<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1998
REGISTRATION NO. 333-48787
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------
FLOWERS INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
GEORGIA 58-0244940
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
1919 FLOWERS CIRCLE
THOMASVILLE, GEORGIA 31757
(912) 226-9110
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
G. ANTHONY CAMPBELL, ESQ.
GENERAL COUNSEL AND SECRETARY
1919 FLOWERS CIRCLE
THOMASVILLE, GEORGIA 31757
(912) 226-9110
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT W. SMITH, ESQ. JOHN J. KELLEY III, ESQ.
LIZANNE THOMAS, ESQ. KING & SPALDING
JONES, DAY, REAVIS & POGUE 191 PEACHTREE STREET, N.E.
3500 SUNTRUST PLAZA ATLANTA, GEORGIA 30303-1763
303 PEACHTREE STREET, N.E. (404) 572-4600
ATLANTA, GEORGIA 30308-3242
(404) 521-3939
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, 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 a 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 OF 1933 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.
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<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains three forms of Prospectus, one to be
used in connection with the offering (the "U.S. Stock Offering") of 8,000,000
shares of Common Stock by the Company in the United States and Canada (the "U.S.
Stock Prospectus"), one to be used in connection with a concurrent offering of
2,000,000 shares of Common Stock by the Company outside the United States and
Canada (together with the U.S. Offering, the "Common Stock Offering") (the
"International Stock Prospectus," and together with the U.S. Stock Prospectus,
the "Stock Prospectuses"), and one to be used in connection with the offering
(the "Debentures Offering") by the Company of % Debentures due 2028 (the
"Debentures Prospectus"). The Common Stock Offering pursuant to the Stock
Prospectuses and the Debentures Offering pursuant to the Debentures Prospectus
are not conditioned upon each other.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS (Subject to Completion)
ISSUED APRIL 21, 1998
10,000,000 SHARES
FLOWERS INDUSTRIES, INC.
COMMON STOCK
------------------------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY.
OF THE 10,000,000 SHARES OF COMMON STOCK OFFERED HEREBY, 8,000,000 SHARES ARE
BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS
AND 2,000,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND
CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS." THE COMMON STOCK
OF THE COMPANY IS LISTED ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL "FLO."
ON APRIL 20, 1998, THE LAST REPORTED SALE PRICE OF THE COMMON STOCK ON THE NEW
YORK STOCK EXCHANGE WAS $23 1/4 PER SHARE.
CONCURRENTLY WITH THIS OFFERING OF COMMON STOCK, THE COMPANY IS OFFERING,
PURSUANT TO A SEPARATE PROSPECTUS, $200,000,000 PRINCIPAL AMOUNT OF %
DEBENTURES DUE 2028. CONSUMMATION OF THE COMMON STOCK OFFERING AND THE
DEBENTURES OFFERING ARE NOT CONDITIONED UPON EACH OTHER. SEE "USE OF PROCEEDS."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------
<S> <C> <C> <C>
Per Share........................................ $ $ $
Total(3)......................................... $ $ $
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at
$1,700,000.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
1,500,000 additional shares of Common Stock at the price to public less
underwriting discounts and commissions, for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise such option
in full, the total price to public, underwriting discounts and
commissions and proceeds to Company will be $ , $ and
$ , respectively. See "Underwriters."
------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by King & Spalding, counsel for the Underwriters. It is expected that delivery
of the Shares will be made on or about , 1998 at the office of Morgan
Stanley & Co. Incorporated, New York, N.Y. against payment therefor in
immediately available funds.
------------------------
MORGAN STANLEY DEAN WITTER SBC WARBURG DILLON READ INC.
, 1998
<PAGE> 4
[INSIDE FRONT COVER PAGE GRAPHICS: THREE PHOTOGRAPHS OF FLOWERS PRODUCTS AND
FLOWERS LOGO]
[INSIDE FRONT COVER GATEFOLD GRAPHICS: LEFT - PHOTOGRAPH OF SAN ANTONIO BAKERY
PRODUCTION LINE -- CAPTION: FLOWERS INDUSTRIES, INC. OFFERS A FULL LINE OF FRESH
AND FROZEN BAKED FOODS; RIGHT - PHOTOGRAPH COLLAGE OF FLOWERS BRANDED PRODUCTS
- -- CAPTION: FLOWERS BAKERIES' AUTOMATED PRODUCTION FACILITY IN SAN ANTONIO,
TEXAS]
<PAGE> 5
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY
SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
------------------------
TABLE OF CONTENTS
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PAGE
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Incorporation of Certain Information by Reference........... i
Available Information....................................... ii
Summary..................................................... 1
Forward-Looking Statements.................................. 9
Risk Factors................................................ 9
Use of Proceeds............................................. 12
Price Range of Common Stock and Dividends................... 12
Capitalization.............................................. 14
Unaudited Pro Forma Condensed Consolidated Financial
Statements................................................ 15
Selected Consolidated Historical Financial Data............. 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 29
Management.................................................. 40
Description of Capital Stock................................ 42
Certain United States Federal Tax Considerations for
Non-U.S. Holders of Common Stock.......................... 43
Underwriters................................................ 46
Legal Matters............................................... 49
Experts..................................................... 49
Index to Consolidated Financial Statements.................. F-1
</TABLE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), are incorporated herein by reference:
(i) The Company's Transition Report on Form 10-K for the transition
period ended January 3, 1998;
(ii) The Company's Current Report on Form 8-K dated February 18, 1998
(as amended by Form 8-K/A dated March 13, 1998); and
(iii) The description of the Company's securities set forth under the
heading "Description of the Securities to be Registered" in the Company's
Registration Statement on Form 8-B dated December 7, 1987, for the
registration of the Common Stock under the Exchange Act, and the Company's
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<PAGE> 6
Registration Statement on Form 8-A dated March 21, 1989, for the
registration of the Rights to purchase Series A Junior Participating
Preferred Stock of the Company.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Common Stock shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or was deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. The information relating
to the Company contained in this Prospectus should be read together with the
information in the documents incorporated by reference.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. Such documents (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference) are
available without charge to any person, including any beneficial owner, to whom
this Prospectus is delivered, upon written or oral request. Requests for such
documents should be directed to Flowers Industries, Inc., 1919 Flowers Circle,
Thomasville, Georgia 31757, Attention: G. Anthony Campbell, telephone: (912)
226-9110.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center,
Suite 1200, New York, New York 10048, and at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material also may be
obtained by mail from the Public Reference Section of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Additionally, the Commission maintains a Web site on the Internet that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission and that is
located at http://www.sec.gov. In addition, information concerning the Company
is available for inspection at the offices of the New York Stock Exchange
("NYSE"), 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (including the exhibits and amendments thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to this offering of Common Stock (the "Common Stock Offering") and
the offering of $200,000,000 principal amount of % Debentures due 2028 of
the Company (the "Debentures Offering"). This Prospectus, which constitutes a
part of the Registration Statement, does not contain all the information set
forth in the Registration Statement, certain portions of which are omitted in
accordance with the rules and regulations of the Commission and to which
reference is hereby made. Statements contained in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission, reference is made to the exhibit or other filing for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. Copies of the Registration
Statement together with exhibits may be inspected at the office of the
Commission in Washington, D.C., as indicated above, without charge, and copies
thereof may be obtained therefrom upon payment of a prescribed fee.
ii
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and notes thereto included
elsewhere or incorporated by reference in this Prospectus. As used in this
Prospectus, unless the context otherwise indicates, (i) "Flowers" means Flowers
Industries, Inc., a Georgia corporation and its consolidated subsidiaries,
excluding Keebler Foods Company, a Delaware corporation, and its consolidated
subsidiaries ("Keebler"); and (ii) the "Company" means Flowers and Keebler,
collectively. Unless stated otherwise, figures provided for market share
percentages and rank in any market are based on retail sales (measured in
dollars) in 1997 as reported by Information Resources, Inc. ("IRI"), which
tracks retail sales through scanner data in United States grocery stores with
annual revenue greater than $2.0 million. The IRI data excludes sales through
other channels in which the Company operates and, therefore, may overstate or
understate the Company's share of particular product lines in the baked foods
market. See "Business -- Products." All information in this Prospectus assumes
no exercise of the U.S. Underwriters' over-allotment option described under the
caption "Underwriters." In January 1998, the Company changed its fiscal year end
from the Saturday nearest June 30 to the Saturday nearest December 31. Unless
stated otherwise, all references to (i) "fiscal year 1997" shall mean Flowers'
full fiscal year ended June 28, 1997, (ii) "fiscal year 1998" shall mean
Flowers' full fiscal year ending January 2, 1999, and (iii) "transition period
1998" shall mean Flowers' 27 week transition period from June 29, 1997 through
January 3, 1998.
THE COMPANY
The Company is the largest nationally branded producer and marketer of a
full line of baked foods in the United States, with products which include
Flowers Bakeries' fresh breads and rolls, Mrs. Smith's Bakeries' fresh and
frozen baked desserts, snacks, breads and rolls, as well as Keebler's cookies
and crackers. Since its founding in 1919 in Thomasville, Georgia, the Company
has dramatically expanded the diversity and geographic scope of its operations
and is now a leader in the market for baked foods throughout the United States.
The Company's core strategy is to be the country's leading low-cost
producer and marketer of a full line of branded fresh and frozen baked products
on a national and super-regional basis, serving all possible customers, through
all channels of distribution. This strategy is focused on responding to current
market trends for the Company's products and changing consumer preferences,
which now increasingly favor purchases of ready-made convenience food products
as opposed to traditional home-prepared foods. To assist in accomplishing this
core strategy, the Company has aggressively invested capital to modernize and
expand its plant and equipment capacity and has acquired nationally branded
businesses which complement its traditional strengths. It has also continually
improved its distribution systems and has established a presence in all
distribution channels where baked foods are sold, including restaurants,
fast-food chains, food wholesalers, institutions and vending machines, as well
as grocery stores.
In the fresh baked product line (Flowers Bakeries), the Company focuses on
the production and marketing of baked foods to customers in the super-regional
19 state area in and surrounding the southeastern United States. In this effort,
the Company has devoted significant resources to modernizing production
facilities and improving its distribution capabilities, as well as actively
marketing well-recognized brands such as Nature's Own and Cobblestone Mill
bread. Since 1980, the Company has acquired 24 local bakery operations which are
generally within or contiguous to its existing region and which can be served
with its extensive direct-to-store sales and distribution system (a "DSD
system"). The Company's strategy is to use acquisitions to better serve new and
existing customers, principally by increasing the productivity and efficiency of
newly acquired plants, establishing reciprocal baking arrangements among its
bakeries, and by extending its DSD system. Flowers Bakeries' DSD system utilizes
approximately 3,100 independent distributors who own the right to sell the
Company's fresh baked products within their respective territories.
The Company's frozen baked foods operations (Mrs. Smith's Bakeries) began
in the mid-1970s with the acquisition of the Stilwell business, with frozen
products initially marketed to customers in the southeastern and southwestern
United States. In 1989, the Company entered the frozen bread and dough market in
the
1
<PAGE> 8
southeastern United States with its acquisition of the bakery operations of
Winn-Dixie, Inc. In 1991, the Company undertook its first significant entry into
the national market for frozen baked dessert products with the acquisition of
Pies, Inc., a midwest-based producer of premium pies for the restaurant and
foodservice markets, and further expanded its national presence by acquiring the
Oregon Farms branded frozen carrot cake line. In May 1996, the Company obtained
a leading presence in the frozen baked dessert category with the acquisition of
the business of Mrs. Smith's Inc., which markets the leading national brand of
frozen pies sold at retail. In January 1998, the Company launched "Operation
365," a strategy aimed at significantly expanding year-round sales in the frozen
dessert baked product category through product line extensions designed to take
advantage of nationwide consumer recognition of the Mrs. Smith's brand name.
Examples of significant product line extensions that are underway include Mrs.
Smith's retail frozen fruit cobblers and Mrs. Smith's "Restaurant Classics"
retail frozen pies.
The Company entered the cookies and crackers marketplace in January 1996 by
acquiring for $62.5 million an approximate 45% stake in Keebler, the number two
producer and marketer of cookies and crackers in the United States with net
sales of approximately $2.1 billion for its fiscal year ended January 3, 1998.
In June 1996, Keebler acquired Sunshine Biscuits, Inc. ("Sunshine"), the third
largest cookie and cracker producer in the United States. By the end of 1996,
Keebler completed its planned integration of Sunshine's operations, achieving
efficiencies in administration, purchasing, production, marketing, sales and
distribution. Under the control of Flowers and its co-investors, Keebler's
results of operations have improved from a net loss of $158.3 million for its
fiscal year ended December 30, 1995, to a net income of $57.0 million for its
fiscal year ended January 3, 1998. On February 3, 1998, Keebler completed its
initial public offering in which Flowers' co-investors sold a portion of their
shares to the public. Concurrent with that offering, Flowers purchased an
additional 11% of Keebler from its co-investors for approximately $309 million,
thereby increasing its ownership to approximately 55% of the total Keebler
shares outstanding (the "Keebler Acquisition").
The Company has a leading presence in each of the major product categories
in which it competes. Flowers Bakeries' fresh baked branded bread and roll sales
rank first in ten of its 15 major metropolitan markets and second in its
remaining five such markets, and its Nature's Own brand is the number one volume
brand of wheat/variety bread in the country despite being marketed solely in the
super-regional 19 state area in and surrounding the southeastern United States.
Mrs. Smith's Bakeries is one of the leading frozen baked dessert producers and
marketers in the United States, and its Mrs. Smith's pies are the leading
national brand of frozen pies sold at retail. Keebler is the number two producer
and marketer of branded cookies and crackers, the number one producer and
marketer of private label cookies and the number one producer and marketer of
cookies and crackers for the foodservice market. The Company's major branded
products include, among others, the following:
<TABLE>
<CAPTION>
FLOWERS BAKERIES MRS. SMITH'S BAKERIES KEEBLER
FRESH BAKED PRODUCTS FRESH AND FROZEN BAKED PRODUCTS COOKIES AND CRACKERS
-------------------- ------------------------------- --------------------
<S> <C> <C>
Flowers Mrs. Smith's Keebler Brands:
Nature's Own Mrs. Smith's Restaurant Classics - Chips Deluxe
Whitewheat Mrs. Smith's Special Recipe - Pecan Sandies
Cobblestone Mill Mrs. Freshley's - Fudge Shoppe
Dandee Oregon Farms - Town House
Evangeline Maid European Bakers, Ltd. - Club
Betsy Ross Stilwell - Graham Selects
ButterKrust Our Special Touch - Wheatables
BlueBird Danish Kitchen - Zesta
Licensed Brands: Pour-A-Quiche Cheez-It
- - Sunbeam Carr's
- - Roman Meal Vienna Fingers
- - Country Hearth Hydrox
- - Bunny Sunshine Krispy
- - Holsum Hi-Ho
Ready Crust
</TABLE>
2
<PAGE> 9
The Company is committed to being the low cost producer in all of its
operations and has made significant capital investments in recent years to
modernize, automate and expand its production and distribution capabilities.
Flowers has invested approximately $377 million over the past six years, of
which approximately $227 million was used to expand and modernize existing
production facilities for Flowers Bakeries, including the addition of twelve new
highly-automated production lines in nine facilities. The remaining
approximately $150 million was used primarily to build a state-of-the-art
distribution facility, and to add 13 highly-automated production lines in nine
facilities for Mrs. Smith's Bakeries. Since Flowers' initial investment in
Keebler in January 1996, Keebler has invested approximately $78 million to
streamline and rationalize its production operations in order to better support
its national DSD system.
In order to provide prompt and responsive service to its consumers, the
Company tailors its distribution systems to the marketing and production aspects
of its major product lines. Flowers Bakeries distributes its fresh baked foods
through an extensive DSD system of approximately 3,100 independent distributors
who, as owners of their territories, are motivated to maintain and build shelf
space and to monitor product freshness, which is essential in the marketing of
short shelf life products such as fresh bread, rolls and buns. These
distributors make an aggregate of approximately 70,000 stops per day. Mrs.
Smith's Bakeries' frozen foods are distributed through its two
strategically-located frozen distribution facilities, as well as through
additional commercial frozen warehouse space throughout the United States, in
order to accommodate inventory growth in seasonal products and to provide
staging to expedite distribution throughout the year. Keebler's cookies and
crackers are distributed through a DSD system designed to maximize customer
service and Keebler's control over the availability and presentation of
products. Keebler's DSD system employees distribute products to approximately
30,000 retail locations, principally supermarkets. Keebler is one of only two
cookie and cracker companies that own and operate a national DSD system.
INDUSTRY OVERVIEW
The United States baked foods industry is comprised of a number of distinct
product lines, including fresh baked foods (fresh breads, rolls and buns),
refrigerated and frozen baked foods (desserts, snacks, breads and doughs) and
cookies and crackers. Changes in consumer preferences have shifted food
purchases away from the traditional grocery store aisles for home preparation
and consumption, and toward home meal replacement purchases, either in
supermarkets' in-store deli/bakeries or in non-supermarket channels, such as
mass merchandisers, convenience stores, club stores, restaurants and other
convenience channels. Non-supermarket channels of distribution are becoming
increasingly important throughout the baked foods industry.
Fresh Baked Foods
In 1997, retail bread sales in the United States were approximately $5
billion, according to IRI, which tracks retail sales through scanner data in
United States grocery stores with annual revenue greater than $2.0 million. In
the last decade, retail sales of fresh breads have experienced modest growth,
with expansion occurring primarily in a variety of premium and specialty breads.
In addition to Flowers Bakeries, several large baking and diversified food
companies market fresh baked foods in the United States. Competitors in this
category include Interstate Bakeries Corporation ("Interstate"), The Earthgrains
Company ("Earthgrains"), Bestfoods, formerly CPC International Inc.
("Bestfoods") and Pepperidge Farm Inc. ("Pepperidge Farm"). There are also a
number of smaller, regional baking companies. The Company believes that the
larger companies enjoy several competitive advantages over smaller operations,
due principally to economies of scale in areas such as purchasing, production,
advertising, marketing and distribution, as well as through greater brand
awareness.
A significant trend in the fresh baked foods industry over the last several
years has been the consolidation of smaller bakeries into larger baking
businesses. Consolidation, which has reduced industry capacity, continues to be
driven by factors such as capital constraints on smaller bakeries, which limit
their ability to avoid technological obsolescence, to increase productivity or
to develop new products, generational changes at family-owned businesses, and
the need to serve super-regional grocery store chains. The Company believes
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<PAGE> 10
that the consolidation trend in the fresh baked foods industry will continue to
present opportunities for strategic acquisitions that complement its existing
businesses and that extend its regional presence.
Frozen Baked Foods
The United States frozen and refrigerated baked foods industry, including
desserts, breads, rolls and doughs, had 1997 sales of approximately $7 billion,
according to estimates compiled for the February 1998 edition of Refrigerated
and Frozen Foods, an industry trade publication. While retail sales of frozen
baked desserts have declined by approximately 9% since 1992, sales of frozen
baked foods to other distribution channels, including restaurants and other
foodservice institutions, have grown significantly over the same period,
including a cumulative 23% increase in sales of foodservice desserts and a 50%
increase in sales at in-store deli/bakeries. Primary competitors in the frozen
baked desserts category include The Pillsbury Co. ("Pillsbury"), Sara Lee Bakery
("Sara Lee"), Rich Products Corp. ("Rich Products"), Edwards Baking Co.
("Edwards") and Pepperidge Farm.
Cookies and Crackers
The United States cookie and cracker industry had 1997 retail sales of
approximately $8.3 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 approximately 78% of 1996 retail sales in the
cookie and cracker industry with mass merchandisers, convenience stores, and
drug stores accounting for most of the balance. Since 1992, United States annual
dollar supermarket sales of cookies and crackers have increased an average of
1.5% per year.
Keebler and Nabisco, Inc. ("Nabisco") are the two largest national
participants in the cookie and cracker industry. Keebler and Nabisco have a
combined market share of approximately 58%, with Keebler having approximately
24% and Nabisco having approximately 34%. 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.
BUSINESS STRATEGY
The Company's strategy is to be the country's leading low-cost producer and
marketer of a full-line of branded fresh and frozen baked foods products on a
national and super-regional basis serving all possible customers through all
channels of distribution. Flowers Bakeries, Mrs. Smith's Bakeries and Keebler
each develop separate strategies based on the production, distribution and
marketing requirements of its particular baked foods category. The Company
employs the following five overall strategies:
- Strong Brand Recognition. The Company intends to capitalize on the
success of its well-recognized brand names, which communicate product
consistency and high quality, through extending those brand names to
additional products and categories. Among other strategies, the Company
will continue to extend the Mrs. Smith's brand to additional frozen baked
products, expand the use of the Cheez-It brand name and develop new
products under the Keebler brand name. Many of the Company's products,
including its Nature's Own bread, Mrs. Smith's retail frozen baked pies
and Cheez-It snack crackers, are the top-selling brands in their
categories. Flowers Bakeries' fresh baked branded bread and roll sales
rank first in ten of its 15 major metropolitan markets and second in its
remaining five such markets. Keebler brand cookies rank second overall in
the United States, with eight of the 25 best-selling cookies and ten of
the 25 best-selling crackers in the United States based on dollar sales.
4
<PAGE> 11
- State-of-the-Art Production and Distribution Facilities. The Company
intends to maintain a continuing level of capital improvements that will
permit it to fulfill its commitment to remain among the most modern and
efficient baked foods producers in the United States. Toward this goal,
Flowers has invested approximately $377 million in Flowers Bakeries and
Mrs. Smith's Bakeries in the six-year period ended June 28, 1997 to build
several modern and highly efficient production facilities and a
state-of-the-art distribution facility, as well as to automate and
modernize its existing facilities. Since Flowers' initial investment in
Keebler in January 1996, Keebler has spent approximately $78 million to
keep its operations modern and efficient and has lowered its operating
costs by closing plants, consolidating production and reducing overhead.
- Efficient and Customer Service-Oriented Distribution. The Company
intends to expand and refine its distribution systems to allow it to
respond quickly and efficiently to changing customer service needs,
consumer preferences and seasonal demands. In the last decade, the Company
has developed distribution systems that are tailored to the nature of each
of its three baked food product categories and are designed to provide the
highest levels of service to retail and foodservice customers. Flowers
Bakeries has developed a DSD network of approximately 3,100 independent
distributors for its fresh baked products, who make an aggregate of
approximately 70,000 stops per day. Mrs. Smith's Bakeries operates a
network of strategically located storage and distribution facilities for
its frozen baked products and a centralized distribution facility for its
fresh baked snack products. Keebler operates its own national DSD system
for its cookie and cracker products, enabling it to provide frequent
service to over 30,000 retail customers.
- Broad Range of Products and Sales Channels. In recognition that
consumers are increasingly seeking home meal replacements and other
convenience food products, the Company intends to continue to emphasize
expansion of its product lines and sales channels to meet those
preferences. The Company's product lines now include virtually every
category of baked foods, including fresh and frozen bread, buns, rolls,
pies, cakes, and other baked snacks and desserts, as well as cookies and
crackers. The Company's products generally can be found in all baked food
distribution channels, including traditional supermarkets and their
in-store deli/bakeries, convenience stores, mass merchandisers, club
stores, wholesalers, restaurants, fast food outlets, schools, hospitals
and vending machines. The Company intends to continue to increase its
focus on non-supermarket channels, such as restaurants, mass merchandisers
and convenience stores.
- Strategic Acquisitions. The Company intends to continue to pursue growth
through strategic acquisitions and investments that will complement and
expand its existing markets, product lines and product categories. The
Company has consistently pursued growth in sales, geographic markets and
products through strategic acquisitions and has completed over 75
acquisitions in 30 years. Most recently, Flowers continued its regional
expansion in fresh baked foods with its January 1998 acquisition of
Franklin Baking Company, a regional bakery based in North Carolina. The
Company expanded its frozen baked foods product line with the 1996
acquisition of Mrs. Smith's, Inc. and the well-recognized Mrs. Smith's
national brand. In February 1998, the Company obtained a controlling
interest in Keebler, the second largest cookie and cracker producer and
marketer in the United States.
5
<PAGE> 12
THE OFFERING
Common Stock offered hereby........... 10,000,000 shares
Common Stock to be outstanding
after the Offering.................. 100,809,232 shares(1)
Use of proceeds....................... Repayment of a portion of the
Company's outstanding indebtedness
and for general corporate purposes
New York Stock Exchange Symbol........ FLO
Concurrent Debentures Offering........ Concurrently with the Common Stock
Offering, the Company intends to
issue $200 million aggregate
principal amount of % Debentures
due 2028. The Company intends to use
the net proceeds of the Debentures
Offering to repay indebtedness and
for general corporate purposes. See
"Use of Proceeds." Consummation of
the Common Stock and the Debentures
Offerings are not conditioned upon
each other.
- ---------------
(1) Based upon 90,809,232 shares outstanding on April 20, 1998. Does not include
12,350,000 shares of Common Stock reserved for issuance under the Company's
stock incentive plans, of which awards for 5,262,788 shares of Common Stock
have been granted and were outstanding as of April 20, 1998.
6
<PAGE> 13
SUMMARY CONSOLIDATED HISTORICAL AND
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following summary consolidated historical financial information (the
"Historical Financial Information") at and for the 27 week transition period
ended January 3, 1998, and fiscal years ended June 28, 1997, June 29, 1996, and
July 1, 1995, has been derived from audited financial statements of Flowers
filed with the Commission. The Historical Financial Information at and for the
27 weeks ended January 4, 1997 and the 52 weeks ended January 3, 1998 has been
derived from the unaudited financial statements of Flowers. The results of
operations below are not necessarily indicative of results to be expected for
any future period. The Historical Financial Information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related
notes thereto incorporated by reference or included elsewhere in this
Prospectus. See "Available Information" and "Incorporation of Certain
Information by Reference."
The following summary unaudited pro forma consolidated financial
information (the "Pro Forma Financial Information") for the 52 weeks ended
January 3, 1998 is based on the historical financial statements of Flowers and
Keebler during such period. The Pro Forma Financial Information gives effect to
certain pro forma adjustments related to (i) the Keebler Acquisition, (ii) the
Common Stock Offering, and (iii) the Debentures Offering, as if such
transactions had occurred on January 5, 1997. The adjustments are described in
the accompanying notes and are based upon available information and certain
assumptions that management of the Company believes are reasonable. The Pro
Forma Financial Information does not purport to represent what the Company's
results of operations would actually have been had the Keebler Acquisition, the
Common Stock Offering and the Debentures Offering in fact occurred on such date
or to project the Company's results of operations for any future period. The Pro
Forma Financial Information should be read in conjunction with the consolidated
financial statements and related notes thereto incorporated by reference or
included elsewhere in this Prospectus. See "Available Information" and
"Incorporation of Certain Information by Reference."
SUMMARY CONSOLIDATED HISTORICAL AND SUMMARY UNAUDITED PRO FORMA FINANCIAL
INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
52 WEEKS ENDED 27 WEEKS ENDED
-------------------------------------------- ---------------------------------
JULY 1, 1995 JUNE 29, 1996 JUNE 28, 1997 JANUARY 4, 1997 JANUARY 3, 1998
------------ ------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF INCOME DATA:
Sales.................. $1,129,203 $1,238,564 $1,437,713 $774,767 $784,097
Gross profit(1)........ 529,787 563,802 649,914 334,618 365,171
Income before income
taxes................ 68,015 48,340 87,794 50,335 25,019
Income (loss) from
investment in
unconsolidated
affiliate............ 0 613 7,721 (195) 18,061
Income before
cumulative effect of
changes in accounting
principles and
minority interest.... 42,301 30,768 62,324 31,113 33,448
Minority interest...... 0 0 0 0 0
Net income............. 42,301 30,768 62,324 31,113 33,448(3)
OTHER DATA:
EBITDA(4).............. 111,705 102,192 158,873 86,813 63,745
EARNINGS PER COMMON
SHARE:
BASIC:
Net income per common
share................ .49 .35 .71 .35 .38(5)
Weighted average shares
outstanding.......... 86,229 86,933 88,000 87,892 88,368
DILUTED:
Net income per common
share................ .49 .35 .71 .35 .38(5)
Weighted average shares
outstanding.......... 86,438 87,211 88,401 88,285 88,773
<CAPTION>
52 WEEKS ENDED
JANUARY 3, 1998
-------------------------
ACTUAL PRO FORMA
---------- ----------
<S> <C> <C>
CONSOLIDATED STATEMENT
OF INCOME DATA:
Sales.................. $1,442,481 $3,507,665
Gross profit(1)........ 647,273 1,824,426
Income before income
taxes................ 62,478 156,999
Income (loss) from
investment in
unconsolidated
affiliate............ 24,813 0
Income before
cumulative effect of
changes in accounting
principles and
minority interest.... 63,495 90,228
Minority interest...... 0 (28,071)(2)
Net income............. 63,495(3) 62,157(6)
OTHER DATA:
EBITDA(4).............. 134,653 336,758
EARNINGS PER COMMON
SHARE:
BASIC:
Net income per common
share................ .72(5) .63(6)
Weighted average shares
outstanding.......... 88,263 98,263
DILUTED:
Net income per common
share................ .72(5) .63(6)
Weighted average shares
outstanding.......... 88,696 98,696
</TABLE>
7
<PAGE> 14
<TABLE>
<CAPTION>
AS OF
AS OF JANUARY 3, 1998
-------------------------------------------- ---------------------
JULY 1, 1995 JUNE 29, 1996 JUNE 28, 1997 ACTUAL PRO FORMA
------------ ------------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.............................................. $ 655,921 $ 849,443 $ 898,187 $899,381 $2,137,779
Long-term notes payable................................... 99,251 254,355 259,884 259,249 611,013
</TABLE>
- ---------------
(1) Gross profit is defined as sales less materials, supplies, labor and other
production costs.
(2) Adjusted to reflect the 45% interest in Keebler held other than by Flowers.
(3) Represents net income before cumulative effect of changes in accounting
principles of $9.9 million, or $.11 per share.
(4) EBITDA is defined as income before interest, taxes, depreciation and
amortization, income from investment in unconsolidated affiliate and
cumulative effect of changes in accounting principles. EBITDA is presented
because the Company 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) Before cumulative effect of changes in accounting principles of $9.9
million, or $.11 per share, for the 27 weeks and the 52 weeks ended January
3, 1998.
(6) Before cumulative effect of changes in accounting principles of $9.9
million, or $.10 per share.
8
<PAGE> 15
FORWARD-LOOKING STATEMENTS
Certain statements incorporated by reference or made in this Prospectus
under the captions "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, and are subject to the
safe harbor provisions of that Act. Such forward-looking statements include,
without limitation, the future availability and prices of raw materials, the
availability of capital on acceptable terms, the competitive conditions in the
baked foods industry, potential regulatory obligations, the Company's strategies
and other statements contained herein that are not historical facts. 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 baked foods markets), the Company's ability to recover its raw material
costs in the pricing of its products, the availability of capital on acceptable
terms, actions of competitors, the extent to which the Company 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 Company's
business strategies and other factors discussed under "Risk Factors" and
elsewhere in this Prospectus.
RISK FACTORS
ABILITY OF THE COMPANY TO COMPETE EFFECTIVELY IN THE HIGHLY COMPETITIVE BAKED
FOODS INDUSTRY
The baked foods industry is highly competitive. The Company faces
competition in all of its markets from large, national bakeries and smaller,
regional operators, as well as from supermarket chains with their own bakeries
or private label products and grocery stores with their own in-store bakeries.
Some of the Company's competitors, including other diversified food companies,
are larger and may have greater financial resources than the Company. The
Company from time to time experiences price pressure in certain of its markets
as a result of competitors' promotional pricing practices as well as market
conditions generally. Competition is based on product quality, brand loyalty,
price, effective promotional activities and the ability to identify and satisfy
emerging consumer preferences. Customer service, including frequency of
deliveries and maintenance of fully stocked shelves, is also an important
competitive factor and is central to the competition for retail shelf space
among baked foods distributors. See "Business -- Competition."
RISK OF PRICE INCREASES AND SHORTAGES OF RAW MATERIALS
The principal baking ingredients used by the Company are flour, sugar,
shortening and fruit, all of which are subject to price fluctuations. Any
substantial increase in the prices of raw materials would, if not offset by
product price increases or effectively placed commodities hedging, have an
adverse impact on the profitability of the Company. Historically, the Company
has been able to recover the majority of its commodity cost increases through
increasing prices, switching to a higher-margin revenue mix and obtaining
additional operating efficiencies. There can be no assurance, however, that the
Company will continue to be able to offset raw material price increases to the
same extent in the future. From time to time the Company enters into contracts,
generally not longer than one year in duration, for the purchase of baking
ingredients at fixed prices, which are designed to protect the Company against
raw material price increases during their term. These contracts could result in
the Company paying higher prices for its raw materials than would otherwise be
available in the spot markets. The Company also uses paper products, such as
corrugated cardboard, aluminum products, such as pie plates, and films and
plastics to package its baked foods. In addition, the Company is also dependent
upon natural gas and propane as a fuel for firing ovens. Substantial future
increases in prices or shortages of packaging materials or fuels could have a
material adverse effect on the Company. See "Business -- Raw Materials."
9
<PAGE> 16
LIMITED ACCESS TO KEEBLER CASH FLOW
The Company owns a majority of the outstanding capital stock of Keebler. As
a result, Keebler's operations will be reported on a consolidated basis with the
Company and its other subsidiaries; however, the Company is limited in its
ability to gain access to Keebler's cash flows due to restrictions on the
payment of dividends in Keebler's existing credit facilities. In addition, the
Company's partial ownership of Keebler creates an economic disincentive to
effect any such distribution since those distributions must be shared ratably
with Keebler's other stockholders.
TRADEMARKS AND OTHER PROPRIETARY RIGHTS
The Company believes that its trademarks and other proprietary rights are
important to its success and its competitive position. Accordingly, the Company
devotes substantial resources to the establishment and protection of its
trademarks and proprietary rights. However, the actions taken by the Company 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 the
Company. In addition, others may assert rights in the Company's trademarks and
other proprietary rights. See "Business -- Intellectual Property."
DEPENDENCE ON KEY CUSTOMERS
During transition period 1998, the largest purchaser of Flowers' products,
Winn-Dixie, Inc., ("Winn-Dixie") accounted for approximately 10.7% of its sales.
The Company expects that sales to Winn-Dixie will continue to constitute a
significant percentage of its revenues. The loss of Winn-Dixie as an outlet for
the Company's products could have a material adverse effect on the financial
condition or results of operations of the Company. See "Business -- Customers."
AVAILABILITY AND INTEGRATION OF FUTURE ACQUISITIONS
Historically, the Company's growth has depended, in large part, on its
ability to acquire and, thereafter, integrate and operate additional baked foods
businesses. The Company's strategy includes pursuing acquisition candidates that
complement its existing product lines, its geographic presence, or both, and
leverage its purchasing power, brand management capabilities and operating
efficiencies. The Company presently has no material acquisitions under active
consideration. Potential competitors for acquisition opportunities include
larger companies which may have greater financial resources. Competition for
acquisition of baked foods businesses may result in acquisitions on terms that
prove to be less advantageous to the Company than have been attainable in the
past or may increase acquisition prices to levels unacceptable to the Company.
In addition, there can be no assurance that the Company will find attractive
acquisition candidates in the future. There also can be no assurance that the
Company will be successful in integrating future acquisitions into its existing
operations or succeed in reducing the costs and increasing the profitability of
any businesses acquired in the future. See "Business -- Strategy."
LACK OF MANAGEMENT EMPLOYMENT AGREEMENTS AND DEPENDENCE ON KEY PERSONNEL
The business of Flowers requires managerial, financial and operational
expertise. Flowers does not have employment agreements with any members of its
current management. Flowers has no reason to believe that any of its key
management personnel will not continue to be active in Flowers' business, but
there can be no assurance that Flowers will be able to continue to retain and
attract key management personnel in the future. See "Management."
IMPACT OF GOVERNMENTAL REGULATION ON THE COMPANY'S OPERATIONS
The Company's operations are subject to regulation by various federal,
state and local government entities and agencies. As a producer of baked foods
for human consumption, the Company's operations are subject to stringent
production, packaging, quality, labeling and distribution standards, including
the Federal Food and Drug Act. The operations of the Company's production and
distribution facilities are subject to
10
<PAGE> 17
various federal, state and local environmental laws and workplace regulations,
including the Occupational Safety and Health Act, the Fair Labor Standards Act,
the Clean Air Act and the Clean Water Act. Although the Company believes that
its current legal and environmental compliance programs adequately address such
concerns and that it is in substantial compliance with such applicable laws and
regulations, there can be no assurance that future regulation by various
federal, state and local governmental entities and agencies would not have a
material adverse effect on the Company's results of operations. See
"Business -- Regulation."
PRODUCT LIABILITY; PRODUCT RECALLS
The Company may be liable if the consumption of any of its products cause
injury, illness or death. The Company also may be required to recall certain of
its products that become contaminated or are damaged. The Company's current
management is not aware of any material product liability judgment against the
Company or product recall by the Company. However, a product liability judgment
against the Company or a product recall could have a material adverse effect on
the Company's business or financial results.
DIVIDENDS
In transition period 1998 and fiscal year 1997, the Company paid cash
dividends on its Common Stock of $.2225 and $.4125 per share, respectively.
Although the Company presently intends to continue to pay quarterly cash
dividends on its Common Stock, the payment of such dividends will depend on its
financial condition, results of operations and such other factors as the Board
of Directors of the Company may, in its discretion, consider relevant, and no
assurance can be given that the Company will pay any dividends in the future or
that the amount of such dividends will not be reduced from prior periods. See
"Price Range of Common Stock and Dividends."
DIFFICULTY IN EFFECTING CHANGES IN CONTROL DUE TO ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Second Restated Articles of
Incorporation (the "Articles") and Bylaws, Georgia corporate law and actions
taken by the Board of Directors of the Company could discourage potential
acquisition proposals and could delay or prevent a change in control of the
Company. The Company's Articles require the affirmative vote of at least
sixty-six and two-thirds percent (66 2/3%) of its outstanding shares of stock to
approve, among other matters: (i) any plan of merger, share exchange or
consolidation of the Company with another corporation; (ii) any sale, lease,
transfer, exchange or other disposition of all or substantially all of the
property and assets of the Company; or (iii) any dissolution of the Company,
unless recommended by a majority of the Continuing Directors (as therein
defined), in which event, the vote required would be the affirmative vote of a
majority of the outstanding shares of stock. The Company's Articles provide for
a classified board of directors with staggered three-year terms, a provision
that increases the difficulty of removing all of the incumbent directors at one
time which, in turn, could discourage a proxy contest. The authorized but
unissued shares of Common Stock and Preferred Stock of the Company are generally
available for future issuance without stockholder approval. The existence of
authorized but unissued Common Stock and Preferred Stock may enable the Board of
Directors of the Company to issue shares to persons friendly to current
management, which could render more difficult or discourage an attempt to obtain
control of the Company by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the Company's incumbent management. In addition,
in 1989, the Company adopted a Shareholder Rights Plan, which would make
substantially more expensive any takeover attempt not approved by the Company's
Board of Directors. The Company has also adopted a Bylaw electing to be covered
by the Fair Price Requirements of the Georgia Business Corporation Code, which
is designed to protect shareholders against two-tier, front-end loaded
transactions. See "Description of Capital Stock."
YEAR 2000 CONVERSION
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, in less than two years, computer systems and/or
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements.
11
<PAGE> 18
Significant uncertainty exists concerning the potential effects associated with
such compliance. There can be no assurance that the Company's software contains
or will contain all necessary date code changes. The Company, its customers and
its suppliers may be affected by Year 2000 issues. The Company may also incur
certain unexpected expenditures in connection with Year 2000 compliance. Any of
the foregoing could result in a material adverse effect on the Company's
business, financial condition and results of operations.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 10,000,000 shares of
Common Stock offered by the Company are estimated to be approximately $238
million (approximately $274 million if the U.S. Underwriters' over-allotment
option is exercised in full). The net proceeds to the Company from the
Debentures Offering are estimated to be approximately $197 million. The Company
intends to apply the aggregate net proceeds of the Common Stock Offering and the
Debentures Offering to repay indebtedness, principally incurred in connection
with the Keebler Acquisition, under the Amended and Restated Credit Agreement
dated as of January 30, 1998 among the Company, Wachovia Bank, N.A., as Agent,
The Bank of Nova Scotia, as Documentation Agent, NationsBank, N.A., as
Syndications Agent, and the banks (the "Banks") named therein (the "Revolving
Credit Facility"), to repay other miscellaneous indebtedness (the "Miscellaneous
Indebtedness") and for general corporate purposes. The Revolving Credit Facility
permits the Company to borrow from time to time up to $500 million and
terminates on January 29, 2003, unless extended by the Banks in their sole
discretion. Amounts drawn as of April 20, 1998, under the Revolving Credit
Facility aggregated approximately $422 million in principal amount and bore
interest at an annual rate of 6.1%. As of April 20, 1998, the aggregate
principal amount of the Miscellaneous Indebtedness was approximately $13 million
with a weighted average annual interest rate of 7.41%. Pending such uses, the
Company will invest the proceeds in marketable, investment grade debt
instruments of the United States Government.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed on the NYSE and is traded under the symbol
"FLO." The table below presents, for each of the quarterly calendar periods
indicated, the high and low sales prices for the Common Stock, as reported on
the NYSE, and cash dividends paid.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
----- ----- ---------
<S> <C> <C> <C>
Calendar 1996
First Quarter.......................................... $ 10 $ 8 1/4 $.0967
Second Quarter......................................... 12 8 1/2 .0983
Third Quarter.......................................... 13 1/4 10 5/8 .1000
Fourth Quarter......................................... 15 7/8 12 5/8 .1017
Calendar 1997
First Quarter.......................................... $ 16 1/8 $ 13 1/4 $.1033
Second Quarter......................................... 18 15 .1075
Third Quarter.......................................... 20 11/16 16 1/2 .1100
Fourth Quarter......................................... 21 1/2 16 5/8 .1125
Calendar 1998
First Quarter.......................................... $ 26 5/16 $ 20 1/8 $.1150
Second Quarter (through April 20, 1998)................ 24 9/16 23 --
</TABLE>
12
<PAGE> 19
On April 20, 1998, the last reported sale price of the Common Stock on the
NYSE was $23 1/4 per share. On April 20, 1998, the Common Stock was held by
approximately 8,000 holders of record.
The declaration of dividends is at the discretion of the Board of Directors
of the Company. While the Company intends to continue to pay quarterly cash
dividends on its Common Stock, the declaration and payment of future dividends
and the amount thereof will be dependent upon the Company's financial condition,
results of operations, cash requirements for its business, future prospects and
other factors deemed relevant by the Board of Directors. In addition, the
existing debt agreements of Keebler contain covenants which limit Keebler's
ability to, among other things, pay dividends.
13
<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of the Company at January
3, 1998 (i) on an actual basis, (ii) on a pro forma basis to give effect to the
Keebler Acquisition, (iii) on a pro forma basis as further adjusted to give
effect to the Common Stock Offering and the Debentures Offering and the
application of the estimated aggregate net proceeds therefrom, and (iv) on a pro
forma basis as adjusted to give effect to the Common Stock Offering and the
Debentures Offering and reflecting Keebler on a deconsolidated basis. This table
should be read in conjunction with and is qualified by reference to the
consolidated financial statements and related notes thereto incorporated by
reference or included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JANUARY 3, 1998
--------------------------------------------------------------
PRO FORMA
FOR THE PRO FORMA PRO FORMA
ACTUAL KEEBLER ACQUISITION AS ADJUSTED(1) AS ADJUSTED(2)
------ ------------------- -------------- --------------
(DOLLARS IN MILLIONS, EXCEPT OTHER DATA)
<S> <C> <C> <C> <C>
Current portion of long-term debt......... $ 4.3 $ 30.7 $ 26.4 $ 0.0
------ -------- -------- --------
Commercial paper.......................... 53.5 53.5 53.5 53.5
------ -------- -------- --------
Long-term debt, excluding current portion:
Flowers' long-term debt................. 276.2 590.8 359.8 359.8
Keebler's long-term debt................ -- 272.4 272.4 --
------ -------- -------- --------
Total long-term debt(3)......... 276.2 863.2 632.2 359.8
------ -------- -------- --------
Minority Interest......................... -- 99.9 99.9 --
------ -------- -------- --------
Stockholders' Equity:
Preferred Stock, par value $100 per
share, 10,467 shares authorized; none
issued and outstanding...............
Preferred Stock, par value $100 per
share, 249,533 shares authorized,
none issued and outstanding..........
Common Stock, par value $.625 per share,
350,000,000 shares authorized,
88,636,089 shares issued and
98,636,089 shares issued as
adjusted(4).......................... 55.4 55.4 61.7 61.7
Capital in excess of par................ 45.2 45.2 277.2 277.2
Retained earnings....................... 266.7 266.7 266.7 266.7
Less:
Common stock in treasury............. (2.4) (2.4) (2.4) (2.4)
Restricted Stock Award and Equity
Incentive Award.................... (16.3) (16.3) (16.3) (16.3)
------ -------- -------- --------
348.6 348.6 586.9 586.9
------ -------- -------- --------
Total Capitalization............ $682.6 $1,395.9 $1,398.9 $1,000.2
====== ======== ======== ========
OTHER DATA:
Long-term debt/Total capitalization....... 40.5% 61.8% 45.2% 36.0%
Total debt(5)/Total capitalization........ 48.9% 67.9% 50.9% 41.3%
</TABLE>
- ---------------
(1) Gives effect to the Keebler Acquisition, the Common Stock Offering and the
Debentures Offering.
(2) Gives effect to the Keebler Acquisition, the Common Stock Offering and the
Debentures Offering, and reflecting Keebler on a deconsolidated basis.
(3) Long-term debt includes long-term notes payable, obligations under capital
leases and Industrial Revenue Bonds.
(4) Does not include 12,350,000 shares of Common Stock reserved for issuance
under the Company's stock incentive plans, of which awards for 5,262,788
shares of Common Stock have been granted and were outstanding as of April
20, 1998.
(5) Includes current portion of long-term debt, commercial paper, and total
long-term debt.
14
<PAGE> 21
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Consolidated Financial Statements are
based on the historical presentation of the consolidated financial statements of
Flowers. The Unaudited Pro Forma Condensed Consolidated Statements of Income for
the 27 weeks ended January 3, 1998, the 52 weeks ended June 28, 1997, and the 52
weeks ended January 3, 1998 gives effect to certain pro forma adjustments
related to (i) the Keebler Acquisition, (ii) the Common Stock Offering, and
(iii) the Debentures Offering, as if such transactions had occurred as of June
30, 1996. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
January 3, 1998 gives effect to these pro forma adjustments as if the
transactions occurred on January 3, 1998.
The Unaudited Pro Forma Condensed Consolidated Financial Statements do not
purport to be indicative of the results that actually would have been obtained
if the combined operations had been conducted during the periods presented and
they are not necessarily indicative of operating results to be expected in
future periods. The Unaudited Pro Forma Condensed Consolidated Financial
Statements and notes thereto should be read in conjunction with the consolidated
financial statements and the related notes thereto of Flowers and Keebler
incorporated by reference or included elsewhere in this Prospectus.
15
<PAGE> 22
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands)
<TABLE>
<CAPTION>
HISTORICAL
------------------------
FLOWERS KEEBLER
JANUARY 3, JANUARY 3, PRO FORMA PRO FORMA
1998 1998 ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................ $ 3,866 $ 27,188 $ $ 31,054
Accounts receivable...................... 118,147 98,963 217,110
Inventories.............................. 105,431 112,462 217,893
Prepaid expenses and other............... 9,421 20,303 29,724
Deferred income taxes.................... 16,024 42,730 58,754
-------- ---------- ----------
252,889 301,646 554,535
-------- ---------- ----------
Net Property, Plant and Equipment.......... 438,321 478,121 916,442
-------- ---------- ----------
Other Assets and Deferred Charges:
Investment in unconsolidated affiliate... 100,663 -- (100,663)(1) --
Other long-term assets................... 32,620 61,879 3,050(2) 97,549
-------- ---------- --------- ----------
133,283 61,879 (97,613) 97,549
-------- ---------- --------- ----------
Cost in Excess of Net Tangible Assets...... 74,888 201,205 293,160(3) 569,253
-------- ---------- --------- ----------
$899,381 $1,042,851 $ 195,547 $2,137,779
======== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Commercial paper......................... $ 53,506 $ -- $ $ 53,506
Current portion of long-term debt........ 1,581 26,365 27,946
Obligations under capital leases......... 2,651 -- 2,651
Accounts payable......................... 72,311 126,213 198,524
Accrued taxes other than income taxes.... 5,230 -- 5,230
Income taxes............................. -- 13,784 13,784
Other accrued liabilities................ 97,333 201,823 299,156
-------- ---------- ----------
232,612 368,185 600,797
-------- ---------- ----------
200,000(2)
Long-Term Debt............................. 276,211 272,390 (120,626)(2) 627,975
-------- ---------- --------- ----------
Deferred Taxes............................. 39,686 69,417 109,103
-------- ---------- ----------
Postretirement/Postemployment
obligations.............................. -- 60,605 60,605
-------- ---------- ----------
Other...................................... 2,305 50,203 52,508
-------- ---------- ----------
Minority Interest.......................... -- -- 99,924(4) 99,924
-------- ---------- --------- ----------
Stockholders' Equity:
Common stock............................. 55,398 776 (776)(5)
6,250(6) 61,648
Capital in excess of par value........... 45,200 148,538 (148,538)(5)
232,050(6) 277,250
Retained earnings........................ 266,734 72,737 (72,737)(5) 266,734
Less: Treasury stock..................... (2,452) -- (2,452)
Restricted Stock Award and Equity
Incentive Award.................... (16,313) -- (16,313)
-------- ---------- --------- ----------
348,567 222,051 16,249 586,867
-------- ---------- --------- ----------
$899,381 $1,042,851 $ 195,547 $2,137,779
======== ========== ========= ==========
</TABLE>
16
<PAGE> 23
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------
FLOWERS KEEBLER
52 WEEKS ENDED 52 WEEKS ENDED PRO FORMA PRO FORMA
JANUARY 3, 1998(7) JANUARY 3, 1998 ADJUSTMENTS CONSOLIDATED
------------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Sales......................... $1,442,481 $2,065,184 $ $3,507,665
Other income.................. 8,613 -- 8,613
---------- ---------- ----------
1,451,094 2,065,184 3,516,278
---------- ---------- ----------
Materials, supplies, labor and
other production costs...... 795,208 888,031 1,683,239
Selling, delivery and
administrative expenses..... 570,439 1,035,756 7,329(8) 1,613,524
Interest...................... 22,969 33,847 5,700(9) 62,516
---------- ---------- -------- ----------
1,388,616 1,957,634 13,029 3,359,279
---------- ---------- -------- ----------
Income before income taxes.... 62,478 107,550 (13,029) 156,999
Federal and state income tax
expense (benefit)........... 23,796 45,169 (2,194)(10) 66,771
Income from investment in
unconsolidated affiliate.... 24,813 -- (24,813)(11) --
---------- ---------- -------- ----------
Income before minority
interest.................... 63,495 62,381 (35,648) 90,228
Minority interest............. -- -- (28,071)(4) (28,071)
---------- ---------- -------- ----------
Net income.................... $ 63,495(12) $ 62,381 $(63,719) $ 62,157(13)
========== ========== ======== ==========
Net income per common share:
Basic....................... $ .72(12) $ .63(13)
========== ==========
Weighted average shares
outstanding.............. 88,263 98,263
========== ==========
Diluted..................... $ .72(12) $ .63(13)
========== ==========
Weighted average shares
outstanding.............. 88,696 98,696
========== ==========
</TABLE>
17
<PAGE> 24
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------
FLOWERS KEEBLER
27 WEEKS ENDED 24 WEEKS ENDED PRO FORMA PRO FORMA
JANUARY 3, 1998 JANUARY 3, 1998(14) ADJUSTMENTS CONSOLIDATED
--------------- ------------------- ----------- ------------
<S> <C> <C> <C> <C>
Sales............................... $784,097 $1,008,322 $ $1,792,419
Other income........................ 2,442 -- 2,442
-------- ---------- ----------
786,539 1,008,322 1,794,861
-------- ---------- ----------
Materials, supplies, labor and other
production costs.................. 435,286 427,930 863,216
Selling, delivery and administrative
expenses.......................... 314,438 495,543 3,805(8) 813,786
Interest............................ 11,796 14,440 2,960(9) 29,196
-------- ---------- -------- ----------
761,520 937,913 6,765 1,706,198
-------- ---------- -------- ----------
Income before income taxes.......... 25,019 70,409 (6,765) 88,663
Federal and state income tax expense
(benefit)......................... 9,632 29,570 (1,140)(10) 38,062
Income from investment in
unconsolidated affiliate.......... 18,061 -- (18,061)(11) --
-------- ---------- -------- ----------
Income before minority interest..... 33,448 40,839 (23,686) 50,601
Minority interest................... -- -- (18,378)(4) (18,378)
-------- ---------- -------- ----------
Net income.......................... $ 33,448(12) $ 40,839 $(42,064) $ 32,223(13)
======== ========== ======== ==========
Net income per common share:
Basic............................. $ .38(12) $ .33(13)
======== ==========
Weighted average shares
outstanding.................... 88,368 98,368
======== ==========
Diluted........................... $ .38(12) $ .33(13)
======== ==========
Weighted average shares
outstanding.................... 88,773 98,773
======== ==========
</TABLE>
18
<PAGE> 25
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------
FLOWERS
52 WEEKS KEEBLER
ENDED 52 WEEKS ENDED PRO FORMA PRO FORMA
JUNE 28, 1997 JULY 12, 1997(15) ADJUSTMENTS CONSOLIDATED
------------- ----------------- ----------- ------------
<S> <C> <C> <C> <C>
Sales.................................. $1,437,713 $1,983,369 $ $3,421,082
Gain on sale of distributor notes
receivable........................... 43,244 43,244
Other income........................... 3,540 3,540
---------- ---------- ----------
1,484,497 1,983,369 3,467,866
---------- ---------- ----------
Materials, supplies, labor and other
production costs..................... 815,864 890,928 1,706,792
Selling, delivery and administrative
expenses............................. 555,730 987,762 7,329(8) 1,550,821
Interest............................... 25,109 39,073 5,700(9) 69,882
---------- ---------- -------- ----------
1,396,703 1,917,763 13,029 3,327,495
---------- ---------- -------- ----------
Income before income taxes............. 87,794 65,606 (13,029) 140,371
Federal and state income tax expense
(benefit)............................ 33,191 27,475 (2,195)(10) 58,471
Income from investment in
unconsolidated affiliate............. 7,721 -- (7,721)(11) --
---------- ---------- -------- ----------
Income before minority interest........ 62,324 38,131 (18,555) 81,900
Minority interest...................... -- -- (17,159)(4) (17,159)
---------- ---------- -------- ----------
Net income............................. $ 62,324 $ 38,131 $(35,714) $ 64,741
========== ========== ======== ==========
Net income per common share:
Basic................................ $ .71 $ .66
========== ==========
Weighted average shares
outstanding....................... 88,000 98,000
========== ==========
Diluted.............................. $ .71 $ .66
========== ==========
Weighted average shares
outstanding....................... 88,401 98,401
========== ==========
</TABLE>
19
<PAGE> 26
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENTS
OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. Represents the elimination of Flowers' investment in Keebler.
2. Represents the change in debt and equity as follows:
<TABLE>
<S> <C>
Proceeds from Common Stock Offering, net of fees and
expenses of $11,700....................................... $ 238,300
Proceeds from Debentures Offering, net of fees and expenses
of $3,050................................................. 196,950
---------
Total proceeds.................................... 435,250
Less purchase price of Keebler Acquisition and related
costs..................................................... (314,624)(a)
---------
Proceeds applied to repayment of existing debt.............. (120,626)
Increase in debt attributable to Debentures Offering........ 200,000
---------
Net increase in debt.............................. $ 79,374
=========
</TABLE>
--------------------
(a) The purchase price for the Keebler Acquisition was determined as
follows:
<TABLE>
<S> <C>
Purchase price............................................ $308,624
Transaction costs......................................... 6,000
--------
$314,624
========
</TABLE>
3. Represents the portion of the purchase price that has been ascribed to
Cost in Excess of Net Tangible Assets. For pro forma purposes, Flowers estimates
that Keebler's historical net assets approximate fair value, based on the fact
that Keebler's assets and liabilities were adjusted to fair value in 1996 as
part of the acquisition of Keebler by the entity formed by Flowers and its
co-investors.
4. Represents the 45% interest in Keebler held other than by Flowers.
5. Represents the elimination of Keebler's historical equity.
6. Represents the allocation of $238,300 between common stock ($6,250) and
capital in excess of par ($232,050).
7. Derived from the unaudited financial information of Flowers.
8. Represents the amortization of the Cost in Excess of Net Tangible Assets
of $293,160 over 40 years.
9. Represents interest on net increase of approximately $80,000 in debt at
an assumed rate of 7% plus amortization of deferred loan costs of $3,050
relating to the Debentures.
10. To record the tax benefit for the increased interest expense, at an
estimated effective income tax rate of 38.5%.
11. To eliminate Flowers' historical equity in income from investment in
Keebler.
12. Represents net income before cumulative effect of changes in accounting
principles of $9,900, or $.11 per share.
13. Before cumulative effect of changes in accounting principles of $9,900,
or $.10 per share.
14. Derived from unaudited financial statements of Keebler for the third
and fourth quarters ended October 4, 1997 and January 3, 1998, respectively.
15. Derived from unaudited financial information of Keebler.
20
<PAGE> 27
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The selected consolidated historical financial data presented below as of
and for the fiscal years 1993, 1994, 1995, 1996 and 1997, and for transition
period 1998, have been derived from the consolidated financial statements of
Flowers which have been audited by Price Waterhouse LLP, independent
accountants. The selected consolidated historical financial data for the 27
weeks ended January 4, 1997 have been derived from the unaudited financial
statements of Flowers. 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 and related notes thereto incorporated by
reference or included elsewhere in this Prospectus. See "Available Information"
and "Incorporation of Certain Information by Reference."
<TABLE>
<CAPTION>
52 WEEKS ENDED 27 WEEKS ENDED
---------------------------------------------------------- ------------------------
JULY 3, JULY 2, JULY 1, JUNE 29, JUNE 28, JANUARY 4, JANUARY 3,
1993 1994 1995 1996 1997 1997 1998
-------- -------- ---------- ---------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales..................................... $962,132 $989,782 $1,129,203 $1,238,564 $1,437,713 $774,767 $784,097
Other income.............................. 4,395 4,690 10,751 12,020 46,784 41,347 2,442
Materials, supplies, labor and other
production costs........................ 493,997 525,731 599,416 674,762 787,799 440,149 418,926
Selling, delivery and administrative
expenses................................ 375,360 383,073 428,833 468,695 537,825 289,152 303,868
Depreciation and amortization............. 33,137 34,110 36,604 40,848 45,970 22,542 26,930
Interest.................................. 4,001 4,318 7,086 13,004 25,109 13,936 11,796
Accrual for litigation settlement......... -- -- -- 4,935 -- -- --
Income before income taxes................ 60,032 47,240 68,015 48,340 87,794 50,335 25,019
Federal and state income taxes............ 20,871 17,744 25,714 18,185 33,191 19,027 9,632
Income (loss) from investment in
unconsolidated affiliate................ -- -- -- 613 7,721 (195) 18,061
Income before cumulative effect of changes
in accounting principles................ 39,161 29,496 42,301 30,768 62,324 31,113 33,448
Cumulative effect of changes in accounting
principles, net of tax benefit.......... -- -- -- -- -- -- (9,888)
Net income................................ 39,161 29,496 42,301 30,768 62,324 31,113 23,560
EARNINGS PER COMMON SHARE -- BASIC:
Income before cumulative effect of
changes in accounting principles...... $ .47 $ .35 $ .49 $ .35 $ .71 $ .35 $ .38
Cumulative effect of changes in
accounting principles................. -- -- -- -- -- -- (.11)
Net income per common share............. .47 .35 .49 .35 .71 .35 .27
Weighted average shares outstanding..... 83,222 84,521 86,229 86,933 88,000 87,892 88,368
EARNINGS PER COMMON SHARE -- DILUTED:
Income before cumulative effect of
changes in accounting principles...... $ .47 $ .35 $ .49 $ .35 $ .71 $ .35 $ .38
Cumulative effect of changes in
accounting principles................. -- -- -- -- -- -- (.11)
Net income per common share............. .47 .35 .49 .35 .71 .35 .27
Weighted average shares outstanding 83,648 84,784 86,438 87,211 88,401 88,285 88,773
OTHER DATA:
EBITDA(1)............................... 97,170 85,668 111,705 102,192 158,873 86,813 63,745
Ratio of earnings to fixed charges(2)... 6.23 5.10 6.08 3.59 3.65 3.50 2.45
Cash dividends paid per common share.... $ .327 $ .344 $ .362 $ .383 $ .413 $ .2017 $ .223
</TABLE>
<TABLE>
<CAPTION>
AS OF
------------------------------------------------------------------------------------
JULY 3, JULY 2, JULY 1, JUNE 29, JUNE 28, JANUARY 3,
1993 1994 1995 1996 1997 1998
-------- -------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................... $490,948 $559,682 $ 655,921 $ 849,443 $ 898,187 $899,381
Long-term notes payable.................... 22,307 77,422 99,251 254,355 259,884 259,249
Stockholders' equity....................... 280,154 275,731 303,981 305,324 340,012 348,567
</TABLE>
- ---------------
(1) EBITDA is defined as income before interest, taxes, depreciation and
amortization, income from investment in unconsolidated affiliate and
cumulative effect of changes in accounting principles. EBITDA is presented
because the Company 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).
(2) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes and income
from investment in unconsolidated affiliate plus fixed charges. Fixed
charges consist of interest expense and interest portion of rent expense.
21
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Consolidated Historical Financial Data" included herein and the consolidated
financial statements and the related notes thereto of the Company incorporated
by reference or included elsewhere in this Prospectus. The following information
contains forward-looking statements which involve certain risks and
uncertainties. See "Forward-Looking Statements."
OVERVIEW
General
The Company produces and markets fresh baked breads, rolls and snack foods,
frozen baked breads, desserts and snack foods, and cookies and crackers. Sales
are principally affected by pricing, quality, brand recognition, new product
introductions and product line extensions, marketing and service. The Company
manages these factors to achieve a sales mix favoring its higher margin branded
products while using high volume products to control costs and maximize use of
capacity.
The principal elements comprising the Company's production costs are
ingredients, packaging materials, labor and overhead. The major ingredients used
in the production of the Company's products are flour, sugar, shortening and
fruit. The Company also uses paper products, such as corrugated cardboard,
aluminum products, such as pie plates, and plastic to package its products. The
prices of these materials are subject to significant volatility. The Company has
mitigated the effects of such price volatility in the past through its hedging
programs, but may not be successful in protecting itself from fluctuations in
the future. In addition to the foregoing factors, production costs are affected
by the efficiency of production methods and capacity utilization.
The Company's selling, delivery and administrative expenses are comprised
mainly of distribution, logistics and advertising expenses. Distribution and
logistics costs represent the largest component of the Company's cost structure,
other than production costs, and are principally influenced by changes in sales
volume.
Depreciation and amortization expenses for the Company is comprised of
depreciation of property, plant and equipment and amortization of costs in
excess of net tangible assets associated with acquisitions. The Company's
interest expenses are primarily associated with the Company's Revolving Credit
Facility, senior notes outstanding in the aggregate principal amount of $125
million and the Company's commercial paper program. See "-- Liquidity and
Capital Resources."
Matters Affecting Analysis
The Keebler Acquisition closed on February 3, 1998. Accordingly, the
results of operations of Flowers are not consolidated with those of Keebler for
the transition period 1998 or for any prior fiscal year. From January 26, 1996,
the date of the Company's initial investment in Keebler, through February 3,
1998, the Company accounted for its investment in Keebler using the equity
method of accounting. For reporting periods ending after February 3, 1998, the
Company will consolidate Keebler for financial reporting purposes.
As a result of the Company's change in fiscal year end, the Company's
quarterly reporting periods for fiscal year 1998 shall be as follows: first
quarter ending April 25, 1998, second quarter ending July 18, 1998, third
quarter ending October 10, 1998, and fourth quarter and fiscal year ending
January 2, 1999 (the Saturday nearest December 31).
22
<PAGE> 29
The Company's results of operations, expressed as a percentage of sales,
for the 52 week periods ended July 1, 1995, June 29, 1996 and June 28, 1997, and
for the 27 week period ended January 4, 1997, and for the 27 week transition
period ended January 3, 1998, are set forth below:
<TABLE>
<CAPTION>
52 WEEKS ENDED 27 WEEKS ENDED
----------------------------- -----------------------
JULY 1, JUNE 29, JUNE 28, JANUARY 4, JANUARY 3,
1995 1996 1997 1997 1998
------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sales..................................... 100.00% 100.00% 100.00% 100.00% 100.00%
Other income.............................. .95 .97 3.26 5.34 .31
------ ------ ------ ------ ------
100.95 100.97 103.26 105.34 100.31
------ ------ ------ ------ ------
Materials, supplies, labor and other
production costs........................ 53.08 54.48 54.80 56.81 53.43
Selling, delivery and administrative
expenses................................ 37.98 38.24 37.41 37.32 38.75
Depreciation and amortization............. 3.24 3.30 3.20 2.91 3.43
Interest.................................. .63 1.05 1.75 1.80 1.50
------ ------ ------ ------ ------
Income before income taxes................ 6.02 3.90 6.10 6.50 3.20
Federal and state income taxes............ 2.28 1.47 2.31 2.46 1.23
Income (loss) from investment in
unconsolidated affiliate................ -- .05 .54 (.03) 2.30
Income before cumulative effect of changes
in accounting principles................ 3.74 2.48 4.33 4.01 4.27
Cumulative effect of changes in accounting
principles, net of tax benefit.......... -- -- -- -- (1.26)
------ ------ ------ ------ ------
Net income................................ 3.74% 2.48% 4.33% 4.01% 3.01%
====== ====== ====== ====== ======
</TABLE>
TWENTY-SEVEN WEEKS ENDED JANUARY 3, 1998 COMPARED TO TWENTY-SEVEN WEEKS ENDED
JANUARY 4, 1997
Sales. For the 27 weeks ended January 3, 1998, sales were $784.1 million,
or 1% higher than sales for the comparable period in the prior year, which were
$774.8 million. Sales from businesses acquired in 1997 contributed most of the
increase, and were offset somewhat by lost sales attributable to businesses
divested by Flowers Bakeries in 1997. The Company's sales for the current period
also were favorably impacted by a change in promotional practices at Mrs.
Smith's Bakeries implemented in 1997.
Other Income. For the 27 weeks ended January 4, 1997, the Company
recognized approximately $43 million in income attributable to the gain on the
sale of the Company's distributor notes receivable, which occurred in September
1996. The sale of these notes was necessitated by the Company's decision to
settle claims by the United States Internal Revenue Service ("IRS") that the
notes constituted current rather than deferred income. Other income for the more
recent period was offset by approximately $5 million attributable to the
write-down of certain idle facilities.
Materials, Supplies, Labor and Other Production Costs. The Company's
production costs for the 27 weeks ended January 3, 1998, were $418.9 million, or
5% lower than its costs of $440.1 million for the prior year's period. The
improvement is attributable to decreased ingredient costs, primarily flour, and
continued emphasis on cost controls and operating efficiencies.
Selling, Delivery and Administrative Expenses. Selling, delivery and
administrative expenses were $303.9 million, or 5% higher for the 27 weeks ended
January 3, 1998, compared to $289.2 million for the same period in the prior
year. For the 27 weeks ended January 3, 1998, the Company experienced higher
advertising and promotional expenses to support new product introductions,
primarily for Mrs. Smith's Bakeries, than in the prior year, as well as
increased logistics expenses at Mrs. Smith's Bakeries to service increased sales
volume. In addition, the Company accrued administrative and other expenses
associated with the change in its fiscal year.
Depreciation and Amortization. Depreciation and amortization expense was
$26.9 million, or 20% higher for the 27 weeks ended January 3, 1998, than for
the comparable period in the prior year, which was
23
<PAGE> 30
$22.5 million. The increase was due primarily to the effect of depreciation
attributable to capital improvements implemented in 1997.
Interest. Interest expense for the 27 weeks ended January 3, 1998 was
$11.8 million, or 15% lower than interest expense of $13.9 million for the same
period in 1997, due primarily to interest of $2.5 million paid pursuant to the
IRS settlement discussed above during the 27 weeks ended January 4, 1997.
Income Before Income Taxes. Income before income taxes for the 27 weeks
ended January 3, 1998 was $25.0 million. The decrease from the prior year's
corresponding period is primarily attributable to the one-time gain in the prior
period that was generated by the sale of the Company's distributor notes
receivable, discussed above.
Federal and State Income Taxes. Income taxes for the 27 weeks ended
January 3, 1998 were $9.6 million, a decrease from the corresponding period in
the prior year, due primarily to the difference in pre-tax income for such
periods.
Net Income from Keebler Investment. In the 27 weeks ended January 3, 1998,
the Company recorded net income from its investment in Keebler of $18.1 million,
compared to a net loss of $.2 million for the comparable period for the prior
year. The increase in net income from Keebler is primarily attributable to sales
volume increases associated with certain of Keebler's branded cookie and cracker
products, the inclusion of the business of Sunshine following its acquisition in
June 1996 by Keebler, improved gross margins and a more efficient fixed cost
structure at Keebler.
Net Income. Net income of $23.6 million for the 27 weeks ended January 3,
1998 was 24% lower than the $31.1 million net income for the comparable prior
year's period. In addition to the factors described above, the difference in net
earnings was primarily attributable to the effect of one-time charges of $9.9
million for the cumulative effect (net of tax benefit) of changes in accounting
principles taken in the more recent period and expenses accrued by the Company
for administrative and other costs associated with the change in its fiscal
year, as compared to the impact in 1996 of the Company's recognition of the gain
on the sale of its distributor notes receivable.
FISCAL YEAR ENDED JUNE 28, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 29, 1996
Sales. Sales for fiscal year 1997 were $1.438 billion, or 16% higher than
sales of $1.239 billion for fiscal year 1996. The increase in sales was
primarily attributable to sales from businesses acquired during the fourth
quarter of fiscal year 1996 and in fiscal year 1997. The Company also
experienced increased sales volume in the Company's existing businesses,
primarily in Mrs. Smith's Bakeries.
Other Income. In fiscal year 1997, the Company recognized a gain of
approximately $43.2 million on the sale of the Company's distributor notes, as
discussed above.
Materials, Supplies, Labor and Other Production Costs. The Company's
production costs for fiscal year 1997 were $787.8 million, or 17% higher than
costs of $674.8 million for fiscal year 1996. The increase in such costs was due
primarily to increased sales volume, and was offset by decreased ingredient and
packaging costs during the fourth quarter of fiscal 1997.
Selling, Delivery and Administrative Expenses. Selling, delivery and
administrative expenses increased by 15% to $537.8 million for fiscal year 1997
from $468.7 million for fiscal year 1996. The increase was due primarily to
increased sales volume and increased advertising and promotional expenditures,
particularly for Mrs. Smith's Bakeries. Selling, delivery and administrative
expenses as a percentage of sales remained relatively constant with the prior
fiscal year as a result of increased volume and a more efficient cost structure,
particularly in selling and distribution at Flowers Bakeries.
Depreciation and Amortization. Depreciation and amortization expense
increased by 13% to $46.0 million for fiscal year 1997 from $40.8 million for
fiscal year 1996, due primarily to increased capital spending and the
amortization of the Mrs. Smith's trademarks and costs in excess of net tangible
assets.
Interest. Interest expense for fiscal year 1997 increased by 93% to $25.1
million from $13.0 million for fiscal year 1996. The increase was attributable
to higher overall borrowings to partially fund fiscal year 1997 capital
spending, to finance frozen inventory at Mrs. Smith's Bakeries, and to finance
the Company's initial
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<PAGE> 31
investment in Keebler. Interest expense for fiscal year 1997 also reflects the
payment of $2.5 million on the IRS settlement as described above and a higher
average interest rate as compared to the prior year.
Income Before Income Taxes. Fiscal year 1997 income before income taxes
increased by 82% to $87.8 million from $48.3 million for fiscal year 1996, due
primarily to the gain on the sale of the Company's distributor notes receivable.
Federal and State Income Taxes. Federal and state income taxes for fiscal
year 1997 increased to $33.2 million from $18.2 million for fiscal year 1996 due
to increased pre-tax income for fiscal year 1997. The effective income tax rate
for the Company was 37.8% in fiscal year 1997 and 37.6% for fiscal year 1996.
Net Income from Keebler Investment. For fiscal year 1997, the Company
reported net income from its investment in Keebler of $7.7 million, as compared
to $.6 million for fiscal 1996. The increase was due primarily to the Company's
investment in Keebler extending over the full fiscal year 1997, as opposed to
fiscal year 1996, when the Company made its initial investment in Keebler in its
third fiscal quarter. In addition, Keebler's net income for the time period
covered in the Company's fiscal year 1997 increased substantially due to volume
increases, the inclusion of the Sunshine business and improved cost controls at
Keebler.
Net Income. For fiscal year 1997, the Company's net income increased by
102% to $62.3 million from $30.8 million for fiscal year 1996. The increase in
net income was due primarily to the inclusion of the Company's after-tax income
from its investment in Keebler, as well as the gain on the sale of the
distributor notes receivable and the other factors described above.
FISCAL YEAR ENDED JUNE 29, 1996 COMPARED TO FISCAL YEAR ENDED JULY 1, 1995
Sales. Sales for fiscal year 1996 were $1.239 billion, or 10% higher than
sales of $1.129 billion for fiscal year 1996. Approximately one-half of the
increase in sales was attributable to sales from businesses acquired during
fiscal year 1995 and early in fiscal year 1996. The Company also experienced
increased sales volume in the Company's existing businesses, as well as
increased selling prices and the addition of 160 new DSD routes at Flowers
Bakeries.
Other Income. The Company experienced an increase of 12% in other income
for fiscal year 1996 compared to fiscal year 1995, due in part to a gain on the
issuance of additional Keebler stock in connection with Keebler's acquisition of
Sunshine in fiscal year 1996 which was offset by gains attributable to the sale
of certain fixed assets in fiscal year 1995.
Materials, Supplies, Labor and Other Production Costs. The Company's
production costs for fiscal year 1996 were $674.8 million, or 13% higher than
costs of $599.4 million for fiscal year 1995. The increase in such costs was due
primarily to increased ingredient costs, particularly flour, which was at a 21
year high during the year.
Selling, Delivery and Administrative Expenses. Selling, delivery and
administrative expenses increased by 9% to $468.7 million for fiscal year 1996
from $428.8 million for fiscal year 1995. The increase was due primarily to
increased sales volume, as well as start-up costs associated with the addition
of 160 new DSD routes at Flowers Bakeries. Additionally, winter weather in the
eastern United States negatively impacted sales and distribution costs.
Depreciation and Amortization. Depreciation and amortization expense
increased by 12% to $40.8 million for fiscal year 1996 from $36.6 million for
fiscal year 1995, due primarily to increased capital spending.
Interest. Interest expense for fiscal year 1996 increased by 84% to $13.0
million from $7.1 million for fiscal year 1995. The increase was attributable to
higher overall borrowings to finance the Company's initial investment in
Keebler.
Income Before Income Taxes. Fiscal year 1996 income before income taxes
decreased by 29% to $48.3 million from $68.0 million for fiscal year 1995, due
primarily to the factors described above, as well as the impact of a reserve of
$4.9 million recorded to reflect the estimated costs of a final settlement of
litigation involving subsidiary operations in Texas. Income was favorably
impacted by the recognition of a gain of $4.1
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<PAGE> 32
million on the sale of Keebler stock to certain former shareholders of Sunshine
in connection with Keebler's acquisition of Sunshine.
Federal and State Income Taxes. Federal and state income taxes for fiscal
year 1996 decreased to $18.2 million from $25.7 million for fiscal year 1995 due
to decreased pre-tax income for fiscal year 1996. The effective income tax rate
for the Company was 37.6% in fiscal year 1996 and 37.8% for fiscal year 1995.
Net Income from Keebler Investment. For fiscal year 1996, the Company
reported net income from its investment in Keebler of $.6 million. The Company
made its initial investment in Keebler in fiscal year 1996.
Net Income. For fiscal year 1996, the Company's net income decreased by
27% to $30.8 million from $42.3 million for fiscal year 1995 due to the factors
described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of cash to fund its liquidity needs is net
cash provided by operating activities and availability under its Revolving
Credit Facility.
During the transition period 1998, the Company's working capital decreased
$8.8 million to $20.3 million, with cash and cash equivalents decreasing to $3.9
million from $31.1 million at the end of fiscal year 1997. The working capital
decrease and the decrease in cash and cash equivalents in the 27 weeks ended
January 3, 1998 were primarily due to cash expended for capital improvements
throughout the Company.
Cash and cash equivalents increased during fiscal year 1997 from $25.0
million to $31.1 million, and working capital decreased during that fiscal year
from $48.5 million to $29.1 million. The decrease in working capital is
primarily due to the recording of purchase accounting reserves of $35.5 million
relating to acquisitions consummated during fiscal years 1996 and 1997. Cash
flows from operating activities increased in fiscal year 1997 to $79.5 million
from $59.4 million. This increase was the net result of increased profits and
decreased working capital.
During fiscal year 1997 and the 27 weeks ended January 3, 1998, the Company
spent approximately $78 million and $33 million, respectively, for capital
expenditures to expand production facilities and increase efficiencies in both
production and distribution. Since 1992, expenditures have totaled approximately
$377 million with an additional $46 million of expenditures attributable to
acquisitions during that period. Capital expenditures for fiscal year 1998 are
expected to be approximately $40 million for Flowers Bakeries and Mrs. Smith's
Bakeries combined and to be approximately $50 million for Keebler. These
expenditures are targeted to further improve the efficiency of the Company's
production and distribution capabilities.
At January 3, 1998, the Company had borrowed a total of $122 million under
a five year $300 million syndicated loan facility. On January 30, 1998, the
Company entered into the Revolving Credit Facility, which, among other changes,
amended the loan facility to increase available funds to $500 million. In
connection with the Keebler Acquisition, the Company borrowed an additional $309
million and the Company separately repaid $10 million, so that amounts
outstanding under the Revolving Credit Facility as of April 20, 1998 aggregated
$422 million. Also currently outstanding are $125 million of long-term senior
notes issued through a private placement completed during fiscal year 1996. The
Company has in place a $75 million commercial paper program to finance
inventory. Borrowings outstanding under this program at January 3, 1998 were
$53.5 million. The Company also has a $50 million ten-year master lease
agreement to finance the automated production lines at certain of its
facilities. At January 3, 1998, $38.7 million had been used under this
agreement. Certain of the Company's credit facilities contain covenants and
restrictions on actions by the Company and its subsidiaries, other than Keebler,
requirements that the Company comply with a minimum cash flow test, a maximum
leverage ratio, a fixed charges coverage ratio and a minimum consolidated net
worth test. As of January 3, 1998, the Company was in compliance with respect to
all covenants under its credit facilities.
Cash dividends have grown at a compound annual rate of approximately 6%
since 1992, increasing from an annual payout of $.318 in calendar 1992 to $.433
in calendar 1997.
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<PAGE> 33
The Company owns a majority of the outstanding stock of Keebler and,
commencing with all reporting periods ending subsequent to February 3, 1998, the
Company will consolidate Keebler for financial reporting purposes. The Company
is limited in its ability to access the cash flows of Keebler to support the
Company's other operations due to the fact that Keebler is not wholly-owned by
the Company and due to restrictions on the payment of dividends in Keebler's
existing credit facilities.
The Company believes that cash flow from operations, and funds available
under the Company's existing credit facilities, will be sufficient to fund its
operating expenses, working capital, capital expenditures and debt service
requirements through fiscal year 1998.
The Company from time to time reviews and will continue to review
acquisition and joint venture opportunities as well as changes in the capital
markets. If the Company were to consummate a significant acquisition or elect to
take advantage of favorable opportunities in the capital markets, the Company
may supplement availability or revise the terms under its credit facilities or
complete public or private offerings of equity or debt securities.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is effective for the
Company's fiscal year 1998. 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. The Company has not
yet determined the impact this new statement may have on disclosures in the
consolidated financial statements.
The FASB also issued certain other disclosure-related accounting
pronouncements during 1997. While these new statements are effective for future
reporting periods, the Company does not anticipate they will have any
significant impact on the consolidated financial statements.
SEASONALITY
The Company's 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 calendar year due to events
such as back-to-school, and the Thanksgiving and Christmas holidays. Sales for
Mrs. Smith's Bakeries are highly seasonal since, historically, pie sales have
been concentrated in the year-end holiday season. In January 1998, the Company
commenced a program entitled Operation 365 to promote increased pie consumption
during the remainder of the year.
YEAR 2000 CONVERSION
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, in less than two years, computer systems and/or
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements. Significant uncertainty exists concerning the
potential effects associated with such compliance. The Company is currently
analyzing the Year 2000 computer systems issue and has completed the conversion
of certain of its computerized operations. There can be no assurance that the
Company's software contains or will contain all necessary date code changes. The
Company, its customers and its suppliers may be affected by Year 2000 issues.
The Company has plans to communicate with significant customers, vendors and
other third parties with whom it does significant business to determine their
Year 2000 compliance readiness. However, there can be no guarantee that the
systems of other entities will be timely converted, or that their failure to
convert, or a conversion that is incompatible with the Company's system, will
not have an adverse effect on the Company's business, financial condition and
results of operations.
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<PAGE> 34
On November 20, 1997, the Emerging Issues Task Force ("EITF"), a
subcommittee of FASB, issued EITF 97-13, which requires the cost of business
process reengineering activities that are part of an information systems
development project, including Year 2000 compliance, be expensed as those costs
are incurred. Any unamortized costs that were previously capitalized are
required to be written off as a cumulative adjustment in the quarter that
included November 20, 1997. During the twenty-seven week period ended January 3,
1998, the Company recorded a cumulative after-tax charge of $8.8 million, or
$.10 per share, as a result of its adoption of this pronouncement. These costs
were attributable to a state-of-the-art management information system, which is
being implemented at Mrs. Smith's Bakeries.
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<PAGE> 35
BUSINESS
The following information contains forward-looking statements which involve
certain risks and uncertainties. See "Forward-Looking Statements."
THE COMPANY
The Company is the largest nationally branded producer and marketer of a
full line of baked foods in the United States, with products which include
Flowers Bakeries' fresh breads and rolls, Mrs. Smith's Bakeries' fresh and
frozen baked desserts, snacks, breads and rolls, as well as Keebler's cookies
and crackers. Since its founding in 1919 in Thomasville, Georgia, the Company
has dramatically expanded the diversity and geographic scope of its operations
and is now a leader in the market for baked foods throughout the United States.
The Company's core strategy is to be the country's leading low-cost
producer and marketer of a full line of branded fresh and frozen baked products
on a national and super-regional basis, serving all possible customers, through
all channels of distribution. This strategy is focused on responding to current
market trends for the Company's products and changing consumer preferences,
which now increasingly favor purchases of ready-made convenience food products
as opposed to traditional home-prepared foods. To assist in accomplishing this
core strategy, the Company has aggressively invested capital to modernize and
expand its plant and equipment capacity and has acquired nationally branded
businesses which complement its traditional strengths. It has also continually
improved its distribution systems and has established a presence in all
distribution channels where baked foods are sold, including restaurants,
fast-food chains, food wholesalers, institutions and vending machines, as well
as grocery stores.
In the fresh baked product line (Flowers Bakeries), the Company focuses on
the production and marketing of baked foods to customers in the super-regional
19 state area in and surrounding the southeastern United States. In this effort,
the Company has devoted significant resources to modernizing production
facilities and improving its distribution capabilities, as well as actively
marketing well-recognized brands such as Nature's Own and Cobblestone Mill
bread. Since 1980, the Company has acquired 24 local bakery operations which are
generally within or contiguous to its existing region and which can be served
with its extensive DSD system. The Company's strategy is to use acquisitions to
better serve new and existing customers, principally by increasing the
productivity and efficiency of newly acquired plants, establishing reciprocal
baking arrangements among its bakeries, and by extending its DSD system. Flowers
Bakeries' DSD system utilizes approximately 3,100 independent distributors who
own the right to sell the Company's fresh baked products within their respective
territories.
The Company's frozen baked foods operations (Mrs. Smith's Bakeries) began
in the mid-1970s with the acquisition of the Stilwell business, with frozen
products initially marketed to customers in the southeastern and southwestern
United States. In 1989, the Company entered the frozen bread and dough market in
the southeastern United States with its acquisition of the bakery operations of
Winn-Dixie, Inc. In 1991, the Company undertook its first significant entry into
the national market for frozen baked dessert products with the acquisition of
Pies, Inc., a midwest-based producer of premium pies for the restaurant and
foodservice markets, and further expanded its national presence by acquiring the
Oregon Farms branded frozen carrot cake line. In May 1996, the Company obtained
a leading presence in the frozen baked dessert category with the acquisition of
the business of Mrs. Smith's Inc., which markets the leading national brand of
frozen pies sold at retail. In January 1998, the Company launched "Operation
365," a strategy aimed at significantly expanding year-round sales in the frozen
dessert baked product category through product line extensions designed to take
advantage of nationwide consumer recognition of the Mrs. Smith's brand name.
Examples of significant product line extensions that are underway include Mrs.
Smith's retail frozen fruit cobblers and Mrs. Smith's "Restaurant Classics"
retail frozen pies.
The Company entered the cookies and crackers marketplace in January 1996 by
acquiring for $62.5 million an approximate 45% stake in Keebler, the number two
producer and marketer of cookies and crackers in the United States with net
sales of approximately $2.1 billion for its fiscal year ended January 3, 1998.
In June 1996, Keebler acquired Sunshine, the third largest cookie and cracker
producer in the United
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<PAGE> 36
States. By the end of 1996, Keebler completed its planned integration of
Sunshine's operations, achieving efficiencies in administration, purchasing,
production, marketing, sales and distribution. Under the control of Flowers and
its co-investors, Keebler's results of operations have improved from a net loss
of $159.3 million for its fiscal year ended December 30, 1995, to a net income
of $57.0 million for its fiscal year ended January 3, 1998. On February 3, 1998,
Keebler completed its initial public offering in which Flowers' co-investors
sold a portion of their shares to the public. Concurrently with that offering,
Flowers purchased an additional 11% of Keebler from its co-investors for
approximately $309 million in cash, thereby increasing its ownership to
approximately 55% of the total Keebler shares outstanding.
The Company has a leading presence in each of the major product categories
in which it competes. Flowers Bakeries' fresh baked branded bread and roll sales
rank first in ten of its 15 major metropolitan markets and second in its
remaining five such markets, and its Nature's Own brand is the number one volume
brand of wheat/variety bread in the country despite being marketed solely in the
super-regional 19 state area in and surrounding the southeastern United States.
Mrs. Smith's Bakeries is one of the leading frozen baked dessert producers and
marketers in the United States, and its Mrs. Smith's pies are the leading
national brand of frozen pies sold at retail. Keebler is the number two producer
and marketer of branded cookies and crackers, the number one producer and
marketer of private label cookies and the number one producer and marketer of
cookies and crackers for the foodservice market. The Company's major branded
products include, among others, the following:
<TABLE>
<CAPTION>
FLOWERS BAKERIES MRS. SMITH'S BAKERIES KEEBLER
FRESH BAKED PRODUCTS FRESH AND FROZEN BAKED PRODUCTS COOKIES AND CRACKERS
-------------------- ------------------------------- --------------------
<S> <C> <C>
Flowers Mrs. Smith's Keebler Brands:
Nature's Own Mrs. Smith's Restaurant Classics - Chips Deluxe
Whitewheat Mrs. Smith's Special Recipe - Pecan Sandies
Cobblestone Mill Mrs. Freshley's - Fudge Shoppe
Dandee Oregon Farms - Town House
Evangeline Maid European Bakers, Ltd. - Club
Betsy Ross Stilwell - Graham Selects
ButterKrust Our Special Touch - Wheatables
BlueBird Danish Kitchen - Zesta
Licensed Brands: Pour-A-Quiche Cheez-It
- - Sunbeam Carr's
- - Roman Meal Vienna Fingers
- - Country Hearth Hydrox
- - Bunny Sunshine Krispy
- - Holsum Hi-Ho
Ready Crust
</TABLE>
The Company is committed to being the low cost producer in all of its
operations and has made significant capital investments in recent years to
modernize, automate and expand its production and distribution capabilities.
Flowers has invested approximately $377 million over the past six years, of
which approximately $227 million was used to expand and modernize existing
production facilities for Flowers Bakeries, including the addition of twelve new
highly-automated production lines in nine facilities. The remaining
approximately $150 million was used primarily to build a state-of-the-art
distribution facility, and to add 13 highly-automated production lines in nine
facilities for Mrs. Smith's Bakeries. Since Flowers' initial investment in
Keebler in January 1996, Keebler has invested approximately $78 million to
streamline and rationalize its production operations in order to better support
its national DSD system.
In order to provide prompt and responsive service to consumers, the Company
tailors its distribution systems to the marketing and production aspects of its
major product lines. Flowers Bakeries distributes its fresh baked foods through
an extensive DSD system of approximately 3,100 independent distributors who, as
owners of their territories, are motivated to maintain and build shelf space and
to monitor product freshness, which is essential in the marketing of short shelf
life products such as fresh bread, rolls and buns. These distributors make an
aggregate of approximately 70,000 stops per day. Mrs. Smith's Bakeries' frozen
foods are
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distributed through its two strategically-located frozen distribution
facilities, as well as through additional commercial frozen warehouse space
throughout the United States, in order to accommodate inventory growth in
seasonal products and to provide staging to expedite distribution throughout the
year. Keebler's cookies and crackers are distributed through a DSD system
designed to maximize customer service and Keebler's control over the
availability and presentation of products. Keebler's DSD system employees
distribute products to approximately 30,000 retail locations, principally
supermarkets. Keebler is one of only two cookie and cracker companies that own
and operate a national DSD system.
INDUSTRY OVERVIEW
The United States baked foods industry is comprised of a number of distinct
product lines, including fresh baked foods (fresh breads, rolls and buns),
refrigerated and frozen baked foods (desserts, snacks, breads and doughs) and
cookies and crackers. Changes in consumer preferences have shifted food
purchases away from the traditional grocery store aisles for home preparation
and consumption, and toward home meal replacement purchases, either in
supermarkets' in-store deli/bakeries or in non-supermarket channels, such as
mass merchandisers, convenience stores, club stores, restaurants and other
convenience channels. Non-supermarket channels of distribution are becoming
increasingly important throughout the baked foods industry.
Fresh Baked Foods
In 1997, retail bread sales in the United States were approximately $5
billion, according to IRI, which tracks retail sales through scanner data in
United States grocery stores with annual revenue greater than $2.0 million. In
the last decade, retail sales of fresh breads have experienced modest growth,
with expansion within the category occurring primarily in a variety of premium
and specialty breads.
In addition to Flowers Bakeries, several large baking and diversified food
companies market fresh baked food products in the United States. Competitors in
this category include Interstate, Earthgrains, Bestfoods and Pepperidge Farm.
There are also a number of smaller, regional baking companies. The Company
believes that the larger companies enjoy several competitive advantages over
smaller operations due principally to economies of scale in areas such as
purchasing, production, advertising, marketing and distribution, as well as
through greater brand awareness.
A significant trend in the fresh baked foods industry over the last several
years has been the consolidation of smaller bakeries into larger baking
businesses. Consolidation, which has reduced industry capacity, continues to be
driven by factors such as capital constraints on smaller bakeries, which limit
their ability to avoid technological obsolescence, to increase productivity or
to develop new products, generational changes at family-owned businesses, and
the need to serve super-regional grocery store chains. The Company believes that
the consolidation trend in the fresh baked foods industry will continue to
present opportunities for strategic acquisitions that complement its existing
businesses and that extend its regional presence.
Frozen Baked Foods
The United States frozen and refrigerated baked foods industry, including
desserts, breads, rolls and doughs, had 1997 sales of approximately $7 billion,
according to estimates compiled for the February 1998 edition of Refrigerated
and Frozen Foods, an industry trade publication. While retail sales of frozen
baked desserts have declined by approximately 9% since 1992, sales of frozen
baked foods to other distribution channels, including restaurants and other
foodservice institutions, have grown significantly over the same period,
including a cumulative 23% increase in sales of foodservice desserts and a 50%
increase in sales at in-store deli/bakeries. Primary competitors in the frozen
baked desserts category include Pillsbury, Sara Lee, Rich Products, Edwards and
Pepperidge Farm.
Cookies and Crackers
The United States cookie and cracker industry had 1997 retail sales of
approximately $8.3 billion. Since 1992, consumption per person of cookies and
crackers in the United States has remained stable. The cookie
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<PAGE> 38
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 approximately 78% of 1996 retail sales in the
cookie and cracker industry with mass merchandisers, convenience stores, and
drug stores accounting for most of the balance. Since 1992, United States annual
dollar supermarket sales of cookies and crackers have increased an average of
1.5% per year.
Keebler and Nabisco are the two largest national participants in the cookie
and cracker industry. Keebler and Nabisco have a combined market share of
approximately 58%, with Keebler having approximately 24% and Nabisco having
approximately 34%. 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
The Company's strategy is to be the country's leading low-cost producer and
marketer of a full-line of branded fresh and frozen baked foods products on a
national and super-regional basis serving all possible customers through all
channels of distribution. Flowers Bakeries, Mrs. Smith's Bakeries and Keebler
each develop separate strategies based on the production, distribution and
marketing requirements of its particular baked foods category. The Company
employs the following five overall strategies:
- Strong Brand Recognition. The Company intends to capitalize on the
success of its well-recognized brand names, which communicate product
consistency and high quality, through extending those brand names to
additional products and categories. Among other strategies, the Company
will continue to extend the Mrs. Smith's brand to additional frozen baked
products, expand the use of the Cheez-It brand name and develop new
products under the Keebler brand name. Many of the Company's products,
including its Nature's Own bread, Mrs. Smith's retail frozen baked pies
and Cheez-It snack crackers, are the top-selling brands in their
categories. Flowers Bakeries' fresh baked branded bread and roll sales
rank first in ten of its 15 major metropolitan markets and second in its
remaining five such markets. Keebler brand cookies rank second overall in
the United States, with eight of the 25 best-selling cookies and ten of
the 25 best-selling crackers in the United States based on dollar sales.
- State-of-the-Art Production and Distribution Facilities. The Company
intends to maintain a continuing level of capital improvements that, while
lower than its level of capital improvements in recent years, will permit
the Company to fulfill its commitment to remaining among the most modern
and efficient baked foods producers in the United States. Toward this
goal, Flowers has invested approximately $377 million in Flowers Bakeries
and Mrs. Smith's Bakeries in the six-year period ended June 28, 1997 to
build several modern and highly efficient production facilities and a
state-of-the-art distribution facility, as well as to automate and
modernize its existing facilities. Since Flowers' initial investment in
Keebler in January 1996, Keebler has spent approximately $78 million to
keep its production operations modern and efficient and has lowered its
operating costs by closing plants, consolidating production and reducing
overhead.
- Efficient and Customer Service-Oriented Distribution. The Company
intends to expand and refine its distribution systems to allow it to
respond quickly and efficiently to changing customer service needs,
consumer preferences and seasonal demands. In the last decade, the Company
has developed distribution systems that are tailored to the nature of each
of its three baked food product categories and are designed to provide the
highest levels of service to the Company's retail and foodservice outlets.
Flowers Bakeries has developed a DSD network of approximately 3,100
independent distributors for its fresh baked products, who make an
aggregate of approximately 70,000 stops per day. Mrs. Smith's Bakeries
operates a network of strategically located storage and distribution
facilities for its frozen baked products and a centralized distribution
facility for its fresh baked snack products. Keebler operates its own
national DSD system for its cookie and cracker products, enabling it to
provide frequent service to over 30,000 retail outlets.
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<PAGE> 39
- Broad Range of Products and Sales Channels. In recognition that
consumers are increasingly seeking home meal replacements and other
convenience food products, the Company intends to continue to emphasize
expansion of its product lines and sales channels to meet those
preferences. The Company's product lines now include virtually every
category of breads, buns, rolls and baked foods, including fresh bread,
buns, rolls, cakes and other baked snacks and frozen desserts, as well as
cookies and crackers. These products generally can be found anywhere baked
foods are sold, including traditional supermarkets and their in-store
deli/bakeries, convenience stores, mass merchandisers, club stores,
wholesalers, restaurants, fast food outlets, schools, hospitals and
vending machines. The Company intends to continue to increase its focus on
non-supermarket channels, such as restaurants, mass merchandisers and
convenience stores.
- Strategic Acquisitions. The Company intends to continue to pursue growth
through strategic acquisitions and investments that will complement and
expand its existing markets, product lines and product categories. The
Company has consistently pursued growth in sales, geographic markets and
products through strategic acquisitions and has completed over 75
acquisitions in 30 years. Most recently, Flowers continued its regional
expansion in fresh baked foods with its January 1998 acquisition of
Franklin Baking Company, a regional bakery based in North Carolina. The
Company expanded its frozen baked foods product line with the 1996
acquisition of Mrs. Smith's, Inc. and the well-recognized Mrs. Smith's
national brand. In February 1998, the Company obtained a controlling
interest in Keebler, the second largest cookie and cracker manufacturer in
the United States.
PRODUCTS
The Company produces baked foods in three product lines: fresh baked foods,
frozen baked foods and cookies and crackers.
Fresh Baked Foods -- Flowers Bakeries
In 1997, Flowers Bakeries was the leading producer of fresh baked foods in
ten of its major markets and second in five of its major markets and was
developing its presence in the other markets it has recently entered. The
Company's fresh baked foods market includes 19 states in the eastern,
southeastern and south central United States.
The Company markets its fresh soft variety and white breads under numerous
brand names, including Flowers, Nature's Own, Whitewheat, Cobblestone Mill,
Dandee, Evangeline Maid, Betsy Ross, ButterKrust and Purity, among others.
Within licensed geographic territories, the Company also markets fresh bread
under the Sunbeam, Roman Meal, Country Hearth, Bunny and Holsum trademarks.
Nature's Own is the best selling brand by volume of soft variety bread in the
United States, despite being marketed solely in the 19 state super-region in and
surrounding the southeastern United States. Rolls and buns are marketed under
the Cobblestone Mill, European Bakers, Ltd., Breads International and other
brand names. Flowers Bakeries has used its strong brand recognition to expand to
new product lines, such as the successful introduction of Cobblestone Mill
Breakfast Breads. Fresh baked snack cakes, doughnuts, pastries and other sweet
snacks are sold primarily under the BlueBird brand, as well as ButterKrust,
Sunbeam, and Holsum.
In addition to its branded products, Flowers Bakeries also packages baked
foods under private labels for such retailers as Winn-Dixie. While private label
products carry lower margins than its branded products, Flowers Bakeries is able
to use its private label offerings to expand its total shelf space and to
effectively maximize capacity utilization.
The Company also supplies numerous restaurants, institutions and
foodservice companies with fresh bread products, including Burger King, Krystal,
Arby's, Outback Steakhouse, Olive Garden, Dairy Queen and Chili's. In May 1995,
the Company became a preferred supplier to Burger King and currently supplies
baked products to approximately 1,700 Burger King restaurants in the Southeast.
The Company also sells fresh baked products to wholesale distributors for
ultimate sale to a wide variety of food outlets.
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Frozen Baked Foods -- Mrs. Smith's Bakeries
Mrs. Smith's Bakeries and Sara Lee each have an approximate 25% market
share of the frozen baked dessert market, representing the two largest shares of
that market. Mrs. Smith's frozen baked pies were the number one retail frozen
brand pies in the U.S. for 1997 with an approximate 53% market share, according
to IRI. The Company's frozen baked foods are marketed throughout the United
States, and, based on consumer surveys commissioned by the Company, Mrs. Smith's
enjoys a 94% brand awareness in United States households.
The Company's frozen pies, cakes, cobblers and other baked desserts are
sold under the Mrs. Smith's, Mrs. Smith's Restaurant Classics, Mrs. Smith's
Special Recipe, Oregon Farms and Stilwell brand names in the frozen foods
sections of supermarkets, as are the Company's frozen pie shells, mixed fruits
and quiche fillings. The Company has also introduced a line of frozen baked
desserts and cobblers that feature low fat crusts and no-sugar-added fruit
fillings. The Company's frozen baked products also include specialty baked and
parbaked (partially baked) breads, buns, and rolls marketed under the European
Bakers, Ltd. and Our Special Touch brands, which are sold at retail. The Company
also co-packs these and other fresh bakery snack food products on behalf of
other industry participants who sell these products under their own proprietary
brand names.
The Company produces frozen pies, cakes and desserts as well as bread,
rolls and buns for sale to foodservice customers and wholesalers, such as Sysco,
and markets fresh and frozen hearth-baked specialty bread, breadsticks and rolls
to chain restaurants such as Outback Steakhouse and Olive Garden.
Traditionally, frozen pie sales are heavily concentrated throughout the
year-end holiday season. The Company has recently launched "Operation 365," a
strategy aimed at significantly expanding non-seasonal sales in the frozen baked
product line by introducing new products under the Mrs. Smith's brand, thereby
extending the well-recognized Mrs. Smith's brand name to existing and related
products. The Company's newest introduction is Mrs. Smith's Restaurant Classics,
which are frozen premium, restaurant-quality cream pies sold at retail.
Mrs. Smith's Bakeries also produces fresh baked snack products under the
Mrs. Freshley's brand, such as donuts, honeybuns, cream horns, pecan spins,
jelly rolls and cinnamon buns for sale as single packs in vending machines and
in multi-packs marketed through grocery stores and mass merchandisers as center
aisle promotions. In addition, Mrs. Smith's Bakeries sells these same products
to Flowers, which distributes them under its BlueBird brand. Mrs. Smith's
Bakeries produces fresh baked snack foods at some of its production facilities
in order to maximize the use of capacity.
Cookies and Crackers -- Keebler
Keebler is the second largest cookie and cracker producer in the United
States with annual net sales of approximately $2.1 billion and an approximate
24% share of the United States cookie and cracker market. In the United States,
Keebler is the number two producer and marketer of branded cookies and crackers,
the number one producer of private label cookies and the number one producer of
cookies and crackers for the foodservice market. Keebler produces eight of the
25 best-selling cookies and ten of the 25 best-selling crackers in the United
States based on dollar sales. Keebler's branded cookie and cracker products
include, among others, Chips Deluxe cookies, Pecan Sandies cookies, Fudge Shoppe
cookies, Town House crackers, Club crackers, Graham Selects crackers, Wheatables
crackers, Zesta crackers, Cheez-It crackers, Cheez-It party mix, Nacho Cheez-It
crackers, Carr's biscuits, Vienna Fingers cookies, Hydrox cookies, Sunshine
Krispy crackers and Hi-Ho crackers. In addition, Keebler is the number one
producer and marketer of retail branded ice cream cones in the United States,
and a major producer of retail branded pie crusts. Keebler also produces
custom-baked products, such as Nutri-Grain breakfast bars, for other marketers
of branded food products, and private label cookies and crackers to be sold by
retailers under their own brands.
MANUFACTURING AND DISTRIBUTION
The Company designs its production facilities and distribution systems to
meet the marketing and production demands of its major product lines. Through a
significant program of capital improvements and
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careful planning of plant locations, which, among other things, allows the
Company to establish reciprocal baking arrangements among its bakeries, the
Company seeks to remain the country's leading low cost producer and marketer of
branded fresh and frozen baked products on a national and super-regional basis
and to provide the highest quality customer service. In addition to the
independent distributor system for its fresh baked products and the DSD system
used for Keebler, the Company also uses both owned and public warehouses and
distribution centers in central locations for the distribution of certain of its
frozen and other shelf stable products.
Fresh Baked Foods -- Flowers Bakeries
Flowers owns and operates 27 fresh bread and bun bakeries in 10 states.
Flowers has invested approximately $227 million over the past six years,
primarily to build new state-of-the-art baking facilities and to significantly
upgrade existing facilities. During this period, Flowers has added twelve new
highly-automated production lines in nine of its facilities. The Company
believes that these investments, undertaken at a time when many competitors were
minimizing capital improvements due to leverage or earnings pressure, have made
Flowers the most efficient major producer of fresh baked foods in the United
States. Flowers believes that its capital investment yields long-term benefits
in the form of more consistent product quality, highly sanitary processes, and
greater production volume at a lower cost per unit. While its major capital
improvement program is largely complete, Flowers intends to continue to invest
in its plant and equipment to maintain the highest levels of efficiency.
Distribution of fresh baked foods involves determining appropriate order
levels, delivering the product from the plant to the customer, stocking the
product on the shelves, visiting the customer one to three times daily to ensure
that inventory levels remain adequate, and removing stale goods. In 1986,
Flowers Bakeries began converting its bakery sales routes from employees
operating company-owned vehicles to a DSD system of exclusive independent
distributors. The Company effected this change by selling its sales routes
primarily to its sales employees. The Company initially financed these purchases
over ten years, which obligations were sold to a financial institution in 1996.
Currently, all distributor purchase arrangements are made directly with a
financial institution, and, pursuant to an agreement, the Company manages and
services these arrangements.
The distributors lease hand-held computers from the Company, which contain
software proprietary to the Company. The software permits distributors to track
and communicate inventory data to the production facilities and to calculate
recommended order levels based on historical sales data and recent trends. These
orders are electronically transmitted to the appropriate production facility on
a nightly basis. This system, which management believes is more sophisticated
than comparable tracking programs currently used in the industry, is designed to
ensure that adequate product, and the right mix of products, are available to
meet the retail and foodservice customer's immediate needs. Management believes
the system minimizes returns of unsold goods. In addition to the hand-held
distributor units, the Company's main computer system permits tracking of sales,
product returns and profitability by customer location, plant, day and other
bases. Managers receive sales and profitability reports on a weekly basis,
allowing prompt operational adjustments when appropriate.
Management believes that the Company's independent distributor system is
unique in the industry as to its size, with approximately 3,100 distributors,
and with respect to its super-regional scope. In Flowers Bakeries' DSD system,
an aggregate of over 70,000 stops are made each day. The program is designed to
provide the Company's retailers with superior service because distributors,
highly motivated by route ownership, strive to increase sales by maximizing
service. In turn, distributors have the opportunity to benefit directly from the
enhanced value of their routes resulting from higher sales volume.
Frozen Baked Foods -- Mrs. Smith's Bakeries
Mrs. Smith's Bakeries operates 13 production facilities with 67 production
lines for its pies, cakes, breads, rolls and snack foods. The Company maintains
maximum operating efficiency by producing high volume fresh snack products on
long runs to complement its branded frozen baked products, sales of which are
seasonal in nature. In the past six years, the Company has invested
approximately $150 million to upgrade its frozen
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baked foods production and distribution facilities, primarily by adding 13
highly-automated production lines in nine facilities and to construct its
225,000 square foot highly-automated frozen distribution facility in Suwanee,
Georgia. In addition, Mrs. Smith's Bakeries is nearing completion of
installation of the SAP/R3 operating system, which the Company believes will
provide it with competitive advantages in inventory tracking and distribution.
The Company plans to invest approximately $40 million over fiscal 1998 and 1999
in renovations to improve efficiencies at several of its frozen food bakeries.
Mrs. Smith's Bakeries' distribution facilities are strategically located
near its production facilities to simplify distribution logistics and shorten
delivery times. The plant in Stilwell, Oklahoma is an efficient facility which
serves as a principal point of distribution for the Company's products
throughout the central, southwestern and western United States. The
state-of-the-art Suwanee distribution facility is located on a major interstate
corridor near four of Mrs. Smith's Bakeries' frozen dessert production
facilities. This facility opened in 1995 and contains such innovations as five
78-foot tall, laser-guided cranes specifically designed for the facility, a six
million cubic foot freezer, and computer-controlled bar-coding and inventorying.
The automation of this facility enables Mrs. Smith's Bakeries to move extremely
large volumes of product without a significant labor component and enables the
facility to operate with extremely cold temperatures that preserve high product
quality. In addition to cost efficiencies, these features allow the Suwanee
facility to better serve customers by processing customer orders much more
quickly than conventional freezer facilities. This facility's frozen storage
capacity will be expanded in 1998 and production capacity is intended to be
added on-site to expand Mrs. Smith's Bakeries' production capacity and to
enhance operating efficiencies by having contiguous production and frozen
storage.
In addition to Mrs. Smith's Bakeries' two strategically-located freezer and
distribution facilities in Suwanee and Stilwell, the Company leases additional
freezer and distribution facilities on the West Coast to facilitate distribution
of its products nationwide. These owned and leased facilities allow the Company
to build and store necessary inventory in seasonal products, and to expedite the
national distribution of both its seasonal and non-seasonal products.
Mrs. Smith's Bakeries distributes its fresh baked snack products from a
centralized distribution facility located near Knoxville, Tennessee. Centralized
distribution allows the Company to achieve both production and distributing
efficiencies. The production facilities are able to operate longer, more
efficient production runs of a single product, which are then shipped to the
centralized distribution facility. Products coming from different production
facilities are then cross-docked and shipped directly to customer warehouses.
Cookies and Crackers -- Keebler
Keebler attempts to meet the changing demands of its customers by planning
appropriate stock levels and optimal delivery times. To achieve these
objectives, Keebler has developed a network of modern and efficient production
facilities with contiguous or strategically located shipping centers and
distribution warehouses. Keebler owns and operates eleven production facilities
located throughout the United States. 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 production facilities, nine separate
shipping centers (two owned and seven leased) and 67 distribution centers
(twelve owned and 55 leased, 14 of which are idle or subleased) throughout the
United States. Keebler also leases 30 warehouses and 17 depots that are located
throughout the United States and are utilized by the sales force in the
distribution of Keebler's products.
Keebler directly services approximately 30,000 retail customers 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,
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the frequent store presence of Keebler's sales force also 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 uses its DSD distribution system exclusively to serve supermarkets
and mass merchandisers. In the case of club stores and foodservice distributors,
Keebler uses a dedicated sales force and ships its products directly to the
customers' warehouses. Convenience stores and vending distributors are served
using a network of independent distributors.
CUSTOMERS
Fresh Baked Foods -- Flowers Bakeries
The Company's fresh baked foods have a highly diversified customer base,
which includes grocery retailers, restaurants, fast-food chains, food
wholesalers, institutions, and vending companies. Flowers Bakeries also sells
returned and surplus product through a system of independently operated thrift
outlets.
The Company also supplies numerous restaurants, institutions and
foodservice companies with fresh bread products, including buns for fast-food
outlets such as Burger King, Krystal, Arby's, Outback Steakhouse, Olive Garden,
Dairy Queen and Chili's. In May 1995, the Company became a preferred supplier to
Burger King and currently supplies baked products to approximately 1,700 Burger
King restaurants in the Southeast. The Company also sells fresh baked products
to wholesale distributors such as Sysco for ultimate sale to a wide variety of
food outlets. Winn-Dixie is Flowers Bakeries' largest customer for fresh baked
foods.
Frozen Baked Foods -- Mrs. Smith's Bakeries
The Company's frozen baked foods are marketed to traditional retail
outlets, such as grocery stores, as well as non-traditional outlets, ranging
from club stores and mass merchandisers to wholesalers, foodservice distributors
and restaurants. Mrs. Smith's Bakeries' branded frozen baked desserts are sold
primarily through grocery retailers. Its non-branded frozen baked desserts and
specialty breads and rolls are sold to foodservice distributors, such as Sysco,
institutions, retail in-store bakeries and restaurants, including Olive Garden
and Outback Steakhouse. Its fresh baked snack products under the Mrs. Freshley's
brand are sold primarily through vending outlets. Mrs. Smith's Bakeries is in
the second year of a long-term exclusive contract with a major food wholesaler
to supply non-branded frozen premium pies.
To fully utilize capacity in its facilities, Mrs. Smith's Bakeries produces
fresh baked snack products for its own distribution under the Mrs. Freshley's
brand and for Flowers Bakeries, which markets these products under its BlueBird
brand. The Company, in certain circumstances, enters into co-packing
arrangements with some of its competitors. Through co-packing, the Company
produces and packages baked foods for popular brands such as Weight Watchers,
Stouffer, Lance, Pepperidge Farm and Little Debbie.
Cookies and Crackers -- Keebler
Keebler sells its retail branded cookies and crackers through supermarkets,
mass merchandisers, convenience stores, drug stores and club stores to over
30,000 retail customers and manufactures private label products to be sold by
retailers under their own brands. In addition, Keebler supplies cookies and
crackers and ice cream cones for foodservice markets and produces ice cream
cones for various restaurants and ice cream retailers, such as McDonald's and
TCBY. Keebler also produces a variety of custom-baked products for other
marketers of branded food products, such as Kellogg, Oscar Mayer, Starkist,
Kraft, Gerber and McDonald's. No single customer accounted for more than 5% of
Keebler's net sales.
COMPETITION
Fresh Baked Foods -- Flowers Bakeries
The United States fresh baked foods segment is intensely competitive and is
comprised of large food companies, large independent bakeries with national
distribution, and smaller regional and local bakeries. Primary national
competitors include Interstate, Earthgrains, Bestfoods and Pepperidge Farm.
Competition is
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based on product quality, brand loyalty, price effective promotions and the
ability to target changing consumer preferences. Customer service, including
frequent delivery and well-stocked shelves, is an increasingly important
competitive factor. While the Company experiences price pressure from time to
time, primarily as a result of competitors' promotional efforts, the Company
believes that its status as the low cost producer and consumer brand loyalty, as
well as the Company's diversity within its region in terms of geographic
markets, products, and sales channels, limit the effects of such competition.
Recent consolidation in the baked foods industry has reduced prior excess
capacity and has further enhanced the ability of the larger firms to compete
with small regional bakeries. The Company believes that it enjoys significant
competitive advantages over smaller regional bakeries due to economies of scale
in areas such as purchasing, production, advertising, marketing and
distribution, and its lower production costs.
Frozen Baked Foods -- Mrs. Smith's Bakeries
According to Refrigerated and Frozen Foods, an industry trade publication,
the frozen baked foods industry is led by Pillsbury, Sara Lee, and Mrs. Smith's
Bakeries, which together account for approximately 46% of sales volume in the
broad category. Other significant competitors in the frozen baked dessert
category include Rich Products, Edwards and Pepperidge Farm. According to IRI,
Mrs. Smith's Bakeries had an approximate 53% market share, the number one
position, for retail branded frozen pies in 1997. Competitors for the Mrs.
Freshley's brand products produced by Mrs. Smith's Bakeries include Interstate
(Hostess) and McKee (Little Debbie). Mrs. Freshley's is the country's number
three fresh pastry brand sold through vending machines.
Competition for branded frozen baked products depends primarily on brand
recognition and loyalty, perceived product quality, effective promotions and, to
a lesser extent, price. Based on consumer surveys obtained by the Company, Mrs.
Smith's has an approximate 94% brand awareness in United States households. For
the nonbranded products manufactured by Mrs. Smith's Bakeries, competition is
based upon high-quality products requested by foodservice customers, excellent
service and price.
Cookies and Crackers -- Keebler
The United States branded cookie and cracker industry is led by Keebler and
Nabisco, which together account for approximately 58% of total sales volume.
Keebler has an approximate 24% share of the retail cookie and cracker market,
while Nabisco, the largest manufacturer in the United States cookie and cracker
industry, has an approximate 34% share. The remaining industry participants
primarily target certain segments of the industry or focus on certain regions of
the United States. 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 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.
INTELLECTUAL PROPERTY
The Company owns a number of trademarks and trade names, as well as certain
patents and licenses. Flowers Bakeries' principal brand names include Flowers,
Nature's Own, Whitewheat, Cobblestone Mill, Dandee, Evangeline Maid, Betsy Ross,
ButterKrust, Purity, and BlueBird, among others, and its licensed trademarks
include Sunbeam, Roman Meal, Country Hearth, Bunny and Holsum. Mrs. Smith's
Bakeries' principal brand names are Mrs. Smith's, Mrs. Smith's Restaurant
Classics, Mrs. Smith's Special Recipe, Stilwell, Oregon Farms, European Bakers,
Ltd., Our Special Touch, Mrs. Freshley's, Danish Kitchen and Pour-a-Quiche.
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, Pecan
Sandies, Soft Batch, Sunshine, Toasteds, Town House, Vienna Fingers, Wheatables,
and Zesta. Keebler is the exclusive licensee of the Carr's crackers brand name
in the United States. Such trademarks and trade names are considered to be
important to the business of the Company since they have the effect of
developing brand identification and maintaining consumer loyalty.
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Management is not aware of any fact that would negatively impact the continuing
use of any of its trademarks, trade names, patents or licenses.
RAW MATERIALS
The Company's primary baking ingredients are flour, sugar, shortening and
fruit. The Company also uses paper products, such as corrugated cardboard,
aluminum products, such as pie plates, and films and plastics to package its
baked foods. In addition, the Company is also dependent upon natural gas and
propane as a fuel for firing ovens. On average, baking ingredients constitute
approximately 10% to 15%, and packaging represents approximately 1% to 5%, of
the wholesale selling price of the Company's baked foods. The Company maintains
diversified sources for all of its baking ingredients and packaging products.
Commodities, such as the Company's baking ingredients, periodically
experience price fluctuations and, for that reason, the market for these
commodities is continuously monitored. From time to time, the Company enters
into forward purchase agreements and derivative financial instruments to reduce
the impact of volatility in raw materials prices.
REGULATION
As a producer and marketer of food items, the Company's operations are
subject to regulation by various federal governmental 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 the Company's businesses is subject to
regulation by the FTC, and the Company is subject to certain health and safety
regulations, including those issued under the Occupational Safety and Health
Act.
The operations of the Company, like those of similar businesses, are
subject to various Federal, state, and local laws and regulations with respect
to environmental matters, including air and water quality, underground fuel
storage tanks, and other regulations intended to protect public health and the
environment. The operations and the products of the Company's businesses also
are subject to state and local regulation through such measures as licensing of
plants, enforcement by state health agencies of various state standards and
inspection of the facilities. The Company believes that it is currently in
material compliance with applicable laws and regulations.
EMPLOYEES
Flowers employs approximately 7,200 persons, approximately 1,000 of whom
are covered by collective bargaining agreements. Keebler employs approximately
9,700 persons, of whom approximately 5,300 are covered by collective bargaining
agreements. The Company believes that it has good relations with its employees.
EXECUTIVE OFFICES
The address and telephone number of the principal executive offices of the
Company are 1919 Flowers Circle, Thomasville, Georgia 31757, (912) 226-9110.
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MANAGEMENT
The following individuals are the Directors and Executive Officers of the
Company:
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Amos R. McMullian.................................... Chairman of the Board and Chief
Executive Officer
Robert P. Crozer..................................... Vice Chairman of the Board
C. Martin Wood III................................... Senior Vice President, Chief Financial
Officer and Director
G. Anthony Campbell.................................. Secretary, General Counsel and
Director
Edward L. Baker...................................... Director
Joe E. Beverly....................................... Director
Franklin L. Burke.................................... Director
Langdon S. Flowers................................... Director
Joseph L. Lanier, Jr................................. Director
J.V. Shields, Jr..................................... Director
Heeth Varnedoe III................................... Director
George E. Deese...................................... President and Chief Operating Officer,
Flowers Bakeries, Inc.
Gary L. Harrison..................................... President and Chief Operating Officer,
Mrs. Smith's Bakeries, Inc.
Jimmy M. Woodward.................................... Treasurer and Chief Accounting Officer
Marta Jones Turner................................... Vice President of Public Affairs
</TABLE>
Amos R. McMullian, age 60, has served as Chairman of the Board of Directors
of the Company since January 1985, Chairman of the Executive Committee since
January 1984, and Chief Executive Officer of the Company since April 1981. He
served as Vice Chairman of the Board of Directors of the Company from 1984 to
1985 and Co-Chairman of the Executive Committee from 1983 to 1984. Mr. McMullian
served as President and Chief Operating Officer of the Company from 1976 to
1984. Mr. McMullian has been a Director of the Company since 1975. He joined the
Company's predecessor corporation in 1963. Mr. McMullian has served as a
director of Keebler since January 1996.
Robert P. Crozer, age 51, has served as Vice Chairman of the Board of
Directors of the Company since 1989. Mr. Crozer served as Vice
President -- Marketing from 1985 to 1989, as President and Chief Operating
Officer, Convenience Products Group from 1979 to 1989 and as Corporate Director
of Marketing Planning from 1979 to 1985. Mr. Crozer has been a Director of the
Company since 1979. He joined the Company in 1973. Mr. Crozer has served as a
director of Keebler since January 1996 and has served as Chairman of the Board
of Directors of Keebler since February 1998.
C. Martin Wood III, age 54, has served as Senior Vice President and Chief
Financial Officer of the Company since September 1978. Mr. Wood served as Vice
President -- Finance of the Company from 1976 to 1978. Mr. Wood has been a
Director of the Company since 1975. He joined the Company in 1970. Mr. Wood has
served as a director of Keebler since January 1996.
G. Anthony Campbell, age 45, has served as Secretary and General Counsel of
the Company since January 1985. Mr. Campbell served as Assistant General Counsel
of the Company from 1983 to 1985. Mr. Campbell has been a Director of the
Company since 1991. He joined the Company in 1983. Mr. Campbell has served as a
director of Keebler since February 1998.
Edward L. Baker, age 62, is Chairman of the Board of Florida Rock
Industries, Inc. (AMEX), a construction materials company based in Jacksonville,
Florida, which produces and markets sand, gravel, crushed stone, concrete blocks
and other building materials throughout the Southeast. He is also a Director of
American Heritage Life Insurance Company, the principal subsidiary of American
Heritage Life Investment Corporation (NYSE), Regency Realty Corporation (NYSE),
and FRP Properties (OTC). He has been a Director of the Company since 1992.
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Joe E. Beverly, age 56, is Chairman of the Board of Commercial Bank in
Thomasville, Georgia, a wholly-owned subsidiary of Synovus Financial Corp.
(NYSE) and is the former Vice Chairman of the Board of Synovus Financial Corp.
He was President and a Director of Commercial Bank from 1973 to 1989. Mr.
Beverly has been a Director of the Company since 1996.
Franklin L. Burke, age 56, a private investor since 1991, is the former
Senior Executive Vice President and Chief Operating Officer of Bank South Corp.
(OTC), Atlanta, Georgia, and the former Chairman and Chief Executive Officer of
Bank South, N.A., the principal subsidiary of Bank South Corp. From June 1993
through February 1994, Mr. Burke was employed as an advisor by the J. B. Fuqua
Foundation, Inc. He has been a Director of the Company since 1994. Mr. Burke has
served as a director of Keebler since February 1998.
Langdon S. Flowers, age 75, retired as Chairman of the Board of Directors
of the Company in 1985. He has been a Director of the Company since 1968. Mr.
Flowers also is a Director of American Heritage Life Insurance Company, the
principal subsidiary of American Heritage Life Investment Corporation (NYSE).
Joseph L. Lanier, Jr., age 66, has been Chairman of the Board of Directors
and Chief Executive Officer of Dan River Inc. (NYSE), Danville, Virginia, a
textile company, since 1989. He is also a Director of Dimon, Inc. (NYSE),
SunTrust Banks, Inc. (NYSE), Torchmark Corp. (NYSE) and Waddell & Reed
Financial, Inc. (NYSE). Mr. Lanier has been a Director of the Company since
1977.
J.V. Shields, Jr., age 59, is Managing Director and Chairman of the Board
of Directors of Shields & Company, New York, New York, a diversified financial
services company and member of the New York Stock Exchange, Inc. Mr. Shields
also is the Chairman of the Board of Capital Management Associates, Inc., a
registered investment advisor, and the Chairman of the Board of Trustees of The
59 Wall Street Trust, the Brown Brothers Harriman mutual funds group. He has
been a Director of the Company since 1989.
Heeth Varnedoe III, age 60, who joined the Company's predecessor
corporation in 1960, retired from the office of President and Chief Operating
Officer on June 28, 1997. Mr. Varnedoe is currently employed as a consultant by
the Company and serves on the Company's Board of Directors, to which he was
first elected in 1980. Mr. Varnedoe also is a Director of Integrity Music, Inc.
(OTC).
George E. Deese, age 51, has served as President and Chief Operating
Officer of Flowers Bakeries, Inc. since January 1997. Prior to that time, Mr.
Deese served as President and Chief Operating Officer of the Baked Products
Group of the Company from 1983 to January 1997. He served as Regional Vice
President of the Baked Products Group from 1981 to 1983. Mr. Deese was President
of Atlanta Baking Company from 1980 to 1981. He joined the Company in 1964.
Gary L. Harrison, age 60, has served as President and Chief Operating
Officer of Mrs. Smith's Bakeries, Inc., since January 1997. Prior to that time,
Mr. Harrison served as President and Chief Operating Officer of the Specialty
Foods Group of the Company from 1989 to January 1997, served as Executive Vice
President of the Baked Products Group from 1987 to 1989, served as Regional Vice
President of the Baked Products Group from 1977 to 1987, and served as President
of Flowers Baking Company of Thomasville from 1976 to 1977. He joined the
Company in 1954.
Jimmy M. Woodward, age 37, has served as Treasurer and Chief Accounting
Officer of the Company since October 1997. Mr. Woodward served as Assistant
Treasurer of the Company for more than five years prior to that time. Mr.
Woodward has served as a director of Keebler since February 1998.
Marta Jones Turner, age 44, has served as Vice President of Public Affairs
of the Company since September 1997. She served as the Director of Corporate
Communications of the Company for more than five years prior to that time.
Heeth Varnedoe III is a nephew of Langdon S. Flowers. Robert P. Crozer,
J.V. Shields, Jr. and C. Martin Wood III are brothers-in-law, and their spouses
are nieces of Langdon S. Flowers.
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<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
The following discussion of the Company's Articles, Bylaws and Georgia law
is qualified in its entirety by the actual terms of such documents and Georgia
law. Copies of the Company's Articles and Bylaws have been filed with the
Commission as exhibits to the Registration Statement.
The Company's Articles provide that the authorized capital of the Company
consists of 350,000,000 shares of Common Stock of $.625 par value per share,
10,467 shares of preferred stock, par value $100 per share convertible into
Common Stock, and 249,533 shares of preferred stock, par value $100 per share
that, at the discretion of the Board of Directors, may be either convertible or
nonconvertible, of which 100,000 shares has been designated by the Board of
Directors as Series A Junior Participating Preferred Stock ("Series A Preferred
Stock").
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Subject to
preferential rights of any issued and outstanding preferred stock, including the
Series A Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors of
the Company out of funds legally available therefor. In the event of a
liquidation, dissolution or winding-up of the Company, holders of Common Stock
are entitled to share ratably in all assets of the Company, if any, remaining
after payment of liabilities and the liquidation preferences of any issued and
outstanding preferred stock, including the Series A Preferred Stock. Holders of
Common Stock have no preemptive rights, no cumulative voting rights and no
rights to convert their shares of Common Stock into any other securities of the
Company or any other person. The Common Stock is not subject to redemption or
sinking fund redemption.
PREFERRED STOCK
The Board of Directors of the Company has the authority to issue up to
249,533 shares of preferred stock in one or more series and to fix the
designations, relative powers, preferences, rights, qualifications, limitations
and restrictions of all shares of each such series, including without
limitation, dividend rates, conversion rights, voting rights, redemption and
sinking fund provisions, liquidation preferences and the number of shares
constituting each such series, without any further vote or action by the holders
of Common Stock. Pursuant to such authority, the Board of Directors has
designated 100,000 shares of preferred stock as Series A Preferred Stock in
connection with the adoption of the Company's Shareholders' Rights Plan. The
issuance of one or more series of preferred stock will likely decrease the
amount of earnings and assets available for distribution to holders of Common
Stock as dividends or upon liquidation, respectively, and may adversely affect
the rights and powers, including voting rights, of the holders of Common Stock.
The issuance of preferred stock also could have the effect of delaying,
deterring or preventing a change in control of the Company.
SHAREHOLDERS' RIGHTS PLAN
In March 1989, the Board of Directors adopted a Shareholders' Rights Plan
(the "Rights Plan") pursuant to a Rights Agreement dated as of March 17, 1989.
Pursuant to the Rights Plan, the Company declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of Common Stock to
the shareholders of record on April 3, 1989. Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A
Preferred Stock, par value $100, of the Company (the "Preferred Shares") at a
price of $75.00 per one one-thousandth of a Preferred Share (the "Purchase
Price"), subject to adjustment from time to time to prevent dilution in the
event of a stock dividend on, or a subdivision, combination or reclassification
of, the Preferred Shares, including any reclassification in connection with a
consolidation, merger or share exchange in which the Company is the continuing
or surviving corporation. The rights are not exercisable until the occurrence of
certain triggering events.
The Rights will become exercisable upon the earlier of (i) the tenth day
following a public announcement that an Acquiring Person (as defined in the
Rights Plan) acquired, or obtained the right to acquire, beneficial ownership of
10% or more of the outstanding Common Stock (the "Shares Acquisition Date"), or
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<PAGE> 49
(ii) the tenth day following the commencement or announcement of an intention to
make a tender or exchange offer the consummation of which would result in a
Person (other than the Company, any Subsidiary of the Company or any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Stock for or pursuant to the terms of such plan) becoming the
Beneficial Owner of 30% or more of such outstanding Common Stock (the earlier of
such dates being called the "Distribution Date").
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the close of business on April 2, 1999 (the "Final Expiration Date"),
unless earlier redeemed by the Company.
At any time prior to 5:00 p.m. on the earlier of (i) the tenth day
following the Shares Acquisition Date and (ii) the Final Expiration Date, the
Board of Directors of the Company may redeem the Rights in whole, but not in
part (the "Redemption Date"), at a price of $.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date of the Rights Agreement (the "Redemption Price");
provided, however, that the Board of Directors of the Company may redeem the
Rights after the time at which an Acquiring Person obtains beneficial ownership
of 10% or more of the outstanding Common Stock only if a majority of the
directors are Continuing Directors (as defined in the Rights Plan). Immediately
upon the action of the Board of Directors ordering redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
CERTAIN ARTICLES AND BYLAWS PROVISIONS
Certain provisions of the Company's Articles and Bylaws could discourage
potential acquisition proposals and could delay or prevent a change in control
of the Company. The Company's Articles require the affirmative vote of at least
sixty-six and two-thirds percent (66 2/3%) of its outstanding shares of Common
Stock to approve, among other matters: (i) any plan of merger, share exchange or
consolidation of the Company with another corporation; (ii) any sale, lease,
transfer, exchange or other disposition of all or substantially all of the
property and assets of the Company; or (iii) any dissolution of the Company,
unless recommended by a majority of the Continuing Directors (as therein
defined), in which event the vote required would be the affirmative vote of a
majority of the outstanding shares of Common Stock. The Company's Articles
provide for a classified board of directors with staggered three-year terms. The
Company has also adopted a Bylaw electing to be covered by the Fair Price
Requirements of the Georgia Business Corporation Code, which is designed to
protect shareholders against two-tier, front-end loaded transactions.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is Wachovia
Bank of North Carolina, N.A.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
GENERAL
The following is a general discussion of certain material United States
federal income and estate tax consequences of the ownership and disposition of
shares of Common Stock applicable to Non-U.S. Holders of such shares of Common
Stock. As used herein, the term "Non-U.S. Holder" means a beneficial owner other
than (i) an individual citizen or income tax resident, of the United States,
(ii) a corporation created or organized in or under the laws of the United
States or of any State thereof, (iii) an estate the income of which is subject
to United States federal income tax purposes regardless of its source, (iv) a
trust over which a court within the United States is able to exercise primary
supervision and as to which one or more United States persons have the authority
to control all the substantial decisions of trust, or (v) a partnership or other
entity created or organized in or under the laws of the United States or of any
State thereof and properly classified as a United States entity. The discussion
is based on current law, which is subject to change retroactively or
prospectively, and is for general information only. The discussion does not
address all aspects of United States federal income and estate taxation and does
not address any aspects of state, local or foreign tax laws. The
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<PAGE> 50
discussion does not consider any specific facts or circumstances that may apply
to a particular Non-U.S. Holder. Accordingly, prospective investors are urged to
consult their tax advisors regarding the current and possible future United
States federal, state, local and non-U.S. income and other tax consequences of
holding and disposing of shares of Common Stock.
DIVIDENDS
In the event that dividends are paid to a Non-U.S. Holder, such dividends
will be subject to United States withholding tax at a 30% rate (or a lower rate
as may be specified by an applicable tax treaty) unless the dividends are (i)
effectively connected with a trade or business carried on by the Non-U.S. Holder
within the United States or (ii) if a tax treaty applies, attributable to a
United States permanent establishment or, in the case of an individual, a fixed
base in the United States, maintained by the Non-U.S. Holder. Dividends
effectively connected with such a trade or business or, if a tax treaty applies,
attributable to such permanent establishment or fixed base will generally not be
subject to withholding (if the Non-U.S. Holder files certain forms as required
with the payor of the dividend) but generally will be subject to United States
federal income tax on a net income basis at regular graduated individual or
corporate rates. In the case of a Non-U.S. Holder that is a corporation, such
effectively connected income also may be subject to the branch profits tax
(which is generally imposed on a foreign corporation on the deemed repatriation
from the United States of effectively connected earnings and profits) at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
The branch profits tax may not apply if the recipient is a qualified resident of
certain countries with which the United States has an income tax treaty.
To determine the applicability of a tax treaty providing for a lower rate
of withholding, dividends paid to an address in a foreign country are currently
presumed to be paid to a resident of that country, unless the payor has definite
knowledge that such presumption is not warranted or an applicable tax treaty (or
United States Treasury Regulations thereunder) requires some other method for
determining a Non-U.S. Holder's residence. However, under recently finalized
United States Treasury Department Regulations, in the case of dividends paid
after December 31, 1999, a Non-U.S. Holder generally will be unable to claim the
benefits of a reduced rate under an income tax treaty, unless certain
certification procedures are complied with, directly or through an intermediary.
The Company 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, each Non-U.S.
Holder. These reporting requirements apply regardless of whether withholding was
reduced or eliminated by an applicable tax treaty. Copies of these information
returns also may be made available under the provisions of a specific treaty or
agreement with the tax authorities of the country in which the Non-U.S. Holder
resides.
A Non-U.S. Holder that is eligible for a reduced rate of United States
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the IRS.
SALE OF COMMON STOCK
Generally, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the sale or other disposition of such
holder's shares of Common Stock unless: (i) the gain is effectively connected
with a trade or business carried on by the Non-U.S. Holder within the United
States and, if a tax treaty applies, the gain is attributable to a permanent
establishment or a fixed base maintained by the Non-U.S. Holder in the United
States; (ii) the Non-U.S. Holder is an individual who holds the shares of Common
Stock as a capital asset and is present in the United States for 183 days or
more in the taxable year of the disposition, and either (a) such Non-U.S. Holder
has a "tax home" (as specifically defined for United States federal income tax
purposes) in the United States (unless the gain from disposition is attributable
to an office or other fixed place of business maintained by such non-U.S. Holder
in a foreign country and a foreign tax equal to at least 10% of such gain has
been paid to a foreign country), or (b) the gain from the disposition is
attributable to an office or other fixed place of business maintained by such
Non-U.S. Holder in the United States; (iii) the Non-U.S. Holder is subject to
tax pursuant to the provisions of United States tax law applicable to certain
United States expatriates; or (iv) the Company is or has been during certain
periods a "United States real property holding corporation" for United States
federal income tax purposes (which the
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<PAGE> 51
Company does not believe that is has been, currently is or is likely to become)
and, assuming that the Common Stock is deemed for tax purposes to be "regularly
traded on an established securities market," the Non-U.S. Holder held, at any
time during the five-year period ending on the date of disposition (or such
shorter period that such shares were held), directly or indirectly, more than
five percent of the Common Stock.
ESTATE TAX
Shares of Common Stock owned or treated as owned by an individual who is
not a citizen or resident (as specially defined for United States federal estate
tax purposes) of the United States at the time of death will be includible in
the individual's gross estate for United States federal estate tax purposes,
unless an applicable tax treaty provides otherwise, and may be subject to United
States federal estate tax.
BACKUP WITHHOLDING AND INFORMATION REPORTING
As a general rule, under current United States federal income tax law,
backup withholding tax (which generally is a withholding tax imposed at the rate
of 31% on certain payments to persons that fail to furnish the information
required under the United States information reporting requirements) and
information reporting requirements apply to the actual and constructive payment
of dividends. The United States backup withholding tax and information reporting
requirements generally, under current regulations, will not apply to dividends
paid on Common Stock to a Non-U.S. Holder at an address outside the United
States, unless the payor has knowledge that the payee is a United States person.
Backup withholding and information reporting generally will apply to dividends
paid on Common Stock to addresses inside the United States to beneficial owners
that are not entitled to an exemption, as discussed above and that fail to
provide in the manner required certain identifying information. However, under
recently finalized United States Treasury Regulations, in the case of dividends
paid after December 31, 1999, a Non-U.S. Holder generally will be subject to
backup withholding at a 31% rate, unless certain certification procedures (or,
in the case of payments made outside the United States with respect to an
offshore account, certain documentary evidence procedures) are complied with,
directly or through an intermediary.
The payment of the proceeds from the disposition of shares of Common Stock
to or through the United States office of a broker will be subject to
information reporting and backup withholding unless the holder, under penalties
of perjury, certifies, among other things, its status as a Non-U.S. Holder, or
otherwise establishes an exemption. Generally, the payment of the proceeds from
the disposition of shares of Common Stock to or through a non-U.S. office of a
non-U.S. broker will not be subject to backup withholding and will not be
subject to information reporting. In the case of the payment of proceeds from
the disposition of shares of Common Stock to or through a non-U.S. office of a
broker that is a United States person or a "U.S.-related person," United States
Treasury Regulations require (i) backup withholding if the broker has actual
knowledge that the owner is not a Non-U.S. Holder, and (ii) information
reporting on the payment unless the broker receives a statement from the owner,
signed under penalties of perjury, certifying, among other things, its status as
a Non-U.S. Holder, or the broker has documentary evidence in its files that the
owner is a Non-U.S. Holder and the broker has no actual knowledge to the
contrary. For this purpose, a "U.S.-related person" is (i) a "controlled foreign
corporation" for United States federal income tax purposes, (ii) a foreign
person 50% or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment (or for
such part of the period that the broker has been in existence) is derived from
activities that are effectively connected with the conduct of a United States
trade or business, or (iii) in the case of payments made after December 31,
1999, a foreign partnership with certain connections to the United States.
Backup withholding is not an additional tax. Any amounts withheld from a
payment to a Non-U.S. Holder under the backup withholding rules will be allowed
as a credit against such holder's United States federal income tax liability, if
any, provided that such holder files the required information or appropriate
claim for refund with the IRS.
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<PAGE> 52
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the U.S. Underwriters named below, for whom
Morgan Stanley & Co. Incorporated and SBC Warburg Dillon Read Inc. are acting as
U.S. Representatives, and the International Underwriters named below, for whom
Morgan Stanley & Co. International Limited and Swiss Bank Corporation, acting
through its division SBC Warburg Dillon Read, are acting as International
Representatives, have severally agreed to purchase, and the Company has agreed
to sell to them, the respective number of U.S. Shares (as defined below) set
forth opposite the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.........................
SBC Warburg Dillon Read Inc...............................
----------
Subtotal............................................. 8,000,000
----------
International Underwriters:
Morgan Stanley & Co. International Limited................
Swiss Bank Corporation, acting through its division
SBC Warburg Dillon Read................................
----------
Subtotal............................................. 2,000,000
----------
Total............................................. 10,000,000
==========
</TABLE>
The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby (other than those covered by the U.S.
Underwriters' over allotment option described below) if any such shares are
taken.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein); and (ii) it
has
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<PAGE> 53
not offered or sold, and will not offer to sell, directly or indirectly, any
Shares or distribute any prospectus relating to the Shares in the United States
or Canada or to anyone other than a United States or Canadian Person. Pursuant
to the Agreement between U.S. and International Underwriters, each International
Underwriter has represented and agreed that, with certain exceptions: (i) it is
not purchasing any Shares for the account of any United States or Canadian
Person; and (ii) it has not offered or sold, and will not offer or sell,
directly or indirectly, any Shares or distribute any prospectus relating to the
Shares in the United States or Canada or to any United States or Canadian
Person. With respect to any Underwriter that is a U.S. Underwriter and an
International Underwriter, the foregoing representations and agreements (i) made
by it in its capacity as a U.S. Underwriter apply to it only in its capacity as
a U.S. Underwriter and (ii) made by it in its capacity as an International
Underwriter apply to it only in its capacity as an International Underwriter.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement between U.S. and
International Underwriters. As used herein, "United States or Canadian Person"
means any national or resident of the United States or Canada, or any
corporation, pension, profit sharing or other trust or other entity organized
under the laws of the United States or Canada or of any political subdivision
thereof (other than a branch located outside the United States and Canada of any
United States or Canadian Person), and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person. All
shares of Common Stock to be purchased by the Underwriters under the
Underwriting Agreement are referred to herein as the "Shares."
Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares so sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per share
amount of the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
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 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 offering of the Shares to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.
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<PAGE> 54
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any of such Shares, directly or indirectly, in Japan or
to or for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other dealer to whom it sells any of such Shares a
notice containing substantially the same statement as is contained in this
sentence.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ per share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $ per share to other Underwriters or to certain other dealers. After
the initial offering of the shares of Common Stock, the offering price and other
selling terms may from time to time be varied by the Representatives.
The Company has granted to the U.S. Underwriters an option, exercisable for
30 days from the date of this Prospectus, to purchase up to an aggregate of
1,500,000 additional shares of Common Stock at the public offering price set
forth on the cover page hereof, less underwriting discounts and commissions. The
U.S. Underwriters may exercise such option to purchase solely for the purpose of
covering over-allotments, if any, incurred in the sale of the shares of Common
Stock offered hereby. To the extent such option is exercised, each U.S.
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such U.S. Underwriter's name in the preceding table bears to the
total number of shares of Common Stock set forth next to the names of all U.S.
Underwriters in the preceding table.
Each of the Company and the Company's officers and directors have agreed
that, without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the Underwriters, it will not, during the period ending 90 days after
the date of this Prospectus (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other agreement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The restrictions
described in this paragraph do not apply to (a) the shares of Common Stock
offered hereby, (b) the issuance by the Company of shares of Common Stock upon
the exercise of an option or warrant or the conversion of a security outstanding
on the date hereof, (c) any options granted or shares of Common Stock issued
pursuant to existing benefit plans of the Company, or (d) transactions by any
person other than the Company involving shares of Common Stock or other
securities acquired in open market transactions after completion of the offering
of the Common Stock.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
the Common Stock in the open market. Finally, the underwriting syndicate may
reclaim selling concessions allowed to an underwriter or a dealer for
distributing shares of the Common Stock in the Offering, if the syndicate
repurchases previously distributed Common Stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities
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<PAGE> 55
may stabilize or maintain the market price of the Common Stock above independent
market levels. The U.S. Underwriters are not required to engage in these
activities, and may end any of these activities at any time.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
From time to time, the Representatives have provided, and continue to
provide, investment banking services to the Company.
LEGAL MATTERS
The validity of the Shares of Common Stock offered hereby will be passed
upon for the Company by Jones, Day, Reavis & Pogue, Atlanta, Georgia, and for
the Underwriters by King & Spalding, Atlanta, Georgia.
EXPERTS
The consolidated financial statements of Flowers at January 3, 1998, June
28, 1997 and June 29, 1996 and for the 27 weeks ended January 3, 1998, and the
52 weeks ended June 28, 1997, June 29, 1996, and July 1, 1995, included in this
Prospectus and incorporated by reference herein from the Company's Transition
Report on Form 10-K for the transition period ended January 3, 1998 have been so
included and incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of Keebler (including its predecessor company) as
of and for the fiscal year ended January 3, 1998, the 48-week period ended
December 28, 1996, the four week period ended January 26, 1996, and the fiscal
year ended December 30, 1995, incorporated by reference in this Prospectus from
the Company's Transition Report on Form 10-K for the transition period ended
January 3, 1998 and the Company's Current Report on Form 8-K/A dated March 13,
1998, have been audited by Coopers & Lybrand L.L.P., independent accountants,
and are incorporated by reference herein in reliance on the report of such firm,
given on the authority of that firm as experts in accounting and auditing.
The financial statements of Sunshine as of March 31, 1995 and 1996 and for
each of the three years in the period ended March 31, 1996, incorporated by
reference in this Prospectus from the Company's Current Report on Form 8-K/A
dated March 13, 1998, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
49
<PAGE> 56
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of independent accountants........................... F-2
Consolidated balance sheet at January 3, 1998, June 28, 1997
and June 29, 1996......................................... F-3
Consolidated statement of income for the twenty-seven weeks
ended January 3, 1998, and the fifty-two weeks ended June
28, 1997, June 29, 1996 and July 1, 1995.................. F-4
Consolidated statement of changes in stockholders' equity
for the twenty-seven weeks ended January 3, 1998, and the
fifty-two weeks ended June 28, 1997, June 29, 1996 and
July 1, 1995.............................................. F-5
Consolidated statement of cash flows for the twenty-seven
weeks ended January 3, 1998, and the fifty-two weeks ended
June 28, 1997, June 29, 1996 and July 1, 1995............. F-7
Notes to consolidated financial statements.................. F-9
</TABLE>
F-1
<PAGE> 57
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Flowers Industries, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Flowers Industries, Inc. and its subsidiaries at January 3, 1998, June 28, 1997
and June 29, 1996, and the results of their operations and their cash flows for
the twenty-seven week transition period ended January 3, 1998 and for each of
the three fiscal years in the period ended June 28, 1997, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As more fully discussed in Note 1 of the Notes to Consolidated Financial
Statements, during the twenty-seven week transition period ended January 3,
1998, the Company changed its method of accounting for business process
reengineering costs incurred in connection with an information technology
project, pursuant to Emerging Issues Task Force Consensus No. 97-13, "Accounting
for Costs Incurred in Connection with a Consulting Contract or an Internal
Project that Combines Business Process Reengineering and Information Technology
Transformation." In addition, as more fully discussed in Note 1 of the Notes to
Consolidated Financial Statements, during the twenty-seven week transition
period ended January 3, 1998, the Company changed the measurement date used in
its accounting for pensions.
/s/ PRICE WATERHOUSE LLP
Atlanta, Georgia
March 23, 1998
F-2
<PAGE> 58
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JANUARY 3, JUNE 28, JUNE 29,
1998 1997 1996
---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 3,866 $ 31,080 $ 25,039
Accounts receivable....................................... 118,147 113,628 120,301
Inventories............................................... 105,431 104,577 68,576
Prepaid expenses.......................................... 9,421 7,825 5,319
Deferred income taxes..................................... 16,024 14,421 10,992
--------- --------- ---------
252,889 271,531 230,227
--------- --------- ---------
Property, Plant and Equipment:
Land...................................................... 20,388 20,692 23,386
Buildings................................................. 208,179 206,469 183,502
Machinery and equipment................................... 443,739 446,016 393,319
Furniture, fixtures and transportation equipment.......... 28,095 24,774 21,365
Construction in progress.................................. 46,262 49,062 63,005
--------- --------- ---------
746,663 747,013 684,577
Less: accumulated depreciation............................ (308,342) (299,014) (264,107)
--------- --------- ---------
438,321 447,999 420,470
--------- --------- ---------
Other Assets:
Investment in unconsolidated affiliate.................... 100,663 77,071 68,326
Notes receivable from distributors........................ 61,236
Other long-term assets.................................... 32,620 33,133 24,567
--------- --------- ---------
133,283 110,204 154,129
--------- --------- ---------
Cost in Excess of Net Tangible Assets....................... 78,368 70,939 45,962
Less: accumulated amortization............................ (3,480) (2,486) (1,345)
--------- --------- ---------
74,888 68,453 44,617
--------- --------- ---------
$ 899,381 $ 898,187 $ 849,443
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Commercial paper outstanding.............................. $ 53,506 $ 40,792 $
Current portion of long-term debt......................... 1,581 6,625 6,593
Obligations under capital leases.......................... 2,651 2,608 1,988
Accounts payable.......................................... 72,311 78,451 98,796
Accrued taxes other than income taxes..................... 5,230 6,276 5,369
Income taxes.............................................. 220 1,264
Other accrued liabilities................................. 97,333 107,497 67,738
--------- --------- ---------
232,612 242,469 181,748
--------- --------- ---------
Long-Term Notes Payable..................................... 259,249 259,884 254,355
--------- --------- ---------
Obligations Under Capital Leases............................ 4,012 2,413 2,573
--------- --------- ---------
Industrial Revenue Bonds.................................... 12,950 12,950 17,770
--------- --------- ---------
Deferred Income Taxes....................................... 39,686 38,886 47,270
--------- --------- ---------
Deferred Compensation....................................... 2,305 1,573
--------- --------- ---------
Deferred Income............................................. 40,403
--------- --------- ---------
Commitments and Contingencies...............................
--------- --------- ---------
Stockholders' Equity:
Preferred stock -- $100 par value, authorized 10,467
shares and none issued..................................
Preferred stock -- $100 par value, authorized 249,533
shares and none issued..................................
Common stock -- $.625 par value, authorized 350,000,000
shares, issued 88,636,089 shares........................ 55,398 55,398 55,398
Capital in excess of par value............................ 45,200 43,147 40,317
Retained earnings......................................... 266,734 260,094 234,069
Less: Common stock in treasury, 207,670, 563,076 and
761,010 shares, respectively............................ (2,452) (6,567) (6,493)
Restricted Stock Award and Equity Incentive Award.... (16,313) (12,060) (17,967)
--------- --------- ---------
348,567 340,012 305,324
--------- --------- ---------
$ 899,381 $ 898,187 $ 849,443
========= ========= =========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
F-3
<PAGE> 59
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE 27
WEEKS
ENDED FOR THE 52 WEEKS ENDED
---------- ------------------------------------
JANUARY 3, JUNE 28, JUNE 29, JULY 1,
1998 1997 1996 1995
---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales............................................ $784,097 $1,437,713 $1,238,564 $1,129,203
Gain on sale of distributor notes receivable..... 43,244
Other income..................................... 2,442 3,540 7,909 10,751
Gain on issuance of additional stock of
unconsolidated affiliate....................... 4,111
-------- ---------- ---------- ----------
786,539 1,484,497 1,250,584 1,139,954
-------- ---------- ---------- ----------
Materials, supplies, labor and other production
costs.......................................... 418,926 787,799 674,762 599,416
Selling, delivery and administrative expenses.... 303,868 537,825 468,695 428,833
Depreciation and amortization.................... 26,930 45,970 40,848 36,604
Interest......................................... 11,796 25,109 13,004 7,086
Accrual for litigation settlement................ 4,935
-------- ---------- ---------- ----------
761,520 1,396,703 1,202,244 1,071,939
-------- ---------- ---------- ----------
Income before income taxes....................... 25,019 87,794 48,340 68,015
Federal and state income taxes................... 9,632 33,191 18,185 25,714
Income from investment in unconsolidated
affiliate...................................... 18,061 7,721 613
-------- ---------- ---------- ----------
Income before cumulative effect of changes in
accounting principles.......................... 33,448 62,324 30,768 42,301
Cumulative effect of changes in accounting
principles, net of tax benefit of $6,146....... (9,888)
-------- ---------- ---------- ----------
Net income....................................... $ 23,560 $ 62,324 $ 30,768 $ 42,301
======== ========== ========== ==========
Earnings Per Common Share -- Basic
Income before cumulative effect of changes in
accounting principles....................... $ .38 $ .71 $ .35 $ .49
Cumulative effect of changes in accounting
principles, net of tax...................... (.11)
-------- ---------- ---------- ----------
Net income per common share.................... $ .27 $ .71 $ .35 $ .49
======== ========== ========== ==========
Weighted average shares outstanding............ 88,368 88,000 86,933 86,229
======== ========== ========== ==========
Earnings Per Common Share -- Diluted
Income before cumulative effect of changes in
accounting principles....................... $ .38 $ .71 $ .35 $ .49
Cumulative effect of changes in accounting
principles, net of tax...................... (.11)
-------- ---------- ---------- ----------
Net income per common share.................... $ .27 $ .71 $ .35 $ .49
======== ========== ========== ==========
Weighted average shares outstanding............ 88,773 88,401 87,211 86,438
======== ========== ========== ==========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
F-4
<PAGE> 60
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK RESTRICTED
---------------------- TREASURY STOCK STOCK AWARD
NUMBER OF CAPITAL IN ----------------------- AND EQUITY
SHARES EXCESS OF RETAINED NUMBER OF INCENTIVE
ISSUED PAR VALUE PAR VALUE EARNINGS SHARES COST AWARD
---------- --------- ---------- --------- ----------- --------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at July 2,
1994................. 86,269,670 $53,919 $ 21,083 $ 225,601 (1,893,522) $ (15,200) $ (9,672)
Stock issued for
acquisitions......... 2,366,419 1,479 15,872 198,598 1,594
Exercise of employee
stock options........ (178) 104,449 841
Purchase of treasury
stock................ (554,745) (4,426)
Net income for the
year................. 42,301
Exercise of Restricted
Stock Award.......... 63 (74,634) (572) 708
Amortization of
Restricted Stock
Award and Equity
Incentive Award...... 1,825
Dividends
paid -- $.3622 per
common share......... (31,257)
---------- ------- --------- --------- ----------- --------- --------
Balances at July 1,
1995................. 88,636,089 55,398 36,840 236,645 (2,219,854) (17,763) (7,139)
Stock issued for
acquisitions......... 180 137,003 1,119
Exercise of employee
stock options........ (764) 285,366 2,337
Purchase of treasury
stock................ (144,840) (1,303)
Net income for the
year................. 30,768
Exercise of Restricted
Stock Award.......... 769 (187,596) (1,650) 1,526
Exercise of Equity
Incentive Award...... 301 (169,931) (1,830) 1,434
Stock issued into
escrow in connection
with Restricted Stock
Award................ 2,286 1,180,295 9,640 (11,918)
Stock issued into
escrow in connection
with Equity Incentive
Award................ 705 358,547 2,957 (3,662)
Amortization of
Restricted Stock
Award and Equity
Incentive Award...... 1,792
Dividends
paid -- $.3833 per
common share......... (33,344)
---------- ------- --------- --------- ----------- --------- --------
Balances at June 29,
1996................. 88,636,089 55,398 40,317 234,069 (761,010) (6,493) (17,967)
</TABLE>
F-5
<PAGE> 61
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY -- (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK RESTRICTED
---------------------- TREASURY STOCK STOCK AWARD
NUMBER OF CAPITAL IN ----------------------- AND EQUITY
SHARES EXCESS OF RETAINED NUMBER OF INCENTIVE
ISSUED PAR VALUE PAR VALUE EARNINGS SHARES COST AWARD
---------- --------- ---------- --------- ----------- --------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Stock issued for
acquisition.......... 1,025 322,233 2,975
Exercise of employee
stock options........ (1,017) 400,853 3,988
Purchase of treasury
stock................ (19,335) (289)
Net income for the
year................. 62,324
Exercise of Restricted
Stock Award.......... 1,072 (78,106) (1,362) 1,169
Exercise of Equity
Incentive Award...... 1,854 (151,469) (2,365) 1,738
Restricted Stock Award
Reversions........... (104) (56,430) (456) 557
Amortization of
Restricted Stock
Award and Equity
Incentive Award...... 2,443
Stock received from
escrow............... (219,812) (2,565)
Dividends
paid -- $.4125 per
common share......... (36,299)
---------- ------- --------- --------- ----------- --------- --------
Balances at June 28,
1997................. 88,636,089 55,398 43,147 260,094 (563,076) (6,567) (12,060)
Exercise of employee
stock options........ 45,000 524
Purchase of treasury
stock................ (6,227) (117)
Net income for the 27
weeks ended January
3, 1998.............. 23,560
Equity from investment
in unconsolidated
affiliate............ 2,700
Stock issued into
escrow in connection
with Restricted Stock
Award................ 2,118 347,609 3,965 (6,083)
Restricted Stock Award
Reversions........... (65) (30,976) (257) 435
Amortization of
Restricted Stock
Award and Equity
Incentive Award...... 1,395
Dividends
paid -- $.2225 per
common share......... (19,620)
---------- ------- --------- --------- ----------- --------- --------
Balances at January 3,
1998................. 88,636,089 $55,398 $ 45,200 $ 266,734 207,670 $ (2,452) $(16,313)
========== ======= ========= ========= =========== ========= ========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
F-6
<PAGE> 62
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE 27
WEEKS ENDED FOR THE 52 WEEKS ENDED
----------- ------------------------------------
JANUARY 3, JUNE 28, JUNE 29, JULY 1,
1998 1997 1996 1995
----------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers................. $ 779,029 $1,438,870 $1,232,963 $1,117,262
Interest received............................ 325 824 7,741 7,159
Sale of distributor notes receivable......... 65,954
Other........................................ 3,055 6,080 5,416 5,890
--------- ---------- ---------- ----------
Cash provided by operating activities.......... 782,409 1,511,728 1,246,120 1,130,311
--------- ---------- ---------- ----------
Cash paid to suppliers and employees......... 739,575 1,373,583 1,161,431 1,009,931
Interest paid................................ 11,878 25,955 8,582 6,465
Income taxes paid............................ 10,867 32,729 16,748 20,379
--------- ---------- ---------- ----------
Cash disbursed for operating activities........ 762,320 1,432,267 1,186,761 1,036,775
--------- ---------- ---------- ----------
Net cash provided by operating activities (See
Schedule 1).................................. 20,089 79,461 59,359 93,536
--------- ---------- ---------- ----------
Cash flows from investing activities:
Purchase of property, plant and equipment.... (32,857) (77,510) (75,542) (73,466)
Acquisition of businesses.................... (7,931) (28,118) (17,018)
Divestiture of businesses.................... 200 1,061 22,679
Decrease in divestiture receivables.......... 2,399 417 173
Investment in unconsolidated affiliate....... (61,352)
Escrow funds................................. 4,835
Other........................................ 2,145 63 (6,485) (1,845)
--------- ---------- ---------- ----------
Net cash disbursed for investing activities.... (36,244) (76,830) (170,263) (64,815)
--------- ---------- ---------- ----------
Cash flows from financing activities:
Dividends paid............................... (19,620) (36,299) (33,344) (31,257)
Purchase of treasury stock................... (117) (289) (1,303) (4,426)
Increase in short-term notes payable......... 7,713 40,792
Increase in long-term notes payable.......... 356,000 524,400 356,625 151,391
Payments of long-term notes payable.......... (355,035) (525,194) (217,871) (132,351)
--------- ---------- ---------- ----------
Net cash (disbursed for) provided by financing
activities................................... (11,059) 3,410 104,107 (16,643)
--------- ---------- ---------- ----------
Net (decrease) increase in cash and cash
equivalents.................................. $ (27,214) $ 6,041 $ (6,797) $ 12,078
========= ========== ========== ==========
</TABLE>
F-7
<PAGE> 63
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE 27
WEEKS ENDED FOR THE 52 WEEKS ENDED
----------- ------------------------------------
JANUARY 3, JUNE 28, JUNE 29, JULY 1,
1998 1997 1996 1995
----------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
SCHEDULE 1.
Schedule Reconciling Earnings to Net Cash
Provided by Operating Activities:
Net income................................ $ 23,560 $ 62,324 $ 30,768 $ 42,301
Noncash expenses, revenues, losses and
gains included in income:
Depreciation and amortization........... 26,930 45,970 40,848 36,604
Gain on sale of distributor notes
receivable........................... (43,244)
Deferred income taxes................... (803) 1,506 3,494 2,847
Cumulative effect of changes in
accounting principles................ 9,888
Gain on issuance of additional stock of
unconsolidated affiliate............. (4,111)
Net income from investment in
unconsolidated affiliate............. (18,061) (7,721) (613)
Changes in assets and liabilities, net of
acquisitions and divestitures:
(Increase) decrease in accounts
receivable........................... (2,282) 7,863 (17,742) (5,510)
Increase in inventories................. (413) (36,144) (12,821) (4,651)
Increase in prepaid expenses............ (1,495) (2,242) (1,650) (86)
Decrease in distributor notes
receivable........................... 65,954
(Decrease) increase in accounts
payable.............................. (6,685) (21,082) 28,029 5,859
(Decrease) increase in accrued taxes and
other liabilities.................... (10,550) 6,277 (6,843) 16,172
--------- ---------- ---------- ----------
$ 20,089 $ 79,461 $ 59,359 $ 93,536
========= ========== ========== ==========
SCHEDULE 2.
Schedule of Noncash Investing and Financing
Activities:
Common stock issued in connection with the
exercise of employee stock options........ $ 272 $ 2,971 $ 1,573 $ 663
Stock issued and held in escrow in connection
with Restricted Stock Award and Equity
Incentive Award........................... 6,083 15,580
Stock issued for acquisitions................ 4,000 1,299 18,945
Note payable issued in acquisition of
business.................................. 15,000
Exercise of Restricted Stock Award and Equity
Incentive Award........................... 3,727 3,480 572
Stock released from escrow................... 2,565
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
F-8
<PAGE> 64
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CHANGE IN FISCAL YEAR
In January 1998, the Company changed its fiscal year-end from the Saturday
nearest June 30 to the Saturday nearest December 31. As a result, the Company is
reporting a twenty-seven week transition period of June 29, 1997 through January
3, 1998.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Flowers
Industries, Inc. and its wholly owned subsidiaries. Intercompany accounts and
transactions are eliminated in consolidation. The Company's 45% investment
interest in Keebler Foods Company is accounted for under the equity method.
Equity accounting for this investment is discussed in Note 13 to the
consolidated financial statements.
REVENUE RECOGNITION
Revenue from sale of products is recognized at the time of shipment. Sales
to a single customer were approximately $84,000,000, or 10.7% of sales during
the twenty-seven weeks transition period ended January 3, 1998, $163,000,000, or
11% of sales during fiscal 1997, $150,000,000, or 12% of sales during fiscal
1996 and $142,000,000, or 13% of sales during fiscal 1995.
CASH AND CASH EQUIVALENTS
The Company considers deposits in banks, certificates of deposits and
short-term investments with original maturities of three months or less as cash
and cash equivalents for the purposes of the statement of cash flows.
The major components of cash and cash equivalents are as follows:
<TABLE>
<CAPTION>
JANUARY 3, 1998 JUNE 28, 1997 JUNE 29, 1996
--------------- ------------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash............................................ $ $11,010 $10,484
Time deposits................................... 3,866 20,070 14,555
------ ------- -------
Total................................. $3,866 $31,080 $25,039
====== ======= =======
</TABLE>
ACCOUNTS RECEIVABLE
Accounts receivable consists of trade receivables, current portion of
distributor notes receivable and miscellaneous receivables. As the Company has
historically experienced an insignificant amount of uncollectible accounts, when
a receivable balance is determined to be uncollectible, it is charged directly
to expense.
CONCENTRATION OF CREDIT RISK
The Company grants credit to its distributors and customers, who are
primarily in the grocery, foodservice, restaurant and fast-food markets.
INVENTORY
Inventories are carried at the lower of cost (primarily first-in,
first-out) or market.
HEDGING TRANSACTIONS -- RAW MATERIAL COSTS
The Company's primary raw materials are flour, sugar, shortening and fruit.
The Company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. The
F-9
<PAGE> 65
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company enters into various forward purchase agreements and other derivative
financial instruments to reduce the impact of volatility in ingredients prices.
Amounts payable or receivable under the agreements which qualify as hedges are
recognized as deferred gains or losses and are included in other assets or other
liabilities. These deferred amounts are charged or credited to cost of sales as
the related raw materials costs used in production. Gains and losses on
agreements which do not qualify as hedges are recognized immediately as other
income or expense. At January 3, 1998, the Company had no material commitments
outstanding relating to derivative financial instruments.
During June 1997, the Company entered into an arrangement that allows for
the Company to engage in commodity price agreements based on fixed and floating
prices of an agreed type of commodity. At January 3, 1998, no material amounts
were outstanding under this agreement.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
The Company provides depreciation for financial reporting purposes over the
estimated useful lives of fixed assets using the straight-line method. Upon
retirement or sale of fixed assets, the book value is removed from the accounts
and the difference between such net book value and salvage value received is
recorded in income. Expenditures for maintenance and repairs are charged to
expense; renovations and improvements are capitalized.
The approximate annual rates of depreciation are 3% to 5% for buildings, 8%
for machinery and equipment and 10% to 25% for furniture, fixtures and
transportation equipment. Depreciation expense for the twenty-seven weeks ended
January 3, 1998, fiscal 1997, fiscal 1996 and fiscal 1995 was $25,936,000,
$44,829,000, $40,559,000 and $35,874,000, respectively.
INTERNALLY DEVELOPED SOFTWARE
The Company capitalizes certain costs, primarily hardware, software, and
installation costs, associated with internally developed software projects. Such
amounts are depreciated over periods not to exceed eight years. The Company does
not anticipate that Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed, or Obtained for Internal Use," will have a material
impact on the Company's results of operations or financial condition. As further
discussed below, during the twenty-seven week period ended January 3, 1998, the
Company recorded a cumulative after-tax charge of $8,842,000, to write off
business process reengineering costs that had been incurred as part of an
information systems development project.
ADVERTISING AND CONSUMER PROMOTION
Advertising and consumer promotion costs are generally expensed as incurred
or no later than when the advertisement appears or the event is run. Advertising
and consumer promotion expense was approximately $16,998,000 for the
twenty-seven weeks ended January 3, 1998, $19,063,000 for fiscal 1997,
$15,081,000 for fiscal 1996 and $15,875,000 for fiscal 1995. There are no
deferred advertising costs at January 3, 1998, June 28, 1997 or June 29, 1996.
NOTES RECEIVABLE AND DEFERRED INCOME
The Company sells its territories to independent distributors. The income
from these sales is recognized as the cash payments are received. The sales of
the territories were previously financed by the Company with ten year notes. In
September 1996, the Company sold these notes, which totaled approximately
$66,000,000, to a financial institution. The proceeds were used to repay debt
outstanding at that time. Of the notes sold, approximately $44,000,000 were
initially without recourse to the Company with approximately $22,000,000 having
limited recourse. Concurrently, approximately $43,000,000 of deferred pre-tax
income was recognized
F-10
<PAGE> 66
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
by the Company during fiscal 1997. Subsequent to September 1996, all distributor
purchase arrangements are made directly between the distributor and a financial
institution and, pursuant to an agreement, the Company acts as the servicing
agent for the financial institution and receives a fee for these services. Such
fees aggregated $2,317,000 and $5,029,000 during the twenty-seven weeks ended
January 3, 1998 and fiscal 1997, respectively.
AMORTIZATION OF INTANGIBLE ASSETS
Costs in excess of the net tangible assets acquired are, in the opinion of
management, attributable to long-lived intangibles having continuing value.
Excess amounts related to the purchases of businesses are amortized over forty
years from the acquisition date using the straight-line method. Costs of
purchased trademark rights are amortized over the period of expected future
benefit, which is approximately ten to forty years. At each balance sheet date,
the Company assesses whether there has been an impairment of long-lived assets
and the related unamortized goodwill, based on whether certain indicators of
impairment are present. If such indicators are present, the Company evaluates
whether an impairment exists by comparing the gross, undiscounted cash flows to
the carrying value of the related asset. Amortization expense for the
twenty-seven weeks ended January 3, 1998, fiscal 1997, fiscal 1996 and fiscal
1995 was $994,000, $1,141,000, $289,000 and $730,000, respectively.
TREASURY STOCK
The Company records acquisitions of its common stock for treasury at cost.
Differences between proceeds for reissuances of treasury stock and average cost
are credited to capital in excess of par value or charged to capital in excess
of par value to the extent of prior credits and thereafter to retained earnings.
PENSION PLANS
The Company accounts for pensions in accordance with Statement of Financial
Accounting Standards No. 87 -- "Employers' Accounting for Pensions." Pension
accounting information is disclosed in Note 8 to the consolidated financial
statements.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 -- "Accounting for Income Taxes" (SFAS 109). SFAS
109 is an asset and liability approach that requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
In estimating future tax consequences, SFAS 109 generally considers all expected
future events other than enactments of changes in the tax law or rates. Income
tax accounting information is disclosed in Note 9 to the consolidated financial
statements.
NET INCOME PER COMMON SHARE
The Company computes net income per common share in accordance with
Statement of Financial Accounting Standards No. 128 -- "Earnings Per Share"
(SFAS 128). Basic earnings per share is computed by dividing net income by
weighted average common shares outstanding for the period. Diluted earnings per
share is computed by dividing net income by weighted average common and common
equivalent shares outstanding for the period. Common stock equivalents consist
of the incremental shares associated with the Company's stock option plans, as
determined under the treasury stock method. Earnings per share information for
years prior to the twenty-seven weeks ended January 3, 1998, has been restated
in accordance with SFAS 128.
F-11
<PAGE> 67
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CHANGES IN ACCOUNTING PRINCIPLES
On November 20, 1997, the Emerging Issues Task Force (EITF), a subcommittee
of the Financial Accounting Standards Board, issued EITF 97-13, which requires
the cost of business process reengineering activities that are part of an
information systems development project be expensed as those costs are incurred.
Any unamortized costs that were previously capitalized were required to be
written off as a cumulative adjustment in the quarter that included November 20,
1997. During the twenty-seven week period ended January 3, 1998, the Company
recorded a cumulative after-tax charge of $8,842,000, or $.10 per share, as a
result of its adoption of this pronouncement. These costs were attributable to a
state-of-the-art management information system at the Company's Mrs. Smith's
Bakeries locations.
The Company measures its pension plan assets three months prior to the
beginning of its fiscal year. As a result of the Company's changing its fiscal
year, the measurement date has changed from March 31 to September 30. This
change resulted in a cumulative adjustment, net of tax, of $1,046,000, or $.01
per share, for the twenty-seven week period ended January 3, 1998.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
BUSINESS SEGMENTS
The Company's only business is to provide quality fresh and frozen baked
food products to grocery, foodservice, restaurant and fast-food markets.
NOTE 2. INVENTORIES
The major components of inventories are as follows:
<TABLE>
<CAPTION>
JANUARY 3, JUNE 28, JUNE 29,
1998 1997 1996
---------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Ingredients and raw materials........................... $ 27,310 $ 25,479 $14,951
Packaging materials..................................... 13,149 12,500 10,988
Finished goods.......................................... 44,650 47,314 25,527
Supplies................................................ 20,322 19,284 17,110
-------- -------- -------
Total......................................... $105,431 $104,577 $68,576
======== ======== =======
</TABLE>
NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 -- "Disclosure about
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value.
The carrying value of cash and cash equivalents, notes receivable from
distributors, other notes receivable, industrial revenue bonds and long-term
debt payable to financial institutions approximates fair value at January 3,
1998, June 28, 1997 and June 29, 1996.
F-12
<PAGE> 68
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. DEBT
In July 1996, the Company entered into a five-year $300,000,000 syndicated
loan facility, of which, $122,000,000 was outstanding at January 3, 1998.
Amounts are borrowed under this facility for periods not to exceed 180 days and
can be reborrowed as necessary during the term of the facility. Interest under
the syndicated loan facility is generally payable monthly and is variable based
on a performance grid using a choice of LIBOR plus .375% or money market rates.
Subsequent to fiscal year-end, on January 30, 1998, this facility was amended to
become a five-year $500,000,000 syndicated loan facility. Interest under the
amended facility is generally payable monthly and is variable based on a
performance grid using a choice of LIBOR plus .475% or money market rates.
Subsequent to period end, the Company borrowed $422 million under the amended
facility. Such proceeds were primarily used to finance the acquisition of a
controlling interest in Keebler.
In October 1997, the Company amended its short-term commercial paper
program to increase the limit from $50,000,000 to $75,000,000 for use in
financing inventory. Borrowings under this program at January 3, 1998 were
$53,506,000.
In January 1996, the Company completed a private placement of $125,000,000
of long-term Senior Notes. These notes are due in three tranches: $100,000,000
due in semi-annual instalments from January 5, 2004 through January 5, 2008
which bears interest at 6.80% per annum; $20,000,000 due January 5, 2011 which
bears interest at 6.99% per annum; and $5,000,000 due January 5, 2016 which
bears interest at 7.08% per annum. Interest on the Senior Notes is payable
semiannually. A portion of the proceeds were used to pay off $114,150,000 of
debt that was outstanding at that time, with the remaining proceeds being used
for working capital and for other general corporate purposes.
The Company also has a $10,000,000 revolving-term loan agreement entered
into in March of 1993, of which no amounts were outstanding at January 3, 1998.
Several loan agreements of the Company contain restrictions which, among
other things, require maintenance of certain financial ratios and restrict
encumbrance of assets and creation of indebtedness. At January 3, 1998, the
Company was in compliance with these financial ratio requirements.
F-13
<PAGE> 69
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total debt consists of:
<TABLE>
<CAPTION>
JANUARY 3, JUNE 28, JUNE 29,
1998 1997 1996
---------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Private placement long-term Senior Notes with interest
from 6.80% to 7.08% payable in instalments from 2004
through 2016........................................ $125,000 $125,000 $125,000
Borrowings under syndicated loan facility with
interest from 5.98% to 6.45%........................ 122,000 117,000
Commercial paper program with interest from 5.65% to
6.25%............................................... 53,506 40,792
Borrowings under revolving-term loan agreements....... 103,375
Various industrial revenue bonds with interest from
4.20% to 6.00% payable in instalments through 2017
secured by property................................. 13,170 13,170 18,170
Borrowings scheduled to mature in equal instalments
over the next two years with interest from 5.64% to
6.49%............................................... 10,000 15,000
Various unsecured notes payable with interest of
approximately 7.5%, payable in instalments through
2004................................................ 13,610 14,289 17,173
-------- -------- --------
327,286 320,251 278,718
Due within one year................................... 55,087 47,417 6,593
-------- -------- --------
Due after one year.................................... $272,199 $272,834 $272,125
======== ======== ========
</TABLE>
Annual maturities of long-term debt for each of the six years following
January 3, 1998 are $1,581,000 (excludes $53,506,000 for commercial paper),
$5,819,000, $1,362,000, $1,467,000, $1,579,000 and $1,701,000, respectively.
NOTE 5. COMMITMENTS AND CONTINGENCIES
DESCRIPTION OF OPERATING LEASE ARRANGEMENTS
The Company leases certain property and equipment under operating leases
which expire over the next twenty years. Most of these operating leases provide
the Company with the option, after the initial lease term, either to purchase
the property at the then fair value or renew its lease at the then fair rental
value for periods of one month to ten years. Generally, management expects that
leases will be renewed or replaced by other leases in the normal course of
business.
The Company has in place a $50,000,000 ten-year master lease agreement to
finance the automated production lines at certain of its facilities. At January
3, 1998, approximately $38,693,000 had been used under this agreement.
F-14
<PAGE> 70
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Minimum payments for operating leases having initial or remaining
noncancelable terms in excess of one year are as follows:
<TABLE>
<CAPTION>
(AMOUNTS
IN
FISCAL YEAR(S) THOUSANDS)
- -------------- ----------
<S> <C>
1998........................................................ $15,979
1999........................................................ 13,948
2000........................................................ 11,897
2001........................................................ 9,326
2002........................................................ 8,233
2003 to termination (aggregate)............................. 29,730
-------
Total minimum lease payments...................... $89,113
=======
</TABLE>
Total rent expense for all operating leases amounted to $16,225,000 for the
twenty-seven weeks ended January 3, 1998, $24,151,000 for fiscal 1997,
$16,936,000 for fiscal 1996 and $18,897,000 for fiscal 1995.
OTHER COMMITMENTS
The Company's various commodity purchase agreements effectively commit the
Company to purchase raw materials in amounts totaling approximately $55,656,000,
at January 3, 1998, which will be used in production in future periods.
NOTE 6. OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of:
<TABLE>
<CAPTION>
JANUARY 3, JUNE 28, JUNE 29,
1998 1997 1996
---------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Compensation............................................. $ 8,344 $ 13,707 $ 7,518
Vacation cost............................................ 9,779 10,277 10,030
Pension cost............................................. 12,217 12,438 8,729
Workers' compensation insurance.......................... 8,945 9,009 10,881
Other insurance.......................................... 4,484 4,799 5,013
Interest................................................. 5,113 5,195 6,041
Purchase accounting reserves............................. 34,953 35,530
Other.................................................... 13,498 16,542 19,526
------- -------- -------
Total.......................................... $97,333 $107,497 $67,738
======= ======== =======
</TABLE>
NOTE 7. STOCKHOLDERS' EQUITY
The Company's Articles provide that the authorized capital of the Company
consists of 350,000,000 shares of Common Stock of $.625 par value per share,
10,467 shares of preferred stock, par value $100 per share convertible into
Common Stock, and 249,533 shares of preferred stock, par value $100 per share
that, at the discretion of the Board of Directors, may be either convertible or
nonconvertible, of which 100,000 shares has been designated by the Board of
Directors as Series A Junior Participating Preferred Stock ("Series A Preferred
Stock").
F-15
<PAGE> 71
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Subject to
preferential rights of any issued and outstanding preferred stock, including the
Series A Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors of
the Company out of funds legally available therefor. In the event of a
liquidation, dissolution or winding-up of the Company, holders of Common Stock
are entitled to share ratably in all assets of the Company, if any, remaining
after payment of liabilities and the liquidation preferences of any issued and
outstanding preferred stock, including the Series A Preferred Stock. Holders of
Common Stock have no preemptive rights, no cumulative voting rights and no
rights to convert their shares of Common Stock into any other securities of the
Company or any other person. The Common Stock is not subject to redemption or
sinking fund redemption.
PREFERRED STOCK
The Board of Directors of the Company has the authority to issue up to
249,533 shares of preferred stock in one or more series and to fix the
designations, relative powers, preferences, rights, qualifications, limitations
and restrictions of all shares of each such series, including without
limitation, dividend rates, conversion rights, voting rights, redemption and
sinking fund provisions, liquidation preferences and the number of shares
constituting each such series, without any further vote or action by the holders
of Common Stock. Pursuant to such authority, the Board of Directors has
designated 100,000 shares of preferred stock as Series A Preferred Stock in
connection with the adoption of the Company's Shareholders' Rights Plan. The
issuance of one or more series of preferred stock will likely decrease the
amount of earnings and assets available for distribution to holders of Common
Stock as dividends or upon liquidation, respectively, and may adversely affect
the rights and powers, including voting rights, of the holders of Common Stock.
The issuance of preferred stock also could have the effect of delaying,
deterring or preventing a change in control of the Company.
SHAREHOLDER RIGHTS PLAN
On March 17, 1989, the Company's Board of Directors declared a dividend of
one preferred share purchase right (collectively, the "Rights") for each share
of Common Stock held of record on April 3, 1989. Under certain circumstances, a
Right may be exercised to purchase one one-thousandth of a share of Series A
Junior Participating Preferred Stock (the "Preferred Stock") at an exercise
price of $33.33.
The Rights become exercisable 10 days after (i) a person or group acquires
10% or more of the Company's outstanding Common Stock, or (ii) an announcement
of a tender offer for 30% or more of the Company's outstanding Common Stock.
If the Rights become exercisable, each Right will entitle the holder
thereof to purchase one-thousandth of a share of the Preferred Stock. If a
person or group acquires 10% or more of the outstanding Common Stock of the
Company, the holder of each Right not owned by the 10% or more shareholder would
be entitled to purchase for $33.33 (the exercise price of the Right) Common
Stock of the Company having market value equal to $66.66. If the Company is a
party to certain mergers or business combination transactions or transfers 50%
or more of its assets or earning power, each Right will entitle its holder to
buy a number of shares of Common Stock of the acquiring or surviving entity (or
of the Company in certain instances) having a market value of twice the exercise
price of the Right, or $66.66. If the Rights are fully exercised, the shares
issued thereby would have a dilutive effect on the shares previously
outstanding.
The Rights expire April 2, 1999, and may be redeemed by the Company for
$.01 per Right at any time prior to the close of business on the tenth day after
a public announcement of an acquisition of 10% or more of the Common Stock of
the Company.
F-16
<PAGE> 72
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The principal terms of the Rights are set forth in a registration statement
on Form 8-A filed with the Securities and Exchange Commission and dated as of
March 20, 1989.
STOCK INCENTIVE PLANS
The Company has 12,050,000 shares of Common Stock authorized for issuance
to eligible employees under the Executive Stock Incentive Plan (ESIP). The ESIP
authorizes the Compensation Committee of the Board of Directors to grant to
eligible participants of the Company and its subsidiaries, through October 1999,
stock options, stock appreciation rights, restricted or deferred stock awards,
stock purchase rights and other stock-based awards.
During the twenty-seven weeks ended January 3, 1998 and fiscal 1996,
347,609 and 1,180,295 shares, respectively, of the Company's Common Stock were
granted as restricted stock awards (RSA). These shares are held in escrow by the
Company and will be released to the grantee upon the grantee's satisfaction of
continued employment at the same or a higher level during the restriction
periods, which end June 15, 2001, June 15, 1999, May 20, 2000 and June 18, 2000,
and upon payment of the purchase price of $8.75, $4.22, $5.11, and $5.89 per
share, respectively. The purchase price is fifty percent of the mean of the high
and low market value of the Company's Common Stock at the date of grant. The
difference between the market price at the date of grant and the purchase price
to be paid by the grantee is recognized ratably by the Company as compensation
expense over the restriction period. This expense for the twenty-seven weeks
ended January 3, 1998, fiscal 1997, fiscal 1996 and fiscal 1995 was $1,066,000,
$1,661,000, $1,299,000 and $901,000, respectively.
With respect to the grant issued during the twenty-seven week period ended
January 3, 1998, if the mean of the high and low market value for the Company's
Common Stock equals or exceeds $25.63 during the restriction period an
additional 347,609 shares at a purchase price of $12.82 per share will be
granted. Subsequent to year end, on February 26, 1998, the stated market value
was attained and the additional shares were granted. The restriction period for
this grant ends February 26, 2000.
During fiscal 1996, 358,547 shares of the Company's Common Stock were
granted as equity incentive awards (EIA). These shares are held in escrow by the
Company and may be released ratably to the grantee upon the grantee's
satisfaction of continued employment at the same or a higher level during the
restriction periods which end May 20, 1999, and upon payment of the purchase
price of $5.11 per share. The purchase price is fifty percent of the mean of the
high and low market value of the Company's Common Stock at the date of grant.
The difference between the market value at the date of grant and the purchase
price to be paid by the grantee is recognized ratably by the Company as
compensation expense over the restriction period. This expense for the
twenty-seven weeks ended January 3, 1998, fiscal 1997, fiscal 1996 and fiscal
1995 was $329,000, $782,000, $493,000 and $924,000, respectively.
During fiscal 1996, 843,750 shares of the Company's Common Stock were
granted as non-qualified stock options (NQSO's). The NQSO's are exercisable at
any time, commencing on the first anniversary of the grant date, until the year
2005. The optionees are required to pay the market value of the shares,
determined as of the grant date, which was $8.45. As of fiscal year end January
3, 1998, June 28, 1997, and June 29, 1996, there were 787,500, 787,500 and
843,750, NQSO's outstanding, respectively. In addition to the ESIP, the Company
has 377,778 shares of Common Stock authorized for issuance to key employees
under the Company's Stock Option Plan. Option prices must be 100% of the market
value of the Common Stock at the time of the grant. The Plan expired on October
15, 1992, therefore no additional grants will be made pursuant to this Plan.
The Company has a Nonemployee Directors' Equity Plan (the "Directors'
Plan") pursuant to which an aggregate 300,000 shares of Common Stock, may be
issued and as to which grants or awards of stock options may be made.
F-17
<PAGE> 73
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
All individuals who are nonemployee Directors on the first day of the
Company's fiscal year (a "Plan Year") are eligible to participate in the
Directors' Plan. Under the Directors' Plan, the nonemployee Director may
designate the amount of annual compensation payable without regard to the number
of Board or committee meetings attended or committee positions held (the
"Retainer") which can be invested in stock options (an "Option") under the
Directors' Plan. A Director shall be permitted to invest in an Option under the
Directors' Plan only if the total amount invested by that Director is equal to
at least twenty-five percent (25%) of the Retainer. To the extent a Director
elects to invest all or a portion of the Retainer for a Plan Year, an Option
shall be granted on the first day of such Plan Year for that number of shares of
Common Stock ("Shares") equal to 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 Committee.
Subject to the expiration or earlier termination of the Option, 100% of the
Option shall become exercisable on the first anniversary of the date of grant.
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, 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 Committee, all unexercised Options shall be
forfeited.
The Company applies Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees," (APB 25) and related interpretations in
accounting for its plans. Accordingly, no compensation expense has been
recognized for options granted under the Company's Stock Option Plan or the
ESIP.
Had compensation expense for the options and restricted stock awards under
the ESIP been determined based on the fair value at the grant dates for the
awards consistent with the methodology prescribed under Statement of Financial
Accounting Standards No. 123 -- "Accounting for Stock-Based Compensation", the
Company's net income and net income per share would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
FOR THE 27
WEEKS ENDED FOR THE 52 WEEKS ENDED
--------------- --------------------------------------------
JANUARY 3, 1998 JUNE 28, 1997 JUNE 29, 1996 JULY 1, 1995
--------------- ------------- ------------- ------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
As Reported:
Net income......................... $23,560 $62,324 $30,768 $42,301
Net income per common share:
Basic........................... .27 .71 .35 .49
Diluted......................... .27 .71 .35 .49
Pro forma:
Net income......................... $22,735 $61,716 $29,694 $42,301
Net income per common share:
Basic........................... .26 .70 .34 .49
Diluted......................... .26 .70 .34 .49
</TABLE>
The fair values of the awards granted were estimated as of the date of
grant using the Black-Scholes option-pricing model based on the following
weighted-average assumptions used for grants during the twenty-seven weeks ended
January 3, 1998: no expected dividend yield; expected volatility of 26.8
percent; risk-free interest rate of 6.31 percent; and expected lives of four
years; and for grants during fiscal 1996: dividend yield of 3.43 percent;
expected volatility of 24.7 percent; risk-free interest rate of 6.23 percent;
and expected lives of five years.
F-18
<PAGE> 74
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock option activity for the twenty-seven weeks ended January 3, 1998,
fiscal 1997, fiscal 1996 and fiscal 1995 is set forth below:
<TABLE>
<CAPTION>
FOR THE 27
WEEKS ENDED FOR THE 52 WEEKS ENDED
------------------ ------------------------------------------------------------
JANUARY 3, 1998 JUNE 28, 1997 JUNE 29, 1996 JULY 1, 1995
------------------ ------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- -------- ------- -------- ------- -------- ------- --------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year..................... 1,211 $7.52 1,664 $7.11 1,114 $5.70 1,222 $5.67
Granted.................... 844 $8.44
Exercised.................. (46) $6.06 (453) $6.03 (294) $5.59 (108) $5.40
----- ----- ------ -----
Outstanding at end of
year..................... 1,165 $7.57 1,211 $7.52 1,664 $7.11 1,114 $5.70
===== ===== ====== =====
Exercisable at end of
year..................... 1,165 1,211 820 1,114
===== ===== ====== =====
Weighted average fair value
of options granted during
the year................. $ 2.91
======
</TABLE>
All stock options outstanding at January 3, 1998, are exercisable. The
weighted average exercise price is $7.57 and the weighted average remaining
contractual life is 6.39 years.
NOTE 8. PENSION PLANS
The Company has noncontributory defined benefit pension plans covering
certain employees who have completed prescribed service requirements. The
benefits are based on years of service and the employee's career earnings. The
Company also has a supplemental defined benefit pension plan covering certain
Company employees which provides benefits to participants commencing at
retirement calculated according to the formula contained in the Company's
tax-qualified retirement plan, but without regard to statutory limitations on
the maximum amount of compensation which may be taken into account by, nor the
maximum benefits which may be paid from, such plans. Benefits provided by this
supplemental plan are reduced by benefits provided by the defined benefit
pension plans. Pension expense was $2,111,000, $4,860,000, $5,660,000 and
$5,003,000 in the twenty-seven weeks ended January 3, 1998, fiscal 1997, fiscal
1996 and fiscal 1995, respectively. Pension plans are funded at amounts
deductible for income tax purposes but not less than the minimum funding
required by the Employee Retirement Income Security Act of 1974. As of January
3, 1998, June 28, 1997 and June 29, 1996, the assets of the plans include
certificates of deposit, marketable equity securities, mutual funds, corporate
and government debt securities and annuity contracts. The marketable equity
securities include 506,250 shares of Common Stock of the Company with a fair
value of approximately $10,346,000, $8,543,000 and $5,442,000 at January 3,
1998, June 28, 1997 and June 29, 1996, respectively.
During the second quarter of fiscal 1995, the Company recognized an
after-tax curtailment gain of $912,000 or $.01 per share, in accordance with
Statement of Financial Accounting Standards No. 88 -- "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits." The gain arose from the sale of a portion of the
Company's territories to independent distributors and the termination of
participation in the Flowers Industries, Inc. Retirement Plans of certain
employees.
F-19
<PAGE> 75
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic pension costs of these plans for each of the respective
periods includes the following components:
<TABLE>
<CAPTION>
FOR THE 27
WEEKS ENDED FOR THE 52 WEEKS ENDED
----------- -----------------------------
JANUARY 3, JUNE 29, JUNE 29, JULY 1,
1998 1997 1996 1995
----------- -------- -------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Service cost-benefit earned during the
period...................................... $ 2,846 $ 5,603 $ 5,765 $ 5,538
Interest cost on projected benefit
obligation.................................. 5,207 10,311 9,341 8,261
Reduction of pension costs due to actual
return on plan assets....................... (26,113) (10,415) (9,073) (8,593)
Net amortization and deferral................. 20,171 (639) (373) (203)
-------- -------- ------- -------
$ 2,111 $ 4,860 $ 5,660 $ 5,003
======== ======== ======= =======
</TABLE>
Assumptions used to determine net periodic pension cost for these plans at
each of the respective period ends are as follows:
<TABLE>
<CAPTION>
JANUARY 3, JUNE 28, JUNE 29, JULY 1,
1998 1997 1996 1995
---------- -------- -------- -------
<S> <C> <C> <C> <C>
Discount rate....................................... 8.00% 8.00% 7.75% 8.25%
Rate of increase in compensation levels............. 5.50 5.50 5.25 5.75
Expected long-term rate of return on assets......... 9.00 9.00 9.00 9.00
</TABLE>
Flowers Industries, Inc. Retirement Plans No. 01 and 02 have assets that
exceed the accumulated benefit obligation. There are certain plans, however,
with accumulated benefit obligations which exceed plan assets. The following
table summarizes the funded status of the Company's pension plans and the
related amounts that are recognized in the Company's balance sheet at January 3,
1998, June 28, 1997 and June 29, 1996:
<TABLE>
<CAPTION>
PLANS FOR PLANS FOR PLANS FOR PLANS FOR
WHICH WHICH WHICH WHICH
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED ACCUMULATED BENEFITS EXCEED
BENEFITS ASSETS BENEFITS ASSETS
--------------- --------------- --------------- ---------------
JANUARY 3, 1998 JANUARY 3, 1998 JUNE 28, 1997 JUNE 28, 1997
--------------- --------------- --------------- ---------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit
obligations:
Vested................... $(118,783) $(4,810) $(112,419) $(4,696)
Nonvested................ (2,604) (143) (2,387) (137)
--------- ------- --------- -------
$(121,387) $(4,953) $(114,806) $(4,833)
========= ======= ========= =======
Plan assets at fair value.... $ 152,748 $ 2,080 $ 135,810 $ 2,009
Projected benefit
obligations................ (139,244) (7,693) (132,122) (7,473)
--------- ------- --------- -------
Plan assets in excess of
(less than) projected
benefit obligations........ 13,504 (5,613) 3,688 (5,464)
Items not yet recognized in
earnings:
Unrecognized net asset at
transition............... (4,154) (4,366)
Unrecognized prior service
cost..................... 528 88 562 33
Unrecognized net (gain)
loss..................... (18,847) 2,277 (9,308) 2,417
--------- ------- --------- -------
Contribution payable......... $ (8,969) $(3,248) $ (9,424) $(3,014)
========= ======= ========= =======
<CAPTION>
PLANS FOR PLANS FOR
WHICH WHICH
ACCUMULATED ACCUMULATED
BENEFITS EXCEED BENEFITS EXCEED
ASSETS ASSETS
--------------- ---------------
JUNE 29, 1996 JUNE 29, 1996
--------------- ---------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit
obligations:
Vested................... $ (98,543) $(4,615)
Nonvested................ (1,937) (136)
--------- -------
$(100,480) $(4,751)
========= =======
Plan assets at fair value.... $ 114,508 $ 2,047
Projected benefit
obligations................ (117,730) (6,932)
--------- -------
Plan assets in excess of
(less than) projected
benefit obligations........ (3,222) (4,885)
Items not yet recognized in
earnings:
Unrecognized net asset at
transition............... (5,207)
Unrecognized prior service
cost..................... (110) 348
Unrecognized net (gain)
loss..................... 2,929 1,417
--------- -------
Contribution payable......... $ (5,610) $(3,120)
========= =======
</TABLE>
F-20
<PAGE> 76
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company made contributions of approximately $526,000 in the
twenty-seven weeks ended January 3, 1998, $371,000 in fiscal 1997, $271,000 in
fiscal 1996 and $441,000 in fiscal 1995 to collectively bargained, multiemployer
pension plans based on specific rates per hour worked by participating
employees.
NOTE 9. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FOR THE 27
WEEKS ENDED FOR THE 52 WEEKS ENDED
----------- -----------------------------
JANUARY 3, JUNE 28, JUNE 29, JULY 1,
1998 1997 1996 1995
----------- -------- -------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Current taxes:
Federal...................................... $5,686 $26,910 $13,915 $21,886
State........................................ 2,395 5,557 2,621 2,723
------ ------- ------- -------
8,081 32,467 16,536 24,609
------ ------- ------- -------
Deferred taxes:
Federal...................................... 2,395 1,587 1,636 1,358
State........................................ (319) 347 347 854
------ ------- ------- -------
2,076 1,934 1,983 2,212
------ ------- ------- -------
Benefit of operating loss carryforwards........ (525) (1,210) (334) (1,107)
------ ------- ------- -------
Provision for income taxes..................... $9,632 $33,191 $18,185 $25,714
====== ======= ======= =======
</TABLE>
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
FOR THE 27 FOR THE 52 WEEKS
WEEKS ENDED ENDED
----------- -------------------
JANUARY 3, JUNE 28, JUNE 29,
1998 1997 1996
----------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Depreciation......................................... $ 52,936 $ 51,275 $ 47,999
Other................................................ 13,871 8,673 7,902
-------- -------- --------
Gross deferred tax liabilities..................... 66,807 59,948 55,901
-------- -------- --------
Self-insurance accrual............................... (5,228) (5,274) (5,926)
Vacation accrual..................................... (2,080) (2,275) (2,554)
Pension accrual...................................... (3,246) (2,481) (2,547)
Purchase accounting reserves......................... (13,921) (14,483) --
Loss carryforwards................................... (4,739) (4,117) (3,805)
Other................................................ (16,050) (9,093) (7,565)
-------- -------- --------
Gross deferred tax assets.......................... (45,264) (37,723) (22,397)
Deferred tax assets valuation allowance.............. 2,119 2,240 2,774
-------- -------- --------
$ 23,662 $ 24,465 $ 36,278
======== ======== ========
</TABLE>
The net change in the valuation allowance for deferred tax assets was a
decrease of $121,000, related to operating loss carryforwards.
F-21
<PAGE> 77
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes on income differs from the amount computed
by applying the U.S. federal income tax rate (35%) because of the effect of the
following items:
<TABLE>
<CAPTION>
FOR THE 27
WEEKS ENDED FOR THE 52 WEEKS ENDED
----------- -----------------------------
JANUARY 3, JUNE 28, JUNE 29, JULY 1,
1998 1997 1996 1995
----------- -------- -------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Tax at U.S. federal income tax rate............ $8,757 $30,728 $16,919 $23,805
State income taxes, net of U.S. federal income
tax benefit.................................. 1,390 3,837 1,929 2,325
Benefit of operating loss carryforwards........ (525) (1,210) (334) (1,107)
Other.......................................... 10 (164) (329) 691
------ ------- ------- -------
Provision for income taxes................... $9,632 $33,191 $18,185 $25,714
====== ======= ======= =======
</TABLE>
The amount of federal operating loss carryforwards generated by certain
subsidiaries prior to their acquisition is $2,825,000 with expiration dates
through the fiscal year 2009. The use of pre-acquisition operating losses and
tax credit carryforwards is subject to limitations imposed by the Internal
Revenue Code. The Company does not anticipate that these limitations will affect
utilization of the carryforwards prior to their expiration. Various subsidiaries
have state operating loss carryforwards of $63,579,000 with expiration dates
through the fiscal year 2013.
During fiscal 1997, the Internal Revenue Service ("IRS") completed an
examination of the Company's federal income tax returns for fiscal years 1993
through 1995. During the examination, the IRS asserted that the Company's
independent distributor program generated ordinary income upon the initial sale
of the territories. As a result, the Company paid for certain claims by the IRS
relating primarily to the Company's independent distributor program.
NOTE 10. OTHER EMPLOYEE BENEFIT PLANS
Under the Company's Bonus Plan, approved annually by the Compensation
Committee, certain key employees may receive bonus compensation based on
attainment of specified income goals. Total compensation under the Bonus Plan
was approximately $3,405,000, $6,969,000, $877,000 and $6,157,000 for the
twenty-seven weeks ended January 3, 1998, fiscal 1997, fiscal 1996 and fiscal
1995, respectively.
The Flowers Industries, Inc. 401(k) Retirement Savings Plan covers
substantially all employees who have completed certain service requirements.
Generally the cost and contributions for employees who participate in the
defined benefit pension plan is 25% of the first $400 contributed by the
employee. The costs and contributions for employees who do not participate in
the defined benefit pension plan is 2% of compensation and 25% of the employees
contributions up to 6% of compensation. During the twenty-seven weeks ended
January 3, 1998, fiscal 1997, fiscal 1996 and fiscal 1995, the total cost and
contributions was $646,000, $1,367,000, $1,268,000 and $265,000, respectively.
NOTE 11. LEGAL MATTERS AND CONTINGENCIES
The Company is engaged in various legal proceedings which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to those proceedings will not be material to the
Company's financial position or results of operations. A reserve of $4,935,000
was recorded during fiscal 1996 and paid during fiscal 1997 representing final
settlement of certain litigation involving subsidiary operations in Texas.
F-22
<PAGE> 78
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. ACQUISITIONS
On May 31, 1996, the Company acquired certain assets of Mrs. Smith's, Inc.,
a manufacturer and marketer of frozen pies, including its brand name and
trademarks from the J. M. Smucker Company. Under the terms of the acquisition
agreement, Flowers paid $30,000,000, consisting of $15,000,000 in cash at
closing and a $15,000,000 note payable. In addition, the Company entered into
ten-year leases for the property, plant and equipment used in the business. The
acquisition has been accounted for as a purchase, and, accordingly, the results
of operations of the acquired business are included in the consolidated
statement of income from the date of acquisition.
The following unaudited condensed combined pro forma results of operations
assume the acquisition occurred as of the beginning of each fiscal year:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
----------------------------
JUNE 29, 1996 JULY 1, 1995
------------- ------------
(AMOUNTS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C> <C>
Sales....................................................... $1,351,769 $1,249,461
Net income.................................................. 33,056 45,057
Earnings per share -- basic................................. .38 .52
Earnings per share -- diluted............................... .38 .52
</TABLE>
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the acquisition been consummated
as of the beginning of the fiscal year, nor are they necessarily indicative of
future operating results.
In addition, the Company acquired certain other businesses during fiscal
1996, fiscal 1997 and the twenty-seven weeks ended January 3, 1998 which have
been accounted for as purchases. These acquisitions are immaterial to the
results of operations and financial condition of the Company.
During fiscal 1997, the Company recorded $22,653,000, net of tax of
$14,483,000, in additional goodwill related to liabilities anticipated to be
incurred for planned activities for certain acquisitions made during fiscal 1996
and fiscal 1997. A reserve of $34,953,000 and $35,530,000 relating to these
transactions is included in other accrued liabilities at January 3, 1998 and
June 28, 1997, respectively.
NOTE 13. INVESTMENT IN UNCONSOLIDATED AFFILIATE
In January 1996, the Company acquired, for $62,500,000, a 49.6% interest in
INFLO Holdings Corporation (INFLO), a newly formed corporation jointly owned by
the Company and Artal Luxembourg S.A. On January 26, 1996, INFLO acquired 100%
of Keebler Corporation for an aggregate consideration of $454,900,000 from
United Biscuits (Holdings) plc. Keebler is the second largest cookie and cracker
manufacturer in the United States. The acquisition of Keebler Corporation was
financed through the equity of INFLO and bank borrowings. The Company accounts
for its investment in INFLO using the equity method of accounting.
On June 4, 1996, Keebler Corporation acquired 100% of Sunshine Biscuits
from G. F. Industries, Inc. (GFI) for an aggregate purchase price of
$171,600,000. The acquisition was funded by Keebler Corporation's working
capital, bank financing and the issuance to GFI of $23,600,000 of INFLO common
stock and warrants. In fiscal 1996, the Company recognized a pre-tax gain on the
shares issued to GFI of $4,111,000. As a result of this transaction, the
Company's interest in INFLO was reduced to 45.2%.
F-23
<PAGE> 79
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Condensed financial information of INFLO is as follows:
<TABLE>
<CAPTION>
APRIL 19, 1997 APRIL 20, 1996
-------------- --------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Current assets.............................................. $ 332,782 $252,791
Total assets................................................ 1,081,984 867,429
Current liabilities......................................... 347,647 384,635
Total liabilities........................................... 911,997 741,174
Common stockholders' equity................................. 169,987 126,255
Total liabilities and common stockholders' equity........... 1,081,984 867,429
</TABLE>
<TABLE>
<CAPTION>
APRIL 21, 1996 -- APRIL 19, 1997 JANUARY 26, 1996 -- APRIL 20, 1996
-------------------------------- ----------------------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Sales.......................... $1,907,307 $345,600
Gross profit................... 1,030,539 177,900
Net income..................... 19,411 1,255
</TABLE>
On November 20, 1997, INFLO was merged into Keebler Corporation and
subsequently changed its name to Keebler Foods Company ("Keebler"). Condensed
financial information of Keebler for the period included in the Company's
results for the twenty-seven weeks ended January 3, 1998 are as follows:
<TABLE>
<CAPTION>
JANUARY 3, 1998
----------------------
(AMOUNTS IN THOUSANDS)
<S> <C>
Current assets.............................................. $ 301,646
Total assets................................................ 1,042,851
Current liabilities......................................... 368,185
Total liabilities........................................... 820,800
Common stockholders' equity................................. 222,051
Total liabilities and common stockholders' equity........... 1,042,851
</TABLE>
<TABLE>
<CAPTION>
JUNE 29, 1997 - JANUARY 3, 1998
-------------------------------
(AMOUNTS IN THOUSANDS)
<S> <C>
Sales................................................. $1,164,224
Gross profit.......................................... 668,529
Net income............................................ 45,372
</TABLE>
As presented above, the Company's net income from its investment in Keebler
for the twenty-seven weeks ended January 3, 1998, includes twenty-seven weeks of
Keebler's operating results. The increase in retained earnings reflected as
equity from investment in unconsolidated affiliate of $2,700,000 was
necessitated by the Company's change in fiscal year end and represents the
elimination of the lag of approximately two months in its recognition of
Keebler's results.
Currently, Keebler's existing credit agreement places certain restrictions
on its ability to pay dividends. As of January 3, 1998, the Company had
recognized aggregate equity of $29 million from its investment in Keebler.
F-24
<PAGE> 80
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. UNAUDITED QUARTERLY FINANCIAL INFORMATION
Results of operations for each of the two quarters of the twenty
seven-weeks ended January 3, 1998 and for each of the four quarters of the
fiscal years ended June 28, 1997 and June 29, 1996 follow (each quarter
represents a period of twelve weeks except the fourth quarter, which includes
sixteen weeks and the second quarter of 1998, which includes fifteen weeks):
<TABLE>
<CAPTION>
QUARTER FIRST SECOND THIRD FOURTH
------- --------- --------- --------- ---------
1998 1998
1997 1997 1997 1997
1996 1996 1996 1996
--------- --------- --------- ---------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales...................................... $308,387 $475,710(1) $ -- $ --
322,710 381,290 301,392 432,321
269,674 290,538 275,013 403,339
Gross Profit............................... 142,911 222,260(1) -- --
140,438 164,756 142,278 202,442
125,893 130,676 125,398 181,835
Income before income taxes................. 15,364 9,655(1) -- --
32,925 19,175 9,912 25,782
12,696 12,749 9,135 13,760
Net (loss) income from investment in
unconsolidated affiliate................. 5,157 12,904(1) -- --
(531) 336 6,005 1,911
-- -- -- 613
Net income................................. 14,529 9,031(1) -- --
19,948 12,263 12,170 17,943
7,897 7,930 5,682 9,259
Basic net income per common share.......... .16 .10(1) -- --
.23 .14 .14 .20
.09 .09 .07 .11
Diluted net income per common share........ .16 .10(1) -- --
.23 .14 .14 .20
.09 .09 .07 .11
</TABLE>
- ---------------
(1) Amounts relate to a fifteen week period ended January 3, 1998 and, as such,
do not correspond to the amounts reported in the Company's Second Quarter
Form 10-Q for the twelve week period ended December 13, 1997.
F-25
<PAGE> 81
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. NET INCOME PER SHARE
Earnings per share is calculated using the weighted average number of
common and common equivalent shares outstanding during each period. The common
stock equivalents consist of the incremental shares associated with the
Company's stock option plans, as determined under the treasury stock method.
The following table sets forth the computation of basic and diluted net
income per shares:
<TABLE>
<CAPTION>
27 WEEKS 52 WEEKS ENDED
ENDED --------------------------------------------
JANUARY 3, 1998 JUNE 28, 1997 JUNE 29, 1996 JULY 1, 1995
--------------- ------------- ------------- ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Numerator:
Income before cumulative effect of changes
in accounting principles, net of tax... $33,448 $62,324 $30,768 $42,301
Cumulative effect of changes in accounting
principles, net of tax................. (9,888)
------- ------- ------- -------
Net income................................ $23,560 $62,324 $30,768 $42,301
======= ======= ======= =======
Denominator:
Basic weighted average shares............. 88,368 88,000 86,933 86,229
Effect of dilutive securities:
Stock options.......................... 405 401 278 209
------- ------- ------- -------
Diluted weighted average shares........... 88,773 88,401 87,211 86,438
======= ======= ======= =======
</TABLE>
NOTE 16. UNAUDITED OPERATING RESULTS FOR THE TWENTY-SEVEN WEEKS ENDED JANUARY
4, 1997
The unaudited condensed results of operations for the twenty-seven weeks
ended January 4, 1997 are presented below. In the opinion of the Company, the
accompanying unaudited consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly the
results of operations.
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
-----------------------
<S> <C>
Sales....................................................... $774,767
Income before income taxes.................................. 50,335
Income taxes................................................ 19,027
Net loss from investment in unconsolidated affiliate........ (195)
Net income.................................................. 31,113
Earnings per share -- basic................................. .35
Earnings per share -- diluted............................... .35
</TABLE>
F-26
<PAGE> 82
FLOWERS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. SUBSEQUENT EVENT
On February 3, 1998, the Company acquired an additional 11.5% of the common
stock of Keebler, giving the Company a controlling ownership position in Keebler
of approximately 55%. Under the terms of the acquisition agreement, the Company
paid $308,624,000 in cash at closing. The acquisition was financed through
borrowings under the $500,000,000 syndicated loan facility.
The following unaudited condensed combined pro forma results of operations
assume the acquisition occurred as of the beginning of each period:
<TABLE>
<CAPTION>
FOR THE FOR THE
TWENTY-SEVEN WEEKS FIFTY-TWO WEEKS
ENDED ENDED
JANUARY 3, 1998 JUNE 28, 1997
------------------ ---------------
(AMOUNTS IN THOUSANDS EXCEPT PER
SHARE DATA)
<S> <C> <C>
Sales....................................................... $1,792,419 $3,421,082
Net income.................................................. 27,915 56,765
Earnings per share -- basic................................. .32 .65
Earnings per share -- diluted............................... .31 .64
</TABLE>
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the acquisition been consummated
as of the beginning of the period, nor are they necessarily indicative of future
operating results.
F-27
<PAGE> 83
[INSIDE BACK COVER PAGE GRAPHICS: PHOTOGRAPH OF SUWANEE, GEORGIA FROZEN
DISTRIBUTION WAREHOUSE INTERIOR -- CAPTION: MRS. SMITH'S BAKERIES' 225,000
SQUARE FOOT FROZEN DISTRIBUTION CENTER IN SUWANEE, GEORGIA]
<PAGE> 84
[LOGO OF FLOWERS]
<PAGE> 85
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS (Subject to Completion)
ISSUED APRIL 21, 1998
10,000,000 SHARES
FLOWERS INDUSTRIES, INC.
COMMON STOCK
------------------------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY.
OF THE 10,000,000 SHARES OF COMMON STOCK OFFERED HEREBY, 2,000,000 SHARES ARE
BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS AND 8,000,000 SHARES ARE BEING OFFERED INITIALLY IN
THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE "UNDERWRITERS." THE
COMMON STOCK OF THE COMPANY IS LISTED ON THE NEW YORK STOCK EXCHANGE UNDER THE
SYMBOL "FLO." ON APRIL 20, 1998, THE LAST REPORTED SALE PRICE OF THE COMMON
STOCK ON THE NEW YORK STOCK EXCHANGE WAS $23 1/4 PER SHARE.
CONCURRENTLY WITH THIS OFFERING OF COMMON STOCK, THE COMPANY IS OFFERING,
PURSUANT TO A SEPARATE PROSPECTUS, $200,000,000 PRINCIPAL AMOUNT OF %
DEBENTURES DUE 2028. CONSUMMATION OF THE COMMON STOCK OFFERING AND THE
DEBENTURES OFFERING ARE NOT CONDITIONED UPON EACH OTHER. SEE "USE OF PROCEEDS."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------
<S> <C> <C> <C>
Per Share........................................ $ $ $
Total(3)......................................... $ $ $
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at
$1,700,000.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
1,500,000 additional shares of Common Stock at the price to public less
underwriting discounts and commissions, for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise such option
in full, the total price to public, underwriting discounts and
commissions and proceeds to Company will be $ , $ and
$ , respectively. See "Underwriters."
------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by King & Spalding, counsel for the Underwriters. It is expected that delivery
of the Shares will be made on or about , 1998 at the office of Morgan
Stanley & Co. Incorporated, New York, N.Y. against payment therefor in
immediately available funds.
------------------------
MORGAN STANLEY DEAN WITTER SBC WARBURG DILLON READ
, 1998
<PAGE> 86
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS (Subject to Completion)
ISSUED APRIL 21, 1998
$200,000,000
FLOWERS INDUSTRIES, INC.
% DEBENTURES DUE 2028
------------------------
Interest payable April and October
------------------------
THE DEBENTURES WILL BE REDEEMABLE ON AT LEAST 30 DAYS NOTICE AT THE OPTION OF
THE COMPANY, IN WHOLE OR FROM TIME TO TIME IN PART, AT A REDEMPTION PRICE EQUAL
TO THE GREATER OF (I) 100% OF THE PRINCIPAL AMOUNT OF THE DEBENTURES TO BE
REDEEMED AND (II) THE SUM OF THE PRESENT VALUES OF THE REMAINING SCHEDULED
PAYMENTS OF PRINCIPAL AND INTEREST THEREON (EXCLUSIVE OF INTEREST ACCRUED TO
SUCH REDEMPTION DATE) DISCOUNTED TO SUCH REDEMPTION DATE ON A SEMIANNUAL BASIS
(ASSUMING A 360-DAY YEAR CONSISTING OF TWELVE 30-DAY MONTHS) AT THE TREASURY
RATE PLUS BASIS POINTS, PLUS IN EITHER CASE, ACCRUED AND UNPAID INTEREST ON
THE PRINCIPAL AMOUNT BEING REDEEMED TO SUCH REDEMPTION DATE. THE DEBENTURES WILL
BE REPRESENTED BY A GLOBAL CERTIFICATE REGISTERED IN THE NAME OF THE NOMINEE OF
THE DEPOSITORY TRUST COMPANY, WHICH WILL ACT AS THE DEPOSITARY (THE
"DEPOSITARY"). BENEFICIAL INTERESTS IN THE GLOBAL CERTIFICATE WILL BE SHOWN ON,
AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY THE
DEPOSITARY AND, WITH RESPECT TO THE BENEFICIAL OWNERS' INTERESTS, BY THE
DEPOSITARY'S PARTICIPANTS. EXCEPT AS DESCRIBED IN THIS PROSPECTUS, DEBENTURES IN
DEFINITIVE FORM WILL NOT BE ISSUED. SETTLEMENT FOR THE DEBENTURES WILL BE IN
SAME-DAY FUNDS. SEE "DESCRIPTION OF THE DEBENTURES -- BOOK-ENTRY, DELIVERY AND
FORM."
CONCURRENTLY WITH THIS OFFERING OF THE DEBENTURES, THE COMPANY IS OFFERING
10,000,000 SHARES OF COMMON STOCK OF THE COMPANY (11,500,000 SHARES IF THE
OVER-ALLOTMENT OPTION TO THE U.S. UNDERWRITERS IS EXERCISED IN FULL) IN A UNITED
STATES OFFERING AND AN INTERNATIONAL OFFERING (THE "COMMON STOCK OFFERING"). THE
NET PROCEEDS OF THE COMMON STOCK OFFERING AND THE DEBENTURES OFFERING ARE
EXPECTED TO BE USED TO REPAY INDEBTEDNESS AND FOR GENERAL CORPORATE PURPOSES.
SEE "USE OF PROCEEDS." CONSUMMATION OF THE COMMON STOCK OFFERING AND THE
DEBENTURES OFFERING ARE NOT CONDITIONED ON EACH OTHER. APPLICATION WILL BE MADE
FOR THE DEBENTURES TO BE LISTED ON THE NEW YORK STOCK EXCHANGE.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
PRICE % AND ACCRUED INTEREST, IF ANY
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
--------- -------------- -------------
<S> <C> <C> <C>
Per Debenture........................................ % % %
Total................................................ $ $ $
</TABLE>
- ------------
(1) Plus accrued interest, if any, from , 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(3) Before deducting expenses payable by the Company estimated at $1,300,000.
------------------------
The Debentures are offered, subject to prior sale, when, as and if accepted
by the Underwriters named herein and subject to approval of certain legal
matters by King & Spalding, counsel for the Underwriters. It is expected that
delivery of the Debentures will be made on or about , 1998, through
the book-entry facilities of the Depositary against payment therefor in
immediately available funds.
------------------------
MORGAN STANLEY DEAN WITTER SBC WARBURG DILLON READ INC.
, 1998
<PAGE> 87
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE DEBENTURES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Information by Reference...........
Available Information.......................................
Summary.....................................................
Forward-Looking Statements..................................
Risk Factors................................................
Use of Proceeds.............................................
Capitalization..............................................
Unaudited Pro Forma Condensed Consolidated Financial
Statements................................................
Selected Consolidated Historical Financial Data.............
Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................
Business....................................................
Management..................................................
Description of the Debentures...............................
Underwriters................................................
Legal Matters...............................................
Experts.....................................................
Index to Consolidated Financial Statements.................. F-1
</TABLE>
------------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, DEBENTURES IN THE OPEN MARKET. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITERS."
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<PAGE> 88
THE OFFERING
Securities Offered......... $200,000,000 aggregate principal amount at maturity
of % Debentures due 2028 (the "Debentures").
See "Description of the Debentures."
Interest Rate.............. % per annum
Interest Payment Dates..... April and October of each year, commencing
October , 1998.
Redemption by Company...... The Debentures will be redeemable on at least 30
days notice at the option of the Company, in
whole or from time to time in part, at the
redemption price set forth in "Description of the
Debentures -- Redemption at the Option of the
Company," in each case together with accrued and
unpaid interest.
Certain Covenants.......... The Indenture governing the Debentures contains
certain covenants that, among other things, limit
the ability of the Company and certain of its
subsidiaries to create liens, enter into sale and
lease-back transactions and engage in mergers and
consolidations or transfer substantially all of
the Company's assets. See "Description of the
Debentures -- Covenants."
Use of Proceeds............ The net proceeds from the issuance of the
Debentures will be used to repay the Company's
indebtedness and for other general corporate
purposes. See "Use of Proceeds."
Concurrent Equity
Offering................... Concurrently with the Debenture Offering, the
Company intends to issue 10,000,000 shares of
Common Stock (11,500,000 if the U.S.
Underwriters' over-allotment option is
exercised). The Company intends to use the net
proceeds of the Common Stock Offering to repay
indebtedness under a revolving credit facility
and for general corporate purposes. See "Use of
Proceeds." Consummation of the Debentures
Offering and the Common Stock Offering are not
conditioned upon each other.
Listing.................... The Company intends to make application to list the
Debentures on the NYSE.
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<PAGE> 89
RISK FACTORS
[NOTE: THIS RISK FACTOR SUPPLEMENTS THE RISK FACTORS CONTAINED IN THE
COMMON STOCK PROSPECTUS.]
ABSENCE OF PRIOR PUBLIC MARKET FOR THE DEBENTURES
Prior to the Debentures Offering, there has been no trading market for the
Debentures. Although the Company intends to make application to list the
Debentures on the NYSE, there can be no assurance that an active trading market
for the Debentures will develop or, if one does develop, that it will be
maintained. If an active market for the Debentures fails to develop or be
sustained, the trading price of such Debentures could be materially adversely
affected.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Debentures, after deducting the expenses of this offering, are estimated to be
approximately $197 million. The Company intends to apply the net proceeds from
both the Debentures Offering and the Common Stock Offering to repay
indebtedness, principally incurred in connection with the Keebler Acquisition,
under the Amended and Restated Credit Agreement dated as of January 30, 1998,
among the Company, Wachovia Bank, N.A., as Agent, The Bank of Nova Scotia, as
Documentation Agent, NationsBank, N.A., as Syndications Agent, and the banks
(the "Banks") named therein (the "Revolving Credit Facility"), to repay other
miscellaneous indebtedness (the "Miscellaneous Indebtedness") and for general
corporate purposes. The Revolving Credit Facility permits the Company to borrow
from time to time up to $500 million and terminates on January 29, 2003, unless
extended by the Banks in their sole discretion. Amounts drawn as of April 20,
1998, under the Revolving Credit Facility aggregated approximately $422 million
in principal amount and bore interest at an annual rate of 6.1%. As of April 20,
1998, the aggregate principal amount of the Miscellaneous Indebtedness was
approximately $13 million with a weighted average interest rate of 7.41%.
Pending such uses, the Company will invest the proceeds in marketable,
investment grade debt instruments of the United States Government.
DESCRIPTION OF THE DEBENTURES
The Debentures will be unsecured general obligations of the Company and
will be issued under an Indenture, to be dated as of , 1998 (the
"Indenture"), between the Company and SunTrust Bank, Atlanta, as Trustee (the
"Trustee"). The following description of certain terms of the Indenture and the
Debentures does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the provisions of the Indenture, including the
definitions therein and those terms made a part thereof by reference to the
Trust Indenture Act of 1939, as amended. Whenever particular defined terms of
the Indenture not otherwise provided herein are referred to, such defined terms
are incorporated herein by reference. For definitions of certain capitalized
terms used in the following summary, see "-- Certain Definitions."
GENERAL
The Debentures will bear interest from , 1998, at the rate
shown on the front cover of this Prospectus. Interest will be payable on April
and October of each year, commencing on October , 1998, to holders of
record of such Debentures at the close of business on the preceding
and . The Debentures will mature on , 2028. The Debentures
will be limited to $200 million aggregate principal amount. The Debentures are
not subject to any sinking fund.
REDEMPTION AT THE OPTION OF THE COMPANY
The Debentures will be redeemable, in whole or from time to time in part,
at the option of the Company on any date (a "Redemption Date"), at a redemption
price equal to the greater of (i) 100% of the principal amount of the Debentures
to be redeemed and (ii) the sum of the present values of the remaining scheduled
payments of principal and interest thereon (exclusive of interest accrued to
such Redemption Date) discounted to such Redemption Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-
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<PAGE> 90
day months) at the Treasury Rate plus basis points, plus, in either case,
accrued and unpaid interest on the principal amount being redeemed to such
Redemption Date; provided that installments of interest on Debentures which are
due and payable on an Interest Payment Date falling on or prior to the relevant
Redemption Date shall be payable to the Holders of such Debentures, registered
as such at the close of business on the relevant record date according to their
terms and the provisions of the Indenture.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the Debentures to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Debentures.
"Comparable Treasury Price" means, with respect to any Redemption Date of
the Debentures, (i) the average of five Reference Treasury Dealer Quotations for
such Redemption Date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than five such
Reference Treasury Dealer Quotations, the average of all such quotations.
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated or,
if such firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by the
Trustee after consultation with the Company.
"Reference Treasury Dealer" means (i) Morgan Stanley & Co. Incorporated and
its successors; provided, however, that if the foregoing shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company will substitute therefor another Primary Treasury Dealer,
and (ii) any other Primary Treasury Dealer selected by the Independent
Investment Banker after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.
"Treasury Rate" means, with respect to any Redemption Date for the
Debentures, (i) the yield, under the heading which represents the average for
the immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities"
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the maturity date of the Debentures,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall be determined and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight line basis, rounding
to the nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Redemption Date. The Treasury
Rate shall be calculated on the third Business Day preceding the Redemption
Date.
Notice of redemption by the Company will be mailed at least 30 days but not
more than 60 days before any Redemption Date to each Holder of Debentures to be
redeemed. If less than all the Debentures are to be redeemed at the option of
the Company, the Trustee shall select, in such manner as it shall deem fair and
appropriate, the Debentures to be redeemed in whole or in part.
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<PAGE> 91
Unless the Company defaults in payment of the redemption price, on and
after any Redemption Date interest will cease to accrue on the Debentures or
portions thereof called for redemption.
COVENANTS
The Indenture contains various covenants, including the following:
Limitation on Liens. The Company will not, and will not permit any
Subsidiary to, Incur any Debt secured by a Lien on any Principal Property or on
any shares of stock or indebtedness of any Subsidiary, without making effective
provision for securing the Debentures equally and ratably with such Debt.
The foregoing restrictions will not apply to: (i) Liens on any Principal
Property acquired, constructed or improved after the date of the Indenture,
which Liens are created within 180 days of such acquisition, construction or
improvement, to secure Debt Incurred for the payment of all or any part of the
purchase price or the cost of construction or improvement of the Principal
Property in an aggregate principal amount not to exceed the fair market value of
such property, construction or improvements; (ii) Liens on any Principal
Property, shares of stock or indebtedness of a Person existing prior to the time
(A) such Person becomes a Subsidiary of the Company, (B) such Person merges into
or consolidates with the Company or a Subsidiary of the Company or (C) a
Subsidiary of the Company merges into or consolidates with such Person (in a
transaction in which such Person becomes a Subsidiary of the Company); (iii)
Liens on Principal Property securing Debt owed by a Subsidiary to the Company or
any other Subsidiary; (iv) Liens on Principal Property in existence on the date
of the Indenture; (v) Liens on any unimproved real Principal Property
constructed or improved after the date of the Indenture to secure the payment of
all or part of the cost of such construction or improvement; (vi) Liens on any
Principal Property of the Company or any Subsidiary in favor of governmental
bodies; (vii) Liens created by pledges or deposits required in connection with
workers' compensation, unemployment insurance and other social security
legislation and deposits securing obligations to insurance carriers under
insurance policies or self-insurance arrangements of the Company or a
Subsidiary; (viii) Liens to secure taxes not yet due or which are being
contested in good faith by the Company or a Subsidiary; and (ix) Liens to secure
any extension, renewal, refinancing or refunding (or successive extensions,
renewals, refinancings or refundings), in whole or in part, of any Debt secured
by Liens referred to in the foregoing clauses (i) through (viii), so long as
such Lien does not extend to any other property and the Debt so secured is not
increased.
Notwithstanding the foregoing, the Company or any Subsidiary may Incur Debt
secured by Liens which otherwise would be subject to the foregoing restrictions,
in an aggregate amount which, together with all other such Debt outstanding
secured by Liens and all Attributable Debt outstanding in respect of Sale and
Leaseback Transactions (other than as permitted by clause (i) under the
"Limitation on Sale and Leaseback Transactions" covenant below), does not exceed
10% of Consolidated Net Tangible Assets.
Limitation on Sale and Leaseback Transactions. The Company will not, and
will not permit any Subsidiary to, enter into any Sale and Leaseback Transaction
on any Principal Property (except transactions between the Company and any
Subsidiary and transactions for a period not exceeding three years) unless: (i)
the Company or such Subsidiary would be entitled to incur a Lien to secure Debt
by reason of the provisions described in clauses (i) through (ix) of the second
paragraph under the "Limitation on Liens" covenant in an amount equal to the
Attributable Debt of such Sale and Leaseback Transaction without equally and
ratably securing the Debentures or (ii) the Company or such Subsidiary applies
within 120 days an amount equal to, in the case of a sale or transfer for cash,
the net proceeds (not exceeding the net book value), and, otherwise, an amount
equal to the fair value (as determined by its Board of Directors), of the
property so leased to (A) the retirement of Debentures or other Funded Debt of
the Company or such Subsidiary or (B) the acquisition of property which
constitutes a Principal Property.
Limitation on Consolidation, Merger and Sale of Assets. The Indenture
provides that the Company may consolidate with, or sell, convey or lease all or
substantially all of its assets to, or merge with or into, any other
corporation, if (i) either the Company is the continuing corporation, or the
successor corporation is a domestic corporation and expressly assumes the due
and punctual payment of the principal of and interest on the Debentures
outstanding under the Indenture according to their tenor and the due and
punctual
A-5
<PAGE> 92
performance and observance of all of the covenants and conditions of the
Indenture to be performed or observed by the Company and (ii) immediately after
such merger or consolidation, or such sale, conveyance or lease, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing.
EVENTS OF DEFAULT
The Indenture defines the following events as "Events of Default": (a)
failure to pay interest on the Debentures after the interest becomes due and
payable and continuance of such default for a period of 30 days; (b) failure to
pay all or any portion of the principal of the Debentures when such principal
becomes due and payable, without any grace period; (c) default in the
performance, or breach, of any covenant which results in the acceleration of
Debt of the Company or any Subsidiary in excess of $10 million and failure of
such acceleration to be rescinded or such Debt to be discharged within 10 days;
(d) failure to pay any amount due and payable in respect of any Debt of the
Company or any Subsidiary in excess of $10 million and the failure of such
default to be rescinded or such Debt to be discharged within 10 days; (e)
default in the performance, or breach, of any other covenant of the Company for
the benefit of the Debentures that continues for a period of 60 days (or such
other period specified in the Indenture) after written notice of such default
has been given (i) to the Company by the Trustee or (ii) to the Company and the
Trustee by the holders of at least 25% of the Debentures then outstanding; or
(f) certain events of bankruptcy, insolvency, or reorganization.
The Indenture provides that the Trustee shall notify the holders of the
Debentures of the occurrence of a default known to the Trustee with respect to
the Debentures within 90 days after the Trustee has knowledge thereof. The
Indenture provides that notwithstanding the foregoing, except in the case of
default in the payment of the principal of or interest on the Debentures the
Trustee may withhold such notice if the Trustee in good faith determines that
the withholding of such notice is in the interests of the holders of the
Debentures.
The Indenture provides that if an Event of Default (other than an Event of
Default described in clause (f) above) with respect to the Debentures shall have
occurred and be continuing, either the Trustee or the holders of not less than
25% in aggregate principal amount of the Debentures then outstanding may declare
the principal amount of, and accrued and unpaid interest on, the Debentures to
be due and payable immediately. Upon certain conditions such acceleration may be
annulled. The Indenture provides that if an Event of Default described in clause
(f) shall have occurred and be continuing, the principal amount of (and accrued
and unpaid interest on) the Debentures shall ipso facto become due and payable
immediately, without any declaration or other act on the part of the Trustee or
any holder. Any past defaults and the consequences thereof (except a default in
the payment of principal of or interest on the Debentures) may be waived by the
holders of a majority in principal amount of the Debentures then outstanding.
The Indenture also permits the Company not to comply with certain covenants in
the Indenture with respect to the Debentures upon waiver by the holders of a
majority in principal amount of the Debentures then outstanding.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default with respect to the Debentures shall occur
and be continuing, the Trustee shall not be under any obligation to exercise any
of the trust powers vested in it by the Indenture at the request or direction of
any of the holders of the Debentures, unless such holders shall have offered to
the Trustee reasonable security or indemnity. The holders of a majority in
aggregate principal amount of the Debentures then outstanding shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee under the Indenture or exercising any trust
power conferred on the Trustee with respect to the Debentures; provided that the
Trustee may refuse to follow any direction which is in conflict with any law or
the Indenture and subject to certain other limitations.
No holder of the Debentures will have any right by virtue or by availing of
any provision of the Indenture to institute any proceeding at law or in equity
or in bankruptcy or otherwise upon or under or with respect to the Indenture or
for any remedy thereunder, unless such holder shall have previously given the
Trustee written notice of an Event of Default with respect to the Debentures and
unless also the holders of at least 25% in
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<PAGE> 93
aggregate principal amount of the outstanding Debentures shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee and the Trustee shall have failed to institute such
proceeding within 60 days after its receipt of such request, and the Trustee
shall not have received from the holders of a majority in aggregate principal
amount of the outstanding Debentures a direction inconsistent with such request.
However, the right of a holder of any Debenture to receive payment of the
principal of and any interest on such Debenture on or after the due dates
expressed in such Debenture, or to institute suit for the enforcement of any
such payment on or after such dates, shall not be impaired or affected without
the consent of such holder.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture with respect to the Debentures (except for certain specified
surviving obligations including, among other things, the Company's obligation to
pay the principal of and interest on the Debentures) will be discharged and
canceled upon the satisfaction of certain conditions, including the payment of
all principal of and interest on all the Debentures or the deposit with the
Trustee of cash or appropriate Government Obligations or a combination thereof
sufficient for such payment in accordance with the Indenture and the terms of
the Debentures.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Debentures at the time outstanding under the Indenture,
to execute supplemental indentures adding any provisions to, or changing in any
manner or eliminating any of the provisions of, the Indenture or any
supplemental indenture with respect to the Debentures or modifying in any manner
the rights of the holders of the Debentures; provided that no such supplemental
indenture may (i) extend the stated maturity of the principal of any Debenture
or reduce the principal amount thereof or reduce the rate or extend the time of
payment of any interest thereof, or impair or affect the right of any holder of
Debentures to institute suit for payment thereof, or any right of repayment at
the option of the holders of the Debentures, without the consent of the holder
of each Debenture so affected, or (ii) reduce the aforesaid percentage of
Debentures the consent of holders of which is required for any such supplemental
indenture, without the consent of the holders of all Debentures so affected.
Additionally, in certain prescribed instances, including the establishment of
the forms or terms of the Debentures, the Company and the Trustee may execute
supplemental indentures without the consent of the holders of the Debentures.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may elect either (a) to terminate
(and be deemed to have satisfied) all its obligations with respect to such
Debentures (except for the obligations to register the transfer or exchange of
such Debentures, to replace mutilated, destroyed, lost or stolen Debentures, to
maintain an office or agency in respect of the Debentures, to compensate and
indemnify the Trustee and to punctually pay or cause to be paid the principal of
and interest on all Debentures when due) ("defeasance") or (b) to be released
from its obligations with respect to such Debentures described above under
"-- Covenants" ("covenant defeasance"), upon the deposit with the Trustee, in
trust for such purpose, of money and/or Government Obligations which through the
payment of principal and interest in accordance with their terms will provide
money, in an amount sufficient (in the opinion of a nationally recognized firm
of independent public accountants) to pay the principal of and interest, if any,
on the outstanding Debentures, on the scheduled due dates therefor. Such a trust
may be established only if, among other things, (i) the Company has delivered to
the Trustee an opinion of counsel (as specified in the Indenture) with regard to
certain matters, including an opinion to the effect that the holders of such
Debentures will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and discharge and will be subject to U.S.
federal income tax on the same amounts and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred, and (ii) no Event of Default has occurred or is occurring.
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<PAGE> 94
APPLICABLE LAW
The Debentures and the Indenture will be governed by, and construed in
accordance with, the laws of the State of New York.
CONCERNING THE TRUSTEE
The Trustee may provide various commercial banking services to the Company
from time to time.
CERTAIN DEFINITIONS
The terms set forth below are defined in the Indenture as follows:
"Attributable Debt" when used in connection with a Sale and Leaseback
Transaction involving a Principal Property shall mean, at the time of
determination, the present value of the total net amount of rent required to be
paid under such lease during the remaining term thereof (including any renewal
term or period for which such lease has been extended), discounted at the rate
of interest set forth or implicit in the terms of such lease or, if not
practicable to determine such rate, the weighted average interest rate per annum
borne by the Debentures pursuant to the Indenture compounded semi-annually. For
purposes of the foregoing definition, rent shall not include amounts required to
be paid by the lessee on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of the penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated.
"Consolidated Net Tangible Assets" means the total of all the assets
appearing on the consolidated balance sheet of the Company and its Subsidiaries,
less the following: (a) current liabilities and (b) intangible assets,
including, but without limitation, such items as goodwill, trademarks, trade
names, patents and unamortized debt discount and expense carried as an asset on
said balance sheet. Consolidated Net Tangible Assets shall be determined in
accordance with generally accepted accounting principles applied on a consistent
basis and shall be determined by reference to the most recent publicly available
quarterly or annual, as the case may be, consolidated balance sheet of the
Company.
"Debt" of a Person means all indebtedness of such Person which is for money
borrowed.
"Funded Debt" means Debt which by its terms matures at, or can be extended
or renewed at the option of the obligor to, a date more than twelve months after
the date of the Debt's creation, including, but not limited to, outstanding
revolving credit loans.
"Government Obligations" means, unless otherwise specified pursuant to the
Indenture, securities which are (i) direct obligations of the United States
government for which its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by, or acting as an agency or instrumentality
of, the United States government, the payment of which obligations is
unconditionally guaranteed by the United States government, and which, in either
case, are full faith and credit obligations of the United States government, and
which are not callable or redeemable at the option of the issuer thereof prior
to their stated maturity.
"Lien" means any mortgage or deed of trust, pledge, assignment, security
interest, lien, charge, or other encumbrance or preferential arrangement
(including, without limitation, any conditional sale or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
"Incur" means to issue, incur, assume, guarantee, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
the payment of, any Debt.
"Principal Property" means land, land improvement, buildings and associated
factory and laboratory equipment used by the Company or any Subsidiary primarily
for processing, producing, packaging or storing its products, raw materials,
inventories or other materials or supplies, in any case owned or leased pursuant
to a capital lease by the Company or any Subsidiary, or any interest of the
Company or any Subsidiary in such property (in each case including the real
estate related thereto) located within the United States of America.
A-8
<PAGE> 95
"Sale and Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such person of any property or asset of such Person which has
been or is being sold or transferred by such Person more than one year after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other similar amount due under such arrangement
prior to the first date on which such arrangement may be terminated by the
lessee without payment of a penalty.
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of the
outstanding capital stock (or other interests entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, general
partners, managers, managing members, managing partners or trustees thereof or,
if such persons are not elected, to vote on any matter that is submitted to the
vote of all persons holding ownership interests in such entity) is at the time
owned or controlled, directly or indirectly, by (i) the Company, (ii) the
Company and one or more Subsidiaries or (iii) one or more Subsidiaries;
provided, however, that the term Subsidiary does not include (a) Keebler Foods
Company and its subsidiaries or (b) any other corporation, association,
partnership or other business entity (1) of which the Company owns or controls
directly or indirectly less than 80% of such total voting power of the
outstanding capital stock and (2) which has outstanding securities that have
been registered under the Securities Act or the Exchange Act.
BOOK-ENTRY, DELIVERY AND FORM
The Debentures to be sold as set forth herein will be issued in the form of
a fully registered Global Certificate (the "Global Certificate"). The Global
Certificate will be deposited on the date of the closing of the sale of the
Debentures offered hereby with, or on behalf of, The Depository Trust Company
(the "Depositary") and registered in the name of its nominee (such nominee being
referred to herein as the "Global Certificate Holder") or will remain in the
custody of the Trustee pursuant to a FAST Balance Certificate Agreement or
similar agreement between the Depositary and the Trustee.
Except as set forth below, the Global Certificate may be transferred, in
whole and not in part, only to another nominee of the Depositary or to a
successor of the Depositary or its nominee.
The Depositary has advised the Company and the Underwriters as follows: the
Depositary is a limited purpose trust company created to hold securities that
its participating organizations ("Participants") deposit with the Depositary and
to facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes to accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. "Participants" include securities brokers and dealers (including
the Underwriters), banks, trust companies, clearing corporations and certain
other organizations. Access to the Depositary's book-entry system is also
available to others, such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with
Participants, either directly or indirectly ("Indirect Participants"). Persons
who are not Participants may beneficially own securities held by the Depositary
only through Participants or Indirect Participants.
The Depositary has also advised that pursuant to procedures established by
it (i) upon the issuance by the Company of the Debentures, the Depositary will
credit the accounts of Participants designated by the Underwriters with the
principal amount of the Debentures purchased by the Underwriters and (ii)
ownership of beneficial interests in the Global Certificate will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the Depositary (with respect to Participants' interests), the
Participants and the Indirect Participants. The laws of some states require that
certain persons take physical delivery in definitive form of securities which
they own. Consequently, the ability to transfer beneficial interests in the
Global Certificate is limited to such extent.
A-9
<PAGE> 96
All payments on the Global Certificate registered in the name of the
Depositary's nominee will be made by the Company through the Paying Agent to the
Depositary's nominee as the registered owner of the Global Certificate. Under
the terms of the Indenture, the Company and the Trustee will treat the persons
in whose names the Debentures are registered as the owners of such Debentures
for the purpose of receiving payment of principal and interest on such
Debentures and for all other purposes whatsoever. Therefore, neither the
Company, the Trustee nor the Paying Agent has any direct responsibility or
liability for the payment of principal or interest on the Debentures to owners
of beneficial interests in the Global Certificate. The Depositary has advised
the Company and the Trustee that its current practice is, upon receipt of any
payment of principal or interest, to credit immediately the accounts of the
Participants with payments in amounts proportionate to their respective holdings
in principal amount of beneficial interests in the Global Certificate as shown
in the records of the Depositary. Payments by Participants and Indirect
Participants to owners of beneficial interests in the Global Certificate will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name" and will be the responsibility of such Participants or Indirect
Participants.
The Company will issue Debentures in definitive form in exchange for the
Global Certificate if, and only if, either (1) the Depositary is at any time
unwilling or unable to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, (2) an Event of Default has occurred
and is continuing and the Trustee has received a request from the Depositary to
issue Debentures in definitive form in lieu of all or a portion of the Global
Certificate (in which case the Company shall execute within 30 days of such
request, and the Trustee, upon receipt of an Officers' Certificate, shall
promptly authenticate and make available for delivery Debentures in definitive
form), or (3) the Company determines not to have Debentures represented by a
Global Certificate. In any such instance, an owner of a beneficial interest in
the Global Certificate will be entitled to have Debentures equal in principal
amount to such beneficial interest registered in its name and will be entitled
to physical delivery of such Debentures in physical form. Debentures so issued
in definitive form will be issued in denominations of $1,000 and whole multiples
thereof and will be issued in registered form only, without coupons.
So long as the Global Certificate Holder is the registered owner of the
Global Certificate, the Global Certificate Holder will be considered the sole
Holder under the Indenture of any Debentures evidenced by the Global
Certificate. Beneficial owners of Debentures evidenced by the Global Certificate
will not be considered the owners or Holders thereof under the Indenture for any
purpose, including with respect to the giving of any directions, instructions or
approvals to the Trustee thereunder. Neither the Company nor the Trustee will
have any responsibility or liability for any aspect of the records of the
Depositary or for maintaining, supervising or reviewing any records of the
Depositary relating to the Debentures.
A-10
<PAGE> 97
UNDERWRITERS
Under the terms of and subject to the conditions contained in an
Underwriting Agreement dated the date hereof (the "Debentures Underwriting
Agreement"), the Underwriters named below, for whom Morgan Stanley & Co.
Incorporated and SBC Warburg Dillon Read Inc. are acting as Representatives,
have severally agreed to purchase, and the Company has agreed to sell to them,
severally, the respective principal amounts of the Debentures set forth after
their names below at a purchase price of % of the principal amount thereof,
plus accrued interest, if any, from , 1998, to the date of payment and
delivery:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
NAME OF DEBENTURES
- ---- -------------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
SBC Warburg Dillon Read Inc. ...............................
------------
Total............................................. $200,000,000
============
</TABLE>
The Debentures Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Debentures are subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the
Debentures if any are taken.
The Underwriters initially propose to offer part of the Debentures to the
public at the public offering price set forth on the cover page hereof, and part
to certain dealers at a price that represents a concession not in excess of
% of the principal amount of the Debentures. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of % of the
principal amount of the Debentures to certain other dealers. After the initial
offering of the Debentures, the public offering price and other selling terms
may from time to time be varied by the Underwriters.
The Company intends to make application to list the Debentures on the NYSE.
In order to facilitate the offering of the Debentures, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Debentures. Specifically, the Underwriters may overallot in connection with
the offering of the Debentures, creating a short position in the Debentures for
their own account. In addition, to cover overallotments or to stabilize the
price of the Debentures, the Underwriters may bid for, and purchase, the
Debentures in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Debentures in the offering if the syndicate repurchases previously distributed
Debentures in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the
market price of the Debentures above independent market levels. The Underwriters
are not required to engage in these activities, and may end any of these
activities at any time.
The Debentures Underwriting Agreement provides that the Company will
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act.
From time to time, the Representatives have provided, and continue to
provide, investment banking services to the Company.
LEGAL MATTERS
The validity of the Debentures offered hereby will be passed upon for the
Company by Jones, Day, Reavis & Pogue, Atlanta, Georgia, and for the
Underwriters by King & Spalding, Atlanta, Georgia.
A-11
<PAGE> 98
EXPERTS
The consolidated financial statements of Flowers at January 3, 1998, June
28, 1997 and June 29, 1996 and for the 27 weeks ended January 3, 1998, and the
52 weeks ended June 28, 1997, June 29, 1996, and July 1, 1995, included in this
Prospectus and incorporated by reference herein from the Company's Transition
Report on Form 10-K for the transition period ended January 3, 1998 have been so
included and incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of Keebler (including its predecessor company) as
of and for the fiscal year ended January 3, 1998, the 48-week period ended
December 28, 1996, the four week period ended January 26, 1996, and the fiscal
year ended December 30, 1995, incorporated by reference in this Prospectus from
the Company's Transition Report on Form 10-K for the transition period ended
January 3, 1998 and the Company's Current Report on Form 8-K/A dated March 13,
1998, have been audited by Coopers & Lybrand L.L.P., independent accountants,
and are incorporated by reference herein in reliance on the report of such firm,
given on the authority of that firm as experts in accounting and auditing.
The financial statements of Sunshine as of March 31, 1995 and 1996 and for
each of the three years in the period ended March 31, 1996, incorporated by
reference in this Prospectus from the Company's Current Report on Form 8-K/A
dated March 13, 1998, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated herein by reference
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
A-12
<PAGE> 99
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Estimated expenses in connection with the issuance and distribution of the
securities to be registered, other than underwriting discounts and commissions,
are as follows:
<TABLE>
<CAPTION>
ITEM AMOUNT
- ---- ----------
<S> <C>
Registration fee............................................ $ 140,632
Printing and engraving expenses............................. 240,000
Legal fees and expenses..................................... 450,000
Accounting fees and expenses................................ 225,000
NYSE listing fees........................................... 80,000
NASD fees................................................... 28,172
Trustee fees and expenses................................... 15,000
Miscellaneous expenses...................................... 21,196
----------
Total............................................. $1,200,000
==========
</TABLE>
- ---------------
All such expenses will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 14-2-851 of the Georgia Business Corporation Code
provides that a corporation may indemnify or obligate itself to indemnify an
individual made a party to a proceeding because he or she is or was a director
against liability incurred in the proceeding if (1) such individual conducted
himself or herself in good faith; and (2) such individual reasonably believed
(A) in the case of conduct in his or her official capacity, that such conduct
was in the best interests of the corporation, (B) in all other cases, that such
conduct was at least not opposed to the best interests of the corporation; and
(C) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. Subsection (d) of Section
14-2-851 of the Georgia Business Corporation Code provides that a corporation
may not indemnify a director in connection with a proceeding by or in the right
of the corporation, except for reasonable expenses incurred in connection with
the proceeding if it is determined that the director has met the relevant
standard of conduct, or in connection with any proceeding with respect to
conduct for which he or she was adjudged liable on the basis that personal
benefit was improperly received by him or her, whether or not involving action
in his or her official capacity. Notwithstanding the foregoing, pursuant to
Section 14-2-854 a court may order a corporation to indemnify a director if such
court determines, in view of all the relevant circumstances, that it is fair and
reasonable to indemnify the director even if the director has not met the
relevant standard of conduct set forth in subsections (a) and (b) of Section
14-2-851 of the Georgia Business Corporation Code or was adjudged liable in a
proceeding referred to in subsection (d) of Section 14-2-851 of the Georgia
Business Corporation Code, but if the director was adjudged so liable, the
indemnification shall be limited to reasonable expenses incurred in connection
with the proceeding.
Section 14-2-852 of the Georgia Business Corporation Code provides that, a
corporation shall indemnify a director who was wholly successful, on the merits
or otherwise, in the defense of any proceeding to which a he or she was a party
because he or she was a director of the corporation against reasonable expenses
incurred by the director in connection with the proceeding.
Section 14-2-857 of the Georgia Business Corporation Code provides that a
corporation may indemnify an officer of the corporation who is a party to a
proceeding because he or she is an officer of the corporation to the same extent
as a director. If the officer is not a director (or if the officer is a director
but the sole basis on which he or she is made a party to the proceeding is an
act or omission solely as an officer), to such further extent as may be provided
by the articles of incorporation, the bylaws, a resolution of the board of
directors, or contract except for liability arising out of conduct that
constitutes (1) appropriation, in violation of his or her
II-1
<PAGE> 100
duties, of any business opportunity of the corporation, (2) acts or omissions
which involve intentional misconduct or a knowing violation of law, (3) the
types of liability set forth in Section 14-2-832 of the Georgia Business
Corporation Code or, (4) receipt of an improper personal benefit. An officer of
a corporation who is not a director is entitled to mandatory indemnification
under Section 14-2-852 of the Georgia Business Corporation Code and may apply to
a court under Section 14-2-854 of the Georgia Business Corporation Code for
indemnification, in each case to the same extent to which a director may be
entitled to indemnification under those provisions. Finally, a corporation may
also indemnify an employee or agent who is not a director to the extent,
consistent with public policy, that may be provided by its articles of
incorporation, bylaws, general or specific action by its board of directors, or
contract.
As permitted by Section 14-2-202(b)(4) of the Georgia Business Corporation
Code, the Company's Articles provide that a Director shall not be personally
liable to the Company or its shareholders for monetary damages for breach of
duty of care or other duty as a Director, except for liability: (i) for any
appropriation, in violation of that Director's duties, of any business
opportunity of the Company; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) for
the types of liability set forth in Section 14-2-831 of the Georgia Business
Corporation Code; or (iv) for any transaction from which the Director derived an
improper personal benefit.
The Company's Bylaws (Article 8) provide that the Company shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that he or a person of whom he is
the legal representative is or was a director, officer, employee or agent of the
Company or is or was serving at the request of the Company 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 such person in the proceeding if he acted in a manner he reasonably believed
to be in or not opposed to the best interests of the Company, and with respect
to any criminal action or proceeding, he had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that a person did not
act in a manner which such person reasonably believed to be in or not opposed to
the best interests of the Company, and with respect to any criminal action or
proceeding, had reasonable cause to believe that such person's conduct was
unlawful.
In connection with a proceeding by or in the right of the Company, the
Company shall indemnify any person who was or is a party or who is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding or completed action or suit, whether civil, criminal, administrative
or investigative, by reason of the fact that he or a person of whom he is the
legal representative is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company 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 actually and reasonably incurred by such
person in the proceeding if he acted in good faith and in manner he reasonably
believed to be in or not opposed to the best interests of the Company. However,
no indemnification shall be made in respect to any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Company unless
and only to the extent that the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
Every such person, to the extent that such person has been successful, on
the merits or otherwise, in defense of any action, suit or proceeding, or in
defense of any claim, issue or matter therein, shall be indemnified by the
Company against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
Determination concerning whether or not the applicable standard of conduct
has been met shall be made by (i) the Board of Directors by a majority vote of a
quorum of Directors who were not parties to such action, suit or proceeding;
(ii) if such a quorum is not obtainable or, even if obtainable, a quorum of
disinterested
II-2
<PAGE> 101
Directors so directs, by independent legal counsel in a written opinion; or
(iii) the affirmative vote of a majority of the shares entitled to vote thereon.
Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Company in advance of the final disposition of
such action, suit or proceeding, as authorized in the specific case, upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount if it shall ultimately be determined that such person
is not entitled to be indemnified by the Company. Indemnification and
advancement of expenses pursuant to Article 8 of the Company's Bylaws is not
exclusive of any rights to which such director, officer, employee or agent may
be entitled by any Bylaw or resolution approved by the Board, the notice of
which specified that such Bylaw or resolution would be placed before the
Shareholders, both as to action by a director, officer, employee or agent in
such person's official capacity and as to action in another capacity while
holding such office or position, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
The Company's Bylaws provide that the Company and its officers shall have
the power to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Company or who is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Company would have the power to indemnify such person against such
liability.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The following exhibits are filed as part of this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1 -- Form of Common Stock Underwriting Agreement
1.2 -- Form of Debentures Underwriting Agreement
4.1 -- Form of Indenture between the Company and SunTrust Bank,
Atlanta, as Trustee
5.1 -- Opinion of Jones, Day, Reavis & Pogue
12.1+ -- Computation of Ratio of Earnings to Fixed Charges
23.1 -- Consent of Price Waterhouse LLP
23.2 -- Consent of Coopers & Lybrand L.L.P.
23.3 -- Consent of Deloitte & Touche LLP
23.4 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1)
24.1+ -- Power of Attorney
25.1 -- Statement of Eligibility under the Trust Indenture Act of
1939 of SunTrust Bank, Atlanta
</TABLE>
- ---------------
+ Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement 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> 102
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, 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 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 Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 103
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
Thomasville, in the State of Georgia, on the 21st day of April, 1998.
FLOWERS INDUSTRIES, INC.
<TABLE>
<S> <C> <C>
By: /s/ AMOS R. MCMULLIAN By: /s/ ROBERT P. CROZER By: /s/ C. MARTIN WOOD III
- -------------------------- -------------------------- ---------------------------
Amos R. McMullian Robert P. Crozer C. Martin Wood III
Chairman of the Board and Vice Chairman of the Board Senior Vice President and
Chief Executive Officer Chief Financial Officer
</TABLE>
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 April 21, 1998 in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ AMOS R. MCMULLIAN Chairman of the Board and Chief Executive Officer
- ------------------------------------------------
Amos R. McMullian
/s/ ROBERT P. CROZER Vice Chairman of the Board and a Director
- ------------------------------------------------
Robert P. Crozer
/s/ C. MARTIN WOOD III Senior Vice President, Chief Financial Officer and
- ------------------------------------------------ a Director
C. Martin Wood III
* Director
- ------------------------------------------------
Edward L. Baker
* Director
- ------------------------------------------------
Joe E. Beverly
* Director
- ------------------------------------------------
Franklin L. Burke
* General Counsel, Secretary and a Director
- ------------------------------------------------
G. Anthony Campbell
* Director
- ------------------------------------------------
Langdon S. Flowers
* Director
- ------------------------------------------------
Joseph L. Lanier, Jr.
* Director
- ------------------------------------------------
J. V. Shields, Jr.
* Director
- ------------------------------------------------
Heeth Varnedoe III
</TABLE>
II-5
<PAGE> 104
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JIMMY M. WOODWARD Treasurer and Chief Accounting Officer
- ------------------------------------------------
Jimmy M. Woodward
*By: /s/ C. MARTIN WOOD III
--------------------------------------------
C. Martin Wood III
Attorney-in-fact
</TABLE>
II-6
<PAGE> 1
EXHIBIT 1.1
10,000,000 Shares
FLOWERS INDUSTRIES, INC.
COMMON STOCK, PAR VALUE $.625 PER SHARE
UNDERWRITING AGREEMENT
April , 1998
--
<PAGE> 2
April , 1998
--
Morgan Stanley & Co. Incorporated
SBC Warburg Dillon Read Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Swiss Bank Corporation, acting through its
division SBC Warburg Dillon Read
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
Flowers Industries, Inc., a Georgia corporation (the "Company"),
proposes to issue and sell to the several Underwriters (as defined below)
10,000,000 shares of the Common Stock, par value $.625 per share, of the Company
(the "Firm Shares").
It is understood that, subject to the conditions hereinafter stated,
8,000,000 Firm Shares (the "U.S. Firm Shares") will be sold to the several U.S.
Underwriters named in Schedule I hereto (the "U.S. Underwriters") in connection
with the offering and sale of such U.S. Firm Shares in the United States and
Canada to United States and Canadian Persons (as such terms are defined in the
Agreement Between U.S. and International Underwriters of even date herewith),
and 2,000,000 Firm Shares (the "International Shares") will be sold to the
several International Underwriters named in Schedule II hereto (the
"International Underwriters") in connection with the offering and sale of such
International Shares outside the United States and Canada to persons other than
United States and Canadian Persons. Morgan Stanley & Co. Incorporated and SBC
Warburg Dillon Read Inc. shall act as representatives (the "U.S.
Representatives") of the several U.S. Underwriters, and Morgan Stanley & Co.
International Limited and Swiss Bank Corporation, acting through its division
SBC Warburg Dillon Read, shall act as representatives (the "International
Representatives") of the several International Underwriters. The U.S.
Underwriters and the International Underwriters are hereinafter collectively
referred to as the Underwriters.
The Company also proposes to issue and sell to the several U.S.
Underwriters not more than an additional 1,500,000 shares of its Common Stock,
par value $.625 per share (the "Additional Shares") if and to the extent that
the U.S. Representatives shall have determined to exercise, on
<PAGE> 3
behalf of the U.S. Underwriters, the right to purchase such shares of common
stock granted to the U.S. Underwriters in Section 2 hereof. The Firm Shares and
the Additional Shares are hereinafter collectively referred to as the "Shares."
The shares of Common Stock, par value $.625 per share, of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "Common Stock."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the Shares and certain
debentures the Company intends to issue pursuant to a separate underwriting
agreement. The registration statement contains two prospectuses to be used in
connection with the offering and sale of the Shares: the U.S. prospectus, to be
used in connection with the offering and sale of Shares in the United States and
Canada to United States and Canadian Persons, and the international prospectus,
to be used in connection with the offering and sale of Shares outside the United
States and Canada to persons other than United States and Canadian Persons. The
international prospectus is identical to the U.S. prospectus except for the
outside front cover page. The registration statement as amended at the time it
becomes effective, including information incorporated therein by reference and
the information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as
amended (the "Securities Act"), is hereinafter referred to as the "Registration
Statement"; the U.S. prospectus and the international prospectus in the
respective forms first used to confirm sales of Shares, including information
incorporated therein by reference, are hereinafter collectively referred to as
the "Prospectus." If the Company has filed an abbreviated registration statement
to register additional shares of Common Stock pursuant to Rule 462(b) under the
Securities Act (the "Rule 462 Registration Statement"), then any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462 Registration Statement. For purposes of this Agreement, the term subsidiary
shall exclude any entity as to which the Company (and all subsidiaries of the
Company, taken as a whole) does not own an equity interest entitling the Company
to exercise in excess of 50% of the voting power of such entity. Such excluded
entities and the equity interest of the Company (and all subsidiaries of the
Company, taken as a whole) in each such excluded entity are set forth on
Schedule III hereto.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or to
the Company's knowledge threatened by the Commission.
(b) (i) The Registration Statement, when it became effective,
did 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 required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable,
will comply in all material respects with the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange
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<PAGE> 4
Act") and the applicable rules and regulations of the Commission
thereunder and (iii) 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 representations and
warranties set forth in this paragraph 1(b) do not apply to statements
or omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein.
(c) (i) The documents incorporated by reference into the
Registration Statement and Prospectus, when they were filed, did 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, (ii) the documents incorporated by
reference into the Registration Statement and the Prospectus comply in
all material respects with the Securities Act and the Exchange Act and
the applicable rules and regulations of the Commission thereunder and
(iii) the documents incorporated by reference into the Registration
Statement and the Prospectus do 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.
(d) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own or lease its property and to conduct its business as
described in the Prospectus and is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(e) Each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own or lease its property and to conduct its business as
described in the Prospectus and is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole; all of the issued
shares of capital stock of each subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and
non-assessable and, except for approximately 45% of the outstanding
shares of common stock of Keebler Foods Company ("Keebler"), are owned
directly by the Company or a subsidiary of the Company, free and clear
of all liens, encumbrances, equities or claims.
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(f) This Agreement has been duly authorized, executed and
delivered by the Company.
(g) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(h) The shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable. Except as set forth in the
Prospectus, neither the Company nor any subsidiary has outstanding any
options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible
into, or any contracts or commitments to issue or sell, shares of its
capital stock or any such options, rights, convertible securities or
obligations. All outstanding shares of capital stock and options and
other rights to acquire capital stock have been issued in compliance
with the registration and qualification provisions of all applicable
securities laws and were not issued in violation of any preemptive
rights, rights of first refusal or other similar rights.
(i) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such
Shares will be not subject to any preemptive or similar rights.
(j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or bylaws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares.
(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(l) There are no legal or governmental proceedings pending or
to the Company's knowledge threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not
so described or any
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<PAGE> 6
statutes, regulations, contracts or other documents that are required
to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement that are not
described or filed as required.
(m) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 or Rule 462 under the Securities
Act, complied when so filed in all material respects with the
Securities Act and the applicable rules and regulations of the
Commission thereunder.
(n) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
(o) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(p) The Company has conducted a limited review of the effect
of Environmental Laws on the business, operations and properties of the
Company and its subsidiaries. Based on such review, there are no costs
or liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws
or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties)
which would, singly or in the aggregate, have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(q) Other than rights effectively satisfied or waived, 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 Securities Act with respect to
any securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement.
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<PAGE> 7
(r) The consolidated financial statements and schedules of the
Company and its subsidiaries included in the Registration Statement and
the Prospectus and the financial statements of Keebler and Sunshine
Biscuits, Inc. ("Sunshine") incorporated by reference into the
Registration Statement and the Prospectus fairly present the financial
position of the Company, Keebler and Sunshine and their respective
results of operations and cash flows as of the dates and periods
therein specified. Such financial statements and schedules have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as
otherwise noted therein). The selected financial data set forth under
the captions "Selected Consolidated Historical Financial Data" and
"Unaudited Pro Forma Condensed Consolidated Financial Statements" in
the Prospectus fairly present, on the basis stated in the Prospectus,
the information included therein.
(s) The Company has not, directly or indirectly, (i) taken any
action designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares or (ii) since the filing of the
Registration Statement (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Shares or (B) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(t) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all patents, patent applications,
trademarks, service marks, trade names, licenses, copyrights and
proprietary or other confidential information currently employed by
them in connection with their respective businesses which are material
to the Company and its subsidiaries, and neither the Company nor any
such subsidiary has received any notice of, or has any reasonable
belief that its use constitutes, a material infringement of or conflict
with asserted rights of any third party with respect to any of the
foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse
effect on the Company and its subsidiaries.
(u) All offers and sales of the Company's capital stock prior
to the date hereof upon which the applicable statute of limitations has
not expired were at all relevant times (A) (i) registered pursuant to
the Securities Act or (ii) exempt from the registration requirements of
the Securities Act, and (B) were the subject of an available exemption
from the registration requirements of all applicable state securities
or blue sky laws.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly,
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<PAGE> 8
to purchase from the Company the respective numbers of Firm Shares set forth in
Schedules I and II hereto opposite its name at U.S. $_________a share (the
"Purchase Price").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the U.S. Underwriters the Additional Shares, and the U.S. Underwriters shall
have a one-time right to purchase, severally and not jointly, up to 1,500,000
Additional Shares at the Purchase Price. If the U.S. Representatives, on behalf
of the U.S. Underwriters, elect to exercise such option, the U.S.
Representatives shall so notify the Company in writing not later than 30 days
after the date of this Agreement, which notice shall specify the number of
Additional Shares to be purchased by the U.S. Underwriters and the date on which
such shares are to be purchased. Such date may be the same as the Closing Date
(as defined below) but not earlier than the Closing Date nor later than ten
business days after the date of such notice. Additional Shares may be purchased
as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each U.S. Underwriter agrees, severally
and not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the U.S. Representatives may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of U.S. Firm Shares set forth in Schedule I
hereto opposite the name of such U.S. Underwriter bears to the total number of
U.S. Firm Shares.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
(A) to the Shares to be sold hereunder, (B) to the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing, (C) to any options granted or shares
of Common Stock issued pursuant to existing benefit plans of the Company or (D)
to any shares of Common Stock issued in connection with a merger, acquisition or
other business combination in a transaction exempt from registration under the
Securities Act.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at U.S.
$_______ a share (the "Public Offering Price") and to certain dealers selected
by you at a price that represents a concession not in excess of U.S. $______ a
share under the Public Offering Price,
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and that any Underwriter may allow, and such dealers may reallow, a concession,
not in excess of U.S. $_____ a share, to any Underwriter or to certain other
dealers.
4. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 A.M., New York City time, on ____________ 1998, or at such
other time on the same or such other date, not later than ________, 1998, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 A.M., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such other
date, in any event not later than ______, 1998, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Company to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 4:00 p.m. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date,
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the
Securities Act; and
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<PAGE> 10
(ii) there shall not have occurred any change, or
any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries,
taken as a whole, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent
to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the Company, to the effect set forth in clause (a)(i) above and to
the effect that the representations and warranties of the Company
contained in this Agreement are true and correct as of the Closing Date
and that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date
an opinion of G. Anthony Campbell, General Counsel and Secretary of the
Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing in the
State of Georgia, with the corporate power and authority to
own its property and to conduct its business as described in
the Prospectus and is duly qualified to transact business and
is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property
requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(ii) each subsidiary of the Company is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business
as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole;
(iii) the shares of Common Stock outstanding prior to
the issuance of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable;
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<PAGE> 11
(iv) all of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and
are owned directly by the Company or subsidiary of the
Company, free and clear of all liens, encumbrances, equities
or claims;
(v) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement will not contravene any provision of applicable
law or the certificate of incorporation or bylaws of the
Company or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon the Company or any
of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or to such counsel's knowledge
any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares;
(vi) the statements (A) in the Prospectus under the
captions "Business - Regulation" and "Description of Capital
Stock" and (B) in the Registration Statement in Item 15, in
each case insofar as such statements constitute summaries of
the legal matters, documents or proceedings referred to
therein, fairly present the information called for with
respect to such legal matters, documents and proceedings and
fairly summarize the matters referred to therein;
(vii) after due inquiry, such counsel does not know
of any legal or governmental proceedings pending or threatened
to which the Company or any of its subsidiaries is a party or
to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus and are not so
described or of any statutes, regulations, contracts or other
documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described
or filed (or incorporated therein by reference as permitted by
the rules) as required;
(viii) the Company and its subsidiaries (A) are in
compliance with any and all applicable Environmental Laws, (B)
have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to
conduct their respective businesses and (C) are in compliance
with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions
of such permits, licenses or
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<PAGE> 12
approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries,
taken as a whole;
(ix) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules and other financial and statistical
data included therein as to which such counsel need not
express any opinion) comply as to form in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder, (B) has no reason to
believe that (except for financial statements and schedules
and other financial and statistical data as to which such
counsel need not express any belief) the Registration
Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading and (C) has no reason to
believe that (except for financial statements and schedules
and other financial and statistical data as to which such
counsel need not express any belief) the Prospectus contains
any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading; and
(x) except as have been waived at the Closing Date,
there are no persons with registration or similar rights to
have any securities of the Company registered pursuant to the
Registration Statement or otherwise registered by the Company
under the Securities Act or the Exchange Act pursuant to any
agreement or instrument known to such counsel which the
Company is a party.
(d) The Underwriters shall have received on the Closing Date
an opinion of Jones, Day, Reavis & Pogue, counsel for the Company,
dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation and has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus;
(ii) the authorized capital stock of the Company
conforms as to legal matters in all material respects to the
description thereof contained in the Prospectus;
(iii) the Shares have been duly authorized and, when
issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be
subject to any preemptive or similar rights;
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(iv) this Agreement has been duly authorized,
executed and delivered by the Company;
(v) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement will not contravene any provision of applicable
law or the certificate of incorporation or bylaws of the
Company or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon the Company or any
of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or to such counsel's knowledge
any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares;
(vi) the statements (A) in the Prospectus under the
captions "Business - Regulation," "Certain United States
Federal Tax Considerations for Non-U.S. Holders of Common
Stock," "Description of Capital Stock" and "Underwriters"
(with respect to "Underwriters," only as to the description of
this Agreement) and (B) in the Registration Statement in Item
15, in each case insofar as such statements constitute
summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings
and fairly summarize the matters referred to therein;
(vii) after due inquiry, such counsel does not know
of any legal or governmental proceedings pending or threatened
to which the Company or any of its subsidiaries is a party or
to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus and are not so
described or of any statutes, regulations, contracts or other
documents that are required to be described in the
Registration Statement or the Prospectus or to be filed (or
incorporated therein by reference as permitted by the rules)
as exhibits to the Registration Statement that are not
described or filed as required;
(viii) the Company is not and, after giving effect to
the offering and sale of the Shares and the application of the
proceeds thereof as described in the Prospectus, will not be
an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended; and
(ix) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules and other financial and statistical
data included therein as to which such counsel need not
express any
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opinion) comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the
Commission thereunder, (B) has no reason to believe that
(except for financial statements and schedules and other
financial and statistical data as to which such counsel need
not express any belief) the Registration Statement and the
prospectus included therein at the time the Registration
Statement became effective contained any untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading and (C) has no reason to believe that (except
for financial statements and schedules and other financial and
statistical data as to which such counsel need not express any
belief) the Prospectus contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(e) The Underwriters shall have received on the Closing Date
an opinion of King & Spalding, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in subparagraphs (iii),
(iv), (vi) (but only as to the statements in the Prospectus under
"Description of Capital Stock," "Certain United States Federal Tax
Consequences for Non-U.S. Holders of Common Stock" and "Underwriters")
and (ix) of paragraph (d) above.
With respect to subparagraph (ix) of paragraph (d) above,
Jones, Day, Reavis & Pogue and King & Spalding may state that their
opinion and belief, and with respect to subparagraph (ix) of paragraph
(c), G.Anthony Campbell may state that such counsel's opinion and
belief, are based upon such counsel's participation in the preparation
of the Registration Statement and Prospectus and any amendments or
supplements thereto and review and discussion of the contents thereof,
but are without independent check or verification, except as specified.
The opinion of G. Anthony Campbell described in paragraph (c)
above and the opinion of Jones, Day, Reavis & Pogue described in
paragraph (d) above shall be rendered to the Underwriters at the
request of the Company and shall so state therein.
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from Price Waterhouse LLP, Coopers & Lybrand L.L.P.
and Deloitte & Touche, LLP, each independent public accountants,
containing statements and information of the type ordinarily included
in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus; provided that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier
than the date hereof.
(g) The "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company listed on
13
<PAGE> 15
Schedule IV hereto relating to sales and certain other dispositions of
shares of Common Stock or certain other securities, delivered to you on
or before the date hereof, shall be in full force and effect on the
Closing Date.
(h) The Shares shall have been approved for listing on the New
York Stock Exchange.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
6. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four (4) signed copies
of the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and to furnish to you in New York
City, without charge, prior to 5:00 P.M. New York City time on the
business day next succeeding the date of this Agreement and during the
period mentioned in paragraph (c) below, as many copies of the
Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the Company)
to which Shares may have been sold by you on behalf of the Underwriters
and to any other dealers upon request, either amendments or supplements
to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances
when the Prospectus is delivered to a purchaser, be misleading or so
that the Prospectus, as amended or supplemented, will comply with law.
14
<PAGE> 16
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earnings statement
covering the twelve-month period ending on or about December 31, 1998
that satisfies the provisions of Section 11(a) of the Securities Act
and the rules and regulations of the Commission thereunder.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company
agrees to pay or cause to be paid all expenses incident to the
performance of their obligations under this Agreement, including: (i)
the fees, disbursements and expenses of the Company's counsel and the
Company's accountants in connection with the registration and delivery
of the Shares under the Securities Act and all other fees or expenses
in connection with the preparation and filing of the Registration
Statement, any preliminary prospectus, the Prospectus and amendments
and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof
to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and
delivery of the Shares to the Underwriters, including any transfer or
other taxes payable thereon, (iii) the cost of printing or producing
any Blue Sky or Legal Investment memorandum in connection with the
offer and sale of the Shares under state securities laws and all
expenses in connection with the qualification of the Shares for offer
and sale under state securities laws as provided in Section 6(e)
hereof, including filing fees and the reasonable fees and disbursements
of counsel for the Underwriters in connection with such qualification
and in connection with the Blue Sky or Legal Investment memorandum,
(iv) all filing fees and disbursements of counsel to the Underwriters
incurred in connection with the review and qualification of the
offering of the Shares by the National Association of Securities
Dealers, Inc., (v) all fees and expenses in connection with listing the
Shares on the New York Stock Exchange, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of
any transfer agent, registrar or depositary, (viii) the costs and
expenses of the Company relating to investor presentations on any "road
show" undertaken in connection with the marketing of the offering of
the Shares, including, without limitation, expenses associated with the
production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with
the prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants,
and the cost of any aircraft chartered in connection with the road
show, and (ix) all other costs and expenses incident to the performance
of the obligations of the Company hereunder for which provision is not
otherwise made in this Section. It is understood, however, that except
as provided in this Section, Section 7 entitled "Indemnity and
Contribution", and the last paragraph of Section 9 below, the
Underwriters will pay all of their costs and expenses, including fees
and disbursements of their counsel, stock transfer taxes payable on
resale of any of the Shares by them, any advertising expenses connected
with any offers they may make and all expenses in
15
<PAGE> 17
connection with any offer and sale of the Shares outside of the United
States, including filing fees and the reasonable fees and disbursements
of counsel for the Underwriters in connection with offers and sales
outside of the United States.
7. INDEMNITY AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), from and against any and all losses, claims, damages
and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages
or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein; provided, however, that the
foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom
the person asserting any such losses, claims, damages or liabilities
purchased Shares, or any person controlling such Underwriter, if a copy
of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of such Underwriter to such person, if required
by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities, unless such
failure is the result of noncompliance by the Company with Section 5(a)
hereof.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the directors of the Company,
the officers of the Company who sign the Registration Statement and
each person, if any, who controls the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
any amendment thereof, any preliminary prospectus or the Prospectus (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but
only with reference to information relating to such
16
<PAGE> 18
Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use in the Registration Statement, any
preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to paragraph (a) or (b) of this
Section 7, such person (the "indemnified party") shall promptly notify
the person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (i) the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all Underwriters and all persons, if any, who control any
Underwriter within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, (ii) the fees and expenses of
more than one separate firm (in addition to any local counsel) for the
Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the
meaning of either such Section, and that all such fees and expenses
shall be reimbursed as they are incurred. In the case of any such
separate firm for the Underwriters and such control persons of any
Underwriters, such firm shall be designated in writing by Morgan
Stanley & Co. Incorporated. In the case of any such separate firm for
the Company, and such directors, officers and control persons of the
Company, such firm shall be designated in writing by the Company. The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with
such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by
the second and third sentences of this paragraph, the indemnifying
party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement
is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall
not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party,
effect any settlement of any
17
<PAGE> 19
pending or threatened proceeding 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 claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 7 is unavailable to an indemnified
party or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party under
such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the
one hand and the indemnified party or parties on the other hand from
the offering of the Shares 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 indemnifying party
or parties on the one hand and of the indemnified party or parties on
the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand
in connection with the offering of the Shares shall be deemed to be in
the same respective proportions as the net proceeds from the offering
of the Shares (before deducting expenses) received by the Company and
the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of
the Prospectus, bear to the aggregate Public Offering Price of the
Shares. The relative fault of the Company on the one hand and the
Underwriters on the other hand 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 or by the
Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Underwriters' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the respective
number of Shares they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not
be just or equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in paragraph (d) of this Section 7. The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 7,
no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by
it and distributed to the public were offered to the public
18
<PAGE> 20
exceeds the amount of any damages that 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 Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 7 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in
this Section 7 and the representations, warranties and other statements
of the Company contained in this Agreement shall remain operative and
in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter, or the Company,
its officers or directors or any person controlling the Company and
(iii) acceptance of and payment for any of the Shares.
8. TERMINATION. This Agreement shall be subject to termination
by notice given by you to the Company, if (a) after the execution and delivery
of this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a) (i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus
9. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I or Schedule II bears to the
aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; provided that in no event shall the
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 9 by an amount in excess of
one-
19
<PAGE> 21
ninth of such number of Shares without the written consent of such Underwriter.
If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased and arrangements satisfactory to you and the Company for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
10. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
12. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
20
<PAGE> 22
Very truly yours,
FLOWERS INDUSTRIES, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
SBC Warburg Dillon Read Inc.
Acting severally on behalf
of themselves and the
several U.S. Underwriters named in
Schedule I hereto.
By: Morgan Stanley & Co.
Incorporated
By:
--------------------------------
Name:
-------------------------
Title:
------------------------
21
<PAGE> 23
Morgan Stanley & Co. International Limited
Swiss Bank Corporation, acting through its
division SBC Warburg Dillon Read
Acting severally on behalf of themselves and the
several International Underwriters named in
Schedule II hereto.
By: Morgan Stanley & Co. International Limited
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
22
<PAGE> 24
SCHEDULE I
U.S. Underwriters
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated
SBC Warburg Dillon Read Inc.
[NAMES OF OTHER U.S. UNDERWRITERS]
--------------
Total U.S. Firm Shares . . . . . . . 8,000,000
==============
</TABLE>
23
<PAGE> 25
Schedule II
International Underwriters
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
<S> <C>
Morgan Stanley & Co. International Limited
Swiss Bank Corporation, acting through
its division SBC Warburg Dillon Read
[NAMES OF OTHER INTERNATIONAL CO-MANAGERS]
--------------
Total International Firm Shares . . . . . . . 2,000,000
==============
</TABLE>
24
<PAGE> 26
SCHEDULE III
<TABLE>
<CAPTION>
Equity Interest Owned by the
Company (and all subsidiaries of
the Company, taken as a
Excluded Entity whole) in the Excluded Entity
- --------------- --------------------------------
<S> <C>
[None]
</TABLE>
25
<PAGE> 27
SCHEDULE IV
Lock-up Agreements
Amos R. McMullian
Robert P. Crozer
C. Martin Wood III
G. Anthony Campbell
Edward L. Baker
Joe E. Beverly
Franklin L. Burke
Langdon S. Flowers
Joseph L. Lanier, Jr.
J.V. Shields, Jr.
Heeth Varnedoe III
George E. Deese
Gary L. Harrison
Jimmy M. Woodward
Marta Jones Turner
26
<PAGE> 1
EXHIBIT 1.2
$200,000,000
FLOWERS INDUSTRIES, INC.
% DEBENTURES DUE 2028
---
UNDERWRITING AGREEMENT
April , 1998
--
<PAGE> 2
April , 1998
--
Morgan Stanley & Co. Incorporated
SBC Warburg Dillon Read Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Flowers Industries, Inc., a Georgia corporation (the "Company")
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters") $200,000,000 principal amount of its __% Debentures
due 2028 (the "Debentures") to be issued pursuant to the provisions of an
Indenture to be dated as of _____, 1998 (the "Indenture") between the Company
and SunTrust Bank, Atlanta, as Trustee (the "Trustee").
Pursuant to an underwriting agreement dated April __, 1998, among the
Company, Morgan Stanley & Co. Incorporated and SBC Warburg Dillon Read Inc. and
Morgan Stanley & Co. International Limited and Swiss Bank Corporation, acting
through its division SBC Warburg Dillon Read, the Company will issue and sell to
the underwriters named therein an aggregate of 10,000,000 shares (the "Shares")
of Common Stock, par value $.625 per share and an additional 1,500,000 shares of
Common Stock subject to an over-allotment option.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the Debentures and the
Shares. The registration statement as amended at the time it becomes effective,
including information incorporated therein by reference and the information (if
any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended
(the "Securities Act"), is hereinafter referred to as the "Registration
Statement"; the prospectus first used to confirm sales of Debentures, including
information incorporated therein by reference, is hereinafter referred to as the
"Prospectus." If the Company has filed an abbreviated registration statement to
register an additional amount of Debentures pursuant to Rule 462(b) under the
Securities Act (the "Rule 462 Registration Statement"), then any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462 Registration Statement. For purposes of this Agreement, the term subsidiary
shall exclude any entity as to which the Company (and all subsidiaries of the
Company, taken as a whole) does not own an equity interest entitling the Company
to exercise in excess of 50% of the voting power of such entity. Such excluded
entities and the equity interest of the Company (and all subsidiaries of the
Company, taken as a whole) in each such excluded entity are set forth on
Schedule II hereto.
<PAGE> 3
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or to
the Company's knowledge threatened by the Commission.
(b) (i) The Registration Statement, when it became effective,
did 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 required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable,
will comply in all material respects with the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the applicable rules and regulations of the Commission thereunder and
(iii) 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 representations and warranties set
forth in this paragraph 1(b) do not apply to statements or omissions in
the Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(c) (i) The documents incorporated by reference into the
Registration Statement and Prospectus, when they were filed, did 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, (ii) the documents incorporated by
reference into the Registration Statement and the Prospectus comply in
all material respects with the Securities Act and the Exchange Act and
the applicable rules and regulations of the Commission thereunder and
(iii) the documents incorporated by reference into the Registration
Statement and the Prospectus do 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.
(d) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own or lease its property and to conduct its business as
described in the Prospectus and is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
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<PAGE> 4
(e) Each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own or lease its property and to conduct its business as
described in the Prospectus and is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole; all of the issued
shares of capital stock of each subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and
non-assessable and, except for approximately 45% of the outstanding
shares of common stock of Keebler Foods Company ("Keebler"), are owned
directly by the Company or a subsidiary of the Company, free and clear
of all liens, encumbrances, equities or claims.
(f) This Agreement has been duly authorized, executed and
delivered by the Company.
(g) The Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity; and the Indenture will be
substantially in the same form as filed as an exhibit to the
Registration Statement.
(h) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(i) The Debentures have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Company, enforceable in accordance with their terms, subject to
applicable bankruptcy, insolvency or similar laws affecting creditors'
rights generally and general principles of equity.
(j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or bylaws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this
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<PAGE> 5
Agreement, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Debentures.
(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(l) There are no legal or governmental proceedings pending or
to the Company's knowledge threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not
so described or any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(m) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 or Rule 462 under the Securities
Act, complied when so filed in all material respects with the
Securities Act and the applicable rules and regulations of the
Commission thereunder.
(n) The Company is not and, after giving effect to the
offering and sale of the Debentures and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
(o) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(p) The Company has conducted a limited review of the effect
of Environmental Laws on the business, operations and properties of the
Company and its subsidiaries. Based upon such review, there are no
costs or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required for
clean-up,
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<PAGE> 6
closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would,
singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(q) The statements set forth in the Prospectus under the
caption "Description of the Debentures," insofar as they purport to
constitute a summary of the terms of the Debentures, are accurate,
complete and fair.
(r) The consolidated financial statements and schedules of the
Company and its subsidiaries included in the Registration Statement and
the Prospectus and the financial statements of Keebler and Sunshine
Biscuits, Inc. ("Sunshine") incorporated by reference into the
Registration Statement and the Prospectus fairly present the financial
position of the Company, Keebler and Sunshine and their respective
results of operations and cash flows as of the dates and periods
therein specified. Such financial statements and schedules have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as
otherwise noted therein). The selected financial data set forth under
the captions "Selected Consolidated Historical Financial Data" and
"Unaudited Pro Forma Condensed Consolidated Financial Statements" in
the Prospectus fairly present, on the basis stated in the Prospectus,
the information included therein.
(s) The Company has not, directly or indirectly, (i) taken any
action designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Debentures or (ii) since the filing of the
Registration Statement (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Debentures or (B) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(t) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all patents, patent applications,
trademarks, service marks, trade names, licenses, copyrights and
proprietary or other confidential information currently employed by
them in connection with their respective businesses which are material
to their respective business or operations, and neither the Company nor
any such subsidiary has received any notice of, or has any reasonable
belief that its use constitutes, a material infringement of or conflict
with asserted rights of any third party with respect to any of the
foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse
effect on the Company and its subsidiaries.
(u) Except for certain dividend restrictions imposed upon
Keebler Foods Company as described in the Prospectus, no subsidiary of
the Company is currently prohibited pursuant to an agreement, directly
or indirectly, from paying any dividends to the Company, from making
any other distribution on such subsidiary's capital stock, from
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<PAGE> 7
repaying to the Company any loans or advances to such subsidiary from
the Company or from transferring any of such subsidiary's property or
assets to the Company or any other subsidiary of the Company, except as
described in or contemplated by the Prospectus.
(v) No default exists, and no event has occurred which, with
notice or lapse of time or both, would constitute a default in the due
performance and observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, lease or other material agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or any of
their respective properties is bound or may be affected in any material
adverse respect with regard to property, business or operations of the
Company and its subsidiaries taken as a whole.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective amount of Debentures set forth in Schedule I hereto
opposite its name at a purchase price of ___% of the principal amount thereof
plus accrued interest, if any, from ________, 1998 to the date of payment and
delivery.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that
the Underwriters propose to make a public offering of their respective amounts
of the Debentures as soon after the Registration Statement and this Agreement
have become effective as in your judgment is advisable. The Company is further
advised by you that the Debentures are to be offered to the public initially at
____% of the principal amount thereof (the "Public Offering Price") plus accrued
interest, if any, from _______, 1998 to the date of payment and delivery and to
certain dealers selected by you at a price that represents a concession not in
excess of ___% of their principal amount at maturity, and that any Underwriter
may allow, and such dealers may reallow, a concession, not in excess of ___% of
their principal amount at maturity, to any Underwriter or to certain other
dealers.
4. PAYMENT AND DELIVERY. Payment for the Debentures shall be made
to the Company in Federal or other funds immediately available in New York City
against delivery of such Debentures for the respective accounts of the several
Underwriters at 10:00 A.M., New York City time, on ____________ 1998, or at such
other time on the same or such other date, not later than ________, 1998, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Closing Date."
The Debentures shall be prepared in definitive form and registered in
such names and in such denominations as you shall request in writing not later
than one full business day prior to the Closing Date. The certificates
evidencing the Debentures shall be delivered to you on the Closing Date, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Debentures to the Underwriters duly paid,
against payment of the Purchase Price therefor.
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<PAGE> 8
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations
of the Company to sell the Debentures to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Debentures on the
Closing Date are subject to the condition that the Registration Statement shall
have become effective not later than 4:00 p.m. (New York City time) on the date
hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date,
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the
Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of
this Agreement) that, in your judgment, is material and
adverse and that makes it, in your judgment, impracticable to
market the Debentures on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing
Date a certificate, dated the Closing Date and signed by an executive
officer of the Company, to the effect set forth in clause (a)(i) above
and to the effect that the representations and warranties of the
Company contained in this Agreement are true and correct as of the
Closing Date and that the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing
Date an opinion of G. Anthony Campbell, General Counsel and Secretary
of the Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing in the
State of Georgia, with the corporate power and
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<PAGE> 9
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company, is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business
as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole;
(iii) the Debentures conform as to legal matters in
all material respects to the description thereof contained in
the Prospectus;
(iv) all of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and
are owned directly by the Company or subsidiary of the
Company, free and clear of all liens, encumbrances, equities
or claims;
(v) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement will not contravene any provision of applicable
law or the certificate of incorporation or bylaws of the
Company or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon the Company or any
of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or to such counsel's knowledge
any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states in
connection with the offer and sale of the Debentures;
(vi) the statements (A) in the Prospectus under the
captions "Business Regulation" and "Description of the
Debentures" and (B) in the Registration Statement in Item 15,
in each case insofar as such statements constitute summaries
of the legal matters, documents or proceedings referred to
therein, fairly present the information called for with
respect to such legal matters, documents and proceedings and
fairly summarize the matters referred to therein;
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<PAGE> 10
(vii) after due inquiry, such counsel does not know
of any legal or governmental proceedings pending or threatened
to which the Company or any of its subsidiaries is a party or
to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus and are not so
described or of any statutes, regulations, contracts or other
documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described
or filed (or incorporated therein by reference as permitted by
the rules) as required;
(viii) the Company and its subsidiaries (A) are in
compliance with any and all applicable Environmental Laws, (B)
have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to
conduct their respective businesses and (C) are in compliance
with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in
the aggregate, have a material adverse effect on the Company
and its subsidiaries, taken as a whole; and
(ix) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules and other financial and statistical
data included therein as to which such counsel need not
express any opinion) comply as to form in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder, (B) has no reason to
believe that (except for financial statements and schedules
and other financial and statistical data as to which such
counsel need not express any belief) the Registration
Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading and (C) has no reason to
believe that (except for financial statements and schedules
and other financial and statistical data as to which such
counsel need not express any belief) the Prospectus contains
any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading.
(d) The Underwriters shall have received on the Closing
Date an opinion of Jones, Day, Reavis & Pogue, outside counsel for the
Company, dated the Closing Date, to the effect that:
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<PAGE> 11
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation and has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus;
(ii) the Debentures conform as to legal matters in
all material respects to the description thereof contained in
the Prospectus;
(iii) the Indenture has been duly qualified under the
Trust Indenture Act and has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement
of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and general principles
of equity;
(iv) the Debentures have been duly authorized and,
when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by
the Underwriters in accordance with the terms of this
Agreement, will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Company,
enforceable in accordance with their terms, subject to
applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity;
(v) this Agreement has been duly authorized,
executed and delivered by the Company;
(vi) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement will not contravene any provision of applicable
law or the certificate of incorporation or bylaws of the
Company or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon the Company or any
of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or to such counsel's knowledge
any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states in
connection with the offer and sale of the Debentures;
(vii) the statements (A) in the Prospectus under the
captions "Business - Regulation," "Description of the
Debentures" and "Underwriters" (with respect to
"Underwriters," only as to the description of this Agreement)
and (B) in the Registration Statement in Item 15, in each case
insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to therein, fairly
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<PAGE> 12
present the information called for with respect to such legal
matters, documents and proceedings and fairly summarize the
matters referred to therein;
(viii) after due inquiry, such counsel does not know
of any legal or governmental proceedings pending or threatened
to which the Company or any of its subsidiaries is a party or
to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus and are not so
described or of any statutes, regulations, contracts or other
documents that are required to be described in the
Registration Statement or the Prospectus or to be filed (or
incorporated therein by reference as permitted by the rules)
as exhibits to the Registration Statement that are not
described or filed as required;
(ix) the Company is not and, after giving effect to
the offering and sale of the Debentures and the application of
the proceeds thereof as described in the Prospectus, will not
be an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended; and
(x) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules and other financial and statistical
data included therein as to which such counsel need not
express any opinion) comply as to form in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder, (B) has no reason to
believe that (except for financial statements and schedules
and other financial and statistical data as to which such
counsel need not express any belief) the Registration
Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading and (C) has no reason to
believe that (except for financial statements and schedules
and other financial and statistical data as to which such
counsel need not express any belief) the Prospectus contains
any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading.
(e) The Underwriters shall have received on the Closing
Date an opinion of King & Spalding, counsel for the Underwriters, dated
the Closing Date, covering the matters referred to in subparagraphs
(iv), (v), (vii) (but only as to the statements in the Prospectus under
"Description of the Debentures," and "Underwriters") and (x) of
paragraph (d) above.
With respect to subparagraph (x) of paragraph (d) above,
Jones, Day, Reavis & Pogue and King & Spalding may state that their
opinion and belief, and with respect to subparagraph (ix) of paragraph
(c), G. Anthony Campbell may state that such counsel's
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<PAGE> 13
opinion and belief, are based upon such counsel's participation in the
preparation of the Registration Statement and Prospectus and any
amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification,
except as specified.
The opinion of G. Anthony Campbell described in paragraph (c)
above and the opinion of Jones, Day, Reavis & Pogue described in
paragraph (d) above shall be rendered to the Underwriters at the
request of the Company and shall so state therein.
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from Price Waterhouse LLP, Coopers & Lybrand L.L.P.
and Deloitte & Touche, LLP, each independent public accountants,
containing statements and information of the type ordinarily included
in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus; provided that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier
than the date hereof.
6. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four (4) signed copies
of the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and to furnish to you in New York
City, without charge, prior to 5:00 P.M. New York City time on the
business day next succeeding the date of this Agreement and during the
period mentioned in paragraph (c) below, as many copies of the
Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Debentures as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the
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<PAGE> 14
Underwriters and to the dealers (whose names and addresses you will
furnish to the Company) to which Debentures may have been sold by you
on behalf of the Underwriters and to any other dealers upon request,
either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in
the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d) To endeavor to qualify the Debentures for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earnings statement
covering the twelve-month period ending on or about December 31, 1998
that satisfies the provisions of Section 11(a) of the Securities Act
and the rules and regulations of the Commission thereunder.
(f) The Company will not voluntarily claim and will actively
resist any attempts to claim, the benefit of any usury laws against
holders of the Debentures.
(g) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company
agrees to pay or cause to be paid all expenses incident to the
performance of their obligations under this Agreement, including: (i)
the fees, disbursements and expenses of the Company's counsel and the
Company's accountants in connection with the registration and delivery
of the Debentures under the Securities Act and all other fees or
expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all
printing costs associated therewith, and the mailing and delivering of
copies thereof to the Underwriters and dealers, in the quantities
hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Debentures to the Underwriters, including
any transfer or other taxes payable thereon, (iii) the cost of printing
or producing any Blue Sky or Legal Investment memorandum in connection
with the offer and sale of the Debentures under state securities laws
and all expenses in connection with the qualification of the Debentures
for offer and sale under state securities laws as provided in Section
6(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky or Legal Investment
memorandum, (iv) all filing fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification
of the offering of the Debentures by the National Association of
Securities Dealers, Inc., (v) all fees and expenses in connection with
the preparation and filing of the registration statement on Form 8-A
relating to the Debentures and all costs and expenses incident to
listing the Debentures on the New York Stock Exchange, (vi) the cost of
printing certificates representing the Debentures, (vii) the costs and
charges of any transfer agent, registrar or depositary, (viii) the
costs and expenses of the Company relating to investor presentations on
any "road show" undertaken in connection with the marketing of the
offering
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<PAGE> 15
of the Debentures, including, without limitation, expenses associated
with the production of road show slides and graphics, fees and expenses
of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and
any such consultants, and the cost of any aircraft chartered in
connection with the road show, and (ix) all other costs and expenses
incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section. It is
understood, however, that except as provided in this Section, Section 7
entitled "Indemnity and Contribution", and the last paragraph of
Section 9 below, the Underwriters will pay all of their costs and
expenses, including fees and disbursements of their counsel, stock
transfer taxes payable on resale of any of the Debentures by them, any
advertising expenses connected with any offers they may make and all
expenses in connection with any offer and sale of the Debentures
outside of the United States, including filing fees and the reasonable
fees and disbursements of counsel for the Underwriters in connection
with offers and sales outside of the United States.
7. INDEMNITY AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), from and against any and all losses, claims, damages
and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages
or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein; provided, however, that the
foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom
the person asserting any such losses, claims, damages or liabilities
purchased Debentures, or any person controlling such Underwriter, if a
copy of the Prospectus (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Debentures to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities, unless such
failure is the result of noncompliance by the Company with Section 5(a)
hereof.
14
<PAGE> 16
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the directors of the Company,
the officers of the Company who sign the Registration Statement and
each person, if any, who controls the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
any amendment thereof, any preliminary prospectus or the Prospectus (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but
only with reference to information relating to such Underwriter
furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to paragraph (a) or (b) of this
Section 7, such person (the "indemnified party") shall promptly notify
the person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (i) the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all Underwriters and all persons, if any, who control any
Underwriter within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, (ii) the fees and expenses of
more than one separate firm (in addition to any local counsel) for the
Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the
meaning of either such Section, and that all such fees and expenses
shall be reimbursed as they are incurred. In the case of any such
separate firm for the Underwriters and such control persons of any
Underwriters, such firm shall be designated in writing by Morgan
Stanley & Co. Incorporated. In the case of any such separate firm for
the Company, and such directors, officers and control persons of the
Company, such firm shall be designated in writing by the Company. The
indemnifying party
15
<PAGE> 17
shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party
agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for
fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of
such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending
or threatened proceeding 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
claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 7 is unavailable to an indemnified
party or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party under
such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the
one hand and the indemnified party or parties on the other hand from
the offering of the Debentures 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 indemnifying
party or parties on the one hand and of the indemnified party or
parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities,
as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters
on the other hand in connection with the offering of the Debentures
shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Debentures (before deducting
expenses) received by the Company and the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth
in the table on the cover of the Prospectus, bear to the aggregate
Public Offering Price of the Debentures. The relative fault of the
Company on the one hand and the Underwriters on the other hand 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 or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in
16
<PAGE> 18
proportion to the respective number of Debentures they have purchased
hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not
be just or equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in paragraph (d) of this Section 7. The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 7,
no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Debentures
underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that 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 Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 7 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in
this Section 7 and the representations, warranties and other statements
of the Company contained in this Agreement shall remain operative and
in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter, or the Company,
its officers or directors or any person controlling the Company and
(iii) acceptance of and payment for any of the Debentures.
8. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a) (i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Debentures on the terms and in the manner contemplated in the
Prospectus.
17
<PAGE> 19
9. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date, any one or more of the Underwriters shall fail
or refuse to purchase Debentures that it has or they have agreed to purchase
hereunder on such date, and the aggregate number of Debentures which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate amount of Debentures to be purchased
on such date, the other Underwriters shall be obligated severally in the
proportions that the amount of Debentures set forth opposite their respective
names in Schedule I bears to the amount of Debentures set forth opposite the
names of all such non-defaulting Underwriters, or in such other proportions as
you may specify, to purchase the Debentures which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the amount of Debentures that any Underwriter has agreed
to purchase pursuant to this Agreement be increased pursuant to this Section 9
by an amount in excess of one-ninth of such amount of Debentures without the
written consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Debentures and the aggregate
amount of Debentures with respect to which such default occurs is more than
one-tenth of the aggregate amount of Debentures to be purchased and arrangements
satisfactory to you and the Company for the purchase of such Debentures are not
made within 36 hours after such default, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriter or the Company. In any
such case either you or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and in the Prospectus or in any
other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
10. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
12. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
18
<PAGE> 20
Very truly yours,
FLOWERS INDUSTRIES, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
SBC Warburg Dillon Read Inc.
Acting severally on behalf
of themselves and the
several U.S. Underwriters named in
Schedule I hereto.
By: Morgan Stanley & Co.
Incorporated
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
19
<PAGE> 21
SCHEDULE I
Underwriters
<TABLE>
<CAPTION>
Amount of
Debentures
Underwriter To Be Purchased
----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated
SBC Warburg Dillon Read Inc.
[NAMES OF OTHER U.S. UNDERWRITERS]
--------------
Total . . . . . . . 200,000,000
==============
</TABLE>
20
<PAGE> 22
SCHEDULE II
<TABLE>
<CAPTION>
Equity Interest Owned by the
Company (and all subsidiaries of
the Company, taken as a whole)
Excluded Entity in the Excluded Entity
- --------------- --------------------------------
<S> <C>
[None]
</TABLE>
21
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
FLOWERS INDUSTRIES, INC.
TO
SUNTRUST BANK, ATLANTA
Trustee
INDENTURE
Dated as of April __, 1998
_____% Debentures due 2028
- --------------------------------------------------------------------------------
<PAGE> 2
FLOWERS INDUSTRIES, INC.
Reconciliation and Tie Between the Trust Indenture Act of 1939 and Indenture
dated as of April __, 1998.
<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION INDENTURE SECTION
--------------------------- -----------------
<S> <C>
Section 310(a)(1).............................. 7.9
.......................................... 7.10
.......................................... 7.11
(a)(2).................................... 7.9
.......................................... 7.10
.......................................... 7.11
(a)(3).................................... Not Applicable
(a)(4).................................... Not Applicable
(a)(5).................................... 7.9
(b)....................................... 7.8
.......................................... 7.10
.......................................... 7.11
Section 311(a)................................. 7.13
(b)....................................... 7.13
(c)....................................... 7.13
Section 312(a)................................. 5.1
.......................................... 5.2(a)
(b)....................................... 5.2(b)
(c)....................................... 5.2(c)
Section 313(a)................................. 5.3(a)
(b)....................................... 5.3(a)
(c)....................................... 5.3(a)
(d)....................................... 5.3(b)
Section 314(a)................................. 14.7
(b)....................................... Not Applicable
(c)(1).................................... 14.5
(c)(2).................................... 14.5
(c)(3).................................... Not Applicable
(d)....................................... Not Applicable
(e)....................................... 14.5
Section 315(a)................................. 7.1
(b)....................................... 6.9
(c)....................................... 7.1
(d)....................................... 7.1
(d)(1).................................... 7.1(a)
(d)(2).................................... 7.1(b)
(d)(3).................................... 7.1(c)
(e)....................................... 6.10
Section 316(a)................................. 6.7
(a)(1)(A)................................. 6.7
(a)(1)(B)................................. 6.7
(a)(2).................................... Not Applicable
(b)....................................... 6.4
Section 317(a)(1).............................. 6.5
(a)(2).................................... 6.5
(b)....................................... 4.4
Section 318(a)................................. 14.7
</TABLE>
Debenture: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS.................................................................................1
SECTION 1.1. Definitions.................................................................................1
ARTICLE II ISSUE, DESCRIPTION, EXECUTION,
REGISTRATION AND EXCHANGE OF DEBENTURES.....................................................7
SECTION 2.1. Designation Amount and Issue of Debentures..................................................7
SECTION 2.2. Form of Debentures..........................................................................7
SECTION 2.3. Date and Denomination of Debentures; Payments of Interest...................................7
SECTION 2.4. Execution of Debentures.....................................................................9
SECTION 2.5. Exchange and Registration of Transfer of Debentures:
Restrictions on Transfer Depositary.........................................................9
SECTION 2.6. Mutilated, Destroyed, Lost or Stolen Debentures............................................12
SECTION 2.7. Temporary Debentures.......................................................................13
SECTION 2.8. Cancellation of Debentures Paid, Etc.......................................................13
SECTION 2.9. Cusip Numbers..............................................................................13
ARTICLE III REDEMPTION OF DEBENTURES...................................................................14
SECTION 3.1. Redemption.................................................................................14
SECTION 3.2. Notice of Trustee..........................................................................14
SECTION 3.3. Notice of Redemption; Selection of Debentures..............................................14
SECTION 3.4. Payment of Debentures Called for Redemption................................................15
SECTION 3.5. No Sinking Fund............................................................................15
ARTICLE IV PARTICULAR COVENANTS OF THE COMPANY........................................................15
SECTION 4.1. Payment of Principal, Interest and Redemption Price........................................15
SECTION 4.2. Maintenance of Office or Agency............................................................16
SECTION 4.3. Appointments to Fill Vacancies in Trustee's Office.........................................16
SECTION 4.4. Provisions as to Paying Agent..............................................................16
SECTION 4.5. Corporate Existence........................................................................17
SECTION 4.6. Stay, Extension and Usury Laws.............................................................17
SECTION 4.7. Limitations on Liens.......................................................................17
SECTION 4.8. Limitation on Sale and Leaseback Transactions..............................................18
SECTION 4.9. Limitation on Consolidation, Merger and Sale of Assets.....................................18
ARTICLE V HOLDERS' LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE................................................................19
SECTION 5.1. Holders' Lists.............................................................................19
SECTION 5.2. Preservation and Disclosure of Lists.......................................................19
SECTION 5.3. Reports by Trustee.........................................................................19
SECTION 5.4. Reports by Company.........................................................................19
ARTICLE VI REMEDIES OF THE TRUSTEE AND
HOLDERS ON AN EVENT OF DEFAULT.............................................................20
SECTION 6.1. Events of Default..........................................................................20
</TABLE>
(i)
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 6.2. Payments of Debentures on Default; Suit Therefor...........................................22
SECTION 6.3. Application of Monies Collected by Trustee.................................................23
SECTION 6.4. Proceedings by Holder......................................................................24
SECTION 6.5. Proceedings by Trustee.....................................................................24
SECTION 6.6. Remedies Cumulative and Continuing.........................................................24
SECTION 6.7. Direction of Proceedings and Waiver of Defaults by Majority of Holders.....................25
SECTION 6.8. Statement by Officers as to Default........................................................25
SECTION 6.9. Notice of Defaults.........................................................................25
SECTION 6.10. Undertaking to Pay Costs...................................................................25
ARTICLE VII CONCERNING THE TRUSTEE.....................................................................26
SECTION 7.1. Duties and Responsibilities of Trustee.....................................................26
SECTION 7.2. Reliance on Documents, Opinions, Etc.......................................................27
SECTION 7.3. No Responsibility for Recitals, Etc........................................................28
SECTION 7.4. Trustee, Paying Agents or Registrar May Own Debentures.....................................28
SECTION 7.5. Monies to Be Held in Trust.................................................................28
SECTION 7.6. Compensation and Expenses of Trustee.......................................................28
SECTION 7.7. Officers Certificate as Evidence...........................................................29
SECTION 7.8. Conflicting Interests of Trustee...........................................................29
SECTION 7.9. Eligibility of Trustee.....................................................................29
SECTION 7.10. Resignation or Removal of Trustee..........................................................29
SECTION 7.11. Acceptance by Successor Trustee............................................................30
SECTION 7.12. Succession by Merger, Etc..................................................................31
SECTION 7.13. Limitation on Rights of Trustee as Creditor................................................31
ARTICLE VIII CONCERNING THE HOLDERS.....................................................................31
SECTION 8.1. Action by Holders..........................................................................31
SECTION 8.2. Proof of Execution by Holders..............................................................32
SECTION 8.3. Who Are Deemed Absolute Owners.............................................................32
SECTION 8.4. Company-Owned Debentures Disregarded.......................................................32
SECTION 8.5. Revocation of Consents; Future Holders Bound...............................................32
ARTICLE IX HOLDERS' MEETINGS..........................................................................33
SECTION 9.1. Purposes of Meetings.......................................................................33
SECTION 9.2. Call of Meetings by Trustee................................................................33
SECTION 9.3. Call of Meetings by Company or Holders.....................................................33
SECTION 9.4. Qualifications for Voting..................................................................34
SECTION 9.5. Regulations................................................................................34
SECTION 9.6. Voting.....................................................................................34
SECTION 9.7. No Delay of Rights by Meeting..............................................................35
ARTICLE X SUPPLEMENTAL INDENTURES....................................................................35
SECTION 10.1. Supplemental Indentures Without Consent of Holders.........................................35
SECTION 10.2. Supplemental Indentures with Consent of Holders............................................36
SECTION 10.3. Effect of Supplemental Indenture...........................................................36
SECTION 10.4. Notation on Debentures.....................................................................37
SECTION 10.5. Evidence of Compliance of Supplemental Indenture to Be Furnished Trustee...................37
</TABLE>
(ii)
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE XI CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE..........................................37
SECTION 11.1. Company May Consolidate Etc. on Certain Terms..............................................37
SECTION 11.2. Successor Corporation to Be Substituted....................................................37
SECTION 11.3. Opinion of Counsel to Be Given Trustee.....................................................38
ARTICLE XII SATISFACTION, DISCHARGE AND DEFEASANCE OF INDENTURE........................................38
SECTION 12.1. Discharge of Indenture.....................................................................38
SECTION 12.2. Applicability of Defeasance Provisions;
Company's Option to Effect Defeasance or Covenant Defeasance...............................39
SECTION 12.3. Defeasance.................................................................................39
SECTION 12.4. Covenant Defeasance........................................................................39
SECTION 12.5. Conditions to Defeasance or Covenant Defeasance............................................40
SECTION 12.6. Indemnity for Government Obligations.......................................................41
SECTION 12.7. Deposited Monies to Be Held in Trust by Trustee............................................41
SECTION 12.8. Paying Agent to Repay Monies Held..........................................................41
SECTION 12.9. Return of Unclaimed Monies.................................................................41
SECTION 12.10. Reinstatement..............................................................................41
ARTICLE XIII IMMUNITY OF INCORPORATORS,
SHAREHOLDERS, OFFICERS AND DIRECTORS.......................................................42
SECTION 13.1. Indenture and Debentures Solely Corporate Obligations......................................42
ARTICLE XIV MISCELLANEOUS PROVISIONS...................................................................42
SECTION 14.1. Provisions Binding on Company's Successors.................................................42
SECTION 14.2. Official Acts by Successor Corporation.....................................................42
SECTION 14.3. Addresses for Notices, Etc.................................................................42
SECTION 14.4. Governing Law..............................................................................43
SECTION 14.5. Evidence of Compliance with Conditions Precedent; Certificates to Trustee..................43
SECTION 14.6. Legal Holidays.............................................................................43
SECTION 14.7. Trust Indenture Act........................................................................43
SECTION 14.8. No Security Interest Created...............................................................44
SECTION 14.9. Benefits of Indenture......................................................................44
SECTION 14.10. Table of Contents, Headings, Etc...........................................................44
SECTION 14.11. Authenticating Agent.......................................................................44
SECTION 14.12. Execution in Counterparts..................................................................45
</TABLE>
(iii)
<PAGE> 6
INDENTURE dated as of April ___, 1998, between Flowers Industries,
Inc., a Georgia corporation (hereinafter sometimes called the "Company," as more
fully set forth in Section 1.1), and SunTrust Bank, Atlanta, a Georgia banking
corporation, as trustee hereunder (hereinafter sometimes called the "Trustee,"
as more fully set forth in Section 1.1).
WITNESSETH:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its___% Debentures due 2028 (hereinafter sometimes
called the "Debentures"), in an aggregate principal amount not to exceed
$200,000,000 and, to provide the terms and conditions upon which the Debentures
are to be authenticated, issued and delivered, the Company has duly authorized
the execution and delivery of this Indenture; and
WHEREAS, all acts and things necessary to make the Debentures, when
executed by the Company and authenticated and made available for delivery by the
Trustee or a duly authorized authenticating agent in the manner provided in this
Indenture, the valid, binding and legal obligations of the Company, and to
constitute these presents a valid agreement according to its terms, have been
done and performed, and the execution of this Indenture and the issue hereunder
of the Debentures have in all respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the
Debentures are, and are to be, authenticated, issued and made available for
delivery, and in consideration of the premises and of the purchase and
acceptance of the Debentures by the holders thereof, the Company covenants and
agrees with the Trustee for the equal and proportionate benefit of the
respective holders from time to time of the Debentures (except as otherwise
provided below), as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The terms defined in this Section 1.1 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplements hereto shall
have the respective meanings specified in this Section 1.1. All other terms used
in this Indenture that are defined in the Trust Indenture Act or which are by
reference therein defined in the Securities Act (except as herein otherwise
expressly provided or unless the context otherwise requires) shall have the
meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of the execution of this Indenture. The
words "herein," "hereof," "hereunder,"and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision. The terms defined in this Article include the plural as well as the
singular.
"Affiliate" of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control,"when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the
1
<PAGE> 7
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Attributable Debt" when used in connection with a Sale and Leaseback
Transaction involving a Principal Property shall mean, at the time of
determination, the present value of the total net amount of rent required to be
paid under such lease during the remaining term thereof (including any renewal
term or period for which such lease has been extended), discounted at the rate
of interest set forth or implicit in the terms of such lease or, if not
practicable to determine such rate, the weighted average interest rate per annum
borne by the Debentures pursuant to the Indenture compounded semi-annually. For
purposes of the foregoing definition, rent shall not include amounts required to
be paid by the lessee on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of the penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated.
"Board of Directors" shall mean the Board of Directors of the Company
or a committee of such Board duly authorized to act for it hereunder.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which the banking institutions in The City of New
York or the city in which the Corporate Trust Office is located are authorized
or obligated by law or executive order to close or be closed.
"Commission" shall mean the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Company" shall mean Flowers Industries, Inc., a Georgia corporation,
and, subject to the provisions of Article XI, shall include its successors and
assigns.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the Debentures to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Debentures.
"Comparable Treasury Price" means, with respect to any Redemption Date
of the Debentures, (i) the average of five Reference Treasury Dealer Quotations
for such Redemption Date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than five such
Reference Treasury Dealer Quotations, the average of all such quotations.
"Consolidated Net Tangible Assets" shall mean the total of all the
assets appearing on the consolidated balance sheet of the Company and its
Subsidiaries, less the following: (a) current liabilities and (b) intangible
assets, including, but without limitation, such items as goodwill, trademarks,
trade names, patents and unamortized debt discount and expense carried as an
asset on said balance sheet. Consolidated Net Tangible Assets shall be
determined in accordance with generally accepted accounting principles applied
on a consistent basis and shall be determined by reference to the most recent
publicly available quarterly or annual, as the case may be, consolidated balance
sheet of the Company.
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"Corporate Trust Office" or other similar term, shall mean the
principal office of the Trustee at which at any particular time its corporate
trust business shall be principally administered, which office is, at the date
as of which this Indenture is dated, located at 58 Edgewood Avenue, Atlanta,
Georgia, 30302.
"Custodian" shall mean SunTrust Bank, Atlanta, as custodian with
respect to the Debentures in global form, or any successor entity thereto.
"Debenture" or "Debentures" shall mean any Debenture or Debentures, as
the case may be, authenticated and delivered under this Indenture, including any
Global Debenture.
"Debenture register" shall have the meaning specified in Section 2.5.
"Debenture registrar" shall have the meaning specified in Section 2.5.
"Debt" of a Person shall mean all indebtedness of such Person which is
for money borrowed.
"Default" and "default" shall mean any event that is, or after notice
or passage of time, or both, would be, an Event of Default.
"Depositary" means, with respect to the Debentures issuable or issued
in whole or in part in global form, DTC until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter "Depositary" shall mean or include such successor.
"DTC" shall mean The Depositary Trust Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as in effect from
time to time.
"Event of Default" shall mean any event specified in Section 6.1.
"Funded Debt" shall mean Debt which by its terms matures at, or can be
extended or renewed at the option of the obligor to, a date more than twelve
months after the date of the Debt's creation, including, but not limited to,
outstanding revolving credit loans.
"Global Debenture" shall mean any Debenture evidenced in global form as
described in Section 2.5(b).
"Government Obligations" shall mean, unless otherwise specified
pursuant to this Indenture, securities which are (i) direct obligations of the
United States government for which its full faith and credit is pledged or (ii)
obligations of a person controlled or supervised by, or acting as an agency or
instrumentality of, the United States government, the payment of which
obligations is unconditionally guaranteed by the United States government, and
which, in either case, are full faith and credit obligations of the United
States government, and which are not callable or redeemable at the option of the
issuer thereof prior to their stated maturity.
"Holder" or "holder" as applied to any Debenture, or other similar
terms (but excluding the term "beneficial holder"), shall mean any person in
whose name at the time a particular Debenture is registered on the Debenture
register.
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<PAGE> 9
"Incur" shall mean to issue, incur, assume, guarantee, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
the payment of, any Debt.
"Indenture" shall mean this instrument as originally executed or, if
amended or supplemented as herein provided, as so amended or supplemented and
shall include the form and terms of the Debentures established as contemplated
hereunder.
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated
or, if such firm is unwilling or unable to select the Comparable Treasury Issue,
an independent investment banking institution of national standing appointed by
the Trustee after consultation with the Company.
"Lien" shall mean any mortgage or deed of trust, pledge, assignment,
security interest, lien, charge, or other encumbrance or preferential
arrangement (including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing).
"NASD" means the National Association of Securities Dealers, Inc.
"Officers' Certificate", when used with respect to the Company, shall
mean a certificate signed by both (a) the Chairman, Vice Chairman, President,
the Chief Executive Officer or Senior Vice President or any Vice President
(whether or not designated by a number or numbers or word or words added before
or after the title "Vice President") and (b) by the Treasurer or any Assistant
Treasurer or Secretary or any Assistant Secretary of the Company.
"Opinion of Counsel" shall mean a written opinion from the general
counsel of the Company, who may be an employee of or counsel to the Company, or
other legal counsel reasonably acceptable to the Trustee.
"Outstanding", when used with reference to Debentures, shall, subject
to the provisions of Section 8.4, mean, as of any particular time, all
Debentures authenticated and made available for delivery by the Trustee under
this Indenture, except:
(a) Debentures theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Debentures, or portions thereof, for the redemption of which monies
in the necessary amount shall have been deposited in trust with the Trustee or
with any paying agent (other than the Company) or shall have been set aside and
segregated in trust by the Company (if the Company shall act as its own paying
agent); provided, that if such Debentures are to be redeemed, notice of such
redemption shall have been given as provided in Article III, or provision
satisfactory to the Trustee shall have been made for giving such notice;
(c) Debentures, except to the extent provided in Sections 12.4 and
12.5, with respect to which the Company has effected defeasance and/or covenant
defeasance as provided in Article XII;
(d) Debentures in lieu of which, or in substitution for which, other
Debentures shall have been authenticated and delivered pursuant to the terms of
Section 2.6 unless proof satisfactory to the Trustee is presented that any such
Debentures are held by bona fide holders in due course; and
(e) Debentures deemed not outstanding pursuant to Article III.
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<PAGE> 10
"Person" shall mean a corporation, an association, a partnership, an
individual, a joint venture, a joint stock company, a limited liability company,
a company, a trust, an unincorporated organization or a government or an agency
or a political subdivision thereof.
"Predecessor Debenture" of any particular Debenture shall mean every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture; and, for the purposes of this
definition, any Debenture authenticated and delivered under Section 2.6 in lieu
of a lost, destroyed or stolen Debenture shall be deemed to evidence the same
debt as the lost, destroyed or stolen Debenture that is replaces.
"Principal Property" shall mean land, land improvement, buildings and
associated factory and laboratory equipment used by the Company or any
Subsidiary primarily for processing, producing, packaging or storing its
products, raw materials, inventories or other materials or supplies, in any case
owned or leased pursuant to a capital lease by the Company or any Subsidiary, or
any interest of the Company or any Subsidiary in such property (in each case
including the real estate related thereto) located within the United States of
America.
"Redemption Date" means any date fixed for the redemption of the
Debentures or any portion thereof.
"Redemption Price" mean , as of any Redemption Date, an amount equal to
the greater of (i) 100% of the principal amount of the Debentures to be redeemed
and (ii) the sum of the present values of the remaining scheduled payments of
principal and interest thereon (exclusive of interest accrued to the Redemption
Date) discounted to such Redemption Date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate, plus
_____ basis points, plus, in either case, accrued and unpaid interest on the
principal amount being redeemed to such Redemption Date.
"Reference Treasury Dealer" means (i) Morgan Stanley & Co. Incorporated
and its successors; provided, however, that if the foregoing shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company will substitute therefor another Primary Treasury Dealer,
and (ii) any other Primary Treasury Dealer selected by the Independent
Investment Banker after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.
"Responsible Officer", when used with respect to the Trustee, shall
mean an officer of the Trustee in the Corporate Trust Office assigned and duly
authorized by the Trustee to administer its corporate trust matters.
"Restricted Securities" has the meaning specified in Section 2.5.
"Sale and Leaseback Transaction" of any Person shall mean an
arrangement with any lender or investor or to which such lender or investor is a
party providing for the leasing by such person of any property or asset of such
Person which has been or is being sold or transferred by such Person more than
one
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<PAGE> 11
year after the acquisition thereof or the completion of construction or
commencement of operation thereof to such lender or investor or to any person to
whom funds have been or are to be advanced by such lender or investor on the
security of such property or asset. The stated maturity of such arrangement
shall be the date of the last payment of rent or any other similar amount due
under such arrangement prior to the first date on which such arrangement may be
terminated by the lessee without payment of a penalty.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Subsidiary" shall mean any corporation, association, partnership or
other business entity of which more than 50% of the total voting power of the
outstanding capital stock (or other interests entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, general
partners, managers, managing members, managing partners or trustees thereof or,
if such persons are not elected, to vote on any matter that is submitted to the
vote of all persons holding ownership interests in such entity) is at the time
owned or controlled, directly or indirectly, by (i) the Company, (ii) the
Company and one or more Subsidiaries or (iii) one or more Subsidiaries;
provided, however, that the term Subsidiary does not include (a) Keebler Foods
Company and its subsidiaries or (b) any other corporation, association,
partnership or other business entity (1) of which the Company owns or controls
directly or indirectly less than 80% of such total voting power of the
outstanding capital stock and (2) which has outstanding securities that have
been registered under the Securities Act or the Exchange Act.
"Treasury Rate" means, with respect to any Redemption Date for the
Debentures, (i) the yield, under the heading which represents the average for
the immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities"
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the maturity date of the Debentures,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall be determined and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight line basis, rounding
to the nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Redemption Date. The Treasury
Rate shall be calculated on the third Business Day preceding the Redemption
Date.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as
amended, as it was in force at the date of execution of this Indenture, except
as provided in Section 10.3; provided, however, that in the event the Trust
Indenture Act of 1939 is amended after the date hereof, the term "Trust
Indenture Act" shall mean, to the extent required by such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trustee" shall mean SunTrust Bank, Atlanta and its successors and any
corporation resulting from or surviving any consolidation or merger to which it
or its successors may be a party and any successor trustee at the time serving
as successor trustee hereunder.
The definitions of certain other terms are as specified in Sections 2.5
and 3.5.
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ARTICLE II
ISSUE, DESCRIPTION, EXECUTION,
REGISTRATION AND EXCHANGE OF DEBENTURES
SECTION 2.1. Designation Amount and Issue of Debentures. The Debentures
shall be designated as "___% Debentures due 2028." Debentures not to exceed the
aggregate principal amount of $200,000,000 upon the execution of this Indenture,
or from time to time thereafter, may be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall thereupon authenticate and
make available for delivery said Debentures to or upon the written order of the
Company, signed by its (a) Chairman, Vice Chairman, President, Executive or
Senior Vice President or any Vice President (whether or not designated by a
number or numbers or word or words added before or after the title "Vice
President") and (b) Treasurer or Assistant Treasurer or its Secretary or any
Assistant Secretary, without any further action by the Company hereunder.
SECTION 2.2. Form of Debentures. The Debentures and the Trustee's
certificate of authentication to be borne by such Debentures shall be
substantially in the form set forth in Exhibit A, which is incorporated in and
made a part of this Indenture.
Any of the Debentures may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Debentures may be
listed, or to conform to usage.
Any Debenture in global form shall represent such of the outstanding
Debentures as shall be specified therein and shall provide that it shall
represent the aggregate amount of outstanding Debentures from time to time
endorsed thereon and that the aggregate amount of outstanding Debentures
represented thereby may from time to time be increased or reduced to reflect
transfers or exchanges permitted hereby. Any endorsement of a Debenture in
global form to reflect the amount of any increase or decrease in the amount of
outstanding Debentures represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in such manner and upon instructions
given by the holder of such Debentures in accordance with this Indenture.
Payment of any principal of, interest on and Redemption Price in
respect of any Debenture in global form shall be made to the holder of such
Debenture.
The terms and provisions contained in the form of Debenture attached as
Exhibit A hereto shall constitute, and are hereby expressly made a part of, this
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
SECTION 2.3. Date and Denomination of Debentures; Payments of Interest.
The Debentures shall be issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. Every
Debenture shall be dated the date of its authentication and shall bear interest
from the applicable date in each case as specified on the face of the form of
Debenture attached as Exhibit A
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<PAGE> 13
hereto. Interest on the Debentures shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The person in whose name any Debenture (or its Predecessor Debenture)
is registered at the close of business on any record date with respect to any
interest payment date shall be entitled to receive the interest payable on such
interest payment date, except (i) that the interest payable upon redemption
(unless the date of redemption is an interest payment date) will be payable to
the person to whom principal is payable and (ii) as set forth in the next
succeeding sentence. Interest may, at the option of the Company, be paid either
(i) by check mailed to the address of the person entitled thereto as it appears
in the Debenture register or (ii) by transfer to an account maintained by such
person located in the United States; provided, however, that payments to the
Depositary will be made by wire transfer of immediately available funds to the
account of the Depositary or its nominee. The term"record date" with respect to
any interest payment date shall mean the _______ or _________ preceding said
April __ or October __, respectively.
Any interest on any Debenture which is payable, but is not punctually
paid or duly provided for, on any said April __ or October __ (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant record date by virtue of his having been such Holder; and such
Defaulted Interest shall be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below;
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Debentures (or their
respective Predecessor Debentures) are registered at the close of
business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
to be paid on each Debenture and the date of the payment (which shall
be not less than twenty-five (25) days after the receipt by the Trustee
of such notice, unless the Trustee shall consent to an earlier date),
and at the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date for the payment
of such Defaulted Interest which shall be not more than fifteen (15)
days and not less than ten (10) days prior to the date of the proposed
payment and not less than ten (10) days after the receipt by the
Trustee of the notice payment. The Trustee shall promptly notify the
Company at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the special record date
therefor to be mailed, first-class postage prepaid, to each Holder at
this address as it appears in the Debenture register, not less than ten
(10) days prior to such special record date. Notice of the proposed
payment of such Defaulted Interest and the special record date therefor
having been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Debentures (or their respective Predecessor
Debentures) were registered at the close of business on such special
record date and shall no longer be payable pursuant to the following
clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange and automated quotation system on which the
Debentures may be listed or designated for issuance, and upon such
notice as may be required by such exchange and automated quotation
system, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of payment shall
be deemed practicable by the Trustee.
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SECTION 2.4. Execution of Debentures. The Debentures shall be signed in
the name and on behalf of the Company by the manual or facsimile signature of
its Chairman, Vice Chairman, President, any Executive or Senior Vice President
or any Vice President (whether or not designated by a number or numbers or word
or words added before or after the title "Vice President") and attested by the
manual or facsimile signature of its Treasurer, Secretary or any of its
Assistant Treasurers or Assistant Secretaries (which may be printed, engraved or
otherwise reproduced thereon, by facsimile or otherwise). Only such Debentures
as shall bear thereon a certificate of authentication substantially in the form
set forth on the form of Debenture attached as Exhibit A hereto, manually
executed by the Trustee (or an authenticating agent appointed by the Trustee as
provided by Section 14.11), shall be entitled to the benefits of this Indenture
or be valid or obligatory for any purpose. Such certificate by the Trustee (or
such an authenticating agent) upon any Debenture executed by the Company shall
be conclusive evidence that the Debenture so authenticated has been duly
authenticated and delivered hereunder and that the holder is entitled to the
benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Debentures shall cease to be such officer before the Debentures so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Debentures nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Debentures had not ceased to be
such officer of the Company; and any Debenture may be signed on behalf of the
Company by such persons as, at the actual date of the execution of such
Debenture, shall be the proper officers of the Company, although at the date of
the execution of this Indenture any such person was not such an officer.
SECTION 2.5. Exchange and Registration of Transfer of Debentures:
Restrictions on Transfer Depositary.
(a) The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency of the Company designated pursuant to Section 4.2 being herein sometimes
collectively referred to as the "Debenture register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Debentures and of transfers of Debentures. The Debenture
register shall be in written form or in any form capable of being converted into
written form within a reasonably prompt period of time. The Trustee is hereby
appointed "Debenture registrar" for the purpose of registering Debentures and
transfers of Debentures as herein provided. The Company may appoint one or more
co-registrars in accordance with Section 4.2.
Upon surrender for registration of transfer of any Debenture to the
Debenture registrar or any co-registrar, and satisfaction of the requirements
for such transfer set further in this Section 2.5, the Company shall execute,
and the Trustee shall authenticate and make available for delivery, in the name
of the designated transferee or transferees, one or more new Debentures of any
authorized denominations and of a like aggregate principal amount and bearing
such restrictive legends as may be required by this Indenture.
Debentures may be exchanged for other Debentures of any authorized
denominations and of a like aggregate principal amount, upon surrender the
Debentures to be exchanged at any such office or agency maintained by the
Company pursuant to Section 4.2. Whenever any Debentures are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and make
available for delivery, the Debentures which the Holder making the exchange is
entitled to receive bearing registration numbers not contemporaneously
outstanding.
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<PAGE> 15
All Debentures issued upon any registration of transfer or exchange of
Debentures shall be the valid obligations of the Company, evidencing the same
Debt and entitled to the same benefits under this Indenture, as the Debentures
surrendered upon such registration of transfer or exchange.
All Debentures presented or surrendered for registration of transfer or
for exchange or redemption shall (if so required by the Company or the Debenture
registrar) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company, and the Debentures
shall be duly executed by the Holder thereof or his attorney duly authorized in
writing.
No service charge shall be made for any registration of transfer or
exchange of Debentures, but the Company may require payment of a sum sufficient
to cover any tax, assessment or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Debentures.
Neither the Company nor the Trustee nor any Debenture registrar or any
Company registrar shall be required to exchange or register a transfer of (a)
any Debentures for a period of fifteen (15) days next preceding any selection of
Debentures to be redeemed or (b) any Debentures or portions thereof called for
redemption pursuant to Article III.
(b) Subject to Section 2.5(d) below, all Debentures shall be
represented by one or more Debentures in global form (each, a "Global
Debenture") registered in the name of the Depositary or the nominee of the
Depositary, except as otherwise specified below. The transfer and exchange of
beneficial interests in any such Global Debenture shall be effected through the
Depositary in accordance with this Indenture and the procedures of the
Depositary therefor.
Transfers of interests in the Debentures between any Global Debenture
and any other Debenture will be made in accordance with the standing
instructions and procedures of the Depositary and its participants. The Trustee
shall make appropriate endorsements to reflect increases or decreases in the
principal amounts of such Global Debentures as set forth on the face of the
Debenture to reflect any such transfers.
So long as the Depository or its nominee is the registered owner of the
Global Debentures, the Depository shall be considered the sole Holder of any
Debentures evidenced by the Global Debenture. Beneficial owners of a Global
Debenture will not be considered the owners or Holders for any purpose,
including with respect to the giving of any directions, instructions or
approvals to the Trustee thereunder. Beneficial owners of a Global Debenture
shall not be entitled to have certificates registered in their names, will not
receive or be entitled to receive physical delivery of certificates in
definitive form and will not be considered Holders of such Debentures. Neither
the Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depository or for maintaining, supervising or
reviewing any records of the Depository relating to the Debentures.
All payments on the Global Debentures registered in the name of the
Depositary's nominee will be made by the Company through the paying agent to the
Depositary's nominee as the registered owner of the Global Debentures. Under the
terms of the Indenture, the Company and the Trustee will treat the persons in
whose names the Debentures are registered as the owners of such Debentures for
the purpose of receiving payment of principal and interest on such Debentures
and for all other purposes whatsoever. Therefore, neither the Company, the
Trustee nor any paying agent has any direct responsibility or liability for the
payment of principal or interest on the Debentures to owners of beneficial
interests in the Global Debentures. Payments by the Depository or any of its
direct or indirect participants to owners of beneficial interests in the Global
Debentures will be governed by standing instructions and customary practices, as
is the case with
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<PAGE> 16
securities held for the accounts of customers in bearer form or registered in
"street name" and will be the responsibility of such participants or indirect
participants.
Any Debenture in global form may be endorsed with or have incorporated
in the text thereof such legends or recitals or changes not inconsistent with
the provisions of this Indenture as may be required by the Custodian, the
Depositary or by the National Association of Securities Dealers, Inc. in order
for the Debentures to be tradeable on the Nasdaq National Market or as may be
required for the Debentures to be tradeable on any other market developed for
trading of such securities or required to comply with any applicable law or any
regulation thereunder or with the rules and regulations of any securities
exchange or automated quotation system upon which the Debentures may be listed
or traded or to conform with any usage with respect thereto, or to indicated any
special limitations or restrictions to which any particular Debentures are
subject.
(c) As used in this Section 2.5(c) the term "transfer" encompasses any
sale, pledge, transfer or other disposition whatsoever of any Debenture.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in the second paragraph of Section 2.5(b) and in this
Section 2.5(c)), a Debenture in global form may not be transferred as a whole or
in part except by the Depositary to a nominee of the Depositary or by a nominee
of the Depositary to the Depositary or another nominee of the Depositary or by
the Depositary or any such nominee to a successor Depositary or a nominee of
such successor Depositary.
The Depositary shall be a clearing agency registered under the Exchange
Act. The Company initially appoints DTC to act as Depositary with respect to the
Debentures in global form. Initially, any Global Debenture shall be issued to
the Depositary, registered in the name of Cede & Co., as the nominee of the
Depositary, and deposited with the Custodian for Cede & Co.
If at any time the Depositary for a Global Debenture notifies the
Company that it is unwilling or unable to continue as Depositary for such
Debenture, the Company may appoint a successor Depositary with respect to such
Debenture. If a successor Depositary is not appointed by the Company within
ninety (90) days after the Company receives such notice, the Company will
execute, and the Trustee, upon receipt of an Officers' Certificate for the
authentication and delivery of Debentures, will authenticate and make available
for delivery, Debentures in certificated form, in aggregate principal amount
equal to the principal amount of such Debenture in global form, in exchange for
such Debenture in global form, pursuant to Section 2.5(d) below.
If a Debenture in certificated form is issued in exchange for any
portion of a Global Debenture after the close of business at the office or
agency where such exchange occurs on any record date and before the opening of
business at such office or agency on the next succeeding interest payment date,
interest will not be payable on such interest payment date in respect of such
Debenture, but will be payable on such interest payment date, subject to the
provisions of Section 2.3, only to the person to whom interest in respect of
such portion of such Global Debenture is payable in accordance with the
provisions of this Indenture.
Debentures in certificated form issued in exchange for all or a part of
a Debenture in global form pursuant to this Section 2.5 shall be registered in
such names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. Upon execution and authentication, the Trustee shall make
available for delivery such Debentures in certificated form to the persons in
whose names such Debentures in certificated form are so registered.
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At such time as all interests in a Debenture in global form have been
redeemed, canceled, exchanged for Debentures in certificated form, or
transferred to a transferee who receives Debentures in certificated form
thereof, such Debenture in global form shall, upon receipt thereof, be canceled
by the Trustee in accordance with standing procedures and instructions existing
between the Depositary and the Custodian. At any time prior to such
cancellation, if any interest in a Global Debenture is exchanged for Debentures
in certificated form, redeemed, repurchased, canceled or exchanged for
Debentures in certificated form or transferred to a transferee who receives
Debentures in certificated form therefor or any Debenture in certificated form
is exchanged or transferred for part of a Debenture in global form, the
principal amount of such Debenture in global form shall, in accordance with the
standing procedures and instructions existing between the Depositary and the
Custodian, be appropriately reduced or increased, as the case may be, and an
endorsement shall be made on such Global Debenture, by the Trustee or the
Custodian, at the direction of the Trustee, to reflect such reduction or
increase.
(d) The Company will issue Debentures in definitive form in exchange
for the Global Debentures if, and only if, either (1) the Depositary is at any
time unwilling or unable to continue as depositary and a successor depositary is
not appointed by the Company within 90 days, (2) an Event of Default has
occurred and is continuing and the Trustee has received a request from the
Depositary to issue Debentures in definitive form in lieu of all or a portion of
the Global Debentures (in which case the Company shall execute within 30 days of
such request, and the Trustee, upon receipt of an Officers' Certificate, shall
promptly authenticate and make available for delivery Debentures in definitive
form), or (3) the Company determines not to have Debentures represented by a
Global Debenture. In any such instance, an owner of a beneficial interest in the
Global Debenture will be entitled to have Debentures equal in principal amount
to such beneficial interest registered in its name and will be entitled to
physical delivery of such Debentures in physical form. Debentures so issued in
definitive form will be issued in denominations of $1,000 and whole multiples
thereof and will be issued in registered form only, without coupons.
SECTION 2.6. Mutilated, Destroyed, Lost or Stolen Debentures. In case
any Debenture shall become mutilated or be destroyed, lost or stolen, the
Company in its discretion may execute, and upon its request the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and make
available for delivery, a new Debenture, bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Debenture, or in
lieu of and in substitution for the Debenture so destroyed, lost or stolen. In
every case, the applicant for a substituted Debenture shall furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent such
security or indemnity as may be required by them to save each of them harmless
for any loss, liability, cost or expense caused by or connected with such
substitution, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent evidence to their satisfaction of the destruction, loss or
theft of such Debenture and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Debenture and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Debenture, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Debenture which has matured or is
about to mature or has been called for redemption shall become mutilated or be
destroyed, lost or stolen, the Company may, instead of issuing a substitute
Debenture, pay or authorize the payment of the same (without surrender thereof
except in the case of a mutilated Debenture), as the case may be, if the
applicant for such payment shall furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent such security or indemnity as may be
required by them to save each of them harmless
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for any loss, liability, cost or expense caused by or connected with such
substitution, and, in case of destruction, loss or theft, evidence satisfactory
to the Company, the Trustee and, if applicable, any paying agent of the
destruction, loss or theft or such Debenture and of the ownership thereof.
Every substituted Debenture issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any Debenture is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Debenture shall be found at any
time, and shall be entitled to all the benefits of (but shall be subject to all
the limitations set forth in) this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder. To the extent permitted by
law, all Debentures shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Debentures and shall preclude any and all
other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.
SECTION 2.7. Temporary Debentures. Pending the preparation of
Debentures in certificated forms, the Company may execute and the Trustee or an
authenticating agent appointed by the Trustee shall, upon the written request of
the Company, authenticate and make available for delivery temporary Debentures
(printed or lithographed). Temporary Debentures shall be issuable in any
authorized denomination, and substantially in the form of the Debentures in
certificated form, but with such omissions, insertions and variations as may be
appropriate for temporary Debentures, all as may be determined by the Company.
Every such temporary Debenture shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the Debentures in certificated form. Without unreasonable delay the Company will
execute and deliver to the Trustee or such authenticating agent Debentures in
certificated form (other than in the case of Debentures in global form) and
thereupon any or all temporary Debentures (other than any such Debenture in
global form) may be surrendered in exchange therefor, at each office or agency
maintained by the Company pursuant to Section 4.2 and the Trustee or such
authenticating agent shall authenticate and deliver in exchange for such
temporary Debentures an equal aggregate principal amount of Debentures in
certificated form. Such exchange shall be made by the Company at its own expense
and without any charge therefor. Until so exchanged, the temporary Debentures
shall in all respects be entitled to the same benefits and subject to the same
limitations under this Indenture as Debentures in certificated form
authenticated and made available for delivery hereunder.
SECTION 2.8. Cancellation of Debentures Paid, Etc. All Debentures
surrendered for the purpose of payment, redemption, exchange or registration of
transfer, shall, if surrendered to the Company or any paying agent or any
Debenture registrar, be surrendered to the Trustee and promptly canceled by it,
or, if surrendered to the Trustee, shall be promptly canceled by it, and no
Debentures shall be issued in lieu thereof except as expressly permitted by any
of the provisions of this Indenture. After such cancellation, the Trustee shall,
if requested by the Company, deliver such canceled Debentures to the Company. If
the Company shall acquire any of the Debentures, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Debentures unless and until the same are delivered to the Trustee for
cancellation.
SECTION 2.9. Cusip Numbers. The Company in issuing the Debentures may
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use CUSIP numbers in notices of redemption as a convenience to Holders;
provided, that any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the Debentures or as
contained in any notice of a
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redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the CUSIP numbers.
ARTICLE III
REDEMPTION OF DEBENTURES
SECTION 3.1. Redemption. The Debentures will be redeemable, in whole or
from time to time in part, at the option of the Company on any Redemption Date,
upon notice as set forth in Section 3.3, and at the applicable Redemption Price
together with accrued interest to, but excluding, the Redemption Date; provided
that installments of interest on Debentures which are due and payable on the
April __ or October __ falling on or prior to the relevant Redemption Date shall
be payable to the Holders registered as such at the close of business on the
relevant record date according to their terms and the provisions of this
Indenture.
SECTION 3.2. Notice of Trustee. If the Company elects to redeem
Debentures pursuant to Section 3.1, it shall notify the Trustee in writing of
the redemption date and the principal amount of Debentures to be redeemed, as
least 45 days before the Redemption Date (unless a shorter period shall be
satisfactory to the Trustee).
SECTION 3.3. Notice of Redemption; Selection of Debentures. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Debentures pursuant to Section 3.1 for redemption, it or, at its
request, the Trustee in the name of and at the expense of the Company, shall
mail or cause to be mailed a notice of such redemption at least 30 and not more
than 60 days before the Redemption Date to each Holder to be redeemed. Such
mailing shall be by first class mail to the addresses of the Holders as the same
appear on the Debenture register. The notice, if mailed in the manner herein
provided, shall be conclusively presumed to have been duly given, whether or not
the Holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the Holder designated for redemption as a
whole or in part shall not affect the validity of the proceedings for the
redemption of any other Debenture.
Each such notice of redemption shall identify the Debentures to be
redeemed (including CUSIP number), specify the principal amount of each
Debenture to be redeemed, the Redemption Date, the Redemption Price at which
Debentures are to be redeemed, the place or places of payment, that payment will
be made upon presentation and surrender of such Debentures, that interest
accrued to the Redemption Date will be paid as specified in said notice, and
that on and after said date interest thereon or on the portions thereof to be
redeemed will cease to accrue, unless the Company defaults in the payment of the
Redemption Price. If fewer than all the Debentures are to be redeemed, the
notice of redemption shall identify the Debentures to be redeemed. In case any
Debenture is to be redeemed in part only, the notice of redemption shall state
the portion of the principal amount thereof to be redeemed and shall state that
on and after the Redemption Date, upon surrender of such Debenture, a new
Debenture or Debentures in principal amount equal to the unredeemed portion
thereof will be issued.
No later than the Business Day prior to the redemption date specified
in the notice of redemption given as provided in this Section, the Company will
deposit with the Trustee or with one or more Paying Agents (or, if the Company
is acting as its own Paying Agent, set aside, segregate and hold in trust as
provided in Section 4.4) an amount of money sufficient to redeem on the
Redemption Date all the
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Debentures so called for redemption at the appropriate Redemption Price,
together with accrued interest to the Redemption Date.
If fewer than all the Debentures are to be redeemed, the Trustee shall
select, by lot, pro rata or in such other manner as the Trustee shall deem fair
and appropriate, the Debentures or portions thereof (in integral multiples of
$1,000 principal amount) to be redeemed.
SECTION 3.4. Payment of Debentures Called for Redemption. If notice of
redemption has been given as above provided, the Debentures or portions of
Debentures with respect to which such notice has been given shall become due and
payable on the date and at the place or places stated in such notice at the
applicable Redemption Price, together with interest accrued to the Redemption
Date, and on and after said date (unless the Company shall default in the
payment of such Debentures at the Redemption Price, together with interest
accrued to said date) any interest on the Debentures or portions of Debentures
so called for redemption shall cease to accrue and, except as provided in
Sections 7.5 and 12.4, to be entitled to any benefit or security under this
Indenture, and the holders thereof shall have no right in respect of such
Debentures except the right to receive the Redemption Price thereof and unpaid
interest to the Redemption Date. On presentation and surrender of such
Debentures at a place of payment in said notice specified, the said Debentures
or the specified portions thereof shall be paid and redeemed by the Company at
the applicable Redemption Price, together with interest accrued thereon to the
Redemption Date; provided that any semi-annual payment of interest becoming due
on the Redemption Date shall be payable to the holders of such Debentures
registered as such on the relevant record date subject to the terms and
provisions of Section 2.2 hereof.
Upon presentation of any Debenture redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the holder
thereof, at the expense of the Company, a new Debenture or Debentures, of
authorized denominations, in principal amount equal to the unredeemed portion of
the Debenture so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any
Debentures or mail any notice of optional redemption during the continuance of a
default in payment of the principal of, interest on or Redemption Price in
respect of the Debentures or of any Event of Default. If any Debenture called
for redemption shall not be so paid upon surrender thereof for redemption, the
Redemption Price and, to the extent legally permitted, interest, if any, in
respect thereof shall, until paid or duly provided for, bear interest from the
Redemption Date at the rate borne by the Debenture.
SECTION 3.5. No Sinking Fund. The Debentures shall not be entitled to
the benefit of any sinking fund.
ARTICLE IV
PARTICULAR COVENANTS OF THE COMPANY
SECTION 4.1. Payment of Principal, Interest and Redemption Price. The
Company covenants and agrees that it will duly and punctually pay or cause to be
paid the principal of, interest on and Redemption Price, if applicable, in
respect of each of the Debentures at the places, at the respective times and in
the manner provided herein and in the Debentures. Each installment of interest
on the Debentures due on any semi-annual interest payment date may be paid
either (i) by check mailed to the address of the person entitled
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thereto as it appears in the Debenture register or (ii) by transfer to an
account maintained by such person located in the United States; provided,
however, that payments to the Depositary will be made by wire transfer of
immediately available funds to the account of the Depositary or its nominee.
SECTION 4.2. Maintenance of Office or Agency. The Company will maintain
in the City of Atlanta, Georgia, an office or agency where the Debentures may be
surrendered for registration of transfer or exchange or for presentation for
payment or for redemption and where notices and demands to or upon the Company
in respect of the Debentures and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency not designated or appointed by the Trustee.
If at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office or the office or agency of the Trustee in the City of
Atlanta, Georgia.
The Company may also from time to time designate one or more other
offices or agencies where the Debentures may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the City of
Atlanta, Georgia, for such purposes. The Company will give prompt written notice
of any such designation or rescission and of any change in the location of any
such other office or agency.
The Company hereby initially designates the Trustee as paying agent,
Debenture registrar, and Custodian, and each of the Corporate Trust Office of
the Trustee and the office of the Trustee in the City of Atlanta, Georgia (which
shall initially be 58 Edgewood Avenue, Atlanta, Georgia 30302).
So long as the Trustee is the Debenture registrar, the Trustee agrees
to mail, or cause to be mailed, the notices set forth in Section 7.10(a) and the
third paragraph of Section 7.11.
SECTION 4.3. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 7.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
SECTION 4.4. Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee, or if the Trustee shall appoint such a paying agent, it will cause such
paying agent to execute and deliver to the Trustee an instrument in which such
agent shall agree with the Trustee, subject to the provisions of this Section
4.4:
(1) that it will hold all sums held by it as such agent for
the payment of the principal of, interest on or Redemption Price in
respect of, the Debentures (whether such sums have been paid to it by
the Company or by any other obligor on the Debentures) in trust for the
benefit of the holders of the Debentures;
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Debentures) to make any payment
of the principal of, interest on or Redemption Price in respect of the
Debentures when the same shall be due and payable; and
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(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the
Trustee all sums so held in trust.
The Company shall, on or before each due date of the principal of,
interest on or Redemption Price in respect of the Debentures, deposit with the
paying agent a sum sufficient to pay such amounts, and (unless such paying agent
is the Trustee) the Company will promptly notify the Trustee of any failure to
take such action; provided, that if such deposit is made on the due date, such
deposit shall be received by the paying agent by 10:00 a.m. New York City time,
on such date.
(b) If the Company shall act as its own paying agent, it will, on
or before each due date of the principal of, interest on or Redemption Price in
respect of the Debentures, set aside, segregate and hold in trust for the
benefit of the holders of the Debentures a sum sufficient to pay such amounts so
becoming due and will notify the Trustee of any failure to take such action and
of any failure by the Company (or any other obligor under the Debentures) to
make any payment of the principal of, interest on or Redemption Price in respect
of the Debentures when the same shall become due and payable.
(c) Anything in this Section 4.4 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any paying agent hereunder
as required by this Section 4.4, such sums to be held by the Trustee upon the
trusts herein contained and upon such payment by the Company or any paying agent
to the Trustee, the Company or such paying agent shall be released from all
further liability with respect to such sums.
(d) Anything in this Section 4.4 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 4.4 is subject
to Sections 12.3 and 12.4.
SECTION 4.5. Corporate Existence. Subject to Article XI, the Company
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence.
SECTION 4.6. Stay, Extension and Usury Laws. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Debentures as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.7. Limitations on Liens.
(a) The Company will not, and will not permit any Subsidiary to,
Incur any Debt secured by a Lien on any Principal Property or on any shares of
stock or indebtedness of any Subsidiary, without making effective provision for
securing the Debentures equally and ratably with such Debt.
(b) The foregoing restrictions will not apply to: (i) Liens on any
Principal Property acquired, constructed or improved after the date of the
Indenture, which Liens are created within 180 days of such acquisition,
construction or improvement, to secure Debt Incurred for the payment of all or
any part of the
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purchase price or the cost of construction or improvement of the Principal
Property in an aggregate principal amount not to exceed the fair market value of
such property, construction or improvements; (ii) Liens on any Principal
Property, shares of stock or indebtedness of a Person existing prior to the time
(A) such Person becomes a Subsidiary of the Company, (B) such Person merges into
or consolidates with the Company or a Subsidiary of the Company or (C) a
Subsidiary of the Company merges into or consolidates with such Person (in a
transaction in which such Person becomes a Subsidiary of the Company); (iii)
Liens on Principal Property securing Debt owed by a Subsidiary to the Company or
any other Subsidiary; (iv) Liens on Principal Property in existence on the date
of this Indenture; (v) Liens on any unimproved real Principal Property
constructed or improved after the date of this Indenture to secure the payment
of all or part of the cost of such construction or improvement; (vi) Liens on
any Principal Property of the Company or any Subsidiary in favor of governmental
bodies; (vii) Liens created by pledges or deposits required in connection with
workers' compensation, unemployment insurance and other social security
legislation and deposits securing obligations to insurance carriers under
insurance policies or self-insurance arrangements of the Company or a
Subsidiary; (viii) Liens to secure taxes not yet due or which are being
contested in good faith by the Company or a Subsidiary; and (ix) Liens to secure
any extension, renewal, refinancing or refunding (or successive extensions,
renewals, refinancings or refundings), in whole or in part, of any Debt secured
by Liens referred to in the foregoing clauses (i) through (viii), so long as
such Lien does not extend to any other property and the Debt so secured is not
increased.
(c) Notwithstanding the foregoing, the Company or any Subsidiary
may Incur Debt secured by Liens which otherwise would be subject to the
foregoing restrictions, in an aggregate amount which, together with all other
such Debt outstanding secured by Liens and all Attributable Debt outstanding in
respect of Sale and Leaseback Transactions (other than as permitted by clause
(i) under the "Limitation on Sale and Leaseback Transactions" covenant in
Section 4.8), does not exceed 10% of Consolidated Net Tangible Assets.
SECTION 4.8. Limitation on Sale and Leaseback Transactions. The Company
will not, and will not permit any Subsidiary to, enter into any Sale and
Leaseback Transaction on any Principal Property (except transactions between the
Company and any Subsidiary and transactions for a period not exceeding three
years) unless: (i) the Company or such Subsidiary would be entitled to incur a
Lien to secure Debt by reason of the provisions described in clauses (i) through
(ix) of Section 4.7(b) in an amount equal to the Attributable Debt of such Sale
and Leaseback Transaction without equally and ratably securing the Debentures or
(ii) the Company or such Subsidiary applies within 120 days an amount equal to,
in the case of a sale or transfer for cash, the net proceeds (not exceeding the
net book value), and, otherwise, an amount equal to the fair value (as
determined by its Board of Directors), of the property so leased to (A) the
retirement of Debentures or other Funded Debt of the Company or such Subsidiary
or (B) the acquisition of property which constitutes a Principal Property.
SECTION 4.9. Limitation on Consolidation, Merger and Sale of Assets.
The Company will not consolidate with, or sell, convey or lease all or
substantially all of its assets to, or merge with or into, any other
corporation, unless (i) either the Company is the continuing corporation, or the
successor corporation is a domestic corporation and expressly assumes the due
and punctual payment of the principal of and interest on the Debentures
outstanding under this Indenture according to their tenor and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed or observed by the Company and (ii) immediately
after such merger or consolidation, or such sale, conveyance or lease, no Event
of Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing.
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ARTICLE V
HOLDERS' LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE
SECTION 5.1. Holders' Lists. The Company covenants and agrees that it
will furnish or cause to be furnished to the Trustee, semiannually, not more
than fifteen (15) days after each April __ and October __ in each six-month
period beginning with the period ending October __, 1998, and at such other
times as the Trustee may request in writing, within thirty (30) days after
receipt by the Company of any such request (or such lesser time as the Trustee
may reasonably request in order to enable it to timely provide any notice to be
provided by it hereunder), a list in such form as the Trustee may reasonably
require of the names and addresses of the holders of Debentures as of a date not
more than fifteen (15) days (or such other date as the Trustee may reasonably
request in order to so provide any such notices) prior to the time such
information is furnished, except that no such list need be furnished so long as
the Trustee is acting as Debenture registrar.
SECTION 5.2. Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debentures contained in the most recent list furnished to it as provided in
Section 5.1 or maintained by the Trustee in its capacity as Debenture registrar,
if so acting. The Trustee may destroy any list furnished to it as provided in
Section 5.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other holders of
Debentures with respect to their rights under this Indenture or under the
Debentures, and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.
(c) Every Holder, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any agent
of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of holders of Debentures made pursuant to
the Trust Indenture Act.
SECTION 5.3. Reports by Trustee.
(a) Within sixty (60) days after of each year commencing with the year
1998, the Trustee shall transmit to holders of Debentures such reports dated as
of of the year in which such reports are made concerning the Trustee and its
actions under this Indenture as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant thereto.
(b) A copy of such report shall, at the time of such transmission to
holders of Debentures, be filed by the Trustee with each stock exchange and
automated quotation system upon which the Debentures are listed and with the
Company. The Company will notify the Trustee within a reasonable time when the
Debentures are listed on any stock exchange and automated quotation system.
SECTION 5.4. Reports by Company.
(a) The Company shall file with the Trustee (and the Commission if at
any time after this Indenture becomes qualified under the Trust Indenture Act),
and transmit to holders of Debentures, such
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information, documents and other reports and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act; provided, that any such information, documents or
reports required to be filed with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act will be filed with the Trustee within fifteen (15)days after
the same is so required to be filed with the Commission.
Delivery of such information, documents and reports to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
(b) The Company will deliver to the Trustee annually, commencing ,
1998, a certificate, from its principal executive officer, principal financial
officer or principal accounting officer, stating whether or not to the knowledge
of the signer thereof the Company is in compliance (without regard to periods of
grace or notice requirements) with all conditions and covenants under this
Indenture, and if the Company shall not be in compliance, specifying such
non-compliance and the nature and status thereof of which such signer may have
knowledge.
ARTICLE VI
REMEDIES OF THE TRUSTEE AND
HOLDERS ON AN EVENT OF DEFAULT
SECTION 6.1. Events of Default. In case one or more of the following
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) shall have occurred and be
continuing:
(a) default in the payment of any installment of interest upon any of
the Debentures as and when the same shall become due and payable, and
continuance of such default for a period of thirty (30) days; or
(b) default in the payment of all or any portion of the principal and,
if applicable, the Redemption Price, in respect of any of the Debentures as and
when the same shall become due and payable, either at maturity, in connection
with any redemption pursuant to Article III, by acceleration or otherwise; or
(c) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Debentures or in this Indenture (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section 6.1 specifically
dealt with) continued for a period of sixty (60) days (or such other period
specified in the Indenture) after the date on which written notice of such
failure shall have been given to the Company by the Trustee, or to the Company
and a Responsible Officer of the Trustee by the holders of at least 25% in
aggregate principal amount of the Debentures at the time outstanding determined
in accordance with Section 8.4; or
(d) default in the performance, or breach, of any covenant which
results in the acceleration of Debt of the Company or any Subsidiary in excess
of $10 million and failure of such acceleration to be rescinded or such Debt to
be discharged within ten (10) days; or
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(e) failure to pay any amount due and payable in respect of any Debt of
the Company or any Subsidiary in excess of $10 million and the failure of such
default to be rescinded or such Debt to be discharged within ten (10) days; or
(f) the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due; or
(g) an involuntary case or other proceeding shall be commenced against
the Company seeking liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 6.1(f) or (g)), unless the principal of all of the Debentures shall
have already become due and payable, either the Trustee or the holders of not
less than 25% in aggregate principal amount of the Debentures then outstanding
hereunder determined in accordance with Section 8.4, by notice in writing to the
Company (and to the Trustee if given by Holders), may declare the principal of,
and accrued and unpaid interest on, the Debentures, to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Debentures to
the contrary notwithstanding. If an Event of Default specified in Section 6.1(f)
or (g) occurs, the principal amount of, accrued and unpaid interest on and any
Redemption Price in respect of, the Debentures, shall ipso facto become due and
payable immediately and automatically without any declaration or other act on
the part of the Trustee or any Holder.
This provision, however, is subject to the conditions that if, at any
time after the principal of the Debentures shall have been so declared due and
payable, and before any judgment or decree for the payment of the monies due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all Debentures and the principal of, interest on
and any Redemption Price in respect of any and all Debentures which shall have
become due otherwise than by acceleration (with interest on overdue installments
of interest (to the extent that payment of such interest is enforceable under
applicable law) and on such principal amount and any Redemption Price at the
rate borne by the Debentures, to the date of such payment or deposit) and
amounts due to the Trustee pursuant to Section 7.6, and if any and all defaults
under this Indenture, other than the nonpayment of the principal amount, any
declaration or other act on the part of the Trustee or any Holder, and accrued
interest thereon which shall have become due by acceleration, shall have been
cured or waived pursuant to Section 6.7, then and in every such case the holders
of a majority in aggregate principal amount of the Debentures then outstanding,
by written notice to the Company and to the Trustee, may waive all defaults or
Events of Default and rescind and annul such declaration and its consequences;
but no such waiver or rescission and annulment shall extend to or shall affect
any subsequent default or Event of Default, or shall impair any right consequent
thereon. The Company shall notify a Responsible Officer of the Trustee, promptly
upon becoming aware thereof, of any Event of Default.
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In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the Holders and the Trustee shall be restored respectively to their
several positions and rights hereunder, and all rights, remedies and powers of
the Company, the Holders and the Trustee shall continue as though no such
proceeding had been taken.
SECTION 6.2. Payments of Debentures on Default; Suit Therefor. The
Company covenants that (a) in case default shall be made in the payment of any
installment of interest upon any of the Debentures as and when the same shall
become due and payment, and such default shall have continued for a period of
thirty (30) days, or (b) in case default shall be made in the payment of the
principal of, interest on and any Redemption Price in respect of any Debenture
as and when the same shall have become due and payable, whether at maturity of
the Debentures or in connection with any redemption, by or under this Indenture
declaration or otherwise, then, upon demand of the Trustee, the Company will pay
to the Trustee, for the benefit of the Holders, the whole amount that then shall
have become due and payable on all such Debentures for principal amount or
interest, or both, as the case may be, with interest upon the overdue principal
amount and (to the extent that payment of such interest is enforceable under
applicable law) upon the overdue installments of interest at the rate borne by
the Debentures; and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including reasonable
compensation to the Trustee, its agents, attorneys and counsel, and any
reasonable expenses or liabilities incurred by the Trustee hereunder other than
through its negligence or bad faith. Until such demand by the Trustee, the
Company may pay the principal of, interest on and any Redemption Price in
respect of the Debentures to the registered holders, whether or not the
Debentures are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the
Debentures and collect in the manner provided by law out of the property of the
Company or any other obligor on the Debentures wherever situated the monies
adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Debentures under
Title 11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in case of any other judicial proceedings relative to the
Company or such other obligor upon the Debentures, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal or any Redemption Price of the Debentures shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand pursuant to the
provisions of this Section 6.2, shall be entitled and empowered, by intervention
in such proceedings or otherwise, to file and prove a claim or claims for the
whole amount of principal, premium, if any, and interest owing and unpaid in
respect of the Debentures, and, in case of any judicial proceedings, to file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and of the Holders allowed
in such judicial proceedings relative to the Company or any other obligor on the
Debentures, its or their creditors, or its or their property, and to collect and
receive any monies or other property payable or deliverable on any such claims,
and to distribute the same after the deduction of any amounts due the Trustee
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under Section 7.6; and any receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, custodian or similar official is hereby authorized
by each of the Holders to make such payments to the Trustee, and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for reasonable compensation,
expenses, advances and disbursements, including reasonable counsel fees incurred
by it up to the date of such distribution. To the extent that such payment of
reasonable compensation, expenses, advances and disbursements out of the estate
in any such proceedings shall be denied for any reason, payment of the same
shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Debentures may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
All rights of action and of asserting claims under this Indenture, or
under any of the Debentures, may be enforced by the Trustee without the
possession of any of the Debentures, or the production thereof at any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the
Debentures.
In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the Holders
of the Debentures, and it shall not be necessary to make any Holders of the
Debentures parties to any such proceedings.
SECTION 6.3. Application of Monies Collected by Trustee. Any monies
collected by the Trustee pursuant to this Article VI shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Debentures, and stamping
thereon the payment, if only partially paid, and upon surrender thereof, if
fully paid:
First: To the payment of all amounts due the Trustee under Section 7.6;
Second: In case the principal of the outstanding Debentures shall not
have become due and be unpaid, to the payment of interest on the Debentures in
default in the order of the maturity of the installments of such interest, with
interest (to the extent that such interest has been collected by the Trustee)
upon the overdue installments of interest at the rate borne by the Debentures,
such payments to be made ratably to the persons entitled thereto;
Third: In case the principal of the outstanding Debentures shall have
become due, by declaration or otherwise, and be unpaid, to the payment of the
whole amount then owing and unpaid upon the Debentures for principal and
premium, if any, and interest, with interest on the overdue principal and
premium, if any, and (to the extent that such interest has been collected by the
Trustee) upon overdue installments of interest at the rate borne by the
Debentures; and in case such monies shall be insufficient to pay in full the
whole amounts so due and unpaid upon the Debentures, then to the payment of such
principal and premium, if any, and interest without preference or priority of
principal and premium, if any, over interest, or of interest over principal and
premium, if any, or of any installment of interest over any other installment of
interest, or of any Debenture over any other Debenture, ratably to the aggregate
of such principal and premium, if any, and accrued and unpaid interest; and
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Fourth: To the payment of the remainder, if any, to the Company or any
other person lawfully entitled thereto.
SECTION 6.4. Proceedings by Holder. No Holder shall have any right by
virtue of or by availing of any provision of this Indenture to institute any
proceeding at law or in equity upon or under or with respect to this Indenture,
or for the appointment of a receiver, trustee, liquidator, custodian or other
similar official, or for any other remedy hereunder, unless such Holder
previously shall have given to the Trustee written notice of an Event of Default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of not less than 25% in aggregate principal amount of the Debentures
then outstanding shall have made written request upon the Trustee to institute
such proceeding in its own name as Trustee hereunder and shall have offered to
the Trustee such reasonable security or indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee for sixty (60) days after its receipt of such notice, request and offer
of security or indemnity, shall have neglected or refused to institute any such
action, suit or proceeding and no direction inconsistent with such written
request shall have been given to the Trustee pursuant to Section 6.7; it being
understood and intended, and being expressly covenanted, by the taker and Holder
of every Debenture with every other taker and Holder and the Trustee, that no
one or more Holders of Debentures shall have any right in any manner whatever by
virtue of or by availing of any provision of this Indenture to affect, disturb
or prejudice the rights of any other Holder of Debentures, or to obtain or seek
to obtain priority over or preference to any other such Holder, or to enforce
any right under this Indenture, except in the manner herein provided and for the
equal, ratable and common benefit of all Holders of Debentures (except as
otherwise provided herein). For the protection and enforcement of this Section
6.4, each and every Holder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision
of any Debenture, the right of any Holder of any Debenture to receive payment of
the principal of and any interest on such Debenture on or after the respective
due dates expressed in such Debenture, or to institute suit for the enforcement
of any such payment on or after such respective dates against the Company, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.5. Proceedings by Trustee. In case of an Event of Default the
Trustee may in its discretion proceed to protect and enforce the rights vested
in it by this Indenture by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any of such rights, either by
suit in equity or by action at law or by proceeding in bankruptcy or otherwise,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted in this Indenture,
or to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
SECTION 6.6. Remedies Cumulative and Continuing. Except as provided in
Section 2.6, all powers and remedies given by this Article VI to the Trustee or
to the Holders shall, to the extent permitted by law, be deemed cumulative and
not exclusive of any thereof or of any other powers and remedies available to
the Trustee or the holders of the Debentures, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Debentures to exercise any right or power
accruing upon any Default or Event of Default occurring and continuing as
aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such Default or any acquiescence therein; and, subject to the
provisions of Section 6.4, every power and remedy given by this Article VI or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as shall be deemed expedient, by the Trustee or by the Holders.
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SECTION 6.7. Direction of Proceedings and Waiver of Defaults by
Majority of Holders. The Holders of a majority in aggregate principal amount of
the Debentures at the time outstanding determined in accordance with Section 8.4
shall have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided, however, that (a) such direction shall
not be in conflict with any rule of law or with this Indenture, and (b) the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction. The Holders of a majority in aggregate
principal amount of the Debentures at the time outstanding determined in
accordance with Section 8.4 may, on behalf of the Holders of all of the
Debentures, waive any past default or Event of Default hereunder and its
consequences except (i) a default in the payment of interest or premium, if any,
on, or the principal of, the Debentures, (ii) a default in the payment of
Redemption Price pursuant to Article III or (iii) a default in respect of a
covenant or provisions hereof which under Article X cannot be modified or
amended without the consent of the Holders of all Debentures then outstanding.
Upon any such waiver the Company, the Trustee and the Holders shall be restored
to their former positions and rights hereunder; but no such waiver shall extend
to any subsequent or other default or Event of Default or impair any right
consequent thereon. Whenever any default or Event of Default hereunder shall
have been waived as permitted by this Section 6.7, said default or Event of
Default shall for all purposes of the Debentures and this Indenture be deemed to
have been cured and to be not continuing; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 6.8. Statement by Officers as to Default. The Company shall
deliver to the Trustee, as soon as possible and in any event within five (5)
days after the Company becomes aware of the occurrence of any Event of Default
or an event which, with notice or the lapse of time or both, would constitute an
Event of Default, an Officers' Certificate setting forth the details of such
Event of Default or default and the action which the Company proposes to take
with respect thereto.
SECTION 6.9. Notice of Defaults. The Trustee shall, within ninety (90)
days after it has knowledge of the occurrence of a default, mail to all Holders,
as the names and addresses of such holders appear upon the Debenture register,
notice of all defaults known to a Responsible Officer, unless such defaults
shall have been cured or waived before the giving of such notice; and provided,
that, except in the case of default in the payment of the principal of or
interest on any of the Debentures, the Trustee shall be protected in withholding
such notice if and so long as the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders.
SECTION 6.10. Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Debenture by such holder's acceptance thereof
shall be deemed to have agreed, that any court may, in its discretion, require,
in any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Trustee for any action taken or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; provided that the provisions of
this Section 6.10 (to the extent permitted by law) shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than ten percent (10%) in principal
amount of the Debentures at the time outstanding determined in accordance with
Section 8.4, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of or premium, if any, or interest on any Debenture on
or after the due date expressed in such Debenture.
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ARTICLE VII
CONCERNING THE TRUSTEE
SECTION 7.1. Duties and Responsibilities of Trustee. The Trustee, prior
to the occurrence of an Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of
Default has occurred (which has not been cured or waived) the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture and the
Trust Indenture Act, and the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set
forth in this Indenture and no implied covenants or obligations shall
be read into this Indenture and the Trust Indenture Act against the
Trustee; and
(2) in the absence of bad faith and willful misconduct on the
part of the Trustee, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but, in the case of
any such certificates or opinions which by any provisions hereof are
specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts
stated therein);
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Officers of the Trustee, unless the
Trustee was negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the holders of not less than a majority in principal amount of the
Debentures at the time outstanding determined as provided in Section 8.4
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Indenture; and
(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or affording
protection to, the Trustee shall be subject to the provisions of this Section.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise
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of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
SECTION 7.2. Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 7.1:
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, Debenture, coupon or other paper or
document believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Trustee by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it hereunder in good
faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby;
(e) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney; provided, however, that if
the payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expenses or liability as a condition to so
proceeding; the reasonable expenses of every such examination shall be paid by
the Company or, if paid by the Trustee or any predecessor Trustee, shall be
repaid by the Company upon demand;
(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it with due care
hereunder;
(g) the Trustee shall not be deemed to have notice of any Event of
Default unless a Responsible Officer of the Trustee has actual knowledge thereof
or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Debentures and this Indenture;
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(h) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate; and
(i) The Trustee, any authenticating agent, any paying agent, any
Debenture registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of the Debentures, may otherwise
deal with the Company with the same rights it would have if it were not Trustee,
authenticating agent, paying agent, Debenture registrar or such other agent.
SECTION 7.3. No Responsibility for Recitals, Etc. The recitals
contained herein and in the Debentures (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Debentures. The Trustee shall not be accountable for the use or application by
the Company of any Debentures or the proceeds of any Debentures authenticated
and delivered by the Trustee in conformity with the provisions of this
Indenture.
SECTION 7.4. Trustee, Paying Agents or Registrar May Own Debentures.
The Trustee, any paying agent or Debenture registrar, in its individual or any
other capacity, may become the owner or pledgee of Debentures with the same
rights it would have if it were not Trustee, paying agent or Debenture
registrar.
SECTION 7.5. Monies to Be Held in Trust. Subject to the provisions of
Section 12.4, all monies received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received.
Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as may be
agreed from time to time by the Company and the Trustee.
SECTION 7.6. Compensation and Expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, such compensation as shall be agreed to in writing by the
Company and the Trustee for all services rendered by it hereunder in any
capacity (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and expenses and disbursements of its counsel and of all
persons not regularly in its employ) except any such expense, disbursement or
advance as may arise from its negligence, willful misconduct, recklessness or
bad faith. The Company also covenants to indemnify the Trustee in any capacity
under this Indenture and its agents and any authenticating agent for, and to
hold them harmless against, any loss, liability or expense, including taxes
(other than taxes based upon, measured by or determined by the income of the
Trustee) incurred without negligence, willful misconduct, recklessness, or bad
faith on the part of the Trustee or such agent or authenticating agent, as the
case may be, and arising out of or in connection with the acceptance or
administration of this trust or in any other capacity hereunder, including the
costs and reasonable expenses of defending themselves against any claim of
liability in the premises. The obligations of the Company under this Section 7.6
to compensate or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien prior to that of
the Debentures upon all property and funds held or collected by the Trustee as
such. The obligation of the Company under this Section shall survive the
satisfaction and discharge of this Indenture.
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When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
6.1(d) or (e) occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any bankruptcy,
insolvency or similar laws.
SECTION 7.7. Officers' Certificate as Evidence. Except as otherwise
provided in Section 7.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence, willful misconduct, recklessness,
or bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee.
SECTION 7.8. Conflicting Interests of Trustee. If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.
SECTION 7.9. Eligibility of Trustee. There shall at all times be a
Trustee hereunder which shall be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000. If such person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VII.
SECTION 7.10. Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by giving written notice of
such resignation to the Company and to the holders of Debentures. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
trustee by written instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment thirty (30) days after the
mailing of such notice of resignation to the Holders, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee, or any Holder who has been a bona fide holder of a Debenture or
Debentures for at least six (6) months may, subject to the provisions of Section
6.9, on behalf of himself and all others similarly situated, petition any such
court for the appointment of a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe, appoint a
successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 7.8 after
written request therefor by the Company or by any Holder who has been a
bona fide holder of a Debenture or Debentures for at least six (6)
months; or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 7.9 and shall fail to resign after written
request therefor by the Company or by any such Holder; or
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(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 6.9, any Holder who has been a bona fide holder of a
Debenture or Debentures for at least six (6) months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor trustee. If no
successor trustee shall have been so appointed and have accepted appointment
thirty (30) days after the mailing of such notice of removal to the Trustee, the
removed Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee. In either case, such court may thereupon,
after such notice, if any, as it may deem proper and prescribe, remove the
Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless within ten (10) days after notice to the Company of such
nomination the Company objects thereto, in which case the Trustee so removed or
any Holder, upon the terms and conditions and otherwise as in Section 7.10(a)
provided, may petition any court of competent jurisdiction for an appointment of
a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 7.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 7.11.
SECTION 7.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 7.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of Section
7.6, execute and deliver an instrument transferring to such successor trustee
all the rights and powers of the trustee so ceasing to act. Upon request of any
such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any Trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such Trustee as such, except for funds held in trust for the benefit of holders
of particular Debentures, to secure any amounts then due it pursuant to the
provisions of Section 7.6.
No successor trustee shall accept appointment as provided in this
Section 7.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 7.8 and be eligible under the
provisions of Section 7.9.
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Upon acceptance of appointment by a successor trustee as provided in
this Section 7.11, the Company (or the former trustee, at the written direction
of the Company) shall mail or cause to be mailed notice of the succession of
such trustee hereunder to the holders of Debentures at their addresses as they
shall appear on the Debenture register. If the Company fails to mail such notice
within ten (10) days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of the
Company.
SECTION 7.12. Succession by Merger, Etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee (including any trust created
by this Indenture), shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided, that in the case of any corporation succeeding to all
or substantially all of the corporate trust business of the Trustee such
corporation shall be qualified under the provisions of Section 7.8 and eligible
under the provisions of Section 7.9.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee or authenticating agent
appointed by such predecessor trustee, and deliver such Debentures so
authenticated; and in case at that time any of the Debentures shall not have
been authenticated, any successor to the Trustee or an authenticating agent
appointed by such successor trustee may authenticate such Debentures either in
the name of any predecessor trustee hereunder or in the name of the successor
trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Debentures or in this Indenture provided that the
certificate of the Trustee shall have; provided, however, that the right to
adopt the certificate of authentication of any predecessor Trustee or
authenticate Debentures in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
SECTION 7.13. Limitation on Rights of Trustee as Creditor. If and when
the Trustee shall be or become a creditor of the Company (or any other obligor
upon the Debentures), the Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of the claims against the Company
(or any such other obligor).
ARTICLE VIII
CONCERNING THE HOLDERS
SECTION 8.1. Action by Holders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Debentures may take any action (including the making of any demand
or request, the giving of any notice, consent or waiver or the taking of any
other action), the fact that at the time of taking any such action, the holders
of such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Holders in
person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Debentures voting in favor thereof at any meeting of Holders duly
called and held in accordance with the provisions of Article IX, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Holders. Whenever the Company or the Trustee solicits the taking of
any action by the holders of the Debentures, the Company or the Trustee may fix
in advance of such solicitation, a date as the
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record date for determining holders entitled to take such action. The record
date shall be not more than fifteen (15) days prior to the date of commencement
of solicitation of such action.
SECTION 8.2. Proof of Execution by Holders. Subject to the provisions
of Section 7.1, 7.2 and 9.5, proof of the execution of any instrument by a
Holder or his agent or proxy shall be sufficient if made in accordance with such
reasonable rules and regulations as may be prescribed by the Trustee or in such
manner as shall be reasonably satisfactory to the Trustee. The holding of
Debentures shall be proved by the registry of such Debentures or by a
certificate of the Debenture registrar.
The record of any Holders' meeting shall be proved in the manner
provided in Section 9.6.
SECTION 8.3. Who Are Deemed Absolute Owners. The Company, the Trustee,
any paying agent and any Debenture registrar may deem the person in whose name
such Debenture shall be registered upon the Debenture register to be, and may
treat him as, the absolute owner of such Debenture (whether or not such
Debenture shall be overdue and notwithstanding any notation of ownership or
other writing thereon) for the purpose of receiving payment of or on account of
the principal of, interest on and Redemption Price in respect of such Debenture
and for all other purposes; and neither the Company nor the Trustee nor any
paying agent nor any Debenture registrar shall be affected by any notice to the
contrary. All such payments so made to any holder for the time being, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Debenture.
SECTION 8.4. Company-Owned Debentures Disregarded. In determining
whether the holders of the requisite aggregate principal amount of Debentures
have concurred in any direction, consent, waiver or other action under this
Indenture, Debentures which are owned by the Company or any other obligor on the
Debentures or by any person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any other obligor
on the Debentures shall be disregarded and deemed not to be outstanding for the
purpose of any such determination; provided, that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, consent, waiver or other action only Debentures which a Responsible
Officer knows are so owned shall be so disregarded. Debentures so owned which
have been pledged in good faith may be regarded as outstanding for the purposes
of this Section 8.4 if the pledgee shall establish to the satisfaction of the
Trustee the pledgee's right to vote such Debentures and that the pledgee is not
the Company, any other obligor on the Debentures or a person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any such other obligor. In the case of a dispute as
to such right, any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee. Upon request of the Trustee, the
Company shall furnish to the Trustee promptly an Officers' Certificate listing
and identifying all Debentures, if any, known by the Company to be owned or held
by or for the account of any of the above described persons; and, subject to
Section 7.1, the Trustee shall be entitled to accept such Officers' Certificate
as conclusive evidence of the facts therein set forth and of the fact that all
Debentures not listed therein are outstanding for the purposes of any such
determination.
SECTION 8.5. Revocation of Consents; Future Holders Bound. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
8.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Debentures specified in this Indenture in connection
with such action, any holder of a Debenture which is shown by the evidence to be
included in the Debentures the holders of which have consented to such action
may, by filing written notice with the Trustee at its Corporate Trust Office and
upon proof of holding as provided in Section 8.2, revoke such action so far as
concerns such Debenture. Except as aforesaid, any such action taken by the
holder of any Debenture shall be conclusive
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and binding upon such holder and upon all future holders and owners of such
Debenture and of any Debentures issued in exchange or substitution therefor,
irrespective of whether any notation in regard thereto is made upon such
Debenture or any Debenture issued in exchange or substitution therefor.
ARTICLE IX
HOLDERS' MEETINGS
SECTION 9.1. Purposes of Meetings. A meeting of Holders may be called
at any time and from time to time pursuant to the provisions of this Article IX
for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee permitted under this Indenture, or
to consent to the waiving of any default or Event of Default hereunder
and its consequences, or to take any other action authorized to be
taken by Holders pursuant to any of the provisions of Article VI;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VII.
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 10.2; or
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Debentures under any other provision of this Indenture or under
applicable law.
SECTION 9.2. Call of Meetings by Trustee. The Trustee may at any time
call a meeting of Holders to take any action specified in Section 9.1, to be
held at such time and at such place at a location within 10 miles of the
Corporate Trust Office or The City of Atlanta, Georgia, as the Trustee shall
determine. Notice of every meeting of the Holders, setting forth the time and
the place of such meeting and in general terms the action proposed to be taken
at such meeting and the establishment of any record date pursuant to Section
8.1, shall be mailed to holders of Debentures at their addresses as they shall
appear on the Debenture register. Such notice shall also be mailed to the
Company. Such notices shall be mailed not less than twenty (20) nor more than
ninety (90) days prior to the date fixed for the meeting.
Any meeting of Holders shall be valid without notice if the holders of
all Debentures then outstanding are present in person or by proxy or if notice
is waived before or after the meeting by the holders of all Debentures
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
SECTION 9.3. Call of Meetings by Company or Holders. In case at any
time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least ten percent (10%) in aggregate principal amount of the
Debentures then outstanding, shall have requested the Trustee to call a meeting
of Holders, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed the
notice of such meeting within twenty (20) days after receipt of such request,
then the Company or such Holders may determine the time and the place at any
location within 10
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miles of the Corporate Trust Office or The City of Atlanta, Georgia for such
meeting and may call such meeting to take any action authorized in Section 9.1,
by mailing notice thereof as provided in Section 9.2.
SECTION 9.4. Qualifications for Voting. To be entitled to vote at any
meeting of Holders a person shall (a) be a holder of one or more Debentures on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Debentures. The only
persons who shall be entitled to be present or to speak at any meeting of
Holders shall be the persons entitled to vote at such meeting and their counsel
and any representatives of the Trustee and its counsel and any representatives
of the Company and its counsel.
SECTION 9.5. Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders, in regard to proof of the holding of
Debentures and of the appointment of proxies, and in regard to the appointment
and duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders as provided in Section 9.3, in which case the Company or
the Holders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Debentures represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 8.4, at any meeting each Holder or
proxy holder shall be entitled to one vote for each $1,000 principal amount of
Debentures held or represented by him; provided, however, that no vote shall be
cast or counted at any meeting in respect of any Debenture challenged as not
outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of
Debentures held by him or instruments in writing as aforesaid duly designating
him as the proxy to vote on behalf of other Holders. Any meeting of Holders duly
called pursuant to the provisions of Section 9.2 or 9.3 may be adjourned from
time to time by the holders of a majority of the aggregate principal amount of
Debentures represented at the meeting, whether or not constituting a quorum, and
the meeting may be held as so adjourned without further notice.
SECTION 9.6. Voting. The vote upon any resolution submitted to any
meeting of Holders shall be by written ballot on which shall be subscribed the
signatures of the holders of Debentures or of their representatives by proxy and
the principal amount of the Debentures held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Holders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided in
Section 9.2. The record shall show the principal amount of the Debentures voting
in favor of or against any resolution. The record shall be signed and verified
by the affidavits of the permanent chairman and secretary of the meeting and one
of the duplicates shall be delivered to the Company and the other to the Trustee
to be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
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Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 9.7. No Delay of Rights by Meeting. Nothing in this Article IX
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Holders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any right
or rights conferred upon or reserved to the Trustee or to the Holders under any
of the provisions of this Indenture or of the Debentures.
ARTICLE X
SUPPLEMENTAL INDENTURES
SECTION 10.1. Supplemental Indentures Without Consent of Holders. The
Company, when authorized by the resolutions of the Board of Directors, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Debentures, any property or assets;
(b) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation of
the covenants, agreements and obligations of the Company pursuant to Article XI;
(c) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Debentures, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
respect of any such additional covenant, restriction or condition such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default;
(d) to provide for the issuance under this Indenture of Debentures in
coupon form (including Debentures registrable as to principal only) and to
provide for exchangeability of such Debentures with the Debentures issued
hereunder in fully registered form and to make all appropriate changes for such
purpose;
(e) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture which shall not materially adversely affect the
interests of the holders of the Debentures;
(f) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Debentures; or
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(g) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect or maintain the qualifications of
this Indenture under the Trust Indenture Act, or under any similar federal
statute hereafter enacted.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
10.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Debentures at the time outstanding, notwithstanding any of
the provisions of Section 10.2.
SECTION 10.2. Supplemental Indentures with Consent of Holders. With the
consent (evidenced as provided in Article VIII) of the holders of not less than
a majority in aggregate principal amount of the Debentures at the time
outstanding, the Company, when authorized by the resolutions of the Board of
Directors, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions of
this Indenture or any supplemental indenture with respect to the Debentures or
of modifying in any manner the rights of the holders of, the Debentures;
provided, however, that no such supplemental indenture shall (i) extend the
stated maturity of any Debenture or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or impair or
affect the right of any Holder to institute suit for the payment thereof, or any
right of repayment at the option of the Holders, without the consent of the
holder of each Debenture so affected, or (ii) reduce the aforesaid percentage of
Debentures, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Debentures
then outstanding.
Upon the request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of Holders as aforesaid,
the Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section 10.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 10.3. Effect of Supplemental Indenture. Any supplemental
indenture executed pursuant to the provisions of this Article X shall comply
with the Trust Indenture Act, as then in effect; provided, that this Section
10.3 shall not require such supplemental indenture or the Trustee to be
qualified under the Trust Indenture Act prior to the time such qualification is
in fact required under the terms of the Trust Indenture Act or the Indenture has
been qualified under the Trust Indenture Act, nor shall it constitute any
admission or acknowledgment by any party to such supplemental indenture that any
such qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act. Upon the execution of any supplemental
indenture pursuant to the provisions of this Article X, this Indenture shall be
and be deemed to be modified and
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amended in accordance therewith and the respective rights, limitation of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Debentures shall thereafter be determined, exercised
and enforced hereunder subject in all respects to such modifications and
amendments and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.
SECTION 10.4. Notation on Debentures. Debentures authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article X may bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental indenture. If the Company or
the Trustee shall so determine, new Debentures so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental indenture may, at the Company's
expense, be prepared and executed by the Company, authenticated by the Trustee
(or an authenticating agent duly appointed by the Trustee pursuant to Section
14.11) and delivered in exchange for the Debentures then outstanding, upon
surrender of such Debentures then outstanding.
SECTION 10.5. Evidence of Compliance of Supplemental Indenture to Be
Furnished Trustee. The Trustee, subject to the provisions of Sections 7.1 and
7.2, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article X.
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 11.1. Company May Consolidate Etc. on Certain Terms. Subject to
the provisions of Section 11.2, nothing contained in this Indenture or in any of
the Debentures shall prevent any consolidation or merger of the Company with or
into any other corporation or corporations (whether or not affiliated with the
Company), or successive consolidations or mergers in which the Company or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance or lease (or successive sales, conveyances or leases) of all or
substantially all of the property of the Company, to any other corporation
(whether or not affiliated with the Company), authorized to acquire and operate
the same and which shall be organized under the laws of the United States of
America, any state thereof or the District of Columbia; provided, that upon any
such consolidation, merger, sale, conveyance or lease, the due and punctual
payment of the principal of, interest on and Redemption Price in respect of all
of the Debentures, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by the Company, shall be expressly assumed, by
supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee by the corporation (if other than the Company) formed
by such consolidation, or into which the Company shall have been merged, or by
the corporation which shall be acquired or shall have leased such property.
SECTION 11.2. Successor Corporation to be Substituted. In case of any
such consolidation, merger, sale, conveyance or lease and upon the assumption by
the successor corporation, by supplemental indenture, executed and delivered to
the Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of, interest on and Redemption Price in respect of all
of the Debentures and due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party of the first part. Such
successor corporation thereupon may
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cause to be signed, and may issue either in its own name or in the name of
Flowers Industries, Inc. any or all of the Debentures issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation instead of the
Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver, or cause
to be authenticated and delivered, any Debentures which previously shall have
been signed and delivered by the officers of the Company to the Trustee for
authentication, and any Debentures which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All the
Debentures so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Debentures theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Debentures had
been issued at the date of the execution hereof. In the event of any such
consolidation, merger, sale, conveyance or lease, the person named as the
"Company" in the first paragraph of this Indenture or any successor which shall
thereafter have become such in the manner prescribed in this Article XI may be
dissolved, wound up and liquidated at any time thereafter and such person shall
be released from its liabilities as obligor and maker of the Debentures and from
its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate.
SECTION 11.3. Opinion of Counsel to Be Given Trustee. The Trustee,
subject to Sections 7.1 and 7.2, shall receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance or lease and any such assumption complies with the provisions
of this Article XI.
ARTICLE XII
SATISFACTION, DISCHARGE AND DEFEASANCE OF INDENTURE
SECTION 12.1. Discharge of Indenture. When (a) the Company shall
deliver to the Trustee for cancellation all Debentures theretofore authenticated
(other than any Debentures which have been destroyed, lost or stolen and in lieu
of or in substitution for which other Debentures shall have been authenticated
and delivered) and not theretofore canceled, or (b) all the Debentures not
theretofore canceled or delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit with the Trustee, in trust, funds sufficient to pay at
maturity or upon redemption of all the Debentures (other than any Debentures
which shall have been mutilated, destroyed, lost or stolen and in lieu of or in
substitution for which other Debentures shall have been authenticated and
delivered) not theretofore canceled or delivered to the Trustee for
cancellation, including principal of, interest on and Redemption Price in
respect of and interest due or to become due to such date of maturity or
redemption date, as the case may be, and if in either case the Company shall
also pay or cause to be paid all other sums payable hereunder by the Company,
then this Indenture shall cease to be of further effect (except as to (i)
remaining rights of registration of transfer, substitution and exchange of
Debentures, (ii) rights hereunder of Holders to receive payments of principal
of, interest on and Redemption Price in respect of the Debentures and the other
rights, duties and obligations of Holders, as beneficiaries hereof with respect
to the amounts, if any, so deposited with the Trustee and (iii) the rights,
obligations and immunities of the Trustee hereunder), and the Trustee, on demand
of the Company accompanied by an Officers' Certificate and an Opinion of Counsel
as required by Section 14.5
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and at the cost and expense of the Company, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture; the Company,
however, hereby agreeing to reimburse the Trustee for any costs or expenses
thereafter reasonably and properly incurred by the Trustee and to compensate the
Trustee for any services thereafter reasonably and properly rendered by the
Trustee in connection with this Indenture or the Debentures.
SECTION 12.2. Applicability of Defeasance Provisions; Company's Option
to Effect Defeasance or Covenant Defeasance. Unless pursuant to Section 3.1
either or both of (i) defeasance of the Debentures under Section 12.3 or (ii)
covenant defeasance of the Debentures under Section 12.4 shall not be applicable
with respect to the Debentures, then the provisions of such Section or Sections,
as the case may be, together with the provisions of Sections 12.5 through 12.11
inclusive, with such modifications thereto as may be specified pursuant to
Section 3.1 with respect to such Debentures, shall be applicable to such
Debentures, and the Company may at its option by Board Resolution, at any time,
with respect to such Debentures, elect to have Section 12.3 or Section 12.4
(unless such Section 12.3 or Section 12.4, as the case may be, shall not be
applicable to the Debentures) be applied to such Outstanding Debentures upon
compliance with the conditions set forth below in this Article. Unless otherwise
specified pursuant to Section 3.1, the Company's right, if any, to effect
defeasance pursuant to Section 12.3 or covenant defeasance pursuant to Section
12.4 may only be exercised with respect to all of the Outstanding Debentures.
SECTION 12.3. Defeasance. Upon the Company's exercise of the option
specified in Section 12.2 applicable to this Section with respect to the
Debentures, the Company shall be deemed to have been discharged from its
obligations with respect to such Debentures (except as specified below) on the
date the conditions set forth in Section 12.5 are satisfied (hereinafter
"defeasance"). For this purpose, such defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by such
Debentures and interest thereon which shall thereafter be deemed to be
"Outstanding" only for the purposes of Section 12.8 and the other Sections of
this Indenture referred to in clause (ii) of this Section, and to have satisfied
all its other obligations under such Debentures and this Indenture insofar as
such Debentures are concerned (and the Trustee, at the expense of the Company,
shall on Company Order execute proper instruments acknowledging the same),
except the following which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of such Debentures and any
coupons appertaining thereto to receive, solely from the trust funds described
in Section 12.5(a) and as more fully set forth in such Section and in Section
12.8, payments in respect of the principal of and interest, if any, on such
Debentures when such payments are due; (ii) the Company's obligations with
respect to such Debentures under Sections 2.5, 2.6, 4.1, 4.2 and 7.6; (iii) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (iv)
this Article XII. Subject to compliance with this Article XII, the Company may
exercise its option under this Section notwithstanding the prior exercise of its
option under Section 12.4 with respect to such Debentures. Following a
defeasance, payment of such Debentures may not be accelerated because of an
Event of Default.
SECTION 12.4. Covenant Defeasance. Upon the Company's exercise of the
option specified in Section 12.2 applicable to this Section with respect to any
Debentures, the Company shall be released from its obligations under Sections
4.7, 4.8 and 4.9 with respect to such Debentures on and after the date the
conditions set forth in Section 12.5 are satisfied (hereinafter, "covenant
defeasance"), and such Debentures shall thereafter be deemed to be not
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with
Sections 4.7, 4.8 and 4.9, but shall continue to be deemed "Outstanding" for all
other purposes hereunder. For this purpose, such covenant defeasance means that,
with respect to such Debentures, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such Section or such
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<PAGE> 45
other covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such Section or such other covenant or by reason of
reference in any such Section or such other covenant to any other provision
herein or in any other document and such omission to comply shall not constitute
a Default or an Event of Default under Section 6.1(c) or otherwise, as the case
may be, but, except as specified above, the remainder of this Indenture and such
Debentures shall be unaffected thereby.
SECTION 12.5. Conditions to Defeasance or Covenant Defeasance. The
following shall be the conditions to application of Section 12.3 or Section 12.4
to any Debentures:
(a) The Company shall have irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of making the
payments of principal of and interest, if any, on the Debentures on the
scheduled due dates therefor or on the applicable Redemption Date, as the case
may be, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Debentures, with instructions to the Trustee as
to the application thereof, (A) money in an amount or (B) if the Debentures are
not subject to repayment or repurchase at the option of Holders, Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide (without consideration of
any reinvestment of such principal and interest), not later than one day before
the scheduled due dates of any payment of principal of and interest, if any, on
the Debentures or on the applicable Redemption Date, as the case may be, money
in an amount or (C) a combination thereof, in an amount sufficient (in the
opinion of a nationally recognized firm of independent certified public
accountants expressed in a written certification thereof delivered to the
Trustee) to pay and discharge, and which shall be applied by the Trustee to pay
and discharge, the principal of and interest, if any, on such Debentures on the
scheduled due dates therefor or on the applicable Redemption Date, as the case
may be.
(b) Such defeasance or covenant defeasance shall not result in a breach
or violation of, or constitute a Default or Event of Default under, this
Indenture or result in a breach or violation of, or constitute a default under,
any other material agreement or instrument to which the Company is a party or by
which it is bound.
(c) In the case of an election under Section 12.3, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that (i) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of this Indenture, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of such
Debentures will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such defeasance and will be subject to U.S. federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred.
(d) In the case of an election under Section 12.4, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of such Debentures will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such covenant defeasance had
not occurred.
(e) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance under Section 12.3 or the covenant defeasance under
Section 12.4 (as the case may be) have been complied with.
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<PAGE> 46
(f) No Event of Default or Default with respect to such Debentures
shall have occurred and be continuing on the date of such deposit, or, insofar
as Defaults or Events of Default under Sections 6.1(f) and 6.1(g) are concerned,
at any time during the period ending on the 91st day after the date of such
deposit (it being understood that this condition shall not be deemed satisfied
until the expiration of such period).
(g) If the monies or Government Obligations or combination thereof, as
the case may be, deposited under Section 12.5(a) above are sufficient to pay the
principal of, and interest, if any, on such Debentures provided such Debentures
are redeemed on a particular Redemption Date, the Company shall have given the
Trustee irrevocable instructions to redeem such Debentures on such date and to
provide notice of such redemption to Holders as provided in or pursuant to this
Indenture.
SECTION 12.6. Indemnity for Government Obligations. The Company shall
pay, and shall indemnify the Trustee against, any tax, fee or other charge
imposed on or assessed against Government Obligations deposited pursuant to this
Article or the principal and interest received on such Government Obligations.
SECTION 12.7. Deposited Monies to Be Held in Trust by Trustee. Subject
to Section 12.9, all monies and Government Obligations (including proceeds)
deposited with the Trustee pursuant to Section 12.1 and Section 12.5 shall be
held in trust for the sole benefit of the Holders and shall be applied by the
Trustee, in accordance with the provision of this Indenture and the Debentures,
to the payment, either directly or through any paying agent (other than the
Company if acting as its own paying agent), to the Holders of the Debentures of
all sums due and to become due thereon in respect of principal of, interest on
and Redemption Price in respect of the Debentures, but such money need not be
segregated from other funds except to the extent required by law.
SECTION 12.8. Paying Agent to Repay Monies Held. Upon the satisfaction
and discharge of this Indenture, all monies then held by any paying agent of the
Debentures (other than the Trustee) shall, upon written request of the Company,
be repaid to it or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such monies.
SECTION 12.9. Return of Unclaimed Monies. Subject to the requirements
of applicable law, any monies deposited with or paid to the Trustee for payment
of the principal of, interest on and Redemption Price in respect of Debentures
and not applied but remaining unclaimed by the holders of Debentures for two
years after the date upon which such amount in respect of such Debentures, as
the case may be, shall have become due and payable, shall be repaid to the
Company by the Trustee on demand and all liability of the Trustee shall
thereupon cease with respect to such monies; and the holder of any of the
Debentures shall thereafter look only to the Company for any payment which such
holder may be entitled to collect unless an applicable abandoned property law
designates another Person.
SECTION 12.10. Reinstatement. If the Trustee or the paying agent is
unable to apply any money in accordance with Section 12.7 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Debentures shall be revived and reinstated as though no
deposit had occurred pursuant to Section 12.1, 12.3 or 12.4, as the case may be,
until such time as the Trustee or the paying agent is permitted to apply all
such money in accordance with Section 12.7; provided, however, that if the
Company makes any payment of principal of, interest on and Redemption Price in
respect of any Debenture following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Debentures to
receive such payment from the money held by the Trustee or paying agent.
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ARTICLE XIII
IMMUNITY OF INCORPORATORS,
SHAREHOLDERS, OFFICERS AND DIRECTORS
SECTION 13.1. Indenture and Debentures Solely Corporate Obligations. No
recourse for the payment of the principal of, interest on or Redemption Price in
respect of any Debenture, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture or in any
Debenture, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, shareholder, employee, agent, officer, or
director or subsidiary, as such, past, present or future, of the Company or of
any successor corporation, either directly or through the Company or any
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issue of the Debentures.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
SECTION 14.1. Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.
SECTION 14.2. Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
SECTION 14.3. Addresses for Notices, Etc. Any notice or demand which by
any Indenture is required or permitted to be given or served by the Trustee or
by the holders of Debentures on the Company shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Flowers Industries, Inc., 1919 Flowers Circle, Thomasville, Georgia
31757, Attention: General Counsel and Secretary. Any notice, direction, request
or demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed to the Corporate Trust Office, which post office letter box
is, at the date as of which this Indenture is effective, P.O. Box 105036,
Atlanta, Georgia 30348-5036.
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
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Any notice or communication mailed to a Holder shall be mailed to him
by first class mail, postage prepaid, at his address as it appears on the
Debenture register and shall be sufficiently given to him if so mailed within
the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 14.4. Governing Law. This Indenture and each Debenture shall be
deemed to be a contract made under the laws of New York, and for all purposes
shall be construed in accordance with the laws of New York, without regard to
principles of conflicts of laws.
SECTION 14.5. Evidence of Compliance with Conditions Precedent;
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
SECTION 14.6. Legal Holidays. In any case where the date of maturity of
interest on or principal of the Debentures or the Redemption Date of any
Debenture will not be a Business Day, then payment of such interest on or
principal of the Debentures need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the Redemption Date, and no interest shall accrue for
the period from and after such date.
SECTION 14.7. Trust Indenture Act. This Indenture is hereby made
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern indentures qualified under the Trust
Indenture Act; provided, however, that, unless otherwise required by law,
notwithstanding the foregoing, this Indenture and the Debentures issued
hereunder shall not be subject to the provisions of subsections (a)(1), (a)(2),
and (a)(3) of Section 314 of the Trust Indenture Act as now in effect or as
hereafter amended or modified; provided, further, that this Section 14.7 shall
not require this Indenture or the Trustee to be qualified under the Trust
Indenture Act prior to the time such qualification is in fact required under the
terms of the Trust Indenture Act, nor shall it constitute any admission or
acknowledgment by any party to such supplemental indenture that any such
qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof which is required
to be included in an indenture qualified under the Trust Indenture Act, such
required provision shall control.
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SECTION 14.8. No Security Interest Created. Nothing in this Indenture
or in the Debentures, expressed or implied, shall be construed to constitute a
security interest under the Uniform Commercial Code or similar legislation, as
now or hereafter enacted and in effect, in any jurisdiction where property of
the Company or its subsidiaries is located.
SECTION 14.9. Benefits of Indenture. Nothing in this Indenture or in
the Debentures, expressed or implied, shall give to any Person, other than the
parties hereto, any paying agent, any authenticating agent, any Debenture
registrar and their successors hereunder, and the holders of Debentures, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 14.10. Table of Contents, Headings, Etc. The table of contents
and the titles and headings of the articles and sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 14.11. Authenticating Agent. The Trustee may appoint an
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Debentures in connection
with the original issuance thereof and transfers and exchanges of Debentures
hereunder, including under Sections 2.4, 2.5, 2.6, 2.7, 3.3 and 3.5, as fully to
all intents and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate and deliver
Debentures. For all purposes of this Indenture, the authentication and delivery
of Debentures by the authenticating agent shall be deemed to be authentication
and delivery of such Debentures "by the Trustee" and a certificate of
authentication executed on behalf of the Trustee by an authenticating agent
shall be deemed to satisfy any requirement hereunder or in the Debentures for
the Trustee's certificate of authentication. Such authenticating agent shall at
all times be a person eligible to serve as trustee hereunder pursuant to Section
7.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 14.11, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall either promptly appoint a successor authenticating agent or itself
assume the duties and obligations of the former authenticating agent under this
Indenture, and upon such appointment of a successor authenticating agent, if
made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment of
a successor authenticating agent to all holders of Debentures as the names and
addresses of such holders appear on the Debenture register.
The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 7.6.
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The provisions of Sections 7.2, 7.3, 7.4, 9.3 and this Section 14.11
shall be applicable to any authenticating agent.
SECTION 14.12. Execution in Counterparts. This Indenture may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
SunTrust Bank, Atlanta hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
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<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
FLOWERS INDUSTRIES, INC.
By:
---------------------------------
Name:
Title:
SUNTRUST BANK, ATLANTA, as Trustee
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
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<PAGE> 52
EXHIBIT A
{For Global Debenture only: UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.}
FLOWERS INDUSTRIES, INC.
___% DEBENTURE DUE 2028
No. ______ CUSIP
FLOWERS INDUSTRIES, INC., a corporation duly organized and validly
existing under the laws of the State of Georgia (herein called the "Company"),
which term includes any successor corporation under the Indenture referred to on
the reverse hereof, for value received hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of _________ ($_____) on _______, 2028, at
the office or agency of the Company maintained for that purpose in The City of
Atlanta, Georgia, or, at the option of the holder of this Debenture, at the
Corporate Trust Office, in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts, and to pay interest, semi-annually on April __ and October __ of
each year, commencing _______, 1998, on said principal sum at said office or
agency, in like coin or currency, at the rate per annum of __%, from ___________
or __________, as the case may be, next preceding the date of this Debenture to
which interest has been paid or duly provided for, unless the date hereof is a
date to which interest has been paid or duly provided for, in which case from
the date of this Debenture, or unless no interest has been paid or duly provided
for on the Debentures, in which case from April _, 1998, until payment of said
principal sum has been made or duly provided for. The interest payable on the
Debenture pursuant to the Indenture on any April __ or October __, will be paid
to the person entitled thereto as it appears in the Debenture register at the
close of business on the record date, which shall be the ________ or ________
(whether or not a Business Day) next preceding such April __ or October __, as
provided in the Indenture; provided, that any such interest not punctually paid
or duly provided for shall be payable as provided in the Indenture. Interest
may, at the option of the Company, be paid by check mailed to the registered
address of such person.
Reference is made to the further provisions of this Debenture set forth
on the reverse hereof, and such further provisions shall for all purposes have
the same effect as though fully set forth at this place.
This Debenture shall be deemed to be a contract made under the laws of
New York, and for all purposes shall be construed in accordance with and
governed by the laws of New York, without regard to principles of conflicts of
laws.
47
<PAGE> 53
This Debenture shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed under its corporate seal.
FLOWERS INDUSTRIES, INC.
By:
---------------------------------
Name:
Title:
Attest:
--------------------------
48
<PAGE> 54
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-named Indenture.
Dated:
------------------------
, as Trustee
-----------------------------
By:
--------------------------------------
Authorized Signatory
By:
--------------------------------------
As Authenticating Agent
(if different from Trustee)
49
<PAGE> 55
{FORM OF REVERSE OF DEBENTURE}
FLOWERS INDUSTRIES, INC.
___% DEBENTURE DUE 2028
This Debenture is one of a duly authorized issue of Debentures of the
Company, designated as its ___% Debentures due 2028 (herein called the
"Debentures"), limited to the aggregate principal amount of $200,000,000 all
issued or to be issued under and pursuant to an indenture dated as of April __,
1998 (herein called the "Indenture"), between the Company and SunTrust Bank,
Atlanta, as trustee (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Debentures.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal amount of all Debentures and accrued
interest, if any, through the date of declaration on all Debentures may be
declared, or may automatically become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, evidenced
as in the Indenture provided, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or modifying in any manner the
rights of the holders of the Debentures; provided, however, that as provided in
the Indenture, no such supplemental indenture shall (i) extend the fixed
maturity of any Debenture, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof, or reduce any amount
payable on redemption or repurchase thereof, or impair the right of any Holder
to institute suit for the payment thereof, or make the principal amount thereof
or Redemption Price, or interest thereon payable in any coin or currency other
than that provided in the Debenture, without the consent of the holder of each
Debenture so affected or (ii) reduce the aforesaid percentage of Debentures, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Debentures then outstanding. It is
also provided in the Indenture that, prior to any declaration accelerating the
maturity of the Debentures, the holders of a majority in aggregate principal
amount of the Debentures at the time outstanding may on behalf of the holders of
all of the Debentures waive any past Default or Event of Default under the
Indenture and its consequences except a default in the payment of principal of,
interest on and Redemption Price in respect of any of the Debentures. Any such
consent or waiver by the holder of this Debenture (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such holder and upon all
future holders and owners of this Debenture and any Debentures which may be
issued in exchange or substitute hereof, irrespective of whether or not any
notation thereof is made upon this Debenture or such other Debentures.
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and interest on this
Debenture at the place, at the respective times, at the rate and in the coin or
currency herein prescribed.
Interest on the Debentures shall be computed on the basis of a year of
a 360-day year or twelve 30- day months.
50
<PAGE> 56
The Debentures are issuable in registered form without coupons in
denominations of $1,000 principal amount and any integral multiple thereof. At
the office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, but without
payment of any service charge (but with payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration or exchange of Debentures), Debentures may be exchanged for a like
aggregate principal amount of Debentures of other authorized denominations.
Prior to maturity, the Debentures may be redeemed at the option of the
Company at any time as a whole, or from time to time in part, upon mailing a
notice of such redemption not less than 30 days and not more than 60 days before
the Redemption Date to the holders of Debentures at their last registered
addresses, all as provided in the Indenture, at the following Redemption Prices
per $1,000 principal amount, together in each case with accrued interest to the
Redemption Date.
Notwithstanding the foregoing, if the Redemption Date is a ______ or
_______, then the interest payable on such date shall be paid to the holder of
record on the next preceding ________ or _________.
The Debentures are not subject to redemption through the operation of
any sinking fund.
Upon due presentment for registration of transfer of this Debenture at
the office or agency of the Company in the City of Atlanta, Georgia, or at the
option of the holder of this Debenture, at the Corporate Trust Office, a new
Debenture or Debentures of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange thereof, subject
to the limitations provided in the Indenture, without charge except for any tax
or other governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent
and any Debenture registrar may deem and treat the registered holder hereof as
the absolute owner of this Debenture (whether or not this Debenture shall be
overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Debenture registrar), for the
purpose of receiving payment hereof, or on account hereof and for all other
purposes, and neither the Company nor the Trustee nor any other authenticating
agent nor any paying agent nor any Debenture registrar shall be affected by any
notice to the contrary. All payments made to or upon the order of such
registered holder shall, to the extent of the sum or sums paid, satisfy and
discharge liability for monies payable on this Debenture.
No recourse for the payment of the principal of or any interest on this
Debenture, or for any claim based hereon or otherwise in respect hereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
the Indenture or any indenture supplemental thereto or in any Debenture, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
This Debenture shall be deemed to be a contract made under the laws of
New York, and for all purposes shall be construed in accordance with the laws of
New York, without regard to principles of conflicts of laws.
Terms used in this Debenture and defined in the Indenture are used
herein as therein defined.
51
<PAGE> 57
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Debenture, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT --
TEN ENT -- as tenants by the entireties _________________ Custodian
(Cust)
JT TEN -- as joint tenants with right of ____________________ under
survivorship and not as tenants in common (Minor)
Uniform Gifts to Minors Act
____________________(State)
Additional abbreviations may also be used though not in the above list.
52
<PAGE> 58
ASSIGNMENT
For value received ____________________ hereby sell(s), assign(s) and
transfer(s) unto ______________________ (Please insert social security or other
Taxpayer Identification Number of assignee) the within Debenture, and hereby
irrevocably constitutes and appoints ____________________ attorney to transfer
the said Debenture on the books of the Company, with full power of substitution
in the premises.
53
<PAGE> 1
EXHIBIT 5.1
April 21, 1998
Flowers Industries, Inc.
1919 Flowers Circle
Thomasville, Georgia 31757
Gentlemen:
We have acted as counsel to Flowers Industries, Inc., a Georgia
corporation (the "Company"), in connection with the registration of up to
11,500,000 shares of Common Stock, $.625 par value per share, of the Company
(the "Shares") and $200 million principal amount of certain debentures due 2028
(the "Debentures"), to be issued by the Company pursuant to a Registration
Statement on Form S-3 (File No. 333-48787) (the "Registration Statement"),
filed with the Securities and Exchange Commission to which this opinion appears
as Exhibit 5. The Debentures will be issued pursuant to that certain indenture
(the "Indenture"), among the Company and SunTrust Bank, Atlanta, as Trustee.
Unless otherwise defined herein, terms defined in the Registration Statement
herein as defined therein.
We have examined originals or certified or photostatic copies of such
records of the Company, certificates of officers of the Company, and public
officials and such other documents as we have deemed relevant or necessary as
the basis of the opinions set forth below in this letter. In such examination,
we have assumed the genuineness of all signatures, the conformity to original
documents submitted as certified or photostatic copies, and the authenticity of
originals of such latter documents. Based on the foregoing, we are of the
following opinion:
1. The Shares are duly authorized and, when issued by the Company in the
manner described in the Registration Statement, will be validly
issued, fully paid and nonassessable.
2. Assuming the due authorization, execution, and delivery by the
Trustee of the Indenture, when the Debentures, substantially in the
form as set forth in an exhibit to the Indenture filed as Exhibit 4.1
to the Registration Statement, have been duly executed by the Company
and authenticated by the Trustee in accordance with the Indenture and
duly delivered in the manner described in the Registration Statement,
the Debentures will constitute valid and legally binding obligations
of the Company enforceable
<PAGE> 2
in accordance with their terms, except to the extent enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or a law).
We have hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and the reference to this Firm under the heading "Legal
Matters" in the Prospectuses constituting part of the Registration Statement.
Sincerely,
JONES, DAY, REAVIS & POGUE
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of this Amendment No. 2 to the Registration Statement on Form
S-3 of our report dated March 23, 1998 appearing in Flowers Industries, Inc.'s
Transition Report on Form 10-K for the twenty-seven week transition period ended
January 3, 1998. We also consent to the incorporation by reference of our report
on the Financial Statement Schedule which appears in such Transition Report on
Form 10-K. We also consent to the references to us under the headings "Experts"
and "Selected Financial Data" in such Prospectuses. However, it should be noted
that Price Waterhouse LLP has not prepared or certified such "Selected Financial
Data."
PRICE WATERHOUSE LLP
Price Waterhouse LLP
Atlanta, Georgia
April 20, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 2
Registration Statement of Flowers Industries, Inc. on Form S-3 of our reports
dated February 18, 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 caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Coopers Lybrand L.L.P.
Chicago, Illinois
April 20, 1998
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 2 to
Registration Statement No. 333-48787 of Flowers Industries, Inc. on Form S-3 of
our report dated May 15, 1996 on our audits of the financial statements of
Sunshine Biscuits Inc. incorporated by reference in this Registration Statement
of Flowers Industries, Inc. and to the reference to us under the heading
"Experts" in the Prospectuses, which are part of this Registration Statement.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
April 21, 1998
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM T-1
------------------------
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) _____
------------------------
SUNTRUST BANK, ATLANTA
(Exact name of trustee as specified in its charter)
GEORGIA 58-0466330
(Jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization if
not a U.S. national bank)
25 Park Place, N.E. 30303
Suite 1100 (Zip code)
Atlanta, Georgia
(Address of principal executive offices)
------------------------
David M. Kaye
SunTrust Bank, Atlanta
58 Edgewood Avenue, N.E.
Atlanta, Georgia 30303
(404) 588-8060
(Name, address and telephone number of agent for service)
------------------------
FLOWERS INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
GEORGIA 58-0244940
(State or other jurisdiction (I.R.S. Identification Number)
of incorporation or
organization)
1919 Flowers Circle 31757
Thomasville, Georgia (Zip code)
(Address of principal executive offices)
------------------------
__% DEBENTURES DUE 2028
(Title of the indenture securities)
<PAGE> 2
1. General Information.
(a) Name and address of each examining or supervising authority to
which trustee is subject:
Department of Banking and Finance
State of Georgia
Atlanta, Georgia
Federal Reserve Bank of Atlanta
104 Marietta Street, N.W.
Atlanta, Georgia
Federal Deposit Insurance Corporation
Washington, D.C.
(b) The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the obligor.
The obligor is not an affiliate of the trustee.
16. List of Exhibits.
Listed below are all exhibits filed as a part of this statement of
eligibility. Exhibits identified in parentheses are filed with the Securities
and Exchange Commission and are incorporated herein by reference as exhibits
hereto.
(1) Articles of Amendment and Restated Articles of Incorporation
of the trustee as now in effect. (Exhibit 1 to Form T-1,
Registration Statement No. 333-25463)
(2) Certificate of Authority of the trustee to commence business.
(included in Exhibit 1)
(3) Authorization of the trustee to exercise corporate trust
powers. (included in Exhibit 1)
(4) Bylaws of the trustee. (Exhibit 4 to Registration Statement
No. 333-25463)
(5) Not applicable.
(6) Consent of trustee required by Section 321(b) of the Trust
2
<PAGE> 3
Indenture Act of 1939.
(7) A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority. (Exhibit 7 to Form T-1,
Registration Statement No. 333-49503)
(8) Not applicable.
(9) Not applicable.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirement of the Trust Indenture Act of 1939 the
trustee, SunTrust Bank, Atlanta, a banking corporation organized and existing
under the laws of the State of Georgia, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Atlanta, and State of Georgia, on the 21st day of
April, 1998.
SUNTRUST BANK, ATLANTA
By: /s/ David M. Kaye
-------------------------------
David M. Kaye
Group Vice President
4
<PAGE> 5
EXHIBIT T-1(6)
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939 in connection with the proposed issuance of __% Debentures due 2028
of Flowers Industries, Inc., SunTrust Bank, Atlanta hereby consents that reports
of examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
SUNTRUST BANK, ATLANTA
By: /s/ David M. Kaye
-----------------------------
David M. Kaye
Group Vice President
Dated: April 21, 1998
