturers Association.
10
<PAGE> 16
DIVIDEND POLICY
Historically, Keebler has not paid dividends on its Common Stock. Keebler
currently intends to retain all future earnings to fund the development and
growth of its business. Therefore, Keebler does not currently anticipate paying
any cash dividends. Additionally, Keebler's existing senior credit facility (the
"Senior Credit Facility") and Senior Subordinated Notes, which will remain
outstanding following the Offering, place limitations on Keebler's ability to
pay dividends or make other distributions on its Common Stock. Upon the
consummation of the Offering, dividends would be permitted to be paid in the
aggregate amount of (i) $25.0 million under the Senior Credit Facility and (ii)
$19.8 million under the Senior Subordinated Notes. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Description of Certain Indebtedness." Any future
determination as to the payment of dividends will be subject to such
limitations, will be at the discretion of the Board of Directors and will depend
on Keebler's results of operations, financial condition, capital requirements
and other factors deemed relevant by the Board of Directors.
11
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of Keebler as of October
4, 1997 and as adjusted to give effect to the Offering and certain transactions
occurring prior to or concurrently with the Offering:
<TABLE>
<CAPTION>
AS OF OCTOBER 4,
1997
--------------------
ACTUAL ADJUSTED
------ --------
(IN MILLIONS)
<S> <C> <C>
Current maturities of long-term debt........... $ 31.3 $ 31.3
Long-term debt:
Senior Credit Facility.................... 200.0 130.0(a)
Senior Subordinated Notes................. 125.0 125.0
Seller note............................... 28.7 --(b)
Other senior debt......................... 16.9 16.9
------ ------
Total debt (including current
maturities)........................ 401.9 303.2
------ ------
Shareholders' equity(c):
Preferred stock, $.01 par value;
100,000,000 shares authorized and none
issued.................................. -- --
Common stock, $.01 par value; 500,000,000
shares authorized and 77,595,213 shares
outstanding............................. 0.8 0.8(d)
Additional paid-in capital................ 148.5 168.3(d)
Retained earnings......................... 52.2 52.2
------ ------
Total shareholders' equity........... 201.5 221.3
------ ------
Total capitalization............ $603.4 $524.5
====== ======
</TABLE>
-------------------------------------------
(a) Reflects prepayments on the term notes under the Senior Credit
Facility of $40.0 million made on November 10, 1997 and $30.0
million made on December 8, 1997.
(b) Reflects the purchase on November 21, 1997 of the note issued
to the seller in connection with the Keebler acquisition.
(c) For a description of Keebler's capital stock and the
beneficial ownership of the outstanding shares thereof, see
"Principal and Selling Stockholders" and "Description of
Capital Stock." Outstanding shares do not include 9,673,594
shares of Common Stock reserved for issuance under Keebler's
1996 Stock Option Plan (as defined) of which options to
purchase 6,852,344 shares of Common Stock were outstanding as
of October 4, 1997. In addition, 6,500,000 shares of Common
Stock will be reserved for issuance under the 1998 Stock
Incentive Plan and up to 300,000 shares of Common Stock will
be reserved for issuance under the Directors' Plan. See
"Management -- 1996 Option Plan," "-- 1998 Omnibus Stock
Incentive Plan" and "-- Non-Employee Director Stock Plan." In
it is anticipated that approximately 2,100,000 options to
purchase shares of Common Stock will be granted pursuant to
the 1998 Stock Incentive Plan in connection with the Offering.
Authorized shares reflect an amendment to Certificate of
Incorporation to be effected prior to the Offering.
(d) Reflects the exercise of warrants to purchase 6,135,781 shares
of Common Stock held by Bermore for an aggregate exercise
price of $19.8 million. Bermore will exercise these warrants
concurrent with its sale of shares in the Offering. At October
4, 1997, after giving effect to the issuance of shares of
Common Stock upon exercise of the warrants held by Bermore,
83,730,994 shares of Common Stock would have been outstanding.
12
<PAGE> 18
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information (the
"Pro Forma Financial Information") is based on the historical financial
statements of the Predecessor Company, Keebler and Sunshine during the periods
presented, adjusted to give effect to the Keebler acquisition and the Sunshine
acquisition (together, the "Acquisitions").
The Pro Forma Financial Information for the fiscal year ended December 28,
1996 and for the forty weeks ended October 5, 1996, give effect to the
Acquisitions as if they each had occurred at the beginning of the period
presented. The adjustments are described in the accompanying notes and are based
upon available information and certain assumptions that management believes are
reasonable.
The Pro Forma Financial Information does not purport to represent what
Keebler's results of operations would actually have been had the Acquisitions in
fact occurred on such date or to project Keebler's results of operations for any
future period. The Pro Forma Financial Information should be read in conjunction
with the consolidated financial statements included elsewhere in this Prospectus
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 28, 1996
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------
PREDECESSOR
KEEBLER COMPANY SUNSHINE
FORTY-EIGHT FOUR WEEKS TWENTY-TWO
WEEKS ENDED ENDED WEEKS ENDED
DECEMBER 28, 1996(A) JANUARY 26, 1996(B) JUNE 4, 1996(B)
-------------------- ------------------- ---------------
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING DATA:
Net sales........................ $1,645.5 $101.7 $229.8
Costs and expenses:
Cost of sales.................. 774.2 54.9 119.7
Selling, marketing and
administrative
expenses..................... 794.8 71.4 114.9
Restructuring charges
(gains)...................... -- -- (9.1)(c)
Other.......................... 6.4 0.9 --
-------- ------ ------
Income (loss) from continuing
operations..................... 70.1 (25.5) 4.3
Interest expense (income), net... 38.4 (0.1) 3.0
-------- ------ ------
Income (loss) from continuing
operations before income tax
expense (benefit).............. 31.7 (25.4) 1.3
Income tax expense (benefit)..... 14.0 -- 0.6
-------- ------ ------
Net income (loss)................ $ 17.7 $(25.4) $ 0.7
======== ====== ======
Net income per share.............
Weighted average shares
outstanding....................
OTHER DATA:
EBITDA, as adjusted(m)........... $ 119.6 $(23.5) $ 1.2
Depreciation and amortization
(excluding items related to
discontinued operations)....... 49.5 2.0 6.0
Capital expenditures (excluding
expenditures related to
discontinued operations)....... 29.4 3.2 3.0
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------------
KEEBLER SUNSHINE
ACQUISITION ACQUISITION PRO FORMA
----------- ----------- ---------
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING DATA:
Net sales........................ $ -- $(2.6)(h) $1,974.4
Costs and expenses:
Cost of sales.................. -- (2.3)(i) 946.5
Selling, marketing and
administrative
expenses..................... 0.3(d) (2.0)(j) 979.4
Restructuring charges
(gains)...................... -- -- (9.1)
Other.......................... 0.2(e) 1.4(k) 8.9
------ ----- --------
Income (loss) from continuing
operations..................... (0.5) 0.3 48.7
Interest expense (income), net... 1.9(f) 1.5(l) 44.7
------ ----- --------
Income (loss) from continuing
operations before income tax
expense (benefit).............. (2.4) (1.2) 4.0
Income tax expense (benefit)..... (12.3)(g) (0.5)(g) 1.8
------ ----- --------
Net income (loss)................ $ 9.9 $(0.7) $ 2.2
====== ===== ========
Net income per share............. $ 0.03
========
Weighted average shares
outstanding.................... 79.4
========
OTHER DATA:
EBITDA, as adjusted(m)........... $ 0.1 $ 2.0 $ 99.4
Depreciation and amortization
(excluding items related to
discontinued operations)....... 0.6 1.7 59.8
Capital expenditures (excluding
expenditures related to
discontinued operations)....... -- -- 35.6
</TABLE>
13
<PAGE> 19
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FORTY WEEKS ENDED OCTOBER 5, 1996
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------------
PREDECESSOR
KEEBLER COMPANY SUNSHINE
THIRTY-SIX FOUR WEEKS TWENTY-TWO
WEEKS ENDED ENDED WEEKS ENDED
OCTOBER 5, 1996(A) JANUARY 26, 1996(B) JUNE 4, 1996(B)
------------------ ------------------- ---------------
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING DATA:
Net sales.......................... $1,171.4 $101.7 $229.8
Costs and expenses:
Cost of sales.................... 560.7 54.9 119.7
Selling, marketing and
administrative expenses........ 571.3 71.4 114.9
Restructuring charges (gains).... -- -- (9.1)(c)
Other............................ 4.4 0.9 --
-------- ------ ------
Income (loss) from continuing
operations....................... 35.0 (25.5) 4.3
Interest expense (income), net..... 28.7 (0.1) 3.0
-------- ------ ------
Income (loss) from continuing
operations before income tax
expense (benefit)................ 6.3 (25.4) 1.3
Income tax expense (benefit)....... 3.7 -- 0.6
-------- ------ ------
Net income (loss).................. $ 2.6 $(25.4) $ 0.7
======== ====== ======
Net loss per share.................
Weighted average shares
outstanding......................
OTHER DATA:
EBITDA, as adjusted(m)............. $ 68.1 $(23.5) $ 1.2
Depreciation and amortization
(excluding items related to
discontinued operations)......... 33.1 2.0 6.0
Capital expenditures (excluding
expenditures related to
discontinued operations)......... 18.0 3.2 3.0
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------------
KEEBLER SUNSHINE
ACQUISITION ACQUISITION PRO FORMA
----------- ----------- ---------
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING DATA:
Net sales.......................... $ -- $(2.6)(h) $1,500.3
Costs and expenses:
Cost of sales.................... -- (2.3)(i) 733.0
Selling, marketing and
administrative expenses........ 0.3(d) (2.0)(j) 755.9
Restructuring charges (gains).... -- -- (9.1)
Other............................ 0.2(e) 1.4(k) 6.9
------ ----- --------
Income (loss) from continuing
operations....................... (0.5) 0.3 13.6
Interest expense (income), net..... 1.9(f) 1.5(l) 35.0
------ ----- --------
Income (loss) from continuing
operations before income tax
expense (benefit)................ (2.4) (1.2) (21.4)
Income tax expense (benefit)....... (12.3)(g) (0.5)(g) (8.5)
------ ----- --------
Net income (loss).................. $ 9.9 $(0.7) $ (12.9)
====== ===== ========
Net loss per share................. $ (0.17)
========
Weighted average shares
outstanding...................... 77.5
========
OTHER DATA:
EBITDA, as adjusted(m)............. $ 0.1 $ 2.0 $ 47.9
Depreciation and amortization
(excluding items related to
discontinued operations)......... 0.6 1.7 43.4
Capital expenditures (excluding
expenditures related to
discontinued operations)......... -- -- 24.2
</TABLE>
14
<PAGE> 20
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(a) Includes the results of operations for Sunshine from the acquisition date of
June 4, 1996 through the end of the period presented.
(b) The historical results of operations presented for the Predecessor Company
and Sunshine represent the results of operations for the 1996 periods prior
to the Acquisitions.
(c) Income (loss) from continuing operations of Sunshine for the
twenty-two weeks ended June 4, 1996 include amounts
classified as restructuring gains that relate to:
IN MILLIONS
-----
Gains on the sale of Salerno cookie and cracker
division and related bakery prior to the Sunshine
acquisition........................................... $ 6.2
Income from reducing restructuring cost accrued by
Sunshine prior to the Sunshine acquisition............ 2.9
-----
$ 9.1
=====
(d) Reflects four weeks of additional depreciation of property, plant, and
equipment resulting from the fixed asset valuation ($4.2 million per year).
(e) Reflects four weeks of additional amortization expense
associated with the Keebler acquisition, as follows:
IN MILLIONS
-----
Amortization of trademarks and trade names of $104.0
million over a 40-year amortization period............ $ 0.2
Amortization of organizational expenses of $8.1 million
over a 5-year amortization period..................... 0.1
Elimination of historical goodwill amortization........ (0.1)
-----
$ 0.2
=====
(f) Reflects, with respect to items 1 through 5, additional net interest
expense related to borrowings associated with the Keebler acquisition and,
with respect to items 6 and 7, an adjustment to interest expense as
indicated, as follows:
IN MILLIONS
-----
(1) Borrowings under the Senior Credit Facility of $200.0
million at various rates................................ $ 1.2
(2) Senior Subordinated Notes of $125.0 million at
10 3/4%................................................. 1.0
(3) Other senior debt of $20.3 million at various rates..... 0.1
(4) Amortization of $10.2 million of debt issuance
costs amortized over eight and one half years........... 0.1
(5) Interest expense to support operations*................. 0.1
(6) Elimination of historical interest expense.............. 0.1
(7) Reduction in interest expense from the date of
acquisition to June 25, 1996 as if the Senior
Subordinated Notes were outstanding for that
period.................................................. (0.7)
-----
$ 1.9
=====
-----------------------------------------
* Interest expense associated with incremental borrowings used to
finance working capital requirements calculated at the incremental
borrowing rate of the Senior Credit Facility, associated with the
Keebler acquisition, multiplied by net sales.
(g) The income tax effect of the pro forma adjustments on income (loss) before
income taxes is based on the effective tax rate for fiscal 1996. The
Keebler acquisition pro forma adjustments includes a pro forma income tax
benefit of $11.2 million related to the net loss for the four weeks ended
January 26, 1996.
(h) The adjustment to net sales resulted from the sale of Sunshine's Salerno
cookie and cracker division and related bakery prior to the Sunshine
acquisition.
15
<PAGE> 21
(i) Reflects reduction in cost of sales due to:
IN MILLIONS
-----
Sale of Sunshine's Salerno cookie and cracker division and
related bakery prior to the Sunshine acquisition....... $(1.8)
Reduction of postretirement benefit expense for the
twenty-two weeks ended June 4, 1996 resulting from the
Sunshine acquisition................................... (0.5)
-----
$(2.3)
=====
(j) Reflects reduction in selling and administrative expenses
due to:
IN MILLIONS
-----
Sale of Sunshine's Salerno cookie and cracker division and
related bakery prior to the Sunshine acquisition....... $(2.3)
Elimination of Sunshine historical goodwill
amortization........................................... (0.3)
Additional depreciation of property, plant, and equipment
resulting from the fixed asset valuation............... 0.6
-----
$(2.0)
=====
(k) Reflects additional amortization expense associated with the
Sunshine acquisition as follows:
IN MILLIONS
-----
Amortization of goodwill of $48.8 million related to the
Sunshine acquisition over a 40-year amortization
period................................................. $ 0.6
Amortization of trademarks and trade names of $57.0
million over a 40-year amortization period............. 0.8
-----
$ 1.4
=====
(l) The following adjustments to net interest expense reflect
the additional borrowings associated with the Sunshine
acquisition:
IN MILLIONS
-----
Borrowings for an additional twenty-two weeks under the
Senior Credit Facility of $114.0 million at various
interest rates......................................... $ 4.4
Elimination of historical interest expense................ (3.0)
Amortization of debt issuance costs and other............. 0.1
-----
$ 1.5
=====
(m) EBITDA, as adjusted, is defined as income (loss) from
continuing operations before interest, taxes, depreciation,
amortization and restructuring charges (gains). EBITDA, as
adjusted, is presented as additional information because
Keebler believes it to be a useful indicator of a company's
ability to meet debt service and capital expenditure
requirements. It is not, however, intended as an alternative
measure of operating results or cash flow from operations
(as determined in accordance with generally accepted
accounting principles).
16
<PAGE> 22
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data presented below as of and
for the fiscal years ended 1994, 1995 and 1996 have been derived from
the consolidated financial statements of Keebler and the Predecessor
Company included elsewhere in this Prospectus, which have been audited
by Coopers & Lybrand L.L.P., independent public accountants. The
selected historical financial data presented below as of and for the
fiscal year ended January 1, 1994 has been derived from the
consolidated financial statements of the Predecessor Company that are
not included in this Prospectus. The unaudited consolidated financial
data of Keebler as of and for the thirty-six weeks ended October 5,
1996 and the forty weeks ended October 4, 1997 have been derived from
unaudited financial statements of Keebler included elsewhere in this
Prospectus and, in the opinion of Keebler, include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation thereof. The results of operations presented below are
not necessarily indicative of results to be expected for any future
period. The information set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY KEEBLER
------------------------------------------------------- ------------------------------------------
YEAR ENDED FOUR FORTY-EIGHT THIRTY-SIX FORTY
---------------------------------------- WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED
JANUARY 1, DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28, OCTOBER 5, OCTOBER 4,
1994 1994 1995 1996 1996(A) 1996(A) 1997
---------- ------------ ------------ ----------- ------------ ----------- -----------
(IN MILLIONS) (IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales.................. $1,650.1 $1,599.7 $1,578.6 $101.7 $1,645.5 $1,171.4 $1,542.2
Costs and expenses:
Cost of sales............. 718.6 705.5 746.8 54.9 774.2 560.7 668.5
Selling, marketing, and
administrative
expenses................ 878.9 845.7 884.6 71.4 794.8 571.3 770.5
Restructuring charges..... 120.1 -- -- -- -- -- --
Loss on impairment of
Salty Snacks business... -- -- 86.5 -- -- -- --
Other..................... 0.1 2.1 (1.4) 0.9 6.4 4.4 7.1
-------- -------- -------- ------ -------- -------- --------
Income (loss) from
continuing operations..... (67.6) 46.4 (137.9) (25.5) 70.1 35.0 96.1
Interest expense (income),
net....................... 81.6 74.4 28.3 (0.1) 38.4 28.7 28.6
-------- -------- -------- ------ -------- -------- --------
Income (loss) from
continuing operations
before income taxes....... (149.2) (28.0) (166.2) (25.4) 31.7 6.3 67.5
Income tax expense
(benefit)................. (22.3) (1.1) (0.5) -- 14.0 3.7 28.4
-------- -------- -------- ------ -------- -------- --------
Income (loss) from
continuing operations
before extraordinary item
and cumulative effect of
accounting changes........ (126.9) (26.9) (165.7) (25.4) 17.7 2.6 39.1
Discontinued operations:
Income from operations of
discontinued frozen food
businesses, net of
tax..................... 0.6 3.4 7.4 -- -- -- --
Gain on disposal of frozen
food businesses, net of
tax..................... -- -- -- 18.9 -- -- --
-------- -------- -------- ------ -------- -------- --------
Income (loss) before
extraordinary item and
cumulative effect of
accounting changes........ (126.3) (23.5) (158.3) (6.5) 17.7 2.6 39.1
Extraordinary item:
Loss on early
extinguishment of debt,
net of tax.............. -- -- -- -- 1.9 1.9 2.7
-------- -------- -------- ------ -------- -------- --------
Income (loss) before
cumulative effect of
accounting changes........ (126.3) (23.5) (158.3) (6.5) 15.8 0.7 36.4
Cumulative effect of
accounting changes, net
of tax.................. (20.9) 0.5 -- -- -- -- --
-------- -------- -------- ------ -------- -------- --------
Net income (loss).......... $ (147.2) $ (23.0) $ (158.3) $ (6.5) $ 15.8 $ 0.7 $ 36.4
======== ======== ======== ====== ======== ======== ========
Net income per share....... -- -- -- -- $ 0.21 $ 0.01 $ 0.45
======== ======== ========
Weighted average shares
outstanding............... -- -- -- -- 76.6 75.5 81.6
======== ======== ========
OTHER DATA:
EBITDA, as adjusted(b)..... $ 98.4 $ 89.5 $ (93.3) $(23.5) $ 119.6 $ 68.1 $ 141.6
Depreciation and
amortization (excluding
items related to
discontinued
operations)............... 45.9 43.1 44.6 2.0 49.5 33.1 45.5
Capital expenditures
(excluding expenditures
related to discontinued
operations)............... 30.6 54.6 54.2 3.2 29.4 18.0 26.1
CASH FLOW DATA:
Cash provided from (used
by)
Operating activities...... $ 22.0 $ (17.4) $ (61.6) $ (0.4) $ 53.6 $ 14.1 $ 128.1
Investing activities...... (92.1) (45.9) (52.4) 65.2 (130.5) (124.7) (20.8)
Financing activities...... 58.3 69.4 104.4 (65.7) 86.8 112.9 (58.2)
-------- -------- -------- ------ -------- -------- --------
Increase (decrease) in cash
and cash equivalents...... $ (11.8) $ 6.1 $ (9.6) $ (0.9) $ 9.9 $ 2.3 $ 49.1
======== ======== ======== ====== ======== ======== ========
</TABLE>
17
<PAGE> 23
<TABLE>
<CAPTION>
AS OF AS OF
------------------------------------------------------- ------------------------------------------
JANUARY 1, DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28, OCTOBER 5, OCTOBER 4,
1994 1994 1995 1996 1996 1996 1997
---------- ------------ ------------ ----------- ------------ ---------- ----------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............... $ 6.4 $ 12.5 $ 3.0 $ 2.1 $ 12.0 $ 4.4 $ 61.1
Total assets............... 1,043.0 1,001.2 926.9 849.1 1,102.1 1,119.6 1,116.1
Due to affiliate........... 872.7 551.6 108.0 105.0 -- -- --
Total debt................. 263.8 333.2 437.6 371.4 457.9 484.0 401.8
Shareholders' equity
(deficit)................. (511.9) (234.9) 51.8 45.3 165.1 149.5 201.5
</TABLE>
Note: Net sales and cost of sales were $1.7 billion and $735 million,
respectively, for the year ended January 2, 1993.
- ------------------------------------
(a) Includes the operating results of Sunshine from the acquisition date of
June 4, 1996 through the end of the period presented. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(b) EBITDA, as adjusted, is defined as income (loss) from continuing operations
before interest, taxes, depreciation, amortization and restructuring
charges (gains). EBITDA, as adjusted, is presented as additional
information because Keebler believes it to be a useful indicator of a
company's ability to meet debt service and capital expenditure
requirements. It is not, however, intended as an alternative measure of
operating results or cash flow from operations (as determined in accordance
with generally accepted accounting principles).
18
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
General
Keebler sells cookies and crackers, custom-baked products to other
manufacturers of branded food products, pie crusts and ice cream cones. Net
sales are principally affected by product pricing and quality, brand
recognition, new product introductions and product line extensions, marketing
and service. Keebler manages these factors to achieve a sales mix favoring its
higher margin products while driving volume through its DSD distribution system.
The principal elements comprising Keebler's cost of sales are raw and
packaging materials, labor and manufacturing overhead. The major raw materials
used in the manufacture of Keebler's products are flour, sugar, chocolate,
shortening and milk. Keebler also uses paper products, such as corrugated
cardboard, as well as films and plastics to package its products. The prices of
these raw materials have been subject to significant volatility. Keebler has
mitigated the effects of such price increases in the past through its hedging
programs, but may not be successful in protecting itself from increases in the
future. In addition to the foregoing factors, cost of sales are affected by the
efficiency of production methods and manufacturing capacity utilization.
Keebler's selling, marketing and administrative expenses are comprised
mainly of labor and lease costs associated with Keebler's DSD distribution
system, trade and consumer promotion costs, other advertising costs and the cost
of corporate offices. While costs associated with Keebler's DSD distribution
system and the cost of corporate offices are generally fixed, promotion and
other advertising costs are more variable. Promotion and other advertising costs
represent the largest component of Keebler's cost structure other than cost of
sales and are principally influenced by changes in net sales.
Matters Affecting Comparability
For the years ended December 31, 1994 and December 30, 1995, the financial
results of the Predecessor Company include the results of operations of the
Salty Snacks business. The Salty Snacks business was liquidated by prior
management in connection with the Keebler acquisition. The condensed results of
operations of the Salty Snacks business, excluding allocations of the fixed
portions of selling, distribution and general administrative expenses, for these
years were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
(IN MILLIONS)
<S> <C> <C>
Net sales.................................... $185.6 $135.7
Income (loss) from operations................ 6.3 (25.6)
</TABLE>
For the years ended December 31, 1994, and December 30, 1995, the financial
results of the Predecessor Company also include the results of operations of the
Frozen Food businesses as a discontinued operation.
Keebler's operating results for the forty-eight weeks ended December 28,
1996 have been combined with the operating results of the Predecessor Company
for the four weeks ended January 26, 1996 to compare the years ended December
28, 1996 and December 30, 1995. Keebler's operating results for the thirty-six
weeks ended October 5, 1996 have been combined with the operating results of the
Predecessor Company for the four weeks ended January 26, 1996 to compare the
forty weeks ended October 4, 1997 and October 5, 1996. Keebler's operating
results for the year ended December 28, 1996 include the operating results of
Sunshine from its
19
<PAGE> 25
acquisition date of June 4, 1996. Keebler's operating results for the forty
weeks ended October 4, 1997 include the operating results of Sunshine whereas
the comparable forty weeks of 1996 only include the operating results of
Sunshine from its acquisition date of June 4, 1996. The operating results of
Keebler have been restated to reflect the Merger as if it had been effective
January 26, 1996. Keebler's results of operations, expressed as a percentage of
net sales, for the last three years ended December 31, 1994, December 30, 1995,
and December 28, 1996 and the forty-week periods ended October 5, 1996 and
October 4, 1997 are set forth below:
<TABLE>
<CAPTION>
YEARS ENDED FORTY WEEKS ENDED
-------------------------------------------- ------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28, OCTOBER 5, OCTOBER 4,
1994 1995 1996 1996 1997
------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost and expenses:
Cost of sales........................ 44.1 47.3 47.5 48.4 43.3
Selling, marketing and administrative
expenses.......................... 52.9 56.0 49.6 50.5 50.0
Loss on impairment of Salty Snacks
business.......................... -- 5.5 -- --
---
Other................................ 0.1 (0.1) 0.4 0.4 0.5
----- ----- ----- ----- -----
Income (loss) from
operations........................... 2.9 (8.7) 2.5 0.7 6.2
Interest expense, net.................. 4.7 1.8 2.2 2.2 1.8
----- ----- ----- ----- -----
Income (loss) from continuing
operations before income taxes....... (1.8) (10.5) 0.3 (1.5) 4.4
Income tax expense (benefit)......... (0.1) -- 0.8 0.3 1.8
----- ----- ----- ----- -----
Income (loss) from continuing
operations before extraordinary item
and cumulative effect of accounting
changes.............................. (1.7) (10.5) (0.5) (1.8) 2.6
Discontinued operations:
Income from operations of Frozen Food
businesses, net of tax............ 0.2 0.5 -- -- --
Gain on disposal of Frozen Food
businesses, net of tax............ -- -- 1.1 1.5 --
----- ----- ----- ----- -----
Income (loss) before extraordinary item
and cumulative effect of accounting
changes.............................. (1.5) (10.0) 0.6 (0.3) 2.6
Extraordinary item:
Loss on early extinguishment of debt,
net of tax........................ -- -- 0.1 0.2 0.2
----- ----- ----- ----- -----
Income (loss) before cumulative effect
of accounting changes................ (1.5) (10.0) 0.5 (0.5) 2.4
Cumulative effect of accounting
changes, net of tax............... 0.1 -- -- -- --
----- ----- ----- ----- -----
Net income (loss)...................... (1.4)% (10.0)% 0.5% (0.5)% 2.4%
===== ===== ===== ===== =====
</TABLE>
COMPARISON OF FIRST FORTY WEEKS OF 1996 AND 1997
Net Sales. For the forty weeks ended October 4, 1997, net sales of $1,542.2
million were 21.1% higher compared to the same period of the prior year. In
1997, Keebler continued to focus on shifting its sales mix to more profitable
branded cookie and cracker products, while discontinuing or repositioning
several less strategic products. Increased net sales resulting from volume
growth in these more profitable branded cookie and cracker products, new
products and
20
<PAGE> 26
line extensions, and selected price increases more than offset revenue losses
associated with discontinued or de-emphasized products. Higher net sales for the
forty weeks ended October 4, 1997 were partially due to the acquisition of the
Sunshine business. Sunshine results in 1996 were only included from its
acquisition date of June 4, 1996 and accounted for 12.7% of Keebler's 1996 net
sales. For the forty weeks ended October 4, 1997, net sales of Sunshine products
were 27.5% of Keebler's total net sales. The 1997 Sunshine net sales include an
additional twenty-four weeks of activity as compared to 1996.
Gross Profit. Gross profit was $216.3 million higher for the forty weeks
ended October 4, 1997 compared to the same period in the prior year. In
addition, gross profit as a percentage of net sales was 5.1% higher than the
comparable period in 1996. The improvement in the gross margin percentage for
1997 resulted largely from both a shift toward higher margin brands and improved
operating efficiencies. In addition, gross profit as a percent of net sales
reflected the benefit of lower commodity prices, particularly for flour. Gross
margins in 1997 also received the full benefit of higher capacity utilization
associated with the streamlining of production facilities which began in 1996.
Selling, Marketing and Administrative Expenses. Selling, marketing and
administrative expenses were $127.7 million higher for the forty weeks ended
October 4, 1997 compared to the same period in the prior year. Increased
spending was attributed primarily to higher marketing expense in support of new
product introductions. Spending for marketing programs represented 24.2% of net
sales for the first forty weeks of 1997 compared to 22.7% for the same period in
the prior year with the increase due principally to higher national advertising
and consumer promotion expenses. Despite higher spending levels, selling,
marketing and administrative expenses as a percentage of net sales remained
relatively consistent with the comparable period in 1996 as a result of
increased volume and a more efficient fixed cost structure, particularly in the
selling and distribution network.
Other. Other expense for the first forty weeks in 1997 was $1.9 million
higher as compared to the same period in 1996. The increase was mainly
attributed to the amortization of Sunshine intangibles for forty weeks in 1997
versus sixteen weeks in 1996, as well as higher bank service charges.
Income (Loss) from Continuing Operations. Income from continuing operations
of $96.1 million for the forty weeks ended October 4, 1997 was $86.7 million
higher than the same period in 1996. The improvement primarily resulted from
volume growth associated with the change in sales mix, the inclusion of the
Sunshine business, increased gross margins, and a more efficient fixed cost
structure. The total benefits realized more than offset the incremental
marketing, amortization and other expenses.
Interest Expense. Interest expense for the first forty weeks of 1997 of
$28.6 million was $0.1 million lower than the same period in 1996, as the
average debt balance for these periods was comparable. Additional debt incurred
late in the second quarter of 1996 to fund the acquisition of Sunshine was
offset by the benefit associated with the early extinguishment of debt in the
first quarter of 1997, resulting in a comparable average debt balance.
Income Taxes. Income taxes for the forty weeks ended October 4, 1997 were
provided at an effective tax rate of 42%. The effective tax rate exceeded the
statutory rate due to nondeductible expenses, principally amortization of
intangibles, including trademarks, tradenames and goodwill. For the forty weeks
ended October 5, 1996, income taxes were provided at a higher effective tax rate
based on a preliminary estimate of nondeductible expenses.
Discontinued Operations. In 1995, the Predecessor Company adopted plans to
discontinue the operations of the Frozen Food businesses, and in the first four
weeks of 1996, a gain of $18.9 million, net of income taxes, was recognized in
the disposal of the Frozen Food businesses.
21
<PAGE> 27
Extraordinary Item Net of Income Taxes. In the first forty weeks of 1997
and 1996, Keebler recorded extraordinary charges related to the write-off of
unamortized bank fees due to the early extinguishment of debt. The after-tax
extraordinary charges recorded were $2.7 million compared to $1.9 million in
1996. The tax benefits of the extraordinary charges were $1.9 million and $1.3
million, respectively.
Net Income (Loss). Net income of $36.4 million for the first forty weeks of
1997 was $42.2 million higher than the $5.8 million loss for the comparable
period for 1996. The substantial growth in net earnings was primarily attributed
to volume increases associated with certain of Keebler's branded cookie and
cracker products, the inclusion of the Sunshine business, improved gross
margins, and a more efficient fixed cost structure.
COMPARISON OF FISCAL 1996 TO 1995
Net Sales. Net sales in 1996 increased $168.6 million, or 10.7%, over 1995.
Net sales in 1996 included Sunshine revenues of $291.2 million, while net sales
in 1995 included sales of the Salty Snacks business of $135.7 million. After
adjusting for these changes in Keebler's business, the year-on-year sales
increase was up $13.1 million compared to a year ago. Along with achieving this
growth, Keebler also shifted its sales focus to more profitable brands. The new
focus was accomplished through selected price increases on Keebler branded
cookie and cracker products, a more targeted marketing emphasis, new products,
and the discontinuation of weaker products. While volumes in 1996 were
relatively flat compared to volumes in 1995, higher revenues were achieved
through these changes in product mix and selected price increases. Temporary
volume decreases in sales to convenience stores, associated with a change in the
selling organization and product discontinuations, were offset by volume gains
from new products and broadened distribution.
Gross Profit. Gross profit as a percentage of net sales for 1996 was 52.6%
compared to 52.7% in 1995. While gross margins, in the aggregate, were down
slightly year-on-year, this belies the significant improvements that were
achieved. The change in sales mix noted above, resulted in an emphasis on more
profitable volume. However, the value-added products emphasized as part of the
1996 sales strategy carried higher production costs than the products sold in
1995. The impact on gross profit of this change in sales mix along with higher
flour prices contributed to higher cost of sales in 1996 versus 1995. Gross
profit margins in 1996 also reflect the inclusion of Sunshine products, which
historically carried a lower gross margin than Keebler products. The impact of
higher costs was more than fully offset by increasing capacity utilization, cost
reductions at the bakeries, as well as lowering scrap levels and achieving a
more balanced production. In addition, reductions in bakery overhead staffing
and a more efficient balancing of internal and co-packing arrangements achieved
a lower cost of production.
Selling, Marketing and Administrative Expenses. Selling, marketing, and
administrative expenses decreased $18.3 million and improved by 6.4 percentage
points as a percent of net sales in 1996 compared to 1995. Included in 1996
expenses were selling, marketing and administrative expenses of $131.9 million
directly attributable to the Sunshine business; while 1995 included expenses of
$87.4 million directly associated with the Salty Snacks business (excluding
allocation of the fixed portions of selling, distribution, and administrative
expenses). Excluding these influences, selling, marketing and administrative
expenses decreased in 1996 compared to 1995 by $62.8 million. The improvement
was principally accomplished through a targeted marketing plan behind Keebler
products and Keebler's cost reduction program to rationalize the selling and
administrative cost structure. In 1996, Keebler's focus on spending for trade
promotions at the store level resulted in higher trade allowances which were
more than offset by the $49.5 million decrease in national advertising and
consumer promotions. The cost reductions in the selling and administrative
structures were achieved primarily through headcount reductions of approximately
1,740 and changing from a relatively higher cost step-van selling organization
to independent distributors to serve the convenience store channel. A decrease
in research and development
22
<PAGE> 28
costs of $9.6 million was primarily attributed to headcount reductions, more
focused new product programs in 1996 and lower project activity due in part to
the liquidation of the Salty Snacks business prior to the Keebler acquisition.
The cost reductions more than offset increased administrative expenses of
management incentives and increased depreciation as a result of the Keebler and
Sunshine acquisitions.
Other. Other income and expense for 1996 was $7.2 million compared to $1.4
million of income for 1995. Other expense in 1996 consisted of $5.2 million of
amortization resulting from both the Keebler and Sunshine acquisitions and bank
service charges. In 1995, other income and expense consisted of $1.7 million of
amortization expense, $1.4 million of miscellaneous expenses and bank service
charges, and other income of $4.5 million representing the gain on the sale of
interests in certain logos, tradenames, trademarks and service marks registered
or pending registration in Australia, New Zealand, Asia and Europe.
Income (Loss) from Continuing Operations. Income from continuing operations
was $44.7 million in 1996, an improvement of $182.5 million over the loss from
continuing operations for 1995. After adjusting the 1995 net operating loss of
$137.9 million for the $25.6 million loss in the Salty Snacks business and the
impairment write down of $86.5 million associated with that business, the
earnings improvement in 1996 over 1995 was $70.5 million. The turnaround
resulted from improved gross margins on Keebler brands, more efficient marketing
expenditures, and cost savings achieved in sales and distribution and corporate
overhead. The cumulative savings from these initiatives more than offset
incremental depreciation and amortization expense totaling $9.7 million recorded
as a result of the Keebler and Sunshine acquisitions.
Interest Expense. For 1996, net interest expense was $38.4 million compared
to $28.3 million in 1995. The increase was due to the amortization of debt
issuance costs and higher overall borrowings carrying a higher average interest
rate as compared to the prior year.
Income Taxes. Keebler provided for income taxes at an effective tax rate of
44.2% for the forty-eight weeks ended December 28, 1996. The Predecessor Company
did not provide for any income tax expense for the four weeks ended January 26,
1996. The effective tax rate was higher than the statutory rate because of
nondeductible expenses (principally, amortization of intangibles, including
trademarks, tradenames and goodwill). In 1995, there was no provision for income
taxes due to operating losses incurred and the inability to carryback the losses
to recover taxes paid in prior years. As part of the Keebler acquisition,
Keebler adjusted the valuation allowance on deferred taxes by $25.1 million to
reflect the elimination of certain deferred tax assets revalued in the purchase
price allocation. At December 28, 1996, Keebler carried a deferred tax valuation
allowance of $84.4 million to provide for the uncertainty in realizing the
deductibility of deferred tax assets recognized. Pursuant to the terms of the
Keebler acquisition, the Predecessor Company retained the right to use the net
operating losses for potential carrybacks. Any unused operating losses are then
available to Keebler, but are significantly restricted under current tax law.
Therefore, all net operating loss carryforwards have been fully reserved due to
the uncertainty of their realization.
Discontinued Operations. During 1995, the Predecessor Company decided to
dispose of the Frozen Food businesses and, therefore, presented the operations
of those businesses as a discontinued item in the statement of operations. In
the first four weeks of 1996, a gain of $18.9 million net of income taxes on the
disposal of the Frozen Food businesses was recognized.
Extraordinary Item Net of Income Taxes. A before-tax extraordinary loss of
$3.2 million on the early extinguishment of debt was recorded in the second
quarter of 1996. The loss consisted primarily of the write-off of unamortized
bank fees incurred when Keebler replaced the Keebler acquisition bridge loan
with the Senior Subordinated Notes. The tax benefit on the extraordinary loss
was $1.3 million resulting in an after-tax loss of $1.9 million.
23
<PAGE> 29
Net Income (Loss). Net income of $9.3 million for 1996 represented a
substantial improvement over the $158.3 million net loss for the prior year. The
improvement was attributable to operating improvements, the divestiture of the
unprofitable Salty Snacks business, and the recognized gain of $18.9 million on
the disposition of the Frozen Food businesses.
COMPARISON OF FISCAL 1995 TO 1994
Net Sales. The Predecessor Company's net sales in 1995 were $1.58 billion,
a 1.3% decrease from net sales of $1.60 billion in 1994. Net sales, excluding
sales of the Salty Snacks business, in 1995 were $1.44 billion, which
represented an increase of 2.0% over net sales of $1.41 billion in 1994. This
increase resulted from increased private label sales, increased sales of custom
products and price increases on certain Keebler products. Despite more than
thirty new product introductions and increased marketing support, combined
branded cookie and cracker sales were essentially unchanged from sales in 1994.
Sales of branded cookies increased 3.2%, benefiting from price increases for
certain products, new products and line extensions. Branded cracker sales
decreased 2.2% from 1994 because the restaging of both box snack crackers and
graham crackers failed to stimulate sales gains. Private label cookie and
cracker sales increased 7.7% primarily due to both increased account penetration
and expansion of the private label cracker program. Sales of custom products
increased as a result of increased demand by a major customer.
Gross Profit. The Predecessor Company's gross profit decreased to $831.8
million or 52.7% of net sales in 1995 from $894.2 million or 55.9% of net sales
in 1994. Gross profit, excluding gross profit from the Salty Snacks business,
decreased to $770.1 million or 53.4% of net sales in 1995 from $787.8 million or
55.7% of net sales in 1994. Increased raw and packaging material prices in flour
and corrugated cardboard resulted in higher costs to Keebler of approximately
$17.0 million (excluding costs related to the Salty Snacks business), or 1.2% of
net sales, which were not fully passed on to Keebler's customers. The restaging
of box snack crackers and cracker packs, which resulted in a net reduction in
sales price, and a shift to cookie and cracker products with lower margins, such
as private label products and custom-baked products, also reduced gross profits.
Selling, Marketing and Administrative Expenses. The Predecessor Company's
selling, marketing and administrative expenses were $884.6 million or 56.0% of
net sales in 1995 compared to $845.7 million or 52.9% of net sales in 1994.
Selling, marketing and administrative expenses, excluding expenses of the Salty
Snacks business, were $797.2 million or 55.3% of net sales in 1995, compared to
$745.6 million or 52.7% of net sales in 1994. Marketing spending, excluding
spending related to the Salty Snacks business, increased $39.4 million over 1994
expenditures because Keebler followed a marketing plan designed to increase
sales through aggressive advertising and consumer spending to support new
product introductions and through increased trade spending.
Loss on Impairment of Salty Snacks Business. During 1995, the Predecessor
Company recorded an impairment loss related to its anticipated sale and
liquidation of its Salty Snacks business amounting to $86.5 million.
(Loss) Income from Continuing Operations. Loss from continuing operations
was $137.9 million in 1995, compared to income from continuing operations of
$46.4 million in 1994. This decrease primarily resulted from the impairment loss
related to the Salty Snacks business, the decline in gross profit and increased
marketing and selling distribution expenses. (Loss) income from continuing
operations as a percentage of net sales was (8.7)% in 1995 and 2.9% in 1994.
Interest Expense. Net interest expense in 1995 was $28.3 million, compared
to $74.4 million in 1994. This decrease was due to the full year impact of the
recapitalization of $300.0 million in intercompany debt in September 1994, as
well as the recapitalization of an additional $445.0 million of intercompany
debt in February 1995. The benefit of these recapitalizations was partially
offset by increased borrowings to finance operations.
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<PAGE> 30
Loss from Continuing Operations before Income Taxes and Cumulative Effect
of Accounting Changes. Loss from continuing operations before income taxes and
cumulative effect of accounting changes was $166.1 million in 1995, compared to
a loss of $28.1 million in 1994.
Income Taxes. The income tax benefits recorded in 1995 and 1994 were less
than the benefits computed using the federal and state statutory rates because
the Predecessor Company provided an additional $70.4 million and $9.2 million,
respectively, for the valuation allowance against deferred tax assets as the
realization of these benefits is not likely. All tax net operating loss
carryforwards have been fully reserved due to the uncertainty of their
realization.
Loss from Continuing Operations before Cumulative Effect of Accounting
Changes and Net Loss. Loss before cumulative effect of accounting changes in
1995 was $165.7 million compared to a loss of $26.9 million in 1994. There were
no accounting changes in 1995. In 1994, the cumulative effect of accounting
changes was a net credit of $0.5 million. The net credit consisted of a $2.5
million after-tax charge upon the adoption of SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," offset by a $3.0 million after-tax
benefit for a change in the method of accounting for spare machinery and
equipment parts. After the cumulative effect of accounting changes, the net loss
was $158.3 million in 1995, compared to a net loss of $23.0 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
A condensed cash flow statement of Keebler follows:
<TABLE>
<CAPTION>
FORTY WEEKS
YEARS ENDED ENDED
---------------------------- -----------
DECEMBER 30, DECEMBER 28, OCTOBER 4,
1995 1996 1997
------------ ------------ -----------
(IN MILLIONS)
<S> <C> <C> <C>
CASH PROVIDED FROM (USED BY)
Operating activities............ $(61.6) $ 53.2 $128.1
Investing activities............ (52.4) (65.3) (20.8)
Financing activities............ 104.4 21.1 (58.2)
------ ------ ------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................ $ (9.6) $ 9.0 $ 49.1
====== ====== ======
</TABLE>
Cash Flow for the Forty Weeks Ended October 4, 1997
During the first forty weeks of 1997, cash provided from operating
activities was $128.1 million. Net earnings of $36.4 million for the forty weeks
ended October 4, 1997 and reduced funding of current liabilities and income
taxes were the primary contributors to the positive cash flow from operations.
The reduced funding of current liabilities was attributable primarily to the
timing of payments while the increase in income taxes payable was attributable
to increased earnings in 1997. An increased investment in inventory, spending on
plant and facility closing costs and severance, and the payment of an
arbitration award partially offset the benefits noted above. The increase in
inventory from year end reflected normal seasonal inventory replenishment.
Spending on plant and facility closing costs and severance relating to exit
costs associated with the Keebler and Sunshine acquisitions, although down from
the prior year, accounted for $14.0 million of cash used by operations for the
forty weeks ended October 4, 1997. In addition, Keebler paid an arbitration
award regarding a contract packaging arrangement, which was entered into by the
Predecessor Company, in the amount of $6.8 million plus legal fees.
Cash used by investing activities of $20.8 million for 1997 was primarily
used to fund capital expenditures. Capital spending of $26.1 million was made
principally to enhance, update or realign the existing production lines, provide
distribution and production efficiencies, and to
25
<PAGE> 31
achieve near-term cost savings. Proceeds received from asset disposals of $5.3
million partially offset capital expenditures. The sale of Keebler's Santa Fe
Springs plant accounted for $3.6 million of the year-to-date proceeds, with the
remainder of the proceeds provided mainly from the sale of trucks and machinery
and equipment. Keebler continues to carry the Atlanta, Georgia manufacturing
facility as an asset held for sale and expects the disposition to occur before
the end of 1998 without a significant gain or loss.
Cash used by financing activities in 1997 was $58.2 million. In 1997,
Keebler entered into an amendment and restatement of the Senior Credit Facility,
proceeds from which were used to extinguish existing term notes under the Senior
Credit Facility of $153.6 million. The extinguishment was funded primarily by a
draw down on the revolving credit facility (the "Revolving Credit Facility") and
of $109.8 million under new term notes, in each case under the Senior Credit
Facility. During 1997, the draw down on the Revolving Credit Facility was
completely repaid and $14.3 million of scheduled principal payments were made on
the term notes and other debt.
Cash Flow for 1996 and 1995
Cash provided from operating activities increased $114.8 million in 1996
over the cash used in operations in 1995. The significant increase reflects the
net earnings improvement along with improved working capital management.
Adjusting the 1995 net loss of $158.3 million by both the $86.5 million loss
recorded on the impairment of the Salty Snacks business and the Salty Snacks
business operating loss of $25.6 million, yields a 1995 net loss of $46.2
million compared to 1996 net income of $9.3 million. The net earnings
improvement of $55.5 million was achieved through increased revenues attributed
to price increases, a more profitable sales volume mix, and cost reductions.
Lower costs resulted from lower fixed overhead, reduced selling, distribution
and administrative expense resulting from headcount reductions, and more
effective marketing spending. The improved cash provided by working capital
resulted from a sustained improvement in cash collections of accounts receivable
and higher accounts payable. The additional cash provided from working capital
more than funded the combined $41.3 million of spending on plant and facility
closing costs and severance, as a result of actions in connection with the
Keebler and Sunshine acquisitions. Keebler believes that spending on plant and
facility closing costs and severance should be substantially completed over the
next two years. Only noncancellable lease obligations are expected to exceed
such two-year time frame.
Cash used by investing activities was $65.3 million in 1996 compared to
$52.4 million in 1995. The cash used in 1996 was directly attributable to the
$142.7 million used to finance the Sunshine acquisition. Offsetting this use of
cash was the receipt of $32.6 million working capital adjustment paid by UB
Investments (Netherlands) B.V. in connection with the Keebler acquisition and a
$67.7 million source of cash received by the Predecessor Company resulting from
the disposition of the Frozen Food businesses. Capital expenditures were $56.0
million and $55.4 million in 1994 and 1995, respectively. In 1996, current
management spent $32.6 million on capital projects mostly designed to generate
near-term cost savings and to complete the investment in improved management
information systems. Capital expenditures were down from the prior years
reflecting the near completion of the installation of the Company's SAP R/3
management information system and tighter restrictions on additional capital
expenditures in 1996 primarily to achieve near-term costs savings and enable new
product developments. Keebler believes that the capital expenditure program will
continue at a level sufficient to support its strategies and operating needs.
Cash flow provided from financing activities decreased $83.3 million in
1996 from 1995. In 1996, the $21.1 million cash provided from financing
activities was comprised of $220.0 million in long-term debt borrowings of which
$95.0 million was used to finance the Sunshine acquisition. An additional $125.0
million of borrowings represents the issuance of the Senior Subordinated Notes
which was done to refinance the bridge loan used to finance the Keebler
acquisition. Draw downs and repayments on the Revolving Credit Facility were
$37.2 million of which $19.0 million
26
<PAGE> 32
was used to finance a portion of the Sunshine acquisition. The remaining $18.2
million was used to finance working capital requirements. Offsetting these
sources was $63.3 million paid by the Predecessor Company to settle commercial
paper and revolving credit obligations and $2.4 million of principal payments on
equipment obligations. The cash provided from financing activities of $104.4
million in 1995 was through commercial paper borrowings used to finance
operating losses, capital expenditures, and cash spent on restructuring
initiatives.
Liquidity
Keebler's liquidity in 1997 and 1996 was provided from the Revolving Credit
Facility. In 1996 available borrowings under the Revolving Credit Facility were
$155.0 million which was reduced to $140.0 million in 1997. Borrowings under the
Revolving Credit Facility in 1996 and 1997 were $37.2 million and $32.8 million,
respectively, all of which had been repaid as of December 28, 1996 and October
4, 1997. In 1995, borrowings of Keebler were provided by a $200.0 million
commercial paper program and a revolving credit agreement. Both the commercial
paper program and revolving credit agreement were no longer available after the
Keebler acquisition. Keebler's total debt was $437.6 million, $457.9 million and
$401.8 million as of December 30, 1995, December 28, 1996 and October 4, 1997,
respectively. Current maturities on the total debt outstanding were $286.5
million, $18.6 million and $31.3 million as of such respective dates. Cash and
cash equivalents were $3.0 million, $12.0 million and $61.1 million as of such
respective dates. On November 10, 1997, Keebler made a $40.0 million prepayment,
and on December 8, 1997, Keebler made a $30.0 million prepayment, of principal
on outstanding term notes under the Senior Credit Facility. The prepayments were
funded from available cash and will result in the recognition of an aggregate
fourth quarter 1997 after-tax extraordinary charge of $0.8 million resulting
from the loss on the early extinguishment of this debt. On November 21, 1997,
Keebler purchased the Seller Note for $31.7 million and cancelled it. The
purchase and cancellation of the Seller Note will result in the recognition of a
fourth quarter 1997 after-tax extraordinary charge of $1.5 million resulting
from the loss on the early extinguishment of this debt. The consummation of the
Offering will require Keebler to make an offer to purchase its Senior
Subordinated Notes at 101% of their principal amount. Given current trading
prices, Keebler does not expect holders of Senior Subordinated Notes to tender
for the Senior Subordinated Notes. If Senior Subordinated Notes are tendered,
Keebler would obtain funds to consummate the offer to purchase out of internally
generated funds and from draws under the Revolving Credit Facility. See "Risk
Factors -- Required Offer to Purchase Senior Subordinated Notes." Keebler
believes that available cash as well as existing credit facilities will be
sufficient to meet Keebler's normal operating requirements for the foreseeable
future.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," which is required to be adopted in Keebler's first quarter fiscal 1998
financial statements. This new standard establishes methods for computing and
presenting earnings per share ("EPS") and also simplifies the previous standards
found in APB Opinion No. 15, "Earnings per Share." It requires dual presentation
of basic and diluted EPS on the Statements of Consolidated Earnings. Keebler has
not yet determined the impact this new statement may have on disclosures in the
consolidated financial statements.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is effective in fiscal
year 1999. This new statement revises standards for public companies to report
information about segments of their business and also requires disclosure of
selected segment information in quarterly financial reports. The statement also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Keebler has not yet determined the impact
this new statement may have on disclosures in the consolidated financial
statements.
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<PAGE> 33
The FASB also issued certain other disclosure-related accounting
pronouncements during 1997. While these new statements are effective for future
reporting periods, Keebler does not anticipate they will have any significant
impact on the consolidated financial statements.
SEASONALITY
Keebler's net sales, net income and cash flows are affected by the timing
of new product introductions, promotional activities, price increases, and a
seasonal sales bias toward the second half of the year due to events such as
back-to-school, Thanksgiving and Christmas. The relative mix between cookie and
cracker sales varies throughout the year with stronger cracker sales in the last
quarter of the calendar year.
SELF INSURANCE
Keebler purchases insurance coverage for worker's compensation, general,
product and vehicle liability maintaining certain levels of retained risk
(self-insured portion). Potential losses relating to claims under the
self-insured portion of the policies are accrued in accordance with the
requirements of Statement of Financial Accounting Standards (SFAS) No. 5,
"Accounting for Contingencies." There are no unasserted claims that require a
reserve or disclosure in accordance with SFAS No. 5.
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<PAGE> 34
BUSINESS
THE COMPANY
Keebler is the second largest cookie and cracker manufacturer in the United
States with annual net sales of $2.0 billion and a 24.2% share of the U.S.
cookie and cracker market. Keebler markets a majority of its products under
well-recognized brands such as Keebler, Cheez-It and Carr's. In the United
States, Keebler is the number two manufacturer of branded cookies and crackers,
the number one manufacturer of private label cookies and the number one
manufacturer of cookies and crackers for the foodservice market. Keebler is the
number one manufacturer of retail branded ice cream cones in the United States.
In addition, Keebler is a major producer of retail branded pie crusts. Keebler
also produces custom-baked products for other marketers of branded food
products.
Branded Products. Keebler's branded cookie and cracker products accounted
for 81% of its net sales in the first forty weeks of 1997. Keebler produces
eight of the twenty-five best-selling cookies and ten of the twenty-five
best-selling crackers in the United States based on dollar sales. Keebler's
branded cookie and cracker products include, among others, the following:
<TABLE>
<CAPTION>
KEEBLER BRAND CHEEZ-IT BRAND OTHER BRANDS
------------- -------------- ------------
<C> <C> <C>
Chips Deluxe cookies Cheez-It snack crackers Carr's
Pecan Sandies cookies Cheez-It party mix Vienna Fingers
Fudge Shoppe cookies Nacho Cheez-It Hydrox
Town House crackers Sunshine Krispy
Club crackers Hi-Ho
Graham Selects crackers
Wheatables crackers
Zesta crackers
</TABLE>
DSD Distribution System. Keebler distributes its branded cookie and cracker
products to approximately 30,000 retail locations through its DSD distribution
system. With this DSD distribution system, Keebler services substantially all
supermarkets in the United States. Keebler is one of only two cookie and cracker
companies that owns and operates a national DSD distribution system. Keebler
believes its DSD distribution system provides it with certain competitive
advantages. Sales employees of Keebler's DSD distribution system visit
supermarkets on average 2.8 times each week. These employees stock and arrange
Keebler's products on store shelves and build end-aisle and free-standing
product displays. This frequent presence of Keebler employees in supermarkets
provides Keebler with a high level of control over the availability and
presentation of its products. Keebler believes that this control allows it to
maintain shelf space, better execute in-store promotions and more effectively
introduce new products. In-store promotions are important because Keebler
believes that purchases of cookies and crackers are often impulse driven.
INDUSTRY OVERVIEW
The U.S. cookie and cracker industry had 1996 retail sales of $8.1 billion,
with cookie sales of $4.8 billion and cracker sales of $3.3 billion. Since 1992,
consumption per person of cookies and crackers in the United States has remained
stable. The cookie and cracker industry is comprised of distinct product
segments. Cookie segments include, among others, sandwich cookies, chocolate
chip cookies and fudge-covered cookies. Cracker segments include, among others,
saltine crackers, graham crackers and snack crackers.
Supermarkets accounted for 78% of 1996 retail sales in the cookie and
cracker industry with mass merchandisers, such as Target; convenience stores;
and drug stores accounting for the balance. Since 1992, U.S. annual dollar
supermarket sales of cookies and crackers have increased by an average of 1.5%
per year. Keebler believes that non-supermarket channels of distribution are
becoming increasingly important.
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<PAGE> 35
Keebler and Nabisco are the two largest national participants in the cookie
and cracker industry. Keebler and Nabisco have a combined market share of 58.4%,
with Keebler having 24.2% and Nabisco having 34.2%. Other participants in the
industry generally operate only in certain regions of the United States or only
participate in a limited number of segments of the industry.
STRATEGY
Since the acquisition of the Keebler business in January 1996, Keebler's
new management began implementing a business strategy designed to capitalize on
its competitive strengths, which include Keebler's strong national brands and
its national DSD distribution system. The acquisition of Sunshine in June 1996
enables Keebler to further develop this business strategy. The key elements of
Keebler's strategy are:
Build on the Keebler Brand. Keebler is one of the few packaged food brands
that generates over $1 billion in annual sales. The Keebler brand is recognized
in approximately 98% of U.S. households and is used in approximately two-thirds
of U.S. households. This brand awareness has been developed over many years of
marketing "Elfin Magic" imagery and "Uncommonly Good" Keebler products. Keebler
intends to continue to invest in advertising and promoting the Keebler brand.
Keebler's marketing will emphasize the well known images of Ernie and the other
Keebler Elves and Keebler's Hollow Tree.
Take Advantage of Product Segmentation and Keebler Brand Strength Across
Product Segments. As described above, the cookie and cracker industry has many
distinct product segments. Keebler believes that many well known cookie and
cracker brands are only associated with one product segment, such as the
chocolate chip cookie segment, making it difficult for these brands to be used
to market products in other segments. In contrast, Keebler believes the strength
of the Keebler brand is its consumer identity across a wide variety of product
segments. Keebler's strategy is to target product segments where it already has
a strong position or that are not dominated by a strong branded product. In
addition, Keebler plans to continue to use the Keebler brand to cost
effectively:
- introduce new products;
- create new product segments; and
- compete in smaller product segments.
Expand the Cheez-It Brand. Keebler's Cheez-It brand crackers are the number
one selling snack cracker in the United States. Annual retail sales of Cheez-It
brand products exceed $200 million. Keebler began to distribute Cheez-It brand
products through its DSD distribution system in Fall 1996. For the first
forty-eight weeks of 1997, retail sales of Cheez-It brand products increased by
over 30% compared to the first forty-eight weeks of 1996 when they were not
distributed through Keebler's DSD distribution system. The Cheez-It brand has a
distinctive image with consumers. Keebler intends to maintain and build on this
distinctiveness through new products, advertising and packaging.
Expand Non-Supermarket Sales. In 1996, 22% of retail cookie and cracker
sales were through mass merchandisers, convenience stores and drug stores.
Keebler believes that its total share of sales to these and other
non-supermarket channels, including club stores, such as Costco Wholesale, and
vending distributors is less than half of its share of sales to supermarkets.
Following the Keebler acquisition in January 1996, Keebler's new management
began focusing resources on non-supermarket channels. Keebler has developed, and
continues to develop, products, packaging and distribution tailored to
non-supermarket channels. As a result of these efforts, Keebler's
non-supermarket sales have grown significantly. For example, Keebler's retail
sales through mass merchandisers increased 30% in the first forty-eight weeks of
1997 compared to the first forty-eight weeks of 1996.
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<PAGE> 36
Increase the Efficiency of its Operations. Since the Keebler acquisition,
Keebler's new management has lowered annual costs by approximately $120 million
principally by closing plants, reducing overhead and combining the Keebler and
Sunshine sales forces. The relocation of production resulting from the closing
of plants increased Keebler's use of capacity at its manufacturing facilities
from 72% to 82%. Keebler intends to continue to increase the efficiency of its
operations and reduce costs. For example, Keebler plans to reduce costs by
making capital expenditures to further automate its facilities. Keebler also is
focusing on moving products more efficiently through its DSD distribution system
and its other distribution systems.
Pursue Acquisitions. Approximately 27% of cookie and cracker supermarket
sales are attributable to regional or smaller brands, some of which have strong
positions and retail relationships in their core markets. Keebler intends to
pursue acquisitions that complement or provide further opportunities to use its
existing brands, product lines or distribution systems.
KEEBLER HISTORY
Keebler was founded in 1853. In 1974, Keebler was acquired by United
Biscuits plc ("United Biscuits"). In the early 1980s, Keebler introduced salty
snack products and then expanded its distribution system to accommodate them.
After experiencing initial growth, sales of Keebler's salty snack products began
to decline. In response, Keebler embarked on a strategy aimed at increasing the
sales volume of its other products (i.e. cookies and crackers), in part to
increase utilization of its DSD distribution system. As a result of competitive
responses to Keebler's actions, Keebler did not increase its share of the cookie
and cracker market. At the time of the Keebler acquisition in January 1996,
Keebler disposed of its Salty Snacks business.
In June 1996, Keebler acquired Sunshine, the third largest cookie and
cracker manufacturer in the United States. By the end of 1996, Keebler completed
its planned integration of Sunshine's operations into those of Keebler. The
combination of Sunshine and Keebler allowed Keebler to achieve efficiencies in
administration, purchasing, production, marketing, sales and distribution. In
particular, Keebler incorporated the sales and distribution of Sunshine retail
branded products into Keebler's DSD distribution system which had excess
capacity. Filling this excess capacity with Sunshine products made Keebler's DSD
distribution system more efficient and allowed Keebler to focus its sales and
marketing efforts on its more profitable retail branded products.
Other initiatives that Keebler implemented since the Keebler acquisition
include:
- refocusing Keebler on its core cookie and cracker business;
- decentralizing management and tying compensation to profitability rather
than sales volume;
- significantly reducing costs; and
- focusing resources in those segments of the cookie and cracker market
where Keebler believes it has a competitive advantage.
PRODUCTS AND MARKETS
Keebler is the second largest cookie and cracker manufacturer in the United
States. Keebler's principal product categories include branded and private label
cookie and cracker products (which are sold in a variety of different flavors,
shapes, fat contents, sizes, weights and packages), pie crusts and ice cream
cones for retail and foodservice markets and custom-baked products for other
marketers of branded food products. Keebler produces and markets eight of the
twenty-five best-selling cookies and ten of the twenty-five best-selling
crackers in the United States based on dollar sales and has a 22.0% share of the
U.S. cookie market and a 27.4% share of the U.S. cracker market.
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<PAGE> 37
Branded Cookies
Net sales of Keebler's retail branded cookies amounted to $373.8 million,
$453.0 million and $440.5 million in 1995, in 1996 and in the first forty weeks
of 1997, respectively. The following table sets forth information with respect
to Keebler's leading branded cookie products:
<TABLE>
<CAPTION>
PRODUCT SEGMENT MARKET POSITION
------- ------- ---------------
(BASED ON DOLLAR SALES)
<S> <C> <C>
Keebler Chips Deluxe Chocolate Chip #2
Keebler Fudge Shoppe Fudge-covered #1
Keebler Sandies Shortbread #1
Vienna Fingers Non-chocolate Sandwich #2
Keebler Vanilla
Wafers Vanilla Wafers #2
Hydrox Chocolate Sandwich #2
</TABLE>
Branded Crackers
Net sales of Keebler's retail branded crackers (including imported crackers
sold under other branded labels) amounted to $405.1 million, $544.8 million and
$477.5 million in 1995, in 1996 and in the first forty weeks of 1997,
respectively. The following table sets forth information with respect to
Keebler's leading branded cracker products:
<TABLE>
<CAPTION>
PRODUCT SEGMENT MARKET POSITION
------- ------- ---------------
(BASED ON DOLLAR SALES)
<S> <C> <C>
Cheez-It Snack #1
Keebler Town House Everyday #2
Keebler Graham Selects Graham #2
Keebler Zesta Saltine #2
Carr's Specialty #1
</TABLE>
Keebler imports and distributes Carr's crackers in the United States under
an exclusive long-term licensing and distribution agreement with United
Biscuits. Carr's crackers are manufactured in the United Kingdom by McVities, a
subsidiary of United Biscuits. Carr's crackers are the best-selling specialty
crackers in the United States. Pursuant to the licensing and distribution
agreement, Keebler has the right to produce new cookie and cracker products
under the Carr's label, which can be marketed throughout the United States.
Pie Crusts
Preformed pie crusts, sold under the Keebler Ready Crust brand name,
accounted for approximately 71% of the U.S. retail shelf stable preformed pie
crust market (measured in dollars). Net sales of pie crusts in 1995, in 1996 and
the first forty weeks of 1997 were $44.0 million, $43.0 million and $27.3
million, respectively. Keebler's dedicated Keebler Ready Crust sales team,
assisted by a national system of independent brokers, markets Keebler Ready
Crust products, which are shipped directly to customers' warehouses.
Ice Cream Cones
Keebler branded ice cream cones are the leading retail branded ice cream
cones in the United States with a 33% market share. Keebler also markets its ice
cream cones through foodservice channels and produces cones for various
restaurants and ice cream retailers, such as McDonald's and TCBY. Net sales for
branded ice cream cones were $18.3 million, $21.3 million and $21.5 million in
1995, in 1996 and in the first forty weeks of 1997, respectively.
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<PAGE> 38
Products for the Foodservice Market
Keebler is the leading supplier of cookies and crackers purchased by the
foodservice market in the United States. Keebler's net sales to the foodservice
market in the first forty weeks of 1997 amounted to $115.9 million. Keebler's
foodservice products are sold by a national sales force dedicated exclusively to
the foodservice market, with the assistance of independent brokers. In the
foodservice market, Keebler generally sells to large distributors who sell these
products to restaurants and institutions.
New Products
Since the Keebler acquisition, Keebler has focused new product
introductions on line extensions within its core segments such as Keebler
Chocolate Chewy Chips Deluxe and Nacho Cheez-It and has introduced into new or
less competitive segments innovative products such as Keebler Cookie Stix and
Keebler Snackin' Grahams. Keebler has also developed new sizes of its leading
products to enable it to expand in non-supermarket channels.
Private Label Products
Keebler manufactures private label products to be sold by retailers under
their own brands. Keebler expanded into the private label cookie and cracker
market in 1993 with its purchase of Bake-Line Products, Inc. ("Bake-Line"), a
producer of private label cookie products. While Bake-Line had historically
concentrated on cookie products, Keebler expanded into the private label cracker
market in 1994. Keebler is the leading manufacturer of private label cookie
products in the United States with net sales of $101.1 million for the first
forty weeks of 1997. Keebler has a 38% share of the private label cookie market.
Keebler's private label cracker net sales were $25.8 million for the first forty
weeks of 1997. Keebler has a 12% share of the private label cracker market.
Keebler serves leading supermarkets in the United States with a variety of
private label products ranging from value-oriented standard products to premium
items that compete with branded alternatives. Keebler's plant in Des Plaines,
Illinois is dedicated to producing private label cookies, and is capable of
producing a wide variety of products with numerous packaging options to meet the
wide-ranging demands of Keebler's private label customers. Keebler's private
label cookies and crackers are shipped via common carrier directly to customer
warehouses and are not distributed through Keebler's DSD distribution system.
Custom-Baked Products for Other Marketers of Branded Food Products
Keebler manufactures a variety of custom-baked products for other marketers
of branded food products. In particular, Keebler has manufactured Pop Tarts for
Kellogg since the product's introduction in 1963. Keebler also has manufactured
a variety of other Kellogg branded products, including Cracklin' Oat Bran and
Nutri-Grain bars. Custom-baked products produced for other marketers of branded
food products include crackers for Oscar Mayer Lunchables and Starkist Charlie
Tuna snack kits, Kraft Handi-Snacks, Gerber Biter biscuits and McDonaldland
cookies. These custom-baked products are packaged under the customers' labels
and shipped from Keebler plants to the customers' regional warehouses or
distribution centers via common carrier.
CUSTOMERS
Keebler's top 10 customers in the first forty weeks of 1997 accounted for
28.1% of Keebler's net sales. No single customer accounted for more than 5% of
net sales.
MANAGEMENT INFORMATION SYSTEM
Keebler has installed the SAP R/3 management information system allowing
the rapid communication of extensive information among its corporate office,
manufacturing facilities, distribution facilities and sales force. This software
system enables Keebler to (i) improve the
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<PAGE> 39
efficiency of its manufacturing and distribution facilities, (ii) service the
diverse needs of its decentralized sales force, (iii) plan production runs and
control inventory and (iv) provide consistent, timely and current information to
management. Further, Keebler believes that this system's capability will
facilitate additional improvements in operating efficiencies.
MANUFACTURING AND DISTRIBUTION
Keebler recognizes that the mass distribution of its consumer food products
is an important element in maintaining sales growth and providing service to its
customers. Keebler attempts to meet the changing demands of its customers by
planning appropriate stock levels and reasonable delivery times consistent with
achieving optimal economics of distribution. In order to achieve these
objectives, Keebler has developed a network of manufacturing plants, shipping
centers and distribution warehouses strategically located throughout the
continental United States to provide high national in-store presence. Keebler
uses a combination of Keebler-owned, public and contract carriers to deliver its
products from its distribution points to its customers.
Keebler owns and operates eleven manufacturing facilities in the United
States. The manufacturing facilities are located in Athens, Georgia; Chicago,
Illinois; Cincinnati, Ohio; Columbus, Georgia; Denver, Colorado; Des Plaines,
Illinois; Florence, Kentucky; Grand Rapids, Michigan; Kansas City, Kansas;
Macon, Georgia; and Sayreville, New Jersey. As a result of capital expenditures
made over the past decade, management believes that Keebler's manufacturing
facilities are modern and efficient. Keebler also owns and operates a dairy in
Fremont, Ohio that produces cheese under a proprietary formula which is used as
an ingredient in Cheez-It crackers.
Keebler's distribution facilities consist of eleven shipping centers
attached to the manufacturing facilities, nine separate shipping centers (two
owned and seven leased) and sixty-seven distribution centers (twelve owned and
fifty-five leased) throughout the United States. Of the sixty-seven distribution
centers, six were subleased and eight were idle at October 4, 1997. These eight
idle facilities were included in the plant and facility closing costs accrued as
part of the cost of the Keebler and Sunshine acquisitions. One of the idle
facilities was sold subsequent to October 4, 1997. Keebler also leases thirty
warehouses and seventeen depots that are located throughout the United States
and are utilized by the sales force in the distribution of Keebler's products.
Management believes it has sufficient manufacturing and distribution capacity to
meet foreseeable needs.
Keebler directly services approximately 30,000 retail accounts through its
DSD distribution system, which system employs more than 3,200 persons. Keebler's
DSD distribution system distributes its retail branded cookie and cracker
products directly to the retail location, where these products are then
merchandised by Keebler's own sales force. Members of Keebler's sales force
visit retail outlets an average of 2.8 times per week per store, meeting
directly with and taking orders from store managers and arranging for extra
in-store display space. Keebler's trucks then deliver the orders directly to
such retail outlets, where members of Keebler's sales force, rather than store
employees, stock and arrange its products on the retailers' shelves and build
end-aisle and free standing displays within the stores. While strengthening
relationships with retailers, the frequent store presence of Keebler's sales
force allows it to oversee and execute Keebler's in-store promotional programs.
In addition, it provides Keebler with the ability to monitor competitors'
in-store product promotions.
Keebler and Nabisco are the only cookie and cracker producers that have
national wholly owned DSD distribution systems, although Pepperidge Farms
operates a national DSD distribution system through independent distributors.
Keebler uses its DSD distribution system exclusively to serve supermarkets
and mass merchandisers. Convenience stores and vending distributors are served
using a network of independent distributors. In the case of club stores and
foodservice distributions, Keebler uses a
34
<PAGE> 40
dedicated sales force and ships its products directly to the customers'
warehouses. Keebler intends to further develop certain of these additional
distribution channels. See "-- Strategy."
Keebler uses a warehouse sales and distribution system to sell and
distribute Keebler Ready Crust pie crusts and private label cookies and crackers
to its customers, including retail outlets otherwise served by Keebler's DSD
distribution system. Carr's crackers are sold through a network of independent
specialty distributors.
RAW MATERIALS
The principal raw materials that Keebler uses in its food products consist
of flour, sugar, chocolate, shortening and milk. Keebler also uses paper
products, such as corrugated cardboard, as well as films and plastics to package
its products. Keebler uses hedging techniques to minimize the impact of price
fluctuations and not for speculative or trading purposes. However, such
strategies may not result in a reduction in the Company's raw material costs or
protect the Company from sharp increases in certain raw material costs, which
the Company has experienced in the past. See "Risk Factors -- Increases in
Prices of Main Ingredients and Other Materials."
SEASONALITY
Keebler's net sales, net income and cash flows are affected by the timing
of new product introductions, promotional activities, price increases and a
seasonal sales bias toward the second half of the year due to events such as
back-to-school, Thanksgiving and Christmas. The relative mix between cookie and
cracker sales varies throughout the year with stronger cracker sales in the last
quarter of the calendar year.
EMPLOYEES
Keebler employs approximately 9,700 persons, of which approximately 5,300
are represented by unions. Keebler believes its relations with its employees to
be good.
COMPETITION
The U.S. branded cookie and cracker industry is led by Keebler and Nabisco,
which together account for 58.4% of sales volume. Smaller competitors include
numerous national, regional and local manufacturers of both branded and private
label products. Competition in Keebler's markets takes many forms including the
following:
- establishing favorable brand recognition;
- developing products sought by consumers;
- implementing appropriate pricing;
- providing strong marketing support; and
- obtaining access to retail outlets and sufficient shelf space.
Nabisco is the largest manufacturer in the U.S. cookie and cracker
industry. Keebler has a 24.2% share of the retail cookie and cracker market,
while Nabisco has a 34.2% share. The remaining industry participants primarily
target certain segments of the industry or focus on certain geographical regions
of the United States.
INTELLECTUAL PROPERTY
Keebler owns a number of patents, licenses, trademarks and trade names.
Keebler's principal trademarks and trade names include Keebler, Ernie the
Keebler Elf, the Hollow Tree logo, Cheez-It, Chips Deluxe, Club, Fudge Shoppe,
Graham Selects, Hi-Ho, Hydrox, Sunshine Krispy, Munch'ems, Ready Crust, Sandies,
Soft Batch, Sunshine, Toasteds, Town House, Vienna Fingers, Wheatables, and
Zesta. Keebler is the exclusive licensee of the Carr's brand name in the United
States. Such trademarks and trade names are considered to be of material
importance to the
35
<PAGE> 41
business of Keebler since they have the effect of developing brand
identification and maintaining consumer loyalty. Management is not aware of any
fact that would negatively impact the continuing use of any of its patents,
licenses, trademarks or trade names.
REGULATION
As a manufacturer and marketer of food items, Keebler's operations are
subject to regulation by various federal government agencies, including the Food
and Drug Administration, the Department of Agriculture, the Federal Trade
Commission (the "FTC"), the Environmental Protection Agency, and the Department
of Commerce, as well as various state agencies, with respect to production
processes, product quality, packaging, labeling, storage and distribution. Under
various statutes and regulations, such agencies prescribe requirements and
establish standards for quality, purity, and labeling. The finding of a failure
to comply with one or more regulatory requirements can result in a variety of
sanctions, including monetary fines or compulsory withdrawal of products from
store shelves. In addition, advertising of Keebler's businesses is subject to
regulation by the FTC, and Keebler is subject to certain health and safety
regulations, including those issued under the Occupational Safety and Health
Act. See "Risk Factors -- Impact of Government Regulation on Keebler's
Operations."
ENVIRONMENTAL
Keebler's operations and properties are subject to federal, state and local
laws and regulations relating to the storage, handling, emission and discharge
of materials and wastes into the environment. The primary environmental laws
affecting Keebler's operations are the Federal Clean Air Act and Clean Water
Act. Keebler may be required to spend significant sums in order to maintain
compliance with environmental laws, particularly with respect to emission
control equipment, replacement of chlorofluorocarbons (CFCs, i.e.,
ozone-depleting substances) in cooling equipment, and asbestos abatement
projects. Although it is difficult to estimate the cost of complying with
environmental laws, Keebler does not believe that compliance with, or liability
under, any environmental laws individually or in the aggregate will have a
material adverse effect on its results of operations or financial condition. See
"Risk Factors -- Impact of Governmental Regulation on Keebler's Operations."
LITIGATION
Keebler is involved in routine litigation. Keebler believes none of the
pending or threatened litigation would result in an outcome that would have a
material adverse effect on its results of operations or financial condition.
36
<PAGE> 42
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The table below sets forth certain information with respect to the
executive officers and directors of Keebler:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Sam K. Reed.............. 50 President, Chief Executive Officer and
Director
David B. Vermylen........ 47 President - Keebler Brands
E. Nichol McCully........ 43 Chief Financial Officer and Senior Vice
President - Finance
Jack M. Lotker........... 54 President - Specialty Products
James T. Willard......... 57 Senior Vice President - Operations
Thomas E. O'Neill........ 42 Vice President, Secretary and General Counsel
Harry J. Walsh........... 42 Vice President - Corporate Planning and
Development
Robert P. Crozer......... 50 Director
Raymond Debbane.......... 42 Director
Sacha Lainovic........... 41 Director
Amos R. McMullian........ 60 Director
Christopher J. Sobecki... 39 Director
C. Martin Wood III....... 54 Director
</TABLE>
It is anticipated that following the Offering, one director designated by
Artal will resign and five new directors will be elected to the Board of
Directors, two of whom will be independent. See "Certain Related Transactions --
Flowers Control Purchase." The Board of Directors is divided into three classes
serving staggered three year terms. See "Description of Capital Stock -- Certain
Provisions of the Certificate of Incorporation and By-laws."
Sam K. Reed. Mr. Reed has been the President, Chief Executive Officer and
Director of Keebler since the Keebler acquisition in January 1996. Mr. Reed has
24 years of experience in the snack and baking industries. From January 1994 to
January 1995 he served as Chief Executive Officer of Specialty Foods
Corporation's $450 million Western Bakery Group division. Prior to that, he was
President and Chief Executive Officer of Mother's Cake and Cookie Co. from 1991
to 1994, and held Executive Vice President positions at Wyndham Bakery Products
from 1988 to 1990 and Murray Bakery Products from 1985 to 1988. Mr. Reed managed
a natural foods company from 1984 to 1985, which later became The Quaker Oats
Company's rice cake division. He started his career in 1974 with Oroweat Foods
Company where he spent 10 years in finance, manufacturing and general
management. Mr. Reed received a B.A. from Rice University and an M.B.A. from
Stanford University.
David B. Vermylen. Mr. Vermylen has been the President-Keebler Brands since
the Keebler acquisition in January 1996. Mr. Vermylen manages Keebler's branded
biscuits, pie crust and imported products sector. He has 23 years experience in
marketing consumer packaged goods including cookies, cereals, beverages and
convenience foods. He served as Vice President-Marketing at Mother's Cake and
Cookie Co. from 1991 to 1993 and then President and Chief Operating Officer from
1994 to 1995. In 1995, he served as Chairman, President and Chief Executive
Officer of Brothers Gourmet Coffee, a publicly traded specialty beverage
manufacturer and retailer. Mr. Vermylen spent 14 years in product management at
General Foods from 1974 to 1988 managing a variety of businesses, including
serving as Vice President of Marketing for Post Cereals. Mr. Vermylen was also a
founding partner of a consulting firm specializing in food marketing and grocery
distribution. He holds a B.A. in economics from Georgetown University and an
M.B.A. from New York University.
37
<PAGE> 43
E. Nichol McCully. Mr. McCully has been the Chief Financial Officer and
Senior Vice President-Finance of Keebler since the Keebler acquisition in
January 1996. Mr. McCully has over 10 years experience as a senior financial
executive in the food industry, most recently as group Chief Financial Officer
for the Western Bakery Group division of Specialty Foods Corporation from 1993
to 1995. Mr. McCully was Vice President-Finance for Mother's Cake and Cookie Co.
from 1991 until its acquisition by Specialty Foods Corporation in 1993. From
1990 to 1991, he was Vice President-Finance, and from 1988 to 1990, he was
Controller for Spreckels Sugar Co. Prior to entering the food industry, Mr.
McCully held financial management positions with Triad Systems Corporation and
Wells Fargo Leasing Corporation, and he has auditing experience with Arthur
Andersen & Co. Mr. McCully received a B.A. from the University of California at
Berkeley and an M.B.A. from the University of California at Los Angeles.
Jack M. Lotker. Mr. Lotker has been President-Specialty Products of Keebler
since the Keebler acquisition in January 1996. Mr. Lotker has worked in the food
industry for 21 years, most recently at Homeland Stores of Oklahoma from 1988 to
1995. His experience in the baking industry and with DSD distribution systems
includes two years at CPC International as Vice President of Dry Products from
1986 to 1988 and eight years at Arnold Food Company as Vice President and Group
Executive from 1978 to 1986. Mr. Lotker headed the American Bakers Association
Industrial Relations Committee from 1983 to 1986 and has an extensive knowledge
of the interaction among food retailing, wholesale bakery distribution and
unionized bakery operations. Mr. Lotker received his B.A. from Queens College
and his M.B.A. from Long Island University.
James T. Willard. Mr. Willard has been Senior Vice President-Operations of
Keebler since July 1996. With 33 years experience in the food industry, Mr.
Willard most recently was Senior Vice President at Nabisco from 1993 to 1996 and
Senior Vice President-Operations and Technical Services at Nabisco Specialty
Products Division from 1991 to 1993. From 1988 to 1991, Mr. Willard was Senior
Vice President-Operations at ALPO Pet Foods, Inc., and Mr. Willard was Senior
Vice President-North American Operations at Cadbury Schweppes, Inc. from 1986 to
1988. Prior to those assignments, Mr. Willard held various positions at Nestle
Foods Corporation from 1964 to 1986. These positions were Vice President-U.S.
Chocolate Manufacturing (1983 to 1986), General Manager-Chocolate Manufacturing
(1980 to 1983 and 1975 to 1978), General Manager-Fruits, Tomatoes & Meats (1978
to 1980), Division Manager-Manufacturing (1971 to 1975), Assistant
Manager-Quality Control (1970 to 1972) and Microbiologist and Chemist-Regional
Laboratory (1964 to 1970). Mr. Willard received a B.S. from Capital University
and an M.S. from Ohio State University.
Thomas E. O'Neill. Mr. O'Neill has been Vice President, Secretary and
General Counsel of Keebler since December 1996. Mr. O'Neill has spent more than
12 years in the food industry, most recently serving as Vice President and
Division Counsel for the Worldwide Beverage Division of The Quaker Oats Company
from December 1994 to December 1996. In that position, Mr. O'Neill was
responsible for all legal matters in both domestic and international markets
concerning the $2 billion division. Mr. O'Neill was Vice President and Division
Counsel of the Gatorade Worldwide Division of The Quaker Oats Company from 1991
through 1994. Prior to joining Quaker Oats in 1985, Mr. O'Neill spent three
years with Winston & Strawn, a law firm based in Chicago. Mr. O'Neill received
both his B.A. and J.D. from the University of Notre Dame. He also completed
additional work in the executive management program at Harvard University's
Graduate School of Business.
Harry J. Walsh. Mr. Walsh has been Vice President-Corporate Planning and
Development of Keebler since January 1997 and was the Chief Operating Officer of
Sunshine from June 1996 to January 1997. Mr. Walsh has 16 years of experience
with baking and snack food companies with DSD systems, most recently as Vice
President for G.F. Industries, Inc. from 1995 to 1996. From 1994 to 1995, he was
President and Chief Operating Officer, and from 1993 to 1994, Chief Financial
Officer for Granny Goose Foods, Inc. Mr. Walsh served as Vice
President-Operations
38
<PAGE> 44
for Bell Carter Distributing Company from 1992 to 1993, Chief Financial Officer
for San Francisco French Bread Co. from 1991 to 1992 and Vice President-Finance
for Mother's Cake and Cookie Co. from 1985 to 1991. From 1983 to 1985, he was
Vice President-Finance, and from 1981 to 1983, Controller for Salerno Megowen
Biscuit Company. Prior to entering the food industry, Mr. Walsh was an auditor
with Arthur Andersen & Co. Mr. Walsh received a B.A. from the University of
Notre Dame.
Robert P. Crozer. Mr. Crozer has been a Director of Keebler since March
1996. Mr. Crozer has served as Vice Chairman of the Board of Directors of
Flowers since 1989. He joined Flowers in 1973 and has been a director of Flowers
since 1979. Mr. Crozer served as Director of Marketing and Planning of Flowers
from 1979 to 1985, President and Chief Operating Officer, Convenience Products
Group of Flowers from 1979 to 1989 and Vice President-Marketing of Flowers from
1985 to 1989.
Raymond Debbane. Mr. Debbane has been a Director of Keebler since May 1996.
Mr. Debbane has served as the President of The Invus Group, Ltd. ("Invus"), the
U.S. investment advisor for Artal, since 1985. From 1982 to 1985, Mr. Debbane
was a Manager in the Paris office of The Boston Consulting Group, where he was
employed since 1979. Since May 1997, Mr. Debbane has been a director of Artal
Group S.A., a privately-held Luxembourg company and the parent company of Artal
("Artal Group").
Sacha Lainovic. Mr. Lainovic has been a Director of Keebler since March
1996. Mr. Lainovic has served as an Executive Vice President of Invus since
1985. Mr. Lainovic was a Manager in the Paris office of The Boston Consulting
Group from 1984 to 1985, where he was employed since 1981.
Amos R. McMullian. Mr. McMullian has been a Director of Keebler since March
1996. Mr. McMullian has served as Chief Executive Officer of Flowers since April
1981 and Chairman of the Board of Directors of Flowers since January 1985. Since
joining Flowers in 1963, Mr. McMullian has also served as assistant controller,
data processing coordinator, assistant plant manager, plant manager, plant
president, regional vice president and President of the Bakery and Snack Groups.
In 1976, he was appointed President and Chief Operating Officer of Flowers and
was elected to the Board of Directors of Flowers. He served as Vice Chairman of
the Board of Directors of Flowers from 1984 to 1985.
Christopher J. Sobecki. Mr. Sobecki has been a Director of Keebler since
March 1996. Mr. Sobecki joined Invus in 1989 and has served as a Managing
Director since 1993.
C. Martin Wood III. Mr. Wood has been a Director of Keebler since March
1996. Mr. Wood has served as Senior Vice President and Chief Financial Officer
of Flowers since September 1978. Mr. Wood joined Flowers in 1970 as Director of
New Product Development. He was appointed Director of Marketing Services of
Flowers the following year, Director of Finance in 1973, and Vice
President-Finance in 1976. Mr. Wood has been a Director of Flowers since 1975.
All executive officers serve at the pleasure of the Board of Directors.
There is no family relationship between any of the executive officers of
Keebler. Messrs. Crozer and Wood are brothers-in-law.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee is responsible for reviewing the Company's accounting
controls and recommending to the Board of Directors the engagement of Keebler's
outside auditors. The members of the Audit Committee are Messrs. Crozer and
Sobecki. Upon consummation of the Offering, the composition of the current Audit
Committee will be changed. See "Certain Related Transactions -- Flowers Control
Purchase."
The Compensation Committee is responsible for reviewing and approving the
amount and type of consideration to be paid to senior management. The members of
Keebler's Compensation Committee
39
<PAGE> 45
are Messrs. Crozer, Debbane and Reed. Upon consummation of the Offering, the
composition of the current Compensation Committee will be changed. See "Certain
Related Transactions -- Flowers Control Purchase."
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation that was paid to the
top five executive officers of Keebler in 1996 and 1997 (the "Named Executive
Officers") and the number of shares of the Common Stock underlying options to
purchase shares of the Common Stock issued pursuant to the 1996 Stock Purchase
and Option Plan for Key Employees of INFLO Holdings Corporation and
Subsidiaries, as amended (the "1996 Stock Option Plan"), that have been granted
to date for services in all capacities to be rendered to the Company. Keebler
paid no remuneration to its current executive officers prior to the Keebler
acquisition.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------- ----------------------- -------
SECURITIES
OTHER RESTRICTED UNDERLYING ALL
SALARY ANNUAL STOCK OPTIONS/ LTIP OTHER
YEAR (1) BONUS COMPENSATION(4) AWARDS SARS(#) PAYOUTS COMPENSATION
---- -------- -------- ---------------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sam K. Reed............. 1997 $650,000 (2) (3) -- -- -- --
President and Chief 1996 $650,000 $845,000 $167,818 -- 1,289,813 -- --
Executive Officer
David B. Vermylen....... 1997 $341,302 (2) (3) -- -- -- --
President - Keebler 1996 $325,000 $300,000 $ 66,545 -- 300,956 -- --
Brands
E. Nichol McCully....... 1997 $270,010 (2) (3) -- -- -- --
Senior Vice 1996 $240,000 $250,000 $ 77,029 -- 300,956 -- --
President - Finance
and Chief Financial
Officer
Jack M. Lotker.......... 1997 $260,000 (2) (3) -- -- -- --
President - Specialty 1996 $240,000 $211,200 $ 87,650 -- 300,956 -- --
Products
James T. Willard........ 1997 $294,008 (2) (3) -- -- -- --
Senior Vice 1996 $280,000 $271,581 $121,565 -- 300,956 -- --
President - Operations
</TABLE>
- ------------------------------------
(1) Amounts listed for the Named Executive Officers are annual base salaries,
including amounts to be deferred in accordance with any deferred salary
option plan of Keebler.
(2) 1997 bonus amounts not yet determined.
(3) Perquisites and other personal benefits, securities and property in the
aggregate do not exceed the threshold reporting level of the lesser of
$50,000 or 10% of total salary and bonus reported for the Named Executive
Officers.
(4) Includes amounts reimbursed during the fiscal year for the payment of taxes
related to relocation reimbursements. For 1996 the amounts are: Mr. Reed,
$140,515; Mr. Vermylen, $42,330; Mr. McCully, $53,604; Mr. Lotker, $63,496;
and Mr. Willard, $95,964.
40
<PAGE> 46
The table below sets forth certain information with respect to the value of
unexercised options held by the Named Executive Officers at 1997 fiscal year
end. No options were granted to or exercised by the Named Executive Officers in
fiscal 1997.
OPTION VALUES AT JANUARY 3, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FY-END(#) AT FY-END($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
Sam K. Reed....................................... 300,957/988,856 6,247,867/20,528,651
David B. Vermylen................................. 70,223/230,733 1,457,829/4,790,017
E. Nichol McCully................................. 70,223/230,733 1,457,829/4,790,017
Jack M. Lotker.................................... 70,223/230,733 1,457,829/4,790,017
James T. Willard.................................. 70,223/230,733 1,457,829/4,790,017
</TABLE>
RETIREMENT PLANS
Keebler's principal non-contributory defined benefit plan covers qualifying
salaried and certain hourly-paid employees who have completed twelve months of
service. The Named Executive Officers participate in this plan on the same basis
as do approximately 14,300 other eligible participants. Benefit amounts are
based on years of service and average monthly compensation for the five highest
consecutive years out of the last fifteen years of employment for salaried
employees and some hourly employees. Certain hourly groups can have different
benefit schedules than salaried participants. The following table illustrates
the estimated annual benefits to be paid upon normal retirement at age 65 to
individuals in specified compensation and years of service classifications. The
table does not reflect benefit limitations contained in the Internal Revenue
Code. Pursuant to a separate plan (the "Excess Plan"), supplemental payments in
excess of those limitations will be made to participants in order to maintain
benefits upon retirement at the levels provided under the defined benefit plan's
formula. In addition to the plans noted above, Keebler also maintains an
unfunded supplemental retirement plan for certain former executives. No current
Named Executive Officers are covered by the supplemental plan.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL NORMAL RETIREMENT BENEFITS
----------------------------------------------------------------------------
YEARS OF SERVICE AT NORMAL RETIREMENT(A)
COMPENSATION(B) 10 15 20 25 30 35 40
- --------------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 400,000.............. $ 58,000 $ 87,000 $116,000 $145,000 $174,000 $203,000 $ 232,000
600,000.............. 88,000 132,000 176,000 220,000 264,000 308,000 352,000
800,000.............. 118,000 177,000 236,000 295,000 354,000 413,000 472,000
1,000,000.............. 148,000 222,000 296,000 370,000 444,000 518,000 592,000
1,200,000.............. 178,000 267,000 356,000 445,000 534,000 623,000 712,000
1,400,000.............. 208,000 312,000 416,000 520,000 624,000 728,000 832,000
1,600,000.............. 238,000 357,000 476,000 595,000 714,000 833,000 952,000
1,800,000.............. 268,000 402,000 536,000 670,000 804,000 938,000 1,072,000
</TABLE>
- ------------------------------------
(a) Years of service as of January 3, 1998 for the Named Executive Officers were
as follows: Mr. Reed, Mr. Vermylen, Mr. McCully, and Mr. Lotker,
approximately 2.0 years, and Mr. Willard, approximately 1.5 years. In
addition, a separate agreement between Mr. Willard and Keebler provides a
minimum level of benefit to Mr. Willard based on what he could have been
entitled to under his previous employ.
(b) Compensation includes all amounts shown under the columns entitled "Annual
Compensation" in the Summary Compensation Table.
41
<PAGE> 47
1996 STOCK OPTION PLAN
Keebler adopted the 1996 Stock Option Plan pursuant to which management
employees are eligible to receive awards of stock options. The Compensation
Committee of the Board of Directors administers the 1996 Stock Option Plan.
Subject to the terms of the 1996 Stock Option Plan, the Compensation Committee
selects the management employees eligible to receive awards under the 1996 Stock
Option Plan, determines the size of the awards granted thereunder and
administers and interprets the plan.
Executives have been awarded options to purchase 6,852,344 shares of Common
Stock, net of forfeitures, under the 1996 Stock Option Plan pursuant to
Non-Qualified Stock Option Agreements (the "1996 Option Agreements") and up to
2,821,250 additional shares of Common Stock are reserved for issuance under the
1996 Stock Option Plan. The Company intends that any additional options granted
under the 1996 Stock Option Plan will be exercisable at a price per share not
less than the fair market value of the Common Stock at the date of the grant.
The 1996 Option Agreements provide for options that vest based on the period of
employment ("Time Options") and options that vest based on the attainment of
specified performance objectives ("Performance Options"). The 1996 Option
Agreements will be amended prior to the Offering to (i) accelerate by
approximately one year the Time Options that would otherwise have vested in
fiscal years prior to 2000; and (ii) accelerate the percentage of Performance
Options that would otherwise have vested in fiscal years prior to 2000, subject
to the satisfaction of the performance criteria applicable to each such fiscal
year.
1998 OMNIBUS STOCK INCENTIVE PLAN
Keebler has adopted the 1998 Omnibus Stock Incentive Plan (the "1998 Stock
Incentive Plan") pursuant to which employees will be eligible to receive awards
of stock options, performance shares, restricted stock, stock appreciation
rights or other stock-based awards. Up to 6,500,000 shares of Common Stock will
be reserved for issuance under the 1998 Stock Incentive Plan. The Compensation
Committee of the Board of Directors will administer the 1998 Stock Incentive
Plan. Subject to the final terms of the 1998 Stock Incentive Plan, the
Compensation Committee will select the employees eligible to receive awards
under the 1998 Stock Incentive Plan, will determine the size of the awards
granted thereunder and will administer and interpret the plan. It is anticipated
that approximately 2,100,000 options to purchase shares of Common Stock will be
granted under the 1998 Stock Incentive Plan in connection with the Offering. The
Company intends that options granted under the 1998 Stock Incentive Plan will be
exercisable at a price per share not less than the fair market value of the
Common Stock at the date of the grant.
NON-EMPLOYEE DIRECTOR STOCK PLAN
Keebler also has adopted a Non-Employee Director Stock Plan (the
"Directors' Plan") pursuant to which options for a maximum of 300,000 shares of
Common Stock may be awarded under the Directors' Plan. The participants in the
Directors' Plan will be independent directors of the Company. No options have
been granted under the Directors' Plan. No determination has been made with
respect to options that may be granted under the Directors' Plan. In addition to
outright grants of options, participating Directors may elect to defer future
cash retainer payments and convert them into options.
1998 KEEBLER INCENTIVE PROGRAM
Keebler anticipates adopting the 1998 Keebler Incentive Program (KIP) (the
"1998 Incentive Program") pursuant to which certain management and professional
employees will be eligible to receive incentive bonuses based on individual
performance and Keebler's results of operations. The 1998 Incentive Program
specifies a minimum, maximum and target award level based on achievement of
Keebler's financial performance goals. The 1998 Incentive Program will
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<PAGE> 48
be administered by the Compensation Committee of the Board of Directors. The
Compensation Committee and the President and Chief Executive Officer will
approve incentive awards and schedules under the 1998 Incentive Program
annually. Cash bonuses, if any, would be paid annually in the first quarter of
Keebler's next fiscal year.
EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS
The Company intends to enter into an employment agreement with Mr. Sam K.
Reed prior to the Offering which will provide for Mr. Reed's continued
employment as Keebler's President and Chief Executive Officer, and continued
service as a director. Mr. Reed's employment agreement will have severance terms
identical to those for the seven executive officers set forth below.
Additionally, the agreement will provide that Mr. Reed's cash compensation and
future participation in management incentive and option plans will be set by the
Compensation Committee of the Board of Directors, and will be based on the
compensation of other chief executive officers of branded food companies
comparable to Keebler. The Compensation Committee will be charged with creating
or maintaining a package for Mr. Reed which ranks in the third highest quartile
for chief executives of such companies but in no event will his cash
compensation be less than its current levels. Mr. Reed's employment agreement
will terminate according to the provisions for termination of the Employment and
Severance Agreements in general, as set forth below.
Seven other executive officers of Keebler (including the Named Executive
Officers other than Mr. Reed) will become, effective upon the Offering, a party
to a termination of employment and change of control agreement (the "Employment
and Severance Agreements"). Each such Employment and Severance Agreement will
provide for the continuing employment of the executive after the Offering for
three years on terms and conditions no less favorable than those in effect
before the Offering. If Keebler terminates the executive's employment without
"cause" or if the executive terminates his own employment for "good reason"
(each as defined in the Employment and Severance Agreements), at any time during
the term, the executive is entitled to receive continued benefits equal to such
employee's annual compensation (including bonus) and continuation of certain
benefits for the remainder of the term of the Employment and Severance
Agreement, but in no event less than 12 months or, if such termination occurs
within two years after a "change of control" (as defined in the Employment and
Severance Agreements), in no event less than 24 months. In addition, amendments
to their 1996 Option Agreements will provide that in the event of (i) the death,
normal retirement or disability of the participant or (ii) termination of the
executive's employment with Keebler without "cause" or for "good reason" (each
as defined in the Employment and Severance Agreements), all remaining unvested
options under the 1996 Stock Option Plan will immediately vest with the
employee. Each Employment and Severance Agreement also provides that at the
option of Keebler, the employee may not compete for a period of up to one year
following termination, but if termination is without "cause" or the employee
terminates his own employment for "good reason," Keebler must continue to pay
the employee's annual compensation during such period, counting the payments
above. Except for Keebler's obligations to make payments to the executive upon a
change of control, all obligations under the Employment and Severance Agreements
will terminate after three years, including the non-competition agreement of the
executive.
Nineteen additional executives of Keebler will become, effective upon the
Offering, the beneficiaries of a company policy (a "Change of Control Policy").
Such Change of Control Policy will provide that if the employee is terminated
within two years after a "change of control" other than if termination is
without "cause" or the employee terminates his own employment for "good reason,"
the employee will be entitled to receive continued benefits equal to such
employee's annual compensation (including bonus) and continuation of certain
benefits for 12 months. In addition, amendments to their 1996 Option Agreements
will provide that regardless of a "Change of Control," in the event of (i) the
death, normal retirement or disability of the executive or (ii) termination of
such executive's employment with Keebler without "cause" or for "good
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<PAGE> 49
reason," all remaining unvested options under the 1996 Stock Option Plan will
immediately vest with the executive.
Effective upon the Offering, the above-referenced 26 executives and Mr.
Reed will be parties to a liquidity arrangement with Keebler and Flowers. The
arrangement will provide that Keebler or Flowers has a right of first refusal to
purchase any shares of Common Stock a member of management wishes to sell.
Keebler or Flowers will have to exercise such right by the end of the next
succeeding business day following receipt of notice of such sale. The purchase
price for the shares will be the average of the closing price of the Common
Stock on the date notice was delivered to Keebler and the closing price on the
next succeeding business day on which Keebler or Flowers has to elect to
purchase the shares. If Keebler or Flowers does not elect to purchase the shares
of Common Stock, the selling executive may sell such shares at any time into the
market for the next 30 days.
Additionally, the seven senior executives and Mr. Reed will be parties to
an arrangement which, subject to certain limitations, will provide them certain
rights to require Keebler to repurchase their shares of Common Stock in the
event such executives are restricted from selling any shares in the public
market due to contractual "holdbacks" in a pending underwritten public offering
which is pursuant to a demand registration by Artal. The maximum aggregate
amount which Keebler can be required to buy during all such holdback periods is
the greater of (i) 1% of all shares of Common Stock outstanding or (ii) an
aggregate purchase obligation of $25,000,000.
COMPENSATION OF DIRECTORS
No director of Keebler who is also an employee of Keebler or of Flowers, or
who is nominated by Artal, will receive remuneration for serving as a director.
It is anticipated that the remaining directors to be elected following the
consummation of the Offering will receive compensation for serving as directors
at levels customary for publicly-held companies similar to Keebler.
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<PAGE> 50
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of January 22, 1998, and as adjusted to reflect the
sale of the Common Stock offered hereby, by (i) all persons known by Keebler to
own beneficially 5% or more of the Common Stock, (ii) each Director of Keebler,
(iii) the Chief Executive Officer and each of the other Named Executive
Officers, (iv) each Selling Stockholder and (v) all Directors and executive
officers as a group. Unless otherwise indicated, each of the stockholders has
sole voting and investment power with respect to the shares of Common Stock
beneficially owned by such stockholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE NUMBER OF OWNED AFTER THE
OFFERING(1) SHARES OFFERING(2)(3)
--------------------- BEING ---------------------
NAME AND ADDRESS OF BENEFICIAL OWNERS NUMBER PERCENT OFFERED NUMBER PERCENT
------------------------------------- ------ ------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Flowers Industries, Inc.(4)................. 34,999,606 45.1% -- 46,197,466 55.2%
1919 Flowers Circle
Thomasville, Georgia 31757
Artal Luxembourg S.A.(5).................... 34,999,606 45.1% 7,121,485 18,296,952 21.9%
39 Boulevard Royal
Luxembourg City, Luxembourg 2449
Bermore, Limited(6)......................... 11,811,414 14.1% 4,343,515 5,851,208 7.0%
c/o G.F. Industries, Inc.
999 Baker Way, Suite 200
San Mateo, California 94404
Sam K. Reed(7).............................. 1,476,119 1.9% -- 1,476,119 1.7%
David B. Vermylen(8)........................ 310,987 0.4% -- 310,987 0.4%
E. Nichol McCully(8)........................ 310,987 0.4% -- 310,987 0.4%
Jack M. Lotker(8)........................... 310,987 0.4% -- 310,987 0.4%
James T. Willard(8)......................... 310,987 0.4% -- 310,987 0.4%
All Directors and executive
officers as a group (consisting of 13
persons).................................. 2,986,627 3.8% -- 2,986,627 3.5%
</TABLE>
- ------------------------------------
(1) Shares beneficially owned and percentage of ownership are based on
77,595,213 shares of Common Stock outstanding before the Offering.
(2) Shares beneficially owned and percentage of ownership are based on
83,730,994 shares of Common Stock which include 6,135,781 shares of Common
Stock issued upon exercise of warrants held by Bermore concurrent with the
Offering.
(3) After giving effect to the purchase by Flowers of 11,197,860 shares of
Common Stock from Artal and Bermore, concurrent with the Offering. See
"Certain Related Transactions -- Flowers Control Purchase."
(4) Flowers is currently subject to the periodic reporting and other information
requirements of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"). Flowers' common stock is listed on the NYSE.
(5) The parent entity of Artal Luxembourg S.A. ("Artal") is Artal Group. The
address of Artal Group is the same as the address of Artal. Invus serves as
Artal's U.S. investment advisor and receives compensation from Artal that is
based in part on the performance of Artal's U.S. investments. Since 1985,
Artal has completed more than twenty-five acquisitions in the United States
with Invus' advice.
(6) Bermore is a privately held Bermuda limited company and the parent of GFI.
"Shares Beneficially Owned Prior to the Offering" include 6,135,781 shares
of Common Stock issued upon exercise of warrants held by Bermore.
(7) Includes 902,869 shares subject to stock options that are currently
exercisable; excludes 386,944 shares subject to stock options that are not
exercisable within 60 days.
(8) Includes 210,669 shares subject to stock options that are currently
exercisable; excludes 90,287 shares subject to stock options that are not
exercisable within 60 days.
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<PAGE> 51
CERTAIN RELATED TRANSACTIONS
The summaries of the Artal Stock Purchase Agreement and the Bermore Stock
Purchase Agreement set forth below do not purport to be complete and are
qualified in their entirety by reference to all the provisions of the Artal
Stock Purchase Agreement and the Bermore Stock Purchase Agreement, respectively,
copies of which will be filed as exhibits to the Registration Statement of which
this Prospectus forms a part.
FLOWERS CONTROL PURCHASE
Simultaneously with and conditioned upon the closing of the Offering (the
"Closing"), Flowers will purchase 9,581,169 shares of Common Stock from Artal
and 1,616,691 shares of Common Stock from Bermore. Following the Closing and the
purchase of Common Stock from Artal and Bermore by Flowers, Flowers will own
approximately 55% of the outstanding Common Stock (46,197,466 shares), Artal
will own approximately 22% of the outstanding Common Stock (18,296,952 shares)
and Bermore will own approximately 7% of the outstanding Common Stock (5,851,208
shares). See "Principal and Selling Stockholders." The price per share to be
paid to Artal and Bermore by Flowers will be equal to 110% of the per share
"price to public" listed on the cover page of this Prospectus, without giving
effect to any underwriters' discounts or commissions (the "IPO Price") plus 5%
of the IPO Price (which 5% shall not exceed $13,000,000 in the aggregate).
The sale of Common Stock by Artal to Flowers will be made pursuant to a
stock purchase agreement to be executed prior to the Closing by Artal, Flowers
and Keebler (the "Artal Stock Purchase Agreement"), and the sale of Common Stock
by Bermore to Flowers will be made pursuant to a stock purchase and
stockholders' agreement to be executed prior to the Closing by Artal, Flowers,
Bermore and Keebler (the "Bermore Stock Purchase Agreement"). Each of the
Stockholders' Agreement dated as of January 26, 1996 among Artal, Flowers and
Keebler and the GFI Stockholder's Agreement dated as of June 4, 1996 among
Artal, Flowers, GFI and Keebler will terminate and be of no further effect upon
the Closing (except for certain indemnification and other obligations which by
their terms remain in effect after an offering of Common Stock pursuant to such
agreements).
ARTAL STOCK PURCHASE AGREEMENT
The Artal Stock Purchase Agreement will provide that after the Closing,
Artal will be entitled to elect (i) two directors to Keebler's Board of
Directors as long as it owns at least 6,879,000 shares of the Common Stock, (ii)
one director when it owns less than 6,879,000 shares of the Common Stock but no
less than 2,866,250 shares of the Common Stock and (iii) no directors when it
owns less than 2,866,250 shares of the Common Stock. In addition, at least one
of the Artal board designees will be entitled to serve on each committee of the
Board of Directors, subject to applicable rules and regulations of any
securities exchange or other regulatory authority. See "Principal and Selling
Stockholders." Also, Artal has agreed to refrain from participating in certain
third party proxy solicitations that are opposed by Keebler's Board of
Directors.
Until the earlier of (i) the third anniversary of the end of the 180 day
lockup period (as such period may be shortened with the consent of Credit Suisse
First Boston Corporation, the "Lockup Period") more fully described under
"Underwriting" or (ii) the date on which Artal owns less than 4,586,000 shares
of the Common Stock (the "Consent Period"), the following actions by Keebler
will require Artal's prior written consent: (i) mergers, consolidations, similar
business combinations, or sales of substantially all of Keebler's assets, if any
non-cash consideration is received by Keebler's stockholders in connection with
any such transaction; (ii) any acquisition or disposition by Keebler in excess
of $250 million (other than sales of goods in the ordinary course of business);
(iii) issuances of capital stock by Keebler, other than (A) issuances in
connection with acquisitions with an aggregate fair market value not to exceed
$75 million and (B) issuances
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<PAGE> 52
of Common Stock in connection with Keebler's management equity plans not to
exceed approximately 4% (on a fully diluted basis), in the aggregate, of the
Common Stock as of the Closing and (iv) certain material changes in Keebler's
management equity plans. Also, until three years after the Closing, the
termination of Keebler's Chief Executive Officer or the hiring of a Chief
Executive Officer other than Mr. Sam K. Reed will require the prior written
consent of at least one of the Artal board designees.
In addition, (i) amendments to Keebler's Certificate of Incorporation or
By-laws (or certain other corporate actions, such as (A) adoption of "poison
pill" or rights plans or (B) impediments or restrictions on the ability of Artal
or any potential acquirer of Common Stock from Artal to own, vote or dispose of
Common Stock) which are inconsistent with or would adversely affect Artal's
rights under the Artal Stock Purchase Agreement and (ii) any related party
transactions involving Keebler, other than ordinary course, arms-length
transactions, will require Artal's prior written consent until such time as
Artal owns less than 2,293,000 shares of the Common Stock. Flowers and Keebler
also have agreed to take, prior to Closing, all actions necessary for Keebler to
"opt out" of Section 203 of the General Corporation Law of the State of Delaware
(the "Delaware Law"). See "Description of Capital Stock -- Certain Provisions of
the Certificate of Incorporation and By-laws."
During the Consent Period, market purchases of Common Stock by Flowers and
Keebler will be limited, in the aggregate, to approximately 15% of the Common
Stock's public market float, except that (i) Flowers will be entitled to effect
market purchases of any amount to maintain ownership of not less than 51% of the
Common Stock on a fully-diluted basis and (ii) Flowers and Keebler will be
entitled to purchase Common Stock that is not part of the public market float
from Artal, from members of the Company's management or pursuant to the Bermore
Stock Purchase Agreement. In addition, Flowers will be entitled to sell Common
Stock only through private placements undertaken in connection with certain
strategic joint ventures and other similar transactions over which Flowers has
economic and voting control. Also, Flowers will have a limited right of first
refusal with respect to certain sales of Common Stock by Artal.
Artal will be granted four demand registration rights to effect sales of
its remaining shares of Common Stock after the expiration of the Lockup Period.
With one of its four demands, Artal will be entitled to cause Keebler to
maintain effective for up to two years (or, if earlier, until the third
anniversary of the end of the Lockup Period) a shelf registration statement
covering the sale of all of Artal's shares of Common Stock (whether through
block trades, market sales, underwritten offerings or otherwise). Each demand by
Artal must request registration of at least (i) one-third of the number of
shares of Common Stock owned by Artal at the time of such demand and (ii) at
least $75 million worth of Common Stock except that, notwithstanding clauses (i)
and (ii), the fourth demand, if exercised, will request registration of all of
the shares of Common Stock owned by Artal at the time of such demand. Keebler
will have the right to suspend sales of the Common Stock by Artal pursuant to
any such registration statement under certain circumstances relating to material
corporate events and any such suspensions will result in increases in the
effectiveness period of the related registration statement and, under certain
circumstances, the Consent Period.
Keebler will also grant Artal certain "piggyback" registration rights
relating to registered offerings of Common Stock by Keebler, and will agree not
to grant registration rights to other persons unless such rights are
subordinated to Artal's registration rights. Keebler will bear all expenses
relating to all registration procedures contemplated by the Artal Stock Purchase
Agreement, except that Artal will bear any underwriting discounts in respect of
its shares and the expenses of its counsel.
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<PAGE> 53
BERMORE STOCK PURCHASE AGREEMENT
Pursuant to the Bermore Stock Purchase Agreement, Bermore will be
prohibited from selling any Common Stock (other than shares acquired by Bermore
after the Closing) without Artal's prior written consent until the earlier of
(i) the end of the Consent Period and (ii) the termination of Artal's demand
registration rights under the Artal Stock Purchase Agreement (the "Restricted
Period"). This transfer restriction will be subject to certain limited
exceptions, including exceptions for affiliate transfers and transfers of up to
85,987 shares per month after the expiration of the Lockup Period.
During the Restricted Period, Bermore will have the right to participate
(pro rata based on Bermore's and Artal's relative share ownership upon Closing)
in (i) underwritten offerings of Common Stock which include Common Stock owned
by Artal and (ii) sales of Common Stock by Artal to either Flowers or Keebler.
Bermore may also be required to participate in any such sale to Flowers or
Keebler, on the same terms and conditions. In addition, in certain other limited
circumstances, Bermore will mandatorily participate in sales of Common Stock by
Artal (other than the sales contemplated by clauses (i) and (ii)).
Keebler will bear all expenses relating to all registration procedures
contemplated by the Bermore Stock Purchase Agreement, except that Bermore will
bear any underwriting discounts in respect of its shares and the expenses of its
counsel.
OTHER
In connection with the sale of 1,791,406 shares of Common Stock to members
of management on May 10, 1996, Keebler repurchased from each of Artal and
Flowers 541,893 shares of Common Stock at $1.74 per share, the original purchase
price paid by Artal and Flowers to Keebler.
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<PAGE> 54
DESCRIPTION OF CERTAIN INDEBTEDNESS
The summaries of the Senior Credit Facility and the Senior Subordinated
Notes set forth below do not purport to be complete and are qualified in their
entirety by reference to all the provisions of the agreements governing the
Senior Credit Facility (the "Credit Documents") and the Senior Subordinated
Notes, copies of which have been filed as exhibits to the Registration Statement
of which this Prospectus forms a part.
SENIOR CREDIT FACILITY
The Senior Credit Facility is provided by a syndicate of banks and other
financial institutions led by the Bank of Nova Scotia, as administrative agent.
The Senior Credit Facility currently provides for $300 million in available
borrowings, consisting of a $160 million term loan (the "Term Loan") and the
$140 million Revolving Credit Facility, which includes borrowing capacity
available for letters of credit of up to $45.0 million and for a swing-line
facility of up to $20.0 million. The Term Loan matures on April 7, 2003 and the
Revolving Credit Facility commitments terminate no later than April 7, 2003.
Capitalized terms used in this description of the Senior Credit Facility but not
otherwise defined herein shall have the meanings set forth in the Credit
Documents.
The Lenders have received guarantees from all direct and indirect domestic
subsidiaries of Keebler. The Senior Credit Facility is also secured by a first
priority pledge of 100% of the capital stock of Keebler's domestic subsidiaries
(whether direct or indirect), in addition to a first priority pledge of all
notes evidencing intercompany indebtedness of Keebler's subsidiaries.
The Senior Credit Facility contains certain negative covenants that
restrict, among other things, Keebler's ability to (i) incur additional debt
(including subordinated debt), sale leasebacks and contingent liabilities; (ii)
make dividends or similar distributions or pay management or consulting fees;
(iii) repurchase capital stock; (iv) incur liens or other encumbrances; (v) sell
assets or make similar transfers, other than inventory in the ordinary course of
business or unless net proceeds from such asset sales are used to repay
borrowings under the Senior Credit Facility, in the manner described therein;
(vi) make investments or acquisitions; or (vii) merge, consolidate and or
similarly combine or change its business conduct.
The Senior Credit Facility contains certain financial covenants that
require Keebler, among other things, to (i) maintain a minimum net worth; (ii)
maintain a maximum ratio of total funded debt to EBITDA; (iii) maintain a
minimum ratio of EBITDA to interest expense; (iv) maintain a minimum ratio of
EBITDA minus capital expenditures to the sum of cash taxes, cash interest and
mandatory amortization of indebtedness; and (v) limit capital expenditures.
Events of default under the Senior Credit Facility include, among other
things: (i) failure of Keebler to pay principal thereunder or reimbursement
obligations or deposit cash for collateral when due, or to pay interest or any
other amount due within three business days after the date due; (ii) material
inaccuracies in any representations, warranties or other statements in the
credit documents; (iii) default in the performance of any covenants after the
applicable grace period, if any; (iv) default under certain other agreements
governing indebtedness; (v) certain events of bankruptcy or insolvency; (vi)
failure to satisfy certain material ERISA requirements; (vii) unfavorable
judgments; (viii) certain events with respect to Keebler's pension plans; and
(ix) the occurrence of a Change of Control.
SENIOR SUBORDINATED NOTES
Keebler issued the Senior Subordinated Notes to refinance indebtedness
incurred in connection with the Keebler acquisition. The Senior Subordinated
Notes were issued under an indenture dated June 15, 1996 (the "Indenture")
between Keebler, the Restricted Subsidiaries, and the United States Trust
Company of New York, as trustee. Capitalized terms used in this description
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<PAGE> 55
of the Senior Subordinated Notes but not otherwise defined herein shall have the
meanings set forth in the Indenture.
The Indenture limits, among other things: (i) the making of any Restricted
Payment; (ii) the incurrence of additional indebtedness with certain exceptions,
including among other things, the indebtedness under the Senior Credit Facility;
(iii) the creation of liens; (iv) the incurrence of payment restrictions
affecting Restricted Subsidiaries; (v) entering into transactions with
stockholders and affiliates; (vi) the sale or issuance of capital stock of
Restricted Subsidiaries; (vii) the sale of assets and subsidiary stock; and
(viii) the merger, consolidation or sale of substantially all of the assets of
Keebler.
"Restricted Payments" are generally not permitted unless after giving
effect to the proposed Restricted Payment (i) no Default or Event of Default
shall have occurred and is continuing and will not cause or constitute a Default
or Event of Default; (ii) immediately before and immediately after giving effect
to such Restricted Payment, Keebler could incur $1.00 of additional Indebtedness
pursuant to the general indebtedness test of the Indenture; and (iii) the
aggregate amount of all Restricted Payments declared or made after June 25, 1996
does not exceed the sum of (a) 50% of Consolidated Net Income (or in the case
such Consolidated Net Income shall be a loss, minus 100% of such loss), during
the period (on a cumulative basis) from the fiscal quarter that first begins
after June 25, 1996 to the end of Keebler's most recently ended fiscal quarter;
(b) the Net Cash Proceeds received after June 25, 1996 by Keebler from (1) the
issuance or sale of its shares of Capital Stock (other than Disqualified Capital
Stock), (2) Indebtedness or Disqualified Capital Stock which has been converted
into or exchanged for Capital Stock or options, warrants or rights to purchase
such Capital Stock, and (3) the sale or exercise of any options, warrants or
rights to purchase shares of Capital Stock or other cash contributions to its
capital; and (c) to the extent not included in Consolidated Net Income, the net
reduction in Investments made by Keebler since June 25, 1996.
The Senior Subordinated Notes mature on July 1, 2006 and are subject to
redemption at any time on or after July 1, 2001, at the option of the Company,
in whole or in part, on not less than 30 nor more than 60 days prior notice at
the redemption prices set forth therein. In addition, at any time or from time
to time prior to July 1, 1999, Keebler may redeem Senior Subordinated Notes
having a principal amount of up to 35% of the original aggregate principal
amount of the Senior Subordinated Notes within 60 days following one or more
Public Equity Offerings with the net proceeds of such offerings at a redemption
price equal to 110% of the principal amount thereof, together with the accrued
and unpaid interest thereon, if any, to the date of redemption; provided that
immediately after giving effect to each such redemption, at least 65% of the
original aggregate principal amount of the Senior Subordinated Notes remains
outstanding.
The Senior Subordinated Notes also require that upon a Change of Control,
Keebler make an offer to purchase (a "Change of Control Offer") the outstanding
Senior Subordinated Notes at 101% of the principal amount thereof plus accrued
and unpaid interest to the date of purchase. The Offering will result in a
Change of Control for purposes of the Indenture, and Keebler will make a Change
of Control Offer. See "Risk Factors -- Required Offer to Purchase Senior
Subordinated Notes."
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<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
Following the Offering, the authorized capital stock of Keebler will
consist of 500,000,000 shares of Common Stock, par value $0.01 per share, and
100,000,000 shares of preferred stock, par value $0.01 per share ("Preferred
Stock").
COMMON STOCK
Following the Offering, 83,730,994 shares of Common Stock will be issued
and outstanding. Holders of Common Stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. Because holders of Common
Stock do not have cumulative voting rights, the holders of a majority of the
shares of Common Stock can elect all of the members of the Board of Directors
standing for election. Subject to preferences of any Preferred Stock that may be
issued in the future, the holders of Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors. Keebler's ability to pay
dividends is limited under the terms of the Senior Credit Facility and the
Senior Subordinated Notes. See "Description of Certain Indebtedness" and "Risk
Factors -- Restrictions on Payment of Dividends on Common Stock." The Common
Stock is entitled to receive pro rata all of the assets of Keebler available for
distribution to its stockholders. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and non-assessable.
PREFERRED STOCK
Subject to the provisions of the Certificate of Incorporation and
limitations prescribed by law, the Board of Directors has the authority to issue
up to 100,000,000 shares of Preferred Stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, dividend rates, conversion rates, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of such series, which may be superior to those of
the Common Stock, without further vote or action by the stockholders. There will
be no shares of Preferred Stock outstanding upon the closing of the Offering and
Keebler has no present plans to issue any Preferred Stock.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of Keebler by means of a tender offer, proxy contest, merger or
otherwise, and thereby to protect the continuity of Keebler's management. The
issuance of shares of the Preferred Stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
Common Stock. For example, Preferred Stock issued by Keebler may rank prior to
the Common Stock as to dividend rights, liquidation preference or both, may have
full or limited voting rights and may be convertible into shares of Common
Stock. Accordingly, the issuance of shares of Preferred Stock may discourage
bids for the Common Stock or may otherwise adversely affect the market price of
the Common Stock.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
Pursuant to the terms of the Certificate of Incorporation, Keebler's
stockholders have "opted-out" of the provisions of Section 203 of the Delaware
Law ("Section 203"). Section 203 generally provides that a person who, together
with affiliates and associates owns, or within three years did own, 15% or more
of the outstanding voting stock of a corporation (an "Interested Stockholder")
may not engage in certain business combinations with the corporation for a
period of three years after the date on which the person became an Interested
Stockholder, subject to certain exceptions. Section 203 defines the term
"business combination" to encompass a wide variety of transactions with or
caused by an Interested Stockholder including mergers, asset sales and other
transactions in which the Interested Stockholder receives or could receive a
benefit on other than a pro rata basis with other stockholders. Since Keebler's
stockholders have "opted-out" of the
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<PAGE> 57
provisions of Section 203, business combinations with Interested Stockholders of
Keebler will not be limited as described above.
The Certificate of Incorporation provides that the Board of Directors of
Keebler will be divided into three classes serving staggered three-year terms.
Directors can be removed from office only by the affirmative vote of the holders
of a majority of the then-outstanding shares of capital stock entitled to vote
generally in an election of directors. As a result of this classification of
directors, no stockholder or group of stockholders generally would be able to
elect a majority of the Board of Directors at any single meeting for the
election of directors.
The Certificate of Incorporation provides that no director shall be
personally liable to Keebler or its stockholders for monetary damages for breach
of duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to Keebler or its stockholders, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the Delaware Law or (iv) for any
transaction from which the Director derived an improper personal benefit. The
effect of these provisions is to eliminate the rights of Keebler and its
stockholders (through stockholders' derivative suits on behalf of Keebler) to
recover monetary damages against a director for breach of fiduciary duty as a
director (including breaches resulting from grossly negligent behavior), except
in the situations described above.
The By-laws provide that special meetings of stockholders must be called by
the Chairman or the Secretary of Keebler at the request in writing of a majority
of the Board of Directors or at the request in writing of stockholders owning at
least 45% of the capital stock of Keebler issued and outstanding and entitled to
vote. The By-laws establish an advance notice procedure for the nomination,
other than by or at the direction of the Board of Directors, of candidates for
election as directors as well as for other stockholder proposals to be
considered at meetings of stockholders. In general, notice of intent to nominate
a director must be received by the secretary of Keebler not less than 60 nor
more than 90 days prior to the date of a stockholders meeting, and must contain
certain specified information concerning the person to be nominated. Notice of
intent to raise business at an annual meeting must be received by the Secretary
of Keebler not less than 120 nor more than 150 days prior to the first
anniversary of the date of Keebler's consent solicitation or proxy statement
released in connection with the previous year's annual meeting. These procedures
may operate to limit the ability of stockholders to bring business before a
stockholders meeting, including with respect to the nomination of directors.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Harris Trust &
Savings Bank located in Chicago, Illinois.
LISTING
Keebler has applied to list the Common Stock on the NYSE under the symbol
"KBL."
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
holder that is not a "U.S. person" (a "non-U.S. holder"). A "U.S. person" is a
person or entity that, for U.S. federal income tax purposes, is a citizen or
resident of the United States, a corporation, partnership or other entity
taxable as a corporation for U.S. federal income tax purposes, created or
organized in the United States or under the laws of the United States or of any
political subdivision thereof, an estate whose income is includible in gross
income for U.S. federal income tax purposes regardless of its source or a trust
subject to the supervision of a court within the United States and the control
of a United States fiduciary as described in Section 7701(a)(30) of Internal
Revenue Code of 1986, as amended (the "Code"). An individual will be deemed to
be a resident of the United States for U.S. federal income tax purposes if: (1)
such individual is a lawful permanent resident of the United States at any time
during the taxable year; (2) such individual makes an election to be treated as
a resident pursuant to the provisions of the Code; or (3) such individual is
present in the United States for an aggregate of 183 days or more during the
calendar year. In addition, an individual will be presumed to be a resident of
the United States for U.S. federal income tax purposes if such individual is
present in the United States on at least 31 days in the current calendar year
and for an aggregate of 183 days during the three-year period ending with the
current calendar year (counting, for such purposes all of the days present in
the United States during the current year, one-third of the days present during
the immediately preceding year and one-sixth of the days present during the
second preceding year). This presumption of residence may be rebutted if an
individual is present in the United States for fewer than 183 days during the
current year and it is established that such individual has a "tax home" in a
foreign country and a "closer connection" to such foreign country than to the
United States, with such terms being defined in the Code. Furthermore, the
determination of residence under the Code may be rebutted by application of an
applicable tax treaty or convention between the United States and an appropriate
foreign country that may also treat such individual as a tax resident of such
country. A special definition of U.S. resident applies for U.S. federal estate
tax purposes. Resident aliens are subject to U.S. federal tax as if they were
U.S. citizens.
This discussion is based on the provisions of the Code and administrative
and judicial interpretations as of the date hereof, all of which may be changed
either retroactively or prospectively. This discussion does not address all the
aspects of U.S. federal income and estate taxation that may be relevant to
non-U.S. holders in light of their particular circumstances, nor does it address
tax consequences under the laws of any U.S. state, municipality or other taxing
jurisdiction or under the laws of any jurisdiction other than the United States.
The following discussion is merely a summary of the principal Federal
income and estate tax consequences of the ownership and disposition of Common
Stock by non-U.S. Holders. Thus, all investors are urged to consult their own
tax advisors with respect to the application and effect of the Federal income
and estate tax consequences (current and prospective) of the ownership and
disposition of the Common Stock, as well as the application and effect of the
laws of any state, local, foreign, or other taxing jurisdiction.
DIVIDENDS
In the event that dividends are paid to a non-U.S. holder, such dividends
will be subject to United States federal withholding tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. Under current
U.S. Treasury regulations, dividends paid to an address outside the United
States are presumed to be paid to a resident of the country of address (unless
the payor has knowledge to the contrary) for purposes of the withholding tax.
For dividends paid prior to 1999, the same presumption generally applies to
determine the applicability of a reduced rate of withholding under a U.S. tax
treaty (the "address system"). Thus,
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non-U.S. holders receiving dividends at addresses outside the United States
generally are not yet required to file tax forms to obtain the benefit of an
applicable treaty rate. Under U.S. Treasury regulations that were recently
finalized, the address system for claiming treaty benefits is eliminated for
payments made after December 31, 1998. Rather, to claim the benefits of a tax
treaty with respect to such dividends, a non-U.S. holder of Common Stock must
file certain forms attesting to the holder's eligibility to claim such treaty
benefits. If there is excess withholding on a person eligible for a treaty
benefit, the person can file for a refund with the U.S. Internal Revenue Service
(the "IRS").
Generally, upon the filing of a Form 4224 with Keebler, there is no
withholding tax on dividends that are effectively connected with the non-U.S.
holder's conduct of a trade or business within the United States. Instead, the
effectively connected dividends are subject to the U.S. federal income tax on
net income applicable to U.S. persons. Effectively connected dividends received
by a foreign corporation may be subject to an additional "branch profits tax" at
a 30% rate (or a lower rate under an applicable income tax treaty) when such
dividends are deemed repatriated from the United States.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of Common Stock unless (i) the
gain is effectively connected with the conduct of a trade or business of the
non-U.S. holder (or of a partnership that holds the Common Stock in which the
non-U.S. holder is a member) in the United States, (ii) in the case of a non-
U.S. holder who is an individual and holds the Common Stock as a capital asset
(or is a member in a partnership that holds the Common Stock as a capital
asset), such holder is present in the United States for 183 or more days in the
taxable year of the disposition and either (x) has a "tax home" in the United
States (as specially defined for U.S. federal income tax purposes) or (y)
maintains an office or other fixed place of business in the United States and
the income from the sale of the stock is attributable to such office or other
fixed place of business, (iii) the non-U.S. holder is subject to tax pursuant to
the provision of U.S. tax law applicable to certain U.S. expatriates or (iv)
Keebler is or has been a "U.S. real property holding corporation" for federal
income tax purposes. Keebler is not currently, has not been and does not
anticipate becoming a "U.S. real property holding corporation" for U.S. federal
income tax purposes. Even if Keebler were to become a U.S. real property holding
corporation, any gain recognized by a non-U.S. Holder, on the disposition of the
Common Stock, still would not be subject to U.S. tax if the shares were
considered to be "regularly traded" (as per the meaning of the applicable U.S.
Treasury regulations) on an established securities market (e.g., NYSE) and the
non-U.S. Holder did not own, actually, constructively, directly, or indirectly,
at any time during the five year period ending on the date of the disposition,
more than five percent (5%) of the Common Stock.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Pursuant to U.S. Treasury regulations, Keebler must report annually to the
IRS and to each non-U.S. holder the amount of dividends paid to, and the tax
withheld with respect to, such holder, regardless of whether tax was actually
withheld. That information may also be made available to the tax authorities of
the country in which the non-U.S. holder resides.
United States federal backup withholding (which generally is withholding
imposed at the rate of 31% on certain payments to persons not otherwise exempt
who fail to furnish certain identifying information to the IRS) will generally
not apply to dividends paid to a non-U.S. holder that are subject to withholding
at the 30% rate (or would be so subject but for a reduced rate under an
applicable treaty). In addition, for dividends paid prior to 1999, the payor of
dividends may rely on the payee's foreign address in determining that the payee
is exempt from backup withholding, unless the payor has knowledge that the payee
is a U.S. person. However, U.S. Treasury regulations that were recently
finalized eliminate this address system for payments made after
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December 31, 1998 and require a payee to furnish certain documentation to the
payor so as to be able to claim such exemption from backup withholding.
The backup withholding and information reporting requirements also apply to
the gross proceeds paid to a non-U.S. holder upon the disposition of Common
Stock by or through a U.S. office of a U.S. or foreign broker, unless the holder
certifies to the broker under penalty of perjury as to its name, address and
status as a non-U.S. holder or the holder otherwise establishes an exemption.
Information reporting requirements (but not backup withholding) will apply to a
payment of the proceeds of a disposition of Common Stock by or through a foreign
office of (i) a U.S. broker, (ii) a foreign broker 50% or more of whose gross
income for certain periods is effectively connected with the conduct of a trade
or business in the United States or (iii) a foreign broker that is a "controlled
foreign corporation" for U.S. federal income tax purposes, unless the broker has
documentary evidence in its records that the holder is a non-U.S. holder and
certain other conditions are met, or the holder otherwise establishes an
exemption. Neither backup withholding nor information reporting will generally
apply to a payment of the proceeds of a disposition of Common Stock by or
through a foreign office of a foreign broker not subject to the preceding
sentence.
Any amounts withheld under the backup withholding rules will be refunded or
credited against the non-U.S. holder's United States federal income tax
liability, provided that required information is furnished to the IRS.
FEDERAL ESTATE TAXES
Common Stock owned or treated as being owned by an individual who is
neither a citizen nor a resident of the United States for federal estate tax
purposes at the date of death will be included in such individual's gross estate
for U.S. federal estate tax purposes and may be subject to U.S. federal estate
tax unless an applicable estate tax treaty provides otherwise. Estates of
nonresident aliens are generally allowed a statutory credit for U.S. federal
estate tax purposes. Estate tax treaties may permit a larger credit. A special
definition of U.S. resident applies for U.S. federal estate purposes.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market,
or the perception that such sales could occur, could adversely affect the
prevailing market price of the Common Stock. Upon completion of the Offering,
there will be 83,730,994 shares of Common Stock outstanding. Of these shares,
the 11,465,000 shares expected to be sold in the U.S. Offering and the
International Offering (as defined) will be freely transferable without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"), except for shares purchased by "affiliates" of Keebler,
as that term is defined in Rule 144 under the Securities Act ("Rule 144"). The
remaining 72,265,994 shares of Common Stock outstanding will be "restricted
securities," as that term is defined in Rule 144, and may in the future be sold
without registration under the Securities Act to the extent permitted by Rule
144 or any applicable exemption under the Securities Act. Artal will also have
registration rights allowing it to cause Keebler to register under the
Securities Act Artal's and, in some circumstances, Bermore's shares of Common
Stock for sale. See "Certain Related Transactions -- Flowers Control Purchase."
In connection with the Offering, Keebler, its executive officers and directors
and certain of its stockholders have agreed that, subject to certain exceptions,
they will not sell, offer or contract to sell any shares of Common Stock without
the prior written consent of Credit Suisse First Boston Corporation for a period
of 180 days after the date of this Prospectus.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
"restricted securities" for at least
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one year would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (i) 1% of the number of shares of
Common Stock then outstanding (which will equal approximately 837,310 shares
immediately after the Offering) or (ii) the average weekly trading volume of the
Common Stock on the NYSE during the four calendar weeks preceding the filing of
a notice on Form 144 with respect to such sale with the Securities and Exchange
Commission. Sales under Rule 144 are also subject to certain other requirements
regarding the manner of sale, notice and availability of current public
information about Keebler. Under Rule 144(k), a person who is not deemed to have
been an affiliate of Keebler at any time during the 90 days preceding a sale,
and who has beneficially owned the shares proposed to be sold for at least two
years (including the holding period of any prior owner except an affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1998 (the "U.S. Underwriting Agreement"),
among Keebler, the Selling Stockholders and the underwriters named below (the
"U.S. Underwriters"), for whom Credit Suisse First Boston Corporation, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated
and SBC Warburg Dillon Read Inc. are acting as representatives (the
"Representatives"), the U.S. Underwriters have severally but not jointly agreed
to purchase from the Selling Stockholders the following respective numbers of
U.S. Shares (as defined below):
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER U.S. SHARES
----------- -----------
<S> <C>
Credit Suisse First Boston Corporation....................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................
Morgan Stanley & Co. Incorporated.........................
SBC Warburg Dillon Read Inc. .............................
---------
Total................................................ 9,172,000
=========
</TABLE>
Of the 11,465,000 shares of Common Stock being offered, 9,172,000 shares
(the "U.S. Shares") are initially being offered by the U.S. Underwriters in the
United States and Canada (the "U.S. Offering") and 2,293,000 shares (the
"International Shares") are initially being concurrently offered by the Managers
(the "Managers") outside the United States and Canada (the "International
Offering").
The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all the U.S. Shares offered hereby
(other than those shares covered by the over-allotment option described below)
if any are purchased. The U.S. Underwriting Agreement provides that, in the
event of a default by a U.S. Underwriter, in certain circumstances the purchase
commitments of non-defaulting U.S. Underwriters may be increased or the U.S.
Underwriting Agreement may be terminated.
Keebler and the Selling Stockholders have entered into a Subscription
Agreement (the "Subscription Agreement") with the Managers of the International
Offering providing for the concurrent offer and sale of the International Shares
outside the United States and Canada. The closing of the U.S. Offering is a
condition to the closing of the International Offering and vice versa.
The Selling Stockholders have granted to the U.S. Underwriters and the
Managers an option, exercisable by Credit Suisse First Boston Corporation, on
behalf of the U.S. Underwriters and the Managers, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
1,719,750 additional shares of Common Stock at the initial public offering
price, less the underwriting discounts and commissions. Such option may be
exercised only to cover over-allotments, if any, in the sale of the shares of
Common Stock offered hereby. To the extent that this option to purchase is
exercised, each U.S. Underwriter and each Manager will become obligated, subject
to certain conditions, to purchase approximately the same percentage of
additional shares being sold to the U.S. Underwriters and the Managers as the
number of U.S. Shares set forth next to such U.S. Underwriter's name in the
preceding table and as the number set forth next to such Manager's name in the
corresponding table in the Prospectus relating to the International Offering
bears to the total number of shares of Common Stock in such tables.
Keebler intends to reserve for purchase from the U.S. Underwriters up to 5%
of the shares of Common Stock to be sold in the U.S. Offering and the
International Offering which may be purchased by employees and friends of
Keebler through a directed share program. Such sales will
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be at the initial public offering price. The number of shares of Common Stock
available to the general public will be reduced to the extent these persons
purchase the reserved shares.
Keebler and the Selling Stockholders have been advised by the
Representatives that the U.S. Underwriters propose to offer the U.S. Shares in
the United States to the public and in Canada on a private placement basis
initially at the public offering price set forth on the cover page of this
Prospectus and, through the Representatives, to certain dealers at such price
less a concession of $ per share, and that the U.S. Underwriters and such
dealers may allow a discount of $
per share on sales to certain other dealers. After the Offering, the public
offering price and concession and discount to dealers may be changed by the
Representatives.
The public offering price, the aggregate underwriting discounts and
commissions per share and per share concession and discount to dealers for the
U.S. Offering and the concurrent International Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and the Managers (the
"Intersyndicate Agreement") relating to the Offering, changes in the public
offering price, concession and discount to dealers will be made only upon the
mutual agreement of Credit Suisse First Boston Corporation, on behalf of the
U.S. Underwriters, and Credit Suisse First Boston (Europe) Limited ("CSFBL"), on
behalf of the Managers.
Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any prospectus
relating to the Common Stock to any person outside the United States or Canada
or to any other dealer who does not so agree. Each of the Managers has agreed or
will agree that, as part of the distribution of the International Shares and
subject to certain exceptions, it has not offered or sold, and will not offer or
sell, directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to Common Stock in the United States or Canada or to any
other dealer who does not so agree. The foregoing limitations do not apply to
stabilization transactions or to transactions between the U.S. Underwriters and
the Managers pursuant to the Intersyndicate Agreement. As used herein, "United
States" means the United States of America (including the States and the
District of Columbia), its territories, possessions and other areas subject to
its jurisdiction. "Canada" means Canada, its provinces, territories, possessions
and other areas subject to its jurisdiction, and an offer or sale shall be in
the United States or Canada if it is made to (i) any individual resident in the
United States or Canada or (ii) a corporation, partnership, pension,
profit-sharing or other trust or other entity (including any such entity acting
as an investment adviser with discretionary authority) whose office most
directly involved with the purchase is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
U.S. Underwriters and the Managers of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold shall be the public
offering price, less such amount as may be mutually agreed upon by Credit Suisse
First Boston Corporation, as Representative of the U.S. Underwriters, and CSFBL,
on behalf of the Managers, but not exceeding the selling concession applicable
to such shares. To the extent there are sales between the U.S. Underwriters and
the Managers pursuant to the Intersyndicate Agreement, the number of shares of
Common Stock initially available for sale by the U.S. Underwriters or by the
Managers may be more or less than the amount appearing on the cover page of this
Prospectus. Neither the U.S. Underwriters nor the Managers are obligated to
purchase from the other any unsold shares of Common Stock.
Keebler, its officers, directors and the Selling Stockholders have agreed
that, for a period of 180 days after the date of this Prospectus, they will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any additional shares of Common
Stock or securities convertible into or exchangeable or exercisable for any
shares of Common Stock, or disclose the intention to make any such offer, sale,
pledge, disposal or filing, without the
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prior written consent of Credit Suisse First Boston Corporation, except, in the
case of the Company, issuances pursuant to Keebler's 1996 Stock Option Plan, the
1998 Stock Incentive Plan and the Directors' Plan.
Keebler and each of the Selling Stockholders have agreed to indemnify the
U.S. Underwriters and the Managers against certain liabilities, including civil
liabilities under the Securities Act, or to contribute to payments which the
U.S. Underwriters and the Managers may be required to make in respect thereof.
Application has been made to list the shares of Common Stock on the NYSE
under the Symbol "KBL." In order to meet one of the requirements for listing the
shares of Common Stock on the NYSE, the U.S. Underwriters and the Managers have
undertaken to sell (i) lots of 100 or more shares to a minimum of 2,000
beneficial holders, (ii) a minimum of 1.1 million shares and (iii) shares with a
minimum aggregate market value of $40.0 million.
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Selling Stockholders and the Representatives, and does
not necessarily reflect the market price of the Common Stock following the
Offering. Among the principal factors to be considered in determining the
initial public offering price will be market conditions for initial public
offerings, the history of and prospects for Keebler's business, Keebler's past
and present operations, its past and present earnings and current financial
position, an assessment of Keebler's management, the market of securities of
companies in businesses similar to those of Keebler, the general condition of
the securities markets and other relevant factors. There can be no assurance
that the initial public offering price will correspond to the price at which the
Common Stock will trade in the public market subsequent to the Offering or that
an active trading market for the Common Stock will develop and continue after
the Offering.
Credit Suisse First Boston Corporation, on behalf of the U.S. Underwriters
and the Managers, may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit Credit Suisse First Boston Corporation to reclaim a selling
concession from a syndicate member when Common Stock originally sold by such
syndicate member is purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the Common Stock to be
higher than it would otherwise be in the absence of such transactions. These
transactions may be effected on the NYSE or otherwise and, if commenced, may be
discontinued at any time.
The Representatives have informed Keebler that they do not expect
discretionary sales by the U.S. Underwriters and the Managers to exceed 5% of
the number of shares being offered in the Offering.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that Keebler and the Selling
Shareholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of Common Stock are effected.
Accordingly, any resale of the Common Stock in Canada must be made in accordance
with applicable securities laws which will vary depending on the relevant
jurisdiction,
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and which may require resales to be made in accordance with available statutory
exemptions or pursuant to a discretionary exemption granted by the applicable
Canadian securities regulatory authority. Purchasers are advised to seek legal
advice prior to any resale of the Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to Keebler, the Selling Shareholders
and the dealer from whom such purchase confirmation is received that (i) such
purchaser is entitled under applicable provincial securities laws to purchase
such Common Stock without the benefit of a prospectus qualified under such
securities laws, (ii) where required by law, that such purchaser is purchasing
as principal and not as agent, and (iii) such purchaser has reviewed the text
above under "Resale Restrictions".
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein and the Selling Shareholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as result, it may not be possible to satisfy a judgment against the
issuer or such persons in Canada or to enforce a judgment obtained in Canadian
courts against such issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from Keebler. Only one such
report must be filed in respect of Common Stock acquired on the same date and
under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Common Stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock in their particular circumstances and with respect to the
eligibility of the Common Stock for investment by the purchaser under relevant
Canadian Legislation.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby
are being passed upon for Keebler by Winston & Strawn, Chicago, Illinois.
Certain legal matters will be passed
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upon for the U.S. Underwriters and the Managers by Cravath, Swaine & Moore, New
York,
New York.
EXPERTS
The consolidated balance sheets of Keebler and the Predecessor Company, as
of December 30, 1995 and December 28, 1996, and the related consolidated
statements of operations, shareholders' equity (deficit), and cash flows for
each of the periods presented, constituting the three fiscal years ended
December 28, 1996, included in this Prospectus, have been included herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The financial statements of Sunshine included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
Keebler files annual, quarterly and current reports, proxy statements and
other information with the Commission. You may read and copy any reports,
statements or other information on file at the Commission's public reference
room in Washington, D.C. You can request copies of those documents, upon payment
of a duplicating fee, by writing to the Commission.
Keebler has filed a Registration Statement on Form S-1 with the Commission.
This Prospectus, which forms a part of the Registration Statement, does not
contain all of the information included in the Registration Statement. Certain
information is omitted and you should refer to the Registration Statement and
its exhibits. With respect to references made in this Prospectus to any contract
or other document of Keebler, such references are not necessarily complete and
you should refer to the exhibits attached to the Registration Statement for
copies of the actual contract or document. You may review a copy of the
Registration Statement at the Commission's public reference room in Washington,
D.C, and at the Commission's regional offices in Chicago, Illinois and New York,
New York. Please call the Commission at 1-800-SEC-0330 for further information
on the operation of the public reference rooms. Keebler's Commission filings and
the Registration Statement can also be reviewed by accessing the Commission's
Internet site at http://www.sec.gov.
61
<PAGE> 67
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Keebler Foods Company
Consolidated Balance Sheets at December 28, 1996 and
October 4, 1997 (Unaudited)............................ F-2
Consolidated Statements of Operations for the four weeks
ended January 26, 1996, the twelve and thirty-six weeks
ended October 5, 1996, and the twelve and forty weeks
ended October 4, 1997 (Unaudited)...................... F-4
Consolidated Statements of Cash Flows for the four weeks
ended January 26, 1996, the thirty-six weeks ended
October 5, 1996, and the forty weeks ended October 4,
1997 (Unaudited)....................................... F-5
Notes to Consolidated Financial Statements (Unaudited).... F-6
Report of Independent Accountants dated December 5,
1997................................................... F-9
Consolidated Balance Sheets at December 30, 1995 and
December 28, 1996...................................... F-10
Consolidated Statements of Operations for the years ended
December 31, 1994, December 30, 1995, the four weeks
ended January 26, 1996, and the forty-eight weeks ended
December 28, 1996...................................... F-11
Consolidated Statements of Shareholders' Equity (Deficit)
for the years ended December 31, 1994, December 30,
1995, the four weeks ended January 26, 1996, and the
forty-eight weeks ended December 28, 1996.............. F-12
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, December 30, 1995, the four weeks
ended January 26, 1996, and the forty-eight weeks ended
December 28, 1996...................................... F-13
Notes to Consolidated Financial Statements................ F-14
Sunshine Biscuits, Inc.
Independent Auditors' Report dated May 15, 1996........... F-34
Balance Sheets -- March 31, 1995 and 1996.............. F-35
Statements of Operations -- Years ended March 31, 1994,
1995 and 1996......................................... F-36
Statements of Stockholder's Equity -- Years ended March
31, 1994, 1995 and 1996............................... F-37
Statements of Cash Flows -- Years ended March 31, 1994,
1995 and 1996......................................... F-38
Notes to Financial Statements -- Years ended March 31,
1994, 1995 and 1996................................... F-39
</TABLE>
Note: The financial statements listed in the above index for Keebler Foods
Company (the "Company") include the financial statements of the
Predecessor Company for all periods and dates through January 26, 1996,
the date the Company was acquired by INFLO, and the Company for all
periods and dates subsequent to January 26, 1996. The Company's operating
results have been restated as of and for the forty-eight weeks ended
December 28, 1996 to reflect the merger of Keebler Corporation and INFLO
Holdings Corporation, as if it had been effective January 26, 1996. This
distinction between predecessor/successor financial statements has been
made by inserting a double line between such financial statements.
F-1
<PAGE> 68
KEEBLER FOODS COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 28, OCTOBER 4,
1996 1997
------------ ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 11,954 $ 61,077
Trade accounts and notes receivable, net.................. 137,150 129,785
Inventories, net:
Raw materials.......................................... 25,296 23,006
Package materials...................................... 9,842 10,949
Finished goods......................................... 76,054 86,902
Other.................................................. 1,473 2,107
---------- ----------
112,665 122,964
Deferred income taxes..................................... 55,929 44,052
Other..................................................... 19,337 22,741
---------- ----------
Total current assets.............................. 337,035 380,619
PROPERTY, PLANT, AND EQUIPMENT, NET......................... 486,080 470,795
TRADEMARKS AND TRADENAMES, NET.............................. 158,033 155,043
GOODWILL, NET............................................... 48,280 47,341
PREPAID PENSION............................................. 43,359 42,421
ASSETS HELD FOR SALE........................................ 6,785 3,178
OTHER ASSETS................................................ 22,502 16,685
---------- ----------
Total assets...................................... $1,102,074 $1,116,082
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 69
KEEBLER FOODS COMPANY
CONSOLIDATED BALANCE SHEETS, CONTINUED
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 28, OCTOBER 4,
1996 1997
------------ ----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 18,570 $ 31,265
Trade accounts payable.................................... 96,754 97,815
Other liabilities and accruals............................ 186,893 228,434
Income taxes payable...................................... -- 22,381
Plant and facility closing costs and severance............ 19,860 10,309
---------- ----------
Total current liabilities......................... 322,077 390,204
LONG-TERM DEBT.............................................. 439,369 370,582
OTHER LIABILITIES:
Deferred income taxes..................................... 64,068 49,226
Postretirement/postemployment obligations................. 56,382 59,138
Plant and facility closing costs and severance............ 16,124 11,602
Deferred compensation..................................... 18,205 17,075
Other..................................................... 20,708 16,756
---------- ----------
Total other liabilities........................... 175,487 153,797
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock ($.01 par value; 100,000,000 shares
authorized and none issued)............................ -- --
Common stock ($.01 par value; 500,000,000 shares
authorized and 77,638,206 and 77,595,213 shares issued,
respectively).......................................... 776 776
Additional paid-in capital................................ 148,613 148,538
Retained earnings......................................... 15,752 52,185
---------- ----------
Total shareholders' equity........................ 165,141 201,499
---------- ----------
Total liabilities and shareholders' equity........ $1,102,074 $1,116,082
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 70
KEEBLER FOODS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UBIUS COMPANY COMPANY
---------------- --------------------------------- ---------------------------------
FOUR THIRTY-SIX FORTY TWELVE TWELVE
WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED
JANUARY 26, 1996 OCTOBER 5, 1996 OCTOBER 4, 1997 OCTOBER 5, 1996 OCTOBER 4, 1997
---------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
NET SALES..................... $101,656 $1,171,354 $1,542,157 $452,329 $485,295
COSTS AND EXPENSES:
Cost of sales............... 54,870 560,719 668,446 217,348 208,345
Selling, marketing, and
administrative expenses... 71,427 571,310 770,442 220,197 234,775
Other....................... 857 4,366 7,115 1,844 2,369
-------- ---------- ---------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS.................. (25,498) 34,959 96,154 12,940 39,806
Interest (income) from
affiliates................ (875) -- -- -- --
Interest (income)........... (3) (399) (710) -- (382)
Interest expense to
affiliates................ 664 -- -- -- --
Interest expense............ 98 29,055 29,312 10,995 8,179
-------- ---------- ---------- -------- --------
INTEREST EXPENSE (INCOME),
NET......................... (116) 28,656 28,602 10,995 7,797
-------- ---------- ---------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAX
EXPENSE..................... (25,382) 6,303 67,552 1,945 32,009
Income tax expense.......... -- 3,723 28,427 1,143 13,461
-------- ---------- ---------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE
EXTRAORDINARY
ITEM........................ (25,382) 2,580 39,125 802 18,548
DISCONTINUED OPERATIONS:
Gain on disposal of the
Frozen Food businesses,
net of tax................ 18,910 -- -- -- --
-------- ---------- ---------- -------- --------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM.......... (6,472) 2,580 39,125 802 18,548
EXTRAORDINARY ITEM:
Loss on early extinguishment
of debt, net of tax....... -- 1,925 2,692 -- --
-------- ---------- ---------- -------- --------
NET INCOME (LOSS)............. $ (6,472) $ 655 $ 36,433 $ 802 $ 18,548
======== ========== ========== ======== ========
PRIMARY NET INCOME
PER SHARE:
Continuing operations....... $ 0.03 $ 0.48 $ 0.01 $ 0.22
Extraordinary item.......... 0.02 0.03 -- --
---------- ---------- -------- --------
Net income.................. $ 0.01 $ 0.45 $ 0.01 $ 0.22
========== ========== ======== ========
Weighted average shares
outstanding............... 75,502 81,593 80,122 83,695
========== ========== ======== ========
FULLY DILUTED NET INCOME PER
SHARE:
Continuing operations....... $ 0.03 $ 0.46 $ 0.01 $ 0.22
Extraordinary item.......... 0.02 0.03 -- --
---------- ---------- -------- --------
Net income.................. $ 0.01 $ 0.43 $ 0.01 $ 0.22
========== ========== ======== ========
Weighted average shares
outstanding............... 76,067 84,179 80,122 84,194
========== ========== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 71
KEEBLER FOODS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
UBIUS COMPANY
---------------- ---------------------------------
FOUR THIRTY-SIX FORTY
WEEKS ENDED WEEKS ENDED WEEKS ENDED
JANUARY 26, 1996 OCTOBER 5, 1996 OCTOBER 4, 1997
---------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED FROM (USED BY) OPERATING
ACTIVITIES
Net income (loss)................................. $ (6,472) $ 655 $ 36,433
Adjustments to reconcile net income (loss) to cash
from operating activities:
Depreciation and amortization.................. 1,973 33,140 45,523
Deferred income taxes.......................... -- -- (2,965)
Accretion on Seller Note....................... -- 1,665 2,028
Gain on the disposal of the Frozen Food
businesses, net of tax....................... (18,910) -- --
Loss on early extinguishment of debt, net of
tax.......................................... -- 1,925 2,692
(Gain) loss on sale of property, plant, and
equipment.................................... -- (26) (422)
Changes in assets and liabilities:
Trade accounts and notes receivable, net....... 22,068 22,264 7,365
Accounts receivable/payable from affiliates,
net.......................................... (1,941) -- --
Inventories, net............................... 4,353 (34,255) (10,299)
Recoverable income taxes and income taxes
payable...................................... 25 2,886 24,331
Other current assets........................... 1,192 (6,353) (3,404)
Deferred debt issue costs...................... -- (6,123) (1,250)
Trade accounts payable and other current
liabilities.................................. 11,550 21,773 42,417
Restructuring reserves......................... (14,469) -- --
Plant and facility closing costs and
severance.................................... -- (32,994) (14,027)
Other, net........................................ 246 9,554 (313)
-------- --------- ---------
Cash provided from (used by) operating
activities................................ (385) 14,111 128,109
CASH FLOWS (USED BY) PROVIDED FROM INVESTING
ACTIVITIES
Capital expenditures.............................. (3,228) (17,989) (26,097)
Proceeds from property disposals.................. 677 3,389 5,306
Disposition of the Frozen Food businesses......... 67,749 -- --
Purchase of Sunshine Biscuits, Inc., net of cash
acquired....................................... -- (142,670) --
Working capital adjustment paid by UB Investment
(Netherlands) B.V. ............................ -- 32,609 --
-------- --------- ---------
Cash (used by) provided from investing
activities................................ 65,198 (124,661) (20,791)
CASH FLOWS (USED BY) PROVIDED FROM FINANCING
ACTIVITIES
Capital contributions............................. -- 234 (75)
Long-term debt borrowings......................... -- 220,000 109,750
Long-term debt repayments......................... (2,377) (130,987) (167,870)
Revolving Loan facility, net...................... (63,300) 23,600 --
-------- --------- ---------
Cash (used by) provided from financing
activities................................ (65,677) 112,847 (58,195)
-------- --------- ---------
Increase (decrease) in cash and cash
equivalents............................... (864) 2,297 49,123
Cash and cash equivalents at beginning of
period.................................... 2,978 2,115 11,954
-------- --------- ---------
Cash and cash equivalents at end of period... $ 2,114 $ 4,412 $ 61,077
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 72
KEEBLER FOODS COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The consolidated financial statements of Keebler Foods Company (the
"Company", "Keebler", "successor company") include the financial statements of
UB Investments US Inc. ("UBIUS"), the predecessor company, for the four weeks
ended January 26, 1996, the date the Company was acquired by INFLO Holdings
Corporation ("INFLO"), and the successor company for the forty weeks ended
October 4, 1997 and the thirty-six weeks ended October 5, 1996. The distinction
between the predecessor company's and the successor company's consolidated
financial statements has been made by inserting a double line between such
consolidated financial statements. The consolidated financial statements for the
four weeks ended January 26, 1996 include "the Frozen Food businesses", defined
as Bernardi Italian Foods Co., The Original Chili Bowl, Inc., and Chinese Food
Processing Corporation, all of which were wholly owned subsidiaries of UBIUS
prior to their sale on December 31, 1995.
1. BASIS OF PRESENTATION
INTERIM FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements included herein
were prepared pursuant to the rules and regulations for interim reporting under
the Securities Exchange Act of 1934. Accordingly, certain information and
footnote disclosures normally accompanying the annual financial statements were
omitted. The interim consolidated financial statements and notes should be read
in conjunction with the annual audited consolidated financial statements and
notes thereto. The accompanying unaudited interim consolidated financial
statements contain all adjustments, consisting only of normal and necessary
adjustments, which in the opinion of management were necessary for a fair
statement of the results for the interim periods. Results for the interim
periods are not necessarily indicative of results for the full year.
On November 20, 1997, INFLO was merged into Keebler Corporation ("the
Merger"), which subsequently changed its name to Keebler Foods Company. The
financial statements for all periods after January 26, 1996 have been restated
to reflect the Merger as if it had been effective January 26, 1996. INFLO was
legally established as of November 2, 1995, but did not have any operating
activity, assets or liabilities until the Keebler acquisition on January 26,
1996.
FISCAL PERIODS PRESENTED
The Company's fiscal year consists of thirteen four-week periods (52 or 53
weeks) and ends on the Saturday nearest December 31. The first quarter consists
of four four-week periods. In 1996, the Keebler acquisition closed on the last
day of the first four-week period. The 1996 year-to-date information can be
derived from the sum of the thirty-six weeks ended October 5, 1996 of the
Company and the four weeks ended January 26, 1996 of UBIUS.
RECLASSIFICATIONS
Certain reclassifications of prior period data have been made to conform
with the current period reporting.
2. ASSETS HELD FOR SALE
Subsequent to the acquisition of Sunshine Biscuits, Inc. ("Sunshine"),
management decided to close and sell the production plant in Santa Fe Springs,
California. The land and buildings, which were valued at a fair market value of
$3.6 million as of the date of acquisition, were sold on March 27, 1997. No gain
or loss was recognized from the sale of the idle facility. The Company is
currently seeking a buyer for the manufacturing facility in Atlanta, Georgia
which has been held for sale since June 1996. Disposition of the facility is
expected to occur before the end of 1998 without a significant gain or loss.
F-6
<PAGE> 73
KEEBLER FOODS COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
3. DEBT COMMITMENTS
Long-term debt consisted of the following at October 4, 1997:
<TABLE>
<CAPTION>
INTEREST RATE FINAL MATURITY OCTOBER 4, 1997
------------- ----------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revolving Loans.......................... Floating April 7, 2003 $ --
Term Note................................ 6.938% April 7, 2003 230,000
Senior Subordinated Notes................ 10.750% June 15, 2006 125,000
Seller Note.............................. 10.000% January 26, 2007 28,692
Other Senior Debt........................ various 2001-2005 18,155
--------
401,847
Less: Current maturities................. (31,265)
--------
$370,582
========
</TABLE>
On April 8, 1997, the Company amended the primary credit financing facility
in order to obtain more favorable terms, fees, and interest rates. The Second
Amended and Restated Credit Agreement ("Credit Agreement") specifically provides
for available borrowings of $380.0 million consisting of a $140.0 million
Revolving Loan facility and a $240.0 million Term Note. Any unused borrowings
under the Revolving Loan facility are subject to a commitment fee. The current
commitment fee will vary from 0.125%-0.375% based on the relationship of debt to
adjusted earnings.
In conjunction with the amendment to the Credit Agreement, Term Notes B and
C were extinguished by using $40.0 million of borrowings under the Revolving
Loan facility, $109.8 million of increased borrowings against Term Note A, and
$3.8 million from cash resources. The Company recorded a before-tax
extraordinary charge of $4.6 million related primarily to expensing certain bank
fees which were being amortized and which were incurred at the time Term Notes B
and C were issued. The related after-tax charge was $2.7 million.
On November 10, 1997, the Company made a $40.0 million pre-payment of
principal on the Term Note. The pre-payment resulted in the recognition of a
$0.5 million after-tax extraordinary charge related to the expensing of certain
unamortized bank fees which were incurred at the time the Term Note was issued.
4. PLANT AND FACILITY CLOSING COSTS AND SEVERANCE
As part of acquiring Keebler and Sunshine, management adopted and began
executing a plan to reduce costs and inefficiencies. Certain exit costs totaling
$77.4 million were provided for in the allocation of the purchase price of both
the Keebler and Sunshine acquisitions. Spending against the reserves totaled
$14.1 million for the forty weeks ended October 4, 1997 resulting in a remaining
balance of $21.9 million, detailed as follows:
<TABLE>
<CAPTION>
STAFF FACILITY INFORMATION LEASE
REDUCTION CLOSURE SYSTEM TERMINATION
COSTS COSTS EXIT COSTS COSTS TOTAL
--------- -------- ----------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at December 28, 1996...... $ 6,219 $ 3,209 $ 3,771 $22,785 $ 35,984
Charges........................... (6,219) (1,271) (1,537) (5,046) (14,073)
------- ------- ------- ------- --------
Balance at October 4, 1997........ $ -- $ 1,938 $ 2,234 $17,739 $ 21,911
======= ======= ======= ======= ========
</TABLE>
The plans initiated by management are expected to be completed prior to the
end of 1998. Only noncancellable contractual lease obligations are expected to
extend beyond 1998, to be paid out over the next eight years concluding in 2004.
F-7
<PAGE> 74
KEEBLER FOODS COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
5. SUBSEQUENT EVENT
The consolidated financial statements reflect the Company's intention to
declare a 57.325-for-1 stock split of its Common Stock ("Stock Split") effective
concurrent with its initial public offering. The Stock Split will be effected in
the form of a stock dividend. Accordingly, all references in the consolidated
financial statements to number of shares, average number of shares outstanding
and related prices, per share amounts and common stock option and warrant data
have been restated to reflect these intended changes.
F-8
<PAGE> 75
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders of Keebler Foods Company
We have audited the accompanying consolidated balance sheet of UB
Investments US Inc. and Subsidiaries as of December 30, 1995 and the related
consolidated statements of operations, shareholders' equity (deficit), and cash
flows for the fifty-two week periods ended December 31, 1994 and December 30,
1995 and the four-week period ended January 26, 1996. We have also audited the
accompanying consolidated balance sheet of Keebler Foods Company and
Subsidiaries as of December 28, 1996 and, the related consolidated statement of
operations, shareholders' equity and cash flows for the forty-eight week period
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of UB Investments
US Inc. and Subsidiaries at December 30, 1995 and of Keebler Foods Company and
Subsidiaries at December 28, 1996 and the consolidated results of operations and
cash flows of UB Investments US Inc. for the fifty-two week periods ended
December 31, 1994 and December 30, 1995 and the four week period ended January
26, 1996 and the consolidated results of operations and cash flows of Keebler
Foods Company for the forty-eight week period ended December 28, 1996 in
conformity with generally accepted accounting principles.
As described in the notes to the consolidated financial statements, in 1994
UB Investments US Inc. changed its method of accounting for postemployment
benefits and spare machinery and equipment parts.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
December 5, 1997, except for Note 23,
as to which the date is January 22, 1998.
F-9
<PAGE> 76
KEEBLER FOODS COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
UBIUS COMPANY
DECEMBER 30, DECEMBER 28,
1995 1996
------------ -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 2,978 $ 11,954
Trade accounts and notes receivable, net.................. 117,293 137,150
Recoverable income taxes.................................. 1,791 --
Receivables from affiliates............................... 8,073 --
Inventories, net:
Raw materials........................................... 10,646 25,296
Package materials....................................... 11,053 9,842
Finished goods.......................................... 45,517 76,054
Other................................................... 892 1,473
--------- ----------
68,108 112,665
Deferred income taxes..................................... 35,694 55,929
Other..................................................... 33,417 19,337
--------- ----------
Total current assets............................... 267,354 337,035
PROPERTY, PLANT, AND EQUIPMENT, NET......................... 392,727 486,080
TRADEMARKS AND TRADENAMES, NET.............................. -- 158,033
GOODWILL, NET............................................... 74,977 48,280
PREPAID PENSION............................................. 23,836 43,359
NOTES RECEIVABLE FROM AFFILIATE............................. 125,000 --
ASSETS HELD FOR SALE........................................ 38,950 6,785
OTHER ASSETS................................................ 4,042 22,502
--------- ----------
Total assets....................................... $ 926,886 $1,102,074
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Commercial paper and revolving credit facilities.......... $ 284,000 $ --
Current maturities of long-term debt...................... 2,475 18,570
Trade accounts payable.................................... 51,877 96,754
Other liabilities and accruals............................ 123,719 186,893
Restructuring reserves.................................... 38,168 --
Plant and facility closing costs and severance............ -- 19,860
Accounts payable to affiliate............................. 3,016 --
--------- ----------
Total current liabilities.......................... 503,255 322,077
LONG-TERM DEBT.............................................. 151,153 439,369
NOTES PAYABLE TO AFFILIATE.................................. 105,000 --
OTHER LIABILITIES:
Deferred income taxes..................................... 43,806 64,068
Postretirement/postemployment obligations................. 44,603 56,382
Plant and facility closing costs and severance............ -- 16,124
Deferred compensation..................................... 16,281 18,205
Other..................................................... 11,031 20,708
--------- ----------
Total other liabilities............................ 115,721 175,487
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock ($.01 par value; 100,000,000 shares
authorized and none issued)............................. -- --
Common stock ($.01 par value; 500,000,000 shares
authorized and 77,638,206 shares issued)................ 1,000 776
Additional paid-in capital................................ 745,000 148,613
Retained earnings (deficit)............................... (694,243) 15,752
--------- ----------
Total shareholders' equity......................... 51,757 165,141
--------- ----------
Total liabilities and shareholders' equity......... $ 926,886 $1,102,074
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE> 77
KEEBLER FOODS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UBIUS COMPANY
----------------------------------------- ------------
FIFTY-TWO FIFTY-TWO FOUR FORTY-EIGHT
WEEKS WEEKS WEEKS WEEKS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28,
1994 1995 1996 1996
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net Sales...................................... $1,599,675 $1,578,601 $101,656 $1,645,532
COSTS AND EXPENSES:
Cost of sales................................ 705,464 746,754 54,870 774,198
Selling, marketing, and administrative
expenses.................................. 845,704 884,591 71,427 794,837
Loss on impairment of Salty Snacks
business.................................. -- 86,516 -- --
Other........................................ 2,115 (1,363) 857 6,347
---------- ---------- -------- ----------
INCOME (LOSS) FROM OPERATIONS.................. 46,392 (137,897) (25,498) 70,150
Interest (income) from affiliates............ (11,385) (11,376) (875) --
Interest (income)............................ (118) (151) (3) (450)
Interest expense to affiliates............... 65,195 11,802 664 --
Interest expense............................. 20,751 27,976 98 38,921
---------- ---------- -------- ----------
INTEREST EXPENSE (INCOME), NET................. 74,443 28,251 (116) 38,471
---------- ---------- -------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAX EXPENSE (BENEFIT)................. (28,051) (166,148) (25,382) 31,679
Income tax expense (benefit)................. (1,134) (459) -- 14,002
---------- ---------- -------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES........................... (26,917) (165,689) (25,382) 17,677
DISCONTINUED OPERATIONS:
Income from operations of discontinued Frozen
Food businesses, net of tax............... 3,362 7,344 -- --
Gain on disposal of Frozen Food businesses,
net of tax................................ -- -- 18,910 --
---------- ---------- -------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES...... (23,555) (158,345) (6,472) 17,677
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of
tax....................................... -- -- -- 1,925
---------- ---------- -------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES........................... (23,555) (158,345) (6,472) 15,752
Cumulative effect of accounting changes, net
of tax.................................... 535 -- -- --
---------- ---------- -------- ----------
NET INCOME (LOSS).............................. $ (23,020) $ (158,345) $ (6,472) $ 15,752
========== ========== ======== ==========
NET INCOME PER SHARE:
Continuing operations........................ $ 0.23
Extraordinary item........................... 0.02
----------
Net income................................... $ 0.21
==========
WEIGHTED AVERAGE SHARES OUTSTANDING............ 76,621
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE> 78
KEEBLER FOODS COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
------- ---------- --------- ---------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994 (UBIUS).................. $ 1,000 $ -- $(512,878) $(511,878)
Net loss.......................................... -- -- (23,020) (23,020)
Capital contribution from UB Investments
(Netherlands) B.V.............................. -- 300,000 -- 300,000
------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1994 (UBIUS)................ 1,000 300,000 (535,898) (234,898)
Net loss.......................................... -- -- (158,345) (158,345)
Capital contribution from UB Investments
(Netherlands) B.V.............................. -- 445,000 -- 445,000
------- --------- --------- ---------
BALANCE AT DECEMBER 30, 1995 (UBIUS)................ 1,000 745,000 (694,243) 51,757
Net loss for the four weeks....................... -- -- (6,472) (6,472)
------- --------- --------- ---------
BALANCE AT JANUARY 26, 1996 (UBIUS)................. 1,000 745,000 (700,715) 45,285
Write-off of Predecessor Company equity........... (1,000) (745,000) 700,715 (45,285)
Purchase of the Company by INFLO Holdings
Corporation effective January 26, 1996......... 717 124,284 -- 125,001
Issuance of common stock and warrants to GFI...... 57 23,543 -- 23,600
Management investment............................. 2 786 -- 788
Net income for the forty-eight weeks.............. -- -- 15,752 15,752
------- --------- --------- ---------
BALANCE AT DECEMBER 28, 1996 (COMPANY).............. $ 776 $ 148,613 $ 15,752 $ 165,141
======= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE> 79
KEEBLER FOODS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
UBIUS COMPANY
----------------------------------------- ------------
FIFTY-TWO FIFTY-TWO FOUR FORTY-EIGHT
WEEKS WEEKS WEEKS WEEKS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28,
1994 1995 1996 1996
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS PROVIDED FROM (USED BY) OPERATING
ACTIVITIES
Net income (loss)................................. $ (23,020) $ (158,345) $ (6,472) $ 15,752
Adjustments to reconcile net income (loss) to cash
from operating activities:
Depreciation and amortization................... 46,642 47,361 1,973 49,461
Deferred income taxes........................... 2,057 (1,985) -- 12,254
Accretion on Seller Note........................ -- -- -- 2,246
Loss on impairment of the Salty Snacks business,
net of tax................................... -- 86,516 -- --
Gain on the disposal of the Frozen Food
businesses, net of tax....................... -- -- (18,910) --
Loss on early extinguishment of debt, net of
tax.......................................... -- -- -- 1,925
Cumulative effect of accounting changes, net of
tax.......................................... (535) -- -- --
Changes in assets and liabilities:
Trade accounts and notes receivable, net........ 6,673 (11,716) 22,068 3,842
Accounts receivable/payable from affiliates,
net.......................................... (20,303) (4,737) (1,941) --
Inventories, net................................ (4,389) 6,605 4,353 (9,809)
Recoverable income taxes and income taxes
payable...................................... 22,137 (1,304) 25 --
Other current assets............................ (4,693) 3,772 1,192 1,644
Deferred debt issue costs....................... -- -- -- (8,032)
Trade accounts payable and other current
liabilities.................................. (2,200) (13,304) 11,550 26,105
Restructuring reserves.......................... (42,262) (24,122) (14,469) --
Plant and facility closing costs and
severance.................................... -- -- -- (41,279)
Other, net........................................ 2,525 9,702 246 (553)
---------- ---------- -------- ----------
Cash provided from (used by) operating
activities............................... (17,368) (61,557) (385) 53,556
CASH FLOWS (USED BY) PROVIDED FROM INVESTING
ACTIVITIES
Capital expenditures.............................. (56,016) (55,386) (3,228) (29,352)
Proceeds from property disposals.................. 8,928 2,956 677 8,908
Disposition of Frozen Food businesses............. -- -- 67,749 --
Working capital adjustment paid by UB Investment
(Netherlands) B.V............................... -- -- -- 32,609
Purchase of Sunshine Biscuits, Inc., net of cash
acquired........................................ -- -- -- (142,670)
Other............................................. 1,204 -- -- --
---------- ---------- -------- ----------
Cash (used by) provided from investing
activities............................... (45,884) (52,430) 65,198 (130,505)
CASH FLOWS (USED BY) PROVIDED FROM FINANCING
ACTIVITIES
Capital contributions............................. 300,000 445,000 -- 788
Reduction of notes payable to affiliate........... (300,000) (445,000) -- --
Long-term debt borrowings......................... -- -- -- 220,000
Long-term debt repayments......................... (6,894) (30,078) (2,377) (134,000)
Commercial paper and revolving credit facilities,
net............................................. 76,300 134,500 (63,300) --
---------- ---------- -------- ----------
Cash (used by) provided from financing
activities................................... 69,406 104,422 (65,677) 86,788
---------- ---------- -------- ----------
Increase (decrease) in cash and cash
equivalents.................................. 6,154 (9,565) (864) 9,839
Cash and cash equivalents at beginning of
period....................................... 6,389 12,543 2,978 2,115
---------- ---------- -------- ----------
Cash and cash equivalents at end of period...... $ 12,543 $ 2,978 $ 2,114 $ 11,954
========== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE> 80
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of the Company include the financial
statements of the predecessor company for the years ended December 31, 1994 and
December 30, 1995 and the four week period ended January 26, 1996, the date on
which UBIUS was acquired by INFLO, and the successor company for the forty-eight
week period ended December 28, 1996. The distinction between the predecessor
company and successor company consolidated financial statements has been made by
inserting a double line between such consolidated financial statements and
related footnotes.
1. BASIS OF PRESENTATION
BUSINESS AND OWNERSHIP
Keebler Foods Company (the "Company", "Keebler", "successor company"), a
manufacturer and distributor of food products was acquired by INFLO Holdings
Corporation ("INFLO") on January 26, 1996. INFLO is owned by Artal Luxembourg S.
A. ("Artal"), a private investment company, Flowers Industries, Inc.
("Flowers"), a New York Stock Exchange-listed company, Bermore, Limited, a
privately held corporation and the parent of G.F. Industries, Inc. ("GFI"), and
certain members of the Company's current management. On November 20, 1997, INFLO
was merged into Keebler Corporation ("the Merger"), which subsequently changed
its name to Keebler Foods Company. The financial statements as of and for the
forty-eight weeks ended December 28, 1996 of the Company have been restated to
reflect the Merger as if it had been effective January 26, 1996. INFLO was
legally established as of November 2, 1995, but did not have any operating
activity, assets or liabilities until the Keebler acquisition on January 26,
1996. The Company is comprised of primarily the following wholly-owned
subsidiaries: Keebler Company, Shaffer, Clarke & Co., Inc., Bake-Line Products,
Inc., Johnston's Ready Crust Company, Sunshine Biscuits, Inc., and Keebler
Leasing Corp.
The Company, formerly UB Investments US Inc. ("UBIUS", "predecessor
company"), had previously been owned by UB Investments (Netherlands) B.V., a
Dutch Company (See Note 4). UB Investments (Netherlands) B.V. is a member of the
worldwide group of affiliated companies owned by United Biscuits (Holdings)
plc., a publicly held company in the United Kingdom.
FISCAL YEAR
The Company's fiscal year consists of thirteen four week periods (52 or 53
weeks) and ends on the Saturday nearest December 31. The Keebler acquisition
closed on the last day of the first four week period. As a result of the
acquisition, the 1996 fiscal year consists of the forty-eight weeks ended
December 28, 1996. The 1994 and 1995 fiscal years of the predecessor company
were comprised of 52 weeks.
PRINCIPLES OF CONSOLIDATION
All subsidiaries are wholly-owned and included in the consolidated
financial statements of the Company. Intercompany accounts and transactions have
been eliminated.
GUARANTEES OF NOTES
The subsidiaries of the Company that are not Guarantors of the Senior
Subordinated Notes are inconsequential (which means that the total assets,
revenues, income or equity of such non-guarantors, both individually and on a
combined basis, is less than 3% of the Company's consolidated assets, revenues,
income or equity), individually and in the aggregate, to the consolidated
financial statements of the Company. The Guarantees are full, unconditional, and
joint and several. Separate financial statements of the Guarantors are not
presented because management has determined that they would not be material to
investors in the Senior Subordinated Notes.
RECLASSIFICATIONS
Certain reclassifications of prior years' data have been made to conform
with the current year reporting.
F-14
<PAGE> 81
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITION OF KEEBLER FOODS COMPANY BY INFLO HOLDINGS CORPORATION
On January 26, 1996, UB Investments (Netherlands) B.V. sold all the stock
of UBIUS to INFLO. Subsequent to the acquisition, UBIUS changed its name to
Keebler Corporation. On November 20, 1997, INFLO was merged into Keebler
Corporation which subsequently changed its name to Keebler Foods Company. The
sale specifically excluded the stock of the Frozen Food businesses as well as
the Salty Snacks business conducted by Keebler Company and other subsidiaries of
UBIUS, as well as the UBIUS finance companies of U.B.H.C., Inc. and U.B.F.C.,
Inc., also wholly-owned subsidiaries (See Note 4).
The aggregate gross purchase price of $487.5 million (excluding fees and
expenses paid at closing of approximately $15.3 million) was financed by $125
million in equity from INFLO, $200 million in Senior Term Notes, $125 million in
Increasing Rate Notes, the assumption of $20.3 million in existing senior
indebtedness of the Company and a note payable ("Seller Note") by INFLO to UB
Investments (Netherlands) B.V. for $32.5 million. The Seller Note does not bear
interest until January 26, 1999, and has been accounted for at a discounted
value of $24.4 million. In addition, the Company, subsequent to the purchase by
INFLO, received a working capital adjustment of $32.6 million from United
Biscuits (Netherlands) B.V. pursuant to the terms of the stock purchase
agreement between INFLO and United Biscuits (Netherlands) B.V.
The Keebler acquisition has been accounted for as a purchase. The total
purchase price and the fair value of liabilities assumed have been allocated to
the tangible and intangible assets of the Company based on the respective fair
values.
The following provides an allocation of the purchase price:
<TABLE>
<CAPTION>
(In Millions)
<S> <C> <C>
Purchase Price.............................................. $487.5
Less: Net book value of assets acquired..................... 329.5
Less: Asset purchase price allocation
- Working capital receivable from UB (Netherlands)
B.V. .................................................. $ 32.6
- Inventories............................................. 4.4
- Deferred income taxes................................... 11.4
- Property, plant and equipment........................... 45.7
- Prepaid pension......................................... 33.1
- Other assets............................................ (14.2)
- Trademarks and tradenames............................... 104.0 217.0
------
Plus: Liability purchase price allocation
- Other current liabilities and accruals.................. 1.1
- Plant and facility closing costs and severance.......... 55.3
- Deferred income taxes................................... 13.8
- Postretirement/postemployment obligations............... (17.5)
- Other................................................... 6.3 59.0
------ ------
Unallocated excess purchase price over fair value of net
assets acquired........................................... $ 0.0
======
</TABLE>
See Note 3 for the unaudited pro forma consolidated results of operations
of the Keebler acquisition.
3. ACQUISITION OF SUNSHINE BISCUITS, INC.
On June 4, 1996, the Company acquired Sunshine Biscuits, Inc. ("Sunshine")
from GFI for an aggregate consideration of $171.7 million (excluding related
fees and expenses paid at closing of approximately $2.2 million). The
acquisition of Sunshine was funded by $150.3 million in cash, of which $36.3
million was provided by the Company's existing cash sources and $114 million in
borrowings under the
F-15
<PAGE> 82
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. ACQUISITION OF SUNSHINE BISCUITS, INC. (CONTINUED)
Amended and Restated Credit Agreement (See Note 10). In addition, approximately
$23.6 million of common stock and warrants were issued to GFI. Subsequent to the
Merger, the stock and warrants held by GFI were transferred to Bermore, Limited
and reissued for the same value in the name of the Company. These shares and
warrants represent 13.1% of the Company's common stock on a fully diluted basis.
The acquisition of Sunshine by the Company has been accounted for as a
purchase. The total purchase price and the fair value of liabilities assumed
have been allocated to the tangible and intangible assets of Sunshine based on
the respective fair values. The acquisition resulted in goodwill of $48.8
million, which is being amortized over a 40-year period.
The following provides an allocation of the purchase price:
<TABLE>
<CAPTION>
(In Millions)
<S> <C> <C>
Purchase Price.............................................. $171.7
Less: Net book value of assets acquired..................... 92.8
Less: Asset purchase price allocation
- Trade accounts receivable............................... $ 0.3
- Inventories............................................. 3.6
- Deferred income taxes................................... 8.4
- Property, plant, and equipment.......................... 9.5
- Other assets............................................ (3.8)
- Trademarks and tradenames............................... 57.0 75.0
-----
Plus: Liability purchase price allocation
- Other current liabilities and accruals.................. 8.4
- Plant and facility closing costs and severance.......... 22.1
- Deferred income taxes................................... (8.3)
- Pension obligation...................................... 5.0
- Postretirement/postemployment obligations............... 17.8
- Other................................................... (0.1) 44.9
----- ------
Unallocated excess purchase price over fair value of net
assets acquired........................................... $ 48.8
======
</TABLE>
Results of operations for Sunshine from June 4, 1996 to December 28, 1996
have been included in the consolidated statements of operations. The following
unaudited pro forma information has been prepared assuming the acquisition had
taken place at January 1, 1995. The unaudited pro forma information includes
adjustments for interest expense that would have been incurred to finance the
purchase, additional depreciation of the property, plant, and equipment
acquired, and amortization of the trademarks, tradenames, and goodwill arising
from the acquisition. The unaudited pro forma consolidated results of operations
are not necessarily indicative of the results that would have been had the
Keebler and Sunshine acquisitions been effected on the assumed date.
<TABLE>
<CAPTION>
UNAUDITED
FOR THE YEAR ENDED
---------------------------
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $2,213,574 $1,979,105
Loss from continuing operations before income taxes......... $ (241,323) $ (8,652)
Net loss.................................................... $ (253,924) $ (5,440)
</TABLE>
F-16
<PAGE> 83
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PREDECESSOR COMPANY
UBIUS, the predecessor company to Keebler Foods Company, was formed in 1992
as a result of the legal restructuring of United Biscuit (Holdings) plc.'s
operations in the United States. UBIUS received the stock of the subsidiaries in
exchange for the $850 million in debt with UB Investments (Netherlands) B.V. as
well as all of the capital stock of UBIUS.
On May 20, 1995, the predecessor company adopted plans to sell the Salty
Snacks business. On January 24, 1996, the predecessor company sold to Kelly Food
Products, Inc. selected assets of the Salty Snacks business including the
production plant in Bluffton, Indiana, trademarks and other intangibles related
to the business, inventory and property, plant and equipment including selected
assets related to the convenience sales division.
During July, 1995, the predecessor company adopted plans to discontinue the
operations of its Frozen Food businesses. On January 9, 1996, UB Investments
(Netherlands) B.V. sold the assets and stock of Bernardi Italian Foods Co., The
Original Chili Bowl, Inc., Chinese Food Processing Corporation (wholly-owned
subsidiaries collectively known as the Frozen Food businesses) and certain
assets of Keebler Company to Windsor Food Company Ltd. The sale was effective as
of December 31, 1995.
On December 5, 1995, Shaffer, Clarke & Co., Inc. ("Shaffer, Clarke"), a
wholly-owned subsidiary, sold certain assets related to Shaffer, Clarke's KA-ME
business to Liberty Richter, Inc. for a gain of $2.6 million. These assets
included inventory, contractual rights, and other intellectual property.
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
All highly liquid instruments purchased with an original maturity of three
months or less are classified as cash equivalents. The carrying amount of cash
equivalents approximates fair value due to the relatively short maturity of
these investments.
TRADE ACCOUNTS RECEIVABLE
Substantially all of the Company's trade accounts receivable are from
retail dealers and wholesale distributors. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not require
collateral. Trade accounts receivable, as shown on the consolidated balance
sheets, were net of allowances of $3.6 million as of December 30, 1995 and $5.4
million as of December 28, 1996.
INVENTORIES
Inventories are stated at the lower of cost or market with cost determined
principally by the last-in, first-out ("LIFO") method. Inventories stated under
the LIFO method represent approximately 84% of total inventories in 1995 and 91%
of total inventories in 1996. Because the Company has adopted a natural business
unit single pool approach to determining LIFO inventory cost, classification of
the LIFO reserve by inventory component is impractical. The excess of the
current production cost of inventories over LIFO cost was approximately $17.6
million at December 30, 1995. There was no reserve required at December 28, 1996
to state inventory on a LIFO basis.
At December 30, 1995 and December 28, 1996, inventories are shown net of an
allowance for slow-moving and aged inventory of $0.6 million and $5.5 million,
respectively.
F-17
<PAGE> 84
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost at December 30, 1995.
Property, plant and equipment was adjusted to fair market value due to the
Keebler and Sunshine acquisitions. Depreciation expense is computed using the
straight-line method based on the estimated useful lives of the depreciable
assets. Certain facilities and equipment held under capital leases are
classified as property, plant, and equipment and amortized using the
straight-line method over the lease terms, and the related obligations are
recorded as liabilities. Lease amortization is included in depreciation expense.
TRADEMARKS AND TRADENAMES
Trademarks and tradenames are amortized on a straight-line basis over a
period of 40 years. Accumulated amortization of trademarks and tradenames was
$0.1 million and $3.1 million as of December 30, 1995 and December 28, 1996,
respectively.
GOODWILL
Goodwill shown in the consolidated financial statements at December 30,
1995 related to the excess cost over the fair value of tangible net assets
acquired in the purchases of Johnson Ready Crust, Bake-Line Products, Inc., and
the Frozen Food businesses. At December 28, 1996, goodwill reflects the excess
cost over the fair value of the tangible net assets acquired from the Sunshine
purchase. Goodwill is amortized on a straight-line basis over a period of 40
years. Accumulated amortization of goodwill was $31.4 million and $0.5 million
as of December 30, 1995 and December 28, 1996, respectively.
RESEARCH AND DEVELOPMENT
Activities related to new product development and major improvements to
existing products and processes are expensed as incurred and were $15.1 million
in 1994, $14.5 million in 1995, $0.6 million for the four weeks ended January
26, 1996 and $4.3 million for the forty-eight weeks ended December 28, 1996.
ADVERTISING AND CONSUMER PROMOTION
Advertising and consumer promotion costs are generally expensed when
incurred. Production costs for advertising are deferred until the first run of
the advertisement. There were no deferred advertising costs at December 30, 1995
and December 28, 1996. Advertising and consumer promotion expense was $72.3
million in 1994, $87.9 million in 1995, $5.1 million for the four weeks ended
January 26, 1996 and $33.3 million for the forty-eight weeks ended December 28,
1996.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into derivative financial transactions to hedge existing
or future exposures to changes in commodity prices. The Company does not enter
into derivative transactions for speculative purposes. Gains and losses on
commodity futures and options transactions are deferred until the contracts are
liquidated (See Note 21).
INCOME TAXES
The consolidated financial statements reflect the application of Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting For Income
Taxes". The Company files a consolidated federal income tax return.
F-18
<PAGE> 85
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME PER SHARE
On July 29, 1997, the Board of Directors of the Company approved a 1 for 10
reverse stock split. All per share and related amounts contained in these
financial statements and notes have been adjusted to reflect this stock split.
Net income (loss) per common share is calculated using the weighted average
number of common and common equivalent shares outstanding during each period.
The common equivalent shares relate to the 1996 Stock Option Plan and the
warrant issued in connection with the Sunshine acquisition and are calculated
using the treasury stock method.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
In the event that facts and circumstances indicate that the cost of any
long-lived assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to market value or discounted cash flow value is
required.
6. CHANGES IN ACCOUNTING POLICIES
Effective January 2, 1994, the predecessor company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". The predecessor company
recorded a $4 million pre-tax obligation as a cumulative effect of accounting
change, resulting in an after-tax charge of $2.5 million. Prior to this date,
these expenses were recognized on a pay-as-you-go basis.
As of December 31, 1994, the predecessor company adopted a policy of
capitalizing spare machinery and equipment parts. Previously, spare machinery
and equipment parts were expensed when purchased. The new policy was adopted in
order to bring the predecessor company in conformity with the predecessor
company guidelines and to match the cost with the associated benefit of these
supplies. Expense is recognized as the parts are used. Adoption of the new
policy resulted in a pre-tax benefit of $5 million, $3 million net of income
tax.
7. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment, including related accumulated
depreciation follows:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 12,899 $ 16,344
Buildings................................................... 156,200 126,824
Machinery and equipment..................................... 531,007 301,588
Office furniture and fixtures............................... 49,620 54,985
Delivery equipment.......................................... 6,150 6,785
Construction in progress.................................... 37,264 23,980
--------- --------
793,140 530,506
Accumulated depreciation.................................... (400,413) (44,426)
--------- --------
$ 392,727 $486,080
========= ========
</TABLE>
F-19
<PAGE> 86
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Property, plant and equipment is depreciated on a straight-line basis over
the estimated useful lives of the depreciable assets. Buildings are depreciated
over a useful life of ten to forty years. Machinery and equipment is depreciated
over a useful life of eight to twenty-five years. Office furniture and fixtures
are depreciated over useful lives of five to fifteen years. Delivery equipment
is depreciated over a twelve year life.
8. ASSETS HELD FOR SALE
During 1995, the predecessor company adopted plans to sell the Salty Snacks
business. The decision to sell the Salty Snacks business was based on the
overcapacity in a highly competitive industry. Late in 1995, it was determined
that the predecessor company would not be able to sell the three operating Salty
Snack plants as a single unit. A buyer was found for selected assets, which
included the production plant in Bluffton, Indiana. The remaining production
plants were closed down. The aggregate carrying amount of the net assets held
for sale was $116.5 million. The assets held for sale primarily included
inventory and property, plant, and equipment. The predecessor company recorded
an impairment loss of $86.5 million for the expected costs associated with
exiting the Salty Snacks business. The charge was comprised of $77.6 million
related to the write-down of the net assets to their net realizable value of
$38.9 million. In addition, $8.9 million was recorded for the estimated
severance and other costs associated with the liquidation of the Salty Snacks
business. The $38.9 million of Salty Snack assets held for sale were not
included in the net assets acquired by the Company as part of the acquisition.
Since the Keebler acquisition, management has executed a strategic plan to
reduce inefficiencies. In June 1996, the Company, in an effort to reduce excess
capacity, closed the manufacturing facility in Atlanta, Georgia. At December 28,
1996, the estimated fair value of land and buildings held for sale was $3.2
million, net of $0.3 million for selling costs. Similarly, after the acquisition
of Sunshine, management decided to close the production plant in Santa Fe
Springs, California due to overcapacity. The fair market value of land and
buildings held for sale at December 28, 1996 was $3.6 million. The Santa Fe
Springs, California facility was subsequently sold on March 27, 1997.
Disposition of the Atlanta, Georgia manufacturing facility is expected to occur
before the end of 1998 without a significant gain or loss.
9. OTHER CURRENT LIABILITIES AND ACCRUALS
Other current liabilities and accruals consisted of the following at
December 30, 1995 and December 28, 1996:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Self insurance reserves..................................... $ 53,737 $ 58,527
Employee compensation....................................... 28,364 42,555
Marketing and consumer promotions........................... 28,618 45,892
Taxes, other than income.................................... 7,196 10,555
Interest.................................................... 2,751 9,887
Postretirement/Postemployment benefit obligation............ 2,816 5,523
Reclamations................................................ -- 4,321
Other....................................................... 237 9,633
-------- --------
$123,719 $186,893
======== ========
</TABLE>
The Company obtains insurance to manage potential losses and liabilities
related to workers' compensation, health and welfare claims, and general product
and vehicle liability. The Company has elected to retain a significant portion
of the expected losses through the use of deductibles and stop-loss limitations.
Provisions
F-20
<PAGE> 87
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. OTHER CURRENT LIABILITIES AND ACCRUALS (CONTINUED)
for losses expected under these programs are recorded based on the Company's
estimates of aggregate liability for claims incurred. These estimates utilize
the Company's prior experience and actuarial assumptions provided by the
Company's insurance carrier. The total estimated liability for these losses at
December 30, 1995 and December 28, 1996 was $53.7 million and $58.5 million,
respectively, and is included in other current liabilities and accruals. The
Company has collateralized its liability for potential workers' compensation
claims in several states by obtaining standby letters of credit which aggregate
to approximately $17 million.
10. DEBT AND LEASE COMMITMENTS
Long-term debt consisted of the following at December 30, 1995 and December
28, 1996:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
INTEREST RATE FINAL MATURITY 1995 1996
------------- ---------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Term-A Loans................... 7.380-7.875% January 31, 2002 $ -- $132,875
Term-B Loans................... 7.880-8.375 July 31, 2003 -- 89,400
Term-C Loans................... 8.130-8.625 July 31, 2004 -- 64,575
Senior Subordinated Notes...... 10.750 July 1, 2006 -- 125,000
Seller Note.................... 10.000 January 26, 2007 -- 26,664
Other Senior Debt.............. various 2001-2005 16,416 14,290
Private Placement Notes........ 9.000 May 1, 2001 125,000 --
Capital Lease Obligations...... various 1997-2008 6,800 5,135
Other.......................... 5,412 --
-------- --------
153,628 457,939
Less: Current maturities....... 2,475 18,570
-------- --------
$151,153 $439,369
======== ========
</TABLE>
The Company's primary credit financing as of December 28, 1996 was provided
by a $447.9 million Amended and Restated Credit Agreement ("Credit Agreement")
consisting of a $155 million Revolving Loan facility and three Term Loans (Term
Loans A, B and C) of which the current outstanding balance aggregates to $286.9
million. Interest on the Revolving Loans and Term Loans is calculated based on a
Base Rate plus applicable margin. The Base Rate can, at the Company's option, be
1) the higher of the base domestic lending rate as established by the
Administrative Agent for the Lenders under the Credit Agreement, or the Federal
Funds Rate plus one-half of one-percent, or 2) a reserve percentage adjusted
LIBO Rate as offered by the Administrative Agent's office in London. Base Rate
loan interest rates fluctuate immediately based upon a change in the established
Base Rate by the Administrative Agent. The Credit Agreement requires the Company
to meet certain financial covenants including net worth; earnings before
interest, taxes, depreciation and amortization; and cash flow and interest
coverage ratios.
As of December 28, 1996, the Company had a Revolving Loan facility with an
available balance of $155 million. Actual available borrowings under the
Revolving Loan facility can be reduced by the level of qualifying working
capital as defined in the Company's Amended and Restated Credit Agreement. This
gross available balance is further reduced by certain letters of credit totaling
$10.9 million and outstanding borrowings. There were no amounts outstanding
under this facility as of December 28, 1996.
Any unused borrowings under the Revolving Loan facility are subject to a
commitment fee, which will vary from 0.25%-0.5% based on the relationship of
debt to adjusted earnings.
F-21
<PAGE> 88
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. DEBT AND LEASE COMMITMENTS (CONTINUED)
On January 30, 1996, the Company entered into a swap transaction with the
Bank of Nova Scotia, who also serves as the Administrative Agent for the Lenders
under the Credit Agreement. The swap transaction had the effect of converting
the base rate on $170 million of the Term Loans to a fixed rate obligation of
5.0185% plus applicable margin through February 1, 1999. The maturity date on
the swap transaction can be extended to February 1, 2001 at the option of the
Bank of Nova Scotia on January 28, 1999.
The Increasing Rate Notes issued to finance the Keebler acquisition were
repaid in June 1996 with the proceeds from a private placement offering for new
10.75% Senior Subordinated Notes due 2006 ("the Private Notes"). The Company
recorded a before-tax extraordinary loss of $3.2 million on the early
extinguishment of the Increasing Rate Notes. The loss consists primarily of bank
fees incurred at the time the Increasing Rate Notes were issued. The after-tax
loss was $1.9 million.
On October 23, 1996, pursuant to an exchange and registration rights
agreement, the Company registered its 10.75% Senior Subordinated Notes due 2006
("the Notes") under the Securities Act of 1933 in exchange for the Private
Notes. The Notes were issued under an indenture dated June 15, 1996 between the
Company, the Company's Restricted Subsidiaries (as defined in the indenture),
and the U.S. Trust Company of New York, as trustee. The Notes are unsecured
senior subordinated obligations of the Company guaranteed by the Restricted
Subsidiaries. Interest on the Notes will be paid semi-annually on January 1 and
July 1 of each year, commencing January 1, 1997. At the Company's option, up to
35.0% of the aggregate original principal of the Notes can be redeemed at a
redemption price of 110.0% on or prior to July 1, 1999 following a public equity
offering.
In addition, the Company's ability to pay dividends or make other
distributions on its Common Stock is limited by the terms of the indenture
governing the Notes to an amount equal to 50% of the consolidated net income of
the Company for the relevant period, subject to other limitations.
As a result of the Merger, the Company assumed the $32.5 million Seller
Note previously held by INFLO. The Seller Note does not bear interest until
January 26, 1999 and was recorded at a discounted value of $24.4 million on
January 26, 1996. The discount is being amortized over three years at an
effective interest rate of 10.0%.
In 1995, the predecessor company maintained a commercial paper program in
the United States supported by a line of credit agreement which was guaranteed
by United Biscuits (Holdings) plc. The line of credit agreement totaled $200
million as of December 30, 1995. The agreement could be canceled at any time.
The commercial paper had a weighted average interest rate of 5.9% during 1995.
The interest rate was 6.1% for year-end 1995. The predecessor company had $184
million of outstanding borrowings under this program as of December 30, 1995.
Furthermore, during 1995, the predecessor company, along with other United
Biscuits (Holdings) plc. affiliated companies, had access to a revolving credit
agreement in Europe which was guaranteed by United Biscuits (Holdings) plc.
Available borrowings under this agreement were limited by total United Biscuits
(Holdings) plc. borrowings. Maximum borrowings available under this agreement
were $300 million as of year-end 1995. This agreement had a weighted average
interest rate of 6.2% during 1995. The interest rate at year-end was 6.0% for
1995. The predecessor company had $100 million of outstanding borrowings under
this program as of December 30, 1995.
During 1995, the predecessor company prepaid $25.1 million of long-term
debt.
Interest of $111.1 million, $37.6 million, $3.8 million, and $25.2 million
was paid on debt, including notes payable to affiliates (see Note 11), for the
years ended December 31, 1994 and December 30, 1995, the four weeks ended
January 26, 1996, and the forty-eight weeks ended December 28, 1996,
respectively.
F-22
<PAGE> 89
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. DEBT AND LEASE COMMITMENTS (CONTINUED)
Aggregate scheduled annual maturities of long-term debt as of December 28,
1996 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997........................................................ $ 18,570
1998........................................................ 22,940
1999........................................................ 29,175
2000........................................................ 33,865
2001........................................................ 42,255
2002 and thereafter......................................... 311,134
--------
$457,939
========
</TABLE>
Assets recorded under capitalized lease agreements and equipment purchase
obligations included in property, plant, and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 1,246 $ 1,209
Buildings................................................... 8,700 2,881
Machinery and equipment..................................... 21,424 6,361
Other leased assets......................................... 1,213 259
-------- -------
32,583 10,710
Accumulated amortization.................................... (21,397) (1,000)
-------- -------
$ 11,186 $ 9,710
======== =======
</TABLE>
Future minimum lease payments under scheduled capital and operating leases
that have initial or remaining noncancellable terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
1997........................................................ $ 238 $ 23,858
1998........................................................ 258 19,375
1999........................................................ 278 16,567
2000........................................................ 349 14,523
2001........................................................ 366 11,924
2002 and thereafter......................................... 5,813 30,753
------- --------
Total minimum payments...................................... 7,302 $117,000
========
Amount representing interest................................ (2,167)
-------
Obligations under capital lease............................. 5,135
Obligations due within one year............................. (25)
-------
Long-term obligations under capital leases.................. $ 5,110
=======
</TABLE>
Rent expense for all operating leases was $38.8 million, $37.4 million,
$2.7 million and $30.1 million for the years ended December 31, 1994 and
December 30, 1995, the four weeks ended January 26, 1996, and the forty-eight
weeks ended December 28, 1996, respectively.
F-23
<PAGE> 90
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. NOTES RECEIVABLE AND PAYABLE TO AFFILIATE
At December 31, 1995, U.B.H.C., Inc. held $125 million in notes receivable
from UB Investments plc., an affiliated entity of United Biscuits (Holdings)
plc. These notes, which carried an interest rate of 9%, represented unsecured
obligations of UB Investments plc. and were due May 1, 2001. The note receivable
was settled as of the Keebler acquisition.
As part of the 1992 reorganization of United Biscuits (Holdings) plc.
operations in the United States, UBIUS had received the stock of its
subsidiaries in exchange for two notes payable. There was a $300 million note
payable to UB Investments, plc. which carried an interest rate of 9.75% due on
September 20, 2002 and a $550 million note payable due to UB Investments, plc.
with a 8.24% rate of interest due in seven annual installments with the final
installment due on September 20, 1999.
On September 7, 1994, the predecessor company received a capital
contribution of $300 million from U.B. Investments (Netherlands) B.V. and used
the capital contribution to repay the $300 million note. On February 1, 1995,
the predecessor company received a capital contribution of $445 million from
U.B. Investments (Netherlands) B.V. which was used by the predecessor company to
make payments against the $550 million note which would have been due in years
1995, 1996, 1997, 1998 and a portion of the payment due in 1999 leaving one
payment for the balance of $105 million note due September 1999. The remaining
note payable balance was settled as of the Keebler acquisition.
12. PLANT AND FACILITY CLOSING COSTS AND SEVERANCE
As part of acquiring Keebler and Sunshine, management adopted and began
executing a plan to reduce costs and inefficiencies. Certain exit costs totaling
$77.4 million were provided for in the allocation of the purchase price of both
the Keebler and Sunshine acquisitions. Management's plan included company-wide
staff reductions, the closure of manufacturing, distribution, and sales force
facilities, and information system exit costs.
Severance, outplacement, and other related costs associated with staff
reductions were estimated at $30.7 million. Costs incurred related to closing
the Atlanta, Georgia and Santa Fe Springs, California manufacturing facilities,
which include primarily severance and carrying costs, are expected to total
$13.0 million. The carrying and lease termination costs associated with the
closure of distribution and sales force facilities were estimated at $26.9
million. In addition, the Company expects to incur $6.8 million in lease costs
related to exiting legacy information systems. Spending against reserves
established totaled $41.5 million resulting in a balance of $36.0 million at
December 28, 1996, detailed as follows:
<TABLE>
<CAPTION>
STAFF FACILITY INFORMATION LEASE
REDUCTION CLOSURE SYSTEM TERMINATION
COSTS COSTS EXIT COSTS COSTS TOTAL
--------- -------- ----------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Liabilities provided for in the
allocation of the purchase
price of the Keebler
acquisition on January 26,
1996........................... $ 22,760 $ 12,069 $ 6,809 $13,700 $ 55,338
Liabilities provided for in the
allocation of the purchase
price of the Sunshine
acquisition on June 4, 1996.... 7,975 929 -- 13,240 22,144
Charges.......................... (24,516) (9,789) (3,038) (4,155) (41,498)
-------- -------- ------- ------- --------
Balance at December 28, 1996..... $ 6,219 $ 3,209 $ 3,771 $22,785 $ 35,984
======== ======== ======= ======= ========
</TABLE>
F-24
<PAGE> 91
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. PLANT AND FACILITY CLOSING COSTS AND SEVERANCE (CONTINUED)
The plans initiated by management are expected to be completed prior to the
end of 1998. Only noncancellable lease obligations are expected to extend beyond
1998, to be paid out over the next eight years concluding in 2004.
13. EMPLOYEE BENEFIT PLANS
The Company maintains a trusteed, noncontributory pension plan covering
certain salaried and hourly-paid employees. Assets held by the plan consist
primarily of common stocks, collective trust funds, government securities,
bonds, and guaranteed insurance contracts. Benefits provided under the
defined-benefit pension plan are primarily based on years of service and the
employee's final level of compensation. The Company's funding policy is to
contribute annually not less than the ERISA minimum funding requirements.
Effective September 30, 1996, the Sunshine Biscuits, Inc. Pension Plan was
merged with the Retirement Plan for Salaried and Certain Hourly-Paid Employees
of Keebler Company.
Pension expense included the following components:
<TABLE>
<CAPTION>
FOUR WEEKS FORTY-EIGHT
YEAR ENDED YEAR ENDED ENDED WEEKS ENDED
DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28,
1994 1995 1996 1996
------------ ------------ ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service cost.......................... $ 7,888 $ 6,611 $ 599 $ 7,711
Interest cost......................... 13,374 13,877 1,133 21,338
Actual return on plan assets.......... (9,295) (43,661) (1,693) (12,752)
Net amortization of transition
obligation.......................... 616 616 47 --
Deferral of (gains) losses............ (10,407) 24,468 -- (15,495)
Prior service cost.................... (512) (155) (12) --
Net gain.............................. -- (437) -- --
-------- -------- ------- --------
Pension expense....................... $ 1,664 $ 1,319 $ 74 $ 802
======== ======== ======= ========
</TABLE>
The funded status of the Company's pension plan and amounts recognized in
the consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested.................................................... $(136,131) $(366,253)
Nonvested................................................. (24,109) (7,255)
--------- ---------
$(160,240) $(373,508)
========= =========
Projected benefit obligation................................ $(201,267) $(408,060)
Plan assets at fair value................................... 241,604 464,433
--------- ---------
Plan assets greater than projected benefit obligation....... 40,337 56,373
Unrecognized transition obligation.......................... 3,682 --
Unrecognized prior service.................................. (1,123) --
Unrecognized net gain....................................... (19,060) (13,014)
--------- ---------
Prepaid pension............................................. $ 23,836 $ 43,359
========= =========
</TABLE>
F-25
<PAGE> 92
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. EMPLOYEE BENEFIT PLANS (CONTINUED)
Assumptions used in accounting for the defined-benefit pension plan at each
of the respective period-ends are as follows:
<TABLE>
<CAPTION>
FORTY-EIGHT
FOUR WEEKS WEEKS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28,
1994 1995 1996 1996
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Discount rate.......................... 7.75-8.5% 7.5% 7.5% 7.5%
Rate of compensation level increases... 4.4-6.0 4.0-6.0 4.0 4.0
Expected long-term rate of return on
plan assets.......................... 8.0-10.0 8.0-9.0 10.0 8.6
</TABLE>
As of December 31, 1995, included in plan assets were real estate
investments of $7.2 million in two distribution centers which are under two
operating leases to a subsidiary of UBIUS. The plan assets, as of December 28,
1996, include a real estate investment of $3.1 million in a distribution center
which is under an operating lease to the Company.
The Company, in addition to the defined-benefit pension plan, also
maintains an unfunded supplemental retirement plan for certain highly
compensated executives. Benefits provided are based on years of service. Vesting
is graduated depending on termination after age 55.
The supplemental retirement plan expense includes the following components:
<TABLE>
<CAPTION>
FORTY-EIGHT
FOUR WEEKS WEEKS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28,
1994 1995 1996 1996
------------ ------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service cost........................... $ 126 $ 452 $ 35 $ --
Interest cost.......................... 710 854 66 637
Net amortization of transition
obligation........................... 110 111 8 --
Prior service cost..................... 134 170 13 --
------ ------ ---- ----
Plan expense........................... $1,080 $1,587 $122 $637
====== ====== ==== ====
</TABLE>
F-26
<PAGE> 93
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. EMPLOYEE BENEFIT PLANS (CONTINUED)
The unfunded status of the supplemental retirement plan and the amounts
recognized in the consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation
Vested.................................................... $(11,301) $(10,028)
Nonvested................................................. -- --
-------- --------
$(11,301) $(10,028)
======== ========
Projected benefit obligation................................ $(12,077) $ (9,890)
Plan assets at fair value................................... -- --
-------- --------
Projected benefit obligation in excess of plan assets....... (12,077) (9,890)
Unrecognized transition obligation.......................... 664 --
Unrecognized prior service cost............................. 1,307 --
Unrecognized net (gain) loss................................ 1,732 (754)
-------- --------
Plan obligation included in other liabilities............... $ (8,374) $(10,644)
======== ========
</TABLE>
Assumptions used in accounting for the supplemental retirement plan at each
of the respective period-ends are as follows:
<TABLE>
<CAPTION>
FORTY-EIGHT
FOUR WEEKS WEEKS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28,
1994 1995 1996 1996
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Discount rate.......................... 8.5% 7.5% 7.5% 7.5%
Rate of compensation level increase.... 4.5 4.0 4.0 4.0
</TABLE>
Contributions are also made by the Company to a retirement program for
Grand Rapids union employees. Benefits provided under the plan are based on a
flat monthly amount for each year of service and are unrelated to compensation.
Contributions are made based on a negotiated hourly rate. In 1994, 1995, the
four weeks ended January 26, 1996, and the forty-eight weeks ended December 28,
1996, the Company expensed contributions of $2.3 million, $2.5 million, $0.2
million, and $2.3 million, respectively.
The Company contributes to various multiemployer union administered
defined-benefit and defined-contribution pension plans. Benefits provided under
the multiemployer pension plans are generally based on years of service and
employee age. Expense under these plans was $8.7 million, $9.6 million, $0.9
million, and $7.8 million in 1994, 1995, the four weeks ended January 26, 1996
and the forty-eight weeks ended December 28, 1996, respectively.
The Company also offers certain employees participation in the Keebler
Company Salaried Savings Plan, a defined-contribution plan. Prior to July 1,
1995, certain nonunion employees who met length-of-service requirements could
elect to participate in the plan. Currently, participation in the plan can be
elected immediately. Contributions, made by participants with no company
matching, are based on an elected percentage of the participants' compensation
within a specified range. Expenses incurred by the Company to administer the
plan are nominal.
During 1996, the Company matched a portion of employee contributions to a
defined contribution savings plan for qualified salaried employees of Sunshine.
Contributions made by the Company were not to exceed 6%
F-27
<PAGE> 94
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. EMPLOYEE BENEFIT PLANS (CONTINUED)
of gross wages. The Company also provides a savings plan for certain hourly
employees of Sunshine which provides no matching company contributions. Expenses
in 1996 for the plans were nominal.
A Voluntary Employee Beneficiary Association ("VEBA") provides health and
welfare benefits for certain Sunshine employees. Payments made by the Company to
the VEBA relating to future employee benefits are included in other assets. The
Company's policy is to fund the VEBA based on actual expenses of the preceding
year to the extent deductible under current federal income tax laws. The Company
funded $10 million during the forty-eight weeks ended December 28, 1996.
The Company also makes contributions to a money purchase pension plan for
certain hourly and salaried employees of Bake-Line Products, Inc. Contributions
are based on 4% of employees' annual salary. Expenses paid by the Company to
administer the plan were nominal.
14. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company provides certain medical and life insurance benefits for
eligible retired employees. The medical plan, which covers nonunion employees
with ten or more years of service, is a comprehensive indemnity-type plan. The
plan incorporates up-front deductible, coinsurance payments, and employee
contributions which are based on length of service. The life insurance plan
offers a small amount of coverage versus the amount the employees had while
employed. The Company does not fund the plan.
The net periodic postretirement benefit expense includes the following
components:
<TABLE>
<CAPTION>
FOUR FORTY-EIGHT
WEEKS WEEKS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28,
1994 1995 1996 1996
------------ ------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service cost............................ $1,669 $1,598 $123 $2,142
Interest cost........................... 3,015 3,194 246 2,729
------ ------ ---- ------
Net periodic postretirement benefit
expense............................... $4,684 $4,792 $369 $4,871
====== ====== ==== ======
</TABLE>
The funded status of the plan reconciled to the postretirement obligation
in the Company's consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $(18,914) $(33,054)
Fully eligible active participants........................ (3,522) (8,579)
Other active participants................................. (19,635) (11,815)
-------- --------
(42,071) $(53,448)
Unrecognized net gain....................................... (1,048) (3,857)
-------- --------
Postretirement obligation................................... $(43,119) $(57,305)
======== ========
</TABLE>
The accumulated postretirement benefit obligation was determined using a
weighted-average discount rate of 8.5% for the year ended December 31, 1994, and
7.5% for the year ended December 30, 1995, the four weeks ended January 26,
1996, and the forty-eight weeks ended December 28, 1996.
F-28
<PAGE> 95
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS (CONTINUED)
The weighted-average annual assumed rate of increase in the cost of covered
benefits is 7.0% for 1996 declining gradually to an ultimate trend rate of 5.0%
by the year 1999. A 1% increase in the trend rate for health care costs would
have increased the accumulated benefit obligation as of December 28, 1996 by
$3.7 million and the net periodic benefit cost by $0.4 million.
The Company also provides postemployment medical benefits to employees on
long-term disability. The plan is a comprehensive indemnity-type plan which
covers nonunion employees on long-term disability. There is no length of service
requirement. The plan incorporates coinsurance payments and deductibles. The
Company does not fund the plan. The postemployment obligation included in the
consolidated balance sheets at December 30, 1995 and December 28, 1996 was $4.3
million and $4.6 million, respectively.
15. INCOME TAXES
The components of income tax expense (benefit) were as shown below:
<TABLE>
<CAPTION>
FOUR FORTY-EIGHT
WEEKS WEEKS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 30, JANUARY 26, DECEMBER 28,
1994 1995 1996 1996
------------ ------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal.................................. $ (1,505) $ 1,526 $ -- $ --
State.................................... 1,425 -- -- --
-------- -------- ------- -------
Current provision (benefit) for income
taxes.................................... (80) 1,526 -- --
-------- -------- ------- -------
Deferred:
Federal.................................. (11,599) (63,212) 6,490 11,524
State.................................... (733) (9,215) 843 2,478
Valuation allowance (federal and
state)................................ 11,278 70,442 (7,333) --
-------- -------- ------- -------
Deferred provision (benefit) for income
taxes.................................... (1,054) (1,985) -- 14,002
-------- -------- ------- -------
$ (1,134) $ (459) $ -- $14,002
======== ======== ======= =======
</TABLE>
The differences between the income tax expense (benefit) calculated at the
federal statutory income tax rate and the company's consolidated income tax
expense (benefit) are as follows:
<TABLE>
<CAPTION>
FORTY-EIGHT
WEEKS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. federal statutory rate..................... $(10,098) $(64,843) $11,140
State income taxes (net of federal benefit)..... 603 (8,208) 1,608
Deferred tax asset valuation adjustment......... 9,227 70,442 --
Intangible amortization......................... 693 828 1,268
Non-taxable items............................... 228 883 --
All others...................................... (1,787) 439 (14)
-------- -------- -------
$ (1,134) $ (459) $14,002
======== ======== =======
</TABLE>
F-29
<PAGE> 96
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. INCOME TAXES (CONTINUED)
The deferred tax assets and deferred tax (liabilities) recorded on the
consolidated balance sheets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Depreciation................................................ $ (92,573) $ (91,860)
Prepaid pension............................................. (9,207) (17,050)
Capitalized interest........................................ (1,010) --
Inventory valuation......................................... -- (7,073)
Other....................................................... (131) (144)
--------- ---------
(102,921) (116,127)
--------- ---------
Net operating loss carryforwards............................ 81,922 94,659
Restructuring reserves...................................... 63,998 --
Postretirement/postemployment benefits...................... 18,755 24,997
Workers' compensation....................................... 18,375 16,703
Plant and facility closing costs and severance.............. -- 14,232
Incentives and deferred compensation........................ 10,084 11,658
Charitable contributions.................................... 9,204 10,067
Employee benefits........................................... 7,751 8,251
Other current assets........................................ -- 3,121
Other....................................................... 1,537 8,650
--------- ---------
211,626 192,338
Valuation allowance......................................... (116,817) (84,350)
--------- ---------
$ (8,112) $ (8,139)
========= =========
</TABLE>
Net operating loss carryforwards total approximately $236 million through
1996 and expire in 2008 through 2011. Pursuant to the terms of the Keebler
acquisition, the Predecessor Company retained the right to use the net operating
losses for potential carrybacks. Any unused operating losses are then available
to Keebler, but are significantly restricted under current tax law. Therefore,
all net operating loss carryforwards have been fully reserved due to the
uncertainty of their realization.
Income taxes paid (refunded) were approximately $(22.8) million, $2.3
million, and $1.6 million for the year ended December 31, 1994, December 30,
1995, and the forty-eight weeks ended December 28, 1996, respectively. There
were no taxes paid or refunded during the four weeks ended January 26, 1996.
16. SHAREHOLDERS' EQUITY
As a result of the Sunshine acquisition, the Company issued GFI 5,675,633
shares of the Company's common stock and a warrant to purchase 6,135,781 shares
of the Company's common stock. The shares of $.01 par value stock were valued at
$3.23 per share. The warrant is exercisable at $3.23 per share over a seven year
period, beginning June 4, 1996 and expiring June 4, 2003. At December 28, 1996,
the warrant has not been exercised. The total value of the stock and warrant
held by GFI was $23.6 million at December 28, 1996. Subsequent to the Merger,
the stock and warrant held by GFI were transferred to Bermore, Limited and
reissued for the same value in the name of the Company.
During the forty-eight weeks ended December 28, 1996, management invested
$3.7 million in exchange for 1,920,368 shares of the Company's common stock.
F-30
<PAGE> 97
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. STOCK OPTION PLAN
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for employee stock options. Under the Company's
1996 Stock Option Plan 9,673,594 shares of the Company's stock were authorized
for future grant. Options granted to management personnel in 1996 were 7,031,198
shares of the Company's common stock. All options granted have ten year terms
and vest and become exercisable over five years.
The following table summarizes stock option activity:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at January 26, 1996 ........................... -- --
Granted.................................................... 7,031,198 $1.98
Exercised.................................................. -- --
Forfeited.................................................. 228,727 $1.74
Outstanding at December 28, 1996........................... 6,802,471 $1.98
Exercisable at December 28, 1996........................... -- --
</TABLE>
Exercise prices for options as of December 28, 1996 for options outstanding
arising from the May 1996 grant (5,688,073 options) were $1.74 and for options
outstanding from the December 1996 grant (1,114,398 options) were $3.23. The
weighted average fair value for options granted in 1996 was $1.86. The weighted
average remaining contractual life of those options is nine years.
Pro forma information regarding net income is required by the SFAS No. 123,
"Accounting for Stock-Based Compensation", and has been determined as if the
Company had accounted for its employee stock options under the fair value method
of that Statement. The fair value for these options was estimated at the date of
grant using a present value approach with the following weighted-average
assumptions: risk-free interest rate of 6.0%; no expected dividend yield;
volatility of zero; and a weighted-average expected life of the option of five
years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma net income and primary net income per share would have been
approximately $14.0 million and $0.18, respectively, for the forty-eight weeks
ended December 28, 1996.
18. RESTRUCTURING CHARGE
In 1993, the predecessor company had recorded an operating charge of $122.7
million to restructure operations. In 1995, spending against the restructuring
reserves totaled $24.1 million. Restructuring reserves remaining as of December
30, 1995 were $38.2 million related primarily to future cash costs for
contractual obligations related to streamlining of the sales and distribution
network as well as related information system projects and a reserve to reduce a
manufacturing facility to its net realizable value. At December 28, 1996, there
were no restructuring reserves. The restructuring reserve balance of $38.2
million at December 30, 1995 was not a cost assumed as part of the Keebler
acquisition.
F-31
<PAGE> 98
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. RESTRUCTURING CHARGE (CONTINUED)
A summary of the restructuring reserve activity from the time the initial
restructuring reserve was recorded to the Keebler acquisition follows:
<TABLE>
<CAPTION>
FOUR WEEKS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED
JANUARY 1, DECEMBER 31, DECEMBER 30, JANUARY 26,
1994 1994 1995 1996
---------- ------------ ------------ -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Beginning balance........................ $ 14.0 $104.6 $ 62.3 $38.2
Liabilities recorded in connection with
the 1993 acquisition of Bake-Line
Products Inc........................... 5.5 -- -- --
Provision for continuing operations...... 120.1 -- -- --
Provision for discontinued operations.... 2.6 -- -- --
Charges.................................. (19.3) (42.3) (24.1) --
Reclassification of property, plant, and
equipment.............................. (18.3) -- -- --
------ ------ ------ -----
Ending balance........................... $104.6 $ 62.3 $ 38.2 $38.2
====== ====== ====== =====
</TABLE>
19. DISCONTINUED OPERATIONS
During July 1995, the predecessor company adopted plans to discontinue the
operations of the Frozen Food businesses. On January 9, 1996, UB Investments
(Netherlands) B.V. sold the Frozen Food businesses to the Windsor Food Company
Ltd. for $70 million. A gain on sale of $18.9 million was recorded during the
four weeks ended January 26, 1996.
Net sales from these operations were $70.6 million and $70.9 million for
the years ended December 31, 1994 and December 30, 1995. Expenses charged
against discontinued operations include expenses associated with the costs of
production, marketing, and specific administrative expenses. Expenses do not
include an allocation of shared selling, distribution, and general
administrative costs. Income from discontinued operations relating to the Frozen
Food businesses was $3.4 million, net of $3.2 million of tax, for the year ended
December 31, 1994. For the year ended December 30, 1995, income from
discontinued operations was $7.3 million. Income tax expense was not recognized
for discontinued operations in 1995 due to the Company having a net loss on a
consolidated basis. There were no operating activities for the Frozen Food
businesses during the four weeks ended January 26, 1996 as the sale was
effective as of December 31, 1995. The net assets of the Frozen Food businesses
as of December 30, 1995 were $47.7 million. Included in the net assets were
primarily inventory, other current assets, property, plant, and equipment, and
certain current liabilities and accruals.
20. AFFILIATE TRANSACTIONS
In 1995, the predecessor company conducted business with various affiliated
companies that ultimately are under the control of United Biscuits (Holdings)
plc. Transactions with related parties included working capital financing and
the purchase of product for resale in the United States. Receivables from
affiliates and payables to affiliates are summarized in Note 11. Purchases of
product from affiliated companies for resale in the United States were $11.3
million for the year-ended 1995.
On November 30, 1995, Keebler Company sold to UB Group Ltd., ultimately
United Biscuits (Holdings) plc., for a $5 million affiliate receivable, the
entire rights, titles and interests in certain logos, tradenames, trademarks,
and service marks registered or pending registration by Keebler Company in
Australia, New Zealand, Asia, and Europe. The proceeds of this transaction were
offset by certain legal fees and registration and licensing costs aggregating
$0.5 million. The net gain on the sale of these trademarks is included in other
costs and expenses for the year-ended December 30, 1995.
Near the end of 1995 and in consideration of completing various pending
stock and asset purchase agreements, as described in Note 4, the predecessor
company entered into several transactions with affiliated companies within
United Biscuits (Holdings) plc. The accompanying consolidated financial
statements have not
F-32
<PAGE> 99
KEEBLER FOODS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20. AFFILIATE TRANSACTIONS (CONTINUED)
\been adjusted to reflect these transactions which are summarized below, as it
is the Company's policy to only give effect to dispositions resulting in a gain
on the completion of the transaction with the ultimate third party acquirer.
On December 29, 1995, the predecessor company transferred certain assets
and the stock of the Frozen Food businesses to U.B. Investments (Netherlands)
B.V. for promissory notes that aggregated $70 million. On January 9, 1996, U.B.
Investments (Netherlands) B.V. sold both these assets and stock to Windsor Food
Company Ltd. for $70 million, effective December 31, 1995. The aggregate
carrying value of these businesses and assets reflected in the December 30, 1995
consolidated balance sheet is $47.7 million, consisting primarily of goodwill of
$22 million, property, plant and equipment of $21.2 million and inventory of
$7.6 million, which resulted in a pre-tax realized gain, net of a $3.4 million
charge for severance arising from the sale, of $18.9 million for UBIUS.
On December 29, 1995, the predecessor company sold the stock of both
U.B.F.C., Inc. and U.B.H.C., Inc. to U.B. Investments plc. for $100 each which
resulted in no significant gain or loss.
21. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair market value of financial instruments, which includes short and
long-term borrowings, was estimated using discounted cash flow analyses based on
current interest rates which would be obtained for similar financial
instruments. The carrying amounts of these financial instruments approximate
fair value.
The Company often enters into exchange traded commodity futures and options
contracts to protect the Company against a portion of adverse raw material price
movements. Gains or losses realized from the liquidation or expiration of the
contracts are recognized as part of the cost of raw materials. Gains or losses
are deferred until realized. Cost of sales was reduced by gains on futures and
options transactions of $0.6 million in 1994, $3.4 million in 1995, and $0.8
million for the forty-eight weeks ended December 28, 1996. Operations for the
four weeks ended January 26, 1996, was unaffected by gains or losses on futures
and options as the $0.5 million loss was recorded as an adjustment to the
opening balance sheet. As of December 28, 1996, $3.3 million in unrealized
futures contracts losses have been deferred. There were no outstanding options
contracts at December 28, 1996. As of December 28, 1996 the notional amount of
open futures contracts was $45 million.
22. UNAUDITED QUARTERLY FINANCIAL DATA
The unaudited quarterly financial results of operations are as follows:
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
------------------------------------------------
APRIL 20, JULY 13, OCTOBER 5, DECEMBER 28,
1996* 1996 1996 1996
--------- -------- ---------- ------------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................................. $335.3 $383.8 $452.3 $474.1
Gross profit.......................................... 177.8 197.9 235.0 260.6
Income before extraordinary items and cumulative
effect of a change in accounting.................... 1.3 0.5 0.8 15.1
Extraordinary item.................................... -- 1.9 -- --
Net income (loss)..................................... 1.3 (1.4) 0.8 15.1
Net income (loss) per share........................... $ 0.02 $(0.02) $ 0.01 $ 0.19
</TABLE>
- -------------------------
* Quarter 1 excludes the financial data of the predecessor company for the four
weeks ended January 26, 1996.
23. SUBSEQUENT EVENT
The consolidated financial statements reflect the Company's 57.325-for-1
stock split of its Common Stock ("Stock Split") effective January 22, 1998. The
Stock Split was effected in the form of a stock dividend. Accordingly, all
references in the consolidated financial statements to number of shares, average
number of shares outstanding and related prices, per share amounts and common
stock option and warrant data have been restated to reflect such changes.
F-33
<PAGE> 100
INDEPENDENT AUDITORS' REPORT
To the Stockholder
Sunshine Biscuits, Inc.
Woodbridge, New Jersey
We have audited the accompanying balance sheets of Sunshine Biscuits, Inc.
(a wholly-owned subsidiary of G.F. Industries, Inc.) (the "Company") as of March
31, 1995 and 1996, and the related statements of operations, stockholder's
equity and cash flows for each of the three years in the period ended March 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at March 31, 1995 and 1996, and
the results of its operations and its cash flows for each of the three years in
the period ended March 31, 1996 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Parsippany, New Jersey
May 15, 1996
F-34
<PAGE> 101
SUNSHINE BISCUITS, INC.
BALANCE SHEETS
MARCH 31, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 2,140 $ 1,841
Trade accounts receivable, less allowance for doubtful
accounts of $1,399 and $830............................ 43,036 42,361
Due from Parent and affiliates............................ 2,783 3,362
Inventories............................................... 44,272 35,220
Prepaid expenses and other................................ 5,583 5,428
Deferred income taxes..................................... 11,521 6,767
-------- --------
Total current assets................................... 109,335 94,979
PROPERTY HELD FOR SALE -- Net............................... 1,698 993
PROPERTY, PLANT AND EQUIPMENT -- Net........................ 98,879 88,844
OTHER ASSETS................................................ 30,409 27,877
-------- --------
TOTAL ASSETS................................................ $240,321 $212,693
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Trade accounts payable.................................... $ 35,497 $ 32,944
Other accrued liabilities................................. 40,020 27,444
Accrued restructuring costs............................... 9,830 1,904
Due to affiliates......................................... 2,802 399
Current maturities of long-term debt...................... 33 13,192
-------- --------
Total current liabilities......................... 88,182 75,883
LONG-TERM DEBT.............................................. 93,780 73,458
OTHER LIABILITIES........................................... 31,475 30,638
DEFERRED INCOME TAXES....................................... 9,325 10,058
STOCKHOLDER'S EQUITY:
Common stock, no par value; authorized, issued and
outstanding 100 shares................................. 15,000 15,000
Additional paid-in capital................................ 19,660 19,660
Accumulated deficit....................................... (17,101) (12,004)
-------- --------
Total stockholder's equity........................ 17,559 22,656
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.................. $240,321 $212,693
======== ========
</TABLE>
See notes to financial statements.
F-35
<PAGE> 102
SUNSHINE BISCUITS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
SALES (Net of discounts and allowances of $22,155, $24,637
and $21,450).............................................. $643,215 $629,841 $628,302
COST OF SALES............................................... 335,416 350,283 339,982
-------- -------- --------
GROSS MARGIN................................................ 307,799 279,558 288,320
-------- -------- --------
OPERATING EXPENSES:
Selling and marketing..................................... 267,782 272,476 258,018
General and administrative................................ 23,620 23,233 22,585
Restructuring charge (gain)............................... -- 21,933 (16,458)
Other..................................................... 955 5,051 727
-------- -------- --------
INCOME (LOSS) FROM OPERATIONS............................... 15,442 (43,135) 23,448
INTEREST EXPENSE............................................ 6,529 8,409 9,361
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM.................................... 8,913 (51,544) 14,087
ALLOCATED INCOME TAXES (TAX BENEFIT)........................ 4,033 (18,918) 6,169
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEM........................................ 4,880 (32,626) 7,918
LOSS FROM DISCONTINUED OPERATIONS........................... (2,610) -- --
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM..................... 2,270 (32,626) 7,918
EXTRAORDINARY ITEM -- LOSS ON EARLY EXTINGUISHMENT OF DEBT
(NET OF TAX).............................................. -- -- 2,821
-------- -------- --------
NET INCOME (LOSS)........................................... $ 2,270 $(32,626) $ 5,097
======== ======== ========
</TABLE>
See notes to financial statements.
F-36
<PAGE> 103
SUNSHINE BISCUITS, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS TOTAL
COMMON PAID-IN (ACCUMULATED STOCKHOLDER'S
STOCK CAPITAL DEFICIT) EQUITY
------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
BALANCE, MARCH 31, 1993............................ $15,000 $ 35,000 $ 13,255 $ 63,255
Capital contribution............................. -- 8,000 -- 8,000
Transfer of snack food businesses to Parent...... -- (23,340) -- (23,340)
Net income....................................... -- -- 2,270 2,270
------- -------- -------- --------
BALANCE, MARCH 31, 1994............................ 15,000 19,660 15,525 50,185
Net loss......................................... -- -- (32,626) (32,626)
------- -------- -------- --------
BALANCE, MARCH 31, 1995............................ 15,000 19,660 (17,101) 17,559
Net income....................................... -- -- 5,097 5,097
------- -------- -------- --------
BALANCE, MARCH 31, 1996............................ $15,000 $ 19,660 $(12,004) $ 22,656
======= ======== ======== ========
</TABLE>
See notes to financial statements.
F-37
<PAGE> 104
SUNSHINE BISCUITS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 2,270 $(32,626) $ 5,097
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Loss from discontinued operations...................... 2,610 -- --
Depreciation and amortization.......................... 9,049 8,773 8,204
Deferred income taxes (benefit)........................ (190) (20,211) 6,109
Extraordinary item -- loss on extinguishment of debt... -- -- 2,821
Restructuring charge (gain)............................ -- 21,933 (16,458)
Other.................................................. (62) 3 108
Changes in assets and liabilities:
Decrease (increase) in accounts receivable............. (6,228) 11,568 675
Decrease (increase) in inventory....................... (5,474) 7,248 9,052
Decrease in prepaid expenses and other................. 432 7,553 155
Changes in amounts due to and due from
affiliates -- net.................................... (6,494) 1,278 (2,982)
Decrease (increase) in other noncurrent assets......... 394 (11,547) 1,962
(Decrease) increase in trade accounts payable.......... 3,989 4,695 (2,553)
(Decrease) increase in other accrued liabilities....... 2,568 (1,504) (12,576)
Decrease in accrued restructuring charges.............. -- -- (5,417)
Increase in income taxes payable....................... 158 -- --
Increase (decrease) in long-term liabilities........... 1,857 14,886 (2,484)
-------- -------- --------
Net cash (used in) provided by operating
activities...................................... 4,879 12,049 (8,287)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (10,930) (10,660) (6,108)
Proceeds from sale of plant and distribution operation.... -- -- 21,954
Proceeds from sale of other assets........................ 10 34 1,321
-------- -------- --------
Net cash provided by (used in) investing
activities...................................... (10,920) (10,626) 17,167
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan refinancing............................ -- -- 74,522
Payment of debt issue costs............................... (1,461) (47) (1,116)
Payments of revolving credit loans........................ (4,989) (1,460) (21,635)
(Payments) proceeds on senior secured notes............... 60,500 -- (60,500)
Payments on other loans and capital leases................ (48,248) (35) (450)
-------- -------- --------
Net cash (used in) provided by financing
activities...................................... 5,802 (1,542) (9,179)
-------- -------- --------
NET DECREASE IN CASH........................................ (239) (119) (299)
CASH, BEGINNING OF YEAR..................................... 2,498 2,259 2,140
-------- -------- --------
CASH, END OF YEAR........................................... $ 2,259 $ 2,140 $ 1,841
======== ======== ========
</TABLE>
See notes to financial statements.
F-38
<PAGE> 105
SUNSHINE BISCUITS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
1. ORGANIZATION AND OPERATIONS
Sunshine Biscuits, Inc. (the "Company") is a wholly-owned subsidiary of
G.F. Industries, Inc. (the "Parent"). The Company manufactures cookies, crackers
and related products at several plants located in the United States. These
products are sold directly to retailers, distributors and food service
customers. No single customer accounts for more than 10% of total revenues and
export sales are not significant. As discussed in Note 15, in 1994 the Company
transferred to the Parent its salty snack foods operations.
On March 29, 1996 the Parent announced that it had entered into preliminary
discussions with a third party with respect to a possible merger of the Company.
As of May 15, 1996, no definitive purchase agreement has been signed.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
Inventories -- Inventories are stated at the lower of last-in, first-out
("LIFO") cost or market.
Property, Plant and Equipment -- Property, plant and equipment is stated at
fair market value determined at the time the Company was acquired by the Parent.
Property, plant and equipment additions subsequent to such acquisition are
stated at cost, including capitalized interest related to plant expansion and
other major capital projects. Capitalized leases are stated at the lesser of the
present value of future minimum lease payments or the fair value of the leased
property. Depreciation is computed using the straight-line method over the
estimated economic useful lives of the related assets. Leasehold improvements
are amortized over related lease terms.
Other Assets -- The excess cost over fair value of assets acquired is being
amortized over 40 years. Debt issuance costs are being amortized over the terms
of the related loans. Package design and plate costs are deferred and amortized
over periods from twelve to sixty months. On an on-going basis, the Company
reassesses the recorded values of long-lived assets based on estimated
undiscounted expected future cash flows. If the results of these periodic
assessments indicate that an impairment may be likely, the Company recognizes a
charge to operations at that time.
Allocated Income Taxes -- The Company's taxable income or loss is included
in the Parent's consolidated Federal income tax return. A tax-sharing agreement
between the Parent and its subsidiaries specifies that income taxes will be
allocated to each company in an amount equal to the amount of income tax that
would be due if the Company filed separate income tax returns. The Company
receives benefit for losses to the extent that it has paid tax in the past.
Allocated income taxes in these financial statements have been recognized in
accordance with Statement of Financial Accounting Standards No. 109, and
deferred income taxes provided for the differences between the tax bases of
assets and liabilities and their related financial statement amounts using
current income tax rates.
Fair Value of Financial Instruments -- The fair market value of certain
financial instruments, including cash, accounts receivable, accounts payable,
amounts due to and from affiliates and other accrued liabilities, approximate
the amounts recorded in the balance sheet because of the relatively current
maturities of these financial instruments. The fair market value of long-term
debt at March 31, 1995 and 1996 approximates the amounts recorded in the balance
sheet based on information available to the Company with respect to interest
rates and terms for similar financial instruments.
F-39
<PAGE> 106
SUNSHINE BISCUITS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Advertising and Consumer Promotion -- Advertising and consumer promotion
costs of $16,083 in 1994, $24,062 in 1995 and $7,231 in 1996 are expensed when
incurred.
New Accounting Standard -- Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of, is effective for the Company's fiscal year ending March 31,
1997. This standard requires impairment losses to be recorded on long-lived
assets and certain intangible assets when the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Although the Company has not yet completed its evaluation of the impact of
adopting this standard, management does not expect the effect, if any, to be
significant.
Reclassifications -- Certain prior year financial statement amounts have
been reclassified to conform to classifications used in the 1996 financial
statements.
3. RESTRUCTURING PROGRAMS
Results of operations for 1995 include the accrual of $21,933 for a
restructuring program designed to reduce costs and improve operating efficiency.
The restructuring represents primarily the closing of the Oakland, California
bakery and includes (1) a provision to adjust the carrying values of property
held for sale to estimated net realizable values ($7.5 million); (2) severance
and related benefits ($9.3 million); (3) facility shutdown costs ($1.7 million);
and (4) other related expenses ($3.4 million). During 1996, the Company
substantially completed this restructuring program and, as a result, accrued
restructuring costs were reduced by approximately $2,913. This amount is
included in restructuring gain in 1996.
Also during 1996, the Company sold its Chicago, Illinois bakery for cash
proceeds of approximately $17,600, resulting in a gain of approximately $15,900,
and sold its Chicago-based distribution operations for cash proceeds of
approximately $4,200, resulting in a loss of approximately $2,400. As a result
of these transactions, the Company reduced its workforce and recognized a
curtailment gain for the net decrease in accrued pension and postretirement
benefit obligations (see Note 11). Also in connection with the sale of the
distribution operations, the Company recorded a withdrawal liability of
approximately $250 related to a multiemployer pension plan.
On March 27, 1996, the Company entered into a contract to sell the Oakland
bakery property for approximately $2,700. The closing is subject to the
satisfaction of certain conditions. The Company expects that the sale will be
completed in September 1996 at which time any gain, net of related costs to
dispose of the property, will be recognized.
4. INVENTORIES
Inventories at March 31, 1995 and 1996 consist of the following:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Finished goods.............................................. $27,742 $20,046
Raw materials............................................... 12,116 11,328
Packaging................................................... 4,414 3,846
------- -------
Total....................................................... $44,272 $35,220
======= =======
</TABLE>
F-40
<PAGE> 107
SUNSHINE BISCUITS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
4. INVENTORIES -- (CONTINUED)
The cost of finished goods on the LIFO method exceeds their replacement
cost by approximately $2,867 and $1,768 at March 31, 1995 and 1996,
respectively. The replacement cost of raw materials and packaging exceeds their
LIFO cost by approximately $5,716 and $5,618 at March 31, 1995 and 1996,
respectively.
Inventory reductions during 1996 resulted in a LIFO liquidation which
decreased net income by approximately $540.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at March 31, 1995 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Land and improvements....................................... $ 9,666 $ 7,575
Buildings and improvements.................................. 43,194 42,885
Machinery and equipment..................................... 91,236 89,629
Vehicles.................................................... 2,304 1,348
Leasehold improvements...................................... 1,953 1,924
Construction in progress.................................... 6,948 4,587
-------- --------
Total....................................................... 155,301 147,948
Less accumulated depreciation and amortization.............. (56,422) (59,104)
-------- --------
Total....................................................... $ 98,879 $ 88,844
======== ========
</TABLE>
Property above excludes $1,698 and $993 at March 31, 1995 and 1996,
respectively, relating to the Company's closure of the Oakland bakery. Such
amounts have been segregated in the accompanying balance sheet as property held
for sale.
6. OTHER ASSETS
Other assets at March 31, 1995 and 1996 consist of the following:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Excess cost over fair value of assets acquired (net of
related amortization of $2,005 and $1,559)................ $14,707 $14,261
Intangible pension asset.................................... 11,613 10,610
Debt issuance costs......................................... 1,132 1,023
Other....................................................... 2,957 1,983
------- -------
Total....................................................... $30,409 $27,877
======= =======
</TABLE>
7. TRADE ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES
Checks outstanding in excess of related cash balances totaling $10,509 and
$9,935 at March 31, 1995 and 1996, respectively, are included in trade accounts
payable.
F-41
<PAGE> 108
SUNSHINE BISCUITS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
7. TRADE ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES -- (CONTINUED)
Other accrued liabilities at March 31, 1995 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Accrued selling expenses.................................... $15,298 $ 7,030
Compensation and payroll taxes.............................. 13,544 11,335
Other....................................................... 11,178 9,079
------- -------
Total....................................................... $40,020 $27,444
======= =======
</TABLE>
8. INCOME TAXES
Allocated income taxes (tax benefit) from continuing operations for the
years ended March 31, 1994, 1995 and 1996 consist of the following:
<TABLE>
<CAPTION>
1994 1995 1996
------ -------- ------
<S> <C> <C> <C>
Currently (receivable) payable:
Federal.................................................. $3,334 $ 1,341 $ 60
State.................................................... 889 (48) --
------ -------- ------
Total currently payable.................................... 4,223 1,293 60
------ -------- ------
Deferred:
Federal.................................................. (163) (15,921) 4,750
State.................................................... (27) (4,290) 1,359
------ -------- ------
Total deferred............................................. (190) (20,211) 6,109
------ -------- ------
Total...................................................... $4,033 $(18,918) $6,169
====== ======== ======
</TABLE>
Included in the amount due from Parent and affiliates at March 31, 1996 is
$2,679 which represents the portion of the federal tax benefit of the 1995
consolidated net operating loss carryback allocated to the Company pursuant to
the tax sharing agreement among the Parent and its subsidiaries.
At March 31, 1996, the Company has net operating loss carryforwards for
Federal and State tax purposes of approximately $9,625 and $16,200,
respectively, expiring in 2010.
The differences between income taxes calculated at Federal statutory income
tax rate and the Company's allocated income tax provision (benefit) from
continuing operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1994 1995 1996
------ -------- ------
<S> <C> <C> <C>
U.S. Federal Statutory Rate................................ $3,030 $(17,525) $4,930
State income taxes (net of federal benefit)................ 569 (2,863) 883
Goodwill amortization...................................... 152 152 156
Adjustments to prior years' allocated income taxes......... 117 1,106 --
Nondeductible expenses..................................... 165 212 200
------ -------- ------
$4,033 $(18,918) $6,169
====== ======== ======
</TABLE>
F-42
<PAGE> 109
SUNSHINE BISCUITS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
8. INCOME TAXES -- (CONTINUED)
Deferred tax assets and liabilities at March 31, 1995 and 1996 are as
follows:
<TABLE>
<CAPTION>
1995 1996
--------------------- ---------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Current:
Accrued employee benefits...................... $ 4,658 $ -- $ 6,323 $ --
Inventory costing and valuation................ -- 3,644 -- 3,052
Accrued promotion and marketing costs.......... 1,100 -- 175 --
Accrued restructuring costs.................... 6,913 -- 1,206 --
Accrued plant closing and other costs.......... 694 -- 557 --
Other accrued expenses......................... 760 -- 688 --
Allowance for doubtful accounts................ 560 -- 332 --
Other.......................................... 480 -- 538 --
------- ------- ------- -------
Total current.................................... 15,165 3,644 9,819 3,052
------- ------- ------- -------
Noncurrent:
Depreciation................................... -- 24,081 -- 20,381
Net operating loss carryforwards............... 7,868 -- 5,353 --
Accrued pension and post-retirement benefits... 6,284 344 4,539 344
Alternative minimum tax credit carryforwards... 948 -- 775 --
------- ------- ------- -------
Total noncurrent................................. 15,100 24,425 10,667 20,725
------- ------- ------- -------
Total............................................ $30,265 $28,069 $20,486 $23,777
======= ======= ======= =======
</TABLE>
The Internal Revenue Service has examined the Parent's consolidated income
tax returns for years 1989 through 1992. The Parent believes that the amounts
accrued are adequate to cover taxes payable for these years.
9. OTHER LIABILITIES
Other liabilities as of March 31, 1995 and 1996 consist of the following:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Postretirement benefit obligations (Note 11)................ $15,711 $11,347
Pension obligation.......................................... 15,694 19,178
Other....................................................... 70 113
------- -------
Total....................................................... $31,475 $30,638
======= =======
</TABLE>
F-43
<PAGE> 110
SUNSHINE BISCUITS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
10. NOTES PAYABLE
Notes payable as of March 31, 1995 and 1996 consist of the following:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Borrowings under BankAmerica Business Credit Inc. loan and
security agreement, interest payable monthly at a rate
based on prime or LIBOR(1)................................ $ -- $74,105
Borrowings under Wells Fargo revolving credit loan, interest
payable at a rate based on prime (9.0% at March 31, 1995)
plus .25%(1).............................................. 21,635 --
Senior secured notes, interest at 8.69% payable
semi-annually in arrears on May 1st and November 1st
commencing May 1, 1994. Notes are payable in installments
beginning in 1997 with final payment due in 2005(1)....... 60,500 --
Notes payable to Parent (includes accrued interest)(2)...... 10,645 11,545
Subordinated, unsecured, note payable to American Brands,
Inc., interest at prime (8.25% at March 31, 1996) payable
semi-annually beginning July 1993, balance due January 22,
1998...................................................... 1,000 1,000
Capital lease obligation.................................... 33 --
------- -------
Total(3).................................................... 93,813 86,650
Less current maturities, including revolving loans of
$8,192.................................................... 33 13,192
------- -------
Long-term portion........................................... $93,780 $73,458
======= =======
</TABLE>
- -------------------------
(1) On February 1, 1996, the Company refinanced the Wells Fargo and senior
secured notes with BankAmerica Business Credit, Inc. The new credit facility
consists of revolving loans, letters of credit and a term loan of up to
$90,000 in the aggregate. The revolving loans are available for a two-year
period, not exceeding $50,000 at any one time, based on eligible accounts
receivable and inventory. The term loan is for $40,000 and is payable in
twenty-three equal monthly installments with a final balloon payment at
maturity. At March 31, 1996 the amounts outstanding under the revolving
loans and term loan were $34,522 (interest at 7.56%) and $39,583 (interest
at 7.81%), respectively, and letters of credit outstanding totaled $725 at
March 31, 1996. Based on eligible receivables and inventory at March 31,
1996, the Company had $8,657 available under this credit facility. Revolving
loans of $26,330 have been classified as long-term as management expects to
maintain at least this level of borrowings during fiscal year 1997.
The agreement includes restrictive financial covenants related to capital
expenditures, minimum earnings and fixed charge coverage, and borrowings are
collateralized by substantially all of the Company's assets.
As a result of this refinancing, the Company recognized an extraordinary
loss on the early extinguishment of debt of $2,821 (net of related tax
benefit of $2,123).
(2) Notes payable to Parent, due February 1, 2001, are subordinated and bear
interest at prime plus 1/2%. Interest on these notes was approximately
$495, $810 and $900 for the years ended March 31, 1994, 1995 and 1996,
respectively. During 1994, other notes of $8,000 due the Parent were
contributed to capital and recorded as additional paid-in capital.
(3) At March 31, 1996, the long-term portion of notes payable is due, $61,913 in
1998 and $11,545 in 2001.
F-44
<PAGE> 111
SUNSHINE BISCUITS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
11. EMPLOYEE BENEFIT PLANS
The following table sets forth the funded status of the Company's pension
plan and the amounts recognized in the Company's financial statements at March
31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested.................................................... $(174,218) $(197,420)
Nonvested................................................. (16,561) (16,972)
--------- ---------
Total accumulated benefit obligation........................ $(190,779) $(214,392)
========= =========
Projected benefit obligation................................ $(199,804) $(221,305)
Plan assets at fair value................................... 175,085 195,214
--------- ---------
Projected benefit obligation in excess of plan assets....... (24,719) (26,091)
Unrecognized net loss....................................... 5,903 1,206
Additional minimum liability................................ (11,613) (10,610)
Unrecognized prior service cost............................. 14,536 16,153
Unrecognized net obligation from adoption................... 199 164
--------- ---------
Accrued pension cost (including intangible pension asset of
$11,613 in 1995 and $10,610 in 1996, see Note 6).......... $ (15,694) $ (19,178)
========= =========
Components of net pension cost for the year:
Service cost-benefits earned during the period............ $ 3,823 $ 3,363
Interest costs on projected benefit obligation............ 14,888 16,268
Return on plan assets..................................... (12,160) (35,297)
Net amortization and deferral............................. (2,426) 19,874
--------- ---------
Net pension cost............................................ $ 4,125 $ 4,208
========= =========
</TABLE>
Prior to March 31, 1994, eligible salaried and hourly employees
participated in defined benefit pension plans sponsored by the Company or the
Parent. The plans provided for payment of retirement benefits and certain
disability and severance benefits. Effective March 31, 1994, a decision was made
to merge the Company's defined benefit pension plan into the Parent's defined
benefit pension plan. Accordingly, for 1994, the Company was allocated pension
costs, for both salaried and hourly employees, by the Parent. Total pension
costs allocated for 1994 were $3,905.
During 1995, the Parent reevaluated its continuing operations and decided
that the plan merger described above would not be completed. On December 31,
1994, the Parent's defined benefit pension plan was reorganized into two
continuing plans, one primarily for all employees of the Company and the other
for the employees of the Parent and its other subsidiaries. Certain benefit
obligations and accruals were allocated to the plans in accordance with the
Internal Revenue Code and other regulations and other components of the
projected benefit obligations were allocated on a historical basis as shown
above.
The Company's policy is to make plan contributions required by applicable
ERISA regulations. Plan assets are primarily invested in equity and fixed income
securities. The actuarial present value of the benefit obligation at March 31,
1995 and 1996 was determined using assumed discount rates of 8.5% and 7.75%,
respectively, an expected long-term rate of return on plan assets of 10%, and an
assumed increase in future compensation of 4.5% and 4.75%, respectively.
F-45
<PAGE> 112
SUNSHINE BISCUITS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
11. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
In addition, the Company provides a savings plan for qualified salaried
employees and matches a portion of employee contributions not to exceed 6% of
gross wages. Expense for this plan was approximately $692, $411 and $93 in 1994,
1995 and 1996, respectively. The Company also provides a savings plan for
certain hourly employees which provides for no matching Company contributions.
In addition to pension benefits, the Company provides certain health care
benefits and life insurance to eligible retired employees (and their eligible
dependents) who are not covered by any collective bargaining agreements. The
Company continues to fund benefit costs on a pay-as-you-go basis, with retirees
paying a portion of the cost.
The following table sets forth amounts recognized in the Company's 1994,
1995 and 1996 financial statements:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $ 18,352 $ 14,046
Fully eligible active employees........................... 5,702 5,939
Other employees........................................... 9,783 9,908
-------- --------
Total............................................. 33,837 29,893
Unrecognized net gain....................................... 5,828 9,406
Unrecognized transition obligation.......................... (23,954) (27,952)
-------- --------
Accrued postretirement benefit obligation at March 31 (Note
9)........................................................ $ 15,711 $ 11,347
======== ========
</TABLE>
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Service cost of benefits earned............................. $ 891 $ 945 $ 792
Interest cost on accumulated postretirement benefit
obligation................................................ 2,955 2,574 2,335
Amortization -- net......................................... 1,447 1,215 959
------ ------ ------
Net postretirement benefit cost for the year................ $5,293 $4,734 $4,086
====== ====== ======
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
post-retirement benefit obligation was 12% and 10.25% for those retirees not
eligible for Medicare (pre 65 years of age) and 9% and 7.25% for those eligible
for Medicare in 1995 and 1996, respectively, gradually declining to 5.5% and
5.75% by the years 2001 and 2002, respectively, and remaining at that level
thereafter. A one percentage-point increase in the assumed health care cost
trend rate for each year would increase the accumulated postretirement benefit
liability by approximately 14% and 10% and net postretirement health care costs
by approximately 14% and 8% at March 31, 1995 and 1996, respectively. The
assumed discount rate and rate of compensation increases used in determining the
accumulated postretirement benefit obligation were 5.25% and 7.75%,
respectively, at March 31, 1995, and 5.25% and 8.25%, respectively, at March 31,
1996.
In 1995, curtailment losses of $4,650 associated with these programs were
included in restructuring costs. In 1996 a net curtailment gain of $5,570
associated with the Company's restructuring programs (see Note 3) was recognized
and is included in restructuring gains for 1996.
A Voluntary Employee Beneficiary Association ("VEBA") provides health and
welfare benefits for certain employees. Payments made to the VEBA relating to
future employee benefits are included in prepaid expenses. The Company's policy
is to fund the VEBA based on actual expenses of the preceding year to the
F-46
<PAGE> 113
SUNSHINE BISCUITS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
11. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
extent deductible under current Federal income tax laws. Expenses funded through
the VEBA were approximately $18,298, $18,212 and $15,252 in 1994, 1995 and 1996,
respectively.
12. LEASES
The Company leases manufacturing, warehouse and office facilities, vehicles
and other bakery equipment under long-term operating leases. These leases
generally contain renewal options for periods ranging from one to ten years and
generally require the payment of other costs such as property taxes, maintenance
and insurance.
Future minimum payments under operating leases as of March 31, 1996 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING:
- ------------
<S> <C>
1997........................................................ $10,273
1998........................................................ 7,892
1999........................................................ 5,559
2000........................................................ 4,240
2001........................................................ 2,960
Thereafter.................................................. 5,051
-------
Total minimum lease payments...................... $35,975
=======
</TABLE>
Rent expense was approximately $11,490, $12,346 and $12,537 for the years
ended March 31, 1994, 1995 and 1996, respectively.
13. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information for the years ended March 31, 1994, 1995
and 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Cash paid during the year for:
Interest.................................................. $4,181 $7,432 $10,084
Income taxes.............................................. 724 252 90
</TABLE>
14. RELATED PARTY TRANSACTIONS
Subsequent to March 31, 1995, one of the Parent's subsidiaries filed for
protection under Chapter 11 of the United States Bankruptcy Code, and another
subsidiary's business was closed and in process of being liquidated. It is
expected that the assets of both of these subsidiaries will be insufficient to
satisfy all of the creditors' claims. For 1995 and 1996, $2,567 and $750,
respectively of trade receivables due from these subsidiaries were written off
as uncollectible. At March 31, 1996, amounts due from Parent and affiliates
includes $513 of these receivables remaining unpaid.
The Company is obligated as guarantor under certain lease agreements of
these subsidiaries. In 1996 the Company subleased certain property subject to
these leases and, accordingly, reduced the amounts recorded for these guarantees
by approximately $600. At March 31, 1995, the Company recorded a liability of
$1,734 related to its expected future obligations (including rental payments and
carrying costs, etc.) associated with such leases.
F-47
<PAGE> 114
SUNSHINE BISCUITS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED MARCH 31, 1994, 1995 AND 1996
(IN THOUSANDS)
15. DISCONTINUED OPERATIONS
Effective October 1, 1993, the Company transferred its salty snack food
operations to the Parent and has accounted for these businesses as discontinued
operations. Accordingly, their operating results for 1994 have been segregated
in the accompanying statement of operations as follows:
<TABLE>
<S> <C>
Sales....................................................... $ 42,721
Costs and expenses.......................................... (46,895)
Income tax benefit.......................................... 1,564
--------
Net loss.................................................... $ (2,610)
========
</TABLE>
* * * * * *
F-48
<PAGE> 115
DESCRIPTION OF INSIDE BACK COVER PAGE:
A series of four pictures starting clockwise with (i) Ernie the Elf
appearing in The Hollow Tree, (ii) a Keebler delivery truck, (iii) a mother and
child in a grocery store selecting Keebler products and (iv) a Keebler elf
discussing Keebler products with a store manager.
<PAGE> 116
- --------------------------------------------------------------------------------
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER KEEBLER FOODS COMPANY, THE SELLING STOCKHOLDERS NOR ANY U.S.
UNDERWRITER HAS AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH
INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS
NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS
OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO PERMIT
A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS WHO COME INTO POSSESSION OF THIS
PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES AND CANADA ARE REQUIRED TO
INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING AND
THE DISTRIBUTION OF THIS PROSPECTUS APPLICABLE IN THAT JURISDICTION.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[KEEBLER ELF WITH TREE LOGO]
KEEBLER FOODS COMPANY
11,465,000 SHARES
COMMON STOCK
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SBC WARBURG DILLON READ INC.
- --------------------------------------------------------------------------------
<PAGE> 117
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE AMENDED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE RELATED REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR ANY APPLICABLE STATE SECURITIES
COMMISSION BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS
NOT PERMITTED.
[ALTERNATE COVER PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED JANUARY 23, 1998
11,465,000 Shares
KEEBLER LOGO KEEBLER FOODS COMPANY
Common Stock KEEBLER ELF
------------------
This is an initial public offering of shares of common stock of Keebler
Foods Company. Selling stockholders identified in this prospectus are offering
all of the shares to be sold in the offering. Keebler will not receive any of
the proceeds from the offering. After the offering, Flowers Industries, Inc.
will own approximately 55% of the outstanding shares of common stock. There is
currently no public market for the common stock. Keebler expects that the public
offering price in the offering will be between $21.00 and $24.00 per share.
Keebler will list the common stock on the New York Stock Exchange under the
symbol "KBL."
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to the Selling Stockholders........................ $ $
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CREDIT SUISSE FIRST BOSTON MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY DEAN WITTER SBC WARBURG DILLON READ
Prospectus dated , 1998
<PAGE> 118
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 7
Forward-Looking Statements; Certain Defined Terms; Market
Share Data................................................ 10
Dividend Policy............................................. 11
Capitalization.............................................. 12
Unaudited Pro Forma Consolidated Financial Information...... 13
Selected Historical Financial Data.......................... 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 19
Business.................................................... 29
Management.................................................. 37
Principal and Selling Stockholders.......................... 45
Certain Related Transactions................................ 46
Description of Certain Indebtedness......................... 49
Description of Capital Stock................................ 51
Certain United States Federal Tax Considerations For
Non-U.S. Holders of Common Stock.......................... 53
Shares Eligible for Future Sale............................. 55
Subscription and Sale....................................... 57
Legal Matters............................................... 60
Experts..................................................... 60
Available Information....................................... 60
Index to Financial Statements............................... F-1
</TABLE>
------------------------------------
Keebler's principal executive offices are located at 677 Larch Avenue,
Elmhurst, Illinois 60126, (630) 833-2900.
Unless otherwise stated herein, all information contained in this
prospectus assumes no exercise of the over-allotment option to purchase up to
1,719,750 shares of common stock granted to the underwriters for the U.S.
portion of the offering (the "U.S. Underwriters") and the managers for the
international portion of the offering (the "Managers").
For the definition of certain capitalized terms and an explanation of
certain market share data, see "Forward-Looking Statements; Certain Defined
Terms; Market Share Data."
ALT-I
<PAGE> 119
SUBSCRIPTION AND SALE
The institutions named below (the "Managers") have, pursuant to a
Subscription Agreement dated , 1998, among Keebler, the Selling
Stockholders and the Managers (the "Subscription Agreement"), severally and not
jointly, agreed with the Selling Stockholders to subscribe and pay for the
following respective numbers of International Shares (as defined) as set forth
opposite their names:
<TABLE>
<CAPTION>
NUMBER OF
MANAGER INTERNATIONAL SHARES
------- --------------------
<S> <C>
Credit Suisse First Boston (Europe) Limited........
Merrill Lynch International........................
Morgan Stanley & Co. International.................
Swiss Bank Corporation, acting through its division
SBC Warburg Dillon Read .........................
----------
Total......................................... 2,293,000
==========
</TABLE>
Of the 11,465,000 shares of Common Stock being offered, 2,293,000 shares
(the "International Shares") are initially being offered by the Managers (the
"Managers") outside the United States and Canada (the "International Offering")
and 9,172,000 Shares (the "U.S. Shares") are initially being concurrently
offered by the U.S. Underwriters (the "U.S. Underwriters") in the United States
and Canada (the "U.S. Offering").
The Subscription Agreement provides that the obligations of the Managers
are such that, subject to certain conditions precedent, the Managers will be
obligated to purchase all the International Shares offered hereby (other than
those shares covered by the over-allotment option described below) if any are
purchased. The Subscription Agreement provides that, in the event of a default
by a Manager, in certain circumstances the purchase commitments of the
non-defaulting Managers may be increased or the Subscription Agreement may be
terminated.
Keebler and the Selling Stockholders have entered into an Underwriting
Agreement with the U.S. Underwriters providing for the concurrent offer and sale
of the U.S. Shares in the United States and Canada. The closing of the U.S.
Offering is a condition to the closing of the International Offering and vice
versa.
The Selling Stockholders have granted to the Managers and the U.S.
Underwriters an option, exercisable by Credit Suisse First Boston Corporation,
on behalf of the Managers and the U.S. Underwriters, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
1,719,750 additional shares of Common Stock at the initial public offering
price, less the underwriting discounts and commissions. Such option may be
exercised only to cover over-allotments, if any, in the sale of the shares of
Common Stock offered hereby. To the extent that this option to purchase is
exercised, each Manager and each U.S. Underwriter will become obligated, subject
to certain conditions, to purchase approximately the same percentage of
additional shares being sold to the Managers and the U.S. Underwriters as the
number of International Shares set forth next to such Manager's name in the
preceding table and as the number set forth next to such U.S. Underwriter's name
in the corresponding table in the Prospectus relating to the U.S. Offering bears
to the sum of the total number of shares of Common Stock in such tables.
Keebler intends to reserve for purchase from the U.S. Underwriters up to 5%
of the shares of Common Stock to be sold in the U.S. Offering and the
International Offering which may be purchased by employees and friends of
Keebler through a directed share program. Such sales will be at the initial
public offering price. The number of shares of Common Stock available to the
general public will be reduced to the extent these persons purchase the reserved
shares.
Keebler and the Selling Stockholders have been advised by Credit Suisse
First Boston (Europe) Limited, on behalf of the Managers, that the Managers
propose to offer the International Shares outside the United States and Canada
initially at the public offering price set forth on the cover
ALT-II
<PAGE> 120
page of this Prospectus and, through the Managers, to certain dealers at such
price less a commission of $ per share, and that the Managers and such
dealers may reallow a commission of $ per share on sales to certain other
dealers. After the Offering, the public offering price and commission and
re-allowance may be changed by the Managers.
The public offering price, the aggregate underwriting discounts and
commissions per share and the per share commission and re-allowance to dealers
for the International Offering and the concurrent U.S. Offering will be
identical. Pursuant to an Agreement between the U.S. Underwriters and the
Managers (the "Intersyndicate Agreement") relating to the Offering, changes in
the public offering price, the aggregate underwriting discounts and commissions
per share and per share commission and re-allowance to dealers will be made only
upon the mutual agreement of Credit Suisse First Boston (Europe) Limited, on
behalf of the Managers, and Credit Suisse First Boston Corporation, as
representative of the U.S. Underwriters.
Pursuant to the Intersyndicate Agreement, each of the Managers has agreed
that, as part of the distribution of International Shares and subject to certain
exceptions, it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares of Common Stock or distribute any prospectus relating to
the Common Stock in the United States or Canada or to any other dealer who does
not so agree. Each of the U.S. Underwriters has agreed that, as part of the
distribution of the U.S. Shares and subject to certain exceptions, it has not
offered or sold, and will not offer or sell, directly or indirectly, any shares
of Common Stock or distribute any prospectus relating to the Common Stock to any
person outside the United States and Canada or to any other dealer who does not
so agree. The foregoing limitations do not apply to stabilization transactions
or to transactions between the Managers and the U.S. Underwriters pursuant to
the Intersyndicate Agreement. As used herein, "United States" means the Unites
States of America (including the States and the District of Columbia), its
territories, possessions and other areas subject to its jurisdiction, "Canada"
means Canada, its provinces, territories, possessions and other areas subject to
its jurisdiction, and an offer or sale shall be in the United States or Canada
if it is made to (i) an individual resident in the United States or Canada or
(ii) a corporation, partnership, pension, profit-sharing or other trust or other
entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
Managers and the U.S. Underwriters of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the public
offering price, less such amount agreed upon by Credit Suisse First Boston
(Europe) Limited, on behalf of the Managers, and Credit Suisse First Boston
Corporation, as representative of the U.S. Underwriters, but not exceeding the
selling concession applicable to such shares. To the extent there are sales
between the Managers and the U.S. Underwriters pursuant to the Intersyndicate
Agreement, the number of shares of Common Stock initially available for sale by
the Managers or by the U.S. Underwriters may be more or less than the amount
appearing on the cover page of this Prospectus. Neither the Managers nor the
U.S. Underwriters are obligated to purchase from the other any unsold shares of
Common Stock.
Each of the Managers and the U.S. Underwriters severally represents and
agrees that: (i) it has not offered or sold and prior to the date six months
after the date of issue of the Common Stock will not offer or sell any shares of
Common Stock to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act of 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the issue of the Shares to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
ALT-III
<PAGE> 121
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.
Purchasers of shares of Common Stock outside the United States may be
required to pay stamp taxes and other charges in accordance with the laws and
practices of the country of purchase in addition to the Price to Public set
forth on the cover page of this Prospectus.
Keebler, its officers, directors and the Selling Stockholders have agreed
that, for a period of 180 days after the date of this Prospectus, they will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any additional shares of Common
Stock or securities convertible into or exchangeable or exercisable for any
shares of Common Stock, or disclose the intention to make any such offer, sale,
pledge, disposal or filing, without the prior written consent of Credit Suisse
First Boston Corporation, except, in the case of the Company, issuances pursuant
to Keebler's 1996 Stock Option Plan, the 1998 Stock Incentive Plan and the
Directors' Plan.
Keebler and each of the Selling Stockholders have agreed to indemnify the
Managers and the U.S. Underwriters against certain liabilities, including civil
liabilities under the Securities Act, or to contribute to payments that the
Managers and the U.S. Underwriters may be required to make in respect thereof.
Application has been made to list the shares of Common Stock on the NYSE
under the symbol "KBL." In order to meet one of the requirements for listing the
shares of Common Stock on the NYSE, the U.S. Underwriters and the Managers have
undertaken to sell (i) lots of 100 or more shares to a minimum of 2,000
beneficial holders, (ii) a minimum of 1.1 million shares and (iii) shares with a
minimum aggregate market value of $40.0 million.
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Selling Stockholders and the Representatives, and does
not reflect the market price for the Common Stock following the Offering. Among
the principal factors considered in determining the initial public offering
price will be market conditions for initial public offerings, the history of and
prospects for Keebler's business, Keebler's past and present operations, its
past and present earnings and current financial position, an assessment of the
Keebler's management, the market of securities of companies in businesses
similar to those of Keebler, the general condition of the securities markets and
other relevant factors. There can be no assurance that the initial public
offering price will correspond to the price at which the Common Stock will trade
in the public market subsequent to the Offering or that an active trading market
for the Common Stock will develop and continue after the Offering.
Credit Suisse First Boston Corporation, on behalf of the Managers and the
U.S. Underwriters, may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit Credit Suisse First Boston Corporation to reclaim a selling
concession from a syndicate member when the Common Stock originally sold by such
syndicate member is purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the Common Stock to be
higher than it would otherwise be in the absence of such transactions. These
transactions may be effected on the NYSE or otherwise and, if commenced, may be
discontinued at any time.
The Managers and the U.S. Underwriters have informed the Company that they
do not expect discretionary sales by the Managers and the U.S. Underwriters to
exceed 5% of the number of shares of Common Stock being offered in the Offering.
ALT-IV
<PAGE> 122
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby
are being passed upon for Keebler by Winston & Strawn, Chicago, Illinois.
Certain legal matters will be passed upon for the U.S. Underwriters and the
Managers by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The consolidated balance sheets of Keebler and the Predecessor Company, as
of December 30, 1995 and December 28, 1996, and the related consolidated
statements of operations, shareholders' equity (deficit), and cash flows for
each of the periods presented, constituting the three fiscal years ended
December 28, 1996, included in this Prospectus, have been included herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The financial statements of Sunshine included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
Keebler files annual, quarterly and current reports, proxy statements and
other information with the Commission. You may read and copy any reports,
statements or other information on file at the Commission's public reference
room in Washington, D.C. You can request copies of those documents, upon payment
of a duplicating fee, by writing to the Commission.
Keebler has filed a Registration Statement on Form S-1 with the Commission.
This Prospectus, which forms a part of the Registration Statement, does not
contain all of the information included in the Registration Statement. Certain
information is omitted and you should refer to the Registration Statement and
its exhibits. With respect to references made in this Prospectus to any contract
or other document of Keebler, such references are not necessarily complete and
you should refer to the exhibits attached to the Registration Statement for
copies of the actual contract or document. You may review a copy of the
Registration Statement at the Commission's public reference room in Washington,
D.C, and at the Commission's regional offices in Chicago, Illinois and New York,
New York. Please call the Commission at 1-800-SEC-0330 for further information
on the operation of the public reference rooms. Keebler's Commission filings and
the Registration Statement can also be reviewed by accessing the Commission's
Internet site at http://www.sec.gov.
ALT-V
<PAGE> 123
[ALTERNATE BACK COVER PAGE FOR INTERNATIONAL PROSPECTUS]
- --------------------------------------------------------------------------------
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER KEEBLER FOODS COMPANY, THE SELLING STOCKHOLDERS NOR ANY
MANAGER HAS AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH INFORMATION
DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN
OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS
OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO PERMIT
A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS WHO COME INTO POSSESSION OF THIS
PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES AND CANADA ARE REQUIRED TO
INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING AND
THE DISTRIBUTION OF THIS PROSPECTUS APPLICABLE IN THAT JURISDICTION.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[KEEBLER ELF WITH TREE LOGO]
KEEBLER FOODS COMPANY
11,465,000 SHARES
COMMON STOCK
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY DEAN WITTER
SBC WARBURG DILLON READ
- --------------------------------------------------------------------------------
<PAGE> 124
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth fees payable to the Securities and Exchange
Commission and the New York Stock Exchange, and other estimated expenses
expected to be incurred in connection with issuance and distribution of
securities being registered. All such fees and expenses shall be paid by
Keebler.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 93,348.03
NYSE Fee.................................................... 361,100.00
NASD Fee.................................................... 30,500.00
Trustee and Transfer Agent Fees and Expenses................ 10,000.00
Printing and Engraving Fees and Expenses.................... 500,000.00
Legal Fees and Expenses..................................... 400,000.00
Accounting Fees and Expenses................................ 225,000.00
Miscellaneous............................................... 100,000.00
-------------
Total.................................................. $1,719,948.03
=============
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal or investigative (other than an action by or
in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be a made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses (including
attorneys' fees) actually and reasonably incurred in connection with the defense
or settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or such other court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
Keebler's Certificate of Incorporation and Bylaws provide that
indemnification shall be to the fullest extent permitted by the DGCL for all
current or former directors or officers of the Company.
II-1
<PAGE> 125
As permitted by the DGCL, the Certificate of Incorporation provides that
directors of Keebler shall have no personal liability to Keebler or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except (i) for any breach of a director's duty of loyalty to Keebler or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, (iii) under Section 174 of
the DGCL or (iv) for any transaction in which a director derives an improper
personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since January 1, 1995, Keebler has issued the following securities which
were not registered under the Securities Act:
(i) Immediately prior to the Keebler acquisition, Keebler issued
35,541,500 shares of Common Stock to each of Flowers and Artal for a
purchase price of $1.74 per share. In addition, Keebler issued 573,250
shares of Common Stock to Sam K. Reed at $1.74 per share. On May 10, 1996,
Keebler repurchased from each of Flowers and Artal 541,893 shares of Common
Stock. In 1996, Keebler sold 1,920,368 shares of Common Stock to certain
members of management for aggregate consideration of approximately $3.7
million. In 1996 and 1997, Keebler also issued options to certain members
of management exercisable into 7,081,071 (6,852,344 net of forfeitures)
shares of Common Stock. The weighted average exercise price of options
granted in 1996 and 1997 was $2.00.
(ii) In connection with the Keebler acquisition, on January 26, 1996
Keebler issued to United Biscuits a promissory note in the principal amount
of $32.5 million bearing interest at a rate of 10% per annum. On November
21, 1997, the obligations under such promissory note were paid in full by
Keebler.
(iii) In connection with the Keebler acquisition, on January 26, 1996
Keebler issued notes to an affiliate of Nomura. On June 25, 1996, the notes
were repaid with the proceeds of Keebler's 10 3/4% Senior Subordinated
Notes due 2006 (the "Private Notes"). On October 23, 1996, in a transaction
registered under the Securities Act, Keebler issued $125 million aggregate
principal amount of the Senior Subordinated Notes in exchange for all of
the issued and outstanding Private Notes.
(iv) On June 4, 1996, in connection with the Sunshine acquisition,
Keebler issued 5,675,633 shares of Common Stock and warrants exercisable
into 6,135,781 shares of Common Stock to GFI. The aggregate consideration
received by Keebler was approximately $23.6 million which was accounted for
as a capital contribution. The shares and warrants were subsequently
transferred by GFI to Bermore. Immediately prior to the Offering, Bermore
intends to exercise its warrants.
In each of the above instances, exemption from registration was claimed on
the grounds that the issuance of such securities did not involve any public
offering within the meaning of Section 4(2) of the Securities Act.
II-2
<PAGE> 126
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. See the Exhibit Index following the signature pages to this
Registration Statement.
(b) Financial Statement Schedules. See Report of Independent Accountants
included herein on Page S-1 and Schedule II -- Valuation and Qualifying
Accounts included herein on Page S-2.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 127
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Elmhurst, in the State of Illinois, on the 23rd day of January, 1998.
KEEBLER FOODS COMPANY
By: /s/ SAM K. REED
------------------------------------
Name: Sam K. Reed
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed below by the following persons
on January 23, 1998 in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ SAM K. REED President, Chief Executive Officer (Principal
- --------------------------------------------- Executive Officer) and Director
Sam K. Reed
/s/ E. NICHOL MCCULLY Chief Financial Officer and Senior Vice
- --------------------------------------------- President-Finance (Principal Financial Officer)
E. Nichol McCully
/s/ JAMES T. SPEAR Vice President Finance and Corporate Controller
- --------------------------------------------- (Principal Accounting Officer)
James T. Spear
* Director
- ---------------------------------------------
Robert P. Crozer
* Director
- ---------------------------------------------
Raymond Debbane
* Director
- ---------------------------------------------
Sacha Lainovic
* Director
- ---------------------------------------------
Amos R. McMullian
* Director
- ---------------------------------------------
Christopher J. Sobecki
* Director
- ---------------------------------------------
C. Martin Wood III
*By: /s/ E. NICHOL MCCULLY
----------------------------------------
E. Nichol McCully
Attorney-in-fact
</TABLE>
II-4
<PAGE> 128
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT AND DESCRIPTION
- --------- ------------------------
<S> <C>
1.1 Form of Underwriting Agreement between Keebler Foods Company
("Keebler"), Artal Luxembourg S.A. ("Artal"), Bermore,
Limited ("Bermore") and the underwriters named therein
1.2 Form of Subscription Agreement between Keebler, Artal,
Bermore and the managers named therein
2.1*** Plan and Agreement of Merger dated November 20, 1997 between
Keebler and INFLO Holdings Corporation ("INFLO")
3.1 Amended and Restated Certificate of Incorporation of Keebler
3.2 Amended and Restated By-Laws of Keebler
5.1 Opinion of Winston & Strawn re: legality
10.1 Stockholders' Agreement dated as of January 26, 1996 among
INFLO, Artal and Flowers Industries, Inc. ("Flowers")
(incorporated herein by reference to Exhibit 10.1 of
Keebler's Registration Statement on Form S-4 previously
filed with the Securities and Exchange Commission (the
"Commission") (File No. 333-8379) (the "1996 Registration
Statement"))
10.2 Stock Purchase Agreement dated November 5, 1995 between
INFLO and UB Investments (Netherlands) B.V. ("UB
Investments") (incorporated herein by reference to Exhibit
10.2 of the 1996 Registration Statement)
10.3 Amendment Agreement dated as of January 26, 1996 between
INFLO and UB Investments (incorporated herein by reference
to Exhibit 10.3 of the 1996 Registration Statement)
10.4 Distribution Agreement dated as of January 26, 1996 between
United Biscuits (UK) Limited ("UBL") and Shaffer, Clarke &
Co., Inc. ("Shaffer") (incorporated herein by reference to
Exhibit 10.5 of the 1996 Registration Statement)
10.5 Trademark License Agreement dated as of January 26, 1996
between UBL and Shaffer (incorporated herein by reference to
Exhibit 10.6 of the 1996 Registration Statement)
10.6 Borrower Pledge Agreement dated as of January 26, 1996 made
by Keebler in favor of the Bank (incorporated herein by
reference to Exhibit 10.7(e) of the 1996 Registration
Statement)
10.7 Acknowledgment and Supplement to Borrower Pledge Agreement
dated June 4, 1996 made by Keebler in favor of the Bank
(incorporated herein by reference to Exhibit 10.7(f) of the
1996 Registration Statement)
10.8 Subsidiary Pledge Agreement dated as of January 26, 1996
made by each of Keebler's subsidiaries listed as parties
thereto in favor of the Bank (incorporated herein by
reference to Exhibit 10.7(g) of the 1996 Registration
Statement)
10.8(a) Form of First Amendment and Supplement to Subsidiary Pledge
Agreement by certain subsidiaries of the Company dated
November 25, 1997 in favor of the Bank
10.9 Indenture dated June 15, 1996 between Keebler and the
Trustee named therein (incorporated herein by reference to
Exhibit 4.1 of the 1996 Registration Statement)
10.10 Management Stockholder's Agreement between INFLO and Key
Employees of INFLO incorporated herein by reference to
Exhibit 10.8 of the 1996 Registration Statement)
10.11 Non-Qualified Stock Option Agreement between INFLO and Key
Employees of INFLO (incorporated herein by reference to
Exhibit 10.9 of the 1996 Registration Statement)
10.12 1996 Stock Purchase and Option Plan for Key Employees of
INFLO (incorporated herein by reference to Exhibit 10.10 of
the 1996 Registration Statement)
10.13 Sale Participation Agreement among Artal, Flowers and Key
Employees of INFLO (incorporated herein by reference to
Exhibit 10.11 of the 1996 Registration Statement)
</TABLE>
II-5
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT AND DESCRIPTION
- --------- ------------------------------------------------------------------------------------------------------
<S> <C>
10.14 Stock Purchase Agreement dated June 4, 1996 among INFLO, Keebler and G.F. Industries, Inc. ("GFI")
(incorporated herein by reference to Exhibit 10.12 of the 1996 Registration Statement)
10.15 GFI Stockholder's Agreement dated June 4, 1996 among INFLO, Artal, Flowers and GFI (incorporated
herein by reference to Exhibit 10.13 of the 1996 Registration Statement)
10.16 Warrant to Purchase Shares of Common Stock of INFLO (incorporated herein by reference to Exhibit 10.14
of the 1996 Registration Statement)
10.17 Second Amended and Restated Credit Agreement dated April 8, 1997 among Keebler, the Bank, and the
other parties thereto (the "Credit Agreement") (incorporated herein by reference to Exhibit 10.15 of
Keebler's Quarterly Report on Form 10-Q previously filed with the Commission on November 10, 1997 (the
"Quarterly Report"))
10.18 First Amendment to the Credit Agreement dated October 3, 1997 among Keebler, the Bank and the other
parties thereto (incorporated herein by reference to Exhibit 10.15(a) of the Quarterly Report)
10.19*** Form of Second Amendment to the Credit Agreement dated November 17, 1997 between Keebler, the Bank and
the other parties thereto
10.20 Form of Third Amendment and Waiver to Second Amended and Restated Credit Agreement dated January 5,
1998 between Keebler, the Bank and the other parties thereto
10.21 Stock Appreciation Rights Plan of Keebler for Certain Management Employees dated March 4, 1997
(incorporated herein by reference to Exhibit 10.16 of the Quarterly Report)
10.22 Form of Artal Stock Purchase Agreement among Artal, Flowers and Keebler
10.23 Form of Bermore Stock Purchase Agreement among Artal, Flowers, Bermore and Keebler
10.24 Form of Employment and Severance Agreement between Keebler and Sam K. Reed
10.25 Form of Employment and Severance Agreement between Keebler and certain executive officers
10.26 Form of 1998 Omnibus Stock Incentive Plan of Keebler
10.27 Form of Non-Employee Director Stock Plan of Keebler
10.28 Form of Amendments to 1996 Non-Qualified Option Agreements
10.29 Form of Supplement to Subsidiary Guaranty (Hollow Tree)
10.30 Form of Supplement to Subsidiary Guaranty (Elfin Equity)
10.31.1 Form of Amendment No. 1 to Management Stockholder's Agreement (Non-Executives)
10.31.2 Form of Amendment No. 1 to Management Stockholder's Agreement (Executives other than O'Neill, Walsh
and Spear)
10.31.3 Form of Amendment No. 1 to Management Stockholder's Agreement (O'Neill, Walsh and Spear)
11 Statement re: computation of income per share
21 Subsidiaries of Keebler
23.1 Consent of Coopers & Lybrand L.L.P. (independent auditors)
23.2 Consent of Deloitte & Touche LLP (independent auditors)
23.3 Consent of Winston & Strawn (contained in Exhibit 5.1)
24** Power of Attorney
27*** Financial Data Schedule
</TABLE>
- -------------------------
** Previously filed on December 12, 1997 pursuant to Registration Statement.
*** Previously filed on January 7, 1998 pursuant to Amendment No. 1 to
Registration Statement.
II-6
<PAGE> 130
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders of Keebler Foods Company
In connection with our audits of the consolidated financial statements of
Keebler Foods Company and Subsidiaries as of and for the forty-eight weeks ended
December 28, 1996, and UB Investments US Inc. and Subsidiaries as of and for the
four-week period ended January 26, 1996 and the fifty-two weeks ended December
30, 1995 and December 31, 1994, which consolidated financial statements are
included in the Prospectus, we have also audited the consolidated financial
statement schedule listed in Item 16 herein.
In our opinion, the consolidated 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 required to be
included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
December 5, 1997
S-1
<PAGE> 131
SCHEDULE II
KEEBLER FOODS COMPANY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS (NOTE 1)
FIFTY-TWO WEEKS ENDED DECEMBER 31, 1994 AND DECEMBER 30, 1995,
FOUR WEEKS ENDED JANUARY 26, 1996 AND FORTY-EIGHT WEEKS ENDED DECEMBER 28, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ----------------------------------- ---------- ----------------------- ---------- ----------
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS/ OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Those valuation and qualifying
accounts which are deducted in
the balance sheet from the assets
to which they apply:
FIFTY-TWO WEEKS ENDED DECEMBER 31,
1994
For discounts and doubtful
accounts....................... $ 2,790 $ 9,484 $ -- $(10,527)(1) $ 1,747
-------- ------- ---- -------- --------
For deferred taxes............... $ 35,097 $11,278 $ -- $ -- $ 46,375
-------- ------- ---- -------- --------
For inventory reserves........... $ 1,632 $ -- $ -- $ (496)(2) $ 1,136
-------- ------- ---- -------- --------
FIFTY-TWO WEEKS ENDED DECEMBER 30,
1995
For discounts and doubtful
accounts....................... $ 1,747 $13,801 $ -- $(11,990)(1) $ 3,558
-------- ------- ---- -------- --------
For deferred taxes............... $ 46,375 $70,442 $ -- $ -- $116,817
-------- ------- ---- -------- --------
For inventory reserves........... $ 1,136 $ -- $ -- $ (499)(2) $ 637
-------- ------- ---- -------- --------
FOUR WEEKS ENDED JANUARY 26, 1996
For discounts and doubtful
accounts....................... $ 3,558 $ 1,577 $ -- $ (954)(1) $ 4,181
-------- ------- ---- -------- --------
For deferred taxes............... $116,817 $(7,333) $ -- $ -- $109,484
-------- ------- ---- -------- --------
For inventory reserves........... $ 637 $ 378 $ -- $ -- $ 1,015
-------- ------- ---- -------- --------
======================================================================================================
FORTY-EIGHT WEEKS ENDED DECEMBER
28, 1996
For discounts and doubtful
accounts....................... $ 4,181 $14,399 $907(3) $(14,097)(1) $ 5,390
-------- ------- ---- -------- --------
For deferred taxes............... $109,484 $ -- $ -- $(25,134)(4) $ 84,350
-------- ------- ---- -------- --------
For inventory reserves........... $ 9,578(5) $ 3,370 $ -- $ (7,440)(6) $ 5,508
-------- ------- ---- -------- --------
</TABLE>
- ------------------------------------
NOTE 1: Schedule II -- Valuation and Qualifying Accounts includes certain
financial data of UBIUS, the predecessor company, for the years ended
December 31, 1994 and December 30, 1995, and for the four weeks ended
January 26, 1996, the date on which UBIUS was acquired by INFLO, as well
as for the forty-eight weeks ended December 28, 1996 of the Company. The
distinction between the predecessor company's and the Company's
financial data has been made by inserting a double line.
(1) Primarily charges against reserves, net of recoveries.
(2) Adjustment to reduce reserve.
(3) Amount acquired in the Sunshine acquisition.
(4) Adjustment to reduce the valuation allowance as a result of the Keebler
acquisition.
(5) Includes inventory reserves established in the Keebler acquisition.
(6) Inventory write-offs.
S-2
<PAGE> 1
EXHIBIT 1.1
[ ] SHARES
KEEBLER FOODS COMPANY
COMMON STOCK ($0.01 PAR VALUE)
FORM OF UNDERWRITING AGREEMENT
January [ ], 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
SBC WARBURG DILLON READ INC.,
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, NY 10010-3629
Dear Sirs:
1. Introductory. The stockholders listed in Schedule B hereto (the
"Selling Stockholders") propose severally to sell (the "U.S. Offering") to the
several underwriters named in Schedule A hereto (the "Underwriters") an
aggregate of [ ] outstanding shares (the "U.S. Firm Securities") of
the Common Stock, $0.01 par value per share (the "Securities") of Keebler Foods
Company, a Delaware corporation (the "Company"), and also propose to sell to
the Underwriters and the Managers (as defined) an option, exercisable by Credit
Suisse First Boston Corporation ("CSFBC"), for an aggregate of not more than [
] additional outstanding shares (the "Optional Securities") of the Company's
Securities as set forth below. The U.S. Firm Securities and the Optional
Securities that may be sold to the Underwriters (together with the Optional
Securities that may be sold to the Managers, the "Optional Securities") are
herein collectively called the "U.S. Securities".
It is understood that the Company and the Selling Stockholders are
concurrently entering into a Subscription Agreement, dated the date hereof (the
"Subscription Agreement"), with Credit Suisse First Boston (Europe) Limited
("CSFBL") and the other managers named therein (together with CSFBL, the
"Managers"), relating to the
<PAGE> 2
concurrent offering and sale (the "International Offering") by the Selling
Stockholders of an aggregate of [ ] Securities (the
"International Firm Securities", which together with the Optional Securities
that may be sold to the Managers are hereinafter called the "International
Securities") outside the United States and Canada. The U.S. Firm Securities
and the International Firm Securities are collectively referred to as the "Firm
Securities". The U.S. Securities and the International Securities are
collectively referred to as the "Offered Securities". To provide for the
coordination of their activities, the Underwriters and the Managers have
entered into an Agreement between U.S. Underwriters and Managers which permits
them, among other things, to sell the Offered Securities to each other for
purposes of resale.
2. Representations and Warranties of the Company and the Selling
Stockholders. (a) The Company represents and warrants to, and agrees with,
the several Underwriters that:
(i) A registration statement on Form S-1 (No. 333-42075)
relating to the Offered Securities, including a form of prospectus,
has been filed with the Securities and Exchange Commission (the
"Commission"). The registration statement contains two prospectuses
to be used in connection with the offering and sale of the Offered
Securities: the U.S. prospectus, to be used in connection with the
U.S. Offering, and the international prospectus, to be used in
connection with the International Offering. The international
prospectus is identical to the U.S. prospectus except for the front
and back covers, the "Table of Contents" and related text, the
information appearing under "Subscription and Sale" on pages Alt-4 to
Alt-6 and the deletion of the information under "Notice to Canadian
Residents" on pages 54 to 55 of the U.S. prospectus and except that
certain information has been reordered in the international
prospectus. The registration statement either (A) has been declared
effective under the Securities Act of 1933, as amended (the "Act"),
and is not proposed to be amended or (B) is proposed to be amended by
amendment or post-effective amendment. If such registration statement
(the "initial registration statement") has been declared effective,
either (A) an additional registration statement (the "additional
registration statement") relating to the Offered Securities may have
been filed with the Commission pursuant to Rule 462(b) ("Rule 462(b)")
under the Act and, if so filed, has become effective upon filing
pursuant to such Rule and the Offered Securities all have been duly
registered under the Act pursuant to the initial registration
statement and, if applicable, the additional registration statement or
(B) such an additional registration statement is proposed to be filed
with the Commission pursuant to Rule 462(b) and will become effective
upon filing pursuant to such Rule and upon such filing the Offered
Securities will all have been duly registered under the Act pursuant
to the initial registration statement and such additional registration
statement. If the Company does not propose to amend the initial
registration statement or, if an additional registration statement has
been filed and the Company does not propose to amend it, and if any
post-effective amendment to either such registration statement has
been filed with the Commission prior to the execution and delivery of
this Agreement, the most recent amendment (if any) to each such
registration statement has been declared effective by the Commission
or has become effective upon filing pursuant to Rule 462(c) ("Rule
462(c)") under the Act or, in the case of the additional registration
statement, Rule 462(b). For purposes of this Agreement, "Effective
Time" with respect to the initial registration statement or, if filed
prior to the execution and delivery of this Agreement, the additional
registration statement means (A) if the Company has advised the
Representatives that it does not
2
<PAGE> 3
propose to amend such registration statement, the date and time as of
which such registration statement, or the most recent post-effective
amendment thereto (if any) filed prior to the execution and delivery
of this Agreement, was declared effective by the Commission or has
become effective upon filing pursuant to Rule 462(c), or (B) if the
Company has advised the Representatives that it proposes to file an
amendment or post-effective amendment to such registration statement,
the date and time as of which such registration statement, as amended
by such amendment or post-effective amendment, as the case may be, is
declared effective by the Commission. If an additional registration
statement has not been filed prior to the execution and delivery of
this Agreement but the Company has advised the Representatives that it
proposes to file one, "Effective Time" with respect to such additional
registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule
462(b). "Effective Date" with respect to the initial registration
statement or the additional registration statement (if any) means the
date of the Effective Time thereof. The initial registration
statement, as amended at its Effective Time, including all information
contained in the additional registration statement (if any) and deemed
to be a part of the initial registration statement as of the Effective
Time of the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("Rule
430A(b)") under the Act, is hereinafter referred to as the "Initial
Registration Statement". The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "Additional Registration
Statement". The Initial Registration Statement and the Additional
Registration Statement are hereinafter referred to collectively as the
"Registration Statements" and individually as a "Registration
Statement". The form of U.S. prospectus, together with the form of
international prospectus, relating to the Offered Securities, as first
filed with the Commission pursuant to and in accordance with Rule
424(b) ("Rule 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement, is hereinafter
referred to as the "Prospectus". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement:
(A) on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all material respects to
the requirements of the Act and the rules and regulations of the
Commission (the "Rules and Regulations") and did not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, (B) on the Effective Date of the Additional
Registration Statement (if any), each Registration Statement
conformed, or will conform, in all material respects to the
requirements of the Act and the Rules and Regulations and did not
include, or will not include, any untrue statement of a material fact
and did not omit, or will not omit, to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (C) on the date of this Agreement, the
Initial Registration Statement and, if the Effective Time of the
Additional Registration Statement is prior to the execution and
delivery of this Agreement, the Additional Registration Statement each
conforms, and at the time of filing of the Prospectus
3
<PAGE> 4
pursuant to Rule 424(b) or (if no such filing is required) at the
Effective Date of the Additional Registration Statement in which the
Prospectus is included, each Registration Statement and the Prospectus
will conform, in all material respects to the requirements of the Act
and the Rules and Regulations, and none of such documents includes, or
will include, any untrue statement of a material fact or omits, or
will omit, to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. If the
Effective Time of the Initial Registration Statement is subsequent to
the execution and delivery of this Agreement: on the Effective Date of
the Initial Registration Statement, the Initial Registration Statement
and the Prospectus will conform in all material respects to the
requirements of the Act and the Rules and Regulations, none of such
documents will include any untrue statement of a material fact or will
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and no
Additional Registration Statement has been or will be filed. The two
preceding sentences do not apply to statements in or omissions from a
Registration Statement or the Prospectus based upon written
information furnished to the Company by any Underwriter through
the Representatives specifically for use therein, it being understood
and agreed that the only such information is that described as such in
Section 7(c) hereof.
(iii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify would not have,
individually or in the aggregate, a material adverse effect on the
condition (financial or otherwise), results of operation, business or
prospects of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect").
(iv) Each subsidiary of the Company has been duly incorporated
and is a validly existing corporation in good standing under the laws
of the jurisdiction of its incorporation, with appropriate power and
authority to own its properties and conduct its business as described
in the Prospectus; and each subsidiary of the Company is duly
qualified to do business as a foreign corporation in good standing in
all other jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification, except where
the failure to so qualify would not have, individually or in the
aggregate, a Material Adverse Effect; all of the issued and
outstanding capital stock of each subsidiary of the Company has been
duly authorized and validly issued and is fully paid and
nonassessable; and, except as disclosed in the Prospectus, the capital
stock of each subsidiary owned by the Company, directly or through
subsidiaries, is owned free from liens, encumbrances and defects.
(v) The Offered Securities and all other outstanding shares
of capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and conform to the
description thereof contained in the Prospectus; and, except as
disclosed in the Prospectus, the stockholders of the Company have no
preemptive rights with respect to the Securities.
(vi) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person that would
4
<PAGE> 5
give rise to a valid claim against the Company or any Underwriter for
a brokerage commission, finder's fee or other like payment with
respect to the sale of the Offered Securities.
(vii) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to a Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act.
(viii) The Offered Securities have been approved for listing
subject to notice of issuance on The New York Stock Exchange ("NYSE").
(ix) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
to be obtained or made by the Company for the consummation of the
transactions contemplated by this Agreement or the Subscription
Agreement in connection with the sale of the Offered Securities,
except such as have been obtained and made under the Act and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") and such as may be required under state securities laws.
(x) The execution, delivery and performance of this
Agreement and the Subscription Agreement, and the consummation of the
transactions herein and therein contemplated will not result in a
breach or violation of (A) any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order
of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any subsidiary of the Company
or any of their properties, or (B) any agreement or instrument to
which the Company or any such subsidiary is a party or by which the
Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject, or (C)
the charter or by-laws of the Company or any such subsidiary, except,
in the cases of (A) and (B), where such breach, violation or default,
individually or in the aggregate, would not have a Material Adverse
Effect.
(xi) Each of this Agreement and the Subscription Agreement
has been duly authorized, validly executed and delivered by the
Company.
(xii) Except as disclosed in the Prospectus, the Company and
its subsidiaries have good and marketable title to all real properties
and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or to be made
thereof by them; and except as disclosed in the Prospectus, the
Company and its subsidiaries hold any leased real or personal property
under valid and enforceable leases with no exceptions that would,
individually or in the aggregate, have a Material Adverse Effect.
(xiii) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now
operated by them and have not received
5
<PAGE> 6
any notice of proceedings relating to the revocation or modification
of any such certificate, authority or permit that, if determined
adversely to the Company or any of its subsidiaries, individually or
in the aggregate, could be expected to have a Material Adverse Effect.
(xiv) No labor dispute with the employees of the Company or
any subsidiary exists or, to the knowledge of the Company, is imminent
that could be expected to have a Material Adverse Effect.
(xv) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and
other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property
(collectively, "intellectual property rights") necessary to conduct
the business now operated by them, or presently employed by them, and
have not received any notice of infringement of or conflict with
asserted rights of others with respect to any intellectual property
rights that, if determined adversely to the Company or any of its
subsidiaries, individually or in the aggregate, could be expected to
have a Material Adverse Effect.
(xvi) Except as disclosed in the Prospectus, neither the
Company nor any of its subsidiaries is in violation of any statute,
any rule, regulation, decision or order of any governmental agency or
body or any court, domestic or foreign, relating to the use, disposal
or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, "environmental laws"),
owns or operates any real property contaminated with any substance
that is subject to any environmental laws, is liable for any off-site
disposal or contamination pursuant to any environmental laws, or is
subject to any claim relating to any environmental laws, which
violation, contamination, liability or claim, individually or in the
aggregate, could be expected to have a Material Adverse Effect; and
the Company is not aware of any pending investigation which might lead
to such a claim.
(xvii) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting the
Company, any of its subsidiaries or any of their respective properties
that, if determined adversely to the Company or any of its
subsidiaries, individually or in the aggregate, could be expected to
have a Material Adverse Effect, or would materially and adversely
affect the ability of the Company to perform its obligations under
this Agreement, or which are otherwise material in the context of the
sale of the Offered Securities; and, to the Company's knowledge, no
such actions, suits or proceedings are threatened or contemplated.
(xviii) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of
the Company and its consolidated subsidiaries as of the dates shown
and their results of operations and cash flows for the periods shown,
and such financial statements have been prepared in conformity with
the generally accepted accounting principles in the United States
applied on a consistent basis; the schedules included in each
Registration Statement present fairly the information required to be
stated therein; and the assumptions used in preparing the pro forma
financial statements included in each Registration Statement and the
Prospectus provide a reasonable basis for presenting the significant
effects directly attributable to the transactions or events described
therein, the related pro forma adjustments give appropriate effect to
6
<PAGE> 7
those assumptions, and the pro forma columns therein reflect the
proper application of those adjustments to the corresponding
historical financial statement amounts.
(xix) Except as disclosed in the Prospectus, since the date
of the latest audited financial statements included in the Prospectus
there has been no material adverse change, nor any development or
event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries individually, or taken
as a whole, and, except as disclosed in or contemplated by the
Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock.
(xx) The Company is not and, after giving effect to the
offering and sale of the Offered Securities, will not be an
"investment company" as defined in the Investment Company Act of 1940.
(b) Each Selling Stockholder, severally and not jointly,
represents and warrants to, and agrees with, the several Underwriters
that:
(i) Such Selling Stockholder is duly incorporated
(if such Selling Stockholder is a corporation) and validly
existing and, to the extent such concept exists in the
relevant jurisdiction, in good standing under the laws of the
jurisdiction of its incorporation.
(ii) Each of this Agreement and the Subscription
Agreement has been duly authorized, executed and, to the
extent such concept exists in the relevant jurisdiction,
delivered by such Selling Stockholder.
(iii) The execution and delivery by such Selling
Stockholder of, and the performance by such Selling
Stockholder of its obligations under, this Agreement and the
Subscription Agreement, will not contravene any provision of
applicable law, or the organization documents of such Selling
Stockholder (if such Selling Stockholder is a corporation), or
any agreement or other instrument binding upon such Selling
Stockholder or any of its assets or any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over such Selling Stockholder or any of its
assets, except where such contravention would not have,
individually or in the aggregate, a Material Adverse Effect,
and no consent, approval, authorization, or order of, or
qualification or filing with, any governmental agency or body
or any court is required to be obtained or made by such
Selling Stockholder for the performance by such Selling
Stockholder of its obligations under this Agreement or the
Subscription Agreement, except (A) such as have been obtained
or made, (B) such as may be required by the securities or Blue
Sky laws of the various states of the United States of America
in connection with the offer and sale of the Offered
Securities in the United States of America and (C) such as may
be required by the securities laws of any jurisdiction outside
the Untied States of America.
(iv) Such Selling Stockholder has, and on each
Closing Date hereinafter mentioned will have, valid
unencumbered title to the Offered Securities to be sold by
such Selling Stockholder on such date and the
7
<PAGE> 8
legal right and power, and all authorization and approval
required by law, to enter into this Agreement and the
Subscription Agreement and to sell, assign, transfer and
deliver the Offered Securities to be sold by such Selling
Stockholder.
(v) Upon delivery of the Offered Securities to be
sold by such Selling Stockholder pursuant to this Agreement
and the Subscription Agreement and payment therefor as
contemplated by this Agreement and the Subscription Agreement,
marketable title to the Offered Securities will pass to the
Underwriters free and clear of any security interests, claims,
liens, equities and other encumbrances, other than security
interests, liens, equities or other encumbrances arising
solely from the actions of the Underwriters.
(vi) There are no material agreements or
arrangements relating to the Company or its subsidiaries to
which such Selling Stockholder, or to the best of such Selling
Stockholder's knowledge, to which any direct or indirect
stockholder of such Selling Stockholder is a party, which are
required to be described in the Registration Statements or the
Prospectus or to be filed as exhibits thereto that are not so
described or filed.
(vii) (a) Each Registration Statement, when such
Registration Statement became effective, did not contain and
each such Registration Statement, as amended or supplemented,
if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, (b) each Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Act and the
applicable rules and regulations of the Commission thereunder
and (c) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
except that the foregoing representations and warranties apply
only to the extent that any statements or omissions in each
Registration Statement or the Prospectus are based upon
information relating to such Selling Stockholder and any
direct or indirect stockholder of such Selling Stockholder
furnished to the Company in writing by such Selling
Stockholder expressly for use therein.
3. Purchase, Sale and Delivery of Offered Securities. On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, each Selling Stockholder agrees,
severally and not jointly, to sell to the Underwriters, and each Underwriter
agrees, severally and not jointly, to purchase from each Selling Stockholder,
at a purchase price of $[ ] per share, that number of U.S. Firm
Securities (rounded up or down, as determined by CSFBC in its discretion, in
order to avoid fractions) obtained by multiplying the number of U.S. Firm
Securities set forth opposite the name of such Selling Stockholder in Schedule
B hereto by a fraction the numerator of which is the number of U. S. Firm
Securities set forth opposite the name of such Underwriter in Schedule A hereto
and the denominator of which is the total number of U.S. Firm Securities.
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<PAGE> 9
Each of the Selling Stockholders will deliver the U.S. Firm Securities
to the Representatives for the accounts of the Underwriters, against payment of
the purchase price in Federal (same day) funds by official bank check or checks
or wire transfer to an account at a bank acceptable to CSFBC drawn to the order
of [ ] at the office of Cravath, Swaine & Moore
("Underwriters' Counsel"), at 10:00 a.m., New York time, on [ ], 1998,
or at such other time not later than seven full business days thereafter as
CSFBC and the Selling Stockholders determine, such time being herein referred
to as the "First Closing Date". For purposes at Rule 15c6-1 under the
Securities Exchange Act of 1934, as amended, the First Closing Date (if later
than the otherwise applicable settlement date) shall be the settlement date for
payment of funds and delivery of securities for all the Offered Securities
sold pursuant to the U.S. Offering and the International Offering. The
certificates for the U.S. Firm Securities so to be delivered will be in
definitive form, in such denominations and registered in such names as CSFBC
requests and will be made available for checking and packaging at the above
office of Underwriters' Counsel at least 24 hours prior to the First Closing
Date.
In addition, upon written notice from CSFBC given to the Company and
the Selling Stockholders from time to time not more than 30 days subsequent to
the date of the Prospectus, the Underwriters may purchase all or less than all
of the Optional Securities at the purchase price per Security to be paid for
the U.S. Firm Securities. Each of the Selling Stockholders agrees, severally
and not jointly, to sell to the Underwriters the respective numbers of Optional
Securities obtained by multiplying the number of Optional Securities specified
in such notice by a fraction the numerator of which is the number of shares set
forth opposite the names of such Selling Stockholders in Schedule B hereto
under the caption "Number of Optional Securities to be Sold" and the
denominator of which is the total number of Optional Securities (subject to
adjustment by CSFBC to eliminate fractions). Such Optional Securities shall be
purchased from each Selling Stockholder for the account of each Underwriter and
Manager in the same proportion as the number of U.S. Firm Securities set forth
opposite such Underwriter's name bears to the total number of U.S. Firm
Securities and the number of International Firm Securities set forth opposite
such Manager's name bears to the total number of International Firm Securities
(subject to adjustment by CSFBC to eliminate fractions) and may be purchased by
the Underwriters only for the purpose of covering over-allotments made in
connection with the sale of the Firm Securities. No Optional Securities shall
be sold or delivered unless the U.S. Firm Securities and the International Firm
Securities previously have been, or simultaneously are, sold and delivered.
The right to purchase the Optional Securities or any portion thereof may be
exercised from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Selling
Stockholders.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. Each of the Selling
Stockholders will deliver the Optional Securities being purchased on each
Optional Closing Date to the Representatives for the accounts of the several
Underwriters, against payment of the purchase price in Federal (same day) funds
by official bank check or checks or wire transfer to an account at a bank
acceptable to CSFBC drawn to the order of [ ], at the above
office of Underwriters' Counsel. The certificates for the Optional Securities
being purchased on each Optional Closing Date will be in definitive form, in
such denominations and registered in such names as CSFBC requests upon
reasonable notice prior to such Optional Closing Date and will be
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<PAGE> 10
made available for checking and packaging at the above office of Underwriters'
Counsel at a reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the U.S. Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement,
the Company will file the Prospectus with the Commission pursuant to
and in accordance with subparagraph (1) (or, if applicable and if
consented to by CSFBC, subparagraph (4)) of Rule 424(b) not later than
the earlier of (A) the second business day following the execution and
delivery of this Agreement or (B) the fifteenth business day after the
Effective Date of the Initial Registration Statement. The Company
will advise CSFBC promptly of any such filing pursuant to Rule 424(b).
If the Effective Time of the Initial Registration Statement is prior
to the execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion of the
Offered Securities under the Act but the Effective Time thereof has
not occurred as of such execution and delivery, the Company will file
the additional registration statement or, if filed, will file a
post-effective amendment thereto with the Commission pursuant to and
in accordance with Rule 462(b) on or prior to 10:00 p.m., New York
time, on the date of this Agreement or, if earlier, on or prior to the
time the Prospectus is printed and distributed to any Underwriter, or
will make such filing at such later date as shall have been consented
to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or the related prospectus or the Initial
Registration Statement, the Additional Registration Statement (if any)
or the Prospectus and will not effect such amendment or
supplementation without CSFBC's consent (which will not be
unreasonably withheld); and the Company will also advise CSFBC
promptly of the effectiveness of each Registration Statement (if its
Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration
Statement or the Prospectus and of the institution by the Commission
of any stop order proceedings in respect of a Registration Statement
and will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection
with sales by any Underwriter or dealer, any event occurs as a result
of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify CSFBC of such event and will promptly
prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBC's consent
to, nor the Underwriters' delivery of,
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<PAGE> 11
any such amendment or supplement shall constitute a waiver of any of
the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its securityholders an earnings statement covering a
period of at least 12 months beginning after the Effective Date of the
Initial Registration Statement (or, if later, the Effective Date of
the Additional Registration Statement) which will satisfy the
provisions of Section 11(a) of the Act. For the purpose of the
preceding sentence, "Availability Date" means the 45th day after the
end of the fourth fiscal quarter following the fiscal quarter that
includes such Effective Date, except that, if such fourth fiscal
quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth
fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement (five of which will be signed and will
include all exhibits), each related preliminary prospectus, and, so
long as a prospectus relating to the Offered Securities is required to
be delivered under the Act in connection with sales by any Underwriter
or dealer, the U.S. Prospectus and all amendments and supplements to
such documents, in each case in such quantities as CSFBC reasonably
requests. The Prospectus shall be so furnished on or prior to 3:00
p.m., New York time, on the business day following the later of the
execution and delivery of this Agreement or the Effective Time of the
Initial Registration Statement. All other such documents shall be so
furnished as soon as available. The Company will pay the expenses of
printing and distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as
CSFBC designates and will continue such qualifications in effect so
long as required for the distribution; provided, that in no event
shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action
which would subject it to general service of process in any
jurisdiction where it is not now so subject.
(g) During the period of 5 years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal
year, a copy of its annual report to stockholders for such year; and
the Company will furnish to the Representatives (i) as soon as
available, a copy of each report and any definitive proxy statement of
the Company filed with the Commission under the Securities Exchange
Act of 1934 or mailed to stockholders, and (ii) from time to time,
such other information concerning the Company as CSFBC may reasonably
request.
(h) For a period of 180 days after the date of the initial
public offering of the Offered Securities (the "Lockup Period"), the
Company will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Commission a
registration statement under the Act relating to, any additional
shares of its Securities or securities convertible into or
exchangeable or exercisable for any shares of its Securities, or
publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of CSFBC,
except issuances of Securities pursuant to the conversion or exchange
of convertible or exchangeable securities or the exercise of warrants
or
11
<PAGE> 12
options, in each case outstanding on the date hereof, grants of
employee stock options pursuant to the terms of a plan in effect on
the date hereof, issuances of Securities pursuant to the exercise of
such options or issuances of Securities pursuant to the Company's
dividend reinvestment plan. Notwithstanding the provisions of this
subsection (h), the Company may file, but may not offer, sell or
otherwise dispose of any securities during the Lockup Period pursuant
to, a registration statement in connection with (A) the exercise by
Artal Luxembourg S.A. ("Artal") of its demand registration rights
under the Artal Stock Purchase Agreement (the "Artal Agreement"),
dated as of [ ], 1998, among Artal, Flowers Industries, Inc.
("Flowers") and the Company or (B) the exercise of any related
incidental registration rights by Bermore, Limited ("Bermore") under
the Bermore Stock Purchase Agreement (the "Bermore Agreement"), dated
as of [ ], 1998, among Bermore, Artal, Flowers and the Company.
The Company agrees with the several Underwriters that the Company will
pay all expenses incident to the performance of its obligations and the
obligations of the Selling Stockholders under this Agreement, for any filing
fees and other expenses (including fees and disbursements of counsel) incurred
in connection with qualification of the Offered Securities for sale under the
laws of such jurisdictions as CSFBC designates and the printing of memoranda
relating thereto, for any fees incident to listing the Offered Securities on
the NYSE, for the filing fee incident to, and the filing fee and the reasonable
fees and disbursements of counsel to the Underwriters in connection with, the
review by the NASD of the Offered Securities, for any travel expenses of the
Company's officers and employees and any other expenses of the Company in
connection with attending or hosting meetings with prospective purchasers of
the Offered Securities, for any transfer taxes on the sale of the Offered
Securities to the Underwriters and for expenses incurred in printing and
distributing preliminary prospectuses and the Prospectus (including any
amendments and supplements thereto) to the Underwriters.
Each Selling Stockholder agrees, during the Lockup Period, not to
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any additional shares of the Securities of the Company or
securities convertible into or exchangeable or exercisable for any shares of
Securities, or publicly disclose the intention to make any such offer, sale,
pledge or disposition, without the prior written consent of CSFBC.
Notwithstanding the provisions of this paragraph, the Company may file, but may
not offer, sell or otherwise dispose of any securities during the Lockup Period
pursuant to, a registration statement in connection with (A) the exercise by
Artal of its demand registration rights under the Artal Agreement or (B) the
exercise of any related incidental registration rights by Bermore under the
Bermore Agreement.
6. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the U.S. Firm
Securities on the First Closing Date and the Optional Securities to be
purchased on each Optional Closing Date will be subject to the accuracy of the
representations and warranties on the part of the Company
12
<PAGE> 13
and the Selling Stockholders herein, to the accuracy of the statements of
Company officers made pursuant to the provisions hereof, to the performance by
the Company and the Selling Stockholders of their obligations hereunder and to
the following additional conditions precedent:
(a) The Representatives shall have received a letter, dated
the date of delivery thereof (which, if the Effective Time of the
Initial Registration Statement is prior to the execution and delivery
of this Agreement, shall be on or prior to the date of this Agreement
or, if the Effective Time of the Initial Registration Statement is
subsequent to the execution and delivery of this Agreement, shall be
prior to the filing of the amendment or post-effective amendment to
the registration statement to be filed shortly prior to such Effective
Time), of Coopers & Lybrand L.L.P. confirming that they are
independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating to
the effect that:
(i) in their opinion the financial statements and
schedules examined by them and included in the Registration
Statements comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published Rules and Regulations;
(ii) they have performed the procedures specified by
the American Institute of Certified Public Accountants for a
review of interim financial information as described in
Statement of Auditing Standards No. 71, Interim Financial
Information, on the unaudited financial statements included in
the Registration Statements;
(iii) on the basis of the review referred to in
clause (ii) above, a reading of the latest available interim
financial statements of the Company, inquiries of officials of
the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing
came to their attention that caused them to believe that:
(A) the unaudited financial statements
included in the Registration Statements do not comply
as to form in all material respects with the
applicable accounting requirements of the Act and the
related published Rules and Regulations or any
material modifications should be made to such
unaudited financial statements for them to be in
conformity with generally accepted accounting
principles;
(B) the unaudited consolidated net sales,
net operating income and net income and net income
per share amounts for the 40-week periods ended
October 5, 1996, and October 4, 1997,
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<PAGE> 14
included in the Prospectus do not agree with the
amounts set forth in the unaudited consolidated
financial statements for those same periods or were
not determined on a basis substantially consistent
with that of the corresponding amounts in the audited
statements of income;
(C) at the date of the latest available
balance sheet read by such accountants, or at a
subsequent specified date not more than three
business days prior to the date of this Agreement,
there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt
of the Company and its consolidated subsidiaries or,
at the date of the latest available balance sheet
read by such accountants, there was any decrease in
consolidated net assets, as compared with amounts
shown on the latest balance sheet included in the
Prospectus;
(D) for the period from the closing date of
the latest income statement included in the
Prospectus to the closing date of the latest
available income statement read by such accountants
there were any decreases, as compared with the
corresponding period of the previous year and with
the period of corresponding length ended the date of
the latest income statement included in the
Prospectus, in consolidated net sales, net operating
income in the total or per share amounts of
consolidated, net income; or
(E) any unaudited pro forma consolidated
financial statements included in the Prospectus do
not comply as to form in all material respects with
the applicable accounting requirements of the Act and
the related published Rules and Regulations
thereunder or the pro forma adjustments have not been
properly applied to the historical amounts in the
compilation of those statements;
except in all cases set forth in clauses (C) and (D) above for
changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such
letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statements
(in each case to the extent that such dollar amounts,
percentages and other financial information are derived from
the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from
inquiries, a reading of such general accounting records and
other procedures specified in such letter and have found such
dollar amounts, percentages and other financial information to
be in agreement with such results, except as otherwise
specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statement is subsequent to the execution and
delivery of this Agreement, "Registration Statements" shall mean the
initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly
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<PAGE> 15
prior to its Effective Time, (ii) if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement but the Effective Time of the Additional Registration
Statement is subsequent to such execution and delivery, "Registration
Statements" shall mean the Initial Registration Statement and the
additional registration statement as proposed to be filed or as
proposed to be amended by the post-effective amendment to be filed
shortly prior to its Effective Time, and (iii) "Prospectus" shall mean
the prospectus included in the Registration Statements.
(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this
Agreement, such Effective Time shall have occurred not later than
10:00 p.m., New York time, on the date of this Agreement or such later
date as shall have been consented to by CSFBC. If the Effective Time
of the Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 p.m., New York time, on the date of
this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later
date as shall have been consented to by CSFBC. If the Effective Time
of the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with
the Commission in accordance with the Rules and Regulations and
Section 5(a) of this Agreement. Prior to such Closing Date, no stop
order suspending the effectiveness of a Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of any Selling Stockholder, the
Company or the Representatives, shall be contemplated by the
Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or other), business, properties or results of operations of
the Company or its subsidiaries which, in the judgment of a majority
in interest of the Underwriters including the Representatives, is
material and adverse and makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and
payment for the Offered Securities; (ii) any downgrading in the rating
of any debt securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule
436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt
securities of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any suspension or limitation of
trading in securities generally on the NYSE, or any setting of minimum
prices for trading on such exchange, or any suspension of trading of
any securities of the Company on any exchange or in the
over-the-counter market; (iv) any banking moratorium declared by U.S.
Federal or New York authorities; or (v) any outbreak or escalation of
major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of a majority
in interest of the Underwriters including the Representatives, the
effect of any such outbreak, escalation, declaration, calamity or
emergency makes it impractical or inadvisable to proceed with
completion of the public offering or the sale of and payment for the
Offered Securities.
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<PAGE> 16
(d) The Representatives shall have received an opinion, dated
such Closing Date, of Winston & Strawn, counsel for the Company, in
the form attached hereto as Annex I.
(e) The Representatives shall have received the opinion, dated
such Closing Date of each of Simpson Thacher & Bartlett, U.S. counsel
for Artal, Arendt & Medernach, Luxembourg counsel for Artal, Battle
Fowler, U.S. counsel for Bermore, and Appleby Spurling & Kempe,
Bermuda counsel for Bermore, in the forms attached hereto as Annexes
II, III, IV and V, respectively.
(f) The Representatives shall have received from Cravath,
Swaine & Moore, counsel for the Underwriters, such opinion or
opinions, dated such Closing Date, with respect to such matters as the
Representatives may require, and the Selling Stockholders and the
Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
(g) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and warranties
of the Company in this Agreement and the Subscription Agreement are
true and correct; the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date; no stop order suspending
the effectiveness of any Registration Statement has been issued and no
proceedings for that purpose have been instituted or are contemplated
by the Commission; the Additional Registration Statement (if any)
satisfying the requirements of subparagraphs (1) and (3) of Rule
462(b) was filed pursuant to Rule 462(b), including payment of the
applicable filing fee in accordance with Rule 111(a) or (b) under the
Act, prior to the time the Prospectus was printed and distributed to
any underwriter; and, subsequent to the dates of the most recent
financial statements in the Prospectus, there has been no material
adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole except as set forth in or contemplated
by the Prospectus or as described in such certificate.
(h) The Representatives shall have received a letter, dated
such Closing Date, of Coopers & Lybrand L.L.P. which meets the
requirements of subsection (a) of this Section, except that the
specified date referred to in such subsection will be a date not more
than three business days prior to such Closing Date for the purposes
of this subsection.
(i) Each executive officer and director of the Company shall
have furnished to the Representatives a letter substantially in the
form of Exhibit A hereto and addressed to the Representatives relating
to sales of shares of Securities or any securities convertible into or
exercisable or exchangeable for such Securities, and each such letter
shall be in full force and effect on the Closing Date.
(j) Each Selling Stockholder shall deliver to the
Representatives a properly completed and executed United States
Treasury Form W-9 (or other
16
<PAGE> 17
applicable form or statement specified by Treasury Department
regulations in lieu thereof).
(k) The Representatives shall be reasonably satisfied with the
terms of all stockholders agreements and other agreements between the
Company and its stockholders, and all such agreements contemplated in
the Prospectus shall have been executed and delivered by the parties
thereto.
Each of the Selling Stockholders and the Company will furnish the
Representatives with such conformed copies of such opinions, certificates,
letters and documents as the Representatives reasonably request. CSFBC may in
its sole discretion waive on behalf of the Underwriters compliance with any
conditions to the obligations of the Underwriters hereunder, whether in respect
of an Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify
and hold harmless each Underwriter and each Selling Stockholder against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or Selling Stockholder, as the case may be, may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Underwriter and each Selling Stockholder
for any legal or other expenses reasonably incurred by such Underwriter or
Selling Stockholder, as the case may be, in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses
are incurred; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement in or
omission or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company (i) by any
Underwriter through the Representatives specifically for use therein, it being
understood and agreed that the only such information furnished by any
Underwriter consists of the information described as such in subsection (c)
below or (ii) by any Selling Stockholder specifically for use therein.
(b) Each of the Selling Stockholders, severally and not jointly, will
indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information about such
Selling Stockholder (or any direct or indirect stockholders of such Selling
Stockholder) furnished to the Company by such Selling Stockholder specifically
for use therein, and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that such Selling Stockholder
will not be liable in any such case to the extent
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<PAGE> 18
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Company by an Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (c) below.
(c) Each Underwriter will severally and not jointly indemnify and
hold harmless the Company and each Selling Stockholder against any losses,
claims, damages or liabilities to which the Company or such Selling Stockholder
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement, the Prospectus, or any amendment
or supplement thereto, or any related preliminary prospectus, or arise out of
or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through the Representatives
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company and each Selling Stockholder in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed that the
only such information furnished by any Underwriter consists of the following
information in the Prospectus furnished on behalf of each Underwriter: the last
paragraph at the bottom of the cover page concerning the terms of the offering
by the Underwriters, the concession and reallowance figures appearing in the
sixth paragraph under the caption "Underwriting", the over-allotments and
stabilizing language appearing in the fourteenth paragraph under the caption
"Underwriting", and the information contained in the fifteenth paragraph under
the caption "Underwriting".
(d) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
subsection (a), (b) or (c) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a), (b) or (c) above. In case any such action
is brought against any indemnified party and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action.
18
<PAGE> 19
(e) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a), (b) or
(c) above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other from the offering of the Offered Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Stockholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (e) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (e). Notwithstanding the
provisions of this subsection (e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and each Selling Stockholder under
this Section shall be in addition to any liability which the Company and such
Selling Stockholder may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has signed a
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.
The maximum liability of each Selling Stockholder to indemnify or
contribute payments pursuant to this Section 7 shall not exceed the aggregate
net proceeds (after deducting the Underwriters' discount) of the Offered
Securities (including the sale of shares on exercise of the over-allotment
option, if any) to such Selling Stockholder.
8. Default of Underwriters. If any Underwriter or Underwriters
default in their obligations to purchase Offered Securities hereunder on either
the First Closing Date or
19
<PAGE> 20
any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed
to purchase does not exceed 10% of the total number of shares of Offered
Securities that the Underwriters are obligated to purchase on such Closing
Date, CSFBC may make arrangements satisfactory to the Selling Stockholders for
the purchase of such Offered Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
non-defaulting Underwriters shall be obligated severally, in proportion to
their respective commitments hereunder, to purchase the Offered Securities that
such defaulting Underwriters agreed but failed to purchase on such Closing
Date. If any Underwriter or Underwriters so default and the aggregate number
of shares of Offered Securities with respect to which such default or defaults
occur exceeds 10% of the total number of shares of Offered Securities that the
Underwriters are obligated to purchase on such Closing Date and arrangements
satisfactory to CSFBC and the Selling Stockholders for the purchase of such
Offered Securities by other persons are not made within 36 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders, except as
provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the U.S. Firm Securities or any Optional Securities purchased
prior to such termination). As used in this Agreement, the term "Underwriter"
includes any person substituted for an Underwriter under this Section. Nothing
herein will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Selling Stockholders, of the Company or its officers and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation, or statement
as to the results thereof, made by or on behalf of any Underwriter, any Selling
Stockholder, the Company or any of their respective representatives, officers
or directors or any controlling person, and will survive delivery of and
payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by them pursuant to Section 5 and the
respective obligations of the Company, the Selling Stockholders and the
Underwriters pursuant to Section 7 shall remain in effect, and if any Offered
Securities have been purchased hereunder the representations and warranties in
Section 2 and all obligations under Section 5 shall also remain in effect. If
the purchase of the Offered Securities by the Underwriters is not consummated
for any reason other than solely because of the termination of this Agreement
pursuant to Section 8 or the occurrence of any event specified in clause (iii),
(iv) or (v) of Section 6(c), the Company will reimburse the Underwriters for
all out-of-pocket expenses (including fees and disbursements of counsel)
reasonably incurred by them in connection with the offering of the Offered
Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and
confirmed to the Representatives , c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue, New York, NY 10010-3629, Attention: Investment Banking
Department-Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at 677 Larch Avenue,
Elmhurst, Illinois 60126, Attention: Thomas E. O'Neill, or, if sent to the
Selling Stockholders or any of them, will be mailed, delivered or telegraphed
and confirmed to [ ] at [
]; provided,
20
<PAGE> 21
however, that any notice to an Underwriter pursuant to Section 7 will be
mailed, delivered or telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective personal representatives,
heirs and successors and the officers and directors and controlling persons
referred to in Section 7, and no other person will have any right or obligation
hereunder.
12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this
Agreement, and any action under this Agreement taken by the Representatives
jointly or by CSFBC will be binding upon all the Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
Each of the Company and the Selling Stockholders hereby submits to the
non-exclusive jurisdiction of the Federal and state courts in the Borough of
Manhattan in The City of New York in any suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of
the counterparts hereof,
21
<PAGE> 22
whereupon it will become a binding agreement among the Selling Stockholders,
the Company and the several Underwriters in accordance with its terms.
Very truly yours,
KEEBLER FOODS COMPANY,
by
---------------------------------
Name:
Title:
ARTAL LUXEMBOURG S.A.,
by
---------------------------------
Name:
Title:
BERMORE, LIMITED,
by
---------------------------------
Name:
Title:
22
<PAGE> 23
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
SBC WARBURG DILLON READ INC.
Each by its duly authorized attorney-in-fact
By CREDIT SUISSE FIRST BOSTON CORPORATION
by
---------------------------------
Name:
Title:
23
<PAGE> 24
SCHEDULE A
Number of U.S.
Firm Securities
Underwriter to be Purchased
- ----------- ---------------
Credit Suisse First Boston Corporation . .
Merrill Lynch, Pierce, Fenner & Smith Incorporated . . . . .
Morgan Stanley & Co. Incorporated. . . . .
SBC Warburg Dillon Read Inc. . . . . .
Total . . . ---------------
===============
<PAGE> 25
SCHEDULE B
Number of
Number of U.S. Optional
Firm Securities Securities
Selling Stockholder to be Sold to be Sold
- ------------------- ------------------ ----------------
Artal Luxembourg S.A.
Bermore, Limited
Total . . . . . . . . ------------- ------------
============= ============
<PAGE> 26
Annex I
[Form of Opinion of Winston & Strawn]
<PAGE> 27
Annex II
[Form of Opinion of Simpson Thacher & Bartlett]
<PAGE> 28
Annex III
[Form of Opinion of Arendt & Medernach]
<PAGE> 29
Annex IV
[Form of Opinion of Battle Fowler]
<PAGE> 30
Annex V
[Form of Opinion of Appleby Spurling & Kempe]
<PAGE> 1
EXHIBIT 1.2
[ ] SHARES
KEEBLER FOODS COMPANY
COMMON STOCK ($0.01 PAR VALUE)
FORM OF SUBSCRIPTION AGREEMENT
London, England
January [ ], 1998
To: CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY & CO. INTERNATIONAL
SWISS BANK CORPORATION, ACTING THROUGH ITS DIVISION SBC WARBURG
DILLON READ
c/o: CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED ("CSFBL")
One Cabot Square
London, England E14 4QJ
Dear Sirs:
1. Introductory. The stockholders listed in Schedule B hereto (the
"Selling Stockholders") propose severally to sell (the "International
Offering") to the several Managers named in Schedule A hereto (the "Managers")
an aggregate of [ ] outstanding shares (the "International Firm
Securities") of the Common Stock, $0.01 par value per share (the "Securities")
of Keebler Foods Company, a Delaware corporation (the "Company"), and also
propose to sell to the Managers and the U.S. Underwriters (as defined) an
option, exercisable by CSFBC (as defined below), for an aggregate of not more
than [ ] additional outstanding shares (the "Optional Securities") of
the Company's Securities as set forth below. The International Firm Securities
and the Optional Securities that may be sold to the Managers (together with the
Optional Securities that may be sold to the U.S. Underwriters in the United
States and Canada, the "Optional Securities") are herein collectively called
the "International Securities".
It is understood that the Company and the Selling Stockholders are
concurrently entering into an Underwriting Agreement, dated the date hereof
(the "Underwriting Agreement"), with certain United States underwriters listed
in Schedule A thereto (the "U.S. Underwriters"), for whom Credit Suisse First
Boston Corporation ("CSFBC"), Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and SBC Warburg Dillon Read
Inc. are acting as representatives (the "U.S. Representatives"), relating to
the concurrent offering and sale of an aggregate of [ ] shares of
Securities (the "U.S. Firm Securities") in the United States and Canada
<PAGE> 2
(the "U.S. Offering"), which together with the Optional Securities that may be
sold to the U.S. Underwriters in the United States and Canada are hereinafter
called the "U.S. Securities". The International Firm Securities and the U.S.
Firm Securities are collectively referred to as the "Firm Securities". The
International Securities and the U.S. Securities are collectively referred to
as the "Offered Securities". To provide for the coordination of their
activities, the Managers and the U.S. Underwriters have entered into an
Agreement between U.S. Underwriters and Managers which permits them, among
other things, to sell the Offered Securities to each other for purposes of
resale.
2. Representations and Warranties of the Company and the Selling
Stockholders. (a) The Company represents and warrants to, and agrees with, the
several Managers that:
(i) A registration statement on Form S-1 (No. 333-42075)
relating to the Offered Securities, including a form of prospectus,
has been filed with the Securities and Exchange Commission (the
"Commission"). The registration statement contains two prospectuses
to be used in connection with the offering and sale of the Offered
Securities: the U.S. prospectus, to be used in connection with the
U.S. Offering, and the international prospectus, to be used in
connection with the International Offering. The international
prospectus is identical to the U.S. prospectus except for the front
and back covers, the "Table of Contents" and related text, the
information appearing under "Subscription and Sale" on pages Alt-4 to
Alt-6 and the deletion of the information under "Notice to Canadian
Residents" on pages 54 to 55 of the U.S. prospectus and except that
certain information has been reordered in the international
prospectus. The registration statement either (A) has been declared
effective under the Securities Act of 1933, as amended (the "Act"),
and is not proposed to be amended or (B) is proposed to be amended by
amendment or post-effective amendment. If such registration statement
(the "initial registration statement") has been declared effective,
either (A) an additional registration statement (the "additional
registration statement") relating to the Offered Securities may have
been filed with the Commission pursuant to Rule 462(b) ("Rule 462(b)")
under the Act and, if so filed, has become effective upon filing
pursuant to such Rule and the Offered Securities all have been duly
registered under the Act pursuant to the initial registration
statement and, if applicable, the additional registration statement or
(B) suchan additional registration statement is proposed to be filed
with the Commission pursuant to Rule 462(b) and will become effective
upon filing pursuant to such Rule and upon such filing the Offered
Securities will all have been duly registered under the Act pursuant
to the initial registration statement and such additional registration
statement. If the Company does not propose to amend the initial
registration statement or, if an additional registration statement has
been filed and the Company does not propose to amend it, and if any
post-effective amendment to either such registration statement has
been filed with the Commission prior to the execution and delivery of
this Agreement, the most recent amendment (if any) to each such
registration statement has been declared effective by the Commission
or has become effective upon filing pursuant to Rule 462(c) ("Rule
462(c)") under the Act or, in the case of the additional registration
statement, Rule 462(b). For purposes of this Agreement, "Effective
Time" with respect to the initial registration statement or, if filed
prior to the execution and delivery of this Agreement, the additional
registration statement means (A) if the Company has advised
<PAGE> 3
3
CSFBL that it does not propose to amend such registration statement,
the date and time as of which such registration statement, or the most
recent post-effective amendment thereto (if any) filed prior to the
execution and delivery of this Agreement, was declared effective by
the Commission or has become effective upon filing pursuant to Rule
462(c), or (B) if the Company has advised CSFBL that it proposes to
file an amendment or post-effective amendment to such registration
statement, the date and time as of which such registration statement,
as amended by such amendment or post-effective amendment, as the case
may be, is declared effective by the Commission. If an additional
registration statement has not been filed prior to the execution and
delivery of this Agreement but the Company has advised CSFBL that it
proposes to file one, "Effective Time" with respect to such additional
registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule
462(b). "Effective Date" with respect to the initial registration
statement or the additional registration statement (if any) means the
date of the Effective Time thereof. The initial registration
statement, as amended at its Effective Time, including all information
contained in the additional registration statement (if any) and deemed
to be a part of the initial registration statement as of the Effective
Time of the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("Rule
430A(b)") under the Act, is hereinafter referred to as the "Initial
Registration Statement." The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "Additional Registration
Statement". The Initial Registration Statement and the Additional
Registration Statement are hereinafter referred to collectively as the
"Registration Statements" and individually as a "Registration
Statement". The form of U.S. prospectus, together with the form of
international prospectus, relating to the International Securities, as
first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement, is hereinafter
referred to as the "Prospectus". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement:
(A) on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all material respects to
the requirements of the Act and the rules and regulations of the
Commission (the "Rules and Regulations") and did not include any
untrue statement of a material fact or omit to state any material fact
<PAGE> 4
4
required to be stated therein or necessary to make the statements
therein not misleading, (B) on the Effective Date of the Additional
Registration Statement (if any), each Registration Statement
conformed, or will conform, in all material respects to the
requirements of the Act and the Rules and Regulations and did not
include, or will not include, any untrue statement of a material fact
and did not omit, or will not omit, to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (C) on the date of this Agreement, the
Initial Registration Statement and, if the Effective Time of the
Additional Registration Statement is prior to the execution and
delivery of this Agreement, the Additional Registration Statement each
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b) or (if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectus is included,
each Registration Statement and the Prospectus will conform, in all
material respects to the requirements of the Act and the Rules and
Regulations, and none of such documents includes, or will include, any
untrue statement of a material fact or omits, or will omit, to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading. If the Effective Time of the
Initial Registration Statement is subsequent to the execution and
delivery of this Agreement: on the Effective Date of the Initial
Registration Statement, the Initial Registration Statement and the
Prospectus will conform in all material respects to the requirements
of the Act and the Rules and Regulations, none of such documents will
include any untrue statement of a material fact or will omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading, and no Additional Registration
Statement has been or will be filed. The two preceding sentences do
not apply to statements in or omissions from a Registration Statement
or the Prospectus based upon written information furnished to the
Company by any Manager through CSFBL specifically for use therein, it
being understood and agreed that the only such information is that
described as such in Section 7(c) hereof.
(iii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify would not have,
individually or in the aggregate, a material adverse effect on the
condition (financial or otherwise), results of operations, business or
prospects of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect").
(iv) Each subsidiary of the Company has been duly
incorporated and is a validly existing corporation in good standing
under the laws of the jurisdiction of its incorporation, with
appropriate power and authority to own its properties and conduct its
business as described in the Prospectus; and each subsidiary of the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify would not have,
individually or in the aggregate, a Material Adverse Effect; all of
the issued and outstanding capital stock of each subsidiary of the
Company has been duly authorized and validly issued and is fully paid
and nonassessable; and, except as disclosed in the Prospectus, the
capital stock of each subsidiary owned by the Company, directly or
through subsidiaries, is owned free from liens, encumbrances and
defects.
<PAGE> 5
5
(v) The Offered Securities and all other outstanding shares
of capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and conform to the
description thereof contained in the Prospectus; and, except as
disclosed in the Prospectus, the stockholders of the Company have no
preemptive rights with respect to the Securities.
(vi) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or
any Manager or U.S. Underwriter for a brokerage commission, finder's
fee or other like payment with respect to the sale of the Offered
Securities.
(vii) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to a Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act.
(viii) The Offered Securities have been approved for listing
subject to notice of issuance on The New York Stock Exchange ("NYSE").
(ix) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
to be obtained or made by the Company for the consummation of the
transactions contemplated by this Agreement or the Underwriting
Agreement in connection with the sale of the Offered Securities,
except such as have been obtained and made under the Act and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") and such as may be required under state securities laws.
(x) The execution, delivery and performance of this
Agreement and the Underwriting Agreement, and the consummation of the
transactions herein and therein contemplated will not result in a
breach or violation of (A) any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order
of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any subsidiary of the Company
or any of their properties, (B) any agreement or instrument to which
the Company or any such subsidiary is a party or by which the Company
or any such subsidiary is bound or to which any of the properties of
the Company or any such subsidiary is subject, or (C) the charter or
by-laws of the Company or any such subsidiary, except, in the cases of
(A) and (B), where such breach, violation or default, individually or
in the aggregate, would not have a Material Adverse Effect.
(xi) Each of this Agreement and the Underwriting Agreement
has been duly authorized, validly executed and delivered by the
Company.
(xii) Except as disclosed in the Prospectus, the Company and
its subsidiaries have good and marketable title to all real properties
and all other
<PAGE> 6
6
properties and assets owned by them, in each case free from
liens,encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made
thereof by them; and except as disclosed in the Prospectus, the
Company and its subsidiaries hold any leased real or personal property
under valid and enforceable leases with no exceptions that would,
individually or in the aggregate, have a Material Adverse Effect.
(xiii) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now
operated by them and have not received any notice of proceedings
relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company or
any of its subsidiaries, individually or in the aggregate, could be
expected to have a Material Adverse Effect.
(xiv) No labor dispute with the employees of the Company or
any subsidiary exists or, to the knowledge of the Company, is imminent
that could be expected to have a Material Adverse Effect.
(xv) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and
other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property
(collectively, "intellectual property rights") necessary to conduct
the business now operated by them, or presently employed by them, and
have not received any notice of infringement of or conflict with
asserted rights of others with respect to any intellectual property
rights that, if determined adversely to the Company or any of its
subsidiaries, individually or in the aggregate, could be expected to
have a Material Adverse Effect.
(xvi) Except as disclosed in the Prospectus, neither the
Company nor any of its subsidiaries is in violation of any statute,
any rule, regulation, decision or order of any governmental agency or
body or any court, domestic or foreign, relating to the use, disposal
or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, "environmental laws"),
owns or operates any real property contaminated with any substance
that is subject to any environmental laws, is liable for any off-site
disposal or contamination pursuant to any environmental laws, or is
subject to any claim relating to any environmental laws, which
violation, contamination, liability or claim, individually or in the
aggregate, could be expected to have a Material Adverse Effect; and
the Company is not aware of any pending investigation which might lead
to such a claim.
(xvii) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting the
Company, any of its subsidiaries or any of their respective properties
that, if determined adversely to the Company or any of its
subsidiaries, individually or in the aggregate, could be expected to
have a Material Adverse Effect, or would materially and adversely
affect the ability of the Company to perform its obligations under
this Agreement or the Underwriting Agreement, or which are otherwise
<PAGE> 7
7
material in the context of the sale of the Offered Securities; and, to
the Company's knowledge, no such actions, suits or proceedings are
threatened or contemplated.
(xviii) The financial statements included in each
Registration Statement and the Prospectus present fairly the financial
position of the Company and its consolidated subsidiaries as of the
dates shown and their results of operations and cash flows for the
periods shown, and such financial statements have been prepared in
conformity with the generally accepted accounting principles in the
United States applied on a consistent basis; the schedules included in
each Registration Statement present fairly the information required to
be stated therein; and the assumptions used in preparing the pro forma
financial statements included in each Registration Statement and the
Prospectus provide a reasonable basis for presenting the significant
effects directly attributable to the transactions or events described
therein, the related pro forma adjustments give appropriate effect to
those assumptions, and the pro forma columns therein reflect the
proper application of those adjustments to the corresponding
historical financial statement amounts.
(xix) Except as disclosed in the Prospectus, since the date
of the latest audited financial statements included in the Prospectus
there has been no material adverse change, nor any development or
event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries individually, or taken
as a whole, and, except as disclosed in or contemplated by the
Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock.
(xx) The Company is not and, after giving effect to the
offering and sale of the Offered Securities, will not be an
"investment company" as defined in the Investment Company Act of 1940.
(b) Each Selling Stockholder, severally and not
jointly, represents and warrants to, and agrees with, the several
Managers that:
(i) Such Selling Stockholder is duly incorporated (if such
Selling Stockholder is a corporation) and validly existing and, to the
extent such concept exists in the relevant jurisdiction, in good
standing under the laws of the jurisdiction of its incorporation.
(ii) Each of this Agreement and the Underwriting Agreement
has been duly authorized, executed and, to the extent such concept
exists in the relevant jurisdiction, delivered by such Selling
Stockholder.
(iii) The execution and delivery by such Selling Stockholder
of, and the performance by such Selling Stockholder of its obligations
under, this Agreement and the Underwriting Agreement, will not
contravene any provision of applicable law, or the organization
documents of such Selling Stockholder (if such Selling Stockholder is
a corporation), or any agreement or other instrument binding upon such
Selling Stockholder or any of its assets or
<PAGE> 8
8
any judgment, order or decree of any governmental body, agency or
court having jurisdiction over such Selling Stockholder or any of its
assets, except where such contravention would not have, individually
or in the aggregate, a Material Adverse Effect, and no consent,
approval, authorization, or order of, or qualification or filing with,
any governmental agency or body or any court is required to be
obtained or made by such Selling Stockholder for the performance by
such Selling Stockholder of its obligations under this Agreement or
the Underwriting Agreement, except (A) such as have been obtained or
made, (B) such as may be required by the securities or Blue Sky laws
of the various states of the United States of America in connection
with the offer and sale of the Offered Securities in the United States
of America and (C) such as may be required by the securities laws of
any jurisdiction outside the Untied States of America.
(iv) Such Selling Stockholder has, and on each Closing Date
hereinafter mentioned will have, valid unencumbered title to the
Offered Securities to be sold by such Selling Stockholder on such date
and the legal right and power, and all authorization and approval
required by law, to enter into this Agreement and the Underwriting
Agreement and to sell, assign, transfer and deliver the Offered
Securities to be sold by such Selling Stockholder.
(v) Upon delivery of the Offered Securities to be sold by
such Selling Stockholder pursuant to this Agreement and the
Underwriting Agreement and payment therefor as contemplated by this
Agreement and the Underwriting Agreement, marketable title to the
Offered Securities will pass to the Managers free and clear of any
security interests, claims, liens, equities and other encumbrances,
other than security interests, liens, equities or other encumbrances
arising solely from the actions of the Underwriters.
(vi) There are no material agreements or arrangements
relating to the Company or its subsidiaries to which such Selling
Stockholder, or to the best of such Selling Stockholder's knowledge,
to which any direct or indirect stockholder of such Selling
Stockholder is a party, which are required to be described in the
Registration Statements or the Prospectus or to be filed as exhibits
thereto that are not so described or filed.
(vii) (a) Each Registration Statement, when such Registration
Statement became effective, did not contain and each such Registration
Statement, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, (b) each Registration Statement and the
Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Act and the applicable rules
and regulations of the Commission thereunder and (c) the Prospectus
does not contain and, as amended or supplemented, if applicable, will
not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading,
except that the foregoing representations and warranties apply only to
the extent that any statements or omissions in each Registration
Statement or the Prospectus are
<PAGE> 9
9
based upon information relating to such Selling Stockholder and any
direct or indirect stockholder of such Selling Stockholder furnished
to the Company in writing by such Selling Stockholder expressly for
use therein.
3. Purchase, Sale and Delivery of Offered Securities. On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, each Selling Stockholder agrees,
severally and not jointly, to sell to the Managers, and each Manager agrees,
severally and not jointly, to purchase from each Selling Stockholder, at a
purchase price of $[ ] per share, that number of International Firm
Securities (rounded up or down, as determined by CSFBC in its discretion, in
order to avoid fractions) obtained by multiplying the number of International
Firm Securities set forth opposite the name of such Selling Stockholder in
Schedule B hereto by a fraction the numerator of which is the number of
International Firm Securities set forth opposite the name of such Manager in
Schedule A hereto and the denominator of which is the total number of
International Firm Securities.
Each of the Selling Stockholders will deliver the International Firm
Securities to CSFBL for the accounts of the Managers, against payment of the
purchase price in U.S. dollars in Federal (same day) funds by official bank
check or checks or wire transfer to an account at a bank acceptable to CSFBL
drawn to the order of [ ] at the office of Cravath, Swaine & Moore
("Underwriters' Counsel"), at 10:00 a.m., New York time, on [ ],
1998, or at such other time not later than seven full business days thereafter
as CSFBL and the Selling Stockholders determine, such time being herein
referred to as the "First Closing Date". For purposes of Rule 15c6-1 under the
Securities Exchange Act of 1934, as amended, the First Closing Date (if later
than the otherwise applicable settlement date) shall be the settlement date for
payment of funds and delivery of securities for all the Offered Securities sold
pursuant to the U.S. Offering and the International Offering. The certificates
for the International Firm Securities so to be delivered will be in definitive
form, in such denominations and registered in such names as CSFBL requests and
will be made available for checking and packaging at the above office of
Underwriters' Counsel at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company and
the Selling Stockholders from time to time not more than 30 days subsequent to
the date of the Prospectus, the Managers may purchase all or less than all of
the Optional Securities at the purchase price per Security to be paid for the
International Firm Securities. Each of the Selling Stockholders agree,
severally and not jointly, to sell to the Managers the respective numbers of
Optional Securities obtained by multiplying the number of Optional Securities
specified in such notice by a fraction the numerator of which is the number of
shares set forth opposite the names of such Selling Stockholders in Schedule B
hereto under the caption "Number of Optional Securities to be Sold" and the
denominator of which is the total number of Optional Securities (subject to
adjustment by CSFBL to eliminate fractions). Such Optional Securities shall be
purchased from each Selling Stockholder for the account of each Manager and
U.S. Underwriter in the same proportion as the number of International Firm
Securities set forth opposite such Manager's name bears to the total number of
International Firm Securities and the number of U.S. Firm Securities set forth
opposite such U.S. Underwriter's name bears to the total number of U.S. Firm
Securities (subject to adjustment by CSFBL to eliminate fractions) and may be
<PAGE> 10
10
purchased by the Managers only for the purpose of covering over-allotments made
in connection with the sale of the Firm Securities. No Optional Securities
shall be sold or delivered unless the International Firm Securities and the
U.S. Firm Securities previously have been, or simultaneously are, sold and
delivered. The right to purchase the Optional Securities or any portion
thereof may be exercised from time to time and to the extent not previously
exercised may be surrendered and terminated at any time upon notice by CSFBC to
the Selling Stockholders.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. Each of the Selling
Stockholders will deliver the Optional Securities being purchased on each
Optional Closing Date to CSFBL for the accounts of the several Managers,
against payment of the purchase price in Federal (same day) funds by official
bank check or checks or wire transfer to an account at a bank acceptable to
CSFBL drawn to the order of [ ], at the above office of Underwriters' Counsel.
The certificates for the Optional Securities being purchased on each Optional
Closing Date will be in definitive form, in such denominations and registered
in such names as CSFBL requests upon reasonable notice prior to such Optional
Closing Date and will be made available for checking and packaging at the above
office of Underwriters' Counsel at a reasonable time in advance of such
Optional Closing Date.
4. Offering by Managers. It is understood that the several Managers
propose to offer the International Securities for sale to the public as set
forth in the Prospectus.
In connection with the distribution of the International Securities,
the Managers, through a stabilizing manager, may over-allot or effect
transactions on any exchange, in any over-the-counter market or otherwise which
stabilize or maintain the market prices of the International Securities at
levels other than those which might otherwise prevail, but in such event and in
relation thereto, the Managers will act for themselves and not as agents of the
Company, and any loss resulting from over-allotment and stabilization will be
borne, and any profit arising therefrom will be beneficially retained, by the
Managers. Such stabilizing, if commenced, may be discontinued at any time.
5. Certain Agreements of the Company. The Company agrees with the
several Managers that:
(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement,
the Company will file the Prospectus with the Commission pursuant to
and in accordance with subparagraph (1) (or, if applicable and if
consented to by CSFBL, subparagraph (4)) of Rule 424(b) not later than
the earlier of (A) the second business day following the execution and
delivery of this Agreement or (B) the fifteenth business day after the
Effective Date of the Initial Registration Statement. The Company
will advise CSFBL promptly of any such filing pursuant to Rule 424(b).
If the Effective Time of the Initial Registration
<PAGE> 11
11
Statement is prior to the execution and delivery of this Agreement and
an additional registration statement is necessary to register a
portion of the Offered Securities under the Act but the Effective Time
thereof has not occurred as of such execution and delivery, the
Company will file the additional registration statement or, if filed,
will file a post-effective amendment thereto with the Commission
pursuant to and in accordance with Rule 462(b) on or prior to 10:00
p.m., New York time, on the date of this Agreement or, if earlier, on
or prior to the time the Prospectus is printed and distributed to any
Manager or U.S. Underwriter, or will make such filing at such later
date as shall have been consented to by CSFBL.
(b) The Company will advise CSFBL promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or the related prospectus or the Initial
Registration Statement, the Additional Registration Statement (if any)
or the Prospectus and will not effect such amendment or
supplementation without CSFBL's prior consent (which will not be
unreasonably withheld); and the Company will also advise CSFBL
promptly of the effectiveness of each Registration Statement (if its
Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration
Statement or the Prospectus and of the institution by the Commission
of any stop order proceedings in respect of a Registration Statement
and will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection
with sales by any U.S. Underwriter, Manager or dealer, any event
occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company will promptly notify
CSFBL of such event and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will
correct such statement or omission or an amendment which will effect
such compliance. Neither CSFBL's consent to, nor the Managers'
delivery of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its securityholders an earnings statement covering a
period of at least 12 months beginning after the Effective Date of the
Initial Registration Statement (or, if later, the Effective Date of
the Additional Registration Statement) which will satisfy the
provisions of Section 11(a) of the Act. For the purpose of the
preceding sentence, "Availability Date" means the 45th day after the
end of the fourth fiscal quarter following the fiscal quarter that
includes such Effective Date, except that, if such fourth fiscal
quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth
fiscal quarter.
<PAGE> 12
12
(e) The Company will furnish to the Managers copies of each
Registration Statement (five of which will be signed and will include
all exhibits), each related preliminary prospectus and so long as a
prospectus relating to the Offered Securities is required to be
delivered under the Act in connection with sales by any Manager or
dealer, the International Prospectus and all amendments and
supplements to such documents, in each case in such quantities as
CSFBL reasonably requests. The Prospectus shall be so furnished on or
prior to 3:00 p.m., New York time, on the business day following the
later of the execution and delivery of this Agreement or the Effective
Time of the Initial Registration Statement. All other such documents
shall be so furnished as soon as available. The Company will pay the
expenses of printing and distributing to the Managers all such
documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as
CSFBL designates and will continue such qualifications in effect so
long as required for the distribution; provided, that in no event
shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action
which would subject it to general service of process in any
jurisdiction where it is not now so subject.
(g) No action has been or, prior to the completion of the
distribution of the Offered Securities, will be taken by the Company
in any jurisdiction outside the United States and Canada that would
permit a public offering of the Offered Securities, or possession or
distribution of the International Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus issued in
connection with the offering of the Offered Securities, or any other
offering material, in any country or jurisdiction where action for
that purpose is required.
(h) During the period of 5 years hereafter, the Company will
furnish to CSFBL and, upon request, to each of the other Managers, as
soon as practicable after the end of each fiscal year, a copy of its
annual report to stockholders for such year; and the Company will
furnish to CSFBL (i) as soon as available, a copy of each report and
any definitive proxy statement of the Company filed with the
Commission under the Securities Exchange Act of 1934 or mailed to
stockholders, and (ii) from time to time, such other information
concerning the Company as CSFBL may reasonably request.
(i) For a period of 180 days after the date of the initial
public offering of the Offered Securities (the "Lockup Period"), the
Company will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Commission a
registration statement under the Act relating to, any additional
shares of its Securities or securities convertible into or
exchangeable or exercisable for any shares of its Securities, or
publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of CSFBC,
except issuances of Securities pursuant to the conversion or exchange
of convertible or exchangeable securities or the exercise of warrants
or options, in each case outstanding on the date hereof, grants of
employee stock options pursuant to the terms of a plan in effect on
the date hereof, issuances of Securities pursuant to the
<PAGE> 13
13
exercise of such options or issuances of Securities pursuant to the
Company's dividend reinvestment plan. Notwithstanding the provisions
of this subsection (h), the Company may file, but may not offer, sell
or otherwise dispose of any securities during the Lockup Period
pursuant to, a registration statement in connection with (A) the
exercise by Artal Luxembourg S.A. ("Artal") of its demand registration
rights under the Artal Stock Purchase Agreement (the "Artal
Agreement"), dated as of [ ], 1998, among Artal, Flowers Industries,
Inc. ("Flowers") and the Company or (B) the exercise of any related
incidental registration rights by Bermore, Limited ("Bermore") under
the Bermore Stock Purchase Agreement (the "Bermore Agreement"), dated
as of [ ], 1998, among Bermore, Artal, Flowers and the Company.
The Company agrees with the several Managers and the U.S. Underwriters
that the Company will pay all expenses incident to the performance of its
obligations and the obligations of the Selling Stockholders under this
Agreement, for any filing fees and other expenses (including fees and
disbursements of counsel) incurred in connection with qualification of the
Offered Securities for sale under the laws of such jurisdictions as CSFBL
designates and the printing of memoranda relating thereto, for any fees
incident to listing the Offered Securities on the NYSE, for the filing fee
incident to, and the filing fee and the reasonable fees and disbursements of
counsel to the Managers in connection with, the review by the NASD of the
Offered Securities, for any travel expenses of the Company's officers and
employees and any other expenses of the Company in connection with attending or
hosting meetings with prospective purchasers of the Offered Securities, for any
transfer taxes on the sale of the Offered Securities to the Managers and for
expenses incurred in printing and distributing preliminary prospectuses and the
Prospectus (including any amendments and supplements thereto) to the Managers.
Each Selling Stockholder agrees, during the Lockup Period, not to
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any additional shares of the Securities of the Company or
securities convertible into or exchangeable or exercisable for any shares of
Securities, or publicly disclose the intention to make any such offer, sale,
pledge or disposition, without the prior written consent of CSFBC.
Notwithstanding the provisions of this paragraph, the Company may file, but may
not offer, sell or otherwise dispose of any securities during the Lockup Period
pursuant to, a registration statement in connection with (A) the exercise by
Artal of its demand registration rights under the Artal Agreement or (B) the
exercise of any related incidental registration rights by Bermore under the
Bermore Agreement.
6. Conditions of the Obligations of the Managers. The obligations
of the several Managers to purchase and pay for the International Firm
Securities on the First Closing Date and the Optional Securities to be
purchased on each Optional Closing Date will be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholders herein, to the accuracy of the
<PAGE> 14
14
statements of Company officers made pursuant to the provisions hereof, to the
performance by the Company and the Selling Stockholders of their obligations
hereunder and to the following additional conditions precedent:
(a) The Managers shall have received a letter, dated the date
of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if
the Effective Time of the Initial Registration Statement is subsequent
to the execution and delivery of this Agreement, shall be prior to the
filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective
Time), of Coopers & Lybrand L.L.P. in the form agreed upon and set
forth in Section 6(a) of the Underwriting Agreement.
(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this
Agreement, such Effective Time shall have occurred not later than
10:00 p.m., New York time, on the date of this Agreement or such later
date as shall have been consented to by CSFBL. If the Effective Time
of the Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 p.m., New York time, on the date of
this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Manager or U.S. Underwriter, or shall have
occurred at such later date as shall have been consented to by CSFBL.
If the Effective Time of the Initial Registration Statement is prior
to the execution and delivery of this Agreement, the Prospectus shall
have been filed with the Commission in accordance with the Rules and
Regulations and Section 5(a) of this Agreement. Prior to such Closing
Date, no stop order suspending the effectiveness of a Registration
Statement shall have been issued and no proceedings for that purpose
shall have been instituted or, to the knowledge of any Selling
Stockholder, the Company or the Managers, shall be contemplated by
the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (A) a change in U.S. or
international financial, political or economic conditions or currency
exchange rates or exchange controls as would, in the judgment of
CSFBL, be likely to prejudice materially the success of the proposed
issue, sale or distribution of the International Securities, whether
in the primary market or in respect of dealings in the secondary
market, or (B)(i) any change, or any development or event involving a
prospective change, in the condition (financial or other), business,
properties or results of operations of the Company or its subsidiaries
which, in the judgment of CSFBL, is material and adverse and makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities; (ii)
any downgrading in the rating of any debt securities of the Company by
any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act), or any public
announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and
no implication of a possible downgrading, of such rating); (iii) any
suspension or
<PAGE> 15
15
limitation of trading in securities generally on the NYSE, or any
setting of minimum prices for trading on such exchange, or any
suspension of trading of any securities of the Company on any exchange
or in the over-the-counter market; (iv) any banking moratorium
declared by U.S. Federal or New York authorities; or (v) any outbreak
or escalation of major hostilities in which the United States is
involved, any declaration of war by the United States Congress or any
other substantial national or international calamity or emergency if,
in the judgment of CSFBL, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable
to proceed with completion of the public offering or the sale of and
payment for the International Securities.
(d) The Managers shall have received an opinion, dated such
Closing Date, of Winston & Strawn, counsel for the Company, in the
form agreed upon and set forth in Annex I to the Underwriting
Agreement.
(e) The Managers shall have received the opinion, dated such
Closing Date, of each of Simpson Thacher & Bartlett, U.S. counsel for
Artal, Arendt & Medernach, Luxembourg counsel for Artal, Battle
Fowler, U.S. counsel for Bermore, and Appleby Spurling & Kempe,
Bermuda counsel for Bermore, in the form agreed upon and set forth in
Annexes II, III, IV and V, respectively, to the Underwriting
Agreement.
(f) The Managers shall have received from Cravath, Swaine &
Moore, counsel for the Managers, such opinion or opinions, dated such
Closing Date, with respect to such matters as the Managers may
require, and the Selling Stockholders and the Company shall have
furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(g) The Managers shall have received a certificate, dated
such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and warranties of
the Company in this Agreement and the Underwriting Agreement are true
and correct; the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date; no stop order suspending
the effectiveness of any Registration Statement has been issued and no
proceedings for that purpose have been instituted or are contemplated
by the Commission; the Additional Registration Statement (if any)
satisfying the requirements of subparagraphs (1) and (3) of Rule
462(b) was filed pursuant to Rule 462(b), including payment of the
applicable filing fee in accordance with Rule 111(a) or (b) under the
Act, prior to the time the Prospectus was printed and distributed to
any Manager or U.S. Underwriter; and, subsequent to the dates of the
most recent financial statements in the Prospectus, there has been no
material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the Company
and its subsidiaries taken as a whole except as set forth in or
contemplated by the Prospectus or as described in such certificate.
<PAGE> 16
16
(h) The Managers shall have received a letter, dated such
Closing Date, of Coopers & Lybrand L.L.P. which meets the
requirements of subsection (a) of this Section, except that the
specified date referred to in such subsection will be a date not more
than three business days prior to such Closing Date for the purposes
of this subsection.
(i) Each executive officer and director of the Company shall
have furnished to the U.S. Representatives a letter substantially in
the form of Exhibit A hereto and addressed to the U.S.
Representatives relating to sales of shares of Securities or any
securities convertible into or exercisable or exchangeable for such
Securities, and each such letter shall be in full force and effect on
the Closing Date.
(j) Each Selling Stockholder shall deliver to the U.S.
Representatives a properly completed and executed United States
Treasury Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
(k) On such Closing Date, the U.S. Underwriters shall have
purchased the U.S. Firm Securities or the Optional Securities, as the
case may be, pursuant to the Underwriting Agreement.
(l) The U.S. Representatives shall be reasonably satisfied
with the terms of all stockholders agreements and other agreements
between the Company and its stockholders, and all such agreements
contemplated in the Prospectus shall have been executed and delivered
by the parties thereto.
Each of the Selling Stockholders and the Company will furnish the Managers with
such conformed copies of such opinions, certificates, letters and documents as
the Managers reasonably request. CSFBL may in its sole discretion waive on
behalf of the Managers compliance with any conditions to the obligations of the
Managers hereunder, whether in respect of an Optional Closing Date or
otherwise.
7. Indemnification and Contribution. (a) The Company will
indemnify and hold harmless each Manager and each Selling Stockholder against
any losses, claims, damages or liabilities, joint or several, to which such
Manager or Selling Stockholder, as the case may be, may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or any related preliminary prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each Manager and each Selling Stockholder for any legal or other
expenses reasonably incurred by such Manager or Selling Stockholder, as the
case may be, in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Company (i) by any Manager
<PAGE> 17
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through CSFBL specifically for use therein, it being understood and agreed that
the only information furnished by any Manager consists of the information
described as such in subsection (c) below or (ii) by any Selling Stockholder
specifically for use therein.
(b) Each of the Selling Stockholders, severally and not jointly, will
indemnify and hold harmless each Manager against any losses, claims, damages or
liabilities, joint or several, to which such Manager may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or any related preliminary prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information about such Selling Stockholder
(or any direct or indirect stockholders of such Selling Stockholder) furnished
to the Company by such Selling Stockholder specifically for use therein, and
will reimburse each Manager for any legal or other expenses reasonably incurred
by such Manager in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that such Selling Stockholder will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with written information furnished to the Company by a Manager through CSFBL
specifically for use therein, it being understood and agreed that the only such
information furnished by any Manager consists of the information described as
such in subsection (c) below.
(c) Each Manager will severally and not jointly indemnify and hold
harmless the Company and each Selling Stockholder against any losses, claims,
damages or liabilities to which the Company or such Selling Stockholder may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement, the Prospectus, or any amendment
or supplement thereto, or any related preliminary prospectus, or arise out of
or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Manager through CSFBL specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company and each Selling Stockholder in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses
are incurred, it being understood and agreed that the only such information
furnished by any Manager consists of the following information in the
Prospectus furnished on behalf of each Manager: the last paragraph at the
bottom of the cover page concerning the terms of the offering by the Managers,
the concession and reallowance figures appearing in the sixth paragraph under
the caption "Subscription and Sale", the over-allotments and
<PAGE> 18
18
stabilizing language appearing in the fourteenth paragraph under the caption
"Subscription and Sale", and the information contained in the fifteenth
paragraph under the caption "Subscription and Sale".
(d) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
subsection (a), (b) or (c) above, notify indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a), (b) or (c) above. In case any such action is brought
against any indemnified party and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action.
(e) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a), (b) or
(c) above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Managers on the other from the offering of the Offered Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Selling Stockholders on the one hand and the Managers on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Managers on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Selling Stockholders bear to the total
underwriting discounts and commissions received by the Managers. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company, the Selling Stockholders or the Managers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified party as
a result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (e) shall be
<PAGE> 19
19
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (e). Notwithstanding the
provisions of this subsection (e), no Manager shall be required to contribute
any amount in excess of the amount by which the total price at which the
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Manager has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Managers' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and each Selling Stockholder under
this Section shall be in addition to any liability which the Company and such
Selling Stockholder may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Manager within the
meaning of the Act; and the obligations of the Managers under this Section
shall be in addition to any liability which the respective Managers may
otherwise have and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has signed a
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.
The maximum liability of each Selling Stockholder to indemnify or
contribute payments pursuant to this Section 7 shall not exceed the aggregate
proceeds (after deducting the Underwriters' discount) of the Offered Securities
(including the sale of shares on exercise of the over-allotment option, if any)
to such Selling Stockholder.
8. Default of Managers. If any Manager or Managers default in their
obligations to purchase Offered Securities hereunder on either the First
Closing Date or any Optional Closing Date and the aggregate number of shares
of Offered Securities that such defaulting Manager or Managers agreed but
failed to purchase does not exceed 10% of the total number of shares of Offered
Securities that the Managers are obligated to purchase on such Closing Date,
CSFBL may make arrangements satisfactory to the Selling Stockholders for the
purchase of such Offered Securities by other persons, including any of the
Managers, but if no such arrangements are made by such Closing Date the
non-defaulting Managers shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Managers agreed but failed to purchase on such Closing Date. If any
Manager or Managers so default and the aggregate number of shares of Offered
Securities with respect to which such default or defaults occur exceeds 10% of
the total number of shares of Offered Securities that the Managers are
obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBL and the Selling Stockholders for the purchase of such Offered Securities
by other persons are not made within 36 hours after such default, this
Agreement will terminate without liability on the part of any non-defaulting
Manager, the Company or the Selling Stockholders, except as provided in Section
9 (provided that if such default occurs with respect to Optional Securities
after the First Closing Date, this Agreement will not terminate as to the
International Firm Securities or any Optional Securities purchased prior to
such termination). As used in this Agreement,
<PAGE> 20
20
the term "Manager" includes any person substituted for a Manager under this
Section. Nothing herein will relieve a defaulting Manager from liability for
its default.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Selling Stockholders, of the Company or its officers and of
the several Managers set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation, or statement
as to the results thereof, made by or on behalf of any Manager, any Selling
Stockholder, the Company or any of their respective representatives, officers
or directors or any controlling person, and will survive delivery of and
payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Managers is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the
respective obligations of the Company, the Selling Stockholders and the
Managers pursuant to Section 7 shall remain in effect, and if any Offered
Securities have been purchased hereunder the representations and warranties in
Section 2 and all obligations under Section 5 shall also remain in effect. If
the purchase of the Offered Securities by the Managers is not consummated for
any reason other than solely because of the termination of this Agreement
pursuant to Section 8 or the occurrence of any event specified in Section
6(c)(A) or clause (iii), (iv), or (v) of Section 6(c)(B), the Company will
reimburse the Managers for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and,
if sent to the Managers, will be mailed, delivered or telexed and confirmed to
CSFBL at One Cabot Square, London E14 4QJ England, Attention: Company
Secretary, or, if sent to the Company, will be mailed, delivered or telegraphed
and confirmed to it at 677 Larch Avenue, Elmhurst, Illinois 60126, Attention:
Thomas E. O'Neill, or, if sent to the Selling Stockholders or any of them, will
be mailed, delivered or telegraphed and confirmed to [ ] at [
]; provided, however, that any notice to a Manager pursuant to Section 7 will
be mailed, delivered or telexed and confirmed to such Manager.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective personal representatives,
heirs and successors and the officers and directors and controlling persons
referred to in Section 7, and no other person will have any right or obligation
hereunder.
12. Representation of Managers. CSFBL will act for the several
Managers in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by CSFBL will be binding upon all the
Managers.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
<PAGE> 21
21
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Each of the Company and the Selling Stockholders hereby submits to the
non-exclusive jurisdiction of the Federal and state courts in the Borough of
Manhattan in The City of New York in any suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
If the foregoing is in accordance with the Managers' understanding of
our agreement, kindly sign and return to the Company one of the counterparts
hereof,
<PAGE> 22
22
whereupon it will become a binding agreement between and among the Selling
Stockholders, the Company and the several Managers in accordance with its
terms.
Very truly yours,
KEEBLER FOODS COMPANY,
by
-------------------------------
Name:
Title:
ARTAL LUXEMBOURG S.A.,
by
-------------------------------
Name:
Title:
BERMORE, LIMITED,
by
-------------------------------
Name:
Title:
<PAGE> 23
23
The foregoing Subscription Agreement is
hereby confirmed and accepted as of the date
first above written.
CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY & CO. INTERNATIONAL
SWISS BANK CORPORATION, ACTING THROUGH
ITS DIVISION SBC WARBURG DILLON READ
c/o CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
One Cabot Square
London, England E14 4QJ
Each by its duly authorized attorney-in-fact
By CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
by
------------------------------------------
Name:
Title:
<PAGE> 24
24
SCHEDULE A
NUMBER OF
INTERNATIONAL FIRM
SECURITIES TO BE
MANAGER PURCHASED
------- ----------------------
Credit Suisse First Boston (Europe) Limited . . . . . .
Merrill Lynch International . . . . . . . . . . . . . .
Morgan Stanley & Co. International. . . . . . . . . . .
Swiss Bank Corporation, acting through its division SBC
Warburg Dillon Read . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . .
===
<PAGE> 25
25
SCHEDULE B
NUMBER OF INTERNATIONAL
FIRM NUMBER OF OPTIONAL
SELLING STOCKHOLDER SECURITIES TO BE SOLD SECURITIES TO BE SOLD
- -------------------- --------------------- ---------------------
Artal Luxembourg S.A.
Bermore, Limited
--------------- ---------------
Total . . . . . . .
=============== ===============
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
KEEBLER FOODS COMPANY
ARTICLE 1
The name of the Corporation is:
KEEBLER FOODS COMPANY
ARTICLE 2
The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle. The name of the Corporation's registered agent at that address is The
Corporation Trust Company.
ARTICLE 3
The purpose of the corporation is to engage in any lawful act
or activity for which a corporation may be organized under the Delaware General
Corporation Law (the "Delaware Law").
ARTICLE 4
4.1 The total number of shares of stock which the
Corporation shall have authority to issue is 500,000,000 shares of Common
Stock, having a par value of $.01 per share (the
<PAGE> 2
"Common Stock"), and 100,000,000 shares of Preferred Stock, having a par value
of $.01 per share (the "Preferred Stock").
4.2 Each holder of record of shares of the Common Stock
shall be entitled to vote at all meetings of the stockholders and shall have
one (1) vote for each share held by him of record.
4.3 Subject to all of the rights of the holders of all
classes or series of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive
dividends at such times and in such amounts as may be determined by the Board
of Directors of the Corporation.
4.4 The Board of Directors is expressly authorized to
provide for the issuance of all or any shares of the Preferred Stock in one or
more classes or series, and to fix for each such class or series such voting
powers, full or limited, or no voting powers, and such distinctive
designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions adopted by the
Board of Directors of the Corporation providing for the issuance of such class
or series and as may be permitted by the Delaware Law, including without
limitation, the authority to provide that any such class or series may be (i)
subject to redemption at such time or times and at such price or prices; (ii)
entitled to receive dividends (which may be cumulative or non-cumulative) at
such rates, on such conditions, and at such times, and payable in preference
to, or in such relation to, the dividends payable on any other class or classes
or any other series; (iii) entitled to such rights upon the dissolution of, or
upon any distribution of the assets of, the Corporation; or (iv) convertible
into, or exchangeable for, shares of any other class or classes of stock, or of
any other series of the same or any other class or classes of stock, of the
Corporation at such price or prices or at such rates of exchange and with such
adjustments; all as may be stated in such resolution or resolutions.
4.5 In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
the Common Stock shall be entitled, after payment or provision for payment of
the debts and other liabilities of the Corporation and the amount to which the
holders of any class or series of the Preferred Stock shall be entitled, to
share ratably in the remaining net assets of the Corporation.
ARTICLE 5
The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
-2-
<PAGE> 3
(b) The number of directors of the Corporation shall be
fixed by resolution adopted by a majority of the entire Board of
Directors except that such number shall be not less than three (3) nor
more than fifteen (15), the exact number to be eleven (11) until
otherwise determined by resolution adopted by a majority of the entire
Board of Directors.
(c) The directors shall be divided into three classes
designated as Class I, Class II and Class III, respectively. Each
class shall consist, as nearly as may be possible, of one-third of the
total number of directors constituting the entire Board of Directors.
At each annual meeting of the stockholders, successors to the class of
directors whose term expires at the annual meeting shall be elected
for a three-year term. The initial term of the Class I directors
shall expire at the 1999 annual meeting of the stockholders; the
initial term of the Class II directors shall expire at the 2000 annual
meeting of the stockholders; and the initial term of the Class III
directors shall expire at the 2001 annual meeting of the stockholders.
If the number of directors is changed, any increase or decrease shall
be apportioned among the classes so as to maintain the number of
directors in each class as nearly as equal as possible, but in no case
shall a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual
meeting for the year in which his term expires and until his successor
shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement or removal from office.
(d) Subject to the rights, if any, of holders of any
series of the Preferred Stock then outstanding, any vacancy on the
Board of Directors that results from an increase in the number of
directors may be filled by a majority of the Board of Directors then
in office, provided that a quorum is present, and any other vacancy
occurring in the Board of Directors may be filled by a majority of the
directors then in office, even if less than a quorum, or by the
holders of a majority of the shares then entitled to vote at an
election of directors. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the
same remaining term as that of his predecessor.
(e) No director shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware Law or (iv) for any
transaction from which the director derived an improper personal
benefit.
(f) In addition to the powers and authority hereinbefore
or by statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the Delaware Law, this Certificate of
Incorporation, and any By-Laws adopted by the stockholders; provided,
however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid
if such By-Laws had not been adopted.
-3-
<PAGE> 4
(g) The directors shall have the power to make, alter,
amend, change, add to or repeal the By-laws of the Corporation.
(h) Except as otherwise required by law and subject to
the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation,
special meetings of stockholders of the Corporation may be called (i)
by the Board of Directors pursuant to a resolution approved by a
majority of the entire Board of Directors or (ii) at the request in
writing of stockholders owning at least 45% of the capital stock of
the Corporation issued and outstanding and entitled to vote.
(i) Any Director, or the entire Board of Directors, may
be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of Directors.
ARTICLE 6
The Corporation shall indemnify, in accordance with and to the
full extent now or hereafter permitted by law, any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, an action by or in the right of
the Corporation), by reason of his acting as a director of the Corporation (and
the Corporation, in the discretion of the Board of Directors, may so indemnify
a person by reason of the fact that he is or was an officer or employee of the
Corporation or is or was serving at the request of the Corporation in any other
capacity for or on behalf of the Corporation) against any liability or expense
actually or reasonably incurred by such person in respect thereof; provided,
however, that the Corporation shall not be obligated to indemnify any such
person: (i) with respect to proceedings, claims or actions initiated or brought
voluntarily without the authorization or consent of the Corporation by such
person and not by way of defense; or (ii) for any amounts paid in settlement of
an action effected without the prior written consent of the Corporation to such
settlement. Such indemnification is not exclusive of any other right of
indemnification provided by law, agreement or otherwise.
ARTICLE 7
No amendment to or repeal of Articles 5(e) or 6 of this
Certificate of Incorporation shall apply to or have any effect on the rights of
any individual referred to in Articles 5(e) or 6 for or with respect to acts or
omissions of such individual occurring prior to such amendment or repeal.
ARTICLE 8
Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation
may be kept (subject to any provision contained in the Delaware Law) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
-4-
<PAGE> 5
ARTICLE 9
No stockholder of the Corporation shall by reason of holding
shares of any class of stock have any pre- emptive or preferential right to
purchase or subscribe to any shares of any class of stock of the Corporation,
now or hereafter to be authorized, or any notes, debentures, bonds, or other
securities convertible into or carrying options or warrants to purchase shares
of any class of such stock, now or hereafter to be authorized, whether or not
the issuance of any such shares, or such notes, debentures, bonds or other
securities would adversely affect the dividend or voting rights of such
stockholder, other than such rights, if any, as the Board of Directors, in its
discretion from time to time, may grant and at such price as the Board of
Directors in its discretion may fix; and the Board of Directors may issue
shares of any class of stock of the Corporation, or any notes, debentures,
bonds or other securities convertible into or carrying options or warrants to
purchase shares of any class of such stock, without offering any such shares of
any class, either in whole or in part, to the existing stockholders of any
class of such stock.
ARTICLE 10
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ARTICLE 11
The Corporation is hereby exempt from the applicability and
coverage of Section 203 of the Delaware Law.
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
KEEBLER FOODS COMPANY
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 1.2. Other Office. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2.2 Annual Meetings. The annual meetings of stockholders shall
be held on such date and at such time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting, at which
annual meetings the stockholders shall elect by a plurality vote a Board of
Directors, and transact such other business as may properly be brought before
the annual meeting. Written notice of the annual meeting stating the place,
date and hour of the annual meeting shall be given to each stockholder entitled
to vote at such annual meeting not less than 10 nor more than 60 days before
the date of the annual meeting.
Section 2.3. Nominating Directors. Nominations of persons for election
to the Board of Directors at a meeting of stockholders may be made (i) by or at
the direction of the Board of Directors or (ii) by any stockholder entitled to
vote for the election of directors at the meeting who
<PAGE> 2
complies with the notice procedures set forth in this Article II, Section 2.3.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary.
To be timely, a stockholder's notice must be delivered to, or mailed and
received by, the Secretary at the principal executive offices of the
Corporation not less than 60 or more than 90 days prior to the meeting;
provided, however, that if the Corporation has not "publicly disclosed" (in the
manner provided in the last sentence of this Article II, Section 2.3) the date
of the meeting at least 70 days prior to the meeting date, notice may be timely
made by a stockholder under this Article II, Section 2.3 if received by the
Secretary not later than the close of business on the tenth day following the
day on which the Corporation publicly disclosed the meeting date. Such
stockholder's notice shall set forth (i) as to each person whom the stockholder
proposes to nominate for election or re-election as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (including such person's written consent to being named in the proxy
statement as a nominee and to serving as director if elected); and (ii) as to
the stockholder giving notice (A) the name and address, as they appear on the
Corporation's books, of such stockholder, (B) the class and number of shares of
capital stock of the Corporation which are beneficially owned by such
stockholder and (C) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to nominate the persons named in its
notice. At the request of the Board of Directors, any persons nominated by the
Board of Directors for election as a director shall furnish to the Secretary
that information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible to serve
as a director of the Corporation unless nominated in accordance with the
procedures set forth herein, except for persons elected to fill vacancies on
the Board of Directors by action taken by written consent of the holders of a
majority of the shares then entitled to vote at an election of directors. The
presiding officer shall, if the facts so warrant, determine and declare to the
meeting that a nomination was not made in accordance with the procedures
prescribed by the By-Laws, and the defective nomination shall be disregarded.
For purposes of these By-Laws, "publicly disclosed" or "public disclosure"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press, or a comparable national
-2-
<PAGE> 3
news service or in a document publicly filed by the Corporation with the
Securities and Exchange Commission.
Section 2.4. Notice of Business. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been brought
before the meeting (i) by or at the direction of the Board of Directors or (ii)
by any stockholder who complies with the notice procedures set forth in this
Article II, Section 2.4. For business to be properly brought before an annual
meeting by a stockholder, the stockholder must deliver written notice to, or
mail such written notice so that it is received by, the Secretary, at the
principal executive offices of the Corporation, not less than 120 or more than
150 days prior to the first anniversary of the date of the Corporation's
consent solicitation or proxy statement released to stockholders in connection
with the previous year's election of directors or meeting of stockholders,
except that if no annual meeting of stockholders or election by consent was
held in the previous year or if the date of the annual meeting has been changed
from the previous year's meeting, a proposal shall be received by the
Corporation within 10 days after the Corporation has "publicly disclosed" the
date of the meeting in the manner provided in Article II, Section 2.3. above.
The stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (A) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (B) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business, (C) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, (D) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the proposal of such business by
such stockholder and any other material interest of such stockholder in such
business and (E) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting. At an annual meeting, the presiding officer shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Article
II, Section 2.4., and such business not properly brought before the meeting
shall not be transacted. Whether or not the foregoing procedures are followed,
no matter which is not a proper matter for stockholder consideration shall be
brought before the meeting.
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Section 2.5. Special Meetings. Unless otherwise prescribed by law or
by the Certificate of Incorporation, special meetings of stockholders, for any
purpose or purposes, may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the entire Board of Directors or by either
(i) the Chairman, or (ii) the Secretary, upon the request in writing of a
majority of the Board of Directors or the request in writing of stockholders
owning at least 45% of the capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. The business transacted at any special
meeting of the stockholders shall be limited to the purposes stated in the
notice for the meeting transmitted to stockholders. Written notice of a special
meeting stating the place, date and hour of the special meeting and the purpose
or purposes for which the special meeting is called shall be given not less
than 10 nor more than 60 days before the date of the special meeting to each
stockholder entitled to vote at such special meeting.
Section 2.6. Waiver of Notice; Postponement or Cancellation of
Stockholders' Meetings. Notice of the time, place and purpose or purposes of
any meeting of stockholders may be waived by a written waiver thereof, signed
by the person entitled to notice. Such waiver, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person at
a meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Any previously scheduled meeting of the
stockholders may be postponed, and any special meeting of the stockholders may
be cancelled, by resolution of the Board of Directors upon public notice given
prior to the date previously scheduled for such meeting.
Section 2.7. Record Date. In order that the Corporation may determine
the stockholders entitled to vote at any meeting of stockholders or any
adjournment thereof, or entitled to express consent to corporate notice in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted, and which shall be (i) not more than 60 nor less than
10 days before
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the date of a meeting, and (ii) not more than 60 days prior to the other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for any adjourned meeting.
Section 2.8. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the presiding
officer of the meeting or the stockholders entitled to vote thereat, present in
person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder entitled to vote at the meeting.
Section 2.9. Voting. When a quorum is present at any meeting, the
affirmative vote of the holders of a majority of the stock represented and
entitled to vote thereat shall decide any question brought before such meeting
unless the question is one upon which by express provision of applicable law,
the Certificate of Incorporation or these By-Laws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.
Section 2.10. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted after
three years from its date, unless the proxy provides for a longer period. At
any meeting of the stockholders, every stockholder entitled to vote may vote in
person or by proxy authorized by an instrument in writing or by a transmission
permitted by law filed in accordance with the procedure established for the
meeting. Any copy, facsimile telecommunication or other reliable reproduction
of the writing or transmission created pursuant to this paragraph may be
substituted or
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used in lieu of the original writing or transmission for any and all purposes
for which the original meeting or transmission could be used; provided that,
such copy, facsimile telecommunication or other reproduction shall be a
complete reproduction of the entire original writing or transmission. All
voting, excepting where otherwise required by law, the Certificate of
Incorporation or the Board of Directors may be by a voice vote.
Section 2.11. Chairman of the Meeting. The Chairman of the Board of
Directors, if any, shall preside at all meetings of the stockholders. In the
absence or inability to act of the Chairman, the Vice Chairman, the President
or a Vice President (in that order) shall preside, and in their absence or
inability to act another person designated by one of them shall preside. The
Secretary shall act as secretary of each meeting of the stockholders. In the
event of his absence or inability to act, the chairman of the meeting shall
appoint a person who need not be a stockholder to act as secretary of the
meeting.
Section 2.12. Conduct of Meetings. Meetings of the stockholders need
not be governed by any prescribed rules of order. The presiding officer's
rulings on procedural matters shall be final. The presiding officer is
authorized to impose reasonable time limits on the remarks of individual
stockholders and may take such steps as such officer may deem necessary, or
appropriate to assure that the business of the meeting is conducted in an
orderly manner.
Section 2.13. Inspectors of Elections; Opening and Closing the Polls.
The Board of Directors by resolution shall appoint one or more inspectors,
which inspector or inspectors may include individuals who serve the Corporation
in other capacities, including, without limitation, as officers, employees,
agents or representatives, to act at the meetings of stockholders and make a
written report thereof. One or more persons may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate has been appointed to act or is able to act at a meeting of
stockholders, the presiding officer of the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before discharging his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by law. The presiding
officer of the meeting shall fix and announce at the meeting the date and time
of the opening and the closing of the polls for each matter upon which the
stockholders will vote at a meeting.
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Section 2.14. Action Without a Meeting. Unless otherwise provided in
the Certificate of Incorporation, any action required or permitted to be taken
at any annual or special meeting of stockholders of the Corporation, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders
of outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 3.1. Duties and Number of Directors. The business and affairs
of the Corporation shall be managed by or under the direction of a Board of
Directors which shall be chosen by ballot at the annual meeting of
stockholders. The number of directors shall be fixed by resolution adopted by
the entire Board of Directors except that such number shall be not less than
three (3) nor more than fifteen (15), the exact number to be eleven (11) until
otherwise determined by resolution adopted by the entire Board of Directors.
Section 3.2. Resignation, Removal and Vacancies. Each director shall
hold office until his successor is elected and qualified, subject, however, to
his or her prior death, resignation, retirement or removal from office. Any
director may resign at any time upon written notice to the Corporation directed
to the Chairman of the Board of Directors or the Secretary. Such resignation
shall take effect at the time specified therein, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to make it
effective. Any director or the entire Board of Directors may be removed with or
without "Cause" (as hereafter defined) by the vote of the holders of at least a
majority of shares of capital stock then entitled to vote at an election of
directors. Whenever the holders of shares of any class or series of capital
stock are entitled to elect one or more directors by the provisions of the
Certificate of Incorporation, the provisions of the preceding sentence shall
apply, in respect to the removal with Cause of a director or directors so
elected, to the vote of the holders of the outstanding shares of that class or
series of capital stock and not to the vote
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of the holders of the outstanding shares of capital stock as a whole. Unless
otherwise provided by the Certificate of Incorporation, vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by the vote of a majority of the directors then in
office provided that a quorum is present, and any other vacancy occurring in
the Board of Directors may be filled by a majority of the directors then in
office, even if less than a quorum, or by the vote of the holders of a majority
of the shares then entitled to vote at an election of directors, unless
otherwise provided in the Certificate of Incorporation. Any director elected to
fill a vacancy not resulting from an increase in the number of directors shall
have the same remaining term as that of his or her predecessor. For the
purposes of this Section 3.2, "Cause" is defined as the willful and continuous
failure to substantially perform one's duties to the Corporation or the willful
engaging in gross misconduct materially and demonstrably injurious to the
Corporation.
Section 3.3. General. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware. Members of
the Board of Directors may participate in any such meeting by means of
conference telephone or similar communications equipment through which all
persons participating in the meeting can hear each other, and participation by
such means shall constitute presence in person at such meeting.
Section 3.4. Notice. Notice of each meeting of Board of Directors
shall be given to each director at his business or residence in writing by hand
delivery, first-class or overnight mail or courier service, telegram or
facsimile transmission, or orally by telephone. If mailed by first-class mail,
such notice shall be deemed adequately delivered when deposited in the United
States mails so addressed, with postage thereon prepaid, at least five (5) days
before such meeting. If by telegram, overnight mail or courier service, such
notice shall be deemed adequately delivered when the telegram is delivered to
the telegraph company or the notice is delivered to the overnight mail or
courier service company at least twenty-four (24) hours before such meeting. If
by facsimile transmission, such notice shall be deemed adequately delivered
when the notice is transmitted at least twelve (12) hours before such meeting.
If by telephone or by hand delivery, the notice shall be given at least twelve
(12) hours prior to the time set for the meeting. Notice of any meeting of the
Board of Directors for which a notice is required may be waived in writing
signed by the person or persons entitled to such notice, whether before or
after the time of such meeting, and such waiver
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shall be equivalent to the giving of such notice. Attendance of a director at
any such meeting shall constitute a waiver of notice thereof, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because such meeting is not lawfully convened.
Neither the business to be transacted at nor the purpose of any meeting of the
Board of Directors for which a notice is required need be specified in the
notice, or waiver of notice, of such meeting.
Section 3.5. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board of Directors or a majority
of the Board of Directors, either personally, or by courier, telephone,
telefax, mail or telegram.
Section 3.6. Quorum. At all meetings of the Board of Directors, a
majority of the then duly elected directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by
the Certificate of Incorporation. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 3.7. Action Without a Meeting. Unless otherwise provided by
the Certificate of Incorporation, any action required or permitted to be taken
at any meeting of the Board of Directors or any committee designated by the
Board of Directors may be taken without a meeting if all members of the Board
of Directors or of such committee consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board of Directors
or such committee.
Section 3.8. Chairman of the Meeting. Meetings of the Board of
Directors shall be presided over by the Chairman, or in his absence by the Vice
Chairman, if any, or in their absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 3.9. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
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member at any meeting of the committee. In the absence or disqualification of a
member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he, she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent allowed by law and provided in the resolution of the Board of Directors
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation.
Section 3.10. Committee Meetings. Each committee shall keep regular
minutes of its meetings and shall file such minutes and all written consents
executed by its members with the Secretary. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings. A
majority of the members shall constitute a quorum unless the committee shall
consist of one or two members, in which event one member shall constitute a
quorum. All matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee. Members of any committee of
the may participate in any meeting of such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating may hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting.
Section 3.11. Compensation. In the discretion of the Board of
Directors, the directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors. In addition, in the
discretion of the Board of Directors, the directors may receive a stated salary
for serving as directors or any other form of compensation deemed appropriate.
No such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
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Members of special or standing committees may be allowed like compensation for
serving on or attending committee meetings.
ARTICLE IV
OFFICERS
Section 4.1. General. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a Chairman of the Board of Directors
(who must be a director), a President, a Vice President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, may also choose one or
more Vice Chairman (who must be directors), Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers. Any number of offices may
be held by the same person, unless otherwise prohibited by law, the Certificate
of Incorporation or these By-Laws. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the Chairman of the
Board of Directors or Vice Chairman, need such officers be directors of the
Corporation.
Section 4.2. Election. The Board of Directors at its first meeting
held after each annual meeting of stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation
or removal. Any officer may resign at any time upon written notice to the
Corporation directed to the Board of Directors and the Secretary. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be
necessary to make it effective. The Board of Directors may remove any officer
or agent with or without cause at any time by the affirmative vote of a
majority of the Board of Directors. Any such removal shall be without prejudice
to the contractual rights of such officer or agent, if any, with the
Corporation, but the election of an officer or agent shall not of itself create
any contractual rights. Any vacancy occurring in any office of the Corporation
by death, resignation, removal or otherwise may be filled by the Board of
Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors or a committee thereof.
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Section 4.3. Voting Securities Owned by the Corporation.
Notwithstanding anything to the contrary contained herein, powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the Chairman of the Board of Directors, the
President or any Vice President and any such officer may, in the name of and on
behalf of the Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and powers incident
to the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
Section 4.4. Chairman of Board of Directors. The Chairman of the Board
of Directors shall preside at all meetings of the stockholders and of the Board
of Directors. In the absence or disability of the President, the Chairman of
the Board of Directors shall be the chief executive officer of the Corporation,
and except where by law the signature of the President is required, the
Chairman of the Board of Directors shall possess the same power as the
President to sign all contracts, certificates and other instruments of the
Corporation which may be authorized by the Board of Directors. During the
absence or disability of the President, the Chairman of the Board of Directors
shall exercise all the powers and discharge all the duties of the President.
The Chairman of the Board of Directors shall also perform such other duties and
may exercise such other powers as from time to time may be assigned to him by
these By-Laws or by the Board of Directors.
Section 4.5. Vice Chairman. Each Vice Chairman shall perform such
duties and have such powers as the Board of Directors from time to time may
prescribe. In the absence or disability of the Chairman of the Board of
Directors, the Vice Chairman, if any, shall exercise all the powers and
discharge all of the duties of the Chairman of the Board of Directors and shall
preside at all meetings of the stockholders and the Board of Directors.
Section 4.6. President. The President shall be the chief executive
officer of the Corporation, and shall, subject to the control of the Board of
Directors, the Chairman of the Board of Directors, have general supervision of
the business of the Corporation and shall see that all orders
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and resolutions of the Board of Directors are carried into effect. He shall
execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
that the other officers of the Corporation may sign and execute documents when
so authorized by these By-Laws, the Board of Directors or the President. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Chairman of the Board of Directors.
Section 4.7. Vice Presidents. Each Vice President shall perform such
other duties and have such other powers as the Board of Directors or the
President from time to time may prescribe. The Board of Directors may designate
one or more Vice Presidents as Executive Vice Presidents or Senior Vice
Presidents, or make such other designations of Vice Presidents as it deems
appropriate.
Section 4.8. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing and special
committees of the Board of Directors when required. The Secretary shall give,
or cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or the President. The Secretary shall
have custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to attest the affixing by his signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
Section 4.9. Treasurer. The Treasurer shall perform all duties
commonly incident to that office (including, but without limitation, the care
and custody of the funds and securities of the corporation which from time to
time may come into his hands and the deposit of the funds of the corporation in
such banks or trust companies as the Board of Directors may authorize or
direct) and,
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in addition, such other duties as the Board of Directors or the President from
time to time may prescribe.
Section 4.10. Assistant Secretaries. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall
perform such duties and have such powers as from time to time may be assigned
to them by the Board of Directors, the President or the Secretary, and in the
absence of the Secretary or in the event of his disability or refusal to act,
shall perform the duties of the Secretary, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the Secretary.
Section 4.11. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President or the Treasurer, and
in the absence of the Treasurer or in the event of his disability or refusal to
act, shall perform the duties of the Treasurer, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the Treasurer.
Section 4.12. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 5.1. Form Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, certifying the number of shares owned by
him in the Corporation. If the Corporation shall be authorized to issue more
than one class of stock, or more than one series of any class, the
designations, preferences and relative, participating, optional or other
special rights of each class of stock, or series thereof, and the
qualifications, limitations or restrictions of such preferences, and/or rights,
shall be set forth in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock;
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provided that, except as otherwise provided in the General Corporation Law of
the State of Delaware, in lieu of the foregoing requirements, there may be set
forth on the face or back of the certificate which the Corporation shall issue
to represent such class or series of stock, a statement that the Corporation
will furnish without charge to each stockholder who so requests the
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 5.2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 5.3. Lost Certificates. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 5.4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued, except that a new certificate may be issued in the
name of an appropriate state officer or office, without the surrender of the
former certificate for shares presumed abandoned
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under the provisions of applicable state escheat or abandoned property laws.
Upon surrender to the Corporation or the transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person or persons entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 5.5. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VI
NOTICES
Section 6.1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given
personally or by overnight mail, courier service, telegram, telex or cable.
Section 6.2. Waivers of Notice. Whenever any notice is required by
law, the Certificate of Incorporation or these By-Laws to be given to any
director, member of a committee or stockholder, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
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ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock or rights to acquire the same.
Section 7.2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors or a duly authorized committee
thereof may from time to time designate.
Section 7.3. Fiscal Year. Until otherwise fixed by resolution of the
Board of Directors, the fiscal year of the Corporation shall consist of
thirteen four-week periods (52 or 53 weeks) and shall end on the Saturday
nearest December 31.
Section 7.4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Power to Indemnify. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer or employee of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans maintained or sponsored by the Corporation, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer or employee, or in any other capacity while serving as a director,
officer or employee shall be indemnified and held harmless by the Corporation
to the fullest extent authorized by the General Corporation Law of the State of
Delaware (the "Delaware Law") as the same exists or may hereafter be amended
(but,
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in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer or employee and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that except as provided in
Section 8.3 of this Article VIII, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by a majority of the entire Board of Directors. The right to
indemnification conferred in this Article VIII shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceedings in advance of its final disposition, such
advances to be paid by the Corporation within twenty (20) days after the
receipt by the Corporation of a statement or statements from the claimant
requesting such advance or advances from time to time; provided, however, that
if Delaware Law requires, the payment of such expenses incurred by a director
or officer in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be
made only upon delivery to the Corporation of an undertaking by or on behalf of
such director of officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Article VIII or otherwise.
Section 8.2. Procedures for Indemnification. To obtain indemnification
under this Article VIII, a claimant shall submit to the Corporation a written
request, including therein or therewith such documentation and information as
is reasonably available to the claimant and is reasonably necessary to
determine whether and to what extent the claimant is entitled to
indemnification. Upon written request by a claimant for indemnification
pursuant to the first sentence of this Section 8.2, a determination, if
required by applicable law, with respect to the claimant's entitlement thereto
shall be made as follows: (i) by the Board of Directors by a majority vote of a
quorum consisting of
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Disinterested Directors (as hereinafter defined), or (ii) if a quorum of
Disinterested Directors so directs, by the stockholders of the Corporation. If
it is so determined that the claimant is entitled to indemnification, payment
to the claimant shall be made within ten (10) days after such determination.
Section 8.3. Power to Bring Suit. If a claim under Section 8.1 of this
Article VIII is not paid in full by the Corporation within thirty (30) days
after a written claim pursuant to Section 8.2 of this Article VIII has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standard of conduct which makes it permissible under
the Delaware Law for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors or
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware Law, nor an actual determination by the Corporation (including its
Board of Directors or stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
Section 8.4. Binding Determination. If a determination shall have been
made pursuant to Section 8.2 of this Article VIII that the claimant is entitled
to indemnification, the Corporation shall be bound by such determination in any
judicial proceeding commenced pursuant to Section 8.3 of this Article VIII. The
Corporation shall be precluded from asserting in any judicial proceeding
commenced pursuant to Section 8.3 of this Article VIII that the procedures and
presumptions of this Article VIII are not valid, binding and enforceable and
shall stipulate in such proceeding that the Corporation is bound by all the
provisions of this Article VIII.
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Section 8.5. Non-Exclusive Remedy. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article VIII shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, By-Laws, agreement, vote of
stockholders or Disinterested Directors, or otherwise. No repeal or
modification of this Article VIII shall in any way diminish or adversely affect
the rights of any director, officer, employee or agent of the Corporation
hereunder in respect of any occurrence or matter arising prior to any such
repeal or modification.
Section 8.6. Insurance. The Corporation may, but shall not be obligated
to, purchase and maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Corporation against any liability,
cost or expense.
Section 8.7. Expenses. The Corporation may, to the extent authorized
from time to time by the Board of Directors, grant rights to indemnification,
and rights to be paid by the Corporation the expenses incurred in defending any
proceeding in advance of its final disposition, to any employee or agent or
class of employees or agents of the Corporation (including the heirs,
executors, administrators or estate of each such person) to the fullest extent
of the provisions of this Article VIII with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
Section 8.8. Severability. If any provision or provisions of this
Article VIII shall be held to be invalid, illegal or unenforceable for any
reason whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Article VIII (including, without limitation, each
portion of any paragraph of this Article VIII containing any such provision
held to be invalid, illegal or enforceable, that is not itself held to be
invalid, illegal or unenforceable) shall not in any way be affected or impaired
thereby; and (b) to the fullest extent possible, the provisions of this Article
VIII including, without limitation, each such portion of any paragraph of this
Article VIII containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or enforceable.
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Section 8.9. Definitions. For purposes of this Article VIII,
"Disinterested Director" means a director of the Corporation who is not and was
not a party to the matter in respect of which indemnification is sought by the
claimant.
Section 8.10. Notice of Indemnification. Any notice, request or other
communication required or permitted to be given to the Corporation under this
Article VIII shall be in writing and either delivered in person or sent by
telecopy, telex, telegram, overnight mail or courier service, or certified or
registered mail, postage prepaid, return receipt requested, to the Secretary
and shall be effective only upon receipt by the Secretary.
ARTICLE IX
AMENDMENTS
Section 9.1. These By-Laws may be amended, repealed or added to at any
regular or special meeting of the Board of Directors or of the stockholders, by
the affirmative vote of a majority of the entire Board of Directors, or by the
affirmative vote of a majority of the stock issued and outstanding and entitled
to vote, as the case may be.
Section 9.2. Entire Board of Directors. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the
total number of directors which the Corporation would have if there were no
vacancies.
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EXHIBIT 5.1
January 23, 1998
Keebler Foods Company
677 Larch Avenue
Elmhurst, IL 60126
Re: 13,184,750 Shares of Common Stock, $0.01 par value, of
Keebler Foods Company
Dear Sir or Madam:
We refer to the Registration Statement on Form S-1 (as amended, the
"Registration Statement"), filed on December 12, 1997 by Keebler Foods Company
(the "Company") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, (the "Act"), relating to the registration
and sale of 13,184,750 shares of Common Stock, $0.01 par value (the "Shares"),
of the Company by certain selling stockholders.
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the
"Act").
In connection with this opinion, we have examined and are familiar with an
original or copies, certified or otherwise identified to our satisfaction, of
(i) the Registration Statement; (ii) the form of underwriting agreement and the
form of subscription agreement as filed as exhibits to the Registration
Statement (collectively, the "Underwriting Agreements"), (iii) the Amended and
Restated Certificate of Incorporation of the Company, as currently in effect;
(iv) the Amended and Restated By-laws of the Company, as currently in effect;
and (v) resolutions of the Board of Directors of the Company relating to, among
other things, the Registration Statement. We have also examined such other
documents and records as we have deemed necessary or appropriate as a basis for
the opinion set forth below.
In our examination, we have assumed the legal capacity of all natural
persons, the genuiness of all signatures, the authenticity of all documents and
records submitted to us as certified or photostatic copies and the authenticity
of the originals of such latter documents. As to any facts material to this
opinion which we did not independently establish or verify, we have relied upon
oral or written statements and representations of officers and other
representatives of the Company and others.
Based on the foregoing, we are of the opinion that the Shares when sold in
accordance with the terms of the Underwriting Agreements, will be legally
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to all references to our firm included in or made a
part of the Registration Statement. In giving such consent, we do not concede
that we are experts within the meaning of the Act or the rules and regulations
thereunder or that this consent is required by Section 7 of the Act.
Very truly yours,
/s/ Winston & Strawn
<PAGE> 1
EXHIBIT 10.8(a)
[EXECUTION COPY]
FORM OF FIRST AMENDMENT AND SUPPLEMENT TO
SUBSIDIARY PLEDGE AGREEMENT
(Keebler Company and Sunshine Biscuits, Inc.)
This FIRST AMENDMENT AND SUPPLEMENT TO SUBSIDIARY PLEDGE AGREEMENT (this
"First Amendment and Supplement"), dated as of November 25, 1997, made by
KEEBLER COMPANY and SUNSHINE BISCUITS, INC. (collectively the "Pledgors") in
favor of THE BANK OF NOVA SCOTIA, as administrative agent (together with any
successor(s) thereto in such capacity, the "Administrative Agent") on behalf of
the Lender Parties, amends and supplements the Subsidiary Pledge Agreement,
dated as of January 26, 1996 (as amended, supplemented or otherwise modified to
the date hereof, the "Pledge Agreement"), made by each Subsidiary party thereto
(the "Existing Pledgors"), in favor of the Administrative Agent.
W I T N E S S E T H :
WHEREAS, pursuant to the Second Amended and Restated Credit Agreement,
dated as of April 8, 1997 (the "Credit Agreement"), among Keebler Corporation,
a Delaware corporation (the "Borrower"), the Administrative Agent, the various
financial institutions as are, or may from time to time become, parties thereto
(the "Lenders") and the Co-Agents named therein, the Lenders have extended
Commitments to make Credit Extensions to the Borrower;
WHEREAS, the Existing Pledgors have entered into the Pledge Agreement to
secure the Obligations (such capitalized term, and other terms used in this
First Amendment and Supplement, unless otherwise defined herein, to have the
meanings set forth or incorporated by reference in the Pledge Agreement);
WHEREAS, pursuant to the Pledge Agreement, the Pledgors pledged to the
Administrative Agent for the benefit of the Lender Parties the Pledged
Interests; and
WHEREAS, pursuant to the Credit Agreement, the Pledgors are required to
supplement the Pledge Agreement as set forth below;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Pledgors and the Administrative Agent agree as follows:
PART II
<PAGE> 2
DEFINITIONS
SUBPART II.1. Certain Definitions. The following terms (whether or not
underscored) when used in this First Amendment and Supplement shall have the
following meanings (such meanings to be equally applicable to the singular and
plural form thereof):
"Additional Pledged Interest Issuer" is defined in Subpart 3.1(a).
"Additional Pledged Interests" is defined in Subpart 3.1(a).
"Additional Pledged Property" is defined in Subpart 3.1(b).
"Administrative Agent" is defined in the preamble.
"Borrower" is defined in the first recital.
"Credit Agreement" is defined in the first recital.
"Existing Pledgors" is defined in the preamble.
"First Amendment and Supplement" is defined in the preamble.
"First Amendment and Supplement Effective Date" is defined in Subpart 5.1.
"Lender" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledgor" is defined in the preamble.
SUBPART II.2. Other Definitions. Terms for which meanings are provided
in the Credit Agreement or the Pledge Agreement are, unless otherwise defined
herein or the context otherwise requires, used in this First Amendment and
Supplement with such meanings.
PART III
AMENDMENTS TO THE
PLEDGE AGREEMENT
Effective on (and subject to the occurrence of) the First Amendment and
Supplement Effective Date, the Pledge Agreement is hereby amended in accordance
with Subpart 2.1; except
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as so amended, the Pledge Agreement shall continue in full force and effect in
accordance with its terms.
SUBPART III.1. Amendments to Article I. Article I of the Pledge
Agreement is hereby amended in accordance with Subparts 2.1.1 through 2.1.3.
SUBPART III.1.1. Section 1.1 of the Pledge Agreement is hereby amended by
inserting the following definitions in such Section in the appropriate
alphabetical sequence:
"First Amendment and Supplement" means the First Amendment and
Supplement to Subsidiary Pledge Agreement, dated as of November __, 1997,
among Keebler Company, Sunshine Biscuits, Inc. and the Administrative
Agent.
"First Amendment and Supplement Effective Date" is defined in
Subpart 5.1 of the First Amendment and Supplement.
"Pledged Interest Issuers" means each Person identified in Item A of
Schedule I hereto (or in any amendment or supplement hereto) as the
issuer of the Pledged Interests identified opposite the name of such
Person and each Person whose ownership, equity or other similar
interests, including shares of capital stock, and membership interests in
limited liability companies, are required to be pledged hereunder and
under the Credit Agreement from time to time.
"Pledged Interests" means all ownership, equity or other similar
interests, including shares of capital stock and membership interests in
limited liability companies, of any Pledged Interest Issuer which are
pledged by the Pledgor to the Administrative Agent hereunder or may from
time to time hereafter be pledged by the Pledgor to the Administrative
Agent.
SUBPART III.1.2. Section 1.1 of the Pledge Agreement is hereby further
amended by deleting the following definitions in such Section in their
entirety: "Pledged Share Issuer" and "Pledged Shares", and all references to
"Pledged Share Issuer" and "Pledged Shares" shall be replaced by "Pledged
Interest Issuer" and "Pledged Interests", respectively.
SUBPART III.1.3. Section 1.1 of the Pledge Agreement is hereby further
amended by amending and restating in its entirety the following definition.
"Pledged Property" means all Pledged Notes, all Pledged Interests, and all
other pledged shares of capital stock or promissory notes, all other
securities, all assignments of any amounts due or to become due, all other
instruments which are now being delivered by each Pledgor to the Administrative
Agent or may from time to time hereafter be delivered by each Pledgor to the
Administrative Agent for the purpose of pledge under
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this Pledge Agreement or any other Loan Document, and all proceeds of any
of the foregoing.
PART IV
SUPPLEMENTAL PLEDGE, ETC.
SUBPART IV.1. Supplemental Pledge. As collateral security for the
payment in full or performance of the Obligations, the Pledgors hereby pledge,
hypothecate, assign, transfer, set over and deliver unto the Administrative
Agent, and grant to the Administrative Agent for the benefit of the Lender
Parties, a continuing security interest in
(a) all Pledged Interests of each Pledged Interest Issuer identified in
Schedule I hereto (the "Additional Pledged Interest Issuers"), as further
set forth in Schedule I hereto (the "Additional Pledged Interests") issued
from time to time;
(b) any additional shares, securities, or membership interests at any
time or from time to time receivable or otherwise distributable in respect
of, in exchange for or in substitution of, any and all of the Additional
Pledged Interests together with any and all proceeds of the Additional
Pledged Interests or of any of the foregoing (all such shares, membership
interests, securities, proceeds thereof, and any Additional Pledged
Interests being hereinafter collectively called the "Additional Pledged
Property");
Upon delivery to the Administrative Agent, the Additional Pledged Property
shall be accompanied by undated stock powers (or the applicable equivalent)
duly executed in blank and by such other instruments or documents as the
Administrative Agent may reasonably request; provided, however, that if any
Additional Pledged Interest consists of uncertificated securities, the
Administrative Agent shall have received confirmation and evidence,
satisfactory to it that appropriate entries shall have been made in the
relevant books or records of a financial intermediary of the Pledged Interest
Issuer thereof, as the case may be, under applicable law, to effect the
transfer of such Additional Pledged Interest to the Administrative Agent for
purposes of the Pledge Agreement and this First Amendment and Supplement.
PART V
REPRESENTATIONS, ETC.
SUBPART V.1. Additional Pledged Property. The pledge and grant contained
in Part III above and the other agreements of the Pledgors provided for herein
have been made as a supplement to the Pledge Agreement and in furtherance
thereof the Pledgors hereby agree that (a) all references contained in the
Pledge Agreement to the terms "Pledged Property", "Pledged
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<PAGE> 5
Interests" and "Collateral" (in each case as amended hereby) hereafter shall be
deemed expressly to include the Additional Pledged Property, and all rights,
remedies, benefits and privileges extended to the Administrative Agent under
the Pledge Agreement with respect to the Pledged Property, Pledged Interests
and the Collateral are hereby extended to the Administrative Agent with respect
to the Additional Pledged Property, and (b) the Additional Pledged Interest
Issuers shall for all such purposes be "Pledged Interest Issuers" under the
Pledge Agreement; provided, that all rights reserved by the Existing Pledgors
in the Pledge Agreement with respect to the Pledged Property, Pledged Interests
and Collateral shall be deemed to be equally reserved with respect to the
Additional Pledged Property.
SUBPART V.2. Representations and Warranties. The Pledgors hereby
confirm, reaffirm and restate each of the representations and warranties set
forth in Article III of the Pledge Agreement, provided that such
representations and warranties shall be and hereby are amended as follows: (i)
each reference to "Collateral" and "Pledged Property" contained therein shall
be deemed a reference to the original Collateral and Pledged Property, as well
as to the Additional Pledged Property, and (ii) each reference to "Pledged
Interest Issuers" contained therein shall be deemed a reference to the original
Pledged Interest Issuers, as well as to the Additional Pledged Interest
Issuers.
PART VI
CONDITIONS TO EFFECTIVENESS
SUBPART VI.1. First Amendment and Supplement Effective Date. This First
Amendment and Supplement (and the amendments and modifications contained
herein) shall become effective on the date (the "First Amendment and Supplement
Effective Date") when all of the conditions set forth in this Subpart 5.1 have
been satisfied.
SUBPART VI.1.1. Execution of Counterparts. The Administrative Agent
shall have received counterparts of this First Amendment and Supplement, duly
executed and delivered on behalf of the Pledgors.
SUBPART VI.1.2. Legal Details, etc. All documents executed or submitted
pursuant hereto shall be satisfactory in form and substance to the
Administrative Agent and its counsel. The Administrative Agent and its counsel
shall have received all information and such counterpart originals or such
certified or other copies or such materials, as the Administrative Agent or its
counsel may reasonably request, and all legal matters incident to the
transactions contemplated by this First Amendment and Supplement shall be
satisfactory to the Administrative Agent and its counsel.
PART VII
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<PAGE> 6
MISCELLANEOUS
SUBPART VII.1. Governing Law. THIS FIRST AMENDMENT AND SUPPLEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE REQUIRED TO BE GOVERNED BY THE LAWS OF JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
SUBPART VII.2. Obligations Absolute. Except as expressly supplemented by
this First Amendment and Supplement, the Pledge Agreement shall remain in full
force and effect in accordance with its terms. This First Amendment and
Supplement may be signed in counterparts, each of which shall be an original
and all of which shall constitute one and the same agreement.
SUBPART VII.3. Loan Document. This First Amendment and Supplement
constitutes a Loan Document executed and delivered pursuant to the Credit
Agreement.
SUBPART VII.4. Cross-References. References in this First Amendment and
Supplement to any Part or Subpart are, unless otherwise specified or otherwise
required by the context, to such Part or Subpart of this First Amendment and
Supplement.
SUBPART VII.5. Successors and Assigns. This First Amendment and
Supplement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned has caused this First Amendment and
Supplement to be duly executed and delivered by its officer thereunto duly
authorized on the date first written above.
KEEBLER COMPANY
By____________________
Title:
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<PAGE> 7
SUNSHINE BISCUITS, INC.
By:________________________
Title:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By_________________________
Title:
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<PAGE> 8
[EXECUTION COPY]
FORM OF FIRST AMENDMENT AND SUPPLEMENT TO
SUBSIDIARY PLEDGE AGREEMENT
(Keebler Company and Sunshine Biscuits, Inc.)
This FIRST AMENDMENT AND SUPPLEMENT TO SUBSIDIARY PLEDGE AGREEMENT (this
"First Amendment and Supplement"), dated as of November 25, 1997, made by
KEEBLER COMPANY and SUNSHINE BISCUITS, INC. (collectively the "Pledgors") in
favor of THE BANK OF NOVA SCOTIA, as administrative agent (together with any
successor(s) thereto in such capacity, the "Administrative Agent") on behalf of
the Lender Parties, amends and supplements the Subsidiary Pledge Agreement,
dated as of January 26, 1996 (as amended, supplemented or otherwise modified to
the date hereof, the "Pledge Agreement"), made by each Subsidiary party thereto
(the "Existing Pledgors"), in favor of the Administrative Agent.
W I T N E S S E T H :
WHEREAS, pursuant to the Second Amended and Restated Credit Agreement,
dated as of April 8, 1997 (the "Credit Agreement"), among Keebler Corporation,
a Delaware corporation (the "Borrower"), the Administrative Agent, the various
financial institutions as are, or may from time to time become, parties thereto
(the "Lenders") and the Co-Agents named therein, the Lenders have extended
Commitments to make Credit Extensions to the Borrower;
WHEREAS, the Existing Pledgors have entered into the Pledge Agreement to
secure the Obligations (such capitalized term, and other terms used in this
First Amendment and Supplement, unless otherwise defined herein, to have the
meanings set forth or incorporated by reference in the Pledge Agreement);
WHEREAS, pursuant to the Pledge Agreement, the Pledgors pledged to the
Administrative Agent for the benefit of the Lender Parties the Pledged
Interests; and
WHEREAS, pursuant to the Credit Agreement, the Pledgors are required to
supplement the Pledge Agreement as set forth below;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Pledgors and the Administrative Agent agree as follows:
PART II
<PAGE> 9
DEFINITIONS
SUBPART II.1. Certain Definitions. The following terms (whether or not
underscored) when used in this First Amendment and Supplement shall have the
following meanings (such meanings to be equally applicable to the singular and
plural form thereof):
"Additional Pledged Interest Issuer" is defined in Subpart 3.1(a).
"Additional Pledged Interests" is defined in Subpart 3.1(a).
"Additional Pledged Property" is defined in Subpart 3.1(b).
"Administrative Agent" is defined in the preamble.
"Borrower" is defined in the first recital.
"Credit Agreement" is defined in the first recital.
"Existing Pledgors" is defined in the preamble.
"First Amendment and Supplement" is defined in the preamble.
"First Amendment and Supplement Effective Date" is defined in Subpart 5.1.
"Lender" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledgor" is defined in the preamble.
SUBPART II.2. Other Definitions. Terms for which meanings are provided
in the Credit Agreement or the Pledge Agreement are, unless otherwise defined
herein or the context otherwise requires, used in this First Amendment and
Supplement with such meanings.
PART III
AMENDMENTS TO THE
PLEDGE AGREEMENT
Effective on (and subject to the occurrence of) the First Amendment and
Supplement Effective Date, the Pledge Agreement is hereby amended in accordance
with Subpart 2.1; except
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as so amended, the Pledge Agreement shall continue in full force and effect in
accordance with its terms.
SUBPART III.1. Amendments to Article I. Article I of the Pledge
Agreement is hereby amended in accordance with Subparts 2.1.1 through 2.1.3.
SUBPART III.1.1. Section 1.1 of the Pledge Agreement is hereby amended by
inserting the following definitions in such Section in the appropriate
alphabetical sequence:
"First Amendment and Supplement" means the First Amendment and
Supplement to Subsidiary Pledge Agreement, dated as of November __, 1997,
among Keebler Company, Sunshine Biscuits, Inc. and the Administrative
Agent.
"First Amendment and Supplement Effective Date" is defined in
Subpart 5.1 of the First Amendment and Supplement.
"Pledged Interest Issuers" means each Person identified in Item A of
Schedule I hereto (or in any amendment or supplement hereto) as the
issuer of the Pledged Interests identified opposite the name of such
Person and each Person whose ownership, equity or other similar
interests, including shares of capital stock, and membership interests in
limited liability companies, are required to be pledged hereunder and
under the Credit Agreement from time to time.
"Pledged Interests" means all ownership, equity or other similar
interests, including shares of capital stock and membership interests in
limited liability companies, of any Pledged Interest Issuer which are
pledged by the Pledgor to the Administrative Agent hereunder or may from
time to time hereafter be pledged by the Pledgor to the Administrative
Agent.
SUBPART III.1.2. Section 1.1 of the Pledge Agreement is hereby further
amended by deleting the following definitions in such Section in their
entirety: "Pledged Share Issuer" and "Pledged Shares", and all references to
"Pledged Share Issuer" and "Pledged Shares" shall be replaced by "Pledged
Interest Issuer" and "Pledged Interests", respectively.
SUBPART III.1.3. Section 1.1 of the Pledge Agreement is hereby further
amended by amending and restating in its entirety the following definition.
"Pledged Property" means all Pledged Notes, all Pledged Interests, and all
other pledged shares of capital stock or promissory notes, all other
securities, all assignments of any amounts due or to become due, all other
instruments which are now being delivered by each Pledgor to the Administrative
Agent or may from time to time hereafter be delivered by each Pledgor to the
Administrative Agent for the purpose of pledge under
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<PAGE> 11
this Pledge Agreement or any other Loan Document, and all proceeds of any
of the foregoing.
PART IV
SUPPLEMENTAL PLEDGE, ETC.
SUBPART IV.1. Supplemental Pledge. As collateral security for the
payment in full or performance of the Obligations, the Pledgors hereby pledge,
hypothecate, assign, transfer, set over and deliver unto the Administrative
Agent, and grant to the Administrative Agent for the benefit of the Lender
Parties, a continuing security interest in
(a) all Pledged Interests of each Pledged Interest Issuer identified in
Schedule I hereto (the "Additional Pledged Interest Issuers"), as further set
forth in Schedule I hereto (the "Additional Pledged Interests") issued from
time to time;
(b) any additional shares, securities, or membership interests at any time
or from time to time receivable or otherwise distributable in respect of, in
exchange for or in substitution of, any and all of the Additional Pledged
Interests together with any and all proceeds of the Additional Pledged
Interests or of any of the foregoing (all such shares, membership interests,
securities, proceeds thereof, and any Additional Pledged Interests being
hereinafter collectively called the "Additional Pledged Property");
Upon delivery to the Administrative Agent, the Additional Pledged Property
shall be accompanied by undated stock powers (or the applicable equivalent)
duly executed in blank and by such other instruments or documents as the
Administrative Agent may reasonably request; provided, however, that if any
Additional Pledged Interest consists of uncertificated securities, the
Administrative Agent shall have received confirmation and evidence,
satisfactory to it that appropriate entries shall have been made in the
relevant books or records of a financial intermediary of the Pledged Interest
Issuer thereof, as the case may be, under applicable law, to effect the
transfer of such Additional Pledged Interest to the Administrative Agent for
purposes of the Pledge Agreement and this First Amendment and Supplement.
PART V
REPRESENTATIONS, ETC.
SUBPART V.1. Additional Pledged Property. The pledge and grant contained
in Part III above and the other agreements of the Pledgors provided for herein
have been made as a supplement to the Pledge Agreement and in furtherance
thereof the Pledgors hereby agree that (a) all references contained in the
Pledge Agreement to the terms "Pledged Property", "Pledged
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<PAGE> 12
Interests" and "Collateral" (in each case as amended hereby) hereafter shall be
deemed expressly to include the Additional Pledged Property, and all rights,
remedies, benefits and privileges extended to the Administrative Agent under
the Pledge Agreement with respect to the Pledged Property, Pledged Interests
and the Collateral are hereby extended to the Administrative Agent with respect
to the Additional Pledged Property, and (b) the Additional Pledged Interest
Issuers shall for all such purposes be "Pledged Interest Issuers" under the
Pledge Agreement; provided, that all rights reserved by the Existing Pledgors
in the Pledge Agreement with respect to the Pledged Property, Pledged Interests
and Collateral shall be deemed to be equally reserved with respect to the
Additional Pledged Property.
SUBPART V.2. Representations and Warranties. The Pledgors hereby
confirm, reaffirm and restate each of the representations and warranties set
forth in Article III of the Pledge Agreement, provided that such
representations and warranties shall be and hereby are amended as follows: (i)
each reference to "Collateral" and "Pledged Property" contained therein shall
be deemed a reference to the original Collateral and Pledged Property, as well
as to the Additional Pledged Property, and (ii) each reference to "Pledged
Interest Issuers" contained therein shall be deemed a reference to the original
Pledged Interest Issuers, as well as to the Additional Pledged Interest
Issuers.
PART VI
CONDITIONS TO EFFECTIVENESS
SUBPART VI.1. First Amendment and Supplement Effective Date. This First
Amendment and Supplement (and the amendments and modifications contained
herein) shall become effective on the date (the "First Amendment and Supplement
Effective Date") when all of the conditions set forth in this Subpart 5.1 have
been satisfied.
SUBPART VI.1.1. Execution of Counterparts. The Administrative Agent
shall have received counterparts of this First Amendment and Supplement, duly
executed and delivered on behalf of the Pledgors.
SUBPART VI.1.2. Legal Details, etc. All documents executed or submitted
pursuant hereto shall be satisfactory in form and substance to the
Administrative Agent and its counsel. The Administrative Agent and its counsel
shall have received all information and such counterpart originals or such
certified or other copies or such materials, as the Administrative Agent or its
counsel may reasonably request, and all legal matters incident to the
transactions contemplated by this First Amendment and Supplement shall be
satisfactory to the Administrative Agent and its counsel.
PART VII
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<PAGE> 13
MISCELLANEOUS
SUBPART VII.1. Governing Law. THIS FIRST AMENDMENT AND SUPPLEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE REQUIRED TO BE GOVERNED BY THE LAWS OF JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
SUBPART VII.2. Obligations Absolute. Except as expressly supplemented by
this First Amendment and Supplement, the Pledge Agreement shall remain in full
force and effect in accordance with its terms. This First Amendment and
Supplement may be signed in counterparts, each of which shall be an original
and all of which shall constitute one and the same agreement.
SUBPART VII.3. Loan Document. This First Amendment and Supplement
constitutes a Loan Document executed and delivered pursuant to the Credit
Agreement.
SUBPART VII.4. Cross-References. References in this First Amendment and
Supplement to any Part or Subpart are, unless otherwise specified or otherwise
required by the context, to such Part or Subpart of this First Amendment and
Supplement.
SUBPART VII.5. Successors and Assigns. This First Amendment and
Supplement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned has caused this First Amendment and
Supplement to be duly executed and delivered by its officer thereunto duly
authorized on the date first written above.
KEEBLER COMPANY
By__________________
Title:
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<PAGE> 14
SUNSHINE BISCUITS, INC.
By_____________________________
Title:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By_____________________________
Title:
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<PAGE> 15
SCHEDULE I
Pledged Interests
KEEBLER COMPANY
Pledged Interest Issuer Description of Membership Interests
- ----------------------------- -------------------------------------------
Pledgor's
Membership
Character of Interest
Interest Percentage
------------ -----------------
Limited
Liability
Elfin Equity Company, L.L.C. Company 64.6%
Limited
Hollow Tree Financial Liability
Company, L.L.C. Company 100%
SUNSHINE BISCUITS, INC.
Pledged Interest Issuer Description of Membership Interests
- ---------------------------- -----------------------------------------
Pledgor's
Membership
Character of Interest
Interest Percentage
--------------- ------------------
Limited 35.4%
Liability
Elfin Equity Company, L.L.C. Company
-8-
<PAGE> 1
EXHIBIT 10.20
FORM OF THIRD AMENDMENT AND WAIVER TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This THIRD AMENDMENT AND WAIVER, dated as of January 5, 1998 (this
"Amendatory Agreement") to the Existing Credit Agreement (as defined below) is
among KEEBLER CORPORATION (formerly known as Keebler Holding Corp.), a Delaware
corporation (the "Borrower"), the Lenders (as defined below) signatories hereto
and THE BANK OF NOVA SCOTIA, as administrative agent (the "Administrative
Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower, certain financial institutions from time to time
parties thereto (the "Lenders"), The First National Bank of Chicago, Bank of
Montreal, SunTrust Bank, Atlanta and Nationsbank, N.A. (South) (collectively
referred to as the "Co-Agents") and the Administrative Agent are parties to the
Second Amended and Restated Credit Agreement, dated as of April 8, 1997, as
amended by Amendment No. 1 thereto, dated as of October 3, 1997, and Amendment
No. 2 thereto, dated as of November 17, 1997 (as further amended, supplemented,
amended and restated or otherwise modified to the date hereof, the "Existing
Credit Agreement");
WHEREAS, the Borrower has requested that the Lenders amend certain
terms contained in the Existing Credit Agreement to, among other things, modify
the definition of Change of Control and allow for the redemption of the
Subordinated Notes; and
WHEREAS, the Lenders have agreed, subject to the terms and conditions
hereinafter set forth, to amend the Existing Credit Agreement in certain
respects and grant certain consents as provided below (the Existing Credit
Agreement, as so amended or otherwise modified by this Amendatory Agreement,
being referred to as the "Credit Agreement");
NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereto agree as follows:
<PAGE> 2
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. The following terms (whether or not
underscored) when used in this Amendatory Agreement shall have the following
meanings (such meanings to be equally applicable to the singular and plural
form thereof):
"Administrative Agent" is defined in the preamble.
"Amendatory Agreement" is defined in the preamble.
"Amendment No. 3" is defined in Subpart 4.1.
"Borrower" is defined in the preamble.
"Co-Agents" is defined in the first recital.
"Credit Agreement" is defined in the third recital.
"Existing Credit Agreement" is defined in the first recital.
"Lenders" is defined in the first recital.
"Third Amendment Effective Date" is defined in Subpart 4.1.
SUBPART 1.2. Other Definitions. Terms for which meanings are provided
in the Existing Credit Agreement are, unless otherwise defined herein or the
context otherwise requires, used in this Amendatory Agreement with such
meanings.
PART II
AMENDMENTS TO THE
EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Third Amendment
Effective Date, the Existing Credit Agreement is hereby amended, and the
Lenders hereby consent to the Borrower consummating certain events, in each
case in accordance with this Part; except as so amended or otherwise modified
by the consents granted below, the Existing Credit Agreement and the Loan
Documents shall continue in full force and effect in accordance with their
terms.
SUBPART 2.1. Amendments to Article I. Article I of the Existing
Credit Agreement is hereby amended in accordance with Subparts 2.1.1 and 2.1.2.
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<PAGE> 3
SUBPART 2.1.1. Section 1.1 of the Existing Credit Agreement is hereby
amended by inserting the following definitions in such Section in the
appropriate alphabetical sequence:
"Amendment No. 3" means the Third Amendment and Consent, dated
as of January 5, 1998, to this Agreement among the Borrower, the Lenders
parties thereto and the Administrative Agent.
"Change of Control Put" means the right of the Subordinated
Noteholders to cause the Borrower to purchase Subordinated Notes pursuant to
Section 3.15 of the Indenture in connection with the disposition of Capital
Stock of the Borrower by the Permitted ARTAL Investor Group.
"Third Amendment Effective Date" is defined in Subpart 4.1 of
Amendment No. 3.
SUBPART 2.1.2. Section 1.1 of the Existing Credit Agreement is further
amended as follows:
(a) The definition of "Change in Control" is hereby amended
in its entirety to read as follows:
"Change in Control" means
(A) any "person" or "group" (as such terms are used in Rule
13d-5 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Sections 13(d) and 14(d) of the Exchange Act) of persons (other than
the Permitted ARTAL Investor Group or Flowers or, in either case, any of their
wholly-owned Subsidiaries) becomes, directly or indirectly, in a single
transaction or in a related series of transactions by way of merger,
consolidation, or other business combination or otherwise, the "beneficial
owner" (as such term is used in Rule 13d-3 of the Exchange Act) of more than
20% of the total voting power in the aggregate of all classes of Capital Stock
of the Borrower then outstanding entitled to vote generally in elections of
directors of the Borrower; or
(b) during any period of 24 consecutive months, individuals
who at the beginning of such period constituted the Board of Directors of the
Borrower (together with any new directors whose election to such Board or whose
nomination for election by the stockholders of the Borrower was approved by
ARTAL or Flowers or a vote of a majority of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Borrower then in office.
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<PAGE> 4
PART III
LIMITED WAIVER
By their signatures hereto, each of the Lenders hereby waives
(a) the use of proceeds restrictions contained in clause (a)
of Section 7.1.9 of the Existing Credit Agreement with respect to Revolving
Loans in order to allow the Borrower to apply Revolving Loans to pay for the
purchase of any Subordinated Notes tendered as a result of the Change of
Control Put;
(b) the prohibition on payments in connection with
Subordinated Debt contained in clause (b) of Section 7.2.6 of the Existing
Credit Agreement to the extent necessary to permit the Borrower to purchase
and/or redeem any Subordinated Notes tendered in connection with the Change of
Control Put, and the Lenders agree that the amount so expended shall not cause
a reduction in the amount of Subordinated Notes permitted to be redeemed,
purchased or defeased pursuant to clause (g) of Section 7.2.6 of the Existing
Credit Agreement; and
(c) any Default under Section 8.1.12 of the Existing Credit
Agreement resulting from the requirement that the Borrower make an offer to
purchase or redeem Subordinated Notes in connection with the Change of Control
Put.
In addition, each of the Lenders hereby authorizes the Administrative Agent to
take all actions and to execute all documents necessary to implement the
foregoing.
PART IV
CONDITIONS TO EFFECTIVENESS
SUBPART 4.1. Third Amendment Effective Date. This Amendatory
Agreement (and the amendments and modifications contained herein) shall become
effective, and shall thereafter be referred to as "Amendment No. 3", on the
date (the "Third Amendment Effective Date") when all of the conditions set
forth in this Subpart 4.1 have been satisfied.
SUBPART 4.1.1. Execution of Counterparts. The Administrative Agent
shall have received counterparts of this Amendatory Agreement, duly executed
and delivered on behalf of the Borrower and the Required Lenders.
SUBPART 4.1.2. Legal Details, etc. All documents executed or
submitted pursuant hereto shall be satisfactory in form and substance to the
Administrative Agent and its counsel. The Administrative Agent and its counsel
shall have received all information and such counterpart originals or such
certified or other copies or such materials, as the Administrative
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<PAGE> 5
Agent or its counsel may reasonably request, and all legal matters incident to
the transactions contemplated by this Amendatory Agreement shall be
satisfactory to the Administrative Agent and its counsel.
PART V
MISCELLANEOUS
SUBPART 5.1. Cross-References. References in this Amendatory
Agreement to any Part or Subpart are, unless otherwise specified or otherwise
required by the context, to such Part or Subpart of this Amendatory Agreement.
SUBPART 5.2. Loan Document Pursuant to Existing Credit Agreement.
This Amendatory Agreement is a Loan Document executed pursuant to the Existing
Credit Agreement and shall be construed, administered and applied in accordance
with all of the terms and provisions of the Existing Credit Agreement.
SUBPART 5.3. Compliance with Warranties, No Default, etc. The
Borrower represents and warrants on the Third Amendment Effective Date for its
Subsidiaries and itself, both before and after giving effect to this Amendatory
Agreement, as follows:
(a) the representations and warranties set forth in Article VI
of the Credit Agreement and in each other Loan Document are, in each case, true
and correct in all material respects (unless stated to relate solely to an
earlier date, in which case such representations and warranties were true and
correct in all material respects as of such earlier date);
(b) no material adverse development has occurred in any
litigation, action, proceeding, labor controversy, arbitration or governmental
investigation disclosed pursuant to Section 6.7 of the Credit Agreement;
(c) the sum of (x) the aggregate outstanding principal amount
of all Revolving Loans and Swing Line Loans and (y) all Letter of Credit
Outstandings does not exceed the Revolving Loan Commitment Amount; and
(d) no Default has occurred and is continuing.
SUBPART 5.4. Successors and Assigns. This Amendatory Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
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<PAGE> 6
SUBPART 5.5. Counterparts. This Amendatory Agreement may be executed
by the parties hereto in several counterparts, each of which when executed and
delivered shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SUBPART 5.6. Governing Law. THIS AMENDATORY AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendatory
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
KEEBLER CORPORATION
By
-----------------------------
Title:
THE BANK OF NOVA SCOTIA, as
Administrative Agent, the Issuer and a Lender
By
-----------------------------
Title:
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<PAGE> 8
THE FIRST NATIONAL BANK OF CHICAGO,
as a Co-Agent and a Lender
By
----------------------------------
Title:
<PAGE> 9
BANK OF MONTREAL, as a Co-Agent and a
Lender
By
------------------------------------
Title:
<PAGE> 10
SUNTRUST BANK, ATLANTA, as a Co-Agent
and a Lender
By
-----------------------------------
Title:
By
-----------------------------------
Title:
<PAGE> 11
NATIONSBANK, N.A. (SOUTH), as a Co-Agent
and a Lender
By
--------------------------------------
Title:
<PAGE> 12
ABN AMRO BANK N.V., NEW YORK BRANCH
By
------------------------------------
Title:
By
------------------------------------
Title:
<PAGE> 13
THE NORTHERN TRUST COMPANY
By
------------------------------------
Title:
<PAGE> 14
COOPERATIVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A., NEW YORK
BRANCH
By
------------------------------------
Title:
By
------------------------------------
Title:
<PAGE> 15
SOCIETE GENERALE
By
-------------------------------------
Title:
<PAGE> 16
WACHOVIA BANK OF GEORGIA, N.A.
By
-------------------------------------
Title:
<PAGE> 17
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By
-------------------------------------
Title:
By
-------------------------------------
Title:
<PAGE> 18
BANQUE NATIONALE DE PARIS
By
------------------------------------
Title:
<PAGE> 19
COMERICA BANK
By
------------------------------------
Title:
<PAGE> 20
THE FUJI BANK, LIMITED
By
-------------------------------------
Title:
<PAGE> 21
GENERALE BANK, NEW YORK BRANCH
By
-------------------------------------
Title:
By
-------------------------------------
Title:
<PAGE> 22
HIBERNIA NATIONAL BANK
By
-------------------------------------
Title:
<PAGE> 23
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By
-------------------------------------
Title:
<PAGE> 24
FIRSTRUST BANK
By
-------------------------------------
Title:
<PAGE> 1
EXHIBIT 10.22
FORM OF STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT made this ___ day of _______________, 1998, by
and among FLOWERS INDUSTRIES, INC., a Georgia corporation (hereinafter referred
to as "Purchaser"), ARTAL LUXEMBOURG S.A., a Luxembourg corporation
(hereinafter referred to as "Seller") and KEEBLER FOODS COMPANY, a Delaware
corporation (hereinafter referred to as "Keebler").
W I T N E S S E T H:
WHEREAS, Purchaser and Seller are stockholders of Keebler; and
WHEREAS, Seller has requested, and Purchaser has consented to, a demand
registration pursuant to Section 1.1(a) of Annex A of the Stockholders'
Agreement;
WHEREAS, Seller and Purchaser have caused Keebler to file a
Registration Statement with the Securities and Exchange Commission relating to
the sale of such number of Seller's Shares and Bermore's Shares (other than
Acquired Shares) as may be determined by Seller; and
WHEREAS, if the initial public offering is consummated, Seller and
Purchaser have agreed that Purchaser will purchase a portion of Seller's Shares
simultaneously with and conditioned upon the Closing, upon the terms and
conditions set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises, agreements, representations, warranties and covenants hereinafter set
forth, and the sum of ten dollars and other good and valuable consideration,
the receipt and sufficiency of which is hereby specifically agreed to and
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
As used herein, the following terms shall have the following meanings
unless the context otherwise requires:
1.1 "Acquired Shares" shall mean 9,581,169 shares of Keebler Stock to
be sold by Seller to Purchaser at Closing, representing approximately 11.4% of
the outstanding Keebler Stock and which, together with the purchase of the
Bermore Purchase Shares, shall
<PAGE> 2
result in approximately fifty-one percent (51%) ownership of the Keebler Stock,
on a fully diluted basis, by Purchaser on the Closing Date.
1.2 "Affiliate" shall mean any Person which, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, another Person. The term "control" includes, without
limitation, the possession, directly or indirectly, of the power to direct the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
1.3 "Agreement" shall mean this Stock Purchase Agreement.
1.4 "Bermore" shall mean Bermore, Ltd., a Bermuda Limited Company.
1.5 "Bermore Agreement" shall mean the Stock Purchase and Stockholder's
Agreement, among Bermore, Purchaser, Seller and Keebler of even date herewith.
1.6 "Bermore Purchase Shares" shall mean 1,616,691 shares of Keebler
Stock to be sold by Bermore to Purchaser at Closing, representing approximately
1.9% of the outstanding Keebler Stock and which, together with the purchase of
the Acquired Shares, shall result in approximately fifty-one percent (51%)
ownership of the Keebler Stock, on a fully diluted basis, by Purchaser on the
Closing Date.
1.7 "Bermore's Shares" shall mean the shares of Keebler Stock owned by
Bermore.
1.8 "CEO Consent Period" shall have the meaning set forth in Section
13.1.3.
1.9 "Closing" shall mean the consummation of the sale of the Acquired
Shares pursuant to the terms and conditions of this Agreement.
1.10 "Closing Date" shall mean the date on which the Closing occurs
pursuant to Section 7.1.
1.11 "DGCL" shall mean the General Corporation Law of the State of
Delaware.
1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.13 "Extension Period" shall have the meaning set forth in Section
13.4.
1.14 "GFI Stockholder's Agreement" shall mean that certain GFI
Stockholder's Agreement dated as of June 4, 1996 by and among Keebler, G. F.
Industries, Inc., Seller and Purchaser.
2
<PAGE> 3
1.15 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust and
Improvements Act of 1976, as amended.
1.16 "Initial Stock Repurchase Consent Period" shall have the meaning
set forth in Section 13.2.1.
1.17 "IPO" shall mean a public offering of shares of Keebler Stock
owned by Seller and Bermore pursuant to the provisions of Section 2.3 hereof.
1.18 "IPO Price" shall mean the price per share of Keebler Stock at
which it will be sold to the public pursuant to the Underwriting Agreement,
without giving effect to any underwriting spread, discounts, commissions or
reallowances.
1.19 "Keebler" shall mean Keebler Foods Company, a Delaware
corporation, formerly named "INFLO Holdings Corporation."
1.20 "Keebler Stock" shall mean the common stock, $.01 par value per
share, of Keebler.
1.21 "Lockup Period" shall mean the period set forth in the
Underwriting Agreement during which restrictions will be placed on transfers of
Keebler Stock by Seller, as such period may be reduced or waived by the
Underwriters, with respect to all of the remaining shares of Keebler Stock
owned by the Seller upon Closing.
1.22 "Management" shall mean the members of management of Keebler who
either (i) directly own shares of Keebler Stock as of the date hereof or (ii)
have been granted stock options by Keebler to purchase shares of Keebler Stock
(A) as of the date hereof, (B) pursuant to stock option plans approved by
Seller pursuant to Section 13.1 or (C) pursuant to stock options issued under
plans permitted pursuant to the proviso set forth in paragraph (f) of Annex C.
1.23 "1933 Act" shall mean the Securities Act of 1933, as amended.
1.24 "Per Share Purchase Price" shall mean the price derived by
dividing (i) the sum of (A) one hundred ten percent (110%) of the IPO Price
times the aggregate number of Acquired Shares and Bermore Purchase Shares, plus
(B) the lesser of (1) five percent (5%) of the IPO Price times the aggregate
number of Acquired Shares and Bermore Purchase Shares, or (2) $13,000,000 by
(ii) the number of Acquired Shares and Bermore Purchase Shares.
1.25 "Person" shall mean an individual, a partnership, a joint venture,
a corporation, an association, a joint stock company, a limited liability
company, a trust, an unincorporated organization or a governmental entity or
any department, agency or political subdivision thereof.
1.26 "Public Float" shall mean the number of shares of Keebler Stock
that are available for trading in the public market, and shall not in any event
include (i) shares of capital
3
<PAGE> 4
stock of Keebler beneficially owned by Seller, Purchaser, Bermore or
Management prior to being sold in a transaction resulting in such shares
trading in the public market or (ii) shares of capital stock of Keebler which
are subject to statutory, contractual or other restrictions on transfer.
1.27 "Purchase Price" shall have the meaning set forth in Section 2.2
hereof.
1.28 "Purchaser" shall mean Flowers Industries, Inc., a Georgia
corporation.
1.29 "Registration Statement" shall mean a Registration Statement on
Form S-1 in respect of the IPO (File No. 333-42075).
1.30 "SEC" shall mean the U.S. Securities and Exchange Commission.
1.31 "Second Stock Repurchase Consent Period" shall have the meaning
set forth in Section 13.2.2.
1.32 "Securities" shall mean (a) Keebler Stock, (b) any other capital
stock of Keebler issued after the date hereof and (c) any capital stock of
Keebler issued in respect of previously issued capital stock, or in
substitution thereof, in connection with any stock split, reverse stock split,
dividend or combination, or any recapitalization, reclassification, merger,
consolidation, exchange or other similar reorganization.
1.33 "Seller" shall mean Artal Luxembourg S.A., a Luxembourg
corporation.
1.34 "Seller Directors" shall mean members of the Board of Directors of
Keebler nominated by Seller pursuant to Section 12.1 hereof.
1.35 "Seller's Shares" shall mean the shares of Keebler Stock owned by
Seller.
1.36 "Standard Consent Period" shall have the meaning set forth in
Section 13.1.1.
1.37 "Stockholders' Agreement" shall mean that certain Stockholders'
Agreement dated as of January 26, 1996 among Keebler, Seller and Purchaser.
1.38 "Underwriters" shall mean Credit Suisse First Boston Corporation,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated and SBC Warburg Dillon Read Inc.
1.39 "Underwriting Agreement" shall mean the Underwriting Agreement to
be executed contemporaneously with this Agreement among the Underwriters,
Keebler, Bermore and Seller in respect of the IPO.
2. COVENANTS AND UNDERTAKINGS.
4
<PAGE> 5
2.1 Purchase of Acquired Shares. Upon the terms and subject to the
conditions set forth in this Agreement and on the basis of the representations,
warranties, covenants, agreements, undertakings and obligations contained
herein, Seller hereby agrees to sell to Purchaser, and Purchaser hereby agrees
to purchase, the Acquired Shares, free and clear of all liens, claims and
encumbrances of any nature at the Closing.
2.2 Purchase Price and Payment for the Acquired Shares. The purchase
price (the "Purchase Price") to be paid by Purchaser to Seller for the Acquired
Shares will be equal to the Per Share Purchase Price times the number of
Acquired Shares, and shall be payable at Closing in cash by wire transfer in
same day funds to an account or accounts specified by Seller.
2.3 IPO. The parties hereto acknowledge that Keebler has filed the
Registration Statement with the SEC for registration of such numbers of
Seller's Shares and Bermore's Shares as may be determined by Seller. The
parties hereto agree that Seller has requested and Purchaser has consented to a
demand registration pursuant to Section 1.1(a) of Annex A of the Stockholders'
Agreement, and in connection therewith, agree to use their reasonable best
efforts to (i) cause the Registration Statement to be declared effective by the
SEC, (ii) engage in all actions reasonably requested by the Seller, Purchaser
or the Underwriters in order to effectuate or facilitate the marketing and sale
of Seller's Shares and Bermore's Shares and (iii) assist in and take all other
actions in furtherance of the consummation of the IPO. The procedures, further
agreements, rights and obligations of the parties hereto regarding the
Registration Statement and the sale of any portion of Seller's Shares
thereunder (including any procedures, further agreements, rights and
obligations applicable after the Closing) shall be governed by the procedures
in Annex A of the Stockholders' Agreement applicable to demand registrations
made pursuant to Section 1.1(a) of such Annex A, except that notwithstanding
anything to the contrary contained therein or herein, the reasonable fees and
disbursements of counsel to Seller in respect of the IPO shall be paid by
Keebler as provided in Section 14.7. Seller agrees that it shall not terminate
or materially amend, extend or otherwise modify the Underwriting Agreement
without the prior written consent of Purchaser (which consent shall not be
unreasonably withheld or delayed).
2.4 Bermore Purchase. The parties hereto recognize that pursuant to
Section 3.3 and 3.4 of the GFI Stockholder's Agreement, Bermore has certain
"tag along" rights and Purchaser and Seller have certain "drag along" rights as
more fully described in said sections. In lieu thereof, the parties recognize
that, pursuant to the Bermore Agreement, Bermore will sell to Purchaser, and
Purchaser will purchase from Bermore, the Bermore Purchase Shares at the Per
Share Purchase Price.
2.5 Bermore Participation in IPO. The parties hereto acknowledge that
pursuant to Section 1.2 of Annex A to the GFI Stockholder's Agreement, (i)
Bermore has certain rights regarding "Incidental Registrations" as more fully
described therein, (ii) the written notification requirements of such Section
1.2 have been satisfied and/or waived and (iii) Bermore has elected to include
the Bermore IPO Shares (as such term is defined in the Bermore Agreement) for
sale in the IPO in accordance with the terms and provisions of the Bermore
Agreement.
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2.6 Termination of Stockholders' Agreement. Seller, Purchaser and
Keebler covenant and agree to terminate, the Stockholders' Agreement effective
upon the Closing except that the provisions contained in Annex A thereof which
by their terms are applicable after the consummation of an offering made
pursuant thereto (including, without limitation, provisions relating to
indemnification and contribution) shall continue to remain in full force and
effect as provided therein with respect to Seller's Shares sold in the IPO.
2.7 Compliance with Securities Laws. In connection with the
transactions contemplated by this Agreement, the parties hereto agree to
cooperate with one another in complying with the applicable provisions of the
1933 Act and the Exchange Act and the general rules and regulations of the SEC
thereunder, and all other applicable federal and state securities laws, and
each of them agree to furnish the other, or its counsel, with such information
and to take such actions as may be reasonably requested in respect of such
compliance.
2.8 Resignation. Seller covenants to cause to be delivered at the
Closing the resignation of one (1) of the three (3) Directors nominated by it
currently serving on the Board of Directors of Keebler, such resignation to be
effective immediately following the Closing. The remaining Directors nominated
by Seller shall continue to serve and remain on Keebler's Board of Directors
for the remainder of their terms in accordance with, and subject to, the
provisions of Keebler's Bylaws and Section 12.1 hereof. The parties
acknowledge that prior to the IPO, the terms of Keebler's Board of Directors
will be staggered such that (i) approximately one-third of the members shall be
elected each year for a three-year term, (ii) in order to effectuate such
staggered terms the individuals serving on the Board of Directors immediately
following the IPO will be classified as to whether they will stand for
re-election at the next ensuing annual meeting of Shareholders, the annual
meeting one year thereafter, or the annual meeting two years thereafter and
(iii) the Seller Directors shall be classified in the annual meeting two years
thereafter category.
2.9 Consents and Approvals. The parties agrees to use their respective
best efforts to obtain the waiver, consent and approval of all persons whose
waiver, consent or approval is required in order to consummate the transactions
contemplated by this Agreement.
2.10 HSR Act Filings. The parties hereunder acknowledge that the
required filings in connection with the transactions contemplated by this
Agreement under the HSR Act have been made with the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice, and, the
parties hereunder agree that, as promptly as practicable from time to time
hereafter, they shall make, in cooperation with each other, all such further
filings and submissions, and take such further action, as may be required in
connection therewith. The parties shall furnish each other all information in
its or their possession necessary for compliance by the others with the
provisions of this Section 2.10. The parties hereto shall each notify the
others immediately upon receiving any request for additional information with
respect to such filings from either the Antitrust Division of the Department
of Justice or the Federal Trade Commission and the party receiving the request
shall use its best efforts to comply with such request as soon as possible.
Subject to the termination provisions of this Agreement, no party shall
withdraw any such filing or submission without the written consent of the
other parties.
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2.11 DGCL Section 203 Opt-Out. Seller, Purchaser and Keebler covenant
and agree to take all actions necessary to cause Keebler, on or prior to the
Closing Date, to adopt an amendment to Keebler's certificate of incorporation
or bylaws expressly electing not to be governed by Section 203 of the DGCL (or
any successor statute adopted subsequent to the date hereof by the State of
Delaware or, if Keebler reincorporates in a jurisdiction other than the State
of Delaware, any similar statute of any such jurisdiction) and further covenant
to take all actions necessary to cause such amendment to be approved by vote of
a majority of the shares of Keebler Stock entitled to vote thereon. Such
amendment shall be effective as provided in DGCL Section 203(b) and if such
amendment is made to Keebler's bylaws it shall not be further amended by the
Board of Directors.
2.12 Actions by Keebler. Each of Artal and Flowers will use its best
efforts to cause Keebler to (i) take any action required to be taken in
connection with the consummation of the transactions contemplated hereby or
(ii) refrain from taking any action inconsistent with the consummation of the
transactions contemplated hereby. Artal and Flowers, acting jointly, will, if
necessary, take all steps permitted under applicable law to replace any
director who refuses or otherwise fails to use his best efforts to direct
Keebler to comply with such covenants with a director who both Artal and
Flowers believe in good faith will cause Keebler to comply with such covenants.
2.13 FIRPTA. Keebler agrees to deliver to Seller, at Closing, the
Certificate set forth on Section 8.2.3.4 and to deliver to the Internal Revenue
Service, as promptly as practicable and in any event within thirty (30) days of
the Closing, the Notice set forth in Section 8.2.3.4.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to, and for the benefit of,
Keebler and Purchaser as follows:
3.1 Organization and Standing. Seller is a duly organized and
validly existing corporation in good standing under the laws of Luxembourg.
3.2 Authority and Status. The Seller has the corporate
capacity and authority to execute and deliver this Agreement, to perform
hereunder, and to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Seller of this Agreement and each
and every agreement, document, and instrument provided for herein have been
duly authorized and approved by the Directors of Seller and this Agreement has
been duly executed and delivered by the Seller. This Agreement and each and
every agreement, document, and instrument to be executed, delivered and
performed by the Seller in connection herewith constitute or will, when
executed and delivered, constitute the valid and legally binding obligations of
the Seller, enforceable against it in accordance with their respective terms,
except as enforceability may be limited by applicable general equitable
principles (whether considered in a proceeding in equity or at law) or by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or
similar laws from time to time in effect affecting the enforcement of
creditors' rights generally.
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3.3 Agreement Does Not Violate Other Instruments. The execution and
delivery of this Agreement by the Seller do not, and the consummation of the
transactions contemplated hereby will not, violate any provision of the Acte de
Constitution of the Seller or violate or constitute an occurrence of default
under any provision of, or conflict with, or result in acceleration of any
obligation under, or give rise to a right by any party to terminate its
obligations under, any mortgage, deed of trust, conveyance to secure debt,
note, loan, lien, lease, agreement, instrument, or any order, judgment, decree
or other arrangement to which the Seller is a party or is bound except where
the occurrence of any such event would not have a material adverse effect on
the consummation of the transactions contemplated hereby. Except for the
filings with the SEC and various state securities authorities with regard to
the IPO and the filings required under the HSR Act, no consent, approval, order
or authorization of, or registration, declaration or filing with, any
governmental entity is required to be obtained or made by or with respect to
the Seller, in connection with the execution and delivery by the Seller of this
Agreement or the consummation of the transactions contemplated hereby, except
where the failure to obtain or make any of the foregoing would not have a
material adverse effect on the consummation of the transactions contemplated
hereby.
3.4 Litigation. There is no suit, action, proceeding, claim or
investigation pending, or, to the knowledge of Seller, threatened against the
Seller which, if pursued and/or resulting in a judgment, would have a material
adverse effect on the right of the Seller to consummate the transactions
contemplated hereby.
3.5 Shares. The Seller owns the Acquired Shares free and clear of any
liens, claims or encumbrances of any nature. Except as contemplated by the
Stockholders' Agreement, the Seller has not granted any option or right, and is
not a party to any other agreement, and no such option, right or agreement
exists, which requires, or which upon the passage of time, the payment of money
or the occurrence of any other event, may require, the Seller to transfer any
of the Seller's Shares to any one other than Purchaser. When Purchaser
acquires the Acquired Shares from the Seller as contemplated by this Agreement,
the Purchaser will receive them free and clear of any liens, claims or
encumbrances of other persons, other than liens, claims or encumbrances
resulting from acts of Purchaser.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to, and for the benefit of, the
Seller and Keebler as follows:
4.1 Organization and Standing. Purchaser is a duly organized and validly
existing corporation in good standing under the laws of the State of Georgia.
4.2 Authority and Status. Purchaser has the corporate capacity and
authority to execute and deliver this Agreement, to perform hereunder, and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by Purchaser of this Agreement and each and every agreement,
document, and instrument provided for herein have been duly authorized and
approved by its Board of Directors and this Agreement has been duly executed
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and delivered by Purchaser. This Agreement and each and every other agreement,
document, and instrument to be executed, delivered and performed by Purchaser
in connection herewith constitute or will, when executed and delivered,
constitute the valid and legally binding obligations of Purchaser, enforceable
against it in accordance with their respective terms, except as enforceability
may be limited by applicable general equitable principles (whether considered
in a proceeding in equity or at law) or by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or similar laws from time to time in
effect affecting the enforcement of creditors' rights generally.
4.3 Agreement Does Not Violate Other Instruments. The execution and
delivery of this Agreement by Purchaser do not, and the consummation of the
transactions contemplated hereby will not, violate any provisions of the
Articles of Incorporation, as amended, or Bylaws, as amended, of Purchaser, or
violate or constitute an occurrence of default under any provision of, or
conflict with, or result in acceleration of any obligation under, or give rise
to a right by any party to terminate its obligations under, any mortgage, deed
of trust, conveyance to secure debt, note, loan, lien, lease, agreement,
instrument, or any order, judgment, decree or other arrangement to which
Purchaser is a party or is bound, except where the occurrence of any such event
would not have a material adverse effect on the consummation of the
transactions contemplated hereby. Except for the filings with the SEC and
various state securities authorities with regard to the IPO and the filings
required under the HSR Act, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity is required
to be obtained or made by or with respect to Purchaser, in connection with the
execution and delivery by Purchaser of this Agreement or the consummation of
the transactions contemplated hereby, except where the failure to obtain or
make any of the foregoing would not have a material adverse effect on the
consummation of the transactions contemplated hereby.
4.4 Litigation. There is no suit, action, proceeding, claim or
investigation pending, or, to the knowledge of Purchaser, threatened against or
affecting Purchaser which, if pursued and/or resulting in a judgment, would
have a material adverse effect on the right of Purchaser to consummate the
transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF KEEBLER.
Keebler represents and warrants to, and for the benefit of, the Seller
and Purchaser as follows:
5.1 Organization and Standing. Keebler is a duly organized and validly
existing corporation in good standing under the laws of the State of Delaware.
5.2 Authority and Status. Keebler has the corporate capacity and
authority to execute and deliver this Agreement, to perform hereunder, and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by Keebler of this Agreement and each and every agreement,
document, and instrument provided for herein have been duly authorized and
approved by its Board of Directors and this Agreement has been duly executed
and delivered by Keebler. This Agreement and each and every other agreement,
document, and
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instrument to be executed, delivered and performed by Keebler in
connection herewith constitute or will, when executed and delivered, constitute
the valid and legally binding obligations of Keebler, enforceable against it in
accordance with their respective terms, except as enforceability may be limited
by applicable general equitable principles (whether considered in a proceeding
in equity or at law) or by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
5.3 Agreement Does Not Violate Other Instruments. The execution and
delivery of this Agreement by Keebler do not, and the consummation of the
transactions contemplated hereby will not, violate any provisions of the
Articles of Incorporation, as amended, or Bylaws, as amended, of Keebler, or
violate or constitute an occurrence of default under any provision of, or
conflict with, or result in acceleration of any obligation under, or give rise
to a right by any party to terminate its obligations under, any mortgage, deed
of trust, conveyance to secure debt, note, loan, lien, lease, agreement,
instrument, or any order, judgment, decree or other arrangement to which
Keebler is a party or is bound, except for (A) any defaults or violations under
Keebler's senior credit facility, which defaults or violations shall have been
waived or cured on or prior to the Closing Date and (B) Keebler's obligation to
make an offer to purchase its Senior Subordinated Notes due 2006 from the
holders thereof at a purchase price of 101% of the principal amount thereof
after the Closing, which obligation shall be satisfied by Keebler in accordance
with the provisions of the indenture governing such senior subordinated notes.
Except for the filings with the SEC and various state securities authorities
with regard to the IPO and the filings required under the HSR Act, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental entity is required to be obtained or made by or with
respect to Keebler, in connection with the execution and delivery by Keebler of
this Agreement or the consummation of the transactions contemplated hereby,
except where the failure to obtain or make any of the foregoing would not have
a material adverse effect on the consummation of the transactions contemplated
hereby.
5.4 Litigation. There is no suit, action, proceeding, claim or
investigation pending, or, to the knowledge of Keebler, threatened against or
affecting Keebler which, if pursued and/or resulting in a judgment, would have
a material adverse effect on the right of Keebler to consummate the
transactions contemplated hereby.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
All of the obligations of Purchaser to consummate the purchase of the
Acquired Shares contemplated by this Agreement shall be contingent upon and
subject to the satisfaction, on or before the Closing Date, of each and every
one of the following conditions, all or any of which may be waived, in whole or
in part, by Purchaser for purposes of consummating such transactions, but
without prejudice to any other right or remedy which they may have hereunder as
a result of any misrepresentation by, or breach of any covenant or warranty of
Seller contained in this Agreement or any other certificate or instrument
furnished by Seller hereunder.
6.1 Representations True at Closing. The representations and
warranties made by Seller and Keebler to Purchaser in this Agreement and the
Exhibits and Annexes hereto shall
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be true and correct in all material respects on the Closing Date with the same
force and effect as though such representations and warranties had been made
on and as of such date, except for changes contemplated by this Agreement.
6.2 Covenants of Seller and Keebler. Each of Seller and Keebler shall
have duly performed all of the covenants, acts and undertakings to be performed
by it on or prior to the Closing Date, and a duly authorized officer of each of
Seller and Keebler shall deliver to Purchaser certificates dated as of the
Closing Date certifying, as to themselves only, to the fulfillment of this
condition and the condition set forth in Section 6.1 hereof.
6.3 No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation which is related to or arises out of this Agreement
or the transactions contemplated hereby shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body which is
reasonably likely to enjoin, restrain, prohibit or obtain substantial damages
from Purchaser or Keebler in respect of, this Agreement or the consummation of
the transactions contemplated hereby.
6.4 Approvals. The execution and the delivery of this Agreement and
the consummation of the transactions contemplated hereby shall have been
approved by all regulatory authorities whose approvals are required by law and
all applicable waiting periods under the HSR Act shall have expired or been
terminated.
6.5 Effectiveness of Registration Statement. The Registration
Statement shall have been declared effective by the SEC, and no stop order
suspending effectiveness shall have been issued, and no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing. The shares of Keebler Stock to be
sold by the Seller and Bermore pursuant to the Registration Statement shall
have been registered for issuance under all applicable Blue Sky laws or shall
be exempt from such registration, and no stop order shall have been issued with
respect to the issuance or sale of such securities by any Blue Sky authority.
6.6 Closing of IPO. The closing of the IPO shall have occurred
contemporaneously with the Closing.
6.7 No Amendment, Extension or Termination of Underwriting Agreement.
Seller shall not have terminated or have materially amended, extended or
otherwise modified the Underwriting Agreement without the prior written consent
of Purchaser (which consent shall not be unreasonably withheld or delayed).
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER TO CLOSE.
All of the obligations of Seller to consummate the sale of the Acquired
Shares contemplated by this Agreement shall be contingent upon and subject to
the satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part by
Seller, but without prejudice to any other right or remedy
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which they may have hereunder as a result of any misrepresentation by, or
breach of any covenant or warranty of, Purchaser contained in this Agreement,
or any certificate or instrument furnished by it hereunder.
7.1 Representations True at Closing. The representations and
warranties made by Purchaser and Keebler to Seller in this Agreement and the
Exhibits and Annexes hereto shall be true and correct in all material respects
on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such date, except for
changes contemplated by this Agreement.
7.2 Covenants of Purchaser and Keebler. Each of Purchaser and Keebler
shall have duly performed all of the covenants, acts and undertakings to be
performed by them on or prior to the Closing Date, and a duly authorized
officer of each of Purchaser and Keebler shall deliver certificates dated as of
the Closing Date certifying, as to themselves only, to the fulfillment of this
condition and the condition set forth under Section 7.1 above.
7.3 No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation which is related to or arises out of this Agreement
or the transactions contemplated hereby shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body which is
reasonably likely to enjoin, restrain, prohibit or obtain substantial damages
from Seller or Keebler in respect of, this Agreement or the consummation of the
transactions contemplated hereby.
7.4 Approvals. The execution and the delivery of this Agreement and
the consummation of the transactions contemplated hereby shall have been
approved by all regulatory authorities and all courts whose approvals are
required by law and all applicable waiting periods under the HSR Act shall have
expired or been terminated.
7.5 Effectiveness of Registration Statement. The Registration
Statement shall have been declared effective by the SEC, and no stop order
suspending effectiveness shall have been issued, and no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing. The shares of Keebler Stock to be
sold by the Seller and Bermore pursuant to the Registration Statement shall
have been registered for issuance under all applicable Blue Sky laws or shall
be exempt from such registration, and no stop order shall have been issued with
respect to the issuance or sale of such securities by any Blue Sky authority.
7.6 Closing of IPO. The closing of the IPO shall have occurred
contemporaneously with the Closing.
8. CLOSING.
8.1 Time and Place of Closing. The consummation of the transactions
provided for in this Agreement (herein referred to as the "Closing") shall be
held at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York,
New York 10019,
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contemporaneously with, and conditioned upon, the closing of the IPO
(herein referred to as the "Closing Date") unless another place or date is
agreed to in writing by the Seller and Purchaser.
8.2 Transactions at Closing. At the Closing, each of the following
transactions shall occur:
8.2.1 Seller's Performance. Seller shall deliver to Purchaser
and Keebler the following:
8.2.1.1 all certificates representing the Acquired
Shares, duly endorsed for transfer or accompanied by instruments of transfer
reasonably satisfactory in form and substance to Purchaser and its counsel;
8.2.1.2 the certificate of a duly authorized officer
of the Seller described in Section 6.2;
8.2.1.3 certified copies of resolutions of the Board
of Directors of the Seller approving the transactions set forth in and
contemplated by this Agreement;
8.2.1.4 certificates of incumbency for the officers of
the Seller who are executing this Agreement and the other documents
contemplated hereby;
8.2.1.5 resignation of the Director of Keebler
described in Section 2.8; and
8.2.1.6 such other evidence of the performance of all
covenants and satisfaction of all conditions required of Seller by this
Agreement, at or prior to the Closing, as Purchaser, or its counsel may
reasonably require.
8.2.2 Performance by Purchaser. Purchaser shall deliver to the
Seller and Keebler the following:
8.2.2.1 the Purchase Price payable to Seller by wire
transfer of same day funds to the account or accounts designated by Seller in
writing at least two (2) business days prior to Closing;
8.2.2.2 the certificate of a duly authorized officer
of Purchaser described in Section 7.2;
8.2.2.3 certificate of incumbency of the officers of
Purchaser who are executing this Agreement and the other documents
contemplated hereby;
8.2.2.4 certified copies of resolutions of the Board
of Directors of the Purchaser approving the transactions set forth in and
contemplated by this Agreement; and
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8.2.2.5 such other evidence of the performance of all the
covenants and satisfaction of all of the conditions required of Purchaser by
this Agreement at or before the Closing as the Seller or its counsel may
reasonably require.
8.2.3 Performance by Keebler. Keebler shall deliver to the Seller
and Purchaser the following:
8.2.3.1 the certificate of a duly authorized officer of
Keebler described in Sections 6.2 and 7.2;
8.2.3.2 certificate of incumbency of the officers of
Keebler who are executing this Agreement and the other documents contemplated
hereby;
8.2.3.3 certified copies of resolutions of the Board of
Directors of the Keebler approving the transactions set forth in and
contemplated by this Agreement;
8.2.3.4 FIRPTA Certificate and Notice to Internal Revenue
Service Pursuant to Reg. Section 1.897-2(H) in form and substance to comply
with Treasury Regulations Sections 1.1445-2(c)(3)(i) and 1.897-2(h); and
8.2.3.5 such other evidence of the performance of all the
covenants and satisfaction of all of the conditions required of Keebler by
this Agreement at or before the Closing as the Seller, Purchaser or their
counsel may reasonably require.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
9.1 Survival of Representations and Warranties of the Seller. All
representations, warranties, agreements, covenants and obligations made or
undertaken by the Seller in this Agreement or in any document or instrument
executed and delivered pursuant hereto are material, have been relied upon by
Purchaser and Keebler, shall survive the Closing hereunder, and shall not merge
in the performance of any obligation by any party hereto.
9.2 Survival of Representations and Warranties of Purchaser. All
representations, warranties, agreements, covenants and obligations made or
undertaken by Purchaser in this Agreement or in any document or instrument
executed and delivered pursuant hereto are material, have been relied upon by
the Seller and Keebler, shall survive the Closing hereunder and shall not merge
in the performance of any obligation by any party hereto.
9.3 Survival of Representations and Warranties of Keebler. All
representations, warranties, agreements, covenants and obligations made or
undertaken by Keebler in this Agreement or in any document or instrument
executed and delivered pursuant hereto are material, have been relied upon by
Purchaser and Seller, shall survive the Closing hereunder, and shall not merge
in the performance of any obligation by any party hereto.
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10. TERMINATION.
10.1 Method of Termination Prior to Closing. This Agreement shall
terminate immediately upon termination or abandonment of the Underwriting
Agreement by the parties thereto without any further action by the parties
hereto, and may also be terminated or abandoned prior to Closing only by the
mutual written consent of Purchaser and Seller, notwithstanding prior approval
by either of such corporations.
10.2 Effect of Termination Prior to Closing. In the event of a
termination of this Agreement, prior to Closing (i) each party shall pay
the costs and expenses incurred by it in connection herewith, (ii) no party (or
any of its officers, directors, employees, agents, representatives) shall be
liable to any other party for any costs, expenses, damage or loss of
anticipated profits hereunder, (iii) each party shall retain any and all rights
attendant to any breach of any covenant, representation or warranty made
hereunder and (iv) the Stockholders' Agreement shall remain in full force and
effect.
10.3 Termination Following Closing. Should Closing occur, this
Agreement (i) shall not terminate, (ii) shall be in full force and effect ,
(iii) shall be binding on any party hereto until January 26, 2006, and (iv) as
of January 26, 2006, (A) shall terminate, (B) shall thereafter have no further
forces or effect, and (C) shall not be binding any party hereto except that the
provisions contained in Annex A hereto which by their terms are applicable
after consummation of an offering made pursuant thereto (including, without
limitation, provisions relating to indemnification and contribution) shall
continue to remain in full force and effect as provided therein with respect to
offerings made pursuant thereto prior to January 26, 2006..
11. REGISTRATION RIGHTS.
11.1 The procedures and further agreements of the parties hereto
regarding the Seller's Registration Rights for Seller's Shares which are not
sold to Purchaser pursuant to this Agreement and not sold in the IPO are set
forth in Annex A to this Agreement and incorporated herein by reference.
12. DIRECTORS DESIGNATED BY SELLER; RIGHT OF FIRST REFUSAL.
12.1 Election of Directors. From and after the Closing Date, Seller
shall be entitled to nominate two (2) individuals for election to the Keebler
Board of Directors, provided, however, that if Seller (together with its
Affiliates) ceases to beneficially own at least 6,879,000 shares of Keebler
Stock on a fully-diluted basis, Seller shall only be entitled to nominate one
(1) individual for election to the Keebler Board of Directors pursuant to this
Section 12.1, and provided, further, that if Seller (together with its
Affiliates) ceases to beneficially own at least 2,866,250 shares of Keebler
Stock on a fully-diluted basis, Seller shall no longer be entitled to nominate
an individual to the Keebler Board of Directors pursuant to this Section 12.1.
Purchaser agrees to vote, in person or by proxy, or to enter into written
consents in respect of, all of the Keebler Stock owned by Purchaser at any
annual or special meeting of the stockholders of Keebler called for the purpose
of voting on the election of Directors or by consensual action of
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stockholders without a meeting with respect to the election of
Directors, in favor of the election of the individuals nominated by Seller in
accordance with this Section 12.1. At all times Seller shall have the right to
recommend the removal, with or without cause, of such Directors and the
nomination of a replacement therefor. At such time as Seller (together with
its Affiliates) becomes the beneficial owner of less than 6,879,000 shares of
Keebler Stock, on a fully-diluted basis, Seller shall cause one of the
Directors nominated by it and then serving on the Keebler Board of Directors
pursuant to this Section 12.1 to tender his or her resignation. At such time
as Seller (together with its Affiliates) becomes the beneficial owner of less
than 2,866,250 shares of Keebler Stock, on a fully diluted basis, Seller shall
cause each of the Directors nominated by it and then serving on the Keebler
Board of Directors pursuant to this Section 12.1 to tender his or her
resignation. Only Keebler Stock owned by Seller on the date hereof shall be
counted for purposes of determining whether Seller (together with its
Affiliates) holds the requisite percentages to be entitled to nominate
Directors. In addition, for so long as Seller is entitled to nominate at least
one Director, it may designate one of its nominees to sit on each committee of
the Board of Directors unless such director is prohibited from sitting on such
committee under the rules of any applicable stock exchange or regulatory
authority.
12.2 Vacancies. In the event a vacancy is created on the Board by
reason of the death, removal or resignation (other than a vacancy pursuant to
Section 12.1 resulting from the reduction in the number of shares of Keebler
Stock beneficially owned by Seller and its Affiliates) of any one of the Seller
Directors, the parties hereby agree to cause Keebler's Board of Directors to
promptly hold a special meeting of the Board or to enter into a written consent
of Directors without a meeting, and to designate a person selected in
accordance with Section 12.1 hereof to fill such vacancy until the next annual
meeting of stockholders of Keebler and, if necessary, in favor of removing any
director, if any, who had been elected to fill such vacancy otherwise than in
accordance with the selection procedures of Section 12.1 hereof. At such next
annual meeting of stockholders of Keebler, each of Purchaser and Seller agrees
to vote all its shares of Keebler Stock in favor of the person or persons
selected in accordance with Section 12.1 for a term equal to the remaining
term of the original director whose death, removal or resignation created the
vacancy.
12.3 Restrictions on Other Agreements.
12.3.1 Neither Seller nor Purchaser shall grant any proxy or
enter into or agree to be bound by any voting trust or voting agreement or any
stockholder agreements or arrangements of any kind with any Person with respect
to any Securities on terms inconsistent with the provisions of this Agreement,
including but not limited to, agreements or arrangements with respect to the
acquisition or disposition of Securities in a manner which is inconsistent with
this Agreement.
12.3.2 Seller shall not, without the prior approval of a
majority of the Board of Directors of Keebler (excluding for the purpose of
determining whether there is a majority any Seller Director) (a) solicit, or
in any way encourage or assist in the solicitation of, proxies with respect to
any Securities intended to result in the election of directors of Keebler in
opposition to those directors recommended by the Board of Directors of Keebler,
so long as such board recommendation is not inconsistent with the terms of this
Agreement, nor shall it become a
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"participant" in any "solicitation" (as such terms are used in Rule
14a-11 under the Exchange Act) relating to any such election or (b) join a
"group" (as such term is used in Section 13(d)(3) of the Exchange Act), or
otherwise act in concert with any other Person for the purpose of seeking to
(i) enter into, directly or indirectly, any merger or business combination
involving Keebler (ii) purchase, directly or indirectly, a controlling interest
in Keebler or (iii) change the directors of Keebler, so long as, with respect
to clauses (i), (ii) and (iii), Seller has received prior written notification
from Keebler that such action is opposed by a majority of the Board of
Directors of Keebler (excluding for the purpose of determining whether there is
a majority any Seller Director); it being understood that neither (a) nor (b)
shall prevent (x) soliciting efforts by Seller not as a member of a "group" or
in concert with any other Person either in favor of or against any transaction
(including a merger or other business combination) involving Keebler or its
stockholders or (y) the sale of shares of Keebler Stock by Seller at any time
to any Person.
12.3.3 By execution of this Agreement, each of Seller and
Purchaser represents that it is not presently a party to, or bound by, any
arrangement prohibited by this Section 12.3.
12.4 The procedures and further agreements of the parties hereto
regarding the grant by Seller to Keebler of a right of first refusal in respect
of the Seller's Shares (other than the Acquired Shares and Seller's Shares sold
in the IPO) are set forth in Annex B to this Agreement and incorporated herein
by reference.
13. SELLER CONSENT RIGHTS.
13.1 Corporate Actions.
13.1.1 From the Closing Date until the earlier of (i) the
date on which Seller (together with its Affiliates) beneficially owns less than
4,586,000 shares of Keebler Stock or (ii) thirty-six (36) months after the
termination of the Lockup Period (such period, the "Standard Consent Period"),
the actions set forth in subsections (b), (c), (e) and (f) of Annex C shall
require the prior written consent of Seller, and Keebler and Purchaser shall
not take or permit to be taken any such actions without such prior written
consent; provided, however, that the Extension Period shall be added to, and
extend, the thirty-six (36) month period set forth in (ii) above.
13.1.2 From the Closing Date until the date on which Seller
(together with its Affiliates) beneficially owns less than 2,293,000 shares of
Keebler Stock, the actions set forth in subsections (a) and (g) of Annex C shall
require the prior written consent of Seller, and Keebler and Purchaser shall
not take or permit to be taken any such action without such prior written
consent.
13.1.3 From the Closing Date until the earlier of (i) the
date on which Seller (together with its Affiliates) beneficially owns less than
4,586,000 shares of Keebler Stock or (ii) thirty-six (36) months after the
Closing Date (such period, the "CEO Consent Period"), the action set forth in
subsection (d) of Annex C shall require the prior written consent of at least
one
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of the Seller Directors, and Keebler and Purchaser shall not take or permit
to be taken any such action without such prior written consent; provided,
however, that the Extension Period shall be added to, and extend, the
thirty-six (36) month period set forth in (ii) above.
13.1.4 With respect to each of the actions set forth in
subsections (a) through (g) of Annex C, the actions set forth in subsection
(h) of Annex C shall require the prior written consent of Seller, and Keebler
and Purchaser shall not take or permit to be taken any such action without
such prior written consent, for so long as each such underlying action
requires such prior written consent.
13.2 Purchases of Keebler Stock.
13.2.1 From the Closing Date until the earlier of (i) the date
on which Seller (together with its Affiliates) beneficially owns less than
4,586,000 shares of Keebler Stock or (ii) twenty-four (24) months after the
termination of the Lockup Period (such period, the "Initial Stock Repurchase
Consent Period"), any purchase of shares of Keebler Stock by Purchaser or
Keebler (other than purchases (A) by Purchaser or Keebler pursuant to put
rights contained in agreements in effect on the Closing Date, (B) by Purchaser
or Keebler from Artal or Management so long as such shares of Keebler Stock
are not part of the Public Float at the time of purchase, (C) by Keebler from
Bermore of Bermore's Shares which are permitted to be transferred by Bermore as
a "Monthly Transfer" pursuant to Section 4.2(e) of the Bermore Agreement or by
Purchaser or Keebler, as the case may be, pursuant to the tag-along and
drag-along rights contained in Sections 4.3 and 4.4 of the Bermore Agreement
and (D) by Purchaser and Keebler which together, in the aggregate with any
prior such purchases, do not exceed fifteen percent (15%) of the Public Float
in Keebler Stock immediately after the Closing) shall not be consummated
without the prior written consent of Seller, and Keebler and Purchaser shall
not take or permit to be taken any such action without such prior written
consent; provided, however, that the Extension Period shall be added to the
twenty-four (24) month period set forth in (ii) above; and provided, further,
that Purchaser will have the right at any time to purchase the number of
shares of Keebler Stock required to maintain beneficial ownership of at least
fifty- one percent (51%) of Keebler Stock on a fully diluted basis.
13.2.2 After the expiration of the Initial Stock Repurchase
Consent Period (including any Extension Period added thereto) and until the
earlier of (i) the date on which Seller (together with its Affiliates)
beneficially owns less than 4,586,000 shares of Keebler Stock or (ii)
thirty-six (36) months after the termination of the Lockup Period (the Second
Stock Repurchase Consent Period), any purchase of shares of Keebler Stock by
Purchaser or Keebler (other than purchases (A) by Purchaser or Keebler pursuant
to put rights contained in agreements in effect on the Closing Date, (B) by
Purchaser or Keebler from Artal, Bermore or Management so long as such
shares of Keebler Stock are not part of the Public Float at the time of
purchase, (C) by Keebler from Bermore of Bermore's Shares which are permitted
to be transferred by Bermore as a "Monthly Transfer" pursuant to Section 4.2(e)
of the Bermore Agreement or by Purchaser or Keebler, as the case may be,
pursuant to the tag-along and drag-along rights contained in Sections 4.3 and
4.4 of the Bermore Agreement and (D) by Purchaser and Keebler which together,
in the aggregate with any prior such purchases during the Second Stock
Repurchase Consent Period and purchases made during the Initial Stock
Repurchase Consent
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Period, do not exceed fifteen percent (15%) of the Public Float in
Keebler Stock on the date immediately preceding any such purchase) shall not be
consummated without the prior written consent of Seller, and Keebler and
Purchaser shall not take or permit to be taken any such action without such
prior written consent; provided, however, that the Extension Period shall be
added to the thirty-six (36) month period set forth in (ii) above, and
provided, further, that Purchaser will have the right at any time to purchase
the number of shares of Keebler Stock required to maintain beneficial ownership
of at least fifty-one percent (51%) of Keebler Stock on a fully diluted basis.
13.3 Sales of Keebler Stock. Until the expiration of the Standard
Consent Period (including any Extension Period added thereto), the Purchaser
agrees not to sell any shares of Keebler Stock without the prior written
consent of Seller, and Purchaser shall not take or permit to be taken any such
action without such prior written consent, other than private placements of
Keebler Stock by Purchaser in connection with any strategic joint venture or
other similar transactions entered into by Purchaser so long as Purchaser
retains a majority of the economic benefit and the controlling voting interest
in such joint venture or other similar entity.
13.4 For purposes of this Agreement, the "Extension Period" shall mean
the period equal to the aggregate periods of any postponements or suspensions
made pursuant to Section 1.1(g) of Annex A, excluding the first thirty days of
the first such postponement or suspension; provided, however, that the
Extension Period shall extend the Standard Consent Period, the CEO Consent
Period, the Initial Stock Repurchase Consent Period or the Second Stock
Repurchase Consent Period only if such postponements or suspensions occur prior
to the end of such respective period and shall only extend such respective
period for the lesser of (i) one hundred eighty (180) days or (ii) that number
of days that would provide for a full number of days in the respective period
if there had not been a postponement or suspension. Should there be any ]
postponement or suspension occurring during the Extension Period then the
Extension Period shall be extended further for the amount of time of each such
postponement or suspension.
13.5 No After Acquired Shares. For purposes of calculating the share
ownership of Seller (together with its Affiliates) under this Agreement
(including, without limitation, Articles 12 and 13 hereof) only the shares
owned by Seller as of the date hereof shall be counted and any shares acquired
by Seller or any of its Affiliates after the date hereof (except for shares
owned as of the date hereof by Seller or any of its Affiliates which are
subsequently acquired by Seller or any Affiliate through transfers among
themselves) shall not be counted.
13.6 Beneficial Ownership. For purposes of this Agreement, Seller
(together with its Affiliates) shall be deemed to beneficially own shares of
Keebler Stock if they would be deemed a beneficial owner for purposes of Rule
13d-3 of the Exchange Act.
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14. GENERAL PROVISIONS.
14.1 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, mailed by
registered or certified mail, return receipt requested, or sent by Federal
Express or other nationally recognized overnight delivery service addressed as
follows:
14.1.1 If to the Seller:
Artal Luxembourg S.A.
39 Boulevard Royal
Luxembourg City, Luxembourg
Attn: Managing Director
with copies to:
c/o The Invus Group, Ltd.
135 E. 57th Street, 30th Floor
New York, New York 10022
Attn: Raymond Debbane
and:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Robert E. Spatt, Esq.
14.1.2 If to Purchaser:
G. Anthony Campbell, Esq.
Flowers Industries, Inc.
1919 Flowers Circle
Thomasville, Georgia 31757
with a copy to:
Robert W. Smith, Esq. and
Barry J. Stein, Esq.
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
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14.1.3 If to Keebler:
Thomas E. O'Neill, Esq.
Keebler Company
677 Larch Avenue
Elmhurst, Illinois 60126
with a copy to:
Bruce A. Toth
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
14.1.4 If delivered personally, the date on which a notice, request,
instruction or document is delivered shall be the date on which such delivery
is made. If delivered by mail or overnight delivery service, the date on which
such notice, request, instruction or document is received shall be the date of
delivery. In the event any such notice, request, instruction or document is
mailed or sent to a party in accordance with this Section 13.1 and is returned
to the sender as nondeliverable, then such notice, request, instruction or
document shall be deemed to have been delivered or received on the fifth day
following the deposit of such notice, request, instruction or document in the
United States mails or overnight delivery service, as the case may be.
14.1.5 Any party hereto may change its address specified for notices
herein by designating a new address by notice in accordance with this Section
12.1.
14.2 Certificates Representing Seller's Shares. Immediately upon
consummation of the Closing, Keebler will deliver to Seller validly issued and
executed stock certificates representing the remaining Seller's Shares, which
certificates shall no longer bear the legends currently required by the
Stockholders' Agreement.
14.3 Remedies.
14.3.1 Each party hereto shall have all rights and remedies
reserved for such party pursuant to this Agreement, Keebler's certificate of
incorporation and by-laws and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law or equity. Any Person having any
rights under any provision of this Agreement will be entitled to enforce such
rights specifically, to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law or
equity.
14.3.2 The parties hereto agree that if any parties seek to
resolve any dispute arising under this Agreement pursuant to a legal
proceeding, the "prevailing" parties to such proceeding shall be entitled to
receive reasonable fees and expenses (including reasonably attorneys' fees and
expenses) incurred in connection with such proceedings. For purposes of this
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Section 14.3.2, a party shall be deemed to be a "prevailing" party only if it
prevails on each element of its claim (including the amount and type of
damages sought). If neither party is the prevailing party, the parties agree
to request the court or other decision making body to make a separate
determination as to the allocation of fees and expenses.
14.3.3 It is acknowledged that it will be impossible to
measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the
event of any such failure, an aggrieved Person will be irreparably damaged and
will not have an adequate remedy at law. Any such Person shall, therefore, be
entitled to injunctive relief, including specific performance, to enforce such
obligations, and if any action should be brought in equity to enforce any of
the provisions of this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law.
14.4 Brokers.
14.4.1 Seller agrees to indemnify and hold harmless the
Purchaser from and against any fee, claim, loss, or expense arising out of any
claim by any investment banker, broker or finder employed or alleged to have
been employed by it.
14.4.2 Purchaser agrees to indemnify and hold harmless the
Seller from and against any fee, claim, loss, or expense arising out of any
claim by any investment banker, broker or finder employed or alleged to have
been employed by it.
14.4.3 Keebler agrees to indemnify and hold harmless the
Purchaser and the Seller from and against any fee, claim, loss or expense
arising out of any claim by any investment banker, broker, or finder employed
or alleged to have been employed by it.
14.5 Further Assurances. Each party covenants that at any time, and
from time to time, after the Closing Date, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.
14.6 Waiver. Any failure on the part of any party hereto to comply
with any of its obligations, agreements or conditions hereunder may be waived
by any other party to whom such compliance is owed. No waiver of any
provision of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.
14.7 Expenses. All expenses incurred by the parties hereto in
connection with or related to the authorization, preparation and execution of
this Agreement and the closing of the transactions contemplated hereby,
including, without limiting the generality of the foregoing, all fees and
expenses of brokers, agents, representatives, counsel and accountants employed
by any such party, shall be borne solely and entirely by the party which has
incurred the same. Notwithstanding the foregoing, except for the underwriting
discounts in respect of the Seller's Shares sold in the IPO and Seller's
out-of-pocket expenses, Keebler will bear all costs and
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expenses in connection with the registration of Seller's Shares in the
Registration Statement, review and finalization of underwriting arrangements
and all other aspects of the IPO in accordance with Annex A of the
Stockholders' Agreement (except that the reasonable fees and disbursements of
Seller's counsel related to the IPO shall also be borne by Keebler).
14.8 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, executors, administrators, successors and assigns. Except as
provided in Section 1.9 of Annex A, this Agreement shall not be assignable by
Seller, Purchaser or Keebler without the prior written consent of Seller and
Purchaser, except that Seller may transfer all or any portion of the Seller's
Shares, including all rights and obligations hereunder associated with
beneficial ownership of such Seller's Shares, to any of its Affiliates
(excluding Keebler) and any such Affiliate shall be subject to all of the
rights and obligations contained in this Agreement applicable to Seller.
14.9 Headings. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference, and are not a
part of this Agreement.
14.10 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersedes and cancels any prior
agreements, representations, warranties, or communications, whether oral or
written, among the parties hereto relating to the transactions contemplated
hereby or the subject matter herein, except that the provisions contained in
Annex A of the Stockholders' Agreement which by their terms are applicable
after the consummation of an offering made pursuant thereto (including without
limitation, provisions relating to indemnification and contribution) shall
continue in full force and effect as provided therein with respect to Seller's
Shares sold in the IPO. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an agreement in
writing signed by Purchaser and Seller. Any such change, waiver, discharge or
termination may be made without the agreement of Keebler, unless such change,
waiver, discharge or termination would materially and adversely affect
Keebler's rights and obligations hereunder.
14.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard
to the principles thereof regarding conflict of laws, except for matters
directly within the purview of the DGCL.
14.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
14.13 Pronouns. All pronouns used herein shall be deemed to refer to
the masculine, feminine or neuter gender as the context requires.
14.14 Exhibits Incorporated. All Exhibits and Annexes attached hereto
are incorporated herein by reference.
14.15 Time of Essence. Time is of the essence in this Agreement.
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14.16 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law. The parties agree that (i) the provisions of this
Agreement shall be severable in the event that any of the provisions hereof are
held by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, (ii) such invalid, void or otherwise unenforceable provisions
shall be automatically replaced by other provisions which are as similar as
possible in terms to such invalid, void or otherwise unenforceable provisions
but are valid and enforceable and (iii) the remaining provisions shall remain
enforceable to the extent permitted by law.
14.17 Jurisdiction; Venue; Process.
14.17.1 The parties to this Agreement agree that
jurisdiction and venue in any action brought by any party hereto pursuant to
this Agreement shall properly lie and shall be brought in any federal or state
court located in the State of New York. By execution and delivery of this
Agreement, each party hereto irrevocably submits to the jurisdiction of such
courts for itself or himself and in respect of its or his property with
respect to such action. The parties hereto irrevocably agree that venue would
be proper in such court, and hereby irrevocably waive any objection that such
court is an improper or inconvenient forum for the resolution of such action.
14.17.2 Seller hereby irrevocably and unconditionally
designates and directs Mr. David Van Zandt, with offices on the date hereof at
Northwestern University School of Law, 357 East Chicago Avenue, Chicago,
Illinois 60611, as its agent to receive service of any and all process and
documents on its behalf in any legal action or proceeding related to this
Agreement and agrees that service upon such agent shall constitute valid and
effective service upon Seller and that failure of such agent to give any
notice of such service to Seller shall not affect or impair in any way the
validity of such service or of any judgment rendered in any action or
proceeding based thereon.
14.18 Mutual Waiver of Jury Trial. The parties hereto waive all right
to trial by jury in any action, suit or proceeding brought to enforce or defend
any rights or remedies under this Agreement or any documents related hereto.
14.19 Financial Statements. At all times while Seller is entitled to
nominate a Seller Director to serve on the Board of Directors of Keebler,
Keebler shall deliver to any person who is a Seller Director (on behalf of
Seller and such person who is a Seller Director) all information furnished to
any person who is a director of Keebler (or to any related or associated person
on his or her behalf), and any person who is a Seller Director (and up to three
other individuals who are designated by Seller in writing from time to time to
act on behalf of Seller and such person who is a Seller Director) may request
(on behalf of Seller and such person who is a Seller Director) and will receive
from any of Keebler's executive officers a copy of any written information or
report which has been generated by Keebler; provided, however, that Keebler
shall not be required to draft or generate specifically for Seller and any such
person who is a Seller Director any new information or report not otherwise
prepared; and provided, further, that the scope and timing of any such request
do not unreasonably interfere with management's
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<PAGE> 25
ability to conduct the business of Keebler or the ability of any
particular executive officer to perform his duties. Any person who is a Seller
Director (and up to three other individuals who are designated by Seller in
writing from time to time to act on behalf of Seller and such person who is a
Seller Director) may also contact any of Keebler's executive officers from time
to time to receive (on behalf of Seller and such person who is a Seller
Director) an oral report on the status of Keebler's operations and business;
provided, that the scope and timing of any such contact do not unreasonably
interfere with management's ability to conduct the business of Keebler or the
ability of any particular executive officer to perform his duties. Seller
hereby covenants to keep all such information and reports confidential and,
without Keebler's prior written consent, not to disclose (except (i) as
required by judicial or administrative order or (ii), in the written opinion of
counsel for Seller, as required by law) any such information or reports other
than to those of its officers, directors, employees, advisors and
representatives with a need to know the information contained therein; provided
that each such person, as well as the Seller Directors and the three other
individuals who are designated from time to time as described above, shall be
informed of the confidential nature of the information and reports and Seller
will be responsible for any breach of this provision by any such person. The
preceding sentence shall be inoperative as to any particular information or
report if it (i) becomes generally available to the public other than as a
result of a disclosure by Seller or its officers, directors, employees,
advisors or representatives in violation of the preceding sentence, (ii) was
available to Seller or any such person on a non-confidential basis at or prior
to the time of its disclosure to Seller or any such person by Keebler or its
executive officers or (iii) becomes available to Seller on a non-confidential
basis from a source other than Keebler or its executive officers, when Seller
has no reasonable basis to believe that such source is prohibited by a legal,
contractual or fiduciary obligation from making such disclosure to Seller or
any such person.
14.20 Antidilution. The parties recognize that all references to amounts of
shares of Keebler Stock and the price per share to be paid by Purchaser for any
such shares referenced herein give effect to a 1-for-10 reverse stock split
that occurred prior to the date hereof and assumes consummation of a
57.325-for-1 stock split of the Keebler Stock to be consummated by the Company
immediately prior to Closing. An appropriate and proportionate adjustment
shall be made to all references to amounts of shares of Keebler Stock
referenced herein for any event, subsequent to Closing, whereby the outstanding
shares of Keebler Stock shall be, without consideration, increased, decreased,
changed into, or exchanged for a different number or kind of shares or
securities through recapitalization, reclassification, stock dividend, stock
split, reverse stock split, or other like changes to Keebler's capitalization.
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<PAGE> 26
IN WITNESS WHEREOF, each party hereto has executed or caused this
Agreement to be executed on its behalf, all on the day and year first above
written.
FLOWERS INDUSTRIES, INC.
"Purchaser"
By:________________________________________
Name:___________________________________
Title:__________________________________
ARTAL LUXEMBOURG S.A.
"Seller"
By:________________________________________
Name:____________________________________
Title:___________________________________
KEEBLER FOODS COMPANY
"Keebler"
By:________________________________________
Name:___________________________________
Title:__________________________________
<PAGE> 27
LIST OF ANNEXES
Annex A -- Provisions Relating to Shelf and Demand Registration
Annex B -- Provisions Relating to Purchaser's Right of First Refusal
Annex C -- Seller Consent Rights
<PAGE> 28
ANNEX B
RIGHT OF FIRST REFUSAL
If, at any time after the Closing, Seller receives a bona fide offer to
purchase any or all of its shares of Keebler Stock, (the "Offer") from any of
the entities named in a letter signed by the Seller and Purchaser on the date
hereof, or from any of such entity's affiliates or successors (the "Offeror"),
which Seller wishes to accept, Seller shall cause the Offer to be reduced to
writing and shall notify Purchaser in writing (the "Offer Notice") of its wish
to accept the Offer. The Offer Notice will disclose in reasonable detail the
proposed type and number of shares of Keebler Stock (the "Offered Securities")
and the proposed terms and conditions of the transfer (including, in the event
that the consideration to be received by Seller in the Offer includes non-cash
consideration, Seller's good faith reasonable estimate (the "Seller Estimate")
of the cash value of such non-cash consideration), and shall be accompanied by
a true copy of the Offer (which shall identify the Offeror). Seller shall not
be permitted to accept any such Offer unless the right of first refusal
procedures set forth in this Annex B are complied with. Purchaser may elect to
purchase all (but not less than all) of such Offered Securities at the price
and on the terms specified in the Offer Notice by delivering written notice of
such election to Seller as soon as practicable, but in any event within 15 days
after delivery of the Offer Notice (the "Election Period"). In the event that
the terms of any Offer provide for the delivery of non-cash consideration for
the Offered Securities, Purchaser may deliver cash for such Offered Securities
in an amount equal to the value of such non- cash consideration either in
accordance with the Seller Estimate (or such other amount as agreed by Seller
and Purchaser) or, if Purchaser and Seller do not agree, as determined by in
investment banking firm of national reputation selected by mutual agreement of
Purchaser and Seller, provided, that such investment banking firm shall not
have a material direct or indirect financial interest in or other relationship
with any of the parties hereto or their respective subsidiaries or affiliates.
If Purchaser has elected to purchase all the Offered Securities from Seller,
the transfer of such Offered Securities shall be consummated as soon as
practicable after the delivery of the election notice, but in any event within
15 days after the expiration of the Election Period (unless a longer period of
time is necessary to comply with the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, in which case such longer
period). If Purchaser has not elected to purchase (or has failed within such
15-day period or longer period, if applicable, to purchase after electing to do
so) the Offered Securities being offered, Seller may, within 75 days after the
date of the Offer Notice, transfer all the Offered Securities to the Offeror at
a price no less than the price specified in the Offer Notice and on other terms
no less favorable to Seller than those contained in the Offer. If, at the end
of such 75 day period, Seller has not completed the transfer of such Offered
Securities as aforesaid, all the restrictions or transfer contained in this
Annex B shall again be in effect with respect to such Keebler Stock.
<PAGE> 29
ANNEX C
SELLER CONSENT RIGHTS
(a) Any amendment to the certificate of incorporation (including any
certificate of designations) or bylaws of Keebler or any other related
corporate actions such as adoption of a "poison pill" or rights plan by
Keebler or electing to opt into the provisions of Section 203 of the DGCL
(or any successor statute adopted subsequent to the date hereof by the
State of Delaware or, if Keebler reincorporates in a jurisdiction other
than the State of Delaware, any similar statute of any such jurisdiction)
which could reasonably be expected to adversely affect (except in
immaterial respects) or is otherwise inconsistent with (except in
immaterial respects), Seller's rights under this Agreement (it being
expressly agreed that (i) customary defensive charter, by-law and related
provisions or plans adopted or approved by the Board of Directors of
Keebler in connection with or after the IPO and (ii) any impediments or
restrictions (other than impediments or restrictions (x) imposed pursuant
to mandatory applicable law or Annex B hereto or (y) which are immaterial)
on (A) Seller's ability to own, vote or dispose of the Seller's Shares or
engage in transactions involving Keebler, or (B) any acquiror or potential
acquiror of Seller's Shares ability to own, vote or dispose of the
Seller's Shares or engage in transactions involving Keebler, would
adversely affect Seller's rights under, and are inconsistent with the
provisions of, this Agreement for purposes of this paragraph (a) of Annex
C, and it being expressly acknowledged that the fact that a proposed
corporate action not of the nature described in (i) or (ii) of this
parenthetical could reasonably by expected to, or does, affect the
economic value of the Keebler Stock would not, by itself, subject such
matter to the Seller consent right described in this paragraph (a)).
(b) Any merger, consolidation or similar business combination involving
Keebler or any sale of substantially all of Keebler's assets or equity, or
any reorganization or recapitalization having similar effect, if such
transaction results in any consideration other than cash being paid to
Keebler shareholders.
(c) Any acquisition or disposition (whether by way of sale, lease, assignment,
transfer or other disposition) of assets (including, without limitation,
primary or secondary stock or assets of Keebler's subsidiaries) involving
aggregate consideration with a value in excess of $250,000,000, other than
the sale of goods in the ordinary course of business.
(d) Termination of the Chief Executive Officer or appointment of a Chief
Executive Officer other than Samuel K. Reed.
(e) Issuance or sale by Keebler of any capital stock or stock options or
securities convertible into or exchangeable for capital stock, other than
pursuant to (i) outstanding stock options, (ii) stock options or other
executive compensation permitted to be granted pursuant to the proviso set
forth in paragraph (f) below, (iii) stock option plans or stock option
grants approved by Seller pursuant to Section 13.1 hereof, or (iv) in
connection with acquisitions (subject to paragraph (c) above), provided
that capital stock issued in
<PAGE> 30
connection with such acquisitions (A) shall not exceed in the aggregate
$50,000,000 in value (which value shall be determined by (i) multiplying
the number of shares of capital stock issued on any one occasion by the
closing trading price of such capital stock on the business day
immediately preceding such issuance and (ii) aggregating the amounts from
each such occasion) from the Closing Date until the period ending during
the twelve (12) months following the termination of the Lockup Period; (B)
shall not exceed in the aggregate $75,000,000 in value (which value shall
be determined by (i) multiplying the number of shares of capital stock
issued on any one occasion by the closing trading price of such capital
stock on the business day immediately preceding such issuance and (ii)
aggregating the amounts from each such occasion) during any consecutive
thirty-six (36) month period following the termination of the Lockup
Period (including amounts issued pursuant to clause (A)) and (C) shall be
issued pursuant to an exemption from registration under the 1933 Act in
an unregistered transaction and shall be subject to contractual resale
restrictions which extend for a period of no less than one year from the
date of issuance.
(f) Grants under currently existing stock option or executive compensation
plans or any other stock option or executive compensation plan that
provides for the issuance of Keebler Stock or Securities convertible into
Keebler Stock; provided that this subparagraph (f) shall not apply to
grants of stock options or executive compensation to the extent that such
grants or executive compensation provide in the aggregate for further
issuances of shares of Keebler Stock after the IPO in an amount equal to
no more than four percent (4%) of the amount of Keebler Stock issued, on a
fully-diluted basis, immediately upon consummation of the Closing of the
IPO.
(g) Any related-party transaction with Keebler, except for transactions in the
ordinary course of business on terms no less favorable to Keebler than
could be obtained in a comparable arm's-length transaction with an
independent third party.
(h) Any contract or agreement to do any of the foregoing.
<PAGE> 31
ANNEX A
PROVISIONS REGARDING REGISTRATION RIGHTS
This Annex A is part of and is incorporated into that certain Stock
Purchase Agreement (the "SPA"), dated as of _____________, 1998, among Keebler
Foods Company, a Delaware corporation (the "Company"), Artal Luxembourg S.A., a
Luxembourg corporation (together with any of its Affiliates (excluding the
Company) who are beneficial owners of any Seller's Shares "Artal"), and Flowers
Industries, Inc., a Georgia corporation ("Flowers"). Capitalized terms used in
this Annex A and not otherwise defined shall have the meanings ascribed to them
in the SPA. Certain capitalized terms used herein are defined in Section 1.11 of
this Annex A. It is understood and acknowledged that at Closing, the
registration rights set forth in this Annex A shall supersede and replace
entirely those registration rights set forth in Annex A to the Stockholders'
Agreement which is also to be terminated and superseded at Closing, except that
the provisions contained in Annex A thereof which by their terms are applicable
after the consummation of any offering made pursuant thereto shall continue to
remain in full force and effect as provided therein with respect to the Seller's
Shares sold in the IPO.
1.1 Demand Registration Statements.
(a) Filing and Effectiveness. (i) The Company shall, on or after the
Initial Demand Date, upon receipt of a written request (a "Demand Notice") given
by Artal to register Registrable Securities, (A) as promptly as practicable but
in any event within 30 days (the "Filing Date") after receiving such Demand
Notice, file with the Securities and Exchange Commission (the "SEC") a
Registration Statement on Form S-3 (including, if requested by Artal in such
Demand Notice, a Registration Statement filed pursuant to Rule 415 of the 1933
Act) or, if the Company is ineligible to file on Form S-3, such other form
available to the Company for the registration of securities (such Registration
Statement, a "Demand Registration Statement"), and include in such Demand
Registration Statement for registration the Registrable Securities requested to
be registered in the Demand Notice for resale in the manner or manners
designated by
<PAGE> 32
Artal (including, without limitation, underwritten offerings, block trades,
or market sales) and (B) use its best efforts to have such Demand Registration
Statement declared effective by the SEC as promptly as practicable and within 60
days after the Filing Date (the "Effectiveness Date"); provided, however, that
the Company will not in any event be required to have any such Demand
Registration Statement declared effective by the SEC prior to the Lockup
Expiration Date; and provided further, however, that the Company shall have
the right once during the term of the SPA to impose a single period of four
successive months from the expiration of the effectiveness of any Demand
Registration Statement under which Artal sold shares of Common Stock during
which the Company does not have to commence its response to a Demand Notice.
(b) Number of Demand Registration Statements. Artal shall be entitled to
four (4) Demand Registration Statements, provided that if (i) a Demand
Registration Statement is not declared and maintained effective for the period
required by Section 1.1(d) or if the consummation of the offering of Registrable
Securities pursuant to such Demand Registration is interfered with by any stop
order, injunction or other order or requirement of the SEC or other governmental
agency or court; or (ii) Artal shall be prevented through the operation of
clause first of Section 1.1(e) from registering more than 15% of its Registrable
Securities requested to be registered in a Demand Notice, Artal shall be
entitled to an additional Demand Registration Statement in lieu thereof;
provided however that any such additional Demand Registration Statement filed
pursuant to the provisions of (i) above because effectiveness of a Demand
Registration Statement has not been maintained for the period required by
Section 1.1(d), shall only be required to be kept effective for the length of
time measured by the difference between the required effectiveness period of the
related prior Demand Registration Statement under Section 1.1(d) and the period
such Demand Registration Statement was actually kept effective.
(c) Minimum Amount of Registrable Securities. The Company shall not be
required to effect any Demand Registration unless (i) the aggregate amount of
the class of Registrable Securities requested to be registered by Artal shall be
equal to at least one third (33 1/3%) of the aggregate amount of such
Registrable Securities held by Artal on the date of the Demand Notice and (ii)
the product of the number of shares of Registrable Securities included in such
Demand Notice times the closing price of the Registrable Securities on the New
York Stock Exchange on the trading day immediately preceding the date of
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<PAGE> 33
such Demand Notice shall be not less than $75 million; provided, however,
that, notwithstanding clause (i) and (ii) hereof, a fourth (as such number may
be increased pursuant to Section 1.1(b)) Demand Notice, if any, shall cover all
remaining Registrable Securities then owned by Artal.
(d) Effective Period of Demand Registration Statements. Subject to the
provisions of Section 1.1(g), the Company hereby agrees to use its best efforts
to comply with all necessary provisions of the federal securities laws in order
to keep each Demand Registration Statement effective for a period measured by
the earlier of (i) distribution of all Registrable Securities which are the
subject of such Demand Registration Statement; and (ii) 180 days from its
Effectiveness Date, plus any Additional Registration Period resulting from the
provisions of Section 1.1(g); provided, however, that Artal will be entitled to
make, and the Company will be required to comply with, one (1) request in a
Demand Notice to maintain the effectiveness of the related Demand Registration
Statement (which must be made pursuant to Rule 415) (such Demand Registration
Statement, the "Two-Year Registration Statement") for a period measured by the
earlier of (i) distribution of all Registrable Securities which are the subject
of such Demand Registration Statement; (ii) 24 months from its Effectiveness
Date plus any Additional Registration Period resulting from the provisions of
Section 1.1(g); and (iii) three years from the Lockup Expiration Date.
(e) Priority on Demand Registrations. If the Registrable Securities
registered pursuant to a Demand Registration Statement are to be sold in a firm
commitment underwritten offering and the sole or managing Underwriter, as the
case may be, of a registered underwritten offering filed pursuant to Section
1.1(a) hereof advises the Holders of such securities that, in its opinion, the
amount of securities requested to be included in such registration exceeds the
amount which can be sold in such offering without adversely affecting the
distribution of the securities being offered, then the Company shall register
first, the maximum number of Registrable Securities requested to be included in
such registration by Artal and its Assignees and by Bermore, Ltd. (together with
any Person who becomes the owner of Registrable Securities in accordance with
Sections 4.2(a) (c) or (d) of the Bermore Agreement "Bermore") (to the extent
permitted by, and in accordance with, its incidental registration rights
contained in Annex A to the Bermore Agreement) which, with respect to both
Artal, Bermore and their respective Assignees, in the Underwriter's opinion
can be sold, and second, shares requested to be included by the Management
Stockholders and any other holders of the Company's
3
<PAGE> 34
securities pursuant to any incidental registration rights granted after the
date hereof (the Management Stockholders and such other holders together the
"Other Holders"), which, in the Underwriter's opinion can be sold, pro rata
based on the number of securities requested to be included by such stockholders;
provided, however, that the provisions regarding priorities contained in
registration rights agreements to which stockholders other than Artal or Bermore
are parties shall control the relative prioritization as among such
stockholders; and provided further, that (i) application of the preceding
proviso shall not, in any manner, adversely affect or prejudice Artal's or
Bermore's registration priority or other rights in respect of any such Demand
Registration Statement and (ii) in respect of a Demand Registration Statement
under Rule 415, any incidental or piggyback registration rights of any Other
Holders shall apply only to registration of such Other Holders' securities
pursuant to such Demand Registration Statement, and not to mandatory inclusion
of such Other Holders' securities in any particular disposition (whether or not
underwritten) of Seller's shares pursuant to such Demand Registration Statement.
(f) Other Registrations. The Company shall not effect any registration of
its Securities (except on Form S-8, S-4 or any successor forms to such Forms and
only to the extent permitted by the SPA) from the date of a Demand Notice to
register Registrable Securities pursuant to, and in accordance with Section
1.1(a) until the earlier of (i) 90 days after the date on which all securities
covered by such Demand Registration Statement have been sold or (ii) 180 days
after the Effectiveness Date of such Demand Registration Statement (or, in the
case of a Two-Year Registration Statement, if any, the earlier of 24 months
after the Effectiveness Date of such Registration Statement or the third
anniversary of the Lockup Expiration Date), unless the Company shall have first
notified in writing the selling stockholders of the Registrable Securities
covered by such Demand Registration Statement of its intention to do so, and
Artal and, if applicable, the managing Underwriter shall have consented thereto
in writing; provided, however, that in the event of any conflict between the
provisions of clause (ii) of this paragraph (f) and the lock-up provisions
contained in any underwriting agreement which has been entered into in
connection with a registered underwritten offering under the Two Year
Registration Statement which contains a lock-up period which extends beyond 24
months after the Effectiveness Date of such Two Year Registration Statement, the
provisions of such underwriting agreement shall be controlling.
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<PAGE> 35
(g) Postponement and Suspension of Registration. Notwithstanding anything
to the contrary contained herein, the Company may postpone for up to sixty (60)
days the filing or the effectiveness of a Demand Registration Statement or may
suspend the right to transfer securities which are the subject of an effective
Demand Registration Statement if a majority of the Board of Directors, including
the two (2) independent directors, has in good faith determined, and has
delivered to Artal a written certification signed by such majority of the Board
of Directors, including the two (2) independent directors, to the effect that,
(i) the Company is intending to currently consummate, and has a reasonable
likelihood of currently consummating, a material corporate transaction outside
of the ordinary course of business (any such transaction, a "Significant
Corporate Transaction") that would, in the written opinion of outside counsel,
require additional disclosure regarding such Significant Corporate Transaction
in the applicable Registration Statement in order for sales of securities
pursuant to such Registration Statement to not be in violation of applicable
securities laws, (ii) failure to engage in such Significant Corporate
Transaction at such time would be materially adverse to the Company and (iii) no
disclosure could be made in the applicable Registration Statement regarding such
Significant Corporate Transaction that would not be materially adverse to the
Company; provided, however, that a period representing two times the period of
any such postponement or suspension (the "Additional Registration Period") shall
be added to the effectiveness periods set forth under Section 1.1(d) and
provided further, however, that no such postponement or suspension shall be
imposed unless at least four (4) months have expired since the termination of
any prior such postponement or suspension pursuant to this Section 1.1(g).
(h) In order to assist the Company and Flowers in complying with any
trading restrictions or reporting obligations with respect to Keebler Stock
promulgated under the Exchange Act including, but not limited to Regulation M or
any successor provision, Artal, the Company and Flowers shall cooperate in all
reasonable respects, by communicating Flowers' and Keebler's intentions with
respect to open market repurchases of Keebler Stock and Artal's intentions with
respect to sales of Artal Registrable Securities, so long as the fulfillment of
such obligation does not in any way interfere with Artal's ability to dispose of
Artal Registrable Securities in any such transaction, including, but not limited
to, (i) during the period that any Demand Registration Statement covering shares
of Keebler Stock
5
<PAGE> 36
held by Artal is effective, Artal agrees to use its reasonable
efforts to provide at least three business days prior written notice to Keebler
and Flowers of any proposed sale of Artal Registrable Securities pursuant to any
such Registration Statement, provided, however, that notwithstanding anything to
the contrary in this clause (i), Artal shall not be prevented from engaging in
or be delayed with respect to any such sale of Artal Registrable Securities if
such notice has not been given and (ii) Artal shall notify Keebler and Flowers
promptly upon the completion of any distribution of Artal Registrable Securities
pursuant to such Registration Statement.
(i) The obligations of the Company under Section 1.1(a) shall expire on the
earlier of (i) January 26, 2006 and (ii) that point in time when Artal and its
Assignees shall cease to own any Artal Registrable Securities.
1.2 Incidental Registrations.
(a) "Piggy-back" Registrations. If the Company at any time proposes to
register (including a registration effected by the Company for shareholders
other than Artal and its Assignees) any Common Stock under the Securities Act
(other than a registration on Form S-8, S-4 or any successor or similar forms)
for public offerings for cash, whether or not for its own account, it will, each
such time, give prompt written notice to Artal and its Assignees, Bermore (to
the extent permitted by and in accordance with its incidental registration
rights contained in Annex A to the Bermore Agreement) and all Other Holders of
Registrable Securities with then existing rights of registration of its
intention to do so and of such stockholders' rights under this Section 1.2, at
least 30 days prior to the anticipated date of the initial filing of the
registration statement relating to such registration. Such notice shall offer
all such stockholders the opportunity to include in such registration statement
such number of Registrable Securities as each such stockholder may request. Upon
the written request of any such stockholder made within 20 days after the
receipt of the Company's notice (which request shall specify the number of
Registrable Securities intended to be disposed of by such stockholder), the
Company shall use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by such stockholders and to permit the disposition of the
Registrable Securities so to be registered, provided that (i) if such
registration involves an underwritten offering, all stockholders of Registrable
Securities requesting to be included in the Company's registration must sell
6
<PAGE> 37
their Registrable Securities to the underwriters selected by the Company on the
same terms and conditions as apply to the Company or a demanding shareholder
pursuant to a demand registration right granted after the date hereof, as the
case may be, (except that indemnification obligations of the holders shall be
limited to those obligations set forth in 1.5(b)); (ii) if, at any time after
giving written notice of its intention to register any securities pursuant to
this Section 1.2 and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to register such securities, the Company shall give written notice to
all stockholders of Registrable Securities and, thereupon, shall be relieved of
its obligation to register any Registrable Securities in connection with such
registration; and (iii) any stockholder that owns less than 3% of the
outstanding class of any securities to be registered in accordance with this
Section, if such stockholder requests to include in such registration any of
such stockholder's shares of such class, shall request to include in such
registration all of such stockholder's shares of such class. A registration
effected pursuant to this Section 1.2(a) is referred to herein as an "Incidental
Registration."
(b) Priority in Incidental Registrations. If a registration pursuant to
this Section 1.2 involves an underwritten offering and the managing underwriter
advises the Company that, in its opinion, the number of shares of Common Stock
(including all Registrable Securities) which the Company, Artal and its
Assignees and any other stockholders propose to include in such registration
exceeds the largest number of shares which can be sold without having an adverse
effect on such offering, including the price at which such shares can be sold,
the Company will include in such registration up to such maximum number of
shares (i) first, all the shares the Company initially proposes to sell for its
own account, or for the account of a demanding shareholder, pursuant to a demand
registration right granted after the date hereof as the case may be, and (ii)
second, to the extent that the number of shares referred to in clause (i) is
less than the number of shares which the Company has been advised can be sold in
such offering without having the adverse effect referred to above, all
Registrable Securities requested to be included in such registration by Artal
and its Assignees pursuant to Section 1.2(a), Bermore (to the extent permitted
by and accordance with its incidental registration rights contained in Annex A
to the Bermore Agreement), or by any other stockholder of securities entitled to
elect and electing to register securities pursuant to any other registration
rights
7
<PAGE> 38
agreement to which the Company is a party, provided that if the number of
Registrable Securities requested to be included in such registration by Artal,
its Assignees, Bermore and such other stockholders, together with the number of
securities which the Company proposes to sell for its own account to be included
in such registration pursuant to clause (i) of this Section exceeds the number
which the Company has been advised can be sold in such offering without having
the adverse effect referred to above, the number of such Registrable Securities
requested to be included in such registration shall be limited to such extent
and shall be allocated pro rata first among Artal and its Assignees requesting
such registration pursuant to Section 1.2(a) and Bermore (to the extent
permitted by and in accordance with its incidental registration rights contained
in Annex A to the Bermore Agreement) and second among all Other Holders on the
basis of the relative number of securities requested to be included in such
registration, and provided further, however, that the provisions regarding
priorities contained in registration rights agreements to which stockholders
other than Artal and its Assignees or Bermore are parties shall control the
relative priorities among such other stockholders; provided further, that
application of the preceding proviso shall not, in any manner, adversely affect
or prejudice Artal's or Bermore's registration priority or other rights in
respect of any such Registration Statement.
(c) Artal and its Assignees shall be entitled to have their Registrable
Securities included in all registrations covered by this Section 1.2 until the
earlier of (i) January 26, 2006 and (ii) that point in time when Artal and its
Assignees shall cease to own any Artal Registrable Shares.
1.3 Registration Procedures. In connection with the registration of any
Registrable Securities, the Company shall effect such registrations to permit
the sale of such Registrable Securities in accordance with the intended method
or methods of disposition thereof (including, without limitation, block trades,
market sales or underwritten offerings), and pursuant thereto the Company shall
as expeditiously as possible:
(a) Prepare and file with the SEC a Registration Statement or Registration
Statements on Form S-3 (including, if requested by a demanding holder, a
Registration Statement under Rule 415 of the 1933 Act) or such other form
available for the sale of the Registrable Securities by the holders thereof in
accordance with the intended method of distribution thereof, and use its best
efforts to cause each such Registration Statement to become effective and remain
effective as provided herein;
8
<PAGE> 39
provided, however, that before filing any Registration Statement or
Prospectus or any amendments or supplements thereto (not including documents
that would be incorporated or deemed to be incorporated therein by reference),
the Company shall afford the holders of the Registrable Securities covered by
such Registration Statement, their Special Counsel, if any, and the managing or
sole Underwriter, if any, an opportunity to review copies of all such documents
proposed to be filed. The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which Artal
and its Assignees have a right to review prior to the filing of such document,
if Artal (or, if Artal has elected not to include any of its Registrable
Securities in such Registration Statement, the holders of a majority of the
Registrable Securities covered by such Registration Statement, Special Counsel,
if any, or the managing Underwriter, if any), shall reasonably object, in
writing, on a timely basis.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the effectiveness period
provided herein; cause the related Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and comply
with the provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to it with respect to
the disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify Artal and its Assignees, Special Counsel, if any, and the
managing Underwriters, if any, promptly (but in any event within 5 business
days), and confirm such notice in writing, (i) when a Registration Statement,
Prospectus or prospectus supplement or post-effective amendment has been filed,
and, with respect to a Registration Statement or any post-effective amendment,
when the same has become effective (including in such notice a written statement
that any such stockholder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules and all documents incorporated or
deemed to be incorporated by reference and exhibits), (ii) of the issuance by
the SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or the initiation of any proceedings for that purpose,
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<PAGE> 40
iii) if at any time when a prospectus is required by the Securities Act to
be delivered in connection with sales of the Registrable Securities the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated by Section 1.3(k) below
cease to be true and correct in all material respects, (iv) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or any
of the Registrable Securities for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that, in the case of such Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (vi) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) Use its best efforts (i) to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, and, (ii) if any such order is issued, to obtain the
withdrawal of any such order at the earliest possible moment.
(e) If requested by the managing or sole Underwriter, if any, or Artal (or,
if Artal has elected not to include any of its Registrable Securities in such
Registration Statement, the holders of a majority of the Registrable Securities
covered by such Registration Statement), (i) promptly incorporate in a
Registration Statement, Prospectus, prospectus supplement or post-effective
amendment such information as the managing or sole Underwriter, if any, or Artal
or such other stockholders reasonably request to be included therein to comply
with applicable law, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as
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practicable after the Company has received notification of the matters to
be incorporated in such Registration Statement, Prospectus, prospectus
supplement or post-effective amendment, and (iii) supplement or make amendments
to such Registration Statement; provided, however, that the Company shall not be
required to take any actions under this Section 1.3(e) that are not, in the
opinion of counsel for the Company, in compliance with applicable law.
(f) Furnish to each selling stockholder of Registrable Securities who so
requests and to Special Counsel and each managing Underwriter, if any, without
charge, one conformed copy of the Registration Statement or Statements and each
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated or deemed to be incorporated therein by reference and
all exhibits.
(g) Deliver to each selling stockholder of Registrable Securities, Special
Counsel, and the Underwriters, if any, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request; and, the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling stockholders of Registrable Securities
and the Underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, to use its best
efforts to register or qualify, and cooperate with the selling stockholders of
Registrable Securities and the Underwriters or sales agents, if any, in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or "blue sky" laws of such jurisdictions within the United
States as any such selling stockholder or the managing Underwriters or sales
agents, if any, reasonably request in writing, provided that where Registrable
Securities are offered other than through an underwritten offering, the Company
agrees to cause its counsel to perform "blue sky" investigations and file
registrations and qualifications required to be filed pursuant to this Section
1.3(h); use its best efforts to keep each such registration or qualification (or
exemption therefrom) effective during the period during which the related
Registration Statement is required to be kept effective hereby and use its best
efforts to
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do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Registrable Securities covered by
the applicable Registration Statement; provided, however, that the Company will
not be required to (A) qualify generally to do business in any jurisdiction
where it is not then so qualified or (B) take any action that would subject it
to general service of process in any such jurisdiction where it is not then so
subject.
(i) Cooperate with the selling stockholders of Registrable Securities and
the managing or sole Underwriter, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold,
which certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Securities to be in such denominations and registered in such names
as the managing or sole Underwriter, if any, or such selling stockholders may
reasonably request at least two business days prior to any sale of Registrable
Securities.
(j) Upon the occurrence of any event contemplated by clause (v) or (vi) of
Section 1.3(c) above, as promptly as practicable after and in any event within
ten business days of the Company's having become aware of such event prepare and
file a supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(k) If the offering is to be underwritten, enter into an underwriting
agreement in form, scope and substance as is customary in underwritten offerings
and take all such other actions as are reasonably requested by the managing or
sole Underwriter in order to expedite or facilitate the registration or the
disposition of such Registrable Securities, and in such connection: (i) make
such representations and warranties to the Underwriters, with respect to the
business of the Company and its subsidiaries, and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope as
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are customarily made by issuers to Underwriters in underwritten offerings,
and confirm the same if and when requested; (ii) obtain opinions of counsel to
the Company and updates thereof (which counsel and opinions shall be reasonably
satisfactory (in form, scope and substance) to the managing or sole
Underwriters), addressed to the Underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by the Underwriters; (iii) obtain "cold comfort"
letters and updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data are, or are required
to be, included in the Registration Statement), addressed to each of the
Underwriters, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
underwritten offerings; (iv) cause the Company's management to be made available
for, and assist in, the marketing and disposition of such Registrable Securities
in the manner and to the extent reasonably requested by the Underwriters,
including, without limitation, participation by management in customary road
shows, investor conferences and other similar presentations; and (v) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in Section 1.5
hereof (or such other provisions and procedures acceptable to stockholders
holding a majority of the Registrable Securities covered by such Registration
Statement) with respect to all parties to be indemnified pursuant to said
Section. The above shall be done as, when and to the extent required under each
underwriting agreement.
(l) Use its best efforts to cause the Registrable Securities covered by a
Registration Statement to be rated with the appropriate rating agencies, if
applicable, if so requested by Artal (or, if Artal and its Assignees have
elected not to include any of their Registrable Securities in such Registration
Statement, the holders of a majority of the Registrable Securitiescovered by
such Registration Statement) or the managing or sole Underwriter, if any.
(m) Use its best efforts to cause all Registrable Securities covered by
such Registration Statement to be (i) listed on each securities exchange on
which securities issued by the Company are then listed, or (ii) authorized to be
quoted on the NASDAQ or the National Market System of the NASDAQ if the
securities so qualify, in each case, if requested by Artal (or,
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<PAGE> 44
if Artal and its Assignees have elected not to include any of their
Registrable Securities in such Registration Statement, the holders of a majority
of the Registrable Securities covered by such Registration Statement) or the
managing or sole Underwriter, if any.
(n) (i) Make available for inspection by a representative of the selling
stockholders of Registrable Securities being sold, any Underwriter participating
in any such disposition of Registrable Securities, if any, and any accountant
retained by such representative of such stockholders or Underwriter or Special
Counsel, if any (collectively, the "Representatives"), at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors and employees of the Company and
its subsidiaries to supply all information in each case reasonably requested by
any such Representative in connection with such Registration Statement;
provided, however, that any information that is designated in writing by the
Company, in good faith, as confidential at the time of delivery of such
information, shall be kept confidential by such Representative unless (i)
disclosure of such information is required by court or administrative order,
(ii) disclosure of such information, in the opinion of counsel to such
Representative, is necessary to avoid or correct a misstatement or omission of a
material fact in the Registration Statement, Prospectus or any supplement or
post-effective amendment thereto or disclosure is otherwise required by law, or
(iii) such information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard by such Representative; without
limiting the foregoing, no such information shall be used by such Representative
as the basis for any market transactions in securities of the Company or its
subsidiaries in violation of law and (ii) cause the Company's management to be
made available, upon reasonable request and under circumstances, including the
frequency of such requests and the number of shares involved, that do not unduly
impose on such management's ability to conduct the business of the Company, for
presentations or discussions with (A) agents representing Artal and its
Assignees in connection with proposed sales of Seller's Shares by any means
other than an underwritten offering (including, without limitation, by means of
block trades; and (B) prospective purchasers of such Seller's Shares.
(o) Comply with all applicable rules and regulations of the SEC and make
generally available to its securityholders
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earnings statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated under
the Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing atthe end of any fiscal quarter in which Registrable
Securities are sold to Underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to Underwriters in suchan offering,
commencing on the first day of the first fiscal quarter of the Company after the
Effectiveness Date of a Registration Statement, which statements shall cover
said 12-month periods.
The Company may require each seller of Registrable Securities as to which
any registration is being effected hereunder to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Securities as the Company may, from time to time, reasonably request in writing,
provided that such information shall be used only in connection with such
registration. The Company may exclude from such registration the Registrable
Securities of any seller who unreasonably fails to furnish such information
promptly after receiving such request.
Artal and its Assignees hereby agree that upon receipt of any notice from
the Company of the happening of any event of the kind described in clause (ii),
(iv) or (v) (it being understood that, if any event of the kind described in
clause (v) of Section 1.3(c) also would constitute a Significant Corporate
Transaction, so long as the Company has complied with the requirements of
Section 1.1(g)) of Section 1.3(c), such stockholder will forthwith discontinue
disposition of such Registrable Securities covered by such Registration
Statement or Prospectus until such stockholder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 1.3(j), or, if
earlier, until it is advised in writing (the "Advice") by the Company that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Company shall give any such
notice at any time during the effectiveness period of a Registration Statement,
the effectiveness period shall be extended by the number of days during such
periods from and including the date of the giving of such notice (the "Notice
Date") to and including the date when each seller of Registrable Securities
covered by such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 1.3(j) or (y) the
Advice, except that in
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respect of any event of the kind described in clause (v) of Section 1.3(c)
which is a Significant Corporate Transaction, the effectiveness period of any
such Registration Statement shall be extended for the Additional Registration
Period as determined under Section 1.1(g).
1.4 Registration Expenses.
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or not any
Registration Statement is filed or becomes effective, including, without
limitation, (i) all registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the National
Association of Securities Dealers, Inc. in connection with an underwritten
offering and (B) fees and expenses of compliance with state securities or "blue
sky" laws (including, without limitation, reasonable fees and disbursements of
counsel for the Underwriters or counsel for the Company, in connection with
"blue sky" qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as provided in Section 1.3(h), in the case of Registrable
Securities), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with The Depository Trust Company and of printing Prospectuses if the printing
of Prospectuses is requested by the managing or sole Underwriter, if any, or by
the holders of a majority of the Registrable Securities included in any
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company, (v) fees and disbursements of
all independent certified public accountants referred to in Section 1.3(k)
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) rating
agency fees, (vii) Securities Act liability insurance, if the Company so desires
such insurance, (viii) the expense of any annual audit and (ix) the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange.
(b) Without limiting Section 1.4(a), in connection with any Registration
Statement relating to Artal Registrable Securities, Artal and its Assignees
shall bear no fees and expenses of any kind other than the discounts,
commissions, or fees of Underwriters, selling brokers, dealer managers or
similar securities industry professionals relating to the distribution of
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<PAGE> 47
such Registrable Securities, the fees and disbursements of Special Counsel
or such other counsel chosen by Artal and its Assignees and actual out-of-pocket
expenses incurred by Artal and its Assignees in connection with the Registration
Statement.
1.5 Indemnification, Contribution.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless, to the full extent permitted by law, each of Artal and its Assignees,
the officers, directors and agents and employees of each of them, each Person
who controls each such stockholder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act), the officers, directors,
agents and employees of each such controlling person and any financial or
investment adviser (each, an "Indemnified Party"), from and against any and all
losses, claims, damages, liabilities, actions or proceedings (whether commenced
or threatened), reasonable costs (including, without limitation, reasonable
costs of preparation and reasonable attorneys, fees) and reasonable expenses
(including reasonable expenses of investigation) (collectively, "Losses"), as
incurred, arising out of or based upon (i) any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or form of prospectus or in any amendment or supplements thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, except to the extent that the same arise
out of or are based upon information furnished in writing to the Company by such
Indemnified Party or the related holder of Registrable Securities expressly for
use therein or (ii) any violation by the Company of any federal, state or common
law rule or regulation applicable to the Company and relating to action required
of or inaction by the Company in connection with any such registration;
provided, however, that the Company shall not be liable to any Indemnified Party
to the extent that any such Losses arise out of or are based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus if (x) such Indemnified Party or the related holder
of Registrable Securities failed to send or deliver (if it had a duty to do so)
a copy of the Prospectus with or prior to the delivery of written confirmation
of the sale by such Indemnified Party or the related holder of Registrable
Securities to the Person asserting the claim from which such Losses arise, (y)
the Prospectus would have corrected such untrue statement or alleged untrue
statement or such omission or alleged omission, and (z) the Company has complied
with its obligations under Section
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1.3(c). Such indemnity and reimbursement of costs and expenses shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party.
(b) Indemnification by Artal and its Assignees. In connection with any
Registration Statement in which Artal or its Assignees are participating, an
authorized officer of such selling stockholder of Registrable Securities shall
furnish to the Company in writing such information as the Company reasonably
requests for use in connection with any Registration Statement or Prospectus and
agrees, severally and not jointly, to indemnify, to the full extent permitted by
law, the Company and its respective directors, officers, agents and employees
each Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors, officers,
agents or employees of such controlling persons, from and against all Losses
arising out of or based upon any untrue statement or alleged untrue statement of
any material fact contained in any Registration Statement, the Prospectus or any
amendment or supplement thereto or arising out of or based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement therein not misleading (in the case of any
Prospectus or form of Prospectus, in light of the circumstances in which they
were made), in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance on and in conformity with written information about Artal and its
Assignees furnished by such stockholder to the Company expressly for use in such
Registration Statement or Prospectus provided, however, that such selling
stockholder of Registrable Securities shall not be liable in any such case to
the extent that such stockholder has furnished in writing to the Company within
a reasonable period of time prior to the filing of any such, Registration
Statement or Prospectus or amendment or supplement thereto information expressly
for use in such Registration Statement or Prospectus or any amendment or
supplement thereto which corrected or made not misleading, information
previously furnished to the Company, and the Company failed to include such
information therein. In no event shall the liability of Artal or its Assignees
be greater in amount than the dollar amount of the proceeds (net of payment of
all expenses) received by such stockholder upon the sale of the Registrable
Securities giving rise to such indemnification obligation. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Indemnified Party.
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(c) Conduct of Indemnification Proceedings. If any Person shall be entitled
to indemnity hereunder (an "indemnified party"), such indemnified party shall
give prompt notice to the party or parties from which such indemnity is sought
(the "indemnifying parties") of the commencement of any action, suit, proceeding
or investigation or written threat thereof (a "Proceeding") with respect to
which such indemnified party seeks indemnification or contribution pursuant
hereto; provided, however, that the failure to so notify the indemnifying
parties shall not relieve the indemnifying parties from any obligation or
liability except to the extent that the indemnifying parties have been
prejudiced by such failure. The indemnifying parties shall have the right,
exercisable by giving written notice to an indemnified party promptly after the
receipt of written notice from such indemnified party of such Proceeding, to
assume, at the indemnifying parties' expense, the defense of any such
Proceeding, with counsel reasonably satisfactory to such indemnified party;
provided, however, that an indemnified party or parties (if more than one such
indemnified party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless: (1) the indemnifying parties agree to
pay such fees and expenses; (2) the indemnifying parties fail promptly to assume
the defense of such Proceeding or fail to employ counsel reasonably satisfactory
to such indemnified party or parties; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such indemnified party
or parties and the indemnifying parties or an affiliate of the indemnifying
parties or such indemnified parties, and there may be one or more defenses
available to such indemnified party or parties that are different from or
additional to those available to the indemnifying, parties, in which case, if
such indemnified party or parties notifies the indemnifying parties in writing
that it elects to employ separate counsel at the expense of the indemnifying
parties, the indemnifying parties shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the indemnifying parties, it
being understood, however, that, unless there exists a conflict among
indemnified parties, the indemnifying parties shall not, in connection with any
one such Proceeding but substantially similar or related Proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
together with appropriate local counsel) at any time for such indemnified party
or parties. Whether or not such defense is assumed by the
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indemnifying parties, such indemnifying parties or indemnified party or
parties will not be subject to any liability for any settlement made without its
or their consent (but such consent will not be unreasonably withheld). The
indemnifying parties shall not consent to entry of any judgment or enter into
any settlement which (i) provides for other than monetary damages without the
consent of the indemnified party or parties (which consent shall not be
unreasonably withheld or delayed) or (ii) that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party or parties of a release, in form and substance satisfactory to
the indemnified party or parties, from all liability in respect of such
Proceeding for which such indemnified party would be entitled to indemnification
hereunder.
(d) Contribution. If the indemnification provided for in this Section 1.5
is unavailable to an indemnified party or is insufficient to hold such
indemnified party harmless for any Losses in respect of which this Section 1.5
would otherwise apply by its terms, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the amount paid or payable by such indemnified party
as a result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue-statement of a material fact or omission or alleged omission to
state a material fact, has been taken by or relates to information supplied by,
such indemnifying party or indemnified party, and the parties relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with any Proceeding, to the extent such
party would have been indemnified for such expenses if the indemnification
provided for in Section 1.5(a) or 1.5(b) was available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 1.5(d) were determined by pro rata
allocation or by any other method of
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allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. Notwithstanding the
provision of this Section 1.5(d), an indemnifying party that is a selling
stockholder of Registrable Securities shall not be required to contribute any
amount in excess of the amount by which the net proceeds received by such
indemnifying party exceeds the amount of any damages that such indemnifying
party has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
1.6 Rules 144 and 144A. The Company shall file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder (or, if the Company is not required to file
such reports, it will, upon the request of Artal and its Affiliates make
publicly available other information so long as such information is necessary to
permit sales under Rules 144 and 144A), and will take such further action as any
such stockholder may reasonably request, all to the extent required from time to
time to enable such stockholder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 and Rule 144A. Upon the request of any such stockholder,
the Company shall deliver to such stockholder a written statement as to whether
it has complied with such requirements.
1.7 Underwritten Registrations. As to Registrable Securities covered by any
underwritten offering under a Demand Registration Statement, the investment
banker or investment bankers and manager or managers that will manage the
offering will be selected by Artal (or if Artal and its Assignees have elected
not to include any of their Securities in such Registration Statement, the
holders of a majority of the Registrable Securities covered by such Registration
Statement) which selection will be subject to the consent of Flowers (which
consent will not be unreasonably withheld or delayed). No selling stockholder of
Registrable Securities may participate in any underwritten registration
hereunder unless such stockholder (a) agrees to sell such stockholder's
Registrable Securities on the basis provided in any underwritten arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other
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documents required under the terms of such underwriting arrangements
(except that indemnification obligations of such stockholders shall be limited
to those obligations set forth in Section 1.5(b).
1.8 Assignment. The rights and obligations of Artal hereunder (except for
Artal's rights to request the Two-Year Registration Statement) may be assigned
to a purchaser of Registrable Securities from Artal in a private, unregistered
transaction (an "Assignee") but only subject to the satisfaction of all of the
following conditions: (i) any such Assignee must agree in writing to be bound by
all of the provisions of this Agreement as though such Assignee had been an
original signatory hereof; (ii) in no event shall the Company be required to
honor requests for more than four (4) Demand Registration Statements, including
the Two-Year Registration Statement, and such Demand Registrations shall be in
conformity in all respects with the provisions of this Agreement; and (iii) at
the time such Assignee delivers a Demand Notice, the product of the number of
shares which are being requested to be included in such registration times the
closing price of the Registrable Securities on the New York Stock Exchange or
such other exchange on which such shares are then listed on the trading day
immediately preceding the date of such Demand Notice shall be not less than $75
million.
1.9 Other Registration Rights. The Company shall not grant any registration
rights after the date hereof (i) that are superior to the rights granted to
Artal hereunder (including, without limitation, Artal's piggyback registration
rights hereunder) or (ii) which would give another party the right to include
shares of Common Stock in any Demand Registration Statement which is being filed
pursuant to this Agreement (except where such right to include shares in a
Demand Registration Statement is subordinate to the right of Artal and its
Assignees to include shares in such Demand Registration Statement with respect
to prioritization in the event of any underwriter cutback) or (iii) which would
give any party demand registration rights exercisable at any time prior to the
expiration of Artal's demand registration rights hereunder or (iv) which are
superior to the piggyback registration rights granted to Bermore pursuant to the
Bermore Agreement.
1.10 Regulatory Filings. The Company will, to the extent reasonably
requested by Artal, provide information to Artal and otherwise assist Artal in
connection with all filings with the SEC or the New York Stock Exchange required
to be made by Artal or its Affiliates in respect of the Company, including,
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without limitation, filings on Forms 3, 4 and 5 or Schedule 13D under the
Exchange Act, with the understanding that the ultimate responsibility for making
such filings and for the accuracy of such filings remains with Artal or its
Affiliates.
1.11 Definitions. Capitalized terms used in this Annex A shall have the
meanings set forth below:
"Additional Registration Period" shall have the meaning specified in
Section 1.1(g).
"Advice" shall have the meaning specified in Section 1.3.(o).
"Affiliate" means any Person which, directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, another Person. The term "control" includes, without limitation, the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Artal Registrable Securities" means, collectively, (a) the Securities
owned of record by Artal on the date hereof, and (b) all Securities issued with
respect to the Securities described in clause (a) above by way of any
recapitalization, stock split or other similar transaction.
"Assignee" shall have the meaning specified in Section 1.8.
"Demand Notice" shall have the meaning specified in Section 1.1(a).
"Demand Registration Statement" shall have the meaning specified in Section
1.1(a).
"Effectiveness Date" shall have the meaning specified in Section 1.1(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Filing Date" shall have the meaning specified in Section 1.1(a).
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"Indemnified Party" shall have the meaning specified in Section 1.5(a).
"Initial Demand Date" means the date that is 75 days prior to the Lockup
Expiration Date.
"Lockup Expiration Date" means the date on which the Lockup Period expires.
"Losses" shall have the meaning specified in Section 1.5(a).
"Management Stockholders" shall mean those members of management of the
Keebler Corporation who have entered into
Management Stockholder Agreements with INFLO Holdings Corporation prior to
the date hereof.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"Notice Date" shall have the meaning specified in Section 1.3(o).
"Other Holders" shall mean the Management Stockholders and any stockholders
of the Company with registration rights granted after the date hereof.
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Proceeding" shall have the meaning specified in Section 1.5(c).
"Registrable Securities" means the Artal Registrable Securities, and any
securities of the Company owned by Bermore or any Other Holder.
"Registration Statement" means any registration statement of the Company
under which any of the Registrable Securities are included therein pursuant to
the provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective
amendments, all exhibits, and all material incorporated
24
<PAGE> 55
by reference or deemed to be incorporated by reference in such registration
statement.
"Representative" has the meaning set forth in Section 1.3(n).
"Rule 144" means Rule 144 promulgated by the SEC under the Securities Act
as such rule may be amended from time to time, or any similar rule then in
force.
"Rule 144A" means Rule 144A under the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
"Rule 415" means Rule 415 under the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
"SEC" means the Securities and Exchange Commission.
"Special Counsel" means a single law firm selected by Artal and its
Assignees in connection with any Registration Statement.
"Underwriter" has the meaning set forth in Section 2(11) of the Securities
Act.
25
<PAGE> 1
EXHIBIT 10.23
FORM OF STOCK PURCHASE AND STOCKHOLDER'S AGREEMENT
STOCK PURCHASE AND STOCKHOLDER'S AGREEMENT (this "Agreement"), dated as
of January 2_, 1998, among the Company, Artal Luxembourg S.A., Flowers (as
defined in Article I below) and Bermore, Ltd.
WHEREAS, Artal Luxembourg S.A. has requested, and Flowers has consented
to, a demand registration pursuant to Section 1.1(a) of the Original
Stockholders' Agreement;
WHEREAS, Artal Luxembourg S.A. and Flowers have caused the Company, on
December 12, 1997, to file the S-1 Registration Statement with the SEC relating
to the sale of the Artal IPO Shares and the Bermore IPO Shares;
WHEREAS, if the IPO is consummated, Artal Luxembourg S.A. and Flowers
have agreed that Flowers will purchase the Artal Control Shares simultaneously
with the Closing in connection with consummation of the Control Transaction,
upon the terms and conditions set forth in the New Stockholders' Agreement; and
WHEREAS, if the Control Transaction is consummated, Artal Luxembourg
S.A., Flowers and Bermore, Ltd. have agreed that Flowers also will purchase the
Bermore Control Shares simultaneously with the Closing in connection with
consummation of the Control Transaction, upon the terms and conditions set forth
herein;
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms used herein shall have the
meanings set forth below:
"Affiliate" means any Person which, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, another Person. The term "control" includes, without
limitation, the possession, directly or indirectly, of the power to direct the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" shall have the meaning specified in the
first paragraph hereof.
<PAGE> 2
2
"Artal" means Artal Luxembourg S.A., together and collectively
with any other Person who becomes the owner of Artal Shares in accordance with
Section 2.13 hereof.
"Artal Basket" means the number of Artal Shares that is equal
to the product of 1,031,850 and a fraction, (i) the numerator of which is the
number of Remaining Artal Shares and (ii) the denominator of which is the number
of Remaining Bermore Shares.
"Artal Control Shares" means the 9,581,169 Artal Shares to be
sold by Artal to Flowers upon Closing in connection with the consummation of the
Control Transaction.
"Artal IPO Shares" means the 7,121,485 shares of Common Stock
to be sold by Artal in the IPO, as such number may be increased or decreased
(whether to accomodate any exercises of overallotment options by the
Underwriters or otherwise, including pursuant to Section 2.10 hereof).
"Artal Shares" means (a) the Common Stock beneficially owned
by Artal on the date of this Agreement and (b) all Common Stock, Preferred
Stock, Common Stock Equivalents and indebtedness issued in respect thereof, in
exchange therefor, or in substitution thereof, in connection with a
Recapitalization.
"Bermore" means Bermore, Ltd., a Bermuda company, together and
collectively with any other Person who becomes the owner of Bermore Shares in
accordance with Section 4.2(a), (c) or (d) hereof.
"Bermore Control Shares" means the 1,616,691 Bermore Shares to
be sold by Bermore to Flowers upon Closing in connection with the consummation
of the Control Transaction.
"Bermore IPO Shares" means the 4,519,090 Bermore Shares to be
sold by Bermore in the IPO, as such number may be increased (whether to
accomodate any exercises of overallotment options by the Underwriters or
otherwise, including pursuant to Section 2.10 hereof).
"Bermore Shares" means (a) the Common Stock beneficially owned
by Bermore on the date of this Agreement, including, without limitation, shares
of Common Stock issuable upon exercise of the GFI Warrant, and (b) all Common
Stock, Preferred Stock, Common Stock Equivalents and indebtedness issued in
respect thereof, in exchange therefor, or in substitution thereof, in connection
with a Recapitalization.
"Closing" means the consummation of the IPO and, if the IPO is
consummated, the consummation of the Control Transaction.
"Closing Date" means the date on which the Closing occurs.
"Common Stock" means the Company's Common Stock, par
value $.01 per share, and any capital stock of any class of the
<PAGE> 3
3
Company hereafter authorized which is not limited to a fixed sum or percentage
of par or stated value in respect to the rights of the holders thereof to
participate in dividends or in the distribution of assets upon any liquidation,
dissolution or winding up of the Company.
"Common Stock Equivalents" means (without duplication with any
Common Stock or other Common Stock Equivalents) rights, warrants, options,
convertible securities, or exchangeable securities or indebtedness, or other
rights, exercisable for or convertible or exchangeable into, directly or
indirectly, Common Stock or securities exercisable for or convertible or
exchangeable into Common Stock, whether at the time of issuance or upon the
passage of time or the occurrence of some future event.
"Company" means Keebler Foods Company, a Delaware
corporation.
"Control Transaction Price Per Share" means $___.
"Control Transaction" means the sale of the Artal Control
Shares and the Bermore Control Shares to Flowers, which sale shall (i) occur
simultaneously with and is conditioned upon the consummation of the IPO and (ii)
result in Flowers owning 55.2% of the Common Stock.
"Custodian" has the meaning set forth in Section 4.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Excluded Artal Transfer" means any Transfer of Artal Shares
made in compliance with Section 2.13 (i) to or among its Affiliates, (ii) to or
among any members of its Family Group, (iii) pursuant to a pledge or similar
agreement to secure debt of the transferor (incurred in good faith and not for
the purposes of avoiding Artal's obligations under Section 4.3, Section 4.3 or
Article V) owing to a bank or other bona fide financial institution (provided
that such security interest has not yet been exercised by the pledgee),
including, without limitation, any such Transfer upon the exercise by such bank
or other bona fide financial institution of its rights under such pledge or
similar agreement to acquire beneficial or other ownership of the Artal Shares
pledged thereunder, or (iv) by an individual upon his or her death to his or her
estate, provided that the beneficiaries of the estate are Persons specified in
clause (i) or (ii) hereof.
"Family Group" means, with respect to any individual, such
individual's spouse and descendants and such individual's parents, grandparents,
aunts, uncles, brothers, sisters and their respective spouses and descendants
(in each case, whether natural
<PAGE> 4
4
or adopted) and any trust or similar entity established and maintained solely
for the benefit of such individual and/or his spouse, descendants and/or such
above-listed relatives and all of the aforesaid of the grantor of a trust that
is a stockholder of the Company.
"Flowers" means Flowers Industries, Inc., a Georgia corporation.
"GFI" means G.F. Industries, Inc., a Nevada corporation.
"GFI Warrant" means the warrant to purchase 6,135,781 shares of
Common Stock at $3.2272 per share, issued to GFI on June 4, 1996 and
subsequently transferred to Bermore.
"HSR Act" means the Hart-Scott-Rodino Antitrust and Improvements
Act of 1976, as amended.
"Investor Joinder" means a joinder agreement, substantially in
the form of Annex B hereto, by which a Person becomes a party to this Agreement
after the date hereof.
"IPO" means a public offering of the Artal IPO Shares and the
Bermore IPO Shares to be consummated pursuant to the S-1 Registration Statement.
"Lockup Expiration Date" means the date on which the lockup
period provided for in the Underwriting Agreement has expired with respect to
Artal or has otherwise been terminated or waived with respect to Artal.
"Mandatory Sale Event" has the meaning set forth in Section 4.5.
"Mandatory Sale Shares" has the meaning set forth in Section
4.5.
"Monthly Transfer" has the meaning set forth in Section 4.2(e).
"New Stockholders' Agreement" means the Stock Purchase Agreement
dated as of January __, 1998 among Artal, Flowers and the Company, including
Annex A thereto (as the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms hereof).
"Original GFI Agreement" means the GFI Stockholder's Agreement
dated as of June 4, 1996 among Artal, Flowers, GFI and the Company (including
all of the provisions of Annex A thereto).
"Original Stockholders' Agreement" means the Stockholders'
Agreement dated as of January 26, 1996 among Artal, Flowers and the Company.
<PAGE> 5
5
"Person" means an individual, a partnership, a joint venture,
a corporation, an association, a joint stock company, a limited liability
company, a trust, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Preferred Stock" means any capital stock of any class of the
Company hereafter authorized that provides for a preference on liquidation or
with respect to dividends over any other class of capital stock of the Company
or any similar kind of equity security.
"Recapitalization" means any stock split, reverse stock split,
dividend or combination, or any recapitalization, reclassification, merger,
consolidation, sale of all or substantially all assets, exchange or other
similar reorganization.
"Release Date" means the earliest of (i) the date on which
Artal owns less than 4,586,000 shares of Common Stock, (ii) the date that is
three years after the Lockup Expiration Date or (iii) the date on which Artal's
demand registration rights under the New Stockholders' Agreement have expired or
have otherwise been terminated or waived in their entirety.
"Remaining Artal Shares" means the Artal Shares owned by Artal
immediately upon consummation of the Closing, after giving effect to the sale of
the Artal IPO Shares and the Artal Control Shares.
"Remaining Bermore Shares" means the Bermore Shares owned by
Bermore immediately upon consummation of the Closing, after giving effect to the
sale of the Bermore IPO Shares and the Bermore Control Shares.
"Restricted Period" means the period from the Closing Date to
but excluding the Release Date.
"Rule 144" means Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
"Rule 144A" means Rule 144A under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Securities Holding Company" shall have the meaning
specified in Section 4.3.
<PAGE> 6
6
"Subsidiary" means any corporation of which the securities
having a majority of the ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
a Person either directly or through one or more of its Subsidiaries.
"Tag/Drag Notice" has the meaning set forth in Section 4.3(a).
"S-1 Registration Statement" means the Registration Statement
on Form S-1 filed with the SEC by the Company on December 12, 1997, as amended
through the date hereof, in respect of the IPO.
"Transfer" shall be construed broadly and shall include any
direct or indirect transfer by way of issuance, sale, assignment, hypothecation,
disposition, participation, pledge, gift, bequeath, intestate transfer,
distribution, liquidation, merger or consolidation.
"Underwriters" means the underwriters in respect of the IPO.
"Underwriting Agreement" means the underwriting agreement to
be executed among Artal, Bermore, the Company and the Underwriters in respect of
the IPO, if Artal elects to consummate the IPO.
"Warrant Exercise Price Per Share" means $3.2272.
"Warrant Shares" means the 6,135,781 shares of Common Stock
issuable to Bermore upon the exercise of the GFI Warrant in the manner
contemplated by Section 2.3.
ARTICLE II
COVENANTS AND UNDERTAKINGS
2.1 Sale of Bermore Shares. Upon the terms and subject to the
conditions set forth in this Agreement and on the basis of the representations,
warranties, covenants, agreements, undertakings and obligations contained
herein, if the IPO is consummated and, simultaneously with such consummation,
the Control Transaction is consummated, (a) Bermore hereby agrees to sell at
Closing, free and clear of all liens, encumbrances and claims of any nature
(other than liens, encumbrances and claims resulting from the acts of the
Underwriters or Flowers, respectively), the Bermore IPO shares in the IPO and
the Bermore Control Shares to Flowers and (b) Flowers hereby agrees to purchase
from Bermore at Closing the Bermore Control Shares.
2.2 Purchase Price and Payment for Bermore Control Shares. If the IPO
is consummated, the product of (a) the Control Transaction Price Per Share and
(b) the number of Bermore Control Shares shall be paid at Closing to Bermore by
Flowers in cash by wire transfer in same-day funds to an account specified in
writing by Bermore to Flowers at least two business days prior to Closing.
<PAGE> 7
7
2.3 Exercise of GFI Warrant. At the Closing, the following actions
shall occur, or shall be deemed to occur, simultaneously, notwithstanding
anything to the contrary contained in the GFI Warrant:
(a) Bermore shall, by delivery of a written notice to the Company,
exercise the GFI Warrant and the Company shall, without receipt of any cash
consideration by the Company directly from Bermore in respect of such exercise,
(i) cancel the GFI Warrant and deliver to Bermore a stock certificate registered
in its name representing 6,135,781 shares of Common Stock and (ii) cancel such
stock certificate and issue (A) to Flowers a stock certificate registered in its
name representing 1,616,691 shares of Common Stock, which certificate shall bear
all appropriate legends and other notations, if any, and (B) a stock certificate
to the Underwriters representing a number of shares of Common Stock equal to
the Bermore IPO Shares registered in such names as may be requested by the
Underwriters, which certificate shall not bear any restrictive legends; and
(b) An amount equal to $19,801,392.44 shall be deducted from the net
amount to be wired to Bermore by the Underwriters as consideration for
the Warrant Shares, and such amount shall be wired by the Underwriters to the
Company on behalf of Bermore and shall constitute valid payment in full by
Bermore for the shares of Common Stock issued upon exercise of the GFI Warrant,
in accordance with the terms of the GFI Warrant.
2.4 Remaining Bermore Shares. At the Closing, the Company shall (a)
deliver to Bermore a stock certificate registered in Bermore's name for the
Remaining Bermore Shares, which stock certificate shall not bear any restrictive
legends, and (b) an acknowledgment that, in its belief, as of the Closing Date,
Bermore is eligible to sell the Remaining Bermore Shares pursuant to paragraph
(k) of Rule 144 of the Securities Act, subject to the expiration of the lockup
period provided for in the Underwriting Agreement.
2.5 Termination of Original GFI Agreement. Artal, Flowers, Bermore, and
the Company covenant and agree that the Original GFI Agreement will terminate
effective upon the Closing without any further action by the parties thereto,
except that provisions contained in Annex A thereof which by their terms are
applicable after the consummation of any offering made pursuant thereto
(including, without limitation, provisions relating to indemnification and
contribution), shall continue to remain in full force and effect as provided
therein in respect of the Bermore IPO Shares.
2.6 Resignation of Board Representative. Bermore covenants to
cause to be delivered at Closing the resignation of its representative to the
Company's Board of Directors, such resignation to be effective immediately upon
Closing.
<PAGE> 8
8
2.7 Artal Registration Rights. From the date of the New Stockholders'
Agreement until the Release Date, the Company, Artal and Flowers covenant and
agree (a) not to make any changes or amendments to or with respect to, or effect
a waiver or termination of Artal's rights or benefits under or with respect to,
Annex A of the New Stockholders' Agreement, without having received Bermore's
prior written approval of such change, amendment, waiver or termination, and (b)
to provide Bermore with executed copies of the New Stockholders' Agreement and
all changes, amendments, waivers and terminations relating thereto; provided,
however, that such prior written approval shall not be (a) unreasonably withheld
or delayed by Bermore and (b) required if any such change, amendment, waiver or
termination does not materially and adversely affect Artal's rights, benefits or
obligations thereunder.
2.8 Reports Regarding Monthly Transfers. During the Restricted Period,
Bermore shall deliver in writing by facsimile to Artal, five business days after
the last day of each month, a list of all Monthly Transfers during such month by
Bermore pursuant to Section 4.2(e) and the prices per share paid to Bermore in
respect of such Monthly Transfers. If no Monthly Transfers are made by Bermore
during any such month, Bermore will not be obligated to deliver any such list to
Artal.
2.9 Restrictions on Other Agreements. Bermore shall not grant
any proxy or enter into or agree to be bound by any voting trust or voting
agreement with respect to the Bermore Shares or enter into any stockholder
agreements or arrangements of any kind with any Person with respect to any
Bermore Shares on terms inconsistent with the provisions of this Agreement
(whether or not such agreements are with Persons that are parties to this
Agreement), including but not limited to, agreements or arrangements with
respect to the acquisition or disposition of Bermore Shares in a manner which
is inconsistent with this Agreement.
2.10 IPO. (a) The procedures, further agreements, rights and
obligations of the parties hereto regarding the sale of the Bermore IPO Shares
under the S-1 Registration Statement (including any procedures, further
agreements, rights and obligations applicable after the Closing) shall be
governed by the procedures in Annex A of the Original GFI Agreement applicable
to incidental registrations pursuant to Section 1.2 of such Annex A, except
that, notwithstanding anything to the contrary contained therein or in the
Stockholders' Agreement dated as of January 26, 1996 among the Company, Artal
and Flowers, Artal hereby agrees to use its reasonable best efforts to have
included in the IPO 4,519,090 Warrant Shares and, (i) if less than 4,519,090
Warrant Shares are included in the IPO or (ii) the aggregate number of shares
of Common Stock requested to be sold in the IPO shall be cut back by the
Underwriters, Artal shall, in each case, reduce the number of Artal Shares to
be sold in the IPO to the extent (and only to the extent) necessary to enable
Bermore to sell 4,519,090 Warrant Shares in the IPO.
<PAGE> 9
9
(b) If the Underwriters exercise any overallotment option in
accordance with the terms of the Underwriting Agreement, the number of Artal
Shares and Bermore Shares that Artal and Bermore, respectively, will be required
to sell in order to accomodate any such exercise shall be directly proportional
to the number of Artal IPO Shares and Bermore IPO Shares, respectively.
2.11 Compliance with Securities Laws. In connection with the
transactions contemplated by this Agreement, the parties hereto agree to
cooperate with one another in complying with the applicable provisions of the
Securities Act and the Exchange Act, and all other applicable federal and state
securities laws, and each of them agrees to furnish the other, or its counsel,
with such information and to take such actions as may be reasonably requested in
respect of such compliance.
2.12 Consents and Approvals. The parties agree to use their respective
best efforts to obtain the waiver, consent and approval of all other persons
whose waiver, consent or approval is required in order to consummate the
transactions contemplated by this Agreement.
2.13 Artal Investor Joinders. Prior to making any Excluded Artal
Transfer at any time prior to the termination of this Agreement, Artal shall
obtain an Investor Joinder from such transferee, and such transferee, by
execution thereof, (i) shall agree to become and automatically be deemed to be
subject to, and have the benefit of, all of the rights and obligations contained
in this Agreement applicable to Artal and (ii) shall have made on the date
thereof all representations and warranties made on the date hereof by Artal
(modified, if necessary, to reflect the nature of such Person as a corporation,
partnership, other entity or natural person). Promptly thereafter, Artal shall
cause originally executed copies of such Investor Joinder to be delivered to
Bermore, Flowers and the Company and shall notify Bermore, Flowers and the
Company of the number and type of Artal Shares Transferred.
2.14 FIRPTA Certificates. At the Closing, the Company shall deliver to
Bermore a certificate substantially in the form of Annex C-1, and as promptly as
practicable and in any event no more than 30 days thereafter the Company shall
deliver to the Internal Revenue Service a certificate substantially in the form
of Annex C-2.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Artal, Flowers and the Company.
Each of Artal, Flowers and the Company (solely as to itself) hereby represents
and warrants to each of the other parties hereto as follows:
<PAGE> 10
10
(a) It is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has the
requisite power and authority to own, lease and operate its properties and
assets and to conduct its business as now conducted by it. It has all requisite
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery by it of this Agreement and the
performance by it of its obligations hereunder have been duly authorized by all
necessary action. This Agreement has been duly executed and delivered by it and,
assuming the due authorization, execution and delivery thereof by the other
parties hereto, constitutes its valid and legally binding obligation,
enforceable against it in accordance with its terms; and
(b) The execution, delivery and performance of this Agreement
by it will not, with or without the giving of notice or lapse of time, or both,
(i) conflict with its certificate of incorporation or by-laws (or the
corresponding documents of any of its Subsidiaries) or (ii) result in any breach
of any terms or provisions of, or constitute a default under, or conflict with
any material contract, agreement or instrument to which it or any of its
Subsidiaries is a party or by which it or any of its Subsidiaries is bound,
except for such breaches, defaults or conflicts (A) which shall have been cured
or waived prior to the Closing or (B) which, in the aggregate, would not
reasonably be expected to have a material adverse effect on the financial
position, results of operations, assets, liabilities, properties or business of
it and its Subsidiaries, taken as a whole, or (iii) violate any material
provision of law, statute, rule or regulation to which it is subject or any
material order, judgment or decree applicable to it.
(c) There is no suit, action, proceeding, claim or
investigation pending or, to its knowledge, threatened against or affecting it
which, if pursued and/or resulting in a judgment, would have a material adverse
affect on its right to consummate the transactions contemplated hereby.
3.2 Representations and Warranties of Bermore. Bermore hereby
represents and warrants to each of the other parties hereto as follows:
(a) It is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has the
requisite power and authority to own, lease and operate its properties and
assets and to conduct its business as now conducted by it. It has all requisite
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery by it of this Agreement and the
performance by it of its obligations hereunder have been duly authorized by all
necessary action. This Agreement has been duly executed and delivered by it and,
assuming the due authorization, execution and delivery thereof by the other
<PAGE> 11
11
parties hereto, constitutes its valid and legally binding obligation,
enforceable against it in accordance with its terms;
(b) The execution, delivery and performance of this Agreement
by it will not, with or without the giving of notice or lapse of time, or both,
(i) conflict with its certificate of incorporation or by-laws (or the
corresponding documents of any of its Subsidiaries) or (ii) result in any breach
of any terms or provisions of, or constitute a default under, or conflict with
any material contract, agreement or instrument to which it or any of its
Subsidiaries is a party or by which it or any of its Subsidiaries is bound,
except for such breaches, defaults or conflicts (A) which shall have been cured
or waived prior to the Closing and (B) which, in the aggregate, would not
reasonably be expected to have a material adverse effect on the financial
position, results of operations, assets, liabilities, properties or business of
it and its Subsidiaries, taken as a whole, or (iii) violate any material
provision of law, statute, rule or regulation to which it is subject or any
material order, judgment or decree applicable to it; and
(c) There is no suit, action, proceeding, claim or
investigation pending or, to its knowledge, threatened against or affecting it
which, if pursued and/or resulting in a judgment, would have a material adverse
affect on its right to consummate the transactions contemplated hereby.
(d) Upon exercise of the GFI Warrant in the manner
contemplated by Section 2.3, Bermore will own the Bermore IPO Shares and the
Bermore Control Shares free and clear of any liens, claims or encumbrances of
any nature. Except for the rights under the Original GFI Agreement, or as
contemplated by this Agreement, Bermore has not granted any option or right, and
is not a party to any other agreement which requires, or which upon the passage
of time, the payment of money or the occurrence of any other event, may require,
Bermore to transfer any of the Bermore Shares to any other Person other than an
Affiliate of Bermore. When Flowers pays for and acquires the Bermore Control
Shares as contemplated by this Agreement, Flowers will receive them free and
clear of any liens, claims, or encumbrances of other persons, other than liens,
claims or encumbrances resulting from the acts of Flowers. When the Bermore IPO
Shares are delivered in accordance with the instructions of the Underwriters'
and paid for by the Underwriters as contemplated by this Agreement and the
Underwriting Agreement, such shares will be delivered free and clear of any
liens, claims, or encumbrances of other persons, other than liens, claims or
encumbrances resulting from the acts of the Underwriters.
ARTICLE IV
TRANSFER RESTRICTIONS ON REMAINING BERMORE SHARES
4.1 Transfer Restriction. During the Restricted Period,
Bermore agrees, without the prior written consent of Artal,
<PAGE> 12
12
except in accordance with Section 4.2 or pursuant to the exercise of any
overallotment options by the Underwriters in respect of the IPO, not to market,
attempt to arrange for or consummate the Transfer of any Bermore Shares (or any
securities convertible into or exchangeable for Bermore Shares). Prior to making
any permitted (whether as result of the exceptions set forth in Section 4.2 or
otherwise) Transfer of Bermore Shares at any time prior to the termination of
this Agreement (other than a Transfer pursuant to Section 4.2(b) or (e)),
Bermore shall obtain an Investor Joinder from such transferee, and such
transferee, by execution thereof, (i) shall agree to become and automatically be
deemed to be subject to, and have the benefit of, all of the rights and
obligations contained in this Agreement applicable to Bermore, (ii) shall have
made on the date thereof all representations and warranties made on the date
hereof by Bermore (modified, if necessary, to reflect the nature of such Person
as a corporation, partnership, other entity or natural person), (iii) shall have
appointed Michael Uytengsu or such one Person as Bermore and all of its
permitted transferees (other than Persons to whom Bermore Transfers Bermore
Shares pursuant to Section 4.2(b) or (e)) shall agree upon as its true and
lawful attorney-in-fact for purposes of exercising its rights and obligations
contained in this Agreement and (iv) shall have appointed Bermore, Ltd. or such
two Persons (which may include Bermore) as Bermore and all of its permitted
transferees (other than Persons to whom Bermore Transfers Bermore Shares
pursuant to Section 4.2(b) or (e)) shall agree upon as true and lawful
custodians (each a "Custodian" which may act independently of the other in
respect of Bermore Shares which have been Transfered to it) for all Bermore
Shares owned by such transferee and subject to this Agreement and,
simultaneously upon execution of such Investor Joinder, shall Transfer all such
Bermore Shares to the Custodian listed on the Investor Joinder. Promptly
thereafter, Bermore shall cause originally executed copies of such Investor
Joinder to be delivered to Artal, Flowers and the Company and shall notify
Artal, Flowers and the Company of the number and type of Bermore Shares
Transferred.
4.2 Exceptions. The restriction on Transfer contained in Section 4.1
above shall be inapplicable with respect to:
(a) any Transfers of Bermore Shares among Affiliates
of Bermore or members of Bermore's Family Group;
(b) any Transfer of Bermore Shares by Bermore pursuant to the
terms of Section 4.3, 4.4 or 4.5 or pursuant to a registered, underwritten
offering under Article V;
(c) any Transfers of Bermore Shares (A) to the extent of the
grant of a security interest in such Bermore Shares pursuant to a pledge or
similar agreement to secure debt of the transferor (incurred in good faith and
not for purposes of avoiding the transfer restrictions contained in this
Agreement) owing to a bank or other bona fide financial institution;
<PAGE> 13
13
provided that such security interest has not yet been exercised by the pledgee,
and (B) upon the exercise by such bank or other bona fide financial institution
of its rights under such pledge or similar agreement to acquire beneficial or
other ownership of the Bermore Shares pledged thereunder;
(d) any Transfers of Bermore Shares by a member of Bermore's
Family Group upon his or her death to his or her estate, provided that the
beneficiaries of the estate are Persons specified in clause (a) of this Section
4.2;
(e) subject to compliance with Section 1.4 of Annex A hereto,
Transfers (in addition to Transfers pursuant to the other provisions of this
Section 4.2) by Bermore which do not in the aggregate exceed 85,987 Bermore
Shares in any one month (any such Transfer during any such month, a "Monthly
Transfer"), it being understood that, to the extent Bermore does not sell an
aggregate of 85,987 Bermore Shares in any such month (for any reason
whatsoever), Bermore shall not in any event, as a result thereof, be entitled to
increase the number of Bermore Shares which it is entitled to sell in any other
month pursuant to this Section 4.2(e); and
provided, that in order to facilitate compliance with federal securities laws
and the provisions of this Agreement, the aggregate number of permitted
transferees under Sections 4.2(a), (c) and (d) shall not exceed 45 Persons at
any time during the term of this Agreement without the consent of Artal, which
consent will not be unreasonably withheld or delayed.
4.3 Tag Along. (a) At any time during the Restricted Period,
at least 15 days prior to making any Transfer of any Artal Shares to either the
Company or Flowers (or, for all purposes of this Section 4.3 and Section 4.4,
any of their respective Affiliates other than Artal), Artal shall deliver a
written notice (the "Tag/Drag Notice") to Bermore, specifying in reasonable
detail the type and number of Artal Shares proposed to be transferred, the
identity of the prospective transferee(s), the terms and conditions of the
Transfer (including without limitation, the price (or the formula for
determining the price) to be paid for each Artal Share and, in the event that
the consideration to be received by Artal in connection with such transaction
includes non-cash consideration, Artal's good faith reasonable estimate of the
cash value of such non-cash consideration), Artal's good faith estimate after
due inquiry of the maximum number of shares of Common Stock that the proposed
transferee would be willing to purchase in connection with such transfer, and
all information reasonably required to make the calculations set forth in this
Section 4.3(a). Bermore may elect to participate in the proposed Transfer by
delivering written notice to Artal within 10 days after delivery of the Tag/Drag
Notice. If Bermore has elected to participate in such Transfer pursuant to the
terms hereof, Bermore shall be entitled to sell in the proposed Transfer, at the
same price (treating debt of
<PAGE> 14
14
Artal actually assumed by the Company or Flowers, as the case may be, as a cash
payment to Artal, equal to the amount assumed) and on the same terms and
conditions (provided that such conditions are capable of being fulfilled by
Bermore) as Artal, up to a number of Bermore Shares equal to the product of (i)
the number of Artal Shares which Artal proposes to sell in the proposed Transfer
and (ii) a fraction, (A) the numerator of which is the number of Remaining
Bermore Shares and (B) the denominator of which is the number of Remaining Artal
Shares; provided that the number of Bermore Shares which Bermore is permitted to
sell pursuant to this Section 4.3(a) shall not in any event include any shares
of Common Stock other than Remaining Bermore Shares. It is expressly understood
by the parties hereto that if Artal is selling Common Stock in such Transfer,
Bermore may only participate in such Transfer by selling Common Stock and not
any Common Stock Equivalents and that, to the extent that Bermore wishes to sell
shares of Common Stock underlying any such Common Stock Equivalents, it must
exercise, convert or exchange such Common Stock Equivalents in order to Transfer
such underlying shares of Common Stock. If Bermore elects to participate in such
Transfer, it shall be obligated to pay its pro rata portion of the transaction
costs associated therewith. If the aggregate amount of Bermore Shares which
Bermore elects and is permitted under the foregoing provisions to sell in the
proposed Transfer is, together with the aggregate amount of Artal Shares which
Artal proposes to so sell, more than the total number of shares of Common Stock
that the Company or Flowers, as the case may be, wishes to purchase, then each
of Artal and Bermore shall be entitled to sell to the Company or Flowers, as the
case may be, that number of shares of Common Stock equal to the number of shares
of Common Stock to be so purchased by the Company or Flowers, as the case may
be, from Artal and Bermore, multiplied by a fraction, the numerator of which is
the number of such shares of Common Stock that Artal or Bermore, as the case may
be, elects and is permitted under the foregoing provisions to sell and the
denominator of which is the aggregate number of shares of Common Stock Artal and
Bermore elect to sell and are permitted to sell under the foregoing provisions.
If Bermore has not delivered written notice to Artal that Bermore elects to
participate in a proposed Transfer within the 10-day period provided above for
the delivering of such notice, then Artal shall have the right, for a period of
45 days after the expiration of such 10-day period, to consummate such proposed
Transfer to the Company or Flowers, as the case may be, at the same price and on
the same terms and conditions stated in the related Tag/Drag Notice. If, at the
end of such 45-day period, Artal has not consummated such proposed Transfer to
the Company or Flowers, as the case may be, the terms of this Section 3.3 shall
again be in effect with respect to such proposed Transfer to the Company or
Flowers, as the case may be.
(b) For purposes of Section 4.3(a) and Section 4.5(a), if
Artal has Transferred all or part of its Artal Shares to one or more of its
Subsidiaries or other entities controlled by it (a
<PAGE> 15
15
"Securities Holding Company"), a sale or other disposition by Artal (by merger
or otherwise) of an equity or beneficial interest in a Securities Holding
Company to, for purposes of Section 4.3(a), the Company or Flowers, as the case
may be, or, for purposes of Section 4.5(a), any other Person, shall be treated
as follows: (i) if such sale or other disposition is of 50% or more of the
equity or beneficial interest in such Securities Holding Company, then such sale
or other disposition shall be deemed to be a Transfer of all such Artal Shares
directly or indirectly owned or controlled by such Securities Holding Company,
and (ii) if such sale or other disposition is of less than 50% of the equity or
beneficial interest in such Securities Holding Company, then such sale or other
disposition shall be deemed to be a Transfer of a percentage of the number of
Artal Shares directly or indirectly owned or controlled by such Securities
Holding Company equal to the percentage of the equity or beneficial interest in
such Securities Holding Company sold or disposed of in such transaction. In
either such event, if the Securities Holding Company owns assets other than the
Artal Shares, the consideration paid to Artal by the Company or Flowers, as the
case may be, or such other Person, for the Transfer and allocable to the Artal
Shares, in the absence of agreement of Artal and Bermore, shall be determined by
an investment banking firm of national reputation selected by mutual agreement
of the parties hereto, provided, that such investment banking firm shall not
have a material direct or indirect financial interest in or other relationship
with the Company or any of its Subsidiaries or Affiliates.
(c) The exercise or nonexercise of the rights of Bermore in this
Section 4.3 to participate in one or more Transfers by Artal to the Company or
Flowers, as the case may be, shall not adversely affect Bermore's rights to
participate in subsequent Transfers by Artal to the Company or Flowers.
4.4 Drag-Along. (a) In the case that Artal proposes to make a
Transfer of Artal Shares to the Company or Flowers, as the case may be, at any
time after Closing and prior to the Release Date that would trigger Bermore's
tag along rights pursuant to Section 4.3, Artal may elect, by so specifying in
the Tag/Drag Notice, to require Bermore to, and Bermore will, participate in
such transaction on the same terms and conditions as Artal with respect to a
number of Bermore Shares determined as set forth below. Bermore shall be
required to sell in the proposed Transfer, at the same price (treating debt of
Artal actually assumed by the proposed transferee as a cash payment to Artal,
equal to the amount assumed) and on the same terms and conditions as Artal
(provided that such conditions are capable of being fulfilled by Bermore), a
number of Bermore Shares (such number being hereinafter referred to as the "Drag
Along Number") of each type being Transferred by Artal equal to the lesser of
(i) the product of (A) the number of Artal Shares which Artal proposes to sell
in the proposed Transfer and (B) a fraction, (x) the numerator of which is the
number of Remaining Bermore Shares and
<PAGE> 16
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(y) the denominator of which is the number of Remaining Artal Shares, (ii) the
number of such Bermore Shares specified by Artal in the relevant Tag/Drag Notice
and (iii) the number of Remaining Bermore Shares owned by Bermore at the time of
delivery of such Tag/Drag Notice; provided that the number of Bermore Shares
which Bermore is required to sell pursuant to this Section 4.4(a) shall not in
any event include any shares of Common Stock other than Remaining Bermore
Shares. It is expressly understood by the parties hereto that if Artal proposes
to Transfer Common Stock and so elects, Bermore must Transfer a number of shares
of Common Stock equal to the Drag Along Number by selling Common Stock (and not
Common Stock Equivalents) and, if necessary, it must exercise, convert or
exchange such Common Stock Equivalents in order to Transfer such underlying
shares of Common Stock. If Bermore is required to participate in such Transfer,
Artal shall be obligated to pay all the transaction costs associated therewith.
(b) In connection with any proposed transaction described in
Section 4.4(a) above, Bermore agrees (i) to consent to and raise no objections
(other than with respect to its rights under this Section 4.4) to, and to take
all other actions (including, without limitation, voting, or entering into
written consents with respect to, all of its Bermore Shares in favor of such
transaction) reasonably necessary or desirable to cause, the consummation of
such transaction and (ii) to sell, Transfer and deliver its Bermore Shares as
required by the terms of such transaction; provided, however, that,
notwithstanding anything to the contrary contained herein, Bermore will not be
required to register any Bermore Shares under the Securities Act in order to
comply with its obligations under this Section 4.4; and provided further,
however, that, if Bermore has, prior to its receipt of a Tag/Drag Notice,
entered into a binding agreement to Transfer Bermore Shares (so long as such
agreement does not otherwise violate this Agreement), Bermore shall not be
prohibited from consummating such Transfer, notwithstanding anything to the
contrary contained in this Section 4.4.
(c) If the Drag Along Number is less than the number of
Bermore Shares Bermore may sell in the proposed Transfer pursuant to its rights
under Section 4.3, then, notwithstanding the exercise by Artal of its rights
under this Section 4.4, Bermore may elect to sell such additional Bermore Shares
pursuant to its rights under Section 4.3.
4.5 Mandatory Sale Events. (a) If, during any of the three
successive 12-month periods commencing on the Lockup Expiration Date, Artal
proposes to Transfer, in the aggregate (other than Excluded Artal Transfers,
Transfers pursuant to Section 4.3 or 4.4 or Transfers pursuant to registered,
underwritten offerings under Article V), a number of Artal Shares that is
greater than the Artal Basket, then Bermore shall mandatorily participate in any
additional Transfers in excess of the Artal Basket by Artal (other than Excluded
Artal Transfers,
<PAGE> 17
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Transfers pursuant to Section 4.3 or 4.4 or Transfers pursuant to registered,
underwritten offerings under Article V) which are consummated during the
remainder of such 12-month period, on the same terms and conditions as Artal
with respect to a number of Bermore Shares determined as set forth below (each
such Transfer a "Mandatory Sale Event", and the aggregate number of Artal Shares
and Bermore Shares proposed to be Transferred pursuant to such Mandatory Sale
Event, the "Mandatory Sale Shares"). As promptly as practicable after Artal has
(i) with respect to a negotiated Transfer to a third party, agreed to Transfer
the applicable Mandatory Sale Shares to such third party, or (ii) with respect
to an open market sale, decided it intends to Transfer the applicable Mandatory
Sale Shares, but in each case in no event less than two business days prior to
the consummation of such Mandatory Sale Event, Artal shall deliver a written
notice to Bermore via facsimile, specifying in reasonable detail the type and
number of Mandatory Sale Shares, the identity of the prospective transferee(s)
(or, if applicable, that the Transfer will be an open market transaction), the
terms and conditions of the Transfer (including without limitation, the price
(or the method of determining the price) to be paid for each Mandatory Sale
Share and, in the event that the consideration to be received by Artal in
connection with such Mandatory Sale Event includes non-cash consideration,
Artal's good faith reasonable estimate of the cash value of such non-cash
consideration) and all information reasonably required to make the calculations
set forth in this Section 4.5(a). Bermore shall be required to sell in
connection with any Mandatory Sale Event, at the same price (treating debt of
Artal actually assumed by the proposed transferee as a cash payment to Artal,
equal to the amount assumed) and on the same terms and conditions as Artal
(provided that such conditions are capable of being fulfilled by Bermore), the
lesser of (i) the number of Remaining Bermore Shares owned by Bermore at the
time of such Mandatory Sale Event and (ii) a number of Bermore Shares equal to
the product of (A) the number of Mandatory Sale Shares and (B) a fraction, (x)
the numerator of which is number of Remaining Bermore Shares and (y) the
denominator of which is the sum of the number of Remaining Bermore Shares and
the number of Remaining Artal Shares; provided that the number of Bermore Shares
which Bermore is required to sell pursuant to this Section 4.5(a) shall not in
any event include any shares of Common Stock other than Remaining Bermore
Shares. It is expressly understood by the parties hereto that if Bermore is
required to Transfer Bermore Shares pursuant to this Section 4.5, Bermore must
Transfer the requisite number of shares of Common Stock (and not Common Stock
Equivalents) and, if necessary, it must exercise, convert or exchange such
Common Stock Equivalents in order to Transfer such underlying shares of Common
Stock. If Bermore is required to participate in such Mandatory Sale Event, it
shall be obligated to pay its pro rata portion of the transaction costs
associated therewith.
(b) In connection with any Mandatory Sale Event, Bermore
agrees (i) to consent to and raise no objections (other
<PAGE> 18
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than with respect to its rights under this Section 4.5) to, and to take all
other actions (including, without limitation, voting, or entering into written
consents with respect to, all of its Bermore Shares in favor of such
transaction) reasonably necessary or desirable to cause, the consummation of
such transaction and (ii) to sell, Transfer and deliver the Mandatory Sale
Shares which are Remaining Bermore Shares as required by the terms of such
Mandatory Sale Event, including, without limitation, delivery of certificates
for such Remaining Bermore Shares (or arrangement of book-entry transfers in
respect of such Remaining Bermore Shares) in order to permit timely settlement
in accordance with the terms of such Mandatory Sale Event; provided, however,
that, notwithstanding anything to the contrary contained herein, Bermore will
not be required to register any Bermore Shares under the Securities Act in order
to comply with its obligations under this Section 4.5; and provided further,
however, that, if Bermore has, prior to its receipt of a Mandatory Sale Notice,
entered into a binding agreement to Transfer Bermore Shares (so long as such
agreement does not otherwise violate this Agreement), Bermore shall not be
prohibited from consummating such Transfer, notwithstanding anything to the
contrary contained in this Section 4.5.
4.6 Prohibited Transfers. Any Transfer of Bermore Shares or
Artal Shares made in violation of this Agreement (including, without limitation,
a Transfer made without obtaining a necessary Investor Joinder) shall be null
and void. The Company shall not permit such Transfer to be recorded on the
Company's books and records and shall not otherwise cooperate in consummating
such Transfer.
ARTICLE V
REGISTRATION RIGHTS
The procedures and further agreements of the parties hereto
set forth in Annex A to this Agreement are incorporated herein by reference.
ARTICLE VI
CONDITIONS
The obligations of each party hereto at Closing are subject to
satisfaction of the following conditions by each of the other parties hereto
(any or all of which may be waived with respect to any party by the other
parties hereto):
6.1 Representations True at Closing. The representations and
warranties of such party contained in this Agreement will be true and
correct in all material respects at the Closing Date with the same
effect as though made on that date, except to the extent such
representations and warranties expressly relate to an earlier date (in
which case such representations and warranties shall be true and
<PAGE> 19
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correct in all material respects on and as of such earlier date), and
such party will have delivered to each of the other parties hereto a
certificate dated that date and signed by the President, a Vice
President or such other authorized agent or attorney-in-fact of such
party to that effect.
6.2 Covenants. Such party will have fulfilled in all material
respects all its obligations under this Agreement required to have been
fulfilled prior to or at the Closing, and will have delivered to each
of the other parties hereto a certificate dated that date and signed by
the President, a Vice President or such other authorized agent or
attorney- in-factof such party to that effect.
6.3 No Injunction, etc. No order will have been entered by any
court or governmental or regulatory authority and be in force which
invalidates this Agreement or restrains the completion of the
transactions which are the subject of this Agreement.
6.4 Consents. All consents or waivers necessary for the
consummation of the transactions contemplated hereby will have been
received on or prior to the Closing Date.
6.5 Effectiveness of S-1 Registration Statement. The S-1
Registration Statement shall have been declared effective by the SEC, and no
stop order suspending effectiveness shall have been issued, and no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing. The Artal IPO Shares and the
Bermore IPO Shares shall have been registered for issuance under all applicable
Blue Sky laws or shall be exempt from such registration, and no stop order shall
have been issued with respect to the issuance or sale of such securities by any
Blue Sky authority.
6.6 Consummation of IPO. The consummation of the IPO shall
have occurred contemporaneously with the Closing.
ARTICLE VII
MISCELLANEOUS
7.1 Time and Place of Closing. If the IPO is consummated, the
Closing shall be held at the offices of Cravath, Swaine & Moore, 825 Eighth
Avenue, New York, New York 10019, unless another place or date is agreed to in
writing by the parties hereto.
7.2 Transactions at Closing. At the Closing, each of the
following transactions shall occur:
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(a) The transactions contemplated by Sections 2.1, 2.2, 2.3,
2.4, 2.5 and 2.6, in each case in accordance with such section.
(b) The delivery by each of the parties hereto of the
certificates contemplated by Sections 6.1 and 6.2, in each case in accordance
with such sections.
7.3 Survival of Representations and Warranties. All
representations, warranties, agreements, covenants and obligations made or
undertaken by each party hereto in this Agreement or in any document or
instrument executed and delivered pursuant hereto have been relied upon by the
other parties hereto, shall survive the Closing hereunder, and shall not merge
in the performance of any obligation by any party hereto.
7.4 Termination. (a) This Agreement may be terminated or
abandoned prior to Closing only (i) by the mutual consent of the Company, Artal,
Flowers and Bermore, notwithstanding prior approval by any or all of such
parties, and (ii) will terminate automatically without any further action by the
parties hereto simultaneously upon the termination or abandonment, if any, of
the Underwriting Agreement. In the event of a termination of this Agreement
prior to Closing, (i) each party shall pay the costs and expenses incurred by it
in connection herewith, (ii) no party (or any of its officers, directors,
employees agents or representatives) shall be liable to any other party for any
costs, expenses, damage or loss of anticipated profits hereunder, (iii) each
party shall retain any and all rights attendant to any breach of any covenant,
representation or warranty made hereunder and (iv) the Original GFI Agreement
shall remain in full force and effect.
(b) Should Closing occur, this Agreement shall not terminate,
shall remain in full force and effect and shall be binding on any party hereto
until the earlier of (i) the Release Date or (ii) the date on which Bermore no
longer owns any Remaining Bermore Shares (except that, notwithstanding any such
termination, provisions contained in Annex A hereof which by their terms are
applicable after the consummation of any offering made pursuant thereto
(including, without limitation, provisions relating to indemnification and
contribution), shall continue to remain in full force and effect as provided
therein in respect of any Remaining Bermore Shares).
7.5 Remedies. (a) Each party hereto shall have all rights and
remedies reserved for such party pursuant to this Agreement and all of the
rights which such parties have under any law or equity. Any Person having any
rights under any provision of this Agreement will be entitled to enforce such
rights specifically, to recover damages by reason of any breach of any provision
of this Agreement and to exercise all other rights granted by law or equity.
<PAGE> 21
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(b) The parties hereto agree that if any parties seek to
resolve any dispute arising under this Agreement pursuant to a legal proceeding,
the "prevailing" parties to such proceeding shall be entitled to receive
reasonable fees and expenses (including reasonable attorneys' fees and expenses)
incurred in connection with such proceedings. For purposes of this Section
7.5(b), a party shall be deemed to be a "prevailing" party only if it prevails
on each element of its claim (including the amount and type of damages sought).
If neither party is the prevailing party, the parties agree to request the court
or other decision making body to make a separate determination as to the
allocation of fees and expenses.
(c) It is acknowledged that it will be impossible to measure
in money the damages that would be suffered if the parties fail to comply with
any of the obligations herein imposed on them and that in the event of any such
failure, an aggrieved Person will be irreparably damaged and will not have an
adequate remedy at law. Any such Person shall, therefore, be entitled to
injunctive relief, including specific performance, to enforce such obligations,
and if any action should be brought in equity to enforce any of the provisions
of this Agreement, none of the parties hereto shall raise the defense that there
is an adequate remedy at law.
7.6 Consent to Amendments. Except as expressly set forth
herein, the provisions of this Agreement may be amended with the prior written
consent of each of Artal and Bermore only, and each of Artal and Bermore can
waive in writing any of its respective rights hereunder without any action by
any other party hereto except that (i) no such amendment or waiver in respect of
the Control Transaction or Section 2.2 hereof may be effected without the prior
written consent of Flowers and (ii) no such amendment or waiver which materially
and adversely affects the Company's obligations in respect of the registration
rights contained in Annex A hereto may be effected without the prior written
consent of the Company.
7.7 Antidilution. The parties hereto agree that all references
herein to the GFI Warrant, amounts of shares of Common Stock and the Warrant
Exercise Price Per Share give effect to a 1-for-10 reverse stock split of the
Common Stock consummated by the Company prior to the date hereof and assume
consummation of a 57.325-for-1 stock split of the Common Stock to be consummated
by the Company immediately prior to Closing. An appropriate and proportionate
adjustment shall be made to all references to amounts of shares of Common Stock
referenced herein for any Recapitalization consummated by the Company after the
date hereof.
7.8 Successors and Assigns. Except as otherwise expressly
provided herein, all provisions contained in this Agreement by or on behalf of
any of the parties hereto will bind and inure to the benefit of the respective
successors and
<PAGE> 22
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permitted transferees of the parties hereto whether so expressed or not. This
Agreement is not intended to create any third party beneficiaries.
7.9 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law. The parties agree that (i) the provisions of this
Agreement shall be severable in the event that any of the provisions hereof are
held by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, (ii) such invalid, void or otherwise unenforceable provisions
shall be automatically replaced by other provisions which are as similar as
possible in terms to such invalid, void or otherwise unenforceable provisions
but are valid and enforceable and (iii) the remaining provisions shall remain
enforceable to the extent permitted by law.
7.10 Counterparts. This Agreement may be executed in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and the
same Agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
7.11 Notices. All notices, demands and other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing or sent by facsimile and shall be deemed to have been given
(i) when personally delivered or sent by facsimile (with proof of receipt at the
number to which notices are required to be sent), (ii) one business day after
being sent by overnight courier (receipt confirmation requested) or (iii) five
business days after being mailed by certified or registered mail (return receipt
requested and postage prepaid) to the recipient. Such notices, demands and other
communications will be sent to each party hereto (and such party's permitted
transferees or assigns, if any) at the address or addresses indicated on the
signature pages hereto, or to such one other address or to the attention of such
one other person as the recipient party (together with its permitted transferees
or assigns, if any) has specified by prior written notice under this Section
7.11 to the sending party.
7.12 Governing Law. In all respects, including all matters of
construction, validity and performance, this Agreement and the obligations
arising hereunder shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York applicable to contracts made and
performed in such state, without regard to the principles thereof regarding
conflict of laws, except for matters directly within the purview of the General
Corporation Law of the State of Delaware (the "DGCL") which shall be governed by
the DGCL.
7.13 Further Assurances. Each party hereto shall do
and perform or cause to be done and performed all such further
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acts and things and shall execute and deliver all such other agreements,
certificates, instruments, and documents as any other party hereto reasonably
may request in order to carry out the provisions of this Agreement and the
consummation of the transactions contemplated hereby.
7.14 Jurisdiction; Venue; Process. (a) The parties to this
Agreement agree that jurisdiction and venue in any action brought by any party
hereto pursuant to this Agreement shall properly lie and shall be brought in any
federal or state court located in the State of New York. By execution and
delivery of this Agreement, each party hereto irrevocably submits to the
jurisdiction of such courts for itself or himself and in respect of its or his
property with respect to such action. The parties hereto irrevocably agree that
venue would be proper in such court, and hereby irrevocably waive any objection
that such court is an improper or inconvenient forum for the resolution of such
action.
(b) Artal hereby irrevocably and unconditionally designates
and directs Mr. David Van Zandt, with offices on the date hereof at Northwestern
University School of Law, 357 East Chicago Avenue, Chicago, Illinois 60611, as
its agent to receive service of any and all process and documents on its behalf
in any legal action or proceeding related to this Agreement and agrees that
service upon such agent shall constitute valid and effective service upon Artal
and that failure of such agent to give any notice of such service to Artal shall
not affect or impair in any way the validity of such service or of any judgment
rendered in any action or proceeding based thereon.
7.15 Brokers. Each party hereto agrees to indemnify and hold
harmless each of the other parties hereto from and against any fee, claim, loss
or expense arising out of any claim by any investment banker, broker or finder
employed or alleged to have been employed by it.
7.16 Waiver. Any failure on the part of any party hereto to
comply with any of its obligations, agreements or conditions hereunder may be
waived by any other party to whom such compliance is owed. No waiver of any
provision of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.
7.17 Expenses. All expenses incurred by the parties hereto in
connection with or related to the authorization, preparation and execution of
this Agreement and the closing of the transactions contemplated hereby,
including, without limitation, all fees and expenses of brokers, agents,
representatives and counsel and accountants employed by any such party, shall be
borne solely and entirely by the party which has incurred the same.
Notwithstanding the foregoing, (a) the payment of Artal's expenses shall
governed by Section 14.7 of the
<PAGE> 24
24
New Stockholders' Agreement and (b) except for the underwriting discounts in
respect of the Bermore IPO Shares, Bermore's out-of-pocket expenses and the fees
and disbursements of Bermore's counsel, the Company will bear all costs and
expenses in connection with the registration of the Bermore IPO Shares, review
and finalization of underwriting arrangements and all other aspects of the IPO
in accordance with Annex A of the Original GFI Agreement.
7.18 Headings. The section and other headings in this
Agreement are inserted solely as a matter of convenience and for reference, and
are not a part of this Agreement.
7.19 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersedes and cancels any prior
agreements, representations, warranties, or communications, whether oral or
written, among the parties hereto relating to the transactions contemplated
hereby or the subject matter herein, except to the extent set forth in Section
2.5.
7.20 Pronouns. All pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter gender, as the context requires.
7.21 Annexes Incorporated. All Annexes attached hereto are
incorporated herein by reference.
7.22 Time of Essence. Time is of the essence in this
Agreement.
7.23 MUTUAL WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR
DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED
HERETO.
* * * *
<PAGE> 25
25
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
Name: KEEBLER FOODS COMPANY
Address for Notices: with copies to:
Keebler Foods Company Winston & Strawn
677 Larch Avenue 35 West Wacker Drive
Elmhurst, Illinois 60126 Chicago, Illinois 60601
Facsimile No.: 1-630 Facsimile No.: 1-312-558-5700
Attn: Chief Executive Officer Attn: Bruce Toth, Esq.
KEEBLER FOODS COMPANY
By:________________________________
Name:
Title:
<PAGE> 26
26
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
Name: BERMORE, LTD.
Address for with copies
Notices: to:
Crawford House Michael Uytengsu
23 Church Street c/o G.F. Industries, Inc.
P.O. Box HM 1436 999 Baker Way, Suite 200
Hamilton, Bermuda HM FX San Mateo, California 94404
Facsimile No: 1-441-295-4706 Facsimile No.: 1-650-312-9374
Attn: Director
and:
Appleby, Spurling & Kempe
Cedar House
41 Cedar Avenue
P.O. Box HM 1436
Facsimile No.: 1-441-292-8666
Attn: John Campbell, Esq.
BERMORE, LTD.
By:___________________________
Name:
Title:
<PAGE> 27
27
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
Name: ARTAL LUXEMBOURG S.A.
Address for with copies
Notices: to:
Artal Luxembourg S.A. The Invus Group, Ltd.
39 Boulevard Royal 135 E. 57th Street
Luxembourg City, Luxembourg New York, New York 10022
Facsimile No.: 352-22-42-66 Facsimile No.: 1-212-371-1829
Attn: Managing Director Attn: President
and:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Facsimile No.: 1-212-455-2502
Attn: Robert E. Spatt, Esq.
ARTAL LUXEMBOURG S.A.
By:___________________________
Name:
Title:
<PAGE> 28
28
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
Name: FLOWERS INDUSTRIES, INC.
Address for with copies
Notices: to:
Flowers Industries, Inc. Jones, Day, Reavis & Pogue
1919 Flowers Circle 3500 One Peachtree Center
Thomasville, Georgia 31757 303 Peachtree Street, N.E.
Facsimile No.: 1-912-225-3808 Atlanta, GA 30308
Attn: Robert P. Crozer Facsimile No.: 1-404-581-8330
Attn: Robert W. Smith, Esq.
FLOWERS INDUSTRIES, INC.
By:___________________________
Name:
Title:
<PAGE> 29
ANNEX A
PROVISIONS REGARDING REGISTRATION RIGHTS
This Annex A is part of and is incorporated into that certain
Stock Purchase and Stockholder's Agreement (the "Agreement"), dated as of
January 2_, 1998, among the Company, Artal, Flowers and Bermore. Capitalized
terms used in this Annex A and not otherwise defined shall have the meanings
ascribed to them in the Agreement. Certain capitalized terms used herein are
defined in Section 2.1 of this Annex A.
It is understood that certain incidental registration rights
have been granted to various management investors pursuant to certain management
stockholder's agreements pursuant to the Original Stockholders' Agreement,
including Annex A thereto, and certain demand and incidental registration rights
have been granted to Artal pursuant to Annex A of the New Stockholders'
Agreement and that, subject to restrictions contained in the New Stockholders'
Agreement, additional registration rights may be extended in the future to
holders of securities of the Company.
1.1 Incidental Registrations. If, at any time during (and
solely during) the Restricted Period, (a) Artal has exercised a demand
registration right pursuant to the New Stockholders' Agreement, including Annex
A thereto (as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the Agreement) (an "Artal Demand Right") and has
delivered a demand notice to the Company in connection therewith to cause the
Company to register any Artal Shares under the Securities Act for an
underwritten, public offering (or, in connection with a registered, underwritten
offering of Artal Shares pursuant to an effective Shelf Registration Statement,
has delivered a notice to the Company regarding its intention to effect such an
offering), or (b) the Company proposes to engage in a registration of securities
in which Artal will be entitled to exercise its incidental registration rights
under Section 1.2(a) of Annex A of the New Stockholders' Agreement (as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with the Agreement) (an "Artal Piggyback"), the Company will each
such time give prompt written notice to each Custodian of Artal's (or the
Company's, as the case may be) intention to do so and of Bermore's rights under
this Section 1.1, at least (i) with respect to the exercise of an Artal Demand
Right, 15 days prior to the anticipated date of the initial filing of the
related registration statement (or, in the case of a registered, underwritten
offering pursuant to an effective Shelf Registration Statement, 15 days prior to
the formal commencement of such registered, underwritten offering of Artal
Shares) or (ii) with respect to an Artal Piggyback, 30 days prior to the
anticipated date of the initial filing of the related registration statement.
Such notice shall state the number of shares requested to be included in such
offering by Artal (or, if such number is not known by the Company at the time of
delivery of such notice, the Company shall notify Bermore of such number
promptly upon receipt thereof) and shall offer Bermore the opportunity to
include in such registration statement
<PAGE> 30
2
(or, in the case of an effective Shelf Registration Statement, include in such
registered, underwritten offering) a number of Bermore Shares equal to the
product of (i) the number of Artal Shares which Artal proposes to sell in the
proposed registered, underwritten offering and (ii) a fraction, (A) the
numerator of which is the number of Remaining Bermore Shares and (B) the
denominator of which is the number of Remaining Artal Shares. Upon the written
request of Bermore delivered to Artal and the Company within (i) with respect to
the exercise an Artal Demand Right, 10 days after the receipt of the Company's
notice (which request shall specify the number of Bermore Shares intended to be
disposed of by Bermore) or (ii) with respect to an Artal Piggyback, 20 days
after the receipt of the Company's notice (which request shall specify the
number of Bermore Shares intended to be disposed of by Bermore), the Company
shall (and Artal shall use its best efforts do cause the Company to do so), if
applicable, use its best efforts to effect the registration under the Securities
Act of all Artal Shares and Bermore Shares of the class then being registered
which the Company has been so requested to register by Artal and Bermore, to
permit the disposition of the Artal Shares and Bermore Shares so to be
registered; provided that, (i) the investment banker or investment bankers and
manager or managers that will manage the offering will be selected (i) with
respect to an Artal Demand Right, by Artal or (ii) with respect to an Artal
Piggyback, by the Company, and Bermore will not have the right to designate or
select any underwriters in connection with such offering, (ii) if Bermore elects
to participate in such registered, underwritten offering, it must sell the
Bermore Shares to be included in such offering to the underwriters on the same
terms and conditions as apply to Artal (except that indemnification obligations
of Bermore shall be limited to those obligations set forth in Section 1.7(b))
and complete and execute all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) if, at any time after giving
written notice of its intention to register any shares of Common Stock (or, with
respect to an effective Shelf Registration Statement, of its intention to sell
Artal Shares pursuant to a registered, underwritten offering) pursuant to this
Section 1.1 and, prior to the effective date of the related registration
statement (or, in the case of an effective Shelf Registration Statement, prior
to the execution of an underwriting agreement in connection with the applicable
offering of Artal Shares), Artal (in the case of the exercise of an Artal Demand
Right) or the Company (in the case of the exercise of an Artal Piggyback), as
the case may be, shall determine for any reason not to register (or, in the case
of an effective Shelf Registration Statement, not to sell Artal Shares in a
registered, underwritten offering) such shares of Common Stock, Artal or the
Company, as the case may be, shall give written notice to Bermore and,
thereupon, (A) Artal shall be relieved of its obligation to cause the Company to
register (or, in the case of an effective Shelf Registration Statement, sell)
any Bermore Shares in connection with such
<PAGE> 31
3
registered, underwritten offering and (B) the Company shall be relieved of its
obligation to register (or, in the case of an effective Shelf Registration
Statement, sell) any Bermore Shares in connection with such registered,
underwritten offering. A registration (or, in the case of an effective Shelf
Registration Statement, a sale pursuant to a registered, underwritten offering)
effected pursuant to this Section 1.1 is referred to herein as an "Incidental
Registration."
1.2 Priority in Incidental Registrations. If the managing
underwriter in connection with a registered, underwritten offering pursuant to
Section 1.1 advises the Company that, in its opinion, the number of securities
which the Company and any other persons entitled to include securities in such
registration (or, in the case of an effective Shelf Registration Statement, the
applicable registered, underwritten offering) propose to include therein exceeds
the largest number of securities which can be sold without having an adverse
effect on such offering, including the price at which such securities can be
sold, the Company will include in such registration (or, in the case of an
effective Shelf Registration Statement, the applicable registered, underwritten
offering) up to such maximum number of securities (i) first, all the securities
the Company initially proposes to sell for the account of (A) Artal, pursuant to
the Company's contractual requirement to do so contained in Annex A of the New
Stockholders' Agreement, and (B) Bermore, pursuant to the Company's contractual
requirement to do so contained herein to register securities owned by Bermore,
and (ii) second, to the extent that the number of securities referred to in
clause (i) is less than the number of securities which the Company has been
advised can be sold in such offering without having the adverse effect referred
to above, all securities owned by any other holder of securities electing and
entitled to register (or, in the case of a registered, underwritten offering
under an effective Shelf Registration Statement, sell) such securities pursuant
to any similar registration rights agreement; provided that if the number of
securities to be included in such registration (or, in the case of an effective
Shelf Registration Statement, the applicable registered, underwritten offering)
by Artal and Bermore pursuant to clause (i) of this Section exceeds the number
which the Company has been advised can be sold in such offering without having
the adverse effect referred to above, the number of securities included in such
registration by each of Artal and Bermore shall be limited to such extent and
shall be allocated pro rata among Artal and Bermore on the basis of the relative
number of securities requested (and, in the case of Bermore, entitled) to be
included in such registration (or, in the case of an effective Shelf
Registration Statement, the applicable registered, underwritten offering) by
each of Artal and Bermore.
1.3 Rule 415. Notwithstanding anything to the contrary
contained herein, if, during the Restricted Period, Artal proposes to cause the
Company to register any Artal Shares under
<PAGE> 32
4
Rule 415 of the Securities Act pursuant to a Registration Statement on Form S-3
(a "Shelf Registration Statement"), (i) Artal will each such time give prompt
written notice to Bermore of its intention to do so and of Bermore's rights
under this Section 1.3, at least 15 days prior to the anticipated date of the
initial filing of such Shelf Registration Statement, (ii) Bermore will
mandatorily elect to include all Bermore Shares for registration under such
Shelf Registration Statement and (iii) the Company shall use its best efforts to
effect the registration under the Securities Act of all Artal Shares and Bermore
Shares of the class then being registered which the Company has been so
requested to register by Artal and Bermore, to permit the disposition of the
Artal Shares and Bermore Shares so to be registered. Except for registered,
underwritten offerings in which Bermore elects to participate in accordance with
Section 1.1, Bermore will not be required to, and will not, effect sales of
Bermore Shares (including, without limitation, sales of Bermore Shares pursuant
to Article IV of the Agreement) under such Shelf Registration Statement, and
Bermore will not be entitled to exercise any Incidental Registration or other
similar "piggyback" rights in respect of sales by Artal of Artal Shares under
such Shelf Registration Statement, other than its Incidental Registration rights
under Section 1.1 in connection with registered, underwritten offerings;
provided, that it is understood by the parties hereto that nothing contained in
this Section 1.3 or elsewhere in this Annex A shall limit Bermore's rights to
Transfer Remaining Bermore Shares outside of such Shelf Registration Statement
pursuant to Section 4.2, 4.3, 4.4 or 4.5 of the Agreement (subject to compliance
by Bermore with Section 1.4).
1.4 Hold-Back Agreements. Bermore hereby agrees that, each
time it is given the opportunity to sell Bermore Shares in an Incidental
Registration pursuant to Section 1.1 (whether or not it elects to exercise its
Incidental Registration rights and include any Bermore Shares for sale in the
applicable registered, underwritten offering), if requested (pursuant to a
timely written notice) by the managing Underwriter or Underwriters of such
registered, underwritten offering, not to effect any sale or distribution of any
of the issue being registered or a similar security of the Company or any
securities convertible or exchangeable or exercisable for such securities
(including, without limitation, any sales pursuant to Rule 144 or Section 4.2(e)
of the Agreement and excluding Transfers pursuant to Section 4.2(a), (b) (but
only to the extent Artal is permitted to engage in the underlying Transfer in
connection with the selling restrictions contained in the applicable
underwriting agreement, as the same may be amended, waived or otherwise
modified), (c) or (d) of the Agreement), except as part of such underwritten
offering, during the period (as requested by the managing Underwriter) beginning
not more than 10 days prior to, and ending up to 180 days after, the closing
date of each underwritten offering made pursuant to such Registration Statement
(or such shorter period as the managing Underwriter or Underwriters may
<PAGE> 33
5
agree), to the extent timely notified in writing by the Company or by the
managing Underwriter or Underwriters; provided, however, that such period shall
in any event commence and terminate on the same date as the selling restrictions
applicable to Artal in connection with such registered, underwritten offering
commence and terminate, after giving effect to any waiver, shortening or other
modification of such period in respect of Artal, whether before or after the
consummation of such underwritten offering; provided further, however, that,
without limiting the exceptions granted to Bermore in this Section 1.4, Bermore
shall be entitled to the benefit of the same exceptions granted to Artal by the
managing Underwriter or Underwriters, whether or not included in the applicable
Underwriting Agreement; and provided further, however, that the Company will
notify Bermore as promptly as practicable if any such underwritten offering has
been terminated, abandoned or indefinitely postponed, and, upon receipt of such
notice from the Company, Bermore no longer will be subject to the Transfer
restrictions contained in this Section 1.4 in respect of (and solely in respect
of) the related underwritten offering. The Company shall, as promptly as
practicable, advise Bermore of the expected closing date of any such
underwritten offering and any subsequent changes with respect thereto.
1.5 Registration Procedures. In connection with the
registration of any Bermore Shares pursuant to an Incidental Registration, the
Company shall effect such registrations to permit the sale of such Bermore
Shares in accordance with the intended method or methods of disposition thereof
determined for both the Artal Shares and the Bermore Shares by Artal (in the
case of an exercise of an Artal Demand Right) or the Company (in the case of the
exercise of an Artal Piggyback), as the case may be (except that, in connection
with a Shelf Registration Statement, the plan of distribution contained in the
applicable Prospectus shall state that Bermore may, as contemplated by the last
proviso to Section 1.3 and Article IV of the Agreement, Transfer Bermore Shares
from time to time pursuant to Rule 144 or in other transactions exempt from or
not subject to the registration requirements of the Securities Act), the Company
shall as expeditiously as possible:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on Form S-3 (or, if such form is not available for the
sale of such Bermore Shares and the Artal Shares requested to be sold by Artal
in such registered, underwritten offering, such other form as is available for
such sale) thereof in accordance with the intended method of distribution
thereof, and use its best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein; provided, however,
that before filing any Registration Statement or Prospectus or any amendments or
supplements thereto (not including documents that would be incorporated or
deemed to be incorporated therein by reference), the Company shall afford
Bermore and its counsel an opportunity
<PAGE> 34
6
to review copies of all such documents proposed to be filed and give good faith
consideration to any comments from Bermore or its counsel in respect of such
documents.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the effectiveness
period; cause the related Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and comply
with the provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to it with respect to
the disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify Bermore promptly (but in any event within 5
business days), and confirm such notice in writing, (i) when a Registration
Statement, Prospectus or prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in such notice a
written statement that any holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules and all documents incorporated or
deemed to be incorporated by reference and exhibits), (ii) of the issuance of
any order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any Prospectus or the initiation of
any proceedings for that purpose, (iii) if at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of
Bermore Shares the representations and warranties of the Company contained in
any agreement (including any underwriting agreement) contemplated by Section
1.5(k) below cease to be true and correct in any material respect, (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or any
of the Bermore Shares for offer or sale in any jurisdiction, or the initiation
or threatening of any proceeding for such purpose, (v) of the happening of any
event that makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in such Registration Statement, Prospectus or documents so that, in the
case of such Registration Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the case
of the Prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
<PAGE> 35
7
which they were made, not misleading, and (vi) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.
(d) Use its best efforts (including, if necessary, by the
filing of any amendments or supplements to the Registration Statement or the
Prospectus) to prevent the issuance of any order suspending the effectiveness of
a Registration Statement or of any order preventing or suspending the use of a
Prospectus or suspending the qualification (or exemption from qualification) of
a Registration Statement or any of the Bermore Shares for sale in any
jurisdiction, and, if any such order is issued, to obtain the withdrawal of any
such order at the earliest possible moment.
(e) If requested by the managing or sole Underwriter in
connection with such underwritten offering, (i) promptly incorporate in a
Registration Statement, Prospectus, prospectus supplement or post-effective
amendment such information as the managing or sole Underwriter reasonably
requests to be included therein to comply with applicable law, (ii) make all
required filings of such Registration Statement, Prospectus, prospectus
supplement or post-effective amendment as soon as practicable after the Company
has received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment, and (iii) supplement or make amendments
to such Registration Statement; provided, however, that the Company shall not be
required to take any actions under this Section 1.5(e) that are not, in the
opinion of counsel for the Company, in compliance with applicable law.
(f) Furnish to Bermore and its counsel, if Bermore so
requests, and to each managing Underwriter, without charge, one conformed copy
of the Registration Statement or Statements and each post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) Deliver to Bermore, its counsel and the Underwriters,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by Bermore in connection
with the offering and sale of the Bermore Shares covered by such Prospectus and
any amendment or supplement thereto.
(h) Prior to any public offering of Bermore Shares, to use its
best efforts to register or qualify, and cooperate with Bermore, the
Underwriters or sales agents and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, such Bermore Shares for offer and sale under the securities
or "blue sky" laws of such jurisdictions within the United States as
<PAGE> 36
8
Bermore or the managing Underwriters or sales agents reasonably request in
writing; use its best efforts to keep each such registration or qualification
(or exemption therefrom) effective during the period during which the related
Registration Statement is required to be kept effective; and use its best
efforts to do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Bermore Shares covered by the
applicable Registration Statement; provided, however, that the Company will not
be required to (A) qualify generally to do business in any jurisdiction where it
is not then so qualified or (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject.
(i) Cooperate with Bermore and the managing or sole
Underwriters to facilitate the timely preparation and delivery of certificates
representing Bermore Shares to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Bermore Shares to be in such
denominations and registered in such names as the managing or sole Underwriter
or Bermore may reasonably request at least two business days prior to any sale
of Bermore Shares.
(j) Upon the occurrence of any event contemplated by clause
(v) or (vi) of Section 1.5(c) above, as promptly as practicable after and in any
event within ten business days of the Company's having become aware of such
event, prepare a supplement or post-effective amendment to the Registration
Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, or file any such document or
other required document so that, as thereafter delivered to the purchasers of
the Bermore Shares being sold thereunder, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and so that such
Registration Statement will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
(k) Enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing or sole Underwriter in order
to expedite or facilitate the registration or the disposition of the applicable
Artal Shares and such Bermore Shares, and in such connection, (i) make such
representations and warranties to the Underwriters, with respect to, among other
things, the business of the Company and its subsidiaries, and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance and scope as
<PAGE> 37
9
are customarily made by issuers to Underwriters in underwritten offerings, and
confirm the same if and when requested; (ii) obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions shall be reasonably
satisfactory (in form, scope and substance) to the managing or sole
Underwriters), addressed to the Underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by the Underwriters; (iii) obtain "cold comfort"
letters and updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data are, or are required
to be, included in the Registration Statement), addressed to each of the
Underwriters, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
underwritten offerings; (iv) cause the Company's management to be made available
for, and assist in, the marketing and disposition of the applicable Artal Shares
and such Bermore Shares in the manner and to the extent reasonably requested by
the Underwriters, including, without limitation, participation by management in
customary road shows, investor conferences and other similar presentations; and
(v) enter into an underwriting agreement which contains indemnification
provisions and procedures no less favorable than those set forth in Section 1.7
hereof with respect to all parties to be indemnified pursuant to said Section
and with respect to the Underwriters and each Person, if any, who controls such
Underwriters (within the meaning of either Section 15 or the Securities Act or
Section 20 of the Exchange Act) and any other Persons customarily covered by an
indemnity of underwriters. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(l) Use its best efforts to cause the Bermore Shares covered
by a Registration Statement to be rated with the appropriate rating agencies, if
applicable, if so requested for the applicable Artal Shares by Artal or the
managing or sole Underwriter.
(m) Use its best efforts to cause all Bermore Shares covered
by such Registration Statement to be (i) listed on each securities exchange on
which securities issued by the Company are then listed, or (ii) authorized to be
quoted on the NASDAQ or the National Market System of the NASDAQ if the
securities so qualify, in each case, if requested for the applicable Artal
Shares by Artal or the managing or sole Underwriter.
(n) Make available for inspection by a representative of
Bermore, any Underwriter participating in any such disposition of Bermore
Shares, any accountant or counsel retained by Bermore, the Underwriters and any
counsel to the Underwriters (collectively, the "Inspectors"), at the offices
where normally
<PAGE> 38
10
kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors and employees of the Company and
its subsidiaries to supply all information, in each case reasonably requested by
any such Inspector in connection with such Registration Statement; provided,
however, that any information that is designated in writing by the Company, in
good faith, as confidential at the time of delivery of such information, shall
be kept confidential by such Inspector unless (i) disclosure of such information
is required by court or administrative order, (ii) disclosure of such
information, in the opinion of counsel to such Inspector, is necessary to avoid
or correct a misstatement or omission of a material fact in the Registration
Statement, Prospectus or any supplement or post-effective amendment thereto or
disclosure is otherwise required by law, or (iii) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard by such Inspector; without limiting the foregoing, no such
information shall be used by such Inspector as the basis for any market
transactions in securities of the Company or its subsidiaries in violation of
law.
(o) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than 45 days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) commencing at the end of
any fiscal quarter in which Bermore Shares are sold to Underwriters in a
registered, underwritten offering.
The Company may require Bermore to furnish to the Company such
information regarding Bermore and the distribution of such Bermore Shares as the
Company may, from time to time, reasonably request in writing, provided that
such information shall be used only in connection with such registration. The
Company may exclude Bermore Shares from such registration if Bermore
unreasonably fails to furnish such information as promptly as practicable after
receiving such request.
Bermore agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in clause (ii), (iv)
or (v) of Section 1.5(c), Bermore will forthwith discontinue disposition of such
Bermore Shares covered by such Registration Statement or Prospectus until
Bermore's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 1.5(j), or, if earlier, until it is advised in writing
(the "Advice") by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any supplements or amendments thereto. In
the event the Company shall give any such notice at any time during the
effectiveness period of a Registration Statement for registration of an offering
on a continuous basis under Rule 415, the
<PAGE> 39
11
effectiveness period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when Bermore shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 1.5(j) or (y) the Advice.
1.6 Registration Expenses.
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not any Registration Statement is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the National Association of Securities Dealers, Inc. in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or "blue sky" laws (including, without limitation, fees and
disbursements of counsel for the Underwriters or counsel for the Company, in
connection with "blue sky" qualifications of the Bermore Shares and
determination of the eligibility of the Bermore Shares for investment under the
laws of such jurisdictions as provided in Section 1.5(h), in the case of the
Bermore Shares, (ii) printing expenses (including, without limitation, expenses
of printing certificates for Bermore Shares in a form eligible for deposit with
The Depository Trust Company and of printing Prospectuses if the printing of
Prospectuses is requested for the applicable Artal Shares by the managing or
sole Underwriter or by Artal), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, (v) fees and
disbursements of all independent certified public accountants referred to in
Section 1.5(k) (including, without limitation, the expenses of any special audit
and "cold comfort" letters required by or incident to such performance), (vi)
rating agency fees, (vii) Securities Act liability insurance, if the Company so
desires such insurance, (viii) the expense of any annual audit and (ix) the fees
and expenses incurred in connection with the listing of the securities to be
registered on any securities exchange.
(b) Without limiting Section 1.6(a), in connection with any
Registration Statement hereunder, Bermore shall bear no fees and expenses of any
kind other than the discounts, commissions, or fees of Underwriters, selling
brokers, dealer managers or similar securities industry professionals relating
to the distribution of Bermore Shares and the fees and disbursements of counsel
chosen by Bermore, if any, and actual out-of-pocket expenses incurred by Bermore
in connection with the related Registration Statement.
1.7 Indemnification, Contribution.
(a) Indemnification by the Company. The Company shall
indemnify and hold harmless, to the full extent permitted by law, Bermore, its
officers, directors and agents and employees, each
<PAGE> 40
12
Person who controls Bermore (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act), the officers, directors, agents and
employees of each such controlling person and any financial or investment
adviser or other representatives thereto (each, an "Indemnified Party"), from
and against any and all losses, claims, damages, liabilities, actions or
proceedings (whether commenced or threatened), reasonable costs (including,
without limitation, reasonable costs of preparation and reasonable attorneys'
fees and expenses) and reasonable expenses (including reasonable expenses of
investigation) (collectively, "Losses"), as incurred, arising out of or based
upon (i) any untrue or alleged untrue statement of a material fact contained in
any Registration Statement, Prospectus or form of prospectus or in any amendment
or supplements thereto or in any preliminary prospectus, or arising out of or
based upon any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or any amendment or supplement thereto or any
preliminary prospectus, in light of the circumstances under which they were
made) not misleading, except to the extent that the same arise out of or are
based upon information furnished in writing to the Company by such Indemnified
Party or Bermore expressly for use therein, or (ii) any violation by the Company
of any federal, state or common law rule or regulation applicable to the Company
and relating to action required of or inaction by the Company in connection with
any such registration. Such indemnity and reimbursement of costs and expenses
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party.
(b) Indemnification by Bermore. In connection with any
Registration Statement in which Bermore is participating, an authorized officer
of Bermore shall furnish to the Company in writing such information as the
Company reasonably requests for use in connection with any Registration
Statement or Prospectus and Bermore shall indemnify, to the full extent
permitted by law, the Company and its respective directors, officers, agents and
employees, each Person who controls the Company (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling persons, from and against all
Losses arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus, or form of
prospectus, or arising out of or based upon any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any Prospectus or form of
prospectus, in light of the circumstances under which they were made), to the
extent, but only to the extent, that such untrue or alleged untrue statement is
contained in, or such omission or alleged omission is required to be contained
in, any information so furnished in writing by Bermore to the Company expressly
for use in such Registration Statement or Prospectus and that such
<PAGE> 41
13
statement or omission was relied upon by the Company in preparation of such
Registration Statement, Prospectus or form of prospectus; provided, however,
that Bermore shall not be liable in any such case to the extent that Bermore has
furnished in writing to the Company within a reasonable period of time prior to
the filing of any such Registration Statement or Prospectus or amendment or
supplement thereto information expressly for use in such Registration Statement
or Prospectus or any amendment or supplement thereto which corrected or made not
misleading, information previously furnished to the Company, and the Company
failed to include such information therein. In no event shall the liability of
Bermore hereunder be greater in amount than the dollar amount of the proceeds
(net of payment of all expenses) received by Bermore upon the sale of the
Bermore Shares giving rise to such indemnification obligation. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such indemnified party.
(c) Conduct of Indemnification Proceedings. If any Person
shall be entitled to indemnity hereunder (an "indemnified party"), such
indemnified party shall give prompt notice to the party or parties from which
such indemnity is sought (the "indemnifying parties") of the commencement of any
action, suit, proceeding or investigation or written threat thereof (a
"Proceeding") with respect to which such indemnified party seeks indemnification
or contribution pursuant hereto; provided, however, that the failure to so
notify the indemnifying parties shall not relieve the indemnifying parties from
any obligation or liability except to the extent that the indemnifying parties
have been prejudiced by such failure. The indemnifying parties shall have the
right, exercisable by giving written notice to an indemnified party promptly
after the receipt of written notice from such indemnified party of such
Proceeding, to assume, at the indemnifying parties' expense, the defense of any
such Proceeding, with counsel reasonably satisfactory to such indemnified party;
provided, however, that an indemnified party or parties (if more than one such
indemnified party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless: (1) the indemnifying parties agree to
pay such fees and expenses; (2) the indemnifying parties fail promptly to assume
the defense of such Proceeding or fail to employ counsel reasonably satisfactory
to such indemnified party or parties; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such indemnified party
or parties and the indemnifying parties or an affiliate of the indemnifying
parties or such indemnified parties, and there may be one or more defenses
available to such indemnified party or parties that are different from or
additional to those available to the indemnifying parties, in which case, if
such indemnified party or parties notifies the indemnifying parties in writing
that it elects to employ separate counsel at the expense of the indemnifying
<PAGE> 42
14
parties, the indemnifying parties shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the indemnifying parties, it
being understood, however, that, unless there exists a conflict among
indemnified parties, the indemnifying parties shall not, in connection with any
one such Proceeding but substantially similar or related Proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified party
or parties. Whether or not such defense is assumed by the indemnifying parties,
such indemnifying parties or indemnified party or parties will not be subject to
any liability for any settlement made without its or their consent (but such
consent will not be unreasonably withheld or delayed). The indemnifying parties
shall not consent to entry of any judgment or enter into any settlement (i)
which provides for other than monetary damages without the consent of the
indemnified party or parties (which consent shall not be unreasonably withheld
or delayed) or (ii) that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party or parties of a
release, in form and substance satisfactory to the indemnified party or parties,
from all liability in respect of such Proceeding for which such indemnified
party would be entitled to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this
Section 1.7 is unavailable to an indemnified party or is insufficient to hold
such indemnified party harmless for any Losses in respect of which this Section
1.7 would otherwise apply by its terms, then each applicable indemnifying party,
in lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the amount paid or payable by such indemnified party
as a result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been taken by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with any Proceeding, to the extent such
party would have been indemnified for such expenses if the indemnification
provided for in Section 1.7(a) or 1.7(b) was available to such party.
<PAGE> 43
15
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 1.7(d) were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provision of this Section 1.7(d), Bermore, in its
capacity as an indemnifying party, shall not be required to contribute any
amount in excess of the amount by which the net proceeds received by Bermore
exceeds the amount of any damages that Bermore has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
1.8 Rules 144 and 144A. The Company shall file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations promulgated thereunder (or, if the Company is not required
to file such reports, it will, upon the request of Bermore, make publicly
available other information so long as such information is necessary to permit
sales under Rules 144 and 144A), and will take such further action as Bermore
may reasonably request, all to the extent required from time to time to enable
Bermore to sell Bermore Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rules 144 and 144A. Upon the
request of Bermore, the Company shall deliver to Bermore a written statement as
to whether it has complied with such requirements.
1.9 Suspension; Postponement. Notwithstanding anything to the
contrary contained herein, the provisions regarding the Company's right to
suspend or postpone any Demand Registration Statement (as such term is defined
in Annex A of the New Stockholders' Agreement) or the sale of securities
thereunder contained in Section 1.1(g) of such Annex A shall be binding upon
Bermore, if and only if Bermore is selling Bermore Shares under such Demand
Registration Statement and then only with respect to the Bermore Shares being
sold therein, as and to the same extent such Section 1.1(g) is binding upon
Artal, and shall be deemed to be incorporated by reference herein.
1.10 Additional Registration Rights. The Company shall not
grant any registration rights after the date hereof (i) that are superior to the
rights granted to Artal under the New Stockholders' Agreement (including,
without limitation, Artal's piggyback registration rights under the New
Stockholders' Agreement) or (ii) which would give another party the right to
include shares of Common Stock in any Demand Registration Statement which is
being filed pursuant to the New Stockholders' Agreement (except where such right
to include shares in a Demand Registration Statement is subordinate to the right
of Artal and its Assignees (as such term is defined in the
<PAGE> 44
16
New Stockholders' Agreement) to include shares in such Demand Registration
Statement with respect to prioritization in the event of an Underwriter cutback)
or (iii) which would give any party demand registration rights exercisable at
any time prior to the expiration of Artal's demand registration rights under the
New Stockholders' Agreement or (iv) which are superior to the piggyback
registration rights granted to Bermore pursuant to this Agreement.
1.11 Exchange Act Reports. The Company will, to the extent
reasonably requested by Bermore, provide information to Bermore and otherwise
assist Bermore in connection with all filings with the SEC or the New York Stock
Exchange required to be made by Bermore or its Affiliates in respect of the
Company, including, without limitation, filings on Schedule 13D or 13G under the
Exchange Act, with the understanding that the ultimate responsibility for making
such filings and for the accuracy of such filings remains with Bermore and its
Affiliates.
2.1 Definitions. Capitalized terms used in this Annex A shall
have the meanings set forth below:
"Advice" shall have the meaning specified in Section 1.5.
"Artal Demand Right" shall have the meaning specified
in Section 1.1.
"Artal Piggyback" shall have the meaning specified in
Section 1.1.
"Indemnified Party" shall have the meaning specified in
Section 1.7(a).
"Inspectors" shall have the meaning specified in
Section 1.5(n).
"Losses" shall have the meaning specified in Section 1.7(a).
"NASDAQ" means the National Association of Securities
Dealers Automated Quotation System.
"Proceeding" shall have the meaning specified in
Section 1.7(c).
"Prospectus" means the prospectus included in the Registration
Statement, including any form of prospectus or any preliminary prospectus, as
amended or supplemented by any prospectus supplement and by all other amendments
or supplements to such prospectus, including all post-effective amendments and
<PAGE> 45
17
all material, if any, incorporated by reference or deemed to be incorporated by
reference into such prospectus.
"Registration Statement" means any registration statement of
the Company under which any of the Registrable Securities are included therein
pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, all registration statements filed
pursuant to Rule 462(b) under the Securities Act and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Rule 415" means Rule 415 promulgated by the SEC under the
Securities Act as such rule may be amended from time to time, or any similar
rule then in force.
"Underwriter" has the meaning set forth in Section 2(11) of
the Securities Act.
<PAGE> 46
ANNEX B
INVESTOR JOINDER
By execution of this Investor Joinder, the undersigned agrees
to become a party to that certain Stock Purchase and Stockholder's Agreement,
dated as of January __, 1998 (the "Agreement"), among Keebler Foods Company (the
"Company") and certain stockholders of the Company, which stockholders included
on such date Bermore, Ltd., Artal Luxembourg S.A. and Flowers Industries, Inc.
By execution of this Investor Joinder, the undersigned shall have all rights,
and shall observe all the obligations, applicable to [fill in name of
transferee] (except as otherwise set forth in the Agreement), and to have made
on the date hereof all representations and warranties made by such Investor
Stockholder, modified, if necessary, to reflect the nature of the undersigned as
a corporation, partnership, other entity or natural person.
[IF COMPLETED BY A PERMITTED TRANSFEREE OF BERMORE] [The undersigned hereby (i)
appoints Michael Uytengsu or such one Person as Bermore and all of its permitted
transferees shall agree upon, as the undersigned's true and lawful
attorney-in-fact for purposes of exercising the undersigned's rights and
obligations under the Agreement (the "Attorney"), (ii) appoints Bermore, Ltd. or
such two Persons (which may include Bermore) as Bermore and all of its permitted
transferees shall agree upon, as the undersigned's true and lawful custodians
(each a "Custodian" which may act independently of the other in respect of
shares which have been transferred to it) in respect of the shares of common
stock, par value $.01, of the Company transferred to the undersigned on the date
hereof and (iii) simultaneously upon execution hereof shall deposit such shares
with the Custodian listed below and instruct each Custodian to take all actions
in respect of such shares as may at any time or from time to time be requested
by the Attorney.]
[Custodian to whom shares transferred: _____________]
Name:_________________________
Address for with copies
Notices: to:
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
<PAGE> 47
If an individual, are you presently married or separated?
yes _____ no _____
(If yes, you must also have your spouse execute a spousal consent in the form
attached hereto.)
Signature:___________________
Date:___________________
<PAGE> 48
CONSENT AND AGREEMENT OF SPOUSE
I, _________________________________, am the spouse of
____________________, one of the stockholders of Keebler Foods Company, a
Delaware corporation (the "Company"). I acknowledge that my spouse is a party to
that certain Stock Purchase and Stockholder's Agreement, dated as of January __,
1998, among the Company and certain stockholders of the Company, which
stockholders included on such date Bermore, Ltd., Artal Luxembourg S.A. and
Flowers Industries, Inc. (the "Agreement"), and that I have read the Agreement.
I consent to, agree to, approve and ratify each and every one of the terms and
provisions of the Agreement, and I further agree to provide all notices and
information required of me in the time and manner set forth in the Agreement.
Executed this ____ day of __________, 199_.
_________________________________
(Signature of Consenting Spouse)
<PAGE> 49
ANNEX C-1
FIRPTA Certificate
The undersigned hereby certifies to Bermore, Ltd. as to the
status of Keebler Foods Company (the "Company"), and to the status of the stock
of the Company, under the Foreign Investment in Real Property Tax Act of 1980.
Pursuant to Sections 1.1445-2(c)(3) and 1.897.2(h) of the Treasury Regulations,
the undersigned hereby certifies on behalf of the Company:
1. This certificate is given under Treasury Regulations
Sections 1.1445-2(c)(3)(i) and 1.897-2(h);
2. The Company is not, and has not been during the five-year
period ending the date hereof, a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"), and no stock of the Company is a United States real
property interest within the meaning of Section 897(c)(1) of the Code;
3. The Company's U.S. employer identification number is
36-1894790;
4. The office address of the Company is: 677 Larch Avenue,
Elmhurst, IL 60126;
5. The office address of Bermore, Ltd. is: Crawford House, 23
Church Street, P.O. Box HM 1436, Hamilton, Bermuda HMFX; and
6. This certificate and any applicable supplemental statements
shall be submitted to the Internal Revenue Service pursuant to Treasury
Regulation Section 1.897-2(h).
Each Company understands that this certification may be
disclosed to the Internal Revenue Service by Bermore, Ltd. and that any false
statement contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury the officer executing this
certificate on behalf of the Company hereby declares that he has examined this
certification and to the best of his knowledge and belief it is true, correct
and complete, and the undersigned further declares he has authority to sign this
document on behalf of the Company.
KEEBLER FOODS COMPANY,
by____________________________
Name:
Title:
Dated: January __, 1998
<PAGE> 50
ANNEX C-2
Notice to Internal Revenue Service Pursuant
to Reg. Section 1.897-2(H)
The undersigned hereby provides notice to the IRS as to its
certification to Bermore, Ltd. of the status of the stock of Keebler Foods
Company (the "Company"), under the Foreign Investment in Real Property Tax Act
of 1980. Pursuant to Sections 1.1445-2(c)(3) and 1.897.2(h) of the Treasury
Regulations, the undersigned hereby certifies on behalf of the Company:
1. This certificate is given under Treasury Regulations
Sections 1.1445-2(c)(3)(i) and 1.897-2(h).
2. The Company is not, and has not been during the five-year
period ending the date hereof, a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"), and no stock of the Company is a United States real
property interest within the meaning of Section 897(c)(1) of the Code;
3. The Company's U.S. employer identification number is
36-1894790;
4. The office address of the Company is: 677 Larch Avenue,
Elmhurst, IL 60126; and
5. The office address of Bermore, Ltd. is: Crawford House, 23
Church Street, P.O. Box HM 1436, Hamilton, Bermuda HMFX.
Under penalties of perjury the officer executing this
certificate on behalf of the Company hereby declares that he has examined this
certification and to the best of his knowledge and belief it is true, correct
and complete, and the undersigned further declares he has authority to sign this
document on behalf of the Company.
KEEBLER FOODS COMPANY,
by______________________________
Name:
Title:
Dated: January __, 1998
Attachment: FIRPTA Certification to Bermore, Ltd.
<PAGE> 1
EXHIBIT 10.24
FORM OF EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT is made this ____ day of _____________, 1998,
by and between KEEBLER FOODS COMPANY, a Delaware corporation ("Company"), and
Sam K. Reed ("Executive").
RECITALS
In order to confirm the terms of Executive's employment with
Company, the Company and the Executive hereby agree as follows; Executive is
willing to perform services for the Company and accept the protections afforded
under the terms and conditions hereinafter set forth.
1. TERM. The term of this Agreement ("Term") shall commence upon
the closing of the public offering of the Company's stock which occurs
subsequent to the date of this Agreement but prior to March 31, 1998, (the
"Commencement Date") and, subject to the terms hereof, shall terminate on the
third anniversary thereof. If the said public offering does not occur prior to
March 31, 1998, this Agreement shall be void and of no force or effect.
2. DUTIES AND COMPENSATION.
2.1 DUTIES.
As of the Commencement Date, the Executive is President and
Chief Executive of the Company, and his duties shall consist of those duties and
responsibilities currently performed by him in said office plus such other
duties consistent with those generally applicable to a person bearing said title
which are assigned to him by the Company's Chief Executive Officer ("CEO"). The
Board may also change his title.
<PAGE> 2
2.2 COMPENSATION.
(a) The Executive's annual base salary shall be the amount
currently in effect as of the Commencement Date or such greater amount
as may be determined by the Board from time to time. In addition, the
Executive shall be entitled to participate in the Company's short-term
and long-term incentive plans, as in effect from time to time.
(b) The Executive shall be permitted to participate in the
Company's pension benefit plans and welfare benefit plans according to
the terms thereof, as the same may be amended from time to time by the
Company.
3. TERMINATION OF EMPLOYMENT. The Company or Executive may terminate
Executive's employment at any time for any reason upon thirty (30) days' prior
written notice; said prior notice shall not be required in the event of a
termination by the Company for Cause, or by the Executive for Good Reason, as
defined hereinafter, or due to Executive's death or Permanent Disability. In the
event of termination of the Executive's employment by the Company for Cause, the
Executive's active service, authority, responsibilities and compensation shall
cease immediately, but formal termination of employment shall only be effective
upon the fifth business day after notice thereof is delivered to the Executive.
2
<PAGE> 3
3.1 VOLUNTARY TERMINATION BY EXECUTIVE; DISCHARGE FOR CAUSE; DEATH OR
PERMANENT DISABILITY.
(a) In the event that Executive's employment is terminated:
(i) by the Company for Cause (as defined in Section 3.1(b));
(ii) by Executive for any reason other than Good Reason (as
defined in Section 3.1(c)); or
(iii) due to Executive's death or Permanent Disability (as
defined in Section 3.1(d)),
Executive shall only be entitled to receive any earned but unpaid compensation,
including base salary through the date of termination only, any earned but
unpaid bonus of Executive with respect to the Company's fiscal year preceding
his termination in which Executive was employed by Company, and any benefits
under existing Company benefit plans to which he is otherwise entitled under
applicable law or the terms of such plans (collectively, "Earned Compensation").
Executive shall not be entitled, among other things, to the payment of any bonus
in respect of all or any portion of the fiscal year in which such termination
occurs, other than as otherwise provided hereinafter. If, however, Executive's
employment is terminated due to Executive's death or Permanent Disability (as
defined in Section 3.1(d)), Executive or his beneficiary described in Section 9
shall be paid the full amount of the bonus, if any, which he would have received
if his employment had continued until the end of the fiscal year in which such
termination occurs, which bonus payment shall be paid to Executive or his said
beneficiary at such time and in such manner as bonuses in respect of such fiscal
3
<PAGE> 4
year are generally paid to other employees of the Company, as well as a full
year's base salary during the twelve (12) months following said death or
Permanent Disability. Termination of Executive for Cause shall be made by
delivery to Executive of a written notice from the CEO or an officer senior to
Executive setting forth in reasonable detail the reasons for such termination.
Termination by Executive for Good Reason shall be effected by delivery to the
CEO of a notice from the Executive setting forth in reasonable detail the
reasons for such termination.
(b) For purposes of this Agreement, "Cause" means any of the
following:
(i) malfeasance or gross misconduct by Executive in connection
with his employment or malfeasance or gross misconduct
which produces material loss or damage to or has a material
adverse effect on the reputation of the Company,
which shall include but not be limited to instances
of sexual harassment or violations of the Company's
nondiscrimination policies;
(ii) continuing refusal by Executive to perform his employment
duties or any lawful direction of the CEO, within ten (10)
days after written notice of any such refusal to perform such
duties or direction was given to Executive;
(iii) any breach of the provisions of Section 8 of this Agreement
by Executive or any other material breach of this Agreement
by Executive; or
(iv) the conviction of Executive of, or plea of nolo contendere by
Executive to,
(A) any felony under federal, state or local laws; or
(B) a misdemeanor which involves dishonesty or fraud or
produces material loss or damage to or has a material
adverse effect on the reputation of the Company.
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(c) For purposes of this Agreement, "Good Reason" shall mean:
(i) (A) the assignment to the Executive of any duties
inconsistent in any material adverse respect with the
Executive's authority, duties or responsibilities
either as contemplated by Section 2 of this Agreement
or as existing on the date hereof, or (B) any change
in the Executive's title from President and Chief
Executive Officer of the Company, or (C) any other
action by the Company which results in a material
diminishment in such authority, duties or
responsibilities, other than action or in action which
is remedied by the Company within 15 days after receipt
of written notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 2 of this Agreement, other than
any failure which is remedied by the Company within 15
days after receipt of written notice thereof given by
the Executive;
(iii) any purported termination by the Company of the
Executive's employment otherwise than as permitted by
this Agreement;
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(iv) any relocation by the Company of the Executive's
primary office location outside the Standard
Metropolitan Statistical Area in which said office is
currently located;
(v) any reduction in the total potential annual
compensation of the Executive, consisting of base
salary or potential bonus (but not including diminution
in bonus as a consequence of economic performance of
the Company);
(vi) an adverse change in employee benefits other than a
change which results from an amendment or alteration
of the Company's employee benefit plans which affect
its salaried employees generally;
(d) For purposes of this Agreement, "Permanent Disability" shall
mean a disability that would entitle Executive to receive benefits
under the Company's Long-Term Disability Plan applicable to Senior
Executive Officers as in effect from time to time, which prevents the
Executive from performing his duties hereunder for 180 consecutive days
or more.
3.2 TERMINATION OTHER THAN FOR CAUSE. If Executive's
employment is terminated (i) by the Company other than (a) for Cause or (b) due
to Executive's death or Permanent Disability, or (ii) by the Executive for Good
Reason, Executive, upon execution of a release in a form satisfactory to the
Company, shall receive severance benefits in the form of:
(1) continuation of base salary as in effect on the date of
termination for the balance of the Term, but in no case less than one
(1) year of continuation
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<PAGE> 7
of base salary, payable in accordance with the ordinary payroll
practices of the Company, and if such termination occurs where the
remaining portion of the Term is less than one (1) year, base salary
shall be continued for no less than one (1) year from the date of
termination;
(2) continued coverage under the Company's health and medical
plans for the balance of the Term; provided, however, that any such
continued coverage may be satisfied by the Company's payment of the
premiums required to be paid by Executive to maintain such coverage
under the Consolidated Omnibus Budget and Reconciliation Act of 1985
("COBRA") and the COBRA period shall run during such period of
continued coverage; to the extent that such coverage is not available
for former employees under the terms of said plans, the Company may
provide said benefits through the purchase of equivalent insurance at
the Company's expense; and
(3) the Company shall pay to Executive any earned bonus for
the preceding fiscal year and a full bonus for the fiscal year in which
a termination under this Section 3.2 occurs, as well as for any full
fiscal year remaining within the Term, and a prorated portion (based on
days remaining within the Term (or a one year extension thereof
referred to above) in said fiscal year divided by total days in said
year) for any portion of a fiscal year remaining within the Term (or a
one year extension thereof referred to above), payable at such time and
in such manner as bonuses in respect of such fiscal year are generally
payable to employees of the Company. For purposes of said bonus
calculation, the actual
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<PAGE> 8
performance of the Company, or a relevant division, during the bonus
measurement period will be used and it will be assumed that Executive
achieved a "neutral" performance as to the personal goals aspect, if
any, of the bonus formula; and
(4) Any interest which the Executive may have in the Company's
Supplemental Executive Retirement Plan shall become fully vested in
accordance with terms of such plan up to and through the date through
which severance benefits are payable hereunder.
3.3 TERMINATION FOLLOWING CHANGE IN CONTROL
(a) If the Executive's employment is terminated by the
Company without Cause or by the Executive with Good Reason following a
Change in Control (as defined in (b) below) during the period from the
date of said Change in Control and prior to the second anniversary of
the Change in Control, the Executive's base salary shall be continued
for a period of two (2) years from said termination, and the Company
shall pay any earned but unpaid bonus for the preceding fiscal year and
full bonuses for any fiscal years ending within said two (2) years and
a pro rated portion (based on the days remaining within such fiscal
year which ends within the two year period divided by the total days in
such fiscal year) for any portion of a fiscal year remaining within
said two-year period. Bonuses shall be paid at the time and in the
manner they are otherwise payable to employees of the Company. For
purposes of said bonus calculation, the actual performance of the
Company, or a relevant division, during the bonus measurement
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<PAGE> 9
period will be used and it will be assumed that Executive achieved a
"neutral" performance as to the personal goals aspect, if any, of the
bonus formula.
(b) For purposes hereof, a "Change in Control" shall be deemed
to occur on the earliest of:
(i) The effective time of any purchase, sale, merger,
consolidation or other transaction after which any
person, corporation, partnership or other entity
other than Flowers Industries, Inc. ("Flowers") or
its Affiliates, the then current management of the
Company or of Flowers or any member of the immediate
family of said management, or any employee benefit
plan of Company or of Flowers ("Permitted Owners")
shall own more than fifty percent (50%) of the
outstanding capital stock of the Company which
stock is entitled to vote for the election of
directors.
(ii) If it occurs during the first three years beginning
on the Commencement Date, the effective time of any
purchase, sale, merger, consolidation or other
transaction after which any person, corporation,
partnership or other entity other than the then
current management of the Company or Flowers or any
member of the immediate family of said management, or
any employee benefit plan of Company or of Flowers
("Permitted Owners") shall own more than fifty
percent (50%) of the outstanding capital stock of
Flowers which stock is entitled to vote for the
election of directors.
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(iii) The effective time of a transfer to an entity other
than a Permitted Owner of substantially all of the
property of the Company.
(iv) Continuing Directors at any time fail to constitute a
majority of the Board of Directors of the Company.
"Continuing Directors" shall mean the members of the
Board of Directors as of the date hereof, plus any
new directors whose nominations were approved by at
least a majority of the Continuing Directors in
office at the time of the election of any such new
directors.
For the purposes of this Agreement, the term "Affiliate" shall be
as defined in Rule 405 of the General Rules and Regulations under the
Securities Act of 1933, as amended.
(c) Notwithstanding the Term stated in Section 1 above, so long
as the Executive remains employed by the Company the provisions of this
Section 3.3 shall automatically be extended upon expiration of the Term
for successive one-year periods.
3.4 INDEMNIFICATION OF EXECUTIVE. During the Term of this
Agreement, and thereafter with respect to any act occurring within said Term,
the Company agrees to continue in force any indemnification agreements or
obligations which are in effect as of the date hereof, and which would provide
indemnification to Executive, including any such provisions of the Company's
Articles of Incorporation or By-laws.
3.5 NO FURTHER OBLIGATIONS. After the termination of Executive's
employment and payment of all amounts due to Executive under the terms of this
Agreement, the obligations of the Company under this Agreement to make any
further payments, or provide any
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<PAGE> 11
benefits specified herein (other than benefits required to be provided by
applicable law or under the terms of any employee benefit of the Company in
which the Executive was a participant) to Executive shall thereupon cease and
terminate.
4. NOTICES. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company: Chief Executive Officer
Keebler Foods Company
One Hollow Tree Lane
Elmhurst, Illinois 60126-1581
with a copy to: Thomas E. O'Neill, Esq.
Keebler Foods Company
One Hollow Tree Lane
Elmhurst, Illinois 60126-1581
To Executive: Sam K. Reed
_____________________________
_____________________________
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
5. SEPARABILITY. If any provision of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
6. ASSIGNMENT. This contract shall be binding upon and inure to the
benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise
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<PAGE> 12
subject to hypothecation by Executive (except by will or by operation of the
laws of intestate succession) or by the Company, except that the Company may
assign this Agreement to any successor (whether by merger, purchase or
otherwise) to all or substantially all of the stock, assets or businesses of the
Company, if such successor expressly agrees to assume the obligations of the
Company hereunder.
7. AMENDMENT. This Agreement may only be amended by written agreement
of the parties hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION, NON-COMPETITION.
(a) Executive shall not, without the prior written consent of the
Company, use, divulge, disclose or make accessible to any other person,
firm, partnership, corporation or other entity any Confidential
Information pertaining to the business of the Company or any of its
affiliates, except (i) while employed by the Company, in the business
of and for the benefit of the Company, or (ii) when required to do so
by a court of competent jurisdiction, by any governmental agency having
supervisory authority over the business of the Company, or by any
administrative body or legislative body (including a committee thereof)
with jurisdiction to order Executive to divulge, disclose or make
accessible such information. For purposes of this Section 8(a),
"Confidential Information" shall mean non-public information concerning
the financial data, strategic business plans, product development (or
other proprietary product data), customer lists, marketing plans and
other non-public, proprietary and confidential information of
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<PAGE> 13
the Company or its affiliates or customers, that in any case, is not
otherwise available to the public (other than by Executive's breach of
the term hereof).
(b) Executive agrees that any payments made under the terms of
Section 3.2 hereof shall be deemed to be payments in respect of
Executive's non-competition as contemplated under the terms of Section
26(a) of the Management Stockholder's Agreement between Inflo Holdings
Corporation and Executive as of January 26, 1996, as amended, which
section is hereby specifically incorporated into this Agreement by
reference.
9. BENEFICIARIES, REFERENCES. Executive shall be entitled to select
(and change, to the extent permitted under any applicable law) a beneficiary of
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death, and may change such election, in either case by giving the
Company written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative. Any reference to the masculine gender in this Agreement
shall include, where appropriate, the feminine.
10. SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 10 are in addition to the survivorship provisions of
any other section of this Agreement. Section 12(b) of this Agreement shall
survive any termination hereof until all non-qualified options under any
non-qualified stock option agreement issued to the Executive pursuant to the
1996 Stock Purchase and Option Plan for Key
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<PAGE> 14
Employees of INFLO Holdings Corporation and Subsidiaries (the "1996
Non-Qualified Stock Option Agreement") are exercised or otherwise expire by
their terms.
11. GOVERNING LAW. This Agreement shall be construed, interpreted and
governed in accordance with the laws of the State of Illinois, without reference
to rules relating to conflicts of law.
12. EFFECT ON PRIOR AGREEMENTS.
(a) This Agreement contains the entire understanding between
the parties hereto and supersedes in all respects any prior agreement
or understanding between the Company or any affiliate of the Company
and Executive as to employment matters, other than with respect to any
equity arrangements that the Company and Executive have previously
entered into or any arrangements with respect to the relocation of the
Executive.
(b) Any termination of employment of the Executive, whether or
not for Cause hereunder or otherwise, shall be effective as to this
Agreement but shall not also be considered to be a termination
for "Cause" as such term is defined in Section 1.2 of the 1996
Non-Qualified Stock Option Agreement (the "1996 Option Agreement"),
nor will such termination in any way subject the Executive to the
operation of Section 3.2(e) of the 1996 Option Agreement, unless said
termination is for conduct which would be a reasonable basis for an
indictment of a felony and is reasonably likely to be injurious to the
Company.
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13. WITHHOLDING. The Company shall be entitled to withhold from payment
any amount of withholding required by law.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts each of which will be deemed an original.
KEEBLER FOODS COMPANY
By:________________________________
Chairman of the Board
EXECUTIVE
___________________________________
Name: Sam K. Reed
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<PAGE> 1
EXHIBIT 10.25
FORM OF EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT is made this ____ day of _____________, 1998, by and
between KEEBLER FOODS COMPANY, a Delaware corporation ("Company"), and Sam K.
Reed ("Executive").
RECITALS
In order to confirm the terms of Executive's employment with Company,
the Company and the Executive hereby agree as follows; Executive is willing to
perform services for the Company and accept the protections afforded under the
terms and conditions hereinafter set forth.
1. TERM. The term of this Agreement ("Term") shall commence upon the
closing of the public offering of the Company's stock which occurs subsequent
to the date of this Agreement but prior to March 31, 1998, (the "Commencement
Date") and, subject to the terms hereof, shall terminate on the third
anniversary thereof. If the said public offering does not occur prior to March
31, 1998, this Agreement shall be void and of no force or effect.
2. DUTIES AND COMPENSATION.
2.1 DUTIES.
As of the Commencement Date, the Executive is President and Chief
Executive Officer of the Company, and his duties shall consist of those duties
and responsibilities currently performed by him in said office plus such other
duties consistent with those generally applicable to a person bearing said
title which are assigned to him by the Company's Chairman of its Board of
Directors "Board". The Board may also change his title.
<PAGE> 2
2.2 COMPENSATION.
(a) The Executive's annual base salary shall be the amount
currently in effect as of the Commencement Date or such greater amount
as may be determined by the Board from time to time. In addition, the
Executive shall be entitled to participate in the Company's short-term and
long-term incentive plans, as in effect from time to time. The
Compensation Committee of the Board shall maintain said total compensation
of the Executive at a level above the fiftieth percentile for chief
executive officers of companies comparable to Keebler as determined by a
nationally recognized compensation consulting firm selected by the
Compensation Committee.
(b) The Executive shall be permitted to participate in the Company's
pension benefit plans and welfare benefit plans according to the terms
thereof, as the same may be amended from time to time by the Company.
3. TERMINATION OF EMPLOYMENT. The Board or Executive may terminate
Executive's employment at any time for any reason upon thirty (30)
days' prior written notice; said prior notice shall not be required in the
event of a termination by the Company for Cause, or by the Executive for Good
Reason, as defined hereinafter, or due to Executive's death or Permanent
Disability. In the event of termination of the Executive's employment by the
Company for Cause, the Executive's active service, authority, responsibilities
and compensation shall cease immediately, but formal termination of employment
shall only be effective upon the fifth business day after notice thereof is
delivered to the Executive.
3.1 VOLUNTARY TERMINATION BY EXECUTIVE; DISCHARGE FOR CAUSE; DEATH OR
PERMANENT DISABILITY.
(a) In the event that Executive's employment is terminated:
(i) by the Company for Cause (as defined in Section 3.1(b));
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<PAGE> 3
(ii) by Executive for any reason other than Good Reason (as
defined in Section 3.1(c)); or
(iii) due to Executive's death or Permanent Disability (as
defined in Section 3.1(d)),
Executive shall only be entitled to receive any earned but unpaid
compensation, including base salary through the date of termination only,
any earned but unpaid bonus of Executive with respect to the Company's
fiscal year preceding his termination in which Executive was employed by
Company, and any benefits under existing Company benefit plans to which he
is otherwise entitled under applicable law or the terms of such plans
(collectively, "Earned Compensation"). Executive shall not be entitled,
among other things, to the payment of any bonus in respect of all or any
portion of the fiscal year in which such termination occurs, other than as
otherwise provided hereinafter. If, however, Executive's employment is
terminated due to Executive's death or Permanent Disability (as defined in
Section 3.1(d)), Executive or his beneficiary described in Section 9 shall
be paid the full amount of the bonus, if any, which he would have received
if his employment had continued until the end of the fiscal year in which
such termination occurs, which bonus payment shall be paid to Executive or
his said beneficiary at such time and in such manner as bonuses in respect
of such fiscal year are generally paid to other employees of the Company,
as well as a full year's base salary during the twelve (12) months
following said death or Permanent Disability. Termination of Executive
for Cause shall be made by delivery to Executive of a written notice from
the Chairman of the Board at the direction of the Board
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<PAGE> 4
setting forth in reasonable detail the reasons for such termination.
Termination by Executive for Good Reason shall be effected by delivery to
the Chairman of the Board of a notice from the Executive setting forth in
reasonable detail the reasons for such termination.
(b) For purposes of this Agreement, "Cause" means any of the
following:
(i) malfeasance or gross misconduct by Executive
in connection with his employment or malfeasance or gross
misconduct or which produces material loss or damage to or
has a material adverse effect on the reputation of the
Company, which shall include but not be limited to
instances of sexual harassment or violations of the
Company's nondiscrimination policies;
(ii) continuing refusal by Executive to perform his employment
duties or any lawful direction of the Chairman of the
Board, within ten (10) days after written notice of any
such refusal to perform such duties or direction was given
to Executive;
(iii) any breach of the provisions of Section 8 of this Agreement
by Executive or any other material breach of this Agreement
by Executive; or
(iv) the conviction of Executive of, or plea of nolo contendere
by Executive to,
(A) any felony under federal, state or local laws; or
(B) a misdemeanor which involves dishonesty or fraud or
produces material loss or damage to or has a
material adverse effect on the reputation of the
Company.
(c) For purposes of this Agreement, "Good Reason" shall mean:
(i) (A) the assignment to the Executive of any duties
inconsistent in any material adverse respect with the
Executive's authority, duties or responsibilities either as
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<PAGE> 5
contemplated by Section 2 of this Agreement or as
existing on the date hereof, or (B) any change in the
Executive's title from President and Chief Executive
Officer of the Company, or (C) any other action by the
Company which results in a material diminishment in such
authority, duties or responsibilities, other than action or
in action which is remedied by the Company within 15 days
after receipt of written notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 2 of this Agreement, other than any
failure which is remedied by the Company within 15 days
after receipt of written notice thereof given by the
Executive;
(iii) any purported termination by the Company of the
Executive's employment otherwise than as permitted by
this Agreement;
(iv) any relocation by the Company of the Executive's primary
office location outside the Standard Metropolitan
Statistical Area in which said office is currently located;
(v) any reduction in the total potential annual compensation of
the Executive, consisting of base salary or
potential bonus (but not including diminution in bonus
as a consequence of economic performance of the Company);
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(vi) an adverse change in employee benefits other than a change
which results from an amendment or alteration of the
Company's employee benefit plans which affect its salaried
employees generally;
(d) For purposes of this Agreement, "Permanent Disability"
shall mean a disability that would entitle Executive to receive benefits
under the Company's Long-Term Disability Plan applicable to Senior
Executive Officers as in effect from time to time, which prevents the
Executive from performing his duties hereunder for 180 consecutive days or
more.
3.2 TERMINATION OTHER THAN FOR CAUSE. If Executive's employment is
terminated (i) by the Company other than (a) for Cause or (b) due to
Executive's death or Permanent Disability, or (ii) by the Executive for Good
Reason, Executive, upon execution of a release in a form satisfactory to the
Company, shall receive severance benefits in the form of:
(1) continuation of base salary as in effect on the date of
termination for the balance of the Term, but in no case less than one
(1) year of continuation of base salary, payable in accordance with the
ordinary payroll practices of the Company, and if such termination occurs
where the remaining portion of the Term is less than one (1) year, base
salary shall be continued for no less than one (1) year from the date of
termination;
(2) continued coverage under the Company's health and medical
plans for the balance of the Term; provided, however, that any such
continued coverage may be satisfied by the Company's payment of the
premiums required to be paid
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<PAGE> 7
by Executive to maintain such coverage under the Consolidated Omnibus
Budget and Reconciliation Act of 1985 ("COBRA") and the COBRA period shall
run during such period of continued coverage; to the extent that such
coverage is not available for former employees under the terms of said
plans, the Company may provide said benefits through the purchase of
equivalent insurance at the Company's expense; and
(3) the Company shall pay to Executive any earned bonus for
the preceding fiscal year and a full bonus for the fiscal year in which
a termination under this Section 3.2 occurs, as well as for any full fiscal
year remaining within the Term, and a prorated portion (based on days
remaining within the Term (or a one year extension thereof referred to
above) in said fiscal year divided by total days in said year) for any
portion of a fiscal year remaining within the Term (or a one year extension
thereof referred to above), payable at such time and in such manner as
bonuses in respect of such fiscal year are generally payable to employees
of the Company. For purposes of said bonus calculation, the actual
performance of the Company, or a relevant division, during the bonus
measurement period will be used and it will be assumed that Executive
achieved a "neutral" performance as to the personal goals aspect, if any,
of the bonus formula; and
(4) Any interest which the Executive may have in the Company's
Supplemental Executive Retirement Plan shall become fully vested in
accordance
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<PAGE> 8
with terms of such plan up to and through the date through which
severance benefits are payable hereunder.
3.3 TERMINATION FOLLOWING CHANGE IN CONTROL
(a) If the Executive's employment is terminated by the Company without
Cause or by the Executive with Good Reason following a Change in Control (as
defined in (b) below) during the period from the date of said Change in
Control and prior to the second anniversary of the Change in Control, the
Executive's base salary shall be continued for a period of two (2) years from
said termination, and the Company shall pay any earned but unpaid bonus for the
preceding fiscal year and full bonuses for any fiscal years ending within said
two (2) years and a pro rated portion (based on the days remaining within such
fiscal year which ends within the two year period divided by the total days in
such fiscal year) for any portion of a fiscal year remaining within said
two-year period. Bonuses shall be paid at the time and in the manner they are
otherwise payable to employees of the Company. For purposes of said bonus
calculation, the actual performance of the Company, or a relevant division,
during the bonus measurement period will be used and it will be assumed that
Executive achieved a "neutral" performance as to the personal goals aspect, if
any, of the bonus formula.
(b) For purposes hereof, a "Change in Control" shall be deemed to
occur on the earliest of:
(i) The effective time of any purchase, sale, merger,
consolidation or other transaction after which any person,
corporation, partnership or other entity other than
Flowers Industries, Inc. ("Flowers") or its
8
<PAGE> 9
Affiliates, the then current management of the
Company or of Flowers or any member of the immediate family
of said management, or any employee benefit plan of
Company or of Flowers ("Permitted Owners") shall own
more than fifty percent (50%) of the outstanding capital
stock of the Company which stock is entitled to vote for
the election of directors.
(ii) If it occurs during the first three years
beginning on the Commencement Date, the effective time
of any purchase, sale, merger, consolidation or other
transaction after which any person, corporation, partnership
or other entity other than the then current management of
the Company or Flowers or any member of the immediate family
of said management, or any employee benefit plan of Company
or of Flowers ("Permitted Owners") shall own more than fifty
percent (50%) of the outstanding capital stock of Flowers
which stock is entitled to vote for the election of
directors.
(iii) The effective time of a transfer to an entity other than
a Permitted Owner of substantially all of the property
of the Company.
(iv) Continuing Directors at any time fail to constitute a
majority of the Board of Directors of the Company.
"Continuing Directors" shall mean the members of the Board
of Directors as of the date hereof, plus any new directors
whose nominations were approved by at
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<PAGE> 10
least a majority of the Continuing Directors in office at
the time of the election of any such new directors.
For the purposes of this Agreement, the term "Affiliate" shall be as
defined in Rule 405 of the General Rules and Regulations under the Securities
Act of 1933, as amended.
(c) Notwithstanding the Term stated in Section 1 above, so long as
the Executive remains employed by the Company the provisions of this Section 3.3
shall automatically be extended upon expiration of the Term for successive
one-year periods.
3.4 INDEMNIFICATION OF EXECUTIVE. During the Term of this
Agreement, and thereafter with respect to any act occurring within said Term,
the Company agrees to continue in force any indemnification agreements or
obligations which are in effect as of the date hereof, and which would provide
indemnification to Executive, including any such provisions of the Company's
Articles of Incorporation or By-laws.
3.5 NO FURTHER OBLIGATIONS. After the termination of Executive's
employment and payment of all amounts due to Executive under the terms of this
Agreement, the obligations of the Company under this Agreement to make any
further payments, or provide any benefits specified herein (other than benefits
required to be provided by applicable law or under the terms of any employee
benefit of the Company in which the Executive was a participant) to Executive
shall thereupon cease and terminate.
4. NOTICES. All notices or communications hereunder shall be in writing,
addressed as follows:
To the Company: Chairman of the Board
10
<PAGE> 11
Keebler Foods Company
One Hollow Tree Lane
Elmhurst, Illinois 60126-1581
with a copy to: Thomas E. O'Neill, Esq.
Keebler Foods Company
One Hollow Tree Lane
Elmhurst, Illinois 60126-1581
To Executive: Sam K. Reed
-------------------------------
-------------------------------
-------------------------------
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
5. SEPARABILITY. If any provision of this Agreement shall be declared to
be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
6. ASSIGNMENT. This contract shall be binding upon and inure to the
benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by Executive (except by will or by operation of the laws of intestate
succession) or by the Company, except that the Company may assign this
Agreement to any successor (whether by merger, purchase or otherwise) to all or
substantially all of the stock, assets or businesses of the Company, if such
successor expressly agrees to assume the obligations of the Company hereunder.
11
<PAGE> 12
7. AMENDMENT. This Agreement may only be amended by written agreement of
the parties hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION, NON-COMPETITION.
(a) Executive shall not, without the prior written consent of
the Company, use, divulge, disclose or make accessible to any other
person, firm, partnership, corporation or other entity any Confidential
Information pertaining to the business of the Company or any of its
affiliates, except (i) while employed by the Company, in the business of
and for the benefit of the Company, or (ii) when required to do so by a
court of competent jurisdiction, by any governmental agency having
supervisory authority over the business of the Company, or by any
administrative body or legislative body (including a committee thereof)
with jurisdiction to order Executive to divulge, disclose or make
accessible such information. For purposes of this Section 8(a),
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other
non-public, proprietary and confidential information of the Company or its
affiliates or customers, that in any case, is not otherwise available to
the public (other than by Executive's breach of the term hereof).
(b) Executive agrees that any payments made under the terms
of Section 3.2 hereof shall be deemed to be payments in respect of
Executive's non-competition as contemplated under the terms of
Section 26(a) of the Management Stockholder's Agreement between
Inflo Holdings Corporation and Executive as of
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<PAGE> 13
January 26, 1996, as amended, which section is hereby specifically
incorporated into this Agreement by reference.
9. BENEFICIARIES, REFERENCES. Executive shall be entitled to select (and
change, to the extent permitted under any applicable law) a beneficiary of
beneficiaries to receive any compensation or benefit payable hereunder
following Executive's death, and may change such election, in either case by
giving the Company written notice thereof. In the event of Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative. Any reference to the masculine gender in
this Agreement shall include, where appropriate, the feminine.
10. SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 10 are in addition to the survivorship provisions of
any other section of this Agreement. Section 12(b) of this Agreement shall
survive any termination hereof until all non-qualified options under any
non-qualified stock option agreement issued to the Executive pursuant to the
1996 Stock Purchase and Option Plan for Key Employees of INFLO Holdings
Corporation and Subsidiaries (the "1996 Non-Qualified Stock Option Agreement")
are exercised or otherwise expire by their terms.
11. GOVERNING LAW. This Agreement shall be construed, interpreted and
governed in accordance with the laws of the State of Illinois, without
reference to rules relating to conflicts of law.
12. EFFECT ON PRIOR AGREEMENTS.
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<PAGE> 14
(a) This Agreement contains the entire understanding between the
parties hereto and supersedes in all respects any prior agreement or
understanding between the Company or any affiliate of the Company and
Executive as to employment matters, other than with respect to any equity
arrangements that the Company and Executive have previously entered into or
any arrangements with respect to the relocation of the Executive.
(b) Any termination of employment of the Executive, whether or not
for Cause hereunder or otherwise, shall be effective as to this Agreement
but shall not also be considered to be a termination for "Cause" as
such term is defined in Section 1.2 of the 1996 Non-Qualified Stock
Option Agreement (the "1996 Option Agreement"), nor will such termination
in any way subject the Executive to the operation of Section 3.2(e) of
the 1996 Option Agreement, unless said termination is for conduct which
would be a reasonable basis for an indictment of a felony and is
reasonably likely to be injurious to the Company.
13. WITHHOLDING. The Company shall be entitled to withhold from payment
any amount of withholding required by law.
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<PAGE> 15
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts each of which will be deemed an original.
KEEBLER FOODS COMPANY
By:____________________________________
Sam K. Reed
President and Chief Executive Officer
EXECUTIVE
_______________________________________
Name:__________________________________
15
<PAGE> 1
EXHIBIT 10.26
================================================================================
KEEBLER FOODS COMPANY
FORM OF 1998 OMNIBUS STOCK INCENTIVE PLAN
EFFECTIVE JANUARY 21, 1998
================================================================================
<PAGE> 2
KEEBLER FOODS COMPANY
1998 OMNIBUS STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of the 1998 Omnibus Stock Incentive Plan (the
"Plan") is to attract and retain officers and key employees for Keebler Foods
Company (the "Corporation") and its Subsidiaries and to provide to such persons
incentives and rewards for superior performance.
2. DEFINITIONS. As used in this Plan,
"Annual Meeting" means the annual meeting of shareholders of
the Corporation.
"Appreciation Right" means a right granted pursuant to Section
5 of this Plan, including a Free-Standing Appreciation Right or a Tandem
Appreciation Right.
"Base Price" means the price to be used as the basis for
determining the Spread upon the exercise of a Free-standing Appreciation Right.
"Board" means the Board of Directors of the Corporation.
"Change in Control" shall have the meaning provided in Section
12 of this Plan.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" means the committee (or a subcommittee) described
in Section 17 of this Plan.
"Common Shares" means shares of common stock, $.01 par value
per share, of the Corporation or any security into which such Common Shares
may be changed by reason of any transaction or event of the type referred to
in Section 11 of this Plan.
<PAGE> 3
"Covered Employee" means a Participant who is, or is determined
by the Committee to be likely to become, a "covered employee" within the
meaning of Section 162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Committee on
which a grant of Option Rights, Appreciation Rights, Performance Shares,
Performance Units, or Other Stock-Based Awards, or a grant or sale of
Restricted Shares or Deferred Shares shall become effective.
"Deferral Period" means the period of time during which
Deferred Shares are subject to deferral limitations under Section 7 of this
Plan.
"Deferred Shares" means an award made pursuant to Section 7 of
this Plan of the right to receive Common Shares at the end of a specified
Deferral Period.
"Designated Subsidiary" means a Subsidiary that is (i) not a
corporation or (ii) a corporation in which at the time the Corporation owns or
controls, directly or indirectly, less than eighty (80) percent of the total
combined voting power represented by all classes of stock issued by such
corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, as such law, rules and
regulations may be amended from time to time.
"Free-standing Appreciation Right" means an Appreciation Right
granted pursuant to Section 5 of this Plan that is not granted in tandem with
an Option Right or similar right.
"Immediate Family" has the meaning ascribed thereto in Rule
16a-1(e) under the Exchange Act (or any successor rule to the same effect) as
in effect from time to time.
"Incentive Stock Options" means Option Rights that are intended
to qualify as "incentive stock options" under Section 422 of the Code or any
successor provision; provided, however, that (i) the exercise price of each
Incentive Stock Option shall be at least 100% of the Market Value per share of
the Common Shares subject to such Incentive Stock Option on the Date of Grant;
(ii) Incentive Stock Options will be exercisable not later than ten years after
the Date of Grant, and (iii) in the case of an Incentive Stock Option granted
to a Participant who, at the time of grant, owns (as defined in Section 425(d)
of the Code) stock of the Company or its subsidiaries possessing more than 10%
of the total combined voting power of all classes of stock of any such
corporation, the exercise price shall be at least 110% of the fair market
value of the Common Shares subject to the Incentive Stock
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<PAGE> 4
Option at the time it is granted, and the Incentive Stock Option, by its
terms, shall not be exercisable after the expiration of five (5) years from
the date of its grant. The aggregate fair market value (determined with
respect to each Incentive Stock Option as of the time such Incentive Stock
Options are exercisable for the first time by a Participant during any calendar
year (under all Incentive Stock Option plans of the Company and subsidiary
corporations) shall not exceed $100,000.
"Management Objectives" means the measurable performance
objective or objectives established pursuant to this Plan for
Participants who have received grants of Performance Shares or Performance
Units or, when so determined by the Committee, Option Rights, Appreciation
Rights, Restricted Shares and dividend credits, or Other Stock-Based Awards
pursuant to this Plan. Management Objectives may be described in terms of
Corporation-wide objectives or objectives that are related to the performance
of the individual Participant or of the Subsidiary, division, department,
region or function within the Corporation or Subsidiary in which the
Participant is employed. The Management Objectives may be made relative to the
performance of other corporations. The Management Objectives applicable to any
award to a Covered Employee shall be based on specified levels of growth or
improvement in one or more of the following criteria:
1. earnings;
2. earnings per share (earnings per share will be calculated
without regard to any change in accounting standards that
may be required by the Financial Accounting Standards
Board after the goal is established);
3. share price;
4. shareholder return;
5. return on invested capital, equity, or assets;
6. operating earnings;
7. sales;
8. productivity;
9. cash flow;
10. market share;
11. profit margin;
12. customer service; and/or
13. economic value added.
If the Committee determines that a change in the business,
operations, corporate structure or capital structure of the Corporation, or
the manner in which it conducts its business, or other events or
circumstances render the Management Objectives unsuitable, the Committee may
in its discretion modify such Management Objectives or the related minimum
acceptable level of achievement, in whole or in part, as the Committee deems
appropriate and equitable, except in the case of a Covered Employee where such
action would result
3
<PAGE> 5
in the loss of the otherwise available exemption of the award under
Section 162(m) of the Code. In such case, the Committee shall not make any
modification of the Management Objectives or minimum acceptable level of
achievement.
"Market Value per Share" means, as of any particular date, the average
of the highest and lowest quoted selling prices for Common Shares on the
relevant date, or (if there were no sales on such date) the weighted average of
the means between the highest and lowest quoted selling prices on the nearest
day before and the nearest day after the relevant date; provided, however, that
if the Shares are not traded on a national securities exchange in the United
States, the Committee shall determine "Market Value per Share" in its
discretion.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable on exercise of an
Option Right.
"Option Right" means the right to purchase Common Shares upon exercise
of an option granted pursuant to Section 4 or Section 9 of this Plan.
"Other Stock-Based Awards" means those awards referred to in Section 9
of this Plan.
"Participant" means a person who is selected by the Committee to
receive benefits under this Plan and who is at the time an officer, or other
key employee of the Corporation or any one or more of its Subsidiaries, or who
has agreed to commence serving in any of such capacities within 90 days of the
Date of Grant.
"Performance Period" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating to such Performance Share
or Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 8 of this Plan.
"Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 8 of this Plan.
"Reload Option Rights" means additional Option Rights granted
automatically to an Optionee upon the exercise of Option Rights pursuant to
Section 4(f) of this Plan.
4
<PAGE> 6
"Restricted Shares" means Common Shares granted or sold pursuant to
Section 6 or Section 9 of this Plan as to which neither the substantial risk of
forfeiture nor the prohibition on transfers referred to in such Section 6 has
expired.
"Rule l6b-3" means Rule 16b-3 of the Securities and Exchange Commission
(or any successor rule to the same effect) as in effect from time to time.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder, as such law, rules and regulations may be
amended from time to time.
"Spread" means the excess of the Market Value per Share of the Common
Shares on the date when an Appreciation Right is exercised, or on the date when
Option Rights are surrendered in payment of the Option Price of other Option
Rights, over the Option Price provided for in the related Option Right.
"Subsidiary" means a corporation, company or other entity
(i) more than 50 percent of whose outstanding shares or
securities (representing the right to vote for the election of
directors or other managing authority) are, or
(ii) which does not have outstanding shares or securities (as
may be the case in a partnership, joint venture or unincorporated
association), but more than 50 percent of whose ownership interest
representing the right generally to make decisions for such other
entity is,
now or hereafter, owned or controlled, directly or indirectly, by the
Corporation except that for purposes of determining whether any person may be a
Participant for purposes of any grant of Incentive Stock Options, "Subsidiary"
means any corporation in which at the time the Corporation owns or controls,
directly or indirectly, more than 50 percent of the total combined voting power
represented by all classes of stock issued by such corporation.
"Tandem Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is granted in tandem with an Option
Right or any similar right granted under any other plan of the Corporation.
"Voting Shares" means at any time, the then-outstanding securities
entitled to vote generally in the election of directors of the Corporation.
5
<PAGE> 7
3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment
as provided in Section 11 of this Plan, the number of Common Shares that may be
issued or transferred (i) upon the exercise of Option Rights or Appreciation
Rights, (ii) as Restricted Shares and released from substantial risks of
forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of Performance
Shares or Performance Units that have been earned, (v) as Other Stock-Based
Awards, (vi) in payment of dividend equivalents paid with respect to awards
made under the Plan shall not exceed in the aggregate 6,500,000 shares plus any
shares specified in paragraph (b) of this Section 3. Such shares may be shares
of original issuance or treasury shares or a combination of the foregoing.
Upon the payment of any Option Price by the transfer to the Corporation of
Common Shares or upon satisfaction of any withholding amount by means of
transfer or relinquishment of Common Shares, there shall be deemed to have been
issued or transferred under this Plan only the net number of Common Shares
actually issued or transferred by the Corporation.
(b) Total shares available under the plan shall also include any
shares relating to awards that expire or are forfeited or canceled.
(c) Upon payment in cash of the benefit provided by any award granted
under this Plan, any shares that were covered by that award shall again be
available for issue or transfer hereunder.
(d) Notwithstanding anything in this Section 3, or elsewhere in this
Plan, to the contrary, the aggregate number of Common Shares actually issued or
transferred by the Corporation upon the exercise of Incentive Stock Options
shall not exceed 2,500,000 shares, subject to adjustments as provided in
Section 11 of this Plan.
(e) Notwithstanding any other provision of this Plan to the contrary,
no Participant shall be granted Option Rights for more than 600,000 Common
Shares during any calendar year, subject to adjustments as provided in Section
11 of this Plan. Further, in no event shall any Participant in any calendar
year receive more than 600,000 Appreciation Rights, subject to adjustments as
provided in Section 11 of this plan.
(f) Notwithstanding any other provision of this Plan to the contrary,
in no event shall any Participant in any calendar year receive an award of
Performance Shares, Performance Units, Restricted Shares, or Other Stock-Based
Awards that specify Management Objectives, which awards represent an aggregate
maximum value as of their respective Dates of Grant in excess of $1,000,000.
4. OPTION RIGHTS. The Committee may, from time to time and upon
such terms and conditions as it may determine, authorize the granting to
Participants
6
<PAGE> 8
of options to purchase Common Shares. Each such grant may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each grant shall specify the number of Common Shares to which it
pertains subject to the limitations set forth in Section 3 of this plan.
(b) Each grant shall specify an Option Price per share, which shall
not be less than 100 percent of the Market Value per Share on the Date of
Grant.
(c) Each grant shall specify whether the Option Price shall be
payable (i) in cash or by check acceptable to the Corporation, (ii) by the
actual or constructive transfer to the Corporation of nonforfeitable,
unrestricted Common Shares owned by the Optionee for no less than six (6)
months (or other consideration authorized pursuant to subsection (d) below)
having a value at the time of exercise equal to the total Option Price, or
(iii) by a combination of such methods of payment.
(d) The Committee may determine, at or after the Date of Grant, that
payment of the Option Price of any option (other than an Incentive Stock
Option) may also be made in whole or in part in the form of Restricted Shares
or other Common Shares that are forfeitable or subject to restrictions on
transfer, Deferred Shares, Performance Shares (based, in each case, on the
Market Value per Share on the date of exercise), other Option Rights (based on
the Spread on the date of exercise) or Performance Units. Unless otherwise
determined by the Committee at or after the Date of Grant, whenever any Option
Price is paid in whole or in part by means of any of the forms of consideration
specified in this paragraph, the Common Shares received upon the exercise of
the Option Rights shall be subject to such risks of forfeiture or restrictions
on transfer as may correspond to any that apply to the consideration
surrendered, but only to the extent of (i) the number of shares or Performance
Shares, (ii) the Spread of any unexercisable portion of Option Rights, or (iii)
the stated value of Performance Units surrendered.
(e) Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a broker on a date satisfactory to the
Corporation of some or all of the shares to which such exercise relates.
(f) Any grant may, at or after the Date of Grant, provide for the
automatic grant of Reload Option Rights to an Optionee upon the exercise of
Option Rights (including Reload Option Rights) using Common Shares or other
consideration specified in paragraph (d) above. Reload Option Rights shall
cover up to the number of Common Shares, Deferred Shares, Option Rights or
Performance Shares (or the number of Common Shares having a value equal to the
value of any Performance Units) surrendered to the Corporation upon any such
exercise in payment of the Option Price or to meet any withholding obligations.
Reload Options
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<PAGE> 9
shall specify an Option Price per share, which shall not be less than 100
percent of the Market Value per Share on the Date of Grant of the Reload Option
Right, and shall be on such other terms as may be specified by the Committee,
which may be the same as or different from those of the original Option Rights.
(g) Successive grants may be made to the same Participant whether or
not any Option Rights previously granted to such Participant remain
unexercised.
(h) Each grant shall specify the period or periods of continuous
service by the Optionee with the Corporation or any Subsidiary which is
necessary before the Option Rights or installments thereof will become
exercisable and may provide for the earlier exercise of such Option Rights in
the event of a Change in Control retirement, death or disability of the
Optionee or other similar transaction or event.
(i) Any grant of Option Rights may specify Management Objectives that
must be achieved as a condition to the exercise of such rights.
(j) Option Rights granted under this Plan may be (i) options,
including, without limitation, Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are not
intended so to qualify, or (iii) combinations of the foregoing.
(k) The Committee may, at or after the Date of Grant of any Option
Rights (other than Incentive Stock Options), provide for the payment of
dividend equivalents to the Optionee on either a current or deferred or
contingent basis or may provide that such equivalents shall be credited against
the Option Price.
(l) The exercise of an Option Right shall result in the cancellation
on a share-for-share basis of any related Appreciation Right authorized under
Section 5 of this Plan.
(m) Each grant shall specify the term of the Option Right; provided,
however, that no Option Right shall be exercisable more than 10 years from the
Date of Grant.
(n) Each grant of Option Rights shall be evidenced by an agreement
executed on behalf of the Corporation by an officer and delivered to the
Optionee and containing such terms and provisions, consistent with this Plan,
as the Committee may approve.
5. APPRECIATION RIGHTS. The Committee may also authorize grants to
Participants of Appreciation Rights. An Appreciation Right shall be a right of
the Participant to receive from the Corporation an amount, which shall be
determined
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<PAGE> 10
by the Committee and shall be expressed as a percentage (not exceeding 100
percent) of the Spread at the time of the exercise of such right. Any grant of
Appreciation Rights under this Plan shall be upon such terms and conditions as
the Committee may determine in accordance with the following provisions:
(a) Any grant may specify that the amount payable on exercise of an
Appreciation Right may be paid by the Corporation in cash, in Common Shares or
in any combination thereof and may either grant to the Optionee or retain in
the Committee the right to elect among those alternatives.
(b) Any grant may specify that the amount payable on exercise of an
Appreciation Right may not exceed a maximum specified by the Committee at the
Date of Grant.
(c) Any grant may specify waiting periods before exercise and
permissible exercise dates or periods and shall provide that no Appreciation
Right may be exercised except at a time when the related Option Right is also
exercisable and at a time when the Spread is positive.
(d) Any grant may specify that such Appreciation Right may be
exercised only in the event of a Change in Control or other similar transaction
or event.
(e) Each grant of Appreciation Rights shall be evidenced by a
notification executed on behalf of the Corporation by an officer and delivered
to and accepted by the Optionee, which notification shall describe such
Appreciation Rights, identify the related Option Rights, state that such
Appreciation Rights are subject to all the terms and conditions of this Plan,
and contain such other terms and provisions, consistent with this Plan, as the
Committee may approve.
(f) Any grant of Appreciation Rights may specify Management Objectives
that must be achieved as a condition of the exercise of such rights.
(g) Regarding Tandem Appreciation Rights only: Each grant shall
provide that a Tandem Appreciation Right may be exercised only (i) at a time
when the related Option Right (or any similar right granted under any other
plan of the Corporation) is also exercisable and the Spread is positive and
(ii) by surrender of the related Option Right (or such other right) for
cancellation. In addition, a Tandem Appreciation Right awarded in relation to
an Incentive Stock Option must be granted concurrently with such Incentive
Stock Option.
(h) Regarding Free-standing Appreciation Rights only:
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<PAGE> 11
(i) Each grant shall specify in respect of each Free-standing
Appreciation Right a Base Price per Common Share, which shall be
equal to or greater than the Market Value per Share on the Date
of Grant;
(ii) Successive grants may be made to the same Participant
regardless of whether any Free-standing Appreciation Rights
previously granted to such Participant remain unexercised;
(iii) Each grant shall specify the period or periods of
continuous service by the Participant with the Corporation or any
Subsidiary that is necessary before the Free-standing
Appreciation Rights or installments thereof shall become
exercisable, and any grant may provide for the earlier exercise
of such rights in the event of a Change in Control, retirement,
death or disability of the Participant or other similar
transaction or event as approved by the Committee; and
(iv) No Free-standing Appreciation Right granted under this
Plan may be exercised more than 10 years from the Date of Grant.
6. RESTRICTED SHARES. The Committee may also authorize the grant or
sale to Participants of Restricted Shares. Each such grant or sale may utilize
any or all of the authorizations, and shall be subject to all of the
requirements, contained in the following provisions:
(a) Each such grant or sale shall constitute an immediate transfer of
the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, but subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall provide that the Restricted Shares
covered by such grant or sale shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period of not
less than one (1) year to be determined by the Committee at the Date of Grant,
and any grant or sale may provide for the earlier termination of such period in
the event of
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<PAGE> 12
retirement, or death or disability of the Optionee or other similar
transaction or event as approved by the Committee.
(d) Each such grant or sale shall provide that during the period for
which such substantial risk of forfeiture is to continue, the transferability
of the Restricted Shares shall be prohibited or restricted in the manner and to
the extent prescribed by the Committee at the Date of Grant (which restrictions
may include, without limitation, rights of repurchase or first refusal in the
Corporation or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee).
(e) Any grant of Restricted Shares may specify Management Objectives
which, if achieved, will result in termination or early termination of the
restrictions applicable to such shares and each grant may specify in respect of
such specified Management Objectives, a minimum acceptable level of achievement
and may set forth a formula for determining the number of Restricted Shares on
which restrictions will terminate if performance is at or above the minimum
level, but falls short of full achievement of the specified Management
Objectives.
(f) Any such grant or sale of Restricted Shares may require that any
or all dividends or other distributions paid thereon during the period of such
restrictions be automatically deferred and reinvested in additional Restricted
Shares, which may be subject to the same restrictions as the underlying award.
(g) Each grant or sale of Restricted Shares shall be evidenced by an
agreement executed on behalf of the Corporation by any officer and delivered to
and accepted by the Participant and shall contain such terms and provisions,
consistent with this Plan, as the Committee may approve. Unless otherwise
directed by the Committee, all certificates representing Restricted Shares
shall be held in custody by the Corporation until all restrictions thereon
shall have lapsed, together with a stock power executed by the Participant in
whose name such certificates are registered, endorsed in blank and covering
such Shares.
7. DEFERRED SHARES. The Committee may also authorize the granting or
sale of Deferred Shares to Participants. Each such grant or sale may utilize
any or all of the authorizations, and shall be subject to all of the
requirements contained in the following provisions:
(a) Each such grant or sale shall constitute the agreement by the
Corporation to deliver Common Shares to the Participant in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions during the Deferral Period as the Committee may specify.
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<PAGE> 13
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall be subject, except (if the
Committee shall so determine) in the event of a Change in Control or other
similar transaction or event, to a Deferral Period of not less than 1 year, as
determined by the Committee at the Date of Grant.
(d) During the Deferral Period, the Participant shall have no right
to transfer any rights under his or her award and shall have no rights of
ownership in the Deferred Shares and shall have no right to vote them, but the
Committee may, at or after the Date of Grant, authorize the payment of dividend
equivalents on such Shares on either a current or deferred or contingent basis,
either in cash or in additional Common Shares.
(e) Each grant or sale of Deferred Shares shall be evidenced by an
agreement executed on behalf of the Corporation by any officer and delivered to
and accepted by the Participant and shall contain such terms and provisions,
consistent with this Plan, as the Committee may approve.
(f) For purposes of this Plan, a grant which would otherwise
constitute Deferred Shares but which contains Management Objectives shall be
deemed to be issued under Section 8 below, as either Performance Shares or
Performance Units.
8. PERFORMANCE SHARES OR PERFORMANCE UNITS. The Committee may also
authorize the granting of Performance Shares or Performance Units that will
become payable to a Participant upon achievement of specified Management
Objectives. Each such grant may utilize any or all of the authorizations, and
shall be subject to all of the requirements, contained in the following
provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which number may be subject to
adjustment to reflect changes in compensation or other factors; provided,
however, that no such adjustment shall be made in the case of a Covered
Employee where such action would result in the loss of the otherwise available
exemption of the award under Section 162(m) of the Code.
(b) The Performance Period with respect to each Performance Share or
Performance Unit shall be such period of time not less than 1 year, (except in
the event of a Change in Control or other similar transaction or event, if the
Committee shall so determine) commencing with the Date of Grant and ending on
the last date of the Performance Period (as shall be determined by the
Committee at the time of grant).
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(c) Any grant of Performance Shares or Performance Units shall
specify Management Objectives which, if achieved, will result in payment or
early payment of the award, and each grant shall specify in respect of such
specified one or more Management Objectives a minimum acceptable level of
achievement and shall set forth a formula for determining the number of
Performance Shares or Performance Units that will be earned if performance is
at or above the minimum level, but falls short of full achievement of the
specified Management Objectives. The grant of Performance Shares or
Performance Units shall specify that, before the Performance Shares or
Performance Units shall be earned and paid, the Committee must certify that the
Management Objectives have been satisfied.
(d) Each grant shall specify a minimum acceptable level of
achievement in respect of the specified Management Objectives below which no
payment will be made and shall set forth a formula for determining the amount
of payment to be made if performance is at or above such minimum but short of
full achievement of the Management Objectives.
(e) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units which have been earned. Any grant may
specify that the amount payable with respect thereto may be paid by the
Corporation in cash, in Common Shares or in any combination thereof and may
either grant to the Participant or retain in the Committee the right to elect
among those alternatives.
(f) Any grant of Performance Shares may specify that the amount
payable with respect thereto may not exceed a maximum specified by the
Committee at the Date of Grant. Any grant of Performance Units may specify
that the amount payable or the number of Common Shares issued with respect
thereto may not exceed maximums specified by the Committee at the Date of
Grant.
(g) The Committee may, at or after the Date of Grant of Performance
Shares, provide for the payment of dividend equivalents to the holder thereof
on either a current or deferred or contingent basis, either in cash or in
additional Common Shares.
(h) Each grant of Performance Shares or Performance Units shall be
evidenced by a notification executed on behalf of the Corporation by any
officer and delivered to and accepted by the Participant, which notification
shall state that such Performance Shares or Performance Units are subject to
all the terms and conditions of this Plan, and contain such other terms and
provisions, consistent with this Plan, as the Committee may approve.
9. OTHER STOCK-BASED AWARDS. Other awards of Common Shares and other
awards that are valued in whole or in part by reference to, or are otherwise
based
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<PAGE> 15
on, Common Shares ("Other Stock-Based Awards"), including, without limitation,
performance shares, convertible preferred stock (if authorized by the Company's
articles of incorporation), convertible debentures (if authorized by the
Company's articles of incorporation), exchangeable securities and awards,
Common Shares or options valued by reference to book value or subsidiary
performance, may be granted either along with or in addition to or in tandem
with Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock
or Stock Purchase Rights granted under the Plan and/or cash awards made outside
of the Plan.
(a) Subject to the provisions of the Plan, the Committee shall have
authority to determine the persons to whom and the time or times at which such
awards shall be made, the number of Common Shares to be awarded pursuant to
such awards, and all other conditions of the awards. The Committee may also
provide for the grant of Common Shares upon the completion of a specified
performance period.
The provisions of Other Stock Based Awards need not be the same with
respect to each recipient.
(b) Other Stock Based Awards made pursuant to this Section 9 shall be
subject to the following terms and conditions and to such additional conditions
as the Committee in its sole discretion may provide for in the award agreement:
(i) Subject to the provisions of this Plan and the award agreement
referred to in Section 9(b)(v) below, shares subject to awards made under
this Section 9 may not be sold, assigned, transferred, pledged or otherwise
encumbered prior to the date on which the shares covered thereby are issued
to the recipient, or, if later, the date on which any applicable
restriction, performance or deferral period lapses.
(ii) Subject to the provisions of this Plan and the award agreement
and unless otherwise determined by the Committee on the Date of Grant, the
recipient of an award under this Section 9 shall be entitled to receive,
currently or on a deferred basis, interest or dividends or interest or
dividend equivalents with respect to the number of shares covered by the
award, as determined at the time of the award by the Committee, in its sole
discretion, and the Committee may provide that such amounts (if any) shall
be deemed to have been reinvested in additional Stock or otherwise
reinvested.
(iii) Any award under Section 9 and any Stock covered by any such
award shall vest or be forfeited to the extent so provided in the award
agreement, as determined by the Committee, in its sole discretion;
(iv) In the event of the participant's Retirement, Disability or
death, or in cases of special circumstances, the Committee may, in its sole
14
<PAGE> 16
discretion, waive in whole or in part any or all of the remaining
limitations imposed hereunder (if any) with respect to any or all of an
award under this Section 9.
(v) Each award under this Section 9 shall be confirmed by, and
subject to the terms of, an agreement or other instrument executed by the
Corporation and by the participant, the form of which has been approved by
the Committee.
(vi) Stock (including securities convertible into Stock) issued on a
bonus basis under this Section 9 may be issued for no cash consideration.
Stock (including securities convertible into Stock) purchased pursuant to a
purchase right awarded under this Section 9 shall be priced at least 50% of
the Fair Market Value per Share of the Stock on the date of grant.
10. TRANSFERABILITY. (a) Except as otherwise determined by the
Committee and as provided in subparagraph (c) below, no Option Right,
Appreciation Right or other derivative security granted under the Plan shall be
transferable by an Optionee other than by will or the laws of descent and
distribution. Except as otherwise determined by the Committee, Option Rights
and Appreciation Rights shall be exercisable during the Optionee's lifetime
only by him or her or by his or her guardian or legal representative.
(b) The Committee may specify at the Date of Grant that part or all
of the Common Shares that are (i) to be issued or transferred by the
Corporation upon the exercise of Option Rights or Appreciation Rights, upon the
termination of the Deferral Period applicable to Deferred Shares or upon
payment under any grant of Performance Shares, Performance Units or Other
Stock-Based Awards or (ii) no longer subject to the substantial risk of
forfeiture and restrictions on transfer referred to in Section 6 of this Plan,
shall be subject to further restrictions on transfer.
(c) Notwithstanding the provisions of Section 10(a), Option Rights,
Appreciation Rights, Restricted Shares, Deferred Shares, Performance Shares,
Performance Units, and Other Stock-Based Awards shall be transferable by a
Participant without payment of consideration therefor by the transferee, to any
one or more members of the Participant's Immediate Family (or to one or more
trusts established solely for the benefit of one or more members of the
Participant's Immediate Family or to one or more partnerships in which the only
partners are members of the Participant's Immediate Family or to an
organization which is exempt from federal taxation pursuant to Section
501(c)(3)of the Code); provided, however, that (i) no such transfer shall be
effective unless reasonable prior notice thereof is delivered to the Company
and such transfer is thereafter effected in accordance with any terms and
conditions that shall have been made applicable thereto by the Company or the
Board and (ii) any such transferee shall be subject to the same terms and
conditions hereunder as the Participant.
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<PAGE> 17
11. ADJUSTMENTS. The Committee may make or provide for such
adjustments in the numbers of Common Shares covered by outstanding Option
Rights, Appreciation Rights, Deferred Shares, Performance Shares and Other
Stock-Based Awards granted hereunder, in the prices per share applicable to
such Option Rights and Appreciation Rights and in the kind of shares covered
thereby, as the Committee, in its sole discretion, exercised in good faith, may
determine is equitably required to prevent dilution or enlargement of the
rights of Participants or Optionees that otherwise would result from (a) any
stock dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of the Corporation, or (b) any merger,
consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial
or complete liquidation or other distribution of assets, issuance of rights or
warrants to purchase securities, or (c) any other corporate transaction or
event having an effect similar to any of the foregoing. Moreover, in the event
of any such transaction or event, the Committee, in its discretion, may provide
in substitution for any or all outstanding awards under this Plan such
alternative consideration as it, in good faith, may determine to be equitable
in the circumstances and may require in connection therewith the surrender of
all awards so replaced. The Committee may also make or provide for such
adjustments in the numbers of shares specified in Section 3 of this Plan as the
Committee in its sole discretion, exercised in good faith, may determine is
appropriate to reflect any transaction or event described in this Section 11.
12. CHANGE IN CONTROL. For purposes of this Plan, a "Change in
Control" shall be deemed to occur on the earliest of:
(i) The effective time of any purchase, sale, merger,
consolidation or other transaction after which any person,
corporation, partnership or other entity other than Flowers
Industries, Inc. ("Flowers") or its Affiliates, the then current
management of the Company or of Flowers or any member of the
immediate family of said management, or any employee benefit plan
of Company or of Flowers ("Permitted Owners") shall own more than
fifty percent (50%) of the outstanding capital stock of the
Company which stock is entitled to vote for the election of
directors.
(ii) If it occurs prior to February 3, 2001, the effective
time of any purchase, sale, merger, consolidation or other
transaction after which any person, corporation, partnership or
entity other than the then current management of the Company or
Flowers or any member of the immediate family of said management,
or any employee benefit plan of Company or of Flowers ("Permitted
Owners") shall own more than fifty percent (50%) of the
outstanding capital stock of Flowers which stock is entitled to
vote for the election of directors.
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<PAGE> 18
(iii) The effective time of a transfer to an entity other than
a Permitted Owner of substantially all of the property of the
Company.
(iv) Continuing Directors at any time fail to constitute a
majority of the Board of Directors of the Company. "Continuing
Directors" shall mean the members of the Board of Directors as of
the date hereof, plus any new directors whose nominations were
approved by at least a majority of the Continuing Directors in
office at the time of the election of any such new directors.
For the purposes of this Agreement, the term "Affiliate" shall be as
defined in Rule 405 of the General Rules and Regulations under the Securities
Act of 1933, as amended.
13. FRACTIONAL SHARES. The Corporation shall not be required to issue
any fractional Common Shares pursuant to this Plan. The Committee may provide
for the elimination of fractions or for the settlement of fractions in cash
based on Market Value per Share on the date of settlement.
14. WITHHOLDING TAXES. To the extent that the Corporation is required
to withhold federal, state, local or foreign taxes in connection with any
payment made or benefit realized by a Participant or other person under this
Plan, and the amounts available to the Corporation for such withholding are
insufficient, it shall be a condition to the receipt of such payment or the
realization of such benefit that the Participant or such other person make
arrangements satisfactory to the Corporation for payment of the balance of such
taxes required to be withheld, which arrangements (in the discretion of the
Committee) may include relinquishment of a portion of such benefit. The
Corporation and a Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.
15. PARTICIPATION BY EMPLOYEES OF DESIGNATED SUBSIDIARIES. As a
condition to the effectiveness of any grant or award to be made hereunder to a
Participant who is an employee of a Designated Subsidiary, whether or not such
Participant is also employed by the Corporation or another Subsidiary, the
Committee may require such Designated Subsidiary to agree to transfer to such
employee (when, as and if provided for under this Plan and any applicable
agreement entered into with any such employee pursuant to this Plan) the Common
Shares that would otherwise be delivered by the Corporation, upon receipt by
such Designated
17
<PAGE> 19
Subsidiary of any consideration then otherwise payable by such Participant to
the Corporation. Any such award shall be evidenced by an agreement between the
Participant and the Designated Subsidiary, in lieu of the Corporation, on terms
consistent with this Plan and approved by the Committee and such Designated
Subsidiary. All such Common Shares so delivered by or to a Designated
Subsidiary shall be treated as if they had been delivered by or to the
Corporation for purposes of Section 3 of this Plan, and all references to the
Corporation in this Plan shall be deemed to refer to such Designated
Subsidiary, except for purposes of the definition of "Board" and except in
other cases where the context otherwise requires.
16. FOREIGN EMPLOYEES. In order to facilitate the making of any grant
or combination of grants under this Plan, the Committee may provide for such
special terms for awards to Participants who are foreign nationals or who are
employed by the Corporation or any Subsidiary outside of the United States of
America as the Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Committee may
approve such supplements to or amendments, restatements or alternative versions
of this Plan as it may consider necessary or appropriate for such purposes,
without thereby affecting the terms of this Plan as in effect for any other
purpose, and the Secretary or other appropriate officer of the Corporation may
certify any such document as having been approved and adopted in the same
manner as this Plan. No such special terms, supplements, amendments or
restatements, however, shall include any provisions that are inconsistent with
the terms of this Plan as then in effect unless this Plan could have been
amended to eliminate such inconsistency without further approval by the
shareholders of the Corporation.
17. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered
by a Committee of the Board (or subcommittee thereof), consisting of not less
than two Non-Employee Directors appointed by the Board. To the extent of such
delegation, references in the Plan to the Board shall also refer to the
appropriate committee. A majority of the Committee (or subcommittee thereof)
shall constitute a quorum, and the action of the members of the Committee (or
subcommittee thereof) present at any meeting at which a quorum is present, or
acts unanimously approved in writing, shall be the acts of the committee (or
subcommittee thereof). Until subsequent action of the Board, the Committee
shall be the Compensation Committee of the Board. Notwithstanding the
foregoing, the Board may act in lieu of the Committee on any matter hereunder.
(b) The interpretation and construction by the Committee of any
provision of this Plan or of any agreement, notification or document evidencing
the grant of Option Rights, Appreciation Rights, Restricted Shares, Deferred
Shares, Performance Shares or Performance Units and any determination by the
Committee pursuant to any provision of this Plan or of any such agreement,
notification or document shall be final and conclusive. No member of the
Committee shall be liable for any such action or determination made in good
faith.
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<PAGE> 20
18. AMENDMENTS, ETC. (a) The Committee may at any time and from time
to time amend the Plan in whole or in part; provided, however, that any
amendment which must be approved by the shareholders of the Corporation in
order to comply with applicable law or the rules of the principal national
securities exchange upon which the Common Shares are traded or quoted shall not
be effective unless and until such approval has been obtained. Presentation of
this Plan or any amendment hereof for shareholder approval shall not be
construed to limit the Corporation's authority to offer similar or dissimilar
benefits under plans that do not require shareholder approval.
(b) The Committee may, with the concurrence of affected Optionee,
cancel any agreement evidencing Option Rights or any other award granted under
this Plan. In the event of such cancellation, the Committee may authorize the
granting of new Option Rights or other awards hereunder (which may or may not
cover the same number of Common Shares which had been the subject of the prior
award) in such manner, at such option price, and subject to such other terms,
conditions and discretion as would have been applicable under this Plan had the
canceled Option Rights or other award not been granted.
(c) The Committee also may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of this Plan. The Committee also may provide that deferred settlements include
the payment or crediting of dividend equivalents or interest on the deferral
amounts.
(d) The Committee may condition the grant of any award or combination
of awards authorized under this Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Corporation or a Subsidiary to the Participant.
(e) In case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of hardship or other
special circumstances, of a Participant who holds an Option Right or
Appreciation Right not immediately exercisable in full, or any Restricted
Shares as to which the substantial risk of forfeiture or the prohibition or
restriction on transfer has not lapsed, or any Deferred Shares as to which the
Deferral Period has not been completed, or any Performance Shares or
Performance Units or Other Stock-Based Awards which have not been fully earned,
or who holds Common Shares subject to any transfer restriction imposed pursuant
to Section 10(b) of this Plan, the Committee may, in its sole discretion,
accelerate the time at which such Option Right or Appreciation Right may be
exercised or the time at which such substantial risk of forfeiture or
prohibition or restriction on transfer will lapse or the time when such
Deferral Period will end or the time at which such Performance Shares or
Performance Units will be deemed to have been fully earned or the time when
such
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<PAGE> 21
transfer restriction will terminate or may waive any other limitation or
requirement under any such award.
(f) This Plan shall not confer upon any Participant any right with
respect to continuance of employment or other service with the Corporation or
any Subsidiary, nor shall it interfere in any way with any right the
Corporation or any Subsidiary would otherwise have to terminate such
Participant's employment or other service at any time.
(g) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify as an Incentive Stock Option from
qualifying as such, that provision shall be null and void with respect to such
Option Right. Such provision, however, shall remain in effect for other Option
Rights and there shall be no further effect on any provision of this Plan.
19. TERMINATION. No grant (other than an automatic grant of Reload
Option Rights) shall be made under this Plan more than 10 years after the
earlier of the date the Plan is adopted or the date on which this Plan is first
approved by the shareholders of the Corporation, but all grants made on or
prior to such date shall continue in effect thereafter subject to the terms
thereof and of this Plan.
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<PAGE> 1
EXHIBIT 10.27
FORM OF KEEBLER FOODS COMPANY NONEMPLOYEE
DIRECTOR STOCK PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III. ELECTION TO PARTICIPATE . . . . . . . . . . . . . . . . . . . . . 2
3.1. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2. Election to Participate . . . . . . . . . . . . . . . . . . . . . . . 2
3.3. Amount of Participation . . . . . . . . . . . . . . . . . . . . . . . 3
3.4. Minimum Level of Participation For Investment
in Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV. OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1. Grant of Options . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2. Written Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3. Exercisability of Options . . . . . . . . . . . . . . . . . . . . . . 3
4.4. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.5. Early Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.6. Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.7. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.8. Option Nontransferable . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V. CHANGE IN CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE VI. ADMINISTRATION, AMENDMENT AND TERMINATION . . . . . . . . . . . . 5
6.1. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.2. Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . 5
6.3. Amendment of Options . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VII. SHARES SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . . . 6
7.1. Shares Subject to Plan . . . . . . . . . . . . . . . . . . . . . . . 6
7.2. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VIII. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 7
8.1. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.2. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
i
<PAGE> 3
EXHIBIT 10.27
KEEBLER FOODS COMPANY NONEMPLOYEE
DIRECTOR STOCK PLAN
The Keebler Foods Company Nonemployee Director Stock Plan ("Plan") is
effective as of January 21, 1998, subject to approval of shareholders within
twelve months therefrom.
ARTICLE I. DEFINITIONS
Whenever the following terms are used in this Plan they shall have the
meanings specified below unless the context clearly indicates to the contrary:
(a) "Administrator": The Board of Directors of the Company or any
committee designated by the Board.
(b) "Board": The Board of Directors of the Company.
(c) "Change of Control": The meaning set forth in Article V.
(d) "Code": The Internal Revenue Code of 1986, as amended.
(e) "Company": Keebler Foods Company or any successor or
successors thereto.
(f) "Director": An individual duly elected or chosen as a Director
of the Company, but who is neither a current nor a retired Employee of the
Company, of Flowers Industries, Inc., or of Artal Luxembourg S.A., nor is
appointed to the Board by Artal Luxembourg S.A.
(g) "Fair Market Value": The average of the highest and lowest
quoted selling prices for Shares on the relevant date, or (if there were no
sales on such date) the weighted average of the means between the highest
and lowest quoted selling prices on the nearest day before and the nearest
day after the relevant date; provided, however, that notwithstanding the
foregoing, the Committee may determine "Fair Market Value" in its
discretion.
(h) "Option": An option to purchase Shares granted pursuant to
Section 4.1.
(i) "Participation Agreement": The agreement submitted by a
Director to the Administrator in which a Director may specify his or her
election to invest all or a portion of his or her Retainer in Options.
(j) "Plan": The Plan set forth in this instrument as it may from
time to time be amended.
<PAGE> 4
(k) "Plan Year": The fiscal year of the Company.
(l) "Retainer": The portion of a Director's annual compensation
that is payable without regard to number of Board or committee meetings
attended or committee positions.
(m) "Shares": The Company's fully paid, non-assessable common
stock. Shares may be shares of original issuance or treasury shares or a
combination of the foregoing.
(n) "Valuation Date": The date of the meeting of the Compensation
Committee of the Board first preceding the first day of a Plan Year.
ARTICLE II. PURPOSE
The purpose of this Plan is to provide Directors with opportunities to
invest amounts of their Retainer in Options in order to further align the
interests of Directors with the shareholders of the Company and thereby promote
the long-term success and growth of the Company.
ARTICLE III. ELECTION TO PARTICIPATE WITH RESPECT TO RETAINER
3.1. Eligibility. All individuals who are Directors as of the
first day of a Plan Year may participate in the Plan with respect to the
Retainer payable for such Plan Year. A Director may elect to participate for
any Plan Year in accordance with Section 3.2 of this Article. A Director's
entitlement to participate as to future investments shall cease with respect to
the Plan Year following the Plan Year in which he or she ceases to be a
Director.
3.2. Election to Participate. A Director who desires to
participate in this Plan with respect to the Retainer payable for such Plan
Year must complete and deliver a Participation Agreement to the Administrator
before the first day of the Plan Year for which such Retainer would otherwise
be paid. A Participation Agreement that is timely delivered shall be effective
for the succeeding Plan Year and in addition, except as otherwise specified by
a Director in his or her Participation Agreement, shall continue to be
effective from Plan Year to Plan Year until revoked or modified by written
notice to the Administrator or until terminated automatically upon the
termination of the Plan. In order to be effective to revoke or modify a
Participation Agreement with respect to the Retainer for a Plan Year, a
revocation or modification must be delivered prior to the first day of the Plan
Year for which such Retainer is payable.
3.3. Amount of Participation. A Director shall designate on the
Participation Agreement the dollar amount of his or her Retainer that he or she
has elected to invest in Options under this Plan.
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<PAGE> 5
3.4. Minimum Level of Participation For Investment in Options. A
Director shall be permitted to invest in Options under this Plan only if for
the Plan Year involved the total amount of the Retainer for the Director that
is invested in Options for the Plan Year equals at least twenty-five (25)
percent of the Retainer of the Director for such Plan Year.
ARTICLE IV. OPTIONS
4.1. Grant of Options. (a) With Respect to Retainer. To the
extent a Director elects to invest all or a portion of his or her Retainer for
a Plan Year in Options, an Option shall be granted on the first day of such
Plan Year (which shall be the date of grant for said Option) for that number of
Shares as determined by the Administrator which is equal to no more than
150% of the amount of the Retainer invested divided by the value of
an Option for one Share on the Valuation Date. For this purpose, value shall
be determined by the Black-Scholes option pricing model, as applied by the
Administrator. To the extent that the application of the foregoing formula
would result in an Option covering a fractional Share, the number of Shares
covered by the Option shall be rounded up.
(b) Outright Grants. The Board may grant Options to each Director
who serves in said capacity as of any date specified by the Board, which shall
be in addition to any Options granted as a consequence of an election made by a
Director with respect to his Retainer. Said Options shall be subject to any
further terms contained in agreements reflecting said rights executed by the
Chairman or Vice Chairman of the Board.
4.2. Written Agreement. Each grant of Options shall be evidenced
by a written agreement in such form as approved by the Administrator and shall
be subject to the additional terms and conditions set forth in this Article IV.
4.3. Exercisability of Options. Subject to the expiration or
earlier termination of the Option, 100% of the Option described in Section
4.1(a) shall become exercisable on the first anniversary of the date of grant.
Options granted pursuant to Section 4.1(b) shall be immediately exercisable.
4.4. Term. An Option shall expire ten years from the date the
Option is granted and shall be subject to earlier termination as hereinafter
provided. Once an Option becomes exercisable, it may thereafter be exercised,
wholly or in part, at any time prior to its expiration or termination. In the
event of the Director's termination from service on the Board, other than as
provided in Section 4.5, an outstanding Option may be exercised only to the
extent it was exercisable on the date of such termination and shall expire two
years after such termination, or on its stated expiration date, whichever
occurs first. Notwithstanding the above, in the event of a termination for
Cause as determined by the Administrator, all unexercised Options shall be
forfeited. For purposes of this Agreement, "Cause" means any of the following:
(1) malfeasance or gross misconduct by the Director in
connection with his services to the Company or which
produces material loss or damage to or has a material
adverse effect on the reputation of the Company, which
3
<PAGE> 6
shall include but not be limited to instances of sexual
harassment or violations of the Company's
nondiscrimination policies;
(2) the conviction of the Director of, or plea of nolo
contendere by the Director to,
(A) any felony under federal, state or local laws; or
(B) a misdemeanor which involves dishonesty or fraud or
produces material loss or damage to or has a material
adverse effect on the reputation of the Company; or
(3) any similar action on the part of the Director which is
determined by a majority of the remaining members of the
Board to constitute cause for removal.
4.5. Early Vesting. Upon the occurrence of any of the following
events, the Option shall become immediately and fully exercisable: the death
of the Director, the disability of the Director, or a Change in Control. The
Option shall expire two years after such event, or on its stated expiration
date, whichever occurs first.
4.6. Exercise Price. The exercise price of an Option granted to a
Director shall be determined by the Administrator with respect to each grant.
4.7. Payment. An Option may be exercised by a Director only upon
payment to the Company in full of the exercise price of the Option
corresponding to the portion of the Option to be exercised. Such payment shall
be made in cash or in Shares previously owned by the Director for more than six
months, or in a combination of cash and such Shares.
4.8. Option Nontransferable. (a) Unless otherwise determined by
the Administrator, or as provided in subparagraph (b) below, the Option shall
be neither transferable nor assignable by the Director other than by will or by
the laws of descent and distribution and may be exercised, during the lifetime
of the Director, only by the Director, or in the event of his or her legal
incapacity, by his or her guardian or legal representative acting on behalf of
the Director in a fiduciary capacity under the state law and court supervision.
(b) Notwithstanding the provisions of subparagraph (a), Options shall
be transferable by a Director without payment of consideration therefor by the
transferee, to any one or more members of the Director's immediate family (as
described in Rule 16a-1(e) of the Securities Exchange Act of 1934) (or to one
or more trusts established solely for the benefit of one or more members of the
Director's immediate family or to one or more partnerships in which the only
partners are members of the Director's immediate family or to an organization
which is exempt from federal taxation pursuant to Section 501(c)(3)of the
Code; provided, however, that (i) no such transfer shall be effective unless
reasonable prior notice thereof is delivered to the Company and such transfer
is thereafter effected in accordance with any terms and conditions that shall
have been made applicable thereto by the Board and (ii) any such transferee
shall be subject to the same terms and conditions hereunder as the Director.
4
<PAGE> 7
ARTICLE V. CHANGE IN CONTROL
For purposes of this Plan, a "Change in Control" means the first to
occur of the following events:
(1) The effective time of any purchase, sale, merger,
consolidation or other transaction after which any person,
corporation, partnership or other entity other than Flowers
Industries, Inc. ("Flowers") or its Affiliates, the then
current management of the Company or of Flowers or any
member of the immediate family of said management, or any
employee benefit plan of Company or of Flowers ("Permitted
Owners") shall own more than fifty percent (50%) of the
outstanding capital stock of the Company which stock is
entitled to vote for the election of directors.
(2) The effective time of a transfer to an entity other than a
Permitted Owner of substantially all of the property of the
Company.
(3) Continuing Directors at any time fail to constitute a
majority of the Board of Directors of the Company.
"Continuing Directors" shall mean the members of the
Board of Directors as of the date hereof, plus any new
directors whose nominations were approved by at least a
majority of the Continuing Directors in office at the time
of the election of any such new directors.
ARTICLE VI. ADMINISTRATION, AMENDMENT AND TERMINATION
6.1. Administration. The Plan shall be administered by the
Administrator. The Administrator shall have such powers as may be necessary to
discharge its duties hereunder. The Administrator may, from time to time,
employ, appoint or delegate to an agent or agents (who may be an officer or
officers of the Company) and delegate to them such administrative duties as it
sees fit, and may from time to time consult with legal counsel who may be
counsel to the Company. The Administrator shall have no power to add to,
subtract from or modify any of the terms of the Plan, or to change or add to
any benefits provided under the Plan, or to waive or fail to apply any
requirements of eligibility for a benefit under the Plan. No member of the
Administrator shall act in respect of his or her own Retainer. All decisions
and determinations by the Administrator shall be final and binding on all
parties. No member of the Administrator shall be liable for any such action
taken or determination made in good faith. All decisions of the Administrator
shall be made by the vote of the majority, including actions and writing taken
without a meeting. All elections, notices and directions under the Plan by a
Director shall be made on such forms as the Administrator shall prescribe.
6.2. Amendment and Termination. The Board may alter or amend this
Plan from time to time or may terminate it in its entirety; provided, however,
that no such action,
5
<PAGE> 8
except for an acceleration of benefits, shall, without the consent of a
Director, impair the rights in any Shares issued or to be issued to such
Director, as a result of a grant of Options under the Plan; and further
provided, that any amendment that must be approved by the shareholders of the
Company in order to comply with applicable law or the rules of the principal
national securities exchange upon which the Shares are traded or quoted shall
not be effective unless and until such approval has been obtained in compliance
with such applicable law or rules. Presentation of this Plan or any amendment
hereof for shareholder approval shall not be construed to limit the Company's
authority to offer similar or dissimilar benefits through plans that are not
subject to shareholder approval.
6.3. Amendment of Options. The Administrator shall not, without
the further approval of the shareholders of the Company, authorize the
amendment of any outstanding Option to reduce the exercise price of the Option.
Furthermore, no Option shall be canceled and replaced with awards having a
lower exercise price without further approval of the shareholders of the
Company. This Section 6.3 is intended to prohibit the repricing of
"underwater" Options and shall not be construed to prohibit the adjustments
provided for in Section 7.2 of this Plan.
ARTICLE VII. SHARES SUBJECT TO PLAN
7.1. Shares Subject to Plan. Subject to adjustment as provided in
this Plan, the total number of Shares which may be issued under this Plan shall
be three hundred thousand (300,000).
7.2. Adjustments. The Administrator may make or provide for such
adjustments in the (a) number of Shares covered by outstanding Options granted
or awarded hereunder, (b) prices per share applicable to such Options, and (c)
kind of shares covered thereby, as the Administrator in its sole discretion may
in good faith determine to be equitably required in order to prevent dilution
or enlargement of the rights of Directors that otherwise would result from (x)
any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, (y) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial
or complete liquidation of the Company or other distribution of assets,
issuance of rights or warrants to purchase securities of the Company, or (z)
any other corporate transaction or event having an effect similar to any of the
foregoing. In the event of any such transaction or event, the Administrator
may provide in substitution for any or all outstanding grants or awards under
this Plan such alternative consideration as it may in good faith determine to
be equitable under the circumstances and may require in connection therewith
the surrender of all awards so replaced. Moreover, the Administrator may on or
after the date of grant provide in the agreement evidencing any grant or award
under this Plan that the holder of the grant or award may elect to receive an
equivalent grant or award in respect of securities of the surviving entity of
any merger, consolidation or other transaction or event having a similar
effect, or the Administrator may provide that the holder will automatically be
entitled to receive such an equivalent grant or award. The Administrator may
also make or provide for such adjustments in the number of shares specified in
Section 7.1 of this Plan as the Administrator in its sole discretion may in
good faith determine to be appropriate in order to reflect any transaction or
event described in this Section 7.2. This Section 7.2 shall not be construed
to
6
<PAGE> 9
permit the re-pricing of any Options in the absence of any of the
circumstances described above in contravention of Section 6.3 of this Plan.
ARTICLE VIII. GENERAL PROVISIONS
8.1. Governing Law. The provisions of this Plan shall be governed
by and construed in accordance with the laws of the State of Delaware.
8.2. Miscellaneous. Headings are given to the sections of this
Plan solely as a convenience to facilitate reference. Such headings, numbering
and paragraphing shall not in any case be deemed in any way material or
relevant to the construction of this Plan or any provisions thereof. The use
of the singular shall also include within its meaning the plural, and vice
versa.
7
<PAGE> 1
EXHIBIT 10.28
AMENDMENT TO
INFLO HOLDINGS CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AMENDMENT to the Non-Qualified Stock Option Agreement
("Option Agreement") entered as of ____________, by and between INFLO Holdings
Corporation of which Keebler Foods Company (the "Company") is the successor
through merger, and _________________________________ ______________ (the
"Optionee") is made to be effective as of the ______ day of January, 1998. This
Amendment is made in consideration of the mutual covenants reflected herein and
for other good and valuable consideration, the receipt and sufficiency of which
is acknowledged by the parties. The Option Agreement is hereby amended as
follows:
1.
Section 1.2 is amended by adding the following sentence to the
end of said section:
"(For a special definition of "Cause" with limited application, see Section
3.1(f) below.)"
2.
The schedule for exercise of the options is amended with respect
to the Time Options and the Performance Options by deleting the schedules
contained in paragraph (b) of Section 3.1 and in Schedule I and replacing them
with the following, respectively:
<PAGE> 2
3.1(b) The balance of Time Options shall become exercisable as
follows:
<TABLE>
<CAPTION>
Percentage of Option Shares
Date Time Option as to Which Time Option is
Becomes Exercisable Exercisable
------------------- ---------------------------------
<S> <C>
February 3, 1998 60%
February 3, 1999 70%
February 3, 2000 80%
February 3, 2001 100%
</TABLE>
On February 3, 1998, the Performance Options will become
exercisable for seventy-five percent (75%) of the Shares subject
thereto. The Performance Options will become exercisable with respect to the
remaining Shares subject thereto as follows:
<TABLE>
<CAPTION>
Schedule I
Percentage of
Plan Year EBITDA Target Shares Exercisable
--------- ------------- ------------------
<S> <C> <C>
1998 $222.8 million 6.25%
1999 $237.2 million 6.25%
2000 $241.9 million 12.5%
</TABLE>
3.
Paragraph (e) of Section 3.1 is amended by deleting said
paragraph in its entirety and replacing it with the following:
(e) after (i) the termination of
2
<PAGE> 3
employment of the Optionee by the Company and its subsidiaries for Cause
(as defined in Section 1.2 or in subsection (f) below) or (ii) the
termination of his employment by the Optionee other than for Good Reason
(as defined in Section 1.5 or in subsection (g) below), any Option shall
be vested and exercisable only to those Shares as to which it was
exercisable immediately prior to the events set out in (i) or (ii) above.
In the event of a termination of employment for any other reason,
including death or Permanent Disability or by the Company (other than for
Cause as defined in Section 1.2 or in subsection (f) below) or by the
Optionee for Good Reason, all Time Options and Performance Options shall
become fully vested and exercisable.
4.
The following paragraphs (f) and (g) are added to Section 3.1:
(f) For purposes of paragraph (e) above, Cause shall also be
deemed to include the following:
(i) malfeasance or gross misconduct by Optionee
in connection with his employment or which
has a material adverse effect on the
reputation of the Company, which shall
include but not be limited to instances of
sexual harassment or violations of the
Company's nondiscrimination policies;
(ii) continuing refusal by Optionee to perform his
employment duties or any lawful direction of
the [CEO] [Chairman of the Board],
3
<PAGE> 4
within ten (10) days after written notice of any
such refusal to perform such duties or direction was
given to Optionee;
(iii) any breach of the provisions of any agreement
between the Optionee and the Company pertaining to
disclosure of confidential information or competition
with the Company by Optionee or any other material
breach of such an agreement by Optionee; or
(iv) the conviction of Optionee of, or plea of nolo
contendere by Optionee to,
(A) any felony under federal, state or local
laws; or
(B) a misdemeanor which involves
dishonesty or fraud or produces material
loss or damage to or material adverse
effect on the reputation of the Company.
(g) For purposes of paragraph (e) above, Good Reason
shall also be deemed to include the following:
(i) (A) the assignment to the Optionee of any duties
inconsistent in any material respect with the
Executive's authority, duties or responsibilities as
contemplated by any employment agreement which may
exist between the Optionee and the Company or (B) any
other action by the Company which results in a material
diminishment in such authority, duties or
responsibilities, other than action or in action
which is remedied by the Company within 15 days
4
<PAGE> 5
after receipt of written notice thereof given
by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of any employment agreement which may exist
between the Optionee and the Company, other than any
failure which is remedied by the Company within 15 days
after receipt of written notice thereof given by the
Optionee;
(iii) if the Company and the Optionee have entered into an
employment agreement, any purported termination by the
Company of the Optionee's employment otherwise than as
permitted by said employment agreement;
(iv) any relocation by the Company of the Optionee's primary
office location outside the Standard Metropolitan
Statistical Area in which the Optionee's primary office
is located prior to said relocation;
(v) any reduction in the total potential annual compensation
of the Optionee, consisting of base salary and potential
bonus (but not including diminution in bonus as a
consequence of economic performance of the Company);
(vi) a change in Optionee's employee benefits other than a
change which results from an amendment or alteration of
5
<PAGE> 6
the Company's employee benefit plans which affect its
salaried employees generally.
6
<PAGE> 7
5.
Paragraph (c) of Section 3.2 is hereby amended by deleting said
paragraph in its entirety and replacing it with the following:
(c) The first business day which is ninety calendar days after
termination of employment of the Optionee for any reason other than
for Cause (as defined in Section 1.2), death or Permanent Disability;
6.
The remaining provisions of said Option Agreement shall continue
in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the effective date indicated above
KEEBLER FOODS COMPANY
By:
______________________________
Title:________________________
Optionee:
__________________________________
7
<PAGE> 1
EXHIBIT 10.29
[EXECUTION COPY]
FORM OF SUPPLEMENT TO SUBSIDIARY GUARANTY
(Hollow Tree Financial Company, L.L.C.)
This SUPPLEMENT TO SUBSIDIARY GUARANTY (this "Supplement"), dated as of
November 25, 1997, to the Subsidiary Guaranty, dated as of January 26, 1996 (as
amended or otherwise modified through the date hereof, the "Subsidiary
Guaranty"), is made by HOLLOW TREE FINANCIAL COMPANY, L.L.C. a Delaware limited
liability company (the "Additional Guarantor"), in favor of THE BANK OF NOVA
SCOTIA, as administrative agent (together with any successor(s) thereto in such
capacity, the "Administrative Agent") for each of the Lender Parties (as
defined in the Subsidiary Guaranty). Capitalized terms used herein and not
herein defined shall have the meanings ascribed to them in the Subsidiary
Guaranty.
W I T N E S S E T H:
WHEREAS, pursuant to the Second Amended and Restated Credit Agreement,
dated as of April 8, 1997 (the "Credit Agreement"), among Keebler Corporation,
a Delaware corporation (the "Borrower"), the Administrative Agent, the various
financial institutions as are, or may from time to time become, parties thereto
(the "Lenders") and the Co-Agents named therein, the Lenders have extended
Commitments to make Credit Extensions to the Borrower;
WHEREAS, pursuant to the Credit Agreement, the Additional Guarantor is
required to execute and deliver this Supplement;
WHEREAS, it is in the best interests of the Additional Guarantor to
execute this Supplement inasmuch as the Additional Guarantor will derive
substantial direct and indirect benefits from the Credit Extensions made by the
Lender Parties pursuant to the Credit Agreement; and
WHEREAS, the Additional Guarantor desires to become a "Guarantor" under
the Subsidiary Guaranty;
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, the Additional Guarantor agrees, for the benefit of each
Lender Party, as follows:
SECTION 1. Guaranty. The Additional Guarantor hereby jointly and
severally, absolutely, unconditionally and irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of all
<PAGE> 2
Obligations of the Borrower and each other Obligor now or hereafter
existing under the Credit Agreement, the Notes, any Letter of Credit and
each other Loan Document to which the Borrower or such other Obligor is
or may become a party (or, in the case of Letters of Credit, is or may
become the account party), whether for principal, interest, Reimbursement
Obligations, fees, expenses or otherwise (including all such amounts
which would become due but for the operation of the automatic stay under
Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. Section
362(a), and the operation of Sections 502(b) and 506(b) of the United
States Bankruptcy Code, 11 U.S.C. Section 502(b) and Section 506(b)), and
(b) indemnifies and holds harmless each Lender Party and each
holder of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Lender Party or such
holder, as the case may be, in enforcing any rights under the Subsidiary
Guaranty (as supplemented by this Supplement);
provided, however, that the Additional Guarantor shall be liable under the
Subsidiary Guaranty (as supplemented by this Supplement) only for the maximum
amount of such liability that can be thereby incurred without rendering the
Subsidiary Guaranty (as supplemented by this Supplement), as it relates to the
Additional Guarantor, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer, and not for any greater amount. The
Subsidiary Guaranty (as supplemented by this Supplement) constitutes a guaranty
of payment when due and not of collection, and the Additional Guarantor
specifically agrees that it shall not be necessary or required that any Lender
Party or any holder of any Note exercise any right, assert any claim or demand
or enforce any remedy whatsoever against the Borrower or any other Obligor (or
any other Person) before or as a condition to the obligations of the Additional
Guarantor hereunder. The Additional Guarantor acknowledges and agrees that
each obligation hereunder shall be a joint and several obligation of the
Additional Guarantor.
SECTION 2. Acknowledgment. The Additional Guarantor acknowledges and
agrees that by its signature below it hereby is for all purposes a "Guarantor"
under the Subsidiary Guaranty with the same force and effect as if originally
named as a "Guarantor" therein, and each reference to a "Guarantor" in the
Subsidiary Guaranty shall be deemed to include the Additional Guarantor. The
Additional Guarantor hereby agrees to be bound by all of the terms and
provisions of the Subsidiary Guaranty.
SECTION 3. Warranties, etc. The Additional Guarantor hereby represents
and warrants unto each Lender Party, as of the date hereof, each of the
representations and warranties set forth in Article III of the Subsidiary
Guaranty (including as incorporated by reference to the Credit Agreement) as
applied to the Additional Guarantor are true and correct.
SECTION 4. Subsidiary Guaranty Remains in Full Force and Effect. Except
as expressly supplemented hereby, the Subsidiary Guaranty shall remain in full
force and effect in accordance with its terms.
-2-
<PAGE> 3
SECTION 5. Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS
SUPPLEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING
AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 6. Execution in Counterparts. This Supplement may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute but one and the same agreement.
SECTION 7. Loan Document. The Additional Guarantor hereby acknowledges
and agrees that this Supplement constitutes a "Loan Document", as such term is
defined in the Credit Agreement.
IN WITNESS WHEREOF, the Additional Guarantor has duly executed this
Supplement to the Subsidiary Guaranty as of the day and year first above
written.
HOLLOW TREE FINANCIAL
COMPANY, L.L.C.
By:________________________________________
Title:
-3-
<PAGE> 4
Acknowledged and Accepted:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By:_________________________________
Title:
-4-
<PAGE> 1
EXHIBIT 10.30
[EXECUTION COPY]
FORM OF SUPPLEMENT TO SUBSIDIARY GUARANTY
(Elfin Equity Company, L.L.C.)
This SUPPLEMENT TO SUBSIDIARY GUARANTY (this "Supplement"), dated as of
November 25, 1997, to the Subsidiary Guaranty, dated as of January 26, 1996 (as
amended or otherwise modified through the date hereof, the "Subsidiary
Guaranty"), is made by ELFIN EQUITY COMPANY, L.L.C. a Delaware limited
liability company (the "Additional Guarantor"), in favor of THE BANK OF NOVA
SCOTIA, as administrative agent (together with any successor(s) thereto in such
capacity, the "Administrative Agent") for each of the Lender Parties (as
defined in the Subsidiary Guaranty). Capitalized terms used herein and not
herein defined shall have the meanings ascribed to them in the Subsidiary
Guaranty.
W I T N E S S E T H:
WHEREAS, pursuant to the Second Amended and Restated Credit Agreement,
dated as of April 8, 1997 (the "Credit Agreement"), among Keebler Corporation,
a Delaware corporation (the "Borrower"), the Administrative Agent, the various
financial institutions as are, or may from time to time become, parties thereto
(the "Lenders") and the Co-Agents named therein, amending and restating in its
entirety the Existing Credit Agreement, the Lenders have extended Commitments
to make Credit Extensions to the Borrower;
WHEREAS, pursuant to the Credit Agreement, the Additional Guarantor is
required to execute and deliver this Supplement;
WHEREAS, it is in the best interests of the Additional Guarantor to
execute this Supplement inasmuch as the Additional Guarantor will derive
substantial direct and indirect benefits from the Credit Extensions made by the
Lender Parties pursuant to the Credit Agreement; and
WHEREAS, the Additional Guarantor desires to become a "Guarantor" under
the Subsidiary Guaranty;
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, the Additional Guarantor agrees, for the benefit of each
Lender Party, as follows:
SECTION 1. Guaranty. The Additional Guarantor hereby jointly and
severally, absolutely, unconditionally and irrevocably
<PAGE> 2
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of all Obligations of the Borrower and each other
Obligor now or hereafter existing under the Credit Agreement, the Notes,
any Letter of Credit and each other Loan Document to which the Borrower
or such other Obligor is or may become a party (or, in the case of
Letters of Credit, is or may become the account party), whether for
principal, interest, Reimbursement Obligations, fees, expenses or
otherwise (including all such amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the United
States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code,
11 U.S.C. Section 502(b) and Section 506(b)), and
(b) indemnifies and holds harmless each Lender Party and each
holder of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Lender Party or such
holder, as the case may be, in enforcing any rights under the Subsidiary
Guaranty (as supplemented by this Supplement);
provided, however, that the Additional Guarantor shall be liable under the
Subsidiary Guaranty (as supplemented by this Supplement) only for the maximum
amount of such liability that can be thereby incurred without rendering the
Subsidiary Guaranty (as supplemented by this Supplement), as it relates to the
Additional Guarantor, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer, and not for any greater amount. The
Subsidiary Guaranty (as supplemented by this Supplement) constitutes a guaranty
of payment when due and not of collection, and the Additional Guarantor
specifically agrees that it shall not be necessary or required that any Lender
Party or any holder of any Note exercise any right, assert any claim or demand
or enforce any remedy whatsoever against the Borrower or any other Obligor (or
any other Person) before or as a condition to the obligations of the Additional
Guarantor hereunder. The Additional Guarantor acknowledges and agrees that
each obligation hereunder shall be a joint and several obligation of the
Additional Guarantor.
SECTION 2. Acknowledgment. The Additional Guarantor acknowledges and
agrees that by its signature below it hereby is for all purposes a "Guarantor"
under the Subsidiary Guaranty with the same force and effect as if originally
named as a "Guarantor" therein, and each reference to a "Guarantor" in the
Subsidiary Guaranty shall be deemed to include the Additional Guarantor. The
Additional Guarantor hereby agrees to be bound by all of the terms and
provisions of the Subsidiary Guaranty.
SECTION 3. Warranties, etc. The Additional Guarantor hereby represents
and warrants unto each Lender Party, as of the date hereof, each of the
representations and warranties set forth in Article III of the Subsidiary
Guaranty (including as incorporated by reference to the Credit Agreement) as
applied to the Additional Guarantor are true and correct.
-2-
<PAGE> 3
SECTION 4. Subsidiary Guaranty Remains in Full Force and Effect. Except
as expressly supplemented hereby, the Subsidiary Guaranty shall remain in full
force and effect in accordance with its terms.
SECTION 5. Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY AND
CCONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS
SUPPLEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING
AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 6. Execution in Counterparts. This Supplement may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute but one and the same agreement.
SECTION 7. Loan Document. The Additional Guarantor hereby acknowledges
and agrees that this Supplement constitutes a "Loan Document", as such term is
defined in the Credit Agreement.
IN WITNESS WHEREOF, the Additional Guarantor has duly executed this
Supplement to the Subsidiary Guaranty as of the day and year first above
written.
ELFIN EQUITY COMPANY, L.L.C.
By:_________________________________
Title:
-3-
<PAGE> 4
Acknowledged and Accepted:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By:_______________________________
Title:
-4-
<PAGE> 1
EXHIBIT 10.31.1
FORM OF
AMENDMENT NO. 1 TO THE
MANAGEMENT STOCKHOLDER'S AGREEMENT
----------------------------------
(NON-EXECUTIVES)
This Amendment No. 1 to the Management Stockholder's Agreement (this
"Agreement") is entered into as of ________________________ between KEEBLER
FOODS COMPANY, a Delaware corporation (the "Company"), and
_____________________ (the "Investor") (the Company and the Investor being
hereinafter collectively referred to as the "Parties").
RECITALS
--------
Certain stockholders of the Company ("Selling Stockholders") propose
to sell a portion of their shares of the Company's common stock (the "Common
Stock") in an initial public offering under a Registration Statement on Form
S-1 (File No. 333-42075) filed with the Securities and Exchange Commission (the
"IPO"). In such connection the Company (formerly INFLO Holdings Corporation)
and the Investor, who are parties to the Management Stockholders' Agreement
("Original Agreement"), dated [___________, 1996], agree to amend the Original
Agreement as follows:
AGREEMENT
---------
1. Upon the occurrence of the event described in Section 3 of
this Agreement:
(a) Sections 3, 5, 6, 7, 8, 11, 12, 15, 18, 21, 23, and
25 of the Original Agreement are hereby deleted in
their entirety and are of no further force or effect.
(b) Section 10 of the Original Agreement is hereby
amended by deleting said section in its entirety and
in lieu thereof, the Investor shall be entitled to
the "incidental registration rights" set forth on
Annex A hereto.
(c) The Investor's rights under the Sales Participation
Agreement dated as of May 10, 1996 are hereby
terminated and such termination is affirmed and
acknowledged by the signatures of Flowers Industries,
Inc. and Artal Luxembourg S.A. on this Amendment No.
1.
<PAGE> 2
(d) Section 2(e) of the Original Agreement is hereby
amended by deleting said Section in its entirety.
(e) Section 4 of the Original Agreement is hereby amended
by deleting said Section in its entirety and
substituting in lieu thereof a new Section 4, reading
as set forth on Annex C hereto.
(f) Section 22 of the Original Agreement is hereby
amended by deleting said Section in its entirety and
substituting in lieu thereof a new Section 22,
reading as set forth in Annex D hereto.
(g) Section 25 of the Original Agreement is hereby
amended by deleting said section in its entirety and
substituting in lieu thereof a new Section 25,
reading as set forth in Annex E hereto.
(h) Section 26(a) of the Original Agreement is hereby
amended by deleting said Section in its entirety and
substituting in lieu thereof a new Section 26(a),
reading as set forth on Annex F hereto.
2. The Investor hereby acknowledges that the managing
underwriters of the IPO have advised the Company that in their view no shares
of the Investor may be registered in the IPO without an adverse effect on the
offering and, thus, pursuant to Section 10(c)(ii) of the Original Agreement
(prior to the effectiveness of the amendment contained in Section 1(b) above),
the Investor may not register any shares in the IPO. Accordingly, the Investor
has no "piggyback registration rights" (including, not by way of limitation,
any rights to notice) in connection with the IPO, including, not by way of
limitation, any rights which are pursuant to Section 10 of the Original
Agreement. The Investor further acknowledges that pursuant to Section 2(e) of
the Original Agreement (prior to the effectiveness of the amendment contained
in Section 1(d) above) that he is bound by the holdback period required by the
managing underwriters of the IPO.
3. The terms and provisions of Section 1 of this Agreement will
not be effective until the sale of Common Stock pursuant to an IPO.
2
<PAGE> 3
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
KEEBLER FOODS COMPANY
By:__________________________________
Name:
Title:
_____________________________________
[Investor]
Address
As to Paragraph 1(c) and 1(d) only
Affirmed and Acknowledged
_______________________________
Flowers Industries, Inc.
_______________________________
Artal Luxembourg S.A.
As to Paragraph 1(e) only
Affirmed and Acknowledged
______________________________
Flowers Industries, Inc.
3
<PAGE> 4
ANNEX B
INTENTIONALLY LEFT BLANK
4
<PAGE> 5
ANNEX C
REVISED SECTION 4
4. Right of First Refusal.
----------------------
Except for transfers permitted by clauses (x), (y) and (z) of
Section 2(a), if at any time after the IPO the Purchaser desires to transfer
any or all of his shares of Stock, the Purchaser shall notify the Company and
Flowers Industries, Inc. ("Flowers") in writing of his wish to make such
transfer (the "Offer"). The Purchaser's notice shall contain an irrevocable
offer to sell such shares of Stock to the Company and Flowers (in the manner
set forth below) at a purchase price equal to the average of the closing
trading prices of the Company's Common Stock on the New York Stock Exchange (or
if such shares are not traded on the New York Stock Exchange, the closing
trading prices of such security on the principal national securities exchange
or the Nasdaq Stock Market on which such securities are listed) on the day that
the Company and Flowers receives the Offer and on the day that the Company or
Flowers accepts the Offer (or the next succeeding trading day if either such
day is not a trading day) (the "Average Market Price"). At any time within the
next succeeding business day after the date of the receipt by the Company and
Flowers of the Purchaser's notice, the Company and Flowers shall have the right
and option to purchase, or to arrange for a third party to purchase, any or all
of the shares of Stock covered by the Offer, by notifying the Purchaser. The
purchase of the shares shall be effectuated within 3 business days by
delivering a certified bank check or checks in the appropriate amount to the
Purchaser at the principal office of the Company against (i) delivery of
certificates or other instruments representing the shares of the Stock so
purchased, appropriately endorsed by the Purchaser or (ii) such other
instructions to transfer such shares from an account held by Purchaser to
accounts designated by Flowers or the Company, as appropriate. If by 11:59
p.m. of the end of such next succeeding business day, neither the Company nor
Flowers has accepted the Offer in the manner set forth above, the Purchaser
may, during the succeeding 30 day period, transfer any or all of the shares of
Stock covered by the Offer. If, at the end of the 30 day period, the Purchaser
has not completed the transfer of such shares of the Stock as aforesaid, all
the restrictions on sale, transfer or assignment contained in this Agreement
shall again be in effect with respect to such shares of the Stock. If the
Offer is accepted, Flowers shall have the first right to purchase the shares
covered by the Offer, and then the Company shall have the right to purchase any
shares not purchased by Flowers. Notwithstanding the foregoing, the Purchaser
shall not be required to sell shares pursuant to this Section 4 if such sale
would have the result of not being treated as a distribution in part or full
payment in exchange for stock pursuant to Section 302 of the Internal Revenue
Code of 1986, as amended; provided, however, the parties also acknowledge that
Flowers would still have the right to purchase the shares if such favorable tax
treatment would result from its purchase in lieu of a purchase by the Company.
No transfer of any shares in violation of this Section 4 shall be made or
recorded on the books of the Company and any such transfer shall be void and of
no effect. In order to notify Flowers and the
5
<PAGE> 6
Company of the Offer, Purchaser shall give the following notice to each of
them, by hand delivery or facsimile, to the General Counsels of each of them at
the addresses set forth in Section 25(a):
"Pursuant to Section 4 of that certain
Management Stockholder's Agreement,
between Keebler Foods Company (the
"Company") and the undersigned, the
undersigned hereby notifies you of its
irrevocable Offer (as defined in said
Section) to sell to either the Company
or Flowers Industries,_____ shares of
stock of the Company.
By:______________________
Date:_____________________"
In order to accept the Offer, either Flowers or the Company shall either orally
notify the Purchaser of its acceptance (and shall deliver the following notice
as soon as practicable thereafter) or shall deliver the following notice to the
Purchaser at the address set forth in Section 25(b):
"Pursuant to Section 4 of that certain
Management Stockholder's Agreement,
between Keebler Foods Company (the
"Company") and you, the undersigned has
accepted your Offer to purchase ____
shares of stock of the Company.
By:____________________
[Flowers Industries, Inc.]
[Keebler Foods Company]
Date:___________________"
6
<PAGE> 7
ANNEX D
REVISED SECTION 22
22. Applicable Law.
---------------
The laws of the state of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law. Any suit, action or proceeding against the Company, with respect to this
Agreement, or any judgment entered by any court in respect of any thereof, may
be brought in any court of competent jurisdiction in the States of Delaware or
Illinois, as the Company may elect in its sole discretion, and the Purchaser
hereby submits to the non-exclusive jurisdiction of such courts for the purpose
of any such suit, action, proceeding or judgment. By the execution and
delivery of this Agreement, the Purchaser appoints The Corporation Trust
Company, at its office in Chicago, Illinois or Wilmington, Delaware, as the
case may be, as his agent upon which process may be served in any such suit,
action or proceeding. Service of process upon such agent, together with notice
of such service given to the Purchaser in the manner provided in Section 25
hereof, shall be deemed in every respect effective service of process upon him
in any suit, action or proceeding. Nothing herein shall in any way be deemed
to limit the ability of the Company to serve any such writs, process or
summonses in any other manner permitted by applicable law or to obtain
jurisdiction over the Purchaser, in such other jurisdictions and in such
manner, as may be permitted by applicable law. The Purchaser hereby
irrevocably waives any objections which he may now or hereafter have to the
laying of the venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any court of competent jurisdiction in
the States of Delaware or Illinois, and hereby further irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has
been brought in any inconvenient forum. No suit, action or proceeding against
the Company with respect to this Agreement may be brought in any court,
domestic or foreign, or before any similar domestic or foreign authority other
than in a court of competent jurisdiction in the States of Delaware or
Illinois, and the Purchaser hereby irrevocably waives any right which he may
otherwise have had to bring such an action in any other court, domestic or
foreign, or before any similar domestic or foreign authority. The Company
hereby submits to the jurisdiction of such court for the purpose of any such
suit, action or proceeding.
7
<PAGE> 8
ANNEX E
REVISED SECTION 25
25. Notices.
--------
All notices and other communications provided for herein
(except for the notices set forth in Sections 2(e) and 4, in which case the
terms of such Sections shall govern), shall be in writing and shall be deemed
to have been duly given if delivered by hand (or by overnight courier or
facsimile), to the Party to whom it is directed:
(a) If to the Company, to it at the following address:
Keebler Foods Company
677 Larch Avenue
Elmhurst, Illinois 60126
Attn: Chief Executive Officer
Fax No.:______________________
with copies to:
The General Counsel of the Company
at the above address.
and to:
Flowers Industries, Inc.
1919 Flowers Circle
Thomasville, GA 31757
Attn: General Counsel
Fax No.:_____________________
(b) If to the Purchaser, to him at the address set forth
below under his signature;
or at such other address as either party shall have
specified by notice in writing to the other.
8
<PAGE> 9
ANNEX F
REVISED SECTION 26(a)
(a) In consideration of the Company entering into this Agreement with the
Purchaser, the Pruchaser hereby agrees effective as of the Purchase Date, for
so long as the Purchaser is employed by the Company or one of its subsidiaries
(the "Noncompete Period"), the Purchaser shall not, directly or indirectly,
engage in the production, sale or distribution of any food product produced,
sold or distributed by the Company or its subsidiaries on the date hereof or
during the Noncompete Period (except for a food product that the Company only
packages under a co-packing arrangement) anywhere in North America where the
Company or its subsidiaries is doing business other than through the
Purchaser's employment with the Company or any of its subsidiares. The
Noncompete Period shall be extended beyond the termination of the Purchaser's
employment, with the Company or its subsidiaries for up to the earlier of (i)
the third anniversary of the IPO or (ii) an additional one year period from the
date of termination of employment, for so long as the Company, at its option
elects, or is required under the Company's Change of Control Policy, to make
payments to Purchaser equal to the amounts and at the times that Purchaser
would have been entitled to receive payments under the Company's Change of
Control Policy as if such termination occurred within two years after a "change
of control" (as defined in said Change of Control Policy), regardless of
whether there has been an actual "change of control" as of the time of such
termination of employment; provided, however, that if Purchaser is not
entitled to payments under the Company's Change of Control Policy), then the
noncompete provisions of this Section 26(a) shall still apply. For purposes of
this Agreement, the phrase "directly or indirectly engage in" shall include any
direct or indirect ownership or profit participation interest in such
enterprise, whether as an owner, stockholder, partner, joint venturer or
otherwise, and shall include any direct or indirect participation in such
enterprise as a consultant, licensor of technology or otherwise. For purposes
of this Section 26(a), the Company's "Change of Control Policy" shall mean the
Keebler Foods Company Policy Regarding Termination Benefits For Certain
Executives In the Event of a Change of Control, as such policy may be, from
time to time, amended, modified, supplemented or replaced with a different
policy covering the same subject matter.
9
<PAGE> 1
EXHIBIT 10.31.2
FORM OF
AMENDMENT NO. 1 TO THE
MANAGEMENT STOCKHOLDER'S AGREEMENT
(EXECUTIVES OTHER THAN O'NEILL, WALSH AND SPEAR)
This Amendment No. 1 to the Management Stockholder's Agreement (this
"Agreement") is entered into as of ________________________ between KEEBLER
FOODS COMPANY, a Delaware corporation (the "Company"), and
_____________________ (the "Investor") (the Company and the Investor being
hereinafter collectively referred to as the "Parties").
RECITALS
Certain stockholders of the Company ("Selling Stockholders") propose to
sell a portion of their shares of the Company's common stock (the "Common
Stock") in an initial public offering under a Registration Statement on Form
S-1 (File No. 333-42075) filed with the Securities and Exchange Commission (the
"IPO"). In such connection the Company (formerly INFLO Holdings Corporation)
and the Investor, who are parties to the Management Stockholders' Agreement
("Original Agreement"), dated [___________, 1996], agree to amend the Original
Agreement as follows:
AGREEMENT
1. Upon the occurrence of the event described in Section 3 of
this Agreement:
(a) Sections 3, 5, 6, 7, 8, 11, 12, 15, 18, 21, 23, and 25
of the Original Agreement are hereby deleted in their
entirety and are of no further force or effect.
(b) Section 10 of the Original Agreement is hereby amended
by deleting said section in its entirety and in lieu
thereof, the Investor shall be entitled to the
"incidental registration rights" set forth on Annex A
hereto.
(c) The Investor's rights under the Sales Participation
Agreement dated as of May 10, 1996 are hereby
terminated and such termination is affirmed and
acknowledged by the signatures of Flowers Industries,
Inc. and Artal Luxembourg S.A. on this Amendment No. 1.
<PAGE> 2
(d) Section 2(e) of the Original Agreement is hereby
amended by deleting said Section in its entirety and
substituting in lieu thereof a new Section 2(e),
reading as set forth on Annex B hereto.
(e) Section 4 of the Original Agreement is hereby amended
by deleting said Section in its entirety and
substituting in lieu thereof a new Section 4, reading
as set forth on Annex C hereto.
(f) Section 22 of the Original Agreement is hereby amended
by deleting said Section in its entirety and
substituting in lieu thereof a new Section 22, reading
as set forth in Annex D hereto.
(g) Section 25 of the Original Agreement is hereby amended
by deleting said section in its entirety and
substituting in lieu thereof a new Section 25, reading
as set forth in Annex E hereto.
(h) Section 26(a) of the Original Agreement is hereby
amended by deleting said Section in its entirety and
substituting in lieu thereof a new Section 26(a),
reading as set forth on Annex F hereto.
2. The Investor hereby acknowledges that the managing
underwriters of the IPO have advised the Company that in their view no shares of
the Investor may be registered in the IPO without an adverse effect on the
offering and, thus, pursuant to Section 10(c)(ii) of the Original Agreement
(prior to the effectiveness of the amendment contained in Section 1(b) above),
the Investor may not register any shares in the IPO. Accordingly, the Investor
has no "piggyback registration rights" (including, not by way of limitation, any
rights to notice) in connection with the IPO, including, not by way of
limitation, any rights which are pursuant to Section 10 of the Original
Agreement. The Investor further acknowledges that pursuant to Section 2(e) of
the Original Agreement (prior to the effectiveness of the amendment contained in
Section 1(d) above) that he is bound by the holdback period required by the
managing underwriters of the IPO.
3. The terms and provisions of Section 1 of this Agreement will
not be effective until the sale of Common Stock pursuant to an IPO.
2
<PAGE> 3
IN WITNESS WHEREOF, the Parties have executed this
Agreement as of the date first above written.
KEEBLER FOODS COMPANY
By:__________________________________
Name:
Title:
_____________________________________
[Investor]
Address
As to Paragraph 1(c) and 1(d) only
Affirmed and Acknowledged
___________________________________
Flowers Industries, Inc.
___________________________________
Artal Luxembourg S.A.
As to Paragraph 1(e) only
Affirmed and Acknowledged
___________________________________
Flowers Industries, Inc.
3
<PAGE> 4
ANNEX B
REVISED SECTION 2(e)
(e) The parties acknowledge that pursuant to the provisions of Annex A
of that certain Stock Purchase Agreement among Flowers Industries, Inc., Artal
Luxembourg A.A. ("Artal") and the Company, Artal has certain demand registration
rights (the "Registration Rights"). The Purchaser agrees that subsequent to the
closing of the initial public offering under Registration Statement on Form S-1
(File No. 333-42075) filed with the Securities and Exchange Commission (the
"IPO"), if any shares of the capital stock of the Company are offered to the
public pursuant to Artal's exercise of the Registration Rights in an
underwritten public offering under an effective registration statement under the
Act (a "Subsequent Public Offering"), the Purchaser will not effect any public
sale or distribution of any shares of the Stock not covered by such registration
statement (a "Holdback") within 10 days prior to, or within such time period
after, the effective date of such registration statement as the managing
underwriter of such Subsequent Public Offering shall advise the Company is
necessary to complete such Subsequent Public Offering in an effective manner,
unless otherwise agreed to in writing by the Company; provided, however, that if
Purchaser is not selling any shares of Stock in the IPO or in such Subsequent
Public Offering the following shall apply:
(i) If Purchaser is not a member on the Executive Committee of
the management of the Company at the time of such Subsequent
Public Offering, Purchaser shall not be subject to a
Holdback.
(ii) Subject to the Company not being otherwise restricted as a
matter of law, for a period of six months after the initial
180 day holdback period of the IPO, if Purchaser is subject
to such initial holdback, Purchaser may require the Company
to repurchase his stock at the Market Price (as defined in
subsection (vi) below) during any Holdback period to which he
is subject in a Subsequent Public Offering during such six
months, subject to the limitations set forth in subsection
(vii) below. Furthermore, if the initial holdback period of
the IPO is ultimately less than 180 days then the Company
shall not be required to repurchase shares during the
Holdback period of the Subsequent Public Offering until all
such Holdback periods exceed an aggregate total of 180 days
during the twelve-month period.
(iii) If Purchaser is subject to this Section 2(e), Purchaser will
only be required to be subject to a Holdback in a Subsequent
Public Offering in excess of 90 days upon written advice of
the managing underwriter that a Holdback of 90 days or less
would be materially detrimental to the Subsequent Public
Offering.
4
<PAGE> 5
(iv) After the twelve-month period referred to in subsection (ii)
above and upon the written advice per subsection (iii) above,
if there is more than one Subsequent Public Offering in a
twelve-month period and the managing underwriter requires a
Holdback from Purchaser subject to this Section 2(e) in
excess of 90 days, subject to the Company not being otherwise
restricted as a matter of law, Purchaser may require the
Company to repurchase his shares at the Market Price during
the post- 90 day period of the Holdback period, subject to
the limitation set forth in subsection (vii) below.
(v) Notwithstanding the foregoing, Purchaser may not require the
repurchase of his shares, if Purchaser is selling shares in
the Subsequent Public Offering in which he is subject to a
Holdback.
(vi) For purposes of this Section 2(e), "Market Price" shall mean
the closing trading price of the Company's Common Stock on
the New York Stock Exchange (or if such shares are not traded
on the New York Stock Exchange, the closing trading price for
a share of such security on the principal national securities
exchange or on the Nasdaq Stock Market on which such
securities are listed) on the day that the Company receives
notice from the Purchaser (or the next succeeding trading day
if such day is not a trading day) that he is exercising his
rights to require the Company to repurchase his shares
pursuant to subsections (ii) or (iv) above.
(vii) (A) The maximum aggregate buyback by the Company during all
Holdback periods caused by Artal's exercise of the
Registration Rights for all repurchases from Purchaser and
all Other Purchasers shall be the greater of (1) one percent
(1%) of the outstanding shares of the Company immediately
after the closing of the IPO or (2) an aggregate purchase
obligation by the Company of $25 million, and (ii) a maximum
buyback from the Purchaser during all such Holdback periods
shall be no more than 20% of (1) the shares of the Company
owned by the Purchaser as of the closing of the IPO, plus (2)
the shares for which Purchaser has Options under the
Non-Qualified Stock Option Agreement (specifically excluding
any options granted under any other option plans that the
Company has or may adopt.)
(viii) In order to exercise his rights to require the Company to
purchase shares pursuant to subsection (ii) or (iv) above,
Purchaser shall deliver, by hand or facsimile, to the General
Counsel of the Company, at the address set forth in Section
25(a), the following notice:
"Pursuant to Section 2(e) of that certain Management
Stockholder's Agreement, between Keebler Foods Company
(the "Company") and the
5
<PAGE> 6
undersigned,the undersigned requests that the Company
purchase from the undersigned ____ shares of stock of
the Company.
By:_______________________
Date:_____________________"
6
<PAGE> 7
ANNEX C
REVISED SECTION 4
4. Right of First Refusal.
Except for transfers permitted by clauses (x), (y) and (z) of
Section 2(a), if at any time after the IPO the Purchaser desires to transfer any
or all of his shares of Stock, the Purchaser shall notify the Company and
Flowers Industries, Inc. ("Flowers") in writing of his wish to make such
transfer (the "Offer"). The Purchaser's notice shall contain an irrevocable
offer to sell such shares of Stock to the Company and Flowers (in the manner set
forth below) at a purchase price equal to the average of the closing trading
prices of the Company's Common Stock on the New York Stock Exchange (or if such
shares are not traded on the New York Stock Exchange, the closing trading prices
of such security on the principal national securities exchange or the Nasdaq
Stock Market on which such securities are listed) on the day that the Company
and Flowers receives the Offer and on the day that the Company or Flowers
accepts the Offer (or the next succeeding trading day if either such day is not
a trading day) (the "Average Market Price"). At any time within the next
succeeding business day after the date of the receipt by the Company and Flowers
of the Purchaser's notice, the Company and Flowers shall have the right and
option to purchase, or to arrange for a third party to purchase, any or all of
the shares of Stock covered by the Offer, by notifying the Purchaser. The
purchase of the shares shall be effectuated within 3 business days by delivering
a certified bank check or checks in the appropriate amount to the Purchaser at
the principal office of the Company against (i) delivery of certificates or
other instruments representing the shares of the Stock so purchased,
appropriately endorsed by the Purchaser or (ii) such other instructions to
transfer such shares from an account held by Purchaser to accounts designated by
Flowers or the Company, as appropriate. If by 11:59 p.m. of the end of such next
succeeding business day, neither the Company nor Flowers has accepted the Offer
in the manner set forth above, the Purchaser may, during the succeeding 30 day
period, transfer any or all of the shares of Stock covered by the Offer. If, at
the end of the 30 day period, the Purchaser has not completed the transfer of
such shares of the Stock as aforesaid, all the restrictions on sale, transfer or
assignment contained in this Agreement shall again be in effect with respect to
such shares of the Stock. If the Offer is accepted, Flowers shall have the first
right to purchase the shares covered by the Offer, and then the Company shall
have the right to purchase any shares not purchased by Flowers. Notwithstanding
the foregoing, the Purchaser shall not be required to sell shares pursuant to
this Section 4 if such sale would have the result of not being treated as a
distribution in part or full payment in exchange for stock pursuant to Section
302 of the Internal Revenue Code of 1986, as amended; provided, however, the
parties also acknowledge that Flowers would still have the right to purchase the
shares if such favorable tax treatment would result from its purchase in lieu of
a purchase by the Company. No transfer of any shares in violation of this
Section 4 shall be made or recorded on the books of the Company and any such
transfer shall be void and of no effect. In order to notify Flowers and the
7
<PAGE> 8
Company of the Offer, Purchaser shall give the following notice to each of
them, by hand delivery or facsimile, to the General Counsels of each of them
at the addresses set forth in Section 25(a):
"Pursuant to Section 4 of that certain Management
Stockholder's Agreement, between Keebler Foods Company (the
"Company") and the undersigned, the undersigned hereby
notifies you of its irrevocable Offer (as defined in said
Section) to sell to either the Company or Flowers
Industries, Inc. ___ shares of stock of the Company.
By:______________________
Date:____________________"
In order to accept the Offer, either Flowers or the Company shall either orally
notify the Purchaser of its acceptance (and shall deliver the following notice
as soon as practicable thereafter) or shall deliver the following notice to the
Purchaser at the address set forth in Section 25(b):
"Pursuant to Section 4 of that certain Management
Stockholder's Agreement, between Keebler Foods Company (the
"Company") and you, the undersigned has accepted your Offer
to purchase ____ shares of stock of the Company.
By:_________________________
[Flowers Industries, Inc.]
[Keebler Foods Company]
Date:_______________________"
8
<PAGE> 9
ANNEX D
REVISED SECTION 22
22. Applicable Law.
The laws of the state of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law. Any suit, action or proceeding against the Company, with respect to this
Agreement, or any judgment entered by any court in respect of any thereof, may
be brought in any court of competent jurisdiction in the States of Delaware or
Illinois, as the Company may elect in its sole discretion, and the Purchaser
hereby submits to the non-exclusive jurisdiction of such courts for the purpose
of any such suit, action, proceeding or judgment. By the execution and delivery
of this Agreement, the Purchaser appoints The Corporation Trust Company, at its
office in Chicago, Illinois or Wilmington, Delaware, as the case may be, as his
agent upon which process may be served in any such suit, action or proceeding.
Service of process upon such agent, together with notice of such service given
to the Purchaser in the manner provided in Section 25 hereof, shall be deemed in
every respect effective service of process upon him in any suit, action or
proceeding. Nothing herein shall in any way be deemed to limit the ability of
the Company to serve any such writs, process or summonses in any other manner
permitted by applicable law or to obtain jurisdiction over the Purchaser, in
such other jurisdictions and in such manner, as may be permitted by applicable
law. The Purchaser hereby irrevocably waives any objections which he may now or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement brought in any court of competent
jurisdiction in the States of Delaware or Illinois, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in any inconvenient forum. No suit, action or
proceeding against the Company with respect to this Agreement may be brought in
any court, domestic or foreign, or before any similar domestic or foreign
authority other than in a court of competent jurisdiction in the States of
Delaware or Illinois, and the Purchaser hereby irrevocably waives any right
which he may otherwise have had to bring such an action in any other court,
domestic or foreign, or before any similar domestic or foreign authority. The
Company hereby submits to the jurisdiction of such court for the purpose of any
such suit, action or proceeding.
9
<PAGE> 10
ANNEX E
REVISED SECTION 25
25. Notices.
All notices and other communications provided for herein
(except for the notices set forth in Sections 2(e) and 4, in which case the
terms of such Sections shall govern), shall be in writing and shall be deemed to
have been duly given if delivered by hand (or by overnight courier or
facsimile), to the Party to whom it is directed:
(a) If to the Company, to it at the following address:
Keebler Foods Company
677 Larch Avenue
Elmhurst, Illinois 60126
Attn: Chief Executive Officer
Fax No.:_____________________
with copies to:
The General Counsel of the Company
at the above address.
and to:
Flowers Industries, Inc.
1919 Flowers Circle
Thomasville, GA 31757
Attn: General Counsel
Fax No.:_____________________
(b) If to the Purchaser, to him at the address set forth below
under his signature;
or at such other address as either party shall have
specified by notice in writing to the other.
10
<PAGE> 11
ANNEX F
REVISED SECTION 26(a)
(a) In consideration of the Company entering into this Agreement with the
Purchaser, the Purchaser hereby agrees effective as of the Purchase Date, for so
long as the Purchaser is employed by the Company or one of its subsidiaries (the
"Noncompete Period"), the Purchaser shall not, directly or indirectly, engage in
the production, sale or distribution of any food product produced, sold or
distributed by the Company or its subsidiaries on the date hereof or during the
Noncompete Period (except for a food product that the Company only packages
under a copacking arrangement) anywhere in North America where the Company or
its subsidiaries is doing business other than through the Purchaser's employment
with the Company or any of its subsidiaries. The Noncompete Period shall be
extended beyond the termination of the Purchaser's employment with the Company
or its subsidiaries for up to the earlier of (i) the third anniversary of the
IPO or (ii) an additional one year period from the date of termination of
employment, so long as the Company continues to make payments to which Purchaser
is entitled subsequent to his termination under his Employment and Severance
Agreement with the Company, dated _____________, 1998, at the times and in the
amounts set forth therein; provided, however, that if Purchaser is not entitled
to payments under such Employment and Severance Agreement because (i)
Purchaser's employment is terminated by the Company for Cause (as defined in
such agreement) or (ii) Purchaser voluntarily terminates his employment with the
Company for other than Good Reason (as defined in such agreement), then the
non-compete provisions of this Section 26(a) shall still apply. For purposes of
this Agreement, the phrase "directly or indirectly engage in" shall include any
direct or indirect ownership or profit participation interest in such
enterprise, whether as an owner, stockholder, partner, joint venturer or
otherwise, and shall include any direct or indirect participation in such
enterprise as a consultant, licensor of technology or otherwise.
11
<PAGE> 1
EXHIBIT 10.31.3
FORM OF
AMENDMENT NO. 1 TO THE
MANAGEMENT STOCKHOLDER'S AGREEMENT
(O'NEILL, WALSH AND SPEAR)
This Amendment No. 1 to the Management Stockholder's Agreement (this
"Agreement") is entered into as of ________________________ between KEEBLER
FOODS COMPANY, a Delaware corporation (the "Company"), and
_____________________ (the "Investor") (the Company and the Investor being
hereinafter collectively referred to as the "Parties").
RECITALS
Certain stockholders of the Company ("Selling Stockholders") propose to
sell a portion of their shares of the Company's common stock (the "Common
Stock") in an initial public offering under a Registration Statement on Form
S-1 (File No. 333-42075) filed with the Securities and Exchange Commission (the
"IPO"). In such connection the Company (formerly INFLO Holdings Corporation)
and the Investor, who are parties to the Management Stockholders' Agreement
("Original Agreement"), dated [___________, 1996], agree to amend the Original
Agreement as follows:
AGREEMENT
1. Upon the occurrence of the event described in Section 3 of this
Agreement:
(a) Sections 3, 5, 6, 7, 8, 11, 12, 15, 18, 21, 23, and 25 of the
Original Agreement are hereby deleted in their entirety and are
of no further force or effect.
(b) Section 10 of the Original Agreement is hereby amended by
deleting said section in its entirety and in lieu thereof, the
Investor shall be entitled to the "incidental registration
rights" set forth on Annex A hereto.
(c) The Investor's rights under the Sales Participation
Agreement dated as of May 10, 1996 are hereby terminated and
such termination is affirmed and acknowledged by the signatures
of Flowers Industries, Inc. and Artal Luxembourg S.A. on this
Amendment No. 1.
<PAGE> 2
(d) Section 2(e) of the Original Agreement is hereby amended by
deleting said Section in its entirety and substituting in lieu
thereof a new Section 2(e), reading as set forth on Annex B
hereto.
(e) Section 4 of the Original Agreement is hereby amended by
deleting said Section in its entirety and substituting in lieu
thereof a new Section 4, reading as set forth on Annex C
hereto.
(f) Section 22 of the Original Agreement is hereby amended by
deleting said Section in its entirety and substituting in lieu
thereof a new Section 22, reading as set forth in Annex D
hereto.
(g) Section 25 of the Original Agreement is hereby amended by
deleting said section in its entirety and substituting in lieu
thereof a new Section 25, reading as set forth in Annex E
hereto.
(h) Section 26(a) of the Original Agreement is hereby amended
by deleting said Section in its entirety and substituting in
lieu thereof a new Section 26(a), reading as set forth on
Annex F hereto.
2. The Investor hereby acknowledges that the managing underwriters of
the IPO have advised the Company that in their view no shares of the Investor
may be registered in the IPO without an adverse effect on the offering and,
thus, pursuant to Section 10(c)(ii) of the Original Agreement (prior to the
effectiveness of the amendment contained in Section 1(b) above), the Investor
may not register any shares in the IPO. Accordingly, the Investor has no
"piggyback registration rights" (including, not by way of limitation, any
rights to notice) in connection with the IPO, including, not by way of
limitation, any rights which are pursuant to Section 10 of the Original
Agreement. The Investor further acknowledges that pursuant to Section 2(e) of
the Original Agreement (prior to the effectiveness of the amendment contained
in Section 1(d) above) that he is bound by the holdback period required by the
managing underwriters of the IPO.
3. The terms and provisions of Section 1 of this Agreement will not be
effective until the sale of Common Stock pursuant to an IPO.
2
<PAGE> 3
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
KEEBLER FOODS COMPANY
By:__________________________________
Name:
Title:
_____________________________________
[Investor]
Address
As to Paragraph 1(c) and 1(d) only
Affirmed and Acknowledged
_______________________________
Flowers Industries, Inc.
_______________________________
Artal Luxembourg S.A.
As to Paragraph 1(e) only
Affirmed and Acknowledged
______________________________
Flowers Industries, Inc.
3
<PAGE> 4
ANNEX B
REVISED SECTION 2(e)
(e) The parties acknowledge that pursuant to the provisions of Annex A
of that certain Stock Purchase Agreement among Flowers Industries, Inc., Artal
Luxembourg A.A. ("Artal") and the Company, Artal has certain demand
registration rights (the "Registration Rights"). The Purchaser agrees that
subsequent to the closing of the initial public offering under Registration
Statement on Form S-1 (File No. 333-42075) filed with the Securities and
Exchange Commission (the "IPO"), if any shares of the capital stock of the
Company are offered to the public pursuant to Artal's exercise of the
Registration Rights in an underwritten public offering under an effective
registration statement under the Act (a "Subsequent Public Offering"), the
Purchaser will not effect any public sale or distribution of any shares of the
Stock not covered by such registration statement (a "Holdback") within 10 days
prior to, or within such time period after, the effective date of such
registration statement as the managing underwriter of such Subsequent Public
Offering shall advise the Company is necessary to complete such Subsequent
Public Offering in an effective manner, unless otherwise agreed to in writing
by the Company; provided, however, that if Purchaser is not selling any shares
of Stock in the IPO or in such Subsequent Public Offering the following shall
apply:
(i) If Purchaser is not a member on the Executive Committee of the
management of the Company at the time of such Subsequent Public
Offering, Purchaser shall not be subject to a Holdback.
(ii) Subject to the Company not being otherwise restricted as a
matter of law, for a period of six months after the initial 180
day holdback period of the IPO, if Purchaser is subject to such
initial holdback, Purchaser may require the Company to
repurchase his stock at the Market Price (as defined in
subsection (vi) below) during any Holdback period to which he is
subject in a Subsequent Public Offering during such six months,
subject to the limitations set forth in subsection (vii) below.
Furthermore, if the initial holdback period of the IPO is
ultimately less than 180 days then the Company shall not be
required to repurchase shares during the Holdback period of the
Subsequent Public Offering until all such Holdback periods
exceed an aggregate total of 180 days during the twelve-month
period.
(iii) If Purchaser is subject to this Section 2(e), Purchaser
will only be required to be subject to a Holdback in a
Subsequent Public Offering in excess of 90 days upon written
advice of the managing underwriter that a Holdback of 90 days or
less would be materially detrimental to the Subsequent Public
Public Offering.
4
<PAGE> 5
(iv) After the twelve-month period referred to in subsection (ii)
above and upon the written advice per subsection (iii) above, if
there is more than one Subsequent Public Offering in a
twelve-month period and the managing underwriter requires a
Holdback from Purchaser subject to this Section 2(e) in excess
of 90 days, subject to the Company not being otherwise
restricted as a matter of law, Purchaser may require the Company
to repurchase his shares at the Market Price during the post-90
day period of the Holdback period, subject to the limitation set
forth in subsection (vii) below.
(v) Notwithstanding the foregoing, Purchaser may not require the
repurchase of his shares, if Purchaser is selling shares in the
Subsequent Public Offering in which he is subject to a
Holdback.
(vi) For purposes of this Section 2(e), "Market Price" shall
mean the closing trading price of the Company's Common Stock on
the New York Stock Exchange (or if such shares are not traded on
the New York Stock Exchange, the closing trading price for a
share of such security on the principal national securities
exchange or on the Nasdaq Stock Market on which such securities
are listed) on the day that the Company receives notice from the
Purchaser (or the next succeeding trading day if such day is not
a trading day) that he is exercising his rights to require the
Company to repurchase his shares pursuant to subsections (ii) or
(iv) above.
(vii) (A) The maximum aggregate buyback by the Company during all
Holdback periods caused by Artal's exercise of the Registration
Rights for all repurchases from Purchaser and all Other
Purchasers shall be the greater of (1) one percent (1%) of
the outstanding shares of the Company immediately after the
closing of the IPO or (2) an aggregate purchase obligation by
the Company of $25 million, and (B) the maximum buyback from the
Purchaser during all such Holdback periods shall be no more than
the greater of (A) 20% of (1) the shares of the Company owned by
the Purchaser as of the closing of the IPO, plus (2) the shares
for which Purchaser has Options under the Non- Qualified Stock
Option Agreement (specifically excluding any options granted
under any other option plans that the Company has or may adopt)
or (B) $1,000,000.
(viii) In order to exercise his rights to require the Company
to purchase shares pursuant to subsection (ii) or (iv) above,
Purchaser shall deliver, by hand or facsimile, to the General
Counsel of the Company, at the address set forth in Section
25(a), the following notice:
"Pursuant to Section 2(e) of that certain Management
Stockholder's Agreement, between Keebler Foods Company
(the "Company") and the
5
<PAGE> 6
undersigned, the undersigned requests that the Company
purchase from the undersigned ____ shares of stock of the
Company.
By:_______________________
Date:______________________"
6
<PAGE> 7
ANNEX C
REVISED SECTION 4
4. Right of First Refusal.
Except for transfers permitted by clauses (x), (y) and
(z) of Section 2(a), if at any time after the IPO the Purchaser desires to
transfer any or all of his shares of Stock, the Purchaser shall notify the
Company and Flowers Industries, Inc. ("Flowers") in writing of his wish to make
such transfer (the "Offer"). The Purchaser's notice shall contain an
irrevocable offer to sell such shares of Stock to the Company and Flowers (in
the manner set forth below) at a purchase price equal to the average of the
closing trading prices of the Company's Common Stock on the New York Stock
Exchange (or if such shares are not traded on the New York Stock Exchange, the
closing trading prices of such security on the principal national securities
exchange or the Nasdaq Stock Market on which such securities are listed) on the
day that the Company and Flowers receives the Offer and on the day that the
Company or Flowers accepts the Offer (or the next succeeding trading day if
either such day is not a trading day) (the "Average Market Price"). At any
time within the next succeeding business day after the date of the receipt by
the Company and Flowers of the Purchaser's notice, the Company and Flowers
shall have the right and option to purchase, or to arrange for a third party to
purchase, any or all of the shares of Stock covered by the Offer, by notifying
the Purchaser. The purchase of the shares shall be effectuated within 3
business days by delivering a certified bank check or checks in the appropriate
amount to the Purchaser at the principal office of the Company against (i)
delivery of certificates or other instruments representing the shares of the
Stock so purchased, appropriately endorsed by the Purchaser or (ii) such other
instructions to transfer such shares from an account held by Purchaser to
accounts designated by Flowers or the Company, as appropriate. If by 11:59
p.m. of the end of such next succeeding business day, neither the Company nor
Flowers has accepted the Offer in the manner set forth above, the Purchaser
may, during the succeeding 30 day period, transfer any or all of the shares of
Stock covered by the Offer. If, at the end of the 30 day period, the Purchaser
has not completed the transfer of such shares of the Stock as aforesaid, all
the restrictions on sale, transfer or assignment contained in this Agreement
shall again be in effect with respect to such shares of the Stock. If the
Offer is accepted, Flowers shall have the first right to purchase the shares
covered by the Offer, and then the Company shall have the right to purchase any
shares not purchased by Flowers. Notwithstanding the foregoing, the Purchaser
shall not be required to sell shares pursuant to this Section 4 if such sale
would have the result of not being treated as a distribution in part or full
payment in exchange for stock pursuant to Section 302 of the Internal Revenue
Code of 1986, as amended; provided, however, the parties also acknowledge that
Flowers would still have the right to purchase the shares if such favorable tax
treatment would result from its purchase in lieu of a purchase by the Company.
No transfer of any shares in violation of this Section 4 shall be made or
recorded on the books of the Company and any such transfer shall be void and of
no effect. In order to notify Flowers and the
7
<PAGE> 8
Company of the Offer, Purchaser shall give the following notice to each of
them, by hand delivery or facsimile, to the General Counsels of each of them at
the addresses set forth in Section 25(a):
"Pursuant to Section 4 of that certain Management Stockholder's
Agreement, between Keebler Foods Company (the "Company") and the
undersigned, the undersigned hereby notifies you of its irrevocable
Offer (as defined in said Section) to sell to either the Company or
Flowers Industries, Inc. ___ shares of stock of the Company.
By:______________________
Date:_____________________"
In order to accept the Offer, either Flowers or the Company shall either orally
notify the Purchaser of its acceptance (and shall deliver the following notice
as soon as practicable thereafter) or shall deliver the following notice to the
Purchaser at the address set forth in Section 25(b):
"Pursuant to Section 4 of that certain Management Stockholder's
Agreement, between Keebler Foods Company (the "Company") and you, the
undersigned has accepted your Offer to purchase ____ shares of
stock of the Company.
By:____________________
[Flowers Industries, Inc.]
[Keebler Foods Company]
Date:___________________"
8
<PAGE> 9
ANNEX D
REVISED SECTION 22
22. Applicable Law.
The laws of the state of Delaware shall govern the interpretation,
validity and performance of the terms of this Agreement, regardless of the law
that might be applied under principles of conflicts of law. Any suit, action
or proceeding against the Company, with respect to this Agreement, or any
judgment entered by any court in respect of any thereof, may be brought in any
court of competent jurisdiction in the States of Delaware or Illinois, as the
Company may elect in its sole discretion, and the Purchaser hereby submits to
the non-exclusive jurisdiction of such courts for the purpose of any such suit,
action, proceeding or judgment. By the execution and delivery of this
Agreement, the Purchaser appoints The Corporation Trust Company, at its office
in Chicago, Illinois or Wilmington, Delaware, as the case may be, as his agent
upon which process may be served in any such suit, action or proceeding.
Service of process upon such agent, together with notice of such service given
to the Purchaser in the manner provided in Section 25 hereof, shall be deemed
in every respect effective service of process upon him in any suit, action or
proceeding. Nothing herein shall in any way be deemed to limit the ability of
the Company to serve any such writs, process or summonses in any other manner
permitted by applicable law or to obtain jurisdiction over the Purchaser, in
such other jurisdictions and in such manner, as may be permitted by applicable
law. The Purchaser hereby irrevocably waives any objections which he may now
or hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement brought in any court of competent
jurisdiction in the States of Delaware or Illinois, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought
in any such court has been brought in any inconvenient forum. No suit, action
or proceeding against the Company with respect to this Agreement may be brought
in any court, domestic or foreign, or before any similar domestic or foreign
authority other than in a court of competent jurisdiction in the States of
Delaware or Illinois, and the Purchaser hereby irrevocably waives any right
which he may otherwise have had to bring such an action in any other court,
domestic or foreign, or before any similar domestic or foreign authority. The
Company hereby submits to the jurisdiction of such court for the purpose of any
such suit, action or proceeding.
9
<PAGE> 10
ANNEX E
REVISED SECTION 25
25. Notices.
All notices and other communications provided for herein (except
for the notices set forth in Sections 2(e) and 4, in which case the terms of
such Sections shall govern), shall be in writing and shall be deemed to have
been duly given if delivered by hand (or by overnight courier or facsimile),
to the Party to whom it is directed:
(a) If to the Company, to it at the following address:
Keebler Foods Company
677 Larch Avenue
Elmhurst,Illinois 60126
Attn: Chief Executive Officer
Fax No.: ____
with copies to:
The General Counsel of the Company
at the above address.
and to:
Flowers Industries, Inc.
1919 Flowers Circle
Thomasville, GA 31757
Attn: General Counsel
Fax No.: ____
(b) If to the Purchaser, to him at the address set forth below
under his signature;
or at such other address as either party shall have
specified by notice in writing to the other.
10
<PAGE> 11
ANNEX F
REVISED SECTION 26(a)
(a) In consideration of the Company entering into this Agreement with the
Purchaser, the Purchaser hereby agrees effective as of the Purchase Date, for
so long as the Purchaser is employed by the Company or one of its subsidiaries
(the "Noncompete Period"), the Purchaser shall not, directly or indirectly,
engage in the production, sale or distribution of any food product produced,
sold or distributed by the Company or its subsidiaries on the date hereof or
during the Noncompete Period (except for a food product that the Company only
packages under a co-packing arrangement) anywhere in North America where the
Company or its subsidiaries is doing business other than through the
Purchaser's employment with the Company or any of its subsidiaries. The
Noncompete Period shall be extended beyond the termination of the Purchaser's
employment with the Company or its subsidiaries for up to the earlier of (i)
the third anniversary of the IPO or (ii) an additional one year period from the
date of termination of employment, so long as the Company continues to make
payments to which Purchaser is entitled subsequent to his termination under his
Employment and Severance Agreement with the Company, dated _____________, 1998,
at the times and in the amounts set forth therein; provided, however, that if
Purchaser is not entitled to payments under such Employment and Severance
Agreement because (i) Purchaser's employment is terminated by the Company for
Cause (as defined in such agreement) or (ii) Purchaser voluntarily terminates
his employment with the Company for other than Good Reason (as defined in such
agreement), then the non-compete provisions of this Section 26(a) shall still
apply. For purposes of this Agreement, the phrase "directly or indirectly
engage in" shall include any direct or indirect ownership or profit
participation interest in such enterprise, whether as an owner, stockholder,
partner, joint venturer or otherwise, and shall include any direct or indirect
participation in such enterprise as a consultant, licensor of technology or
otherwise.
11
<PAGE> 1
EXHIBIT 11
KEEBLER FOODS COMPANY
COMPUTATION OF INCOME PER SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Forty-Eight Thirty-Six Forty Twelve Twelve
Weeks Ended Weeks Ended Weeks Ended Weeks Ended Weeks Ended
December 28, 1996 October 5, 1996 October 4, 1997 October 5, 1996 October 4, 1997
----------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
PRIMARY NET INCOME PER SHARE
Income from continuing operations $17,677 $ 2,580 $39,125 $ 802 $18,548
Extraordinary item 1,925 1,925 2,692 --- ---
------- ------- ------- ------- -------
Net income $15,752 $ 655 $36,433 $ 802 $18,548
======= ======= ======= ======= =======
Weighted shares outstanding 75,244 74,494 77,601 77,466 77,595
Net additional shares
outstanding assuming dilutive
stock options exercised and
proceeds used to purchase
treasury stock at average
market price 1,377 1,008 3,184 2,656 4,051
Net additional shares
outstanding assuming dilutive
warrant exercised and
proceeds used to purchase
treasury stock at average
market price --- --- 808 --- 2,049
------- ------- ------- ------- -------
Total 76,621 75,502 81,593 80,122 83,695
======= ======= ======= ======= =======
Net Income Per Share:
Continuing operations $0.23 $0.03 $0.48 $0.01 $0.22
Extraordinary item 0.02 0.02 0.03 --- ---
----- ----- ----- ----- -----
Net income $0.21 $0.01 $0.45 $0.01 $0.22
===== ===== ===== ===== =====
FULLY DILUTED NET INCOME PER SHARE
Income from continuing operations $17,677 $ 2,580 $39,125 $ 802 $18,548
Extraordinary item 1,925 1,925 2,692 --- ---
------- ------- ------- ------- -------
Net income $15,752 $ 655 $36,433 $ 802 $18,548
======= ======= ======= ======= =======
Weighted shares outstanding 75,244 74,494 77,601 77,466 77,595
Net additional shares
outstanding assuming dilutive
stock options exercised and
proceeds used to purchase
treasury stock at year-end
market price 1,836 1,573 4,231 2,656 4,253
Net additional shares
outstanding assuming dilutive
warrant exercised and
proceeds used to purchase
treasury stock at year-end
market price --- --- 2,347 --- 2,346
------- ------- ------- ------- -------
Total 77,080 76,067 84,179 80,122 84,194
======= ======= ======= ======= =======
Net income Per Share:
Continuing operations $0.23 $0.03 $0.46 $0.01 $0.22
Extraordinary item 0.02 0.02 0.03 --- ---
----- ----- ----- ----- -----
Net income $0.21 $0.01 $0.43 $0.01 $0.22
===== ===== ===== ===== =====
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF KEEBLER FOODS COMPANY
<TABLE>
<CAPTION>
STATE OF
COMPANY INCORPORATION
<S> <C> <C>
WHOLLY-OWNED SUBSIDIARIES OF KEEBLER FOODS COMPANY
1. Keebler Leasing Corp. Delaware
2. Keebler Company Delaware
3. Shaffer, Clarke & Co., Inc. Delaware
4. Johnston's Ready-Crust Company Delaware
5. Bake-Line Products, Inc. Illinois
6. Sunshine Biscuits, Inc. Delaware
WHOLLY-OWNED SUBSIDIARIES OF KEEBLER COMPANY
1. Steamboat Corporation Georgia
2. Illinois Baking Corporation Delaware
3. Keebler Cookie and Cracker Company Nevada
4. Hollow Tree Company, L.L.C. Delaware
5. Keebler Company/Puerto Rico, Inc. Delaware
6. Keebler H.C., Inc. Illinois
7. Keebler-Georgia, Inc. Georgia
8. Keebler Foreign Sales Corporation Virgin Islands
9. Hollow Tree Financial Company, L.L.C. Delaware
JOINTLY-OWNED SUBSIDIARY OF KEEBLER COMPANY AND SUNSHINE BISCUITS, INC.
1. Elfin Equity Co. L.L.C.(1) Delaware
INDIRECTLY OWNED SUBSIDIARIES OF KEEBLER FOODS COMPANY
1. Keebler Assets Company, L.L.C.(2) Delaware
</TABLE>
_______________________
(1) 64.6% of the limited liability company interests are owned by Keebler
Company and 35.4% of the limited liability company interests are owned
by Sunshine Biscuits, Inc.
(2) 34% of the limited liability company interests are owned by Keebler
Company, 33% of the limited liability company interests are owned by
Keebler-Georgia, Inc. and 33% of the limited liability company interests
are owned by Keebler Leasing Corp.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. 333-42075) of our report dated December 5, 1997, except for Note 23,
as to which the date is January 22, 1998, on our audits of the consolidated
financial statements and financial statement schedule of Keebler Foods Company.
We also consent to the references to our firm under the captions "Experts,"
"Summary Consolidated Historical Financial Data" and "Selected Historical
Financial Data."
/s/ COOPERS & LYBRAND L.L.P.
Chicago, Illinois
January 22, 1998
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement No.
333-42075 of Keebler Foods Company on Form S-1 of our report dated May 15, 1996
on our audit of the financial statements of Sunshine Biscuits, Inc., appearing
in the Prospectus, which is part of such Registration Statement, and to the
reference to us under the heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
January 22, 1998
