-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IKaSA0sMihi1pSoaXBw0ntRGDd5CKygrj0TzEwkC/sEQj7VxC6HrM95NEFRbyUv4 BrpYK4U3PTEL2541Rg87qQ== 0001018848-98-000015.txt : 19981118 0001018848-98-000015.hdr.sgml : 19981118 ACCESSION NUMBER: 0001018848-98-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981010 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEEBLER FOODS CO CENTRAL INDEX KEY: 0001018848 STANDARD INDUSTRIAL CLASSIFICATION: COOKIES & CRACKERS [2052] IRS NUMBER: 363839556 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13705 FILM NUMBER: 98751560 BUSINESS ADDRESS: STREET 1: 677 LARCH AVE CITY: ELMHURST STATE: IL ZIP: 60126 BUSINESS PHONE: 6308332900 FORMER COMPANY: FORMER CONFORMED NAME: KEEBLER CORP DATE OF NAME CHANGE: 19960715 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 10, 1998 OR | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: NO. 001-13705 -------------------- KEEBLER FOODS COMPANY (Exact name of Registrant as specified in its charter) DELAWARE 36-3839556 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 677 LARCH AVE., ELMHURST, IL 60126 (Address of principal executive offices) 630-833-2900 (Registrant's telephone number, including area code) NOT APPLICABLE. (Former name, former address and former fiscal year, if changed since last report) -------------------- INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES |X| NO | | NUMBER OF SHARES OF COMMON STOCK, $0.01 PAR VALUE, OUTSTANDING AS OF THE CLOSE OF BUSINESS ON NOVEMBER 6, 1998: 84,076,609. PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS KEEBLER FOODS COMPANY CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
OCTOBER 10, January 3, 1998 1998 --------------- --------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 17,657 $ 27,188 Trade accounts and notes receivable, net 170,592 98,963 Inventories, net: Raw materials 27,479 25,543 Package materials 15,516 7,306 Finished goods 113,601 78,131 Other 1,119 1,482 --------------- --------------- 157,715 112,462 Deferred income taxes 47,796 42,730 Other 28,758 20,303 --------------- --------------- Total current assets 422,518 301,646 PROPERTY, PLANT, AND EQUIPMENT, NET 574,181 478,121 GOODWILL, NET 368,571 47,059 TRADEMARKS AND TRADE NAMES, NET 202,868 154,146 PREPAID PENSION 42,802 43,060 ASSETS HELD FOR SALE 2,897 3,742 OTHER ASSETS 19,745 15,077 --------------- --------------- Total assets $ 1,633,582 $ 1,042,851 =============== =============== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 2
KEEBLER FOODS COMPANY CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
OCTOBER 10, January 3, 1998 1998 --------------- --------------- LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 103,348 $ 26,365 Trade accounts payable 137,139 126,213 Other liabilities and accruals 263,672 194,923 Income taxes payable 22,932 13,784 Plant and facility closing costs and severance 14,432 6,900 --------------- --------------- Total current liabilities 541,523 368,185 LONG-TERM DEBT 551,309 272,390 OTHER LIABILITIES: Deferred income taxes 110,946 69,417 Postretirement/postemployment obligations 63,832 60,605 Plant and facility closing costs and severance 32,749 15,578 Deferred compensation 17,873 18,669 Other 17,933 15,956 --------------- --------------- Total other liabilities 243,333 180,225 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock ($.01 par value; 100,000,000 shares authorized and - - none issued) Common stock ($.01 par value; 500,000,000 shares authorized and 84,011,487 and 77,638,206 shares issued, respectively) 840 776 Additional paid-in capital 168,902 148,613 Retained earnings 133,468 72,737 Treasury stock (5,793) (75) --------------- --------------- Total shareholders' equity 297,417 222,051 --------------- --------------- Total liabilities and shareholders' equity $ 1,633,582 $ 1,042,851 =============== =============== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 3
KEEBLER FOODS COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
TWELVE Twelve FORTY Forty WEEKS ENDED Weeks Ended WEEKS ENDED Weeks Ended OCTOBER 10, 1998 October 4, 1997 OCTOBER 10, 1998 October 4, 1997 ---------------- --------------- ---------------- --------------- NET SALES $ 499,897 $ 485,295 $ 1,626,685 $ 1,542,157 COSTS AND EXPENSES: Cost of sales 205,515 208,345 678,287 668,446 Selling, marketing, and administrative expenses 237,269 234,775 816,706 770,442 Other 2,315 2,369 7,038 7,115 ---------------- --------------- ---------------- --------------- INCOME FROM OPERATIONS 54,798 39,806 124,654 96,154 Interest (income) (1,637) (382) (3,043) (710) Interest expense 6,493 8,179 20,048 29,312 ---------------- --------------- ---------------- --------------- INTEREST EXPENSE, NET 4,856 7,797 17,005 28,602 ---------------- --------------- ---------------- --------------- INCOME BEFORE INCOME TAX EXPENSE 49,942 32,009 107,649 67,552 Income tax expense 20,976 13,461 45,212 28,427 ---------------- --------------- ---------------- --------------- INCOME BEFORE EXTRAORDINARY ITEM 28,966 18,548 62,437 39,125 EXTRAORDINARY ITEM: Loss on early extinguishment of debt, net of tax 1,706 - 1,706 2,692 ---------------- --------------- ---------------- --------------- NET INCOME $ 27,260 $ 18,548 $ 60,731 $ 36,433 ================ =============== ================ =============== BASIC NET INCOME PER SHARE: Income before extraordinary item $ 0.35 $ 0.24 $ 0.75 $ 0.50 Extraordinary item 0.02 - 0.02 0.04 ================ =============== ================ =============== Net income $ 0.33 $ 0.24 $ 0.73 $ 0.46 ================ =============== ================ =============== WEIGHTED AVERAGE SHARES OUTSTANDING 83,761 77,595 83,088 77,607 ================ =============== ================ =============== DILUTED NET INCOME PER SHARE: Income before extraordinary item $ 0.33 $ 0.23 $ 0.71 $ 0.49 Extraordinary item 0.02 - 0.02 0.04 ================ =============== ================ =============== Net income $ 0.31 $ 0.23 $ 0.69 $ 0.45 ================ =============== ================ =============== WEIGHTED AVERAGE SHARES OUTSTANDING 87,597 81,344 87,352 80,057 ================ =============== ================ =============== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 4
KEEBLER FOODS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
FORTY Forty WEEKS ENDED Weeks Ended OCTOBER 10, 1998 October 4, 1997 ------------------ ------------------ CASH FLOWS PROVIDED FROM (USED BY) OPERATING ACTIVITIES Net income $ 60,731 $ 36,433 Adjustments to reconcile net income to cash from operating activities: Depreciation and amortization 46,483 45,523 Impairment of long-term assets 1,053 - Deferred income taxes 1,057 (2,965) Accretion on Seller Note - 2,028 Loss on early extinguishment of debt, net of tax 1,706 2,692 Loss (gain) on sale of property, plant, and equipment 337 (422) Changes in assets and liabilities: Trade accounts and notes receivable, net (34,522) 7,365 Inventories, net (5,334) (10,299) Income taxes payable 7,597 24,331 Other current assets (5,833) (3,404) Deferred debt issue costs (1,837) (1,250) Trade accounts payable and other current liabilities 37,894 42,417 Plant and facility closing costs and severance (5,334) (14,027) Other, net (635) (313) ------------------ ------------------ Cash provided from (used by) operating activities 103,363 128,109 CASH FLOWS (USED BY) PROVIDED FROM INVESTING ACTIVITIES Capital expenditures (35,990) (26,097) Proceeds from property disposals 744 5,306 Purchase of President International, Inc., net of cash acquired (444,818) - ------------------ ------------------ Cash (used by) provided from investing activities (480,064) (20,791) CASH FLOWS PROVIDED FROM (USED BY) FINANCING ACTIVITIES Purchase of treasury stock (5,718) (75) Exercise of options and warrant 20,353 - Long-term debt borrowings 425,000 109,750 Long-term debt repayments (157,465) (167,870) Revolving loan facility, net 85,000 - ------------------ ------------------ Cash provided from (used by) financing activities 367,170 (58,195) ------------------ ------------------ (Decrease) increase in cash and cash equivalents (9,531) 49,123 Cash and cash equivalents at beginning of period 27,188 11,954 ------------------ ------------------ Cash and cash equivalents at end of period $ 17,657 $ 61,077 ================== ================== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 5
KEEBLER FOODS COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION INTERIM FINANCIAL STATEMENTS The unaudited interim consolidated financial statements included herein were prepared pursuant to the rules and regulations for interim reporting under the Securities Exchange Act of 1934. Accordingly, certain information and footnote disclosures normally accompanying the annual financial statements were omitted. The interim consolidated financial statements and notes should be read in conjunction with the annual audited consolidated financial statements and notes thereto. The accompanying unaudited interim consolidated financial statements contain all adjustments, consisting only of normal adjustments, which in the opinion of management were necessary for a fair statement of the results for the interim periods. Results for the interim periods are not necessarily indicative of results for the full year. BUSINESS AND OWNERSHIP Keebler Foods Company (the "Company") was acquired by INFLO Holdings Corporation ("INFLO") on January 26, 1996. INFLO was owned by Artal Luxembourg S. A. ("Artal"), a private investment company, Flowers Industries, Inc. ("Flowers"), a New York Stock Exchange-listed company, Bermore, Limited ("Bermore"), a privately held corporation and the parent of G.F. Industries, Inc., and certain members of the Company's current management. On November 20, 1997, INFLO was merged into Keebler Corporation, and subsequently changed its name to Keebler Foods Company. The Company made an initial public offering (the "Offering") of 13,386,661 shares of common stock on January 29, 1998. As part of the transaction, Flowers acquired additional shares of common stock from Artal and Bermore, which increased its ownership from approximately 45% to 55%. Artal, having sold shares to both Flowers and the public, retained ownership of approximately 21%. Bermore exercised a warrant in exchange for 6,135,781 shares of common stock, sold shares to both Flowers and the public, and retained ownership of approximately 6%. Management's ownership remained at approximately 2%, with the balance of the outstanding common stock being sold to non-affiliates. Adding to the Company's wholly-owned subsidiaries, on September 28, 1998, Keebler Foods Company purchased all of the issued and outstanding shares of common stock of President International, Inc. ("PII"), a Delaware corporation, the parent and sole owner of President Baking Company, Inc. ("PBC") (See Note 2). FISCAL PERIODS PRESENTED The Company's fiscal year consists of thirteen four-week periods (52 or 53 weeks) and ends on the Saturday nearest December 31. The first quarter consists of four, four-week periods. RECLASSIFICATIONS Certain reclassifications of prior period data have been made to conform with the current period reporting. 6 KEEBLER FOODS COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) - -------------------------------------------------------------------------------- 2. ACQUISITION OF PRESIDENT INTERNATIONAL, INC. On September 28, 1998, the Company acquired President International, Inc. from President International Trade and Investment Corporation, a company limited by shares under the International Business Companies Ordinance of the British Virgin Islands, for an aggregate purchase price of $446.1 million, excluding related fees and expenses paid at closing of approximately $3.4 million. The PII acquisition was a cash transaction funded with approximately $75.0 million from existing resources and the remainder from borrowings under the $700.0 million Senior Credit Facility Agreement ("Credit Facility") and a $125.0 million Bridge Facility, both dated as of September 28, 1998. The acquisition of PII by the Company has been accounted for as a purchase. The total purchase price and the fair value of liabilities assumed have been allocated to the tangible and intangible assets of PII based on a preliminary assessment of their respective fair values. The acquisition has resulted in a preliminary unallocated excess purchase price over fair value of net assets acquired of approximately $325.0 million, which is being amortized straight-line over a forty year period. Results of operations for PII from September 28, 1998 to October 10, 1998 will be included in the consolidated statements of operations for the fourth quarter of the Company's fiscal year. The Company intends to file unaudited pro forma financial information with the Securities and Exchange Commission under a Form 8-K/A filing no later than December 11, 1998. 3. OTHER CURRENT LIABILITIES AND ACCRUALS Other current liabilities and accruals consisted of the following at October 10, 1998:
OCTOBER 10, 1998 ---------------------- (IN THOUSANDS) Self insurance reserves......................................................... $ 53,161 Employee compensation........................................................... 73,635 Marketing and consumer promotions............................................... 91,153 Other........................................................................... 45,723 ---------------------- $ 263,672 ======================
4. DEBT Long-term debt consisted of the following at October 10, 1998:
Interest Rate Final Maturity OCTOBER 10, 1998 ----------------- --------------------------- ---------------------- (IN THOUSANDS) Bridge Facility 6.250% September 26, 1999 $ 75,000 Revolving Facility 6.226% September 28, 2004 85,000 Term Facility 5.944% September 28, 2004 350,000 Senior Subordinated Notes 10.750% July 1, 2006 124,400 Other Senior Debt various 2001-2005 11,805 Capital Lease Obligations various 2002-2042 8,452 ---------------------- 654,657 Less: Current maturities 103,348 ---------------------- $ 551,309 ======================
7 KEEBLER FOODS COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) - -------------------------------------------------------------------------------- 4. DEBT (CONTINUED) On September 28, 1998 the Company entered into a new debt facility in order to finance the acquisition of President International, Inc. The new debt structure specifically provides for available borrowings of $825.0 million consisting of a $350.0 million Revolving Facility and $350.0 million Term Facility, and an additional $125.0 million Bridge Facility. Any unused borrowings under the Revolving Facility are subject to a commitment fee. The current commitment fee will vary from 0.1250% - 0.30% based on the relationship of debt to adjusted earnings with a minimum commitment fee of 0.20% required through March 28, 1999. In conjunction with the acquisition of PII, Term Note A was extinguished by using $145.0 million of borrowings under the new Credit Facility. The Company recorded a before-tax extraordinary charge of $2.8 million related primarily to expensing certain bank fees which were being amortized and which were incurred at the time Term Note A was issued. The related after-tax charge was $1.7 million. 5. SHAREHOLDERS' EQUITY COMMON STOCK The consolidated financial statements reflect the Company's declaration of a 57.325-for-1 stock split of common stock (the "Stock Split") effective January 22, 1998. The Stock Split was effected in the form of a stock dividend. Accordingly, all references in the consolidated financial statements to number of shares, options, warrants, and the related prices, as well as per share amounts and the average number of shares outstanding, have been restated to reflect these changes. On January 29, 1998, the Company made a public offering of 13,386,661 shares of common stock. Concurrent with the Offering, Bermore exercised a warrant to purchase 6,135,781 shares of common stock. The exercise of the warrant resulted in the Company receiving $19.8 million of cash proceeds. All of the shares in the Offering were sold by Artal and Bermore, with no proceeds from the Offering going to the Company. TREASURY STOCK In March 1998, the Company's Board of Directors authorized the repurchase, at management's discretion, of up to $30.0 million of shares of the Company's common stock. The share repurchase program was primarily instituted to offset dilution which may result from the exercise and sale of shares related to employee stock options. The Company's repurchases of shares of common stock are recorded as treasury stock and result in a reduction of shareholders' equity. The Company utilizes the cost method for recording treasury stock transactions. Should the treasury shares be reissued, the Company intends to use a first-in, first-out method of reissuance. Total treasury shares held were 249,194 and 42,994 at October 10, 1998 and January 3, 1998, respectively. The total cost of treasury stock held by the Company was approximately $5.8 million and $0.1 million at October 10, 1998 and January 3, 1998, respectively. 8 KEEBLER FOODS COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) - -------------------------------------------------------------------------------- 6. NET INCOME PER SHARE Basic net income per share is calculated using the weighted average number of common shares outstanding during each period. Diluted net income per share is calculated using the weighted average number of common and potentially dilutive common shares outstanding during each period. The following table sets forth the computation of basic and diluted net income per share:
Twelve Weeks Ended Forty Weeks Ended -------------------------------- -------------------------------- OCTOBER 10, October 4, OCTOBER 10, October 4, 1998 1997 1998 1997 --------------- ------------- -------------- -------------- NUMERATOR: Income before extraordinary item...................... $ 28,966 $ 18,548 $ 62,437 $ 39,125 Extraordinary item, net of tax........................ 1,706 - 1,706 2,692 =============== ============= ============== ============= Net income............................................ $ 27,260 $ 18,548 $ 60,731 $ 36,433 =============== ============= ============== ============= DENOMINATOR: Denominator for Basic Net Income Per Share Weighted average shares.......................... 83,761 77,595 83,088 77,607 Effect of Dilutive Securities: Stock options.................................... 3,836 2,494 3,954 1,960 Warrants......................................... - 1,255 310 490 --------------- ------------- -------------- ------------- Potentially dilutive common shares............... 3,836 3,749 4,264 2,450 =============== ============= ============== ============= Denominator for Diluted Net Income Per Share.......... 87,597 81,344 87,352 80,057 =============== ============= ============== =============
For the twelve weeks ended October 10, 1998, there were weighted average options to purchase 22,500 shares of common stock at $27.44 per share, 33,300 shares of common stock at $29.38 per share, 38,500 shares of common stock at $29.78 per share, 51,300 shares of common stock at $28.88 per share, and 77,909 shares of common stock at $27.31 per share which were excluded from the computation of diluted net income per share as the exercise price of the options exceeded the average market price of common shares; and therefore, the effect would have been antidilutive. For the forty weeks ended October 10, 1998, there were weighted average options to purchase 19,446 shares of common stock at $27.44 per share, 25,570 shares of common stock at $29.38 per share, 28,600 shares of common stock at $29.78 per share, 23,451 shares of common stock at $28.88 per share, and 23,373 shares of common stock at $27.31 per share which were excluded from the computation of diluted net income per share as the exercise price of the options exceeded the average market price of common shares; and therefore, the effect would have been antidilutive. There were no antidilutive securities for either the twelve weeks or forty weeks ended October 4, 1997. 9 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Results of operations expressed as a percentage of net sales for the twelve and forty weeks ended October 10, 1998 and October 4, 1997 are set forth below:
Twelve Weeks Ended Forty Weeks Ended -------------------------------- ------------------------------- October 10, October 4, October 10, October 4, 1998 1997 1998 1997 -------------- -------------- -------------- -------------- NET SALES 100.0% 100.0% 100.0% 100.0% COSTS AND EXPENSES: Cost of sales 41.1 42.9 41.7 43.3 Selling, marketing and administrative expenses 47.4 48.4 50.2 50.0 Other 0.5 0.5 0.4 0.5 -------------- -------------- -------------- -------------- INCOME FROM OPERATIONS 11.0 8.2 7.7 6.2 INTEREST EXPENSE, NET 1.0 1.6 1.1 1.8 -------------- -------------- -------------- -------------- INCOME BEFORE INCOME TAX EXPENSE 10.0 6.6 6.6 4.4 Income tax expense 4.2 2.8 2.8 1.8 -------------- -------------- -------------- -------------- INCOME BEFORE EXTRAORDINARY ITEM 5.8 3.8 3.8 2.6 EXTRAORDINARY ITEM: Loss on early extinguishment of debt, net of tax 0.3 - 0.1 0.2 -------------- -------------- -------------- -------------- NET INCOME 5.5% 3.8% 3.7% 2.4% ============== ============== ============== ==============
NET SALES. Net sales for the third quarter of 1998 were $499.9 million, up 3.0% over the year-earlier quarter. For the forty weeks ended October 10, 1998, net sales of $1,626.7 million were $84.5 million or 5.5% above the same period of the prior year. Select price increases combined with a favorable sales mix and volume growth generated the increased revenue for both the quarter and year-to-date. For both periods presented, sales of branded products, including new products and line extensions of existing brands, combined with wider distribution in nonsupermarket channels drove the volume gains. GROSS PROFIT. Gross profit improvements continued to be achieved in the third quarter of 1998. Gross profit for the twelve weeks ended October 10, 1998 increased $17.4 million, or 1.8 percentage points as a percentage of net sales, over the same period a year ago. The improvement was also realized on a year-to-date basis, with gross profit of $948.4 million up $74.7 million, or 1.6 percentage points as a percentage of net sales. Lower production costs combined with the impact of price increases resulted in the gross profit margin improvements in both the quarter and year-to-date when compared to the respective periods of a year ago. Productivity and cost savings have been principally secured through capital investment in bakery automation projects. SELLING, MARKETING AND ADMINISTRATIVE EXPENSES. Selling, marketing and administrative expenses of $237.3 million and $816.7 million for the twelve and forty weeks ended October 10, 1998, respectively, were $2.5 million and $46.3 million higher than the year-earlier comparable periods. Higher marketing and sales force expenses, offset partially by lower distribution costs, primarily drove the increased spending for the quarter. Higher marketing expenses, in the third quarter, resulted from the Company's continued focus on brand-building advertising and consumer promotions, while improved inventory handling and deployment accounted for a decline in distribution costs. Although total selling, marketing and administrative spending was higher than the comparable quarter, these expenses, as a percentage of net sales, were 1.0 percentage point lower than the same quarter of 1997 due to increased volumes being sold through a more efficient fixed cost sales and distribution network. On a year-to-date basis, selling, marketing and administrative expenses, as a percentage of net sales, were 0.2 percentage points above the prior year-date-period primarily due to the increased marketing expenses. 10 INCOME FROM OPERATIONS. Income from operations was $15.0 million and $28.5 million higher in the third quarter and year-to-date period ended October 10, 1998, respectively, versus the same periods last year. The growth in operating income for the quarter and year-to-date periods was principally attributable to higher revenues combined with productivity and cost savings attained from a more efficient cost structure. The year-to-date results, however, were partially offset by higher selling, marketing and administrative expenses. INTEREST EXPENSE. Net interest expense was $2.9 million and $11.6 million lower for the twelve and forty weeks ended October 10, 1998, respectively. For both periods presented, the decline in net interest expense was primarily attributable to more favorable interest rates in 1998 and up until September 28, 1998, lower outstanding debt balances. Additional debt of $385.0 million was incurred on September 28, 1998 to finance the acquisition of President International, Inc. during the quarter. Also contributing to the lower interest expense on a year-to-date basis, was a lower average debt balance resulting from debt repayments consisting of $70.0 million of principal pre-payments on the Term Note A and a $29.0 million early extinguishment of the Seller Note in the fourth quarter of 1997, as well as from the extinguishment of the $145.0 million outstanding Term Note A balance in the third quarter of 1998. A lower year-to-date weighted average interest rate continued to be realized declining 0.7 percentage points below the same period last year. INCOME TAXES. Income tax expense of $21.0 million and $45.2 million for the twelve and forty weeks ended October 10, 1998, respectively, was $7.5 million and $16.8 million higher than the same periods a year ago. The increase in income tax expense was primarily due to higher pre-tax earnings for the both the third quarter and year-to-date. The Company provided for income taxes at an effective tax rate of 42% for all periods presented. The effective tax rate exceeded the statutory rate due to nondeductible expenses, principally amortization of intangibles, including trademarks, trade names and goodwill. EXTRAORDINARY ITEM NET OF INCOME TAXES. In both the third quarter of 1998 and the first quarter of 1997, the Company recorded extraordinary charges for the write-off of unamortized bank fees associated with the early extinguishment of debt. The debt extinguishment in the third quarter of 1998 was for the Term Note A and was done in conjunction with the new debt financing related to the acquisition of President International, Inc. The after-tax extraordinary charge recorded was $1.7 million for the third quarter 1998 and $2.7 million for the first quarter of 1997. The tax benefits related to the third quarter 1998 and first quarter 1997 extraordinary charges were $1.1 million and $1.9 million, respectively. NET INCOME. Net income for the third quarter and year-to-date of $27.3 million and $60.7 million, respectively, was $8.7 million and $24.3 million higher than the prior year comparable periods. Increased net earnings were the result of revenue growth achieved through both higher prices and sales mix changes, combined with lower operating expenses achieved from cost savings programs and lower interest expense. LIQUIDITY AND CAPITAL RESOURCES For the first forty weeks of 1998, cash provided from operating activities was $103.4 million. Year-to-date net earnings of $60.7 million, together with higher current liabilities and income taxes payable, drove the favorable cash flow. The timing of payments principally drove the increased current liabilities while the higher income taxes payable resulted from a 59.4% increase in pre-tax earnings over the prior year. An increased investment in trade accounts receivable and inventories combined with spending on plant an facility closing costs and severance partially offset the above cash sources. The increase in inventory reflected normal seasonal inventory replenishment as the holiday season approaches. Spending for plant and facility costs and severance of $5.3 million related to exit costs associated with the Keebler and Sunshine acquisitions. Cash used for investing activities was $480.1 million for the year and was directly attributable to the $444.8 million, net of cash acquired, used to consummate the President International, Inc. acquisition. In addition, $36.0 million was used for capital expenditures made to introduce new products, update and enhance production facilities and achieve near-term cost savings and efficiencies in the manufacturing, sales and distribution process. Financing activities for the first forty weeks of 1998 provided $367.2 million of cash principally from proceeds on long-term debt borrowings. In order to finance the acquisition of President International, Inc. in the third quarter, total debt of $530.0 million was incurred. In addition, cash proceeds totaling $19.8 million were received by the Company as a result of Bermore, Limited exercising a warrant in exchange for 6,135,781 shares of common stock at the time of the Company's 11 initial public offering. Employee stock options exercised during the year also provided another $0.5 million of cash. Partially offsetting these cash sources was the $145.0 million pre-payment of the outstanding Term Note A balance and a $20.0 million repayment on the Revolving Facility. Additionally, $5.7 million was used to repurchase common stock into treasury under the stock repurchase program. As of October 10, 1998, cash and cash equivalents were $17.7 million, long-term debt outstanding was $551.4 million and current maturities were $103.3 million. Available borrowings under the Company's Revolving Facility were $350.0 million of which $85.0 million was outstanding as of October 10, 1998. The Company met all financial covenants contained in the financing agreements. Available cash, as well as existing short-term credit facilities, are expected to be sufficient to meet the Company's normal operating requirements for the foreseeable future. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" which is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The new statement establishes accounting and reporting standards for derivative instruments and hedging activities. The statement requires that all derivatives be recognized as either assets or liabilities in the statement of financial position and that the instruments be measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. The Company has not yet determined the impact the new statement may have on the consolidated financial statements. YEAR 2000 ISSUE The Year 2000 Issue arose because many existing computer programs use only the last two digits to refer to a year. As a result, computer programs may not properly recognize a year that begins with "20" instead of the familiar "19." If not corrected, many businesses are at risk for possible computer application miscalculations or systems failures causing disruptions in business operations. This risk is commonly referred to as the Year 2000 ("Y2K") Issue. The Company utilizes software and related technologies that will be affected by the date change in the year 2000. The Company has completed a comprehensive review of the computer systems and non-information technology systems to identify potential Y2K issues. As the Company has implemented the SAP R/3 management information system and Manugistics software, both of which were developed/purchased as Y2K compliant, the impact of the Y2K Issue on the business is not anticipated to be material. Additionally, secondary information systems, which are not material to the Company's ability to forecast, manufacture, or deliver product, have been reviewed and Y2K issues identified. The Company in currently in the process of correcting or upgrading these systems. The Company intends to be Y2K compliant on all critical systems by the end of the first quarter of 1999. The Company is also undertaking efforts to verify, by no later than December 31, 1998, that all vendors and suppliers will be Y2K compliant. A comprehensive questionnaire was sent to all of the Company's significant suppliers and vendors regarding their Y2K compliance in an attempt to identify any problem areas with respect to these groups. As no specific issues related to third parties have been identified to warrant a contingency plan, the Company has not yet developed a plan to deal with a Y2K failure caused by a third party, but rather would intend to do so if a specific problem is identified through the questionnaires. While there can be no absolute assurance that third parties will convert their systems in a timely manner and in a way compatible with the Company's systems, the Company believes that its actions with third parties detailed above will minimize these risks. It is currently estimated that the incremental costs for making the Company compliant for the Y2K Issue is approximately $2.0 - $3.0 million, expensed as incurred. This estimate is also exclusive of Y2K issues regarding the recent acquisition of President International, Inc. The Company is currently conducting a comprehensive review of the computer systems and non-information technology systems to identify potential Y2K issues for this newly-acquired subsidiary. Many of the Y2K risks at President International, Inc. will be mitigated through the implementation of the SAP R/3 management information system, Manugistics software and the Company's warehouse management system. This implementation is expected to be completed during 1999. 12 Based on the progress the Company has made in addressing its Y2K issues and the Company's compliance with the Y2K Issue on its primary business information systems, the Company does not foresee significant risks associated with its Y2K compliance at this time. As the Company's plan is to address any significant Y2K issues prior to being affected by them, a comprehensive contingency plan has not been developed. However, if a significant risk related to Y2K compliance or a delay in the anticipated timeline for compliance occurs, the Company will develop contingency plans as deemed necessary at that time. The information presented above sets forth the steps taken by the Company to address the Y2K Issue. Management does not expect compliance with Y2K Issues or the most reasonably likely worst case scenario and related contingency plan to have a material impact on the business, results of operations, or financial condition. The discussion of the Company's efforts and management's expectations relating to Y2K compliance are forward-looking statements. Readers are cautioned that forward-looking statements contained in the Y2K Issue Update should be read in conjunction with the Company's disclosures under the heading "FORWARD-LOOKING STATEMENTS" that follows below. FORWARD-LOOKING STATEMENTS When used in this discussion, the words "believes" and "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, over which the Company may have no control, which could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligations to republish revised forward-looking statements to reflect events or circumstances after the date thereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures made by the Company, in this report, as well as the Company's periodic reports filed with the Securities and Exchange Commission. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 13 PART II: OTHER INFORMATION ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit NUMBER DESCRIPTION ------- ----------- 10.34 $125,000,000 Bridge Facility Credit Agreement dated as of September 28, 1998 among Keebler Foods Company, various financial institutions, and the Bank of Nova Scotia as the Arranger and the Administrative Agent. 27 Financial Data Schedule (b) Reports on Form 8-K 1. Current Report on Form 8-K dated August 25, 1998, announcing the intention of Keebler Foods Company to acquire President International, Inc. from President International Trade and Investment Corporation. 2. Current Report on Form 8-K dated October 9, 1998, related to the completion of the Stock Purchase Agreement between Keebler Foods Company and President International Trade and Investment Corporation for the acquisition of President International, Inc. 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KEEBLER FOODS COMPANY (Registrant) /s/ SAM K. REED ---------------------------------------------------- Sam K. Reed President and Chief Executive Officer Date: November 16, 1998 /s/ E. NICHOL MCCULLY ---------------------------------------------------- E. Nichol McCully Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date: November 16, 1998 /s/ JAMES T. SPEAR ---------------------------------------------------- James T. Spear Vice President Finance and Corporate Controller (Principal Accounting Officer) Date: November 16, 1998 15 EX-27 2
5 This schedule contains summary financial information extracted from the Keebler Foods Company Consolidated Balance Sheet at October 10, 1998 and the Consolidated Statement of Operations for the forty weeks ended October 10, 1998 found on pages 2 through 4 of the Company's Form 10-Q and is qualified in its entirety by reference to such financial statements. 0001018848 KEEBLER FOODS COMPANY 1,000 10-MOS JAN-2-1999 JAN-4-1998 OCT-10-1998 17,657 0 178,949 8,357 157,715 422,518 710,920 136,739 1,633,582 541,523 551,309 0 0 840 296,577 1,633,582 1,626,685 1,626,685 678,287 1,494,993 7,038 14,541 17,005 107,649 45,212 62,437 0 (1,706) 0 60,731 0.73 0.69
EX-10.34 3 CREDIT AGREEMENT, dated as of September 28, 1998, among KEEBLER FOODS COMPANY, as the Borrower, VARIOUS FINANCIAL INSTITUTIONS, as the Lenders and THE BANK OF NOVA SCOTIA, as the Arranger and the Administrative Agent for the Lenders. TABLE OF CONTENTS
Section Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Defined Terms..........................................................................................1 1.2. Use of Defined Terms...................................................................................5 1.3. CrossReferences........................................................................................5 1.4. Accounting and Financial Determinations................................................................5 ARTICLE II COMMITMENTS, BORROWING AND NOTES 2.1. Commitments............................................................................................5 2.1.1. Loan...................................................................................................5 2.1.2. Lenders Not Permitted or Required To Make the Loans....................................................6 2.2. Optional Reduction of the Commitment Amount............................................................6 2.3. Borrowing Procedures; Continuation/Conversion Elections; Funding; Registered Notes.....................6 ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES 3.1. Repayments and Prepayments; Application................................................................6 3.1.1. Repayments and Prepayments.............................................................................6 3.1.2. Application............................................................................................7 3.2. Interest Provisions....................................................................................7 3.2.1. Rates..................................................................................................7 3.2.2. PostMaturity Rates.....................................................................................7 3.2.3. Payment Dates..........................................................................................8 3.3. Fees...................................................................................................8 3.3.1. Commitment Fee.........................................................................................8 3.3.2. Administrative Agent's Fee.............................................................................8 ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS 4.1. "Makewhole" Provisions.................................................................................9 -i- ARTICLE V CONDITIONS TO BORROWINGS 5.1. Initial Loans..........................................................................................9 5.1.1. Resolutions, etc.......................................................................................9 5.1.2. Delivery of Notes......................................................................................9 5.1.3. Long Term Agreement....................................................................................9 5.1.4. Calculation of Consolidated Coverage Ratio.............................................................9 5.1.5. Opinion of Counsel....................................................................................10 5.1.6. Closing Fees, Expenses, etc...........................................................................10 5.2. All Loans.............................................................................................10 5.2.1. Compliance with Warranties, No Default, etc...........................................................10 5.2.2. Borrowing Request.....................................................................................10 ARTICLE VI REPRESENTATIONS AND WARRANTIES 6.1. Representations and Warranties........................................................................10 ARTICLE VII COVENANTS 7.1. Certain Covenants.....................................................................................11 ARTICLE VIII EVENTS OF DEFAULT 8.1. Listing of Events of Default..........................................................................12 8.2. Action if Bankruptcy, etc.............................................................................12 8.3. Action if Other Event of Default......................................................................12 ARTICLE IX THE ADMINISTRATIVE AGENT 9.1. Actions...............................................................................................12 9.2. Funding Reliance, etc.................................................................................13 9.3. Exculpation...........................................................................................13 9.4. Successor.............................................................................................13 9.5. Loans by Administrative Agent.........................................................................14 9.6. Credit Decisions......................................................................................14 9.7. Copies, etc...........................................................................................14 -ii- ARTICLE X MISCELLANEOUS PROVISIONS 10.1. Waivers, Amendments, etc..............................................................................15 10.2. Notices...............................................................................................15 10.3. Payment of Costs and Expenses.........................................................................16 10.4. Indemnification.......................................................................................16 10.5. Survival..............................................................................................17 10.6. Severability..........................................................................................17 10.7. Headings..............................................................................................17 10.8. Execution in Counterparts, Effectiveness, etc.........................................................18 10.9. Governing Law; Entire Agreement.......................................................................18 10.10. Successors and Assigns................................................................................18 10.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes...............................18 10.11.1. Assignments...........................................................................................18 10.11.2. Participations........................................................................................20 10.12. Other Transactions....................................................................................20 10.13. Forum Selection and Consent to Jurisdiction...........................................................21 10.14. Waiver of Jury Trial..................................................................................21 10.15. Confidentiality.......................................................................................22 -iii-
SCHEDULE I - Disclosure Schedule SCHEDULE II - Fiscal Quarters SCHEDULE III - Percentages and Administrative Information EXHIBIT A-1 - Form of Note EXHIBIT A-2 - Form of Registered Note EXHIBIT B - Form of Borrowing Request EXHIBIT C - Form of Continuation/Conversion Notice EXHIBIT D - Form of Lender Assignment Agreement -iv- CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of September 28, 1998, is among KEEBLER FOODS COMPANY, a Delaware corporation (the "BORROWER"), the various financial institutions as are or may become parties hereto (collectively, the "LENDERS"), THE BANK OF NOVA SCOTIA ("SCOTIABANK"), as the arranger and as the administrative agent (the "ADMINISTRATIVE AGENT") for the Lenders. W I T N E S S E T H: WHEREAS, the Borrower has requested the Lenders to provide their Commitments pursuant to which Borrowings of Loans will be made to the Borrower from time to time prior to the Commitment Termination Date; and WHEREAS, the Lenders are willing, on the terms and subject to the conditions hereinafter set forth (including ARTICLE V), to extend such Commitments and make Loans to the Borrower pursuant to the Commitments described above; NOW, THEREFORE, the parties hereto agree as set forth above and as follows. ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. DEFINED TERMS. Unless otherwise defined in this Agreement or the context otherwise requires, terms defined in the Long Term Agreement, and all other terms of the Long Term Agreement to which reference is made therein, together with all ancillary provisions thereto, are hereby incorporated, MUTATIS MUTANDIS, into this Agreement by this reference as though specifically set forth in this Section (PROVIDED, that if a term is defined in this Section and a similar term is defined in the Long Term Agreement, then when any provision which is incorporated from the Long Term Agreement by reference contains the term defined in this Section, such term will be construed as defined in this Section). The following terms when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof). "ADMINISTRATIVE AGENT" is defined in the PREAMBLE and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to SECTION 9.4. "AGREEMENT" means, on any date, this Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date. "ASSIGNEE LENDER" is defined in SECTION 10.11.1. "AUTHORIZED OFFICER" means, relative to any Obligor, those of its officers whose signatures and incumbency shall have been certified to the Administrative Agent and the Lenders pursuant to SECTION 5.1.1. "BASE RATE LOAN" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate. "BORROWER" is defined in the PREAMBLE. "BORROWING REQUEST" means a loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of EXHIBIT B hereto. "CLOSING DATE" means the date all conditions set forth in SECTION 5.1 are satisfied (or have been waived) and the initial Loan is made hereunder. "COMMITMENT" is defined in SECTION 2.1.1. "COMMITMENT AMOUNT" means, on any date, $125,000,000, as such amount may be reduced from time to time pursuant to SECTION 2.2. "COMMITMENT TERMINATION DATE" means the earliest of (a) November 15, 1998 (if the Loans have not been made on or prior to the such date); (b) the Stated Maturity Date; (c) the date on which the Commitment Amount is terminated in full or reduced to zero pursuant to SECTION 2.2; (d) the date on which any Commitment Termination Event occurs; and (e) the day on which the Borrower or any of its Subsidiaries consummates any Permitted Receivables Transaction. Upon the occurrence of any event described in CLAUSE (c), (d) or (e), the Commitments shall terminate automatically and without any further action. "COMMITMENT TERMINATION EVENT" means (a) the occurrence of any Event of Default described in CLAUSES (a) through (d) of SECTION 8.1.9 with respect to the Borrower; or (b) the occurrence and continuance of any other Event of Default and either (i) the declaration of the Loans to be due and payable pursuant to SECTION 8.3, or -2- (ii) in the absence of such declaration, the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated. "CONTINUATION/CONVERSION NOTICE" means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of EXHIBIT C hereto. "DEFAULT" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto as SCHEDULE I, as it may be amended, supplemented or otherwise modified from time to time by the Borrower with the written consent of the Required Lenders. "DOMESTIC OFFICE" means, relative to any Lender, the office of such Lender designated as such on SCHEDULE II hereto or designated in the Lender Assignment Agreement or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. "EFFECTIVE DATE" means the date this Agreement becomes effective pursuant to SECTION 10.8. "EVENT OF DEFAULT" is defined in SECTION 8.1. "FEE LETTER" means the confidential fee letter, dated as of August 28, 1998, between the Borrower and the Administrative Agent. "HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "INDEMNIFIED LIABILITIES" is defined in SECTION 10.4. "INDEMNIFIED PARTIES" is defined in SECTION 10.4. "LENDER ASSIGNMENT AGREEMENT" means a Lender Assignment Agreement, substantially in the form of EXHIBIT D hereto. "LENDERS" is defined in the PREAMBLE. "LIBO RATE LOAN" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by the LIBO Rate (Reserve Adjusted). "LIBOR OFFICE" means, relative to any Lender, the office of such Lender designated as such on SCHEDULE II hereto or designated in the Lender Assignment Agreement or such other -3- office of a Lender as designated from time to time by notice from such Lender to the Borrower and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder. "LOAN" is defined in SECTION 2.1.1. "LOAN DOCUMENT" means this Agreement, the Notes, the Fee Letter and each other agreement, document or instrument delivered in connection with this Agreement or any other Loan Document, whether or not specifically mentioned herein or therein. "LONG TERM AGREEMENT" means the Credit Agreement, dated as of the date hereof, between the Borrower, certain financial institutions from time to time party thereto, First Chicago NBD, as syndication agent for such financial institutions and Scotiabank as lead arranger and as administrative agent for such financial institutions as in effect on the date hereof, and as amended, supplemented, amended and restated or otherwise modified from time to time with the consent of the Required Lenders hereunder solely for purpose of this Agreement, and regardless of whether such Long Term Agreement is terminated, unless in connection with such termination a replacement credit facility satisfactory to the Required Lenders hereunder is entered into, in which case the representations, affirmative and negative covenants and events of default in such facility shall become the subject of this Agreement. "OBLIGATIONS" means all obligations (monetary or otherwise) of the Borrower and each other Obligor arising under or in connection with this Agreement and each other Loan Document, and Hedging Obligations owed to a Lender or an Affiliate thereof (or a Person that was a Lender or an Affiliate of a Lender at the time the applicable Rate Protection Agreement was entered into), unless the Lender or such Affiliate (or other Person) otherwise agrees. "PARTICIPANT" is defined in SECTION 10.11.2. "PERCENTAGE" means, relative to any Lender, the percentage relating to Loans as set forth opposite its name on SCHEDULE II hereto under the applicable column heading or set forth in Lender Assignment Agreement(s) under the applicable column heading, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to SECTION 10.11.1. "REGISTER" is defined in CLAUSE (b) of SECTION 2.6. "REGISTERED NOTE" means a promissory note of the Borrower payable to the order of any Lender, substantially in the form of EXHIBIT A-2 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof, in each case registered pursuant to SECTION 2.7. "REQUIRED LENDERS" means, at any time, Lenders having Percentages aggregating more than 50%. "SCOTIABANK" is defined in the PREAMBLE. -4- "STATED MATURITY DATE" means September 26, 1999 or, if earlier, the day that the Borrower or any of its Subsidiaries consummates any Permitted Receivables Transaction. SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the Disclosure Schedule and in each other Loan Document, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document. In interpreting any provision of the Long Term Agreement incorporated herein, references to (a) any "Agent" shall mean the Administrative Agent; (b) any "Credit Extension" shall mean a Borrowing hereunder; and (c) the "Issuer", the "Syndication Agent", and any "Term Loan", "Swing Line Loan" or "Letter of Credit" to be provided under the Long Term Agreement (and definitions particularly associated with such terms, such as "Disbursement", "Reimbursement Obligation", "Swing Line Note" and "Term Loan Commitment Termination Date") , shall be deemed to be deleted. SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. References to Sections hereof which have been incorporated from the Long Term Agreement mean references to Sections hereof as incorporated. SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under SECTION 7.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with GAAP. ARTICLE II COMMITMENTS, BORROWING AND NOTES SECTION 2.1. COMMITMENTS. On the terms and subject to the conditions of this Agreement (including ARTICLE V), each Lender severally agrees to make Loans pursuant to the Commitments as described in this ARTICLE II. SECTION 2.1.1. LOAN. From time to time on any Business Day occurring prior to the Commitment Termination Date, each Lender will make loans (relative to such Lender, its "LOANS") to the Borrower equal to such Lender's Percentage of the aggregate amount of the Borrowing of the Loans requested by the Borrower to be made on such day. The Commitment of each Lender described in this Section is herein referred to as its "COMMITMENT". On the terms -5- and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow the Loans. SECTION 2.1.2. LENDERS NOT PERMITTED OR REQUIRED TO MAKE THE LOANS. No Lender shall be permitted or required to, and the Borrower shall not request that any Lender, make any Loan if, after giving effect thereto, (a) the aggregate outstanding principal amount of all Loans of all Lenders would exceed the Commitment Amount or (b) of such Lender would exceed its Percentage of the Commitment Amount. SECTION 2.2. OPTIONAL REDUCTION OF THE COMMITMENT AMOUNT. The Borrower may, from time to time on any Business Day occurring after the Closing Date, voluntarily reduce the Commitment Amount; PROVIDED, HOWEVER, that all such reductions shall require at least three Business Days' prior notice to the Administrative Agent and be permanent, and any partial reduction of the Commitment Amount shall be in a minimum amount of $5,000,000 and in an integral multiple of $1,000,000. SECTION 2.3. BORROWING PROCEDURES; CONTINUATION/CONVERSION ELECTIONS; FUNDING; REGISTERED NOTES. The parties hereto acknowledge, covenant and agree that any portion of the Obligations shall remain unpaid or any Lender shall have any outstanding Commitment they will perform, comply with and be bound by all of the agreements, covenants and obligations contained in Sections 2.3.1, 2.4, 2.5 and 2.7 of the Long Term Agreement, each such agreement, covenant and obligation contained in such Sections and all other terms of the Long Term Agreement to which reference is made therein, together with all related definitions and ancillary provisions, being hereby incorporated, MUTATIS MUTANDIS, into this Agreement by reference as though specifically set forth in this Section. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. REPAYMENTS AND PREPAYMENTS; APPLICATION. SECTION 3.1.1. REPAYMENTS AND PREPAYMENTS. The Borrower shall repay in full the unpaid principal amount of each Loan upon the Stated Maturity Date therefor. Prior thereto, the Borrower (a) may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any Loans; PROVIDED, HOWEVER, that (i) the Borrower shall comply with SECTION 4.4 in the event that any LIBO Rate Loan is prepaid on any day other than the last day of the Interest Period for such Loan; (ii) all such voluntary prepayments shall require at least three but no more than five Business Days' prior written notice to the Administrative Agent; and -6- (iii) all such voluntary partial prepayments shall be, in the case of LIBO Rate Loans, in an aggregate minimum amount of $5,000,000 and an integral multiple of $1,000,000 and, in the case of Base Rate Loans, in an aggregate minimum amount of $1,000,000 and an integral multiple of $500,000; or (b) shall, on each date when any reduction in the Commitment Amount shall become effective, including pursuant to SECTION 2.2, make a mandatory prepayment of Loans in an aggregate amount equal to the excess, if any, of the aggregate outstanding principal amount of all Loans over the Commitment Amount as so reduced; and (c) shall, immediately upon any acceleration of the Stated Maturity Date of any Loans or Obligations pursuant to SECTION 8.2 or SECTION 8.3, repay all Loans unless, pursuant to SECTION 8.3, only a portion of all Loans and Obligations are so accelerated (in which case the portion so accelerated shall be so prepaid or cash collateralized with the Administrative Agent). Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except as may be required by SECTION 4.4. No prepayment of principal of any Loans pursuant to CLAUSE (a) of SECTION 3.1.1 shall cause a reduction in the Commitment Amount. SECTION 3.1.2. APPLICATION. Each prepayment or repayment of the principal of the Loans shall be applied, to the extent of such prepayment or repayment, FIRST, to the principal amount thereof being maintained as Base Rate Loans, and SECOND, to the principal amount thereof being maintained as LIBO Rate Loans. SECTION 3.2. INTEREST PROVISIONS. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this SECTION 3.2. SECTION 3.2.1. RATES. Pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue interest at a rate per annum: (a) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin; and (b) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin. All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan. SECTION 3.2.2. POST-MATURITY RATES. After the date any principal amount of any Loan shall have become due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise), or any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts at a rate per annum equal to -7- (a) in the case of any overdue principal amount of Loans, overdue interest thereon, overdue commitment fees or other overdue amounts owing in respect of Loans or other obligations (or the related Commitments), the rate that would otherwise be applicable to Base Rate Loans pursuant to SECTION 3.2.1 plus 2%; and (b) in the case of overdue monetary Obligations (other than as described in CLAUSE (a)), the Alternate Base Rate plus 2%. SECTION 3.2.3. PAYMENT DATES. Interest accrued on each Loan shall be payable, without duplication: (a) on the Stated Maturity Date therefor; (b) on the date of any payment or prepayment of the Loans, in whole or in part, of principal outstanding on such Loan; (c) with respect to Base Rate Loans, on each Quarterly Payment Date; (d) with respect to LIBO Rate Loans, the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on the third month anniversary of such Interest Period); (e) with respect to any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to CLAUSE (c), on the date of such conversion; and (f) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to SECTION 8.2 or SECTION 8.3, immediately upon such acceleration. Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.3. FEES. The Borrower agrees to pay the fees set forth in this SECTION 3.3. All such fees shall be non-refundable. SECTION 3.3.1. COMMITMENT FEE. The Borrower agrees to pay to the Administrative Agent for the account of each Lender, for the period (including any portion thereof when any of the Lender's Commitments are suspended by reason of the Borrower's inability to satisfy any condition of ARTICLE V) commencing on the Effective Date and continuing through the Commitment Termination Date, a commitment fee at the rate of the Applicable Commitment Fee Margin on such Lender's Percentage of the average daily unused portion of the Commitment Amount. Such commitment fees shall be payable by the Borrower in arrears on each Quarterly Payment Date and on the Commitment Termination Date. SECTION 3.3.2. ADMINISTRATIVE AGENT'S FEE. The Borrower agrees to pay to the Administrative Agent, for its own account, the non-refundable fees in the amounts and on the dates set forth in the Fee Letter. -8- ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 4.1. "MAKE-WHOLE" PROVISIONS. The parties hereto acknowledge and agree that so long as any portion of the Obligations shall remain unpaid or any Lender shall have any outstanding Commitment, they will perform, comply with and be bound by all of the agreements, covenants and obligations contained in Article IV of the Long Term Agreement (including Section 4.9, relating to the potential setoff against accounts of the Borrower), each such agreement, covenant and obligation contained in such Article and all other terms of the Long Term Agreement to which reference is made therein, together with all related definitions and ancillary provisions, being hereby incorporated, MUTATIS MUTANDIS, into this Agreement by reference as though specifically set forth in this Section. ARTICLE V CONDITIONS TO BORROWINGS SECTION 5.1. INITIAL LOANS. The obligations of the Lenders to make Loans shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth below. SECTION 5.1.1. RESOLUTIONS, ETC. The Administrative Agent shall have received from the Borrower a certificate, dated the Closing Date, of its Secretary or Assistant Secretary as to and attaching (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement, the Notes and each other Loan Document to be executed by it; (b) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement and each other Loan Document executed by it; and (c) the full force and validity of its Organic Documents, upon which certificate the Administrative Agent and each Lender may conclusively rely until it shall have received a further certificate of the Secretary of the Borrower canceling or amending such prior certificate. SECTION 5.1.2. DELIVERY OF NOTES. The Administrative Agent shall have received, for the account of each Lender that has requested a Note, such Lender's Notes, duly executed and delivered by the Borrower. SECTION 5.1.3. LONG TERM AGREEMENT. The Administrative Agent shall have received evidence satisfactory to it that all conditions precedent set forth in ARTICLE V of the Long Term Agreement shall have been consummated to the satisfaction of the Administrative Agent. SECTION 5.1.4. CALCULATION OF CONSOLIDATED COVERAGE RATIO. The Administrative Agent shall have also received a certificate from an Authorized Officer of the Borrower evidencing the calculation of the Consolidated Coverage Ratio (under and as defined in the -9- Indenture) after giving effect to the Loans made on the Closing Date, together with a summary of how the Borrower is designating the Loans under Section 3.8 of the Indenture, and such certificates shall demonstrate that all Loans made on such date shall constitute "Senior Indebtedness" (as defined in the Indenture). SECTION 5.1.5. OPINION OF COUNSEL. The Administrative Agent shall have received an opinion letter, dated the Closing Date and addressed to the Administrative Agent and all Lenders, from (i) Winston & Strawn, New York counsel to the Borrower and its U.S. Subsidiaries, and (ii) Thomas E. O'Neill, general counsel to the Borrower and its U.S. Subsidiaries, in each case in form and substance satisfactory to the Administrative Agent. SECTION 5.1.6. CLOSING FEES, EXPENSES, ETC. The Administrative Agent shall have received for its own account, or for the account of each Lender, as the case may be, all fees, costs and expenses due and payable pursuant to SECTIONS 3.3 and 10.3, if then invoiced. SECTION 5.2. ALL LOANS. The obligation of each Lender to make any Loan (including the initial Loan) shall be subject to the satisfaction of each of the conditions precedent set forth in this SECTION 5.2. SECTION 5.2.1. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both before and after giving effect to any Borrowing the following statements shall be true and correct: (a) the representations and warranties set forth in ARTICLE VI and in each other Loan Document shall, in each case, be true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); (b) the sum of the aggregate outstanding principal amount of all Loans does not exceed the Commitment Amount; and (c) no Default shall have then occurred and be continuing. SECTION 5.2.2. BORROWING REQUEST. The Administrative Agent shall have received a Borrowing Request. Each of the delivery of a Borrowing Request and the acceptance by the Borrower of the proceeds of any Loan shall constitute a representation and warranty by the Borrower that on the date of such Loan (both immediately before and after giving effect to such Loan and the application of the proceeds thereof) the statements made in SECTION 5.2.1 are true and correct. ARTICLE VI REPRESENTATIONS AND WARRANTIES SECTION 6.1. REPRESENTATIONS AND WARRANTIES. In order to induce the Lenders and the Administrative Agent to enter into this Agreement and to make Loans hereunder, the Borrower represents and warrants to each Lender and the Administrative Agent as to all matters contained in Article VI of the Long Term Agreement, each such representation and warranty set forth in -10- such Article (insofar as applicable as aforesaid) and all other terms of the Long Term Agreement to which reference is made therein, together with all related definitions and ancillary provisions, being hereby incorporated, MUTATIS MUTANDIS, into this Agreement by this reference as though specifically set forth in this Section; PROVIDED, that the reference to "Revolving Loan" in the last sentence of Section 6.15 of the Long Term Agreement shall be deemed to be a reference to the Loans. ARTICLE VII COVENANTS SECTION 7.1. CERTAIN COVENANTS. The Borrower covenants and agrees that, so long as any portion of the Obligations shall remain unpaid or any Lender shall have any outstanding Commitment, it will perform, comply with and be bound by all of the agreements, covenants and obligations contained in Article VII of the Long Term Agreement, each such agreement, covenant and obligation contained in such Article and all other terms of the Long Term Agreement to which reference is made therein, together with all related definitions and ancillary provisions, being hereby incorporated, MUTATIS MUTANDIS, into this Agreement by this reference as though specifically set forth in this Section; PROVIDED, HOWEVER, that (a) the Borrower shall only be required to deliver the information pursuant to Section 7.1.1 to the Administrative Agent, and such delivery will be satisfied if made to the Administrative Agent under the Long Term Agreement; (b) the Revolving Loans referenced in Section 7.1.5 shall be deemed to be a reference to the Loans; (c) the form of guaranty,pledge agreement and other documents required to be delivered under Section 7.1.6 shall be in the same form of such documents under the Long Term Agreement; (d) clause (i) of Section 7.2.2 of the Long Term Agreement shall be deemed to read in its entirety as follows: "(i) Indebtedness of the Borrower incurred under the Long Term Agreement"; (e) clause (a) of Section 7.2.3 of the Long Term Agreement shall be deemed to read in its entirety as follows: "(a) Liens securing payment of the Obligations, granted pursuant to any Loan Document executed pursuant to SECTION 7.1.6, together with a PARI PASSU Lien to secure obligations under the Long Term Agreement and related documents"; and (f) the Borrower shall not be required to prepay any Loans with the proceeds of Net Disposition Proceeds pursuant to CLAUSE (b) of SECTION 7.2.9. -11- ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1. LISTING OF EVENTS OF DEFAULT. Each provision of Section 8.1.1 through (and including) Section 8.1.12 of the Long Term Agreement and all other terms of the Long Term Agreement to which reference is made therein, together with all related definitions and ancillary provisions, are hereby incorporated, MUTATIS MUTANDIS, into this Agreement by reference as though specifically set forth in this Section; and each of the events in such Sections incorporated by reference into this Agreement shall constitute an "Event of Default". SECTION 8.2. ACTION IF BANKRUPTCY, ETC. If any Event of Default described in CLAUSES (a) through (d) of SECTION 8.1.9 shall occur with respect to the Borrower, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 8.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default other than under CLAUSES (a) through (d) of SECTION 8.1.9 with respect to the Borrower shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or declare the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment and/or, as the case may be, the Commitments shall terminate. ARTICLE IX THE ADMINISTRATIVE AGENT SECTION 9.1. ACTIONS. Each Lender hereby appoints Scotiabank as its Administrative Agent under and for purposes of this Agreement, the Notes and each other Loan Document. Each Lender authorizes the Administrative Agent to act on behalf of such Lender under this Agreement, the Notes and each other Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any amendment and restatement of, or termination of, this Agreement) the Administrative Agent, ratably in accordance with their respective Percentages, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Administrative Agent in any way relating to or arising out of this Agreement, the Notes and any other Loan Document, including reasonable attorneys' fees, and as to which the Administrative Agent is not reimbursed by the Borrower or any other Obligor (and without limiting the obligation of the Borrower or any other Obligor to do so); -12- PROVIDED, HOWEVER, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from the Administrative Agent's gross negligence or willful misconduct. The Administrative Agent shall not be required to take any action hereunder, under the Notes or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement, the Notes or any other Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Administrative Agent shall be or become, in the Administrative Agent's determination, inadequate, the Administrative Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. SECTION 9.2. FUNDING RELIANCE, ETC. Unless the Administrative Agent shall have been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., New York time, on the day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender severally agrees and the Borrower agrees to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing. SECTION 9.3. EXCULPATION. Neither the Administrative Agent, any other Agent nor any of their respective directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Borrower of its obligations hereunder or under any other Loan Document. Any such inquiry which may be made by the Administrative Agent shall not obligate it to make any further inquiry or to take any action. The Administrative Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Administrative Agent believes to be genuine and to have been presented by a proper Person. SECTION 9.4. SUCCESSOR. The Administrative Agent may resign as such at any time upon at least 30 days' prior notice to the Borrower and all Lenders. If the Administrative Agent at any time shall resign, the Required Lenders may, with the prior consent of the Borrower (which consent shall not be unreasonably withheld), appoint another Lender as a successor Administrative Agent which shall thereupon become the Administrative Agent hereunder. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be one of the Lenders or a commercial -13- banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the retiring Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of (a) this ARTICLE IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement; and (b) SECTION 10.3 and SECTION 10.4 shall continue to inure to its benefit. SECTION 9.5. LOANS BY ADMINISTRATIVE AGENT. The Administrative Agent shall have the same rights and powers with respect to (x) the Loans made by it or any of its Affiliates, and (y) the Notes held by it or any of its Affiliates as any other Lender and may exercise the same as if it were not the Administrative Agent. The Administrative Agent and its respective Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if the Administrative Agent were not the Administrative Agent hereunder. SECTION 9.6. CREDIT DECISIONS. Each Lender acknowledges that it has, independently of the Administrative Agent and each other Lender, and based on such Lender's review of the financial information of the Borrower, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of the Administrative Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document. SECTION 9.7. COPIES, ETC. The Administrative Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by the Borrower, including under the terms of the Long Term Agreement to Lender which is also a party to the Long Term Agreement). The Administrative Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Administrative Agent from the Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of this Agreement. -14- ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1. WAIVERS, AMENDMENTS, ETC. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; PROVIDED, HOWEVER, that no such amendment, modification or waiver which would: (a) modify any requirement hereunder that any particular action be taken by all the Lenders shall be effective unless consented to by each Lender; (b) modify this SECTION 10.1, or CLAUSE (a) of SECTION 10.10, change the definition of "Required Lenders", increase the Commitment Amount or the Percentage of any Lender, reduce any fees described in ARTICLE III, if any guarantees are delivered or Capital Stock is pledged pursuant to SECTION 7.1.7, release any Subsidiary guarantor from its obligations under such guaranty or all or substantially all of the collateral security (except in each case as otherwise specifically provided in this Agreement, the subsidiary guaranty or a pledge agreement), or extend the Commitment Termination Date shall be made without the consent of each Lender adversely affected thereby; (c) extend the final Stated Maturity Date of any Loan, or extend the due date for, or reduce the amount of any payment of interest on or fees payable in respect of any Loan (or reduce the principal amount of or rate of interest on or fees payable in respect of any Loan), shall be made without the consent of the Lender owed such Loan; or (d) affect adversely the interests, rights or obligations of the Administrative Agent (in its capacity as Administrative Agent), shall be effective unless consented to by the Administrative Agent. No failure or delay on the part of the Administrative Agent or any Lender in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Administrative Agent or any Lender under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 10.2. NOTICES. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party, in the case of the Borrower or the Administrative Agent, at its address or facsimile number set forth below its signatures in this Agreement, and if to any other party, as set forth on SCHEDULE II hereto or set forth in the Lender Assignment Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by prepaid courier service, shall be deemed -15- given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted (telephonic confirmation in the case of facsimile). SECTION 10.3. PAYMENT OF COSTS AND EXPENSES. The Borrower agrees to pay on demand all reasonable expenses of the Administrative Agent (including the reasonable fees and out-of-pocket expenses of counsel to the Administrative Agent and of local counsel, if any, who may be retained by counsel to the Administrative Agent) in connection with (a) the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated; and (b) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document. The Borrower further agrees to pay, and to save the Administrative Agent and the Lenders harmless from all liability for, any stamp or other similar taxes which may be payable in connection with the execution or delivery of this Agreement, the Loans made hereunder, or the issuance of the Notes or any other Loan Documents. The Borrower also agrees to reimburse the Administrative Agent and each Lender upon demand for all reasonable out-of-pocket expenses (including attorneys' fees and legal expenses) incurred by the Administrative Agent or such Lender in connection with (x) the negotiation of any restructuring or "work-out", whether or not consummated, of any Obligations and (y) the enforcement of any Obligations. SECTION 10.4. INDEMNIFICATION. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments, the Borrower hereby indemnifies, exonerates and holds the Administrative Agent and each Lender and each of their respective Affiliates, and each of their respective partners, officers, directors, employees and agents, and each other Person controlling any of the foregoing within the meaning of either Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Exchange Act, (collectively, the "INDEMNIFIED PARTIES"), free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, fees, and expenses actually incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (collectively, the "INDEMNIFIED LIABILITIES"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Borrowing hereunder; (b) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to ARTICLE V not to make any Loan); (c) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by the Borrower or any of its Subsidiaries of all or any portion of -16- the Capital Stock or assets of any Person, whether or not such Indemnified Party is party thereto; (d) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the Borrower's or any of its Subsidiaries' compliance with or liability under Environmental Law or the Release by the Borrower or any of its Subsidiaries of any Hazardous Material; or (e) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Borrower or any Subsidiary thereof of any Hazardous Material present on or under such property in a manner giving rise to liability at or prior to the time the Borrower or such Subsidiary owned or operated such property (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, the Borrower or such Subsidiary, except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's gross negligence or willful misconduct. The Borrower and its permitted successors and assigns hereby waive, release and agree not to make any claim, or bring any cost recovery action against, the Administrative Agent or any Lender under CERCLA or any state equivalent, or any similar law now existing or hereafter enacted, except to the extent arising out of the gross negligence or willful misconduct of any Indemnified Party. It is expressly understood and agreed that to the extent that any of such Persons is strictly liable under any Environmental Laws, the Borrower's obligation to such Person under this indemnity shall likewise be without regard to fault on the part of the Borrower with respect to the violation or condition which results in liability of such Person. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 10.5. SURVIVAL. The obligations of the Borrower under SECTIONS 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under SECTIONS 4.8 and 9.1, shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments. The representations and warranties made by the Borrower and each other Obligor in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. SECTION 10.6. SEVERABILITY. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 10.7. HEADINGS. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. -17- SECTION 10.8. EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower and each Lender (or notice thereof satisfactory to the Administrative Agent) shall have been received by the Administrative Agent and notice thereof shall have been given by the Administrative Agent to the Borrower and each Lender. SECTION 10.9. GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 10.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; PROVIDED, HOWEVER, that: (a) the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent and all Lenders; and (b) the rights of sale, assignment and transfer of the Lenders are subject to SECTION 10.11. SECTION 10.11. SALE AND TRANSFER OF LOANS AND NOTES; PARTICIPATIONS IN LOANS AND NOTES. Each Lender may assign, or sell participations in, its Loans and Commitments to one or more other Persons in accordance with this SECTION 10.11. SECTION 10.11.1. ASSIGNMENTS. Any Lender (the "ASSIGNOR LENDER"), (a) with the written consents of the Borrower and the Administrative Agent (which consents shall not be unreasonably delayed or withheld and which consent), in the case of the Borrower, shall be deemed to have been given in the absence of a written notice delivered by the Borrower to the Administrative Agent, on or before the fifth Business Day after receipt by the Borrower of such Lender's request for such consent), may at any time assign and delegate to one or more commercial banks or other financial institutions or funds which are regularly engaged in making, purchasing or investing in loans or securities, and (b) with notice to the Borrower and the Administrative Agent, but without the consent of either the Borrower or the Administrative Agent, may assign and delegate to any of its Affiliates or to any other Lender; (each Person described in either of the foregoing clauses as being the Person to whom such assignment and delegation is to be made, being hereinafter referred to as an "ASSIGNEE LENDER"), all or any fraction of such Lender's total Loans and Commitments (which assignment and delegation shall be, as among Commitments and Loans, of a constant, and not a varying, percentage) in a minimum aggregate amount of $10,000,000 or the then remaining amount of a -18- Lender's Loans and Commitments; PROVIDED, HOWEVER, that any such Assignee Lender will comply, if applicable, with the provisions contained in SECTION 4.6 and the Borrower, each other Obligor and the Administrative Agent shall be entitled to continue to deal solely and directly with such Assignor Lender in connection with the interests so assigned and delegated to an Assignee Lender until (c) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the Borrower and the Administrative Agent by such Assignor Lender and such Assignee Lender; (d) such Assignee Lender shall have executed and delivered to the Borrower and the Administrative Agent a Lender Assignment Agreement, accepted by the Administrative Agent; (e) the processing fees described below shall have been paid; and (f) the Administrative Agent shall have registered such assignment and delegation in the Register pursuant to CLAUSE (b) of SECTION 2.7. From and after the date that the Administrative Agent accepts such Lender Assignment Agreement and such assignment and delegation is registered in the Register pursuant to CLAUSE (b) of SECTION 2.7, (i) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (ii) the Assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan Documents. Subject to the provisions of SECTION 2.7, within ten Business Days after its receipt of notice that the Administrative Agent has received an executed Lender Assignment Agreement, at the request of the Assignee Lender, the Borrower shall execute and deliver to the Administrative Agent (for delivery to the relevant Assignee Lender) new Notes evidencing such Assignee Lender's assigned Loans and Commitments and, if the assignor Lender has retained Loans and Commitments hereunder and had originally requested Notes to evidence such loans and Commitments, replacement Notes in the principal amount of the Loans and Commitments retained by the assignor Lender hereunder (such Notes to be in exchange for, but not in payment of, those Notes then held by such assignor Lender). Each such Note shall be dated the date of the predecessor Notes. The Assignor Lender shall mark the predecessor Notes "exchanged" and deliver them to the Borrower. Unless otherwise specified in the Lender Assignment Agreement, interest and fees on the portion of Loans and Commitments being assigned that have accrued prior to the date of such assignment shall be paid to the account of the Assignor Lender and interest and fees that accrue on and subsequent to the date of such assignment shall be paid to the account of the Assignee Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in this Agreement. Such Assignor Lender or such Assignee Lender (unless such Assignor Lender or Assignee Lender is Scotiabank) must also pay a processing fee to the Administrative Agent upon delivery of any Lender Assignment Agreement in the amount of $3,500, unless such assignment and delegation is by a Lender to its Affiliate or if such assignment and delegation is by a Lender to the Federal Reserve Bank (or in the case of a Lender -19- that is an investment fund, to the trustee under the indenture to which such fund is a party), as provided below or is otherwise consented to by the Administrative Agent. Any attempted assignment and delegation not made in accordance with this SECTION 10.11.1 shall be null and void. Nothing contained in this SECTION 10.11.1 shall prevent or prohibit any Lender from pledging its rights (but not its obligations to make Loans) under this Agreement and/or its Loans and/or its Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank or in the case of a Lender that is an investment fund, to the trustee under the indenture to which such fund is a party in support of its obligations to such trustee, in either case, without notice to or consent of the Borrower or the Administrative Agent, PROVIDED, HOWEVER, that (A) such Lender shall remain a "Lender" under this Agreement and shall continue to be bound by the terms and conditions hereof and in the other Loan Documents, and (B) any assignment by such trustee shall be subject to the provisions of CLAUSE (a) of this SECTION 10.11.1. SECTION 10.11.2. PARTICIPATION. Any Lender may at any time sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "PARTICIPANT") participating interests in any of the Loans, Commitments, or other interests of such Lender hereunder; PROVIDED, HOWEVER, that (a) no participation contemplated in this Section shall relieve such Lender from its Commitments or its other obligations hereunder or under any other Loan Document; (b) such Lender shall remain solely responsible for the performance of its Commitments and such other obligations; (c) the Borrower and each other Obligor and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents; (d) no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant's consent, agree to (i) any reduction in the interest rate or amount of fees that such Participant is otherwise entitled to or (ii) a decrease in the principal amount, or an extension of the final Stated Maturity Date, of any Loan in which such Participant has purchased a participating interest; and (e) the Borrower shall not be required to pay any amount under SECTIONS 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4 that is greater than the amount which it would have been required to pay had no participating interest been sold. The Borrower acknowledges and agrees, subject to CLAUSE (e) above, that each Participant, for purposes of SECTIONS 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4, shall be considered a Lender. SECTION 10.12. OTHER TRANSACTIONS. Nothing contained herein shall preclude the Administrative Agent or any Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its -20- Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 10.13. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. SECTION 10.14. WAIVER OF JURY DUTY. THE LENDERS, THE ADMINISTRATIVE AGENT AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS OR THE BORROWER. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A -21- MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. SECTION 10.15. CONFIDENTIALITY. The Lenders shall hold all non-public information obtained pursuant to or in connection with this Agreement or obtained by such Lender based on a review of the books and records of the Borrower or any of its Subsidiaries in accordance with their customary procedures for handling confidential information of this nature, but may make disclosure to any of their examiners, Affiliates, outside auditors, counsel and other professional advisors in connection with this Agreement or as reasonably required by any potential BONA FIDE transferee, participant or assignee, or in connection with the exercise of remedies under a Loan Document, or as requested by any governmental agency or representative thereof or pursuant to legal process; PROVIDED, HOWEVER, that (a) unless specifically prohibited by applicable law or court order, each Lender shall notify the Borrower of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; (b) prior to any such disclosure pursuant to this SECTION 10.15, each Lender shall require any such BONA FIDE transferee, participant and assignee receiving a disclosure of non-public information to agree in writing (i) to be bound by this SECTION 10.15; and (ii) to require such Person to require any other Person to whom such Person discloses such non-public information to be similarly bound by this SECTION 10.15; and (c) except as may be required by an order of a court of competent jurisdiction and to the extent set forth therein, no Agent or Lender shall be obligated or required to return any materials furnished by the Borrower or any Subsidiary. -22- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. KEEBLER FOODS COMPANY By: /s/ E. NICHOL MCCULLY ---------------------------------- Name: E. Nichol McCully Title: Sr. Vice President and Chief Financial Officer THE BANK OF NOVA SCOTIA, as the Administrative Agent and as a Lender By: /s/ F.C.H. ASHBY ---------------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations SCHEDULE I DISCLOSURE SCHEDULE SEE SCHEDULE I TO THE LONG TERM AGREEMENT SCHEDULE II PERCENTAGES AND ADMINISTRATIVE INFORMATION THE BORROWER: Keebler Foods Company Address: 677 Larch Avenue Elmhurst, Illinois 60126 Facsimile No.: (708) 833-3372 Attention: E. Nichol McCully LENDERS: The Bank of Nova Scotia Domestic/LIBOR address: One Liberty Plaza New York, NY 10006 Facsimile No.: (212) 225-5090 Attn: Carroll Rockey Revolving Loan Commitment Percentage: 100% SCHEDULE III FISCAL QUARTERS SEE SCHEDULE III TO THE LONG TERM AGREEMENT -ii- EXHIBIT A-1 REVOLVING NOTE $ , 1998 ------------------- ------------ -- FOR VALUE RECEIVED, the undersigned, KEEBLER FOODS COMPANY, a Delaware corporation (the "BORROWER"), promises to pay to the order of ______ (the "LENDER") on the Stated Maturity Date for Revolving Loans the principal sum of _______ DOLLARS ($____) or, if less, the aggregate unpaid principal amount of all Revolving Loans made by the Lender pursuant to the Credit Agreement, dated as of September 28, 1998 (as amended, supplemented, amended and restated, or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the Borrower, The Bank of Nova Scotia, as Administrative Agent and the various financial institutions as are, or may from time to time become, parties thereto. Unless otherwise defined, terms used in this Note have the meanings provided in the Credit Agreement. The Borrower also promises to pay interest on the unpaid principal amount hereof from time to time outstanding from the date hereof until maturity (whether by acceleration or otherwise) and, after maturity, until paid, at the rates per annum and on the dates specified in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America in same day or immediately available funds to the account designated by the Administrative Agent pursuant to the Credit Agreement. This Note is one of the Revolving Notes referred to in, and evidences Indebtedness incurred under, the Credit Agreement, to which reference is made for a description of the security for this Note and for a statement of the terms and conditions on which the Borrower is permitted and required to make prepayments and repayments of principal of the Indebtedness evidenced by this Note and on which such Indebtedness may be declared to be immediately due and payable. All parties hereto, whether as makers, endorsers, or otherwise, severally waive presentment for payment, demand, protest and notice of dishonor. THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. KEEBLER FOODS COMPANY By _____________________________ Title: -2- REVOLVING LOANS AND PRINCIPAL PAYMENTS
Amount of Revolving Interest Amount of Principal Unpaid Principal Loan Made Period Repaid Balance ======================== (If Ap- ======================= ====================== Alternate LIBO plic- Alternate LIBO Alternate LIBO Notation Date Base Rate Rate able) Base Rate Rate Base Rate Rate Total Made By ======== ============ =========== ========== ============= ========= ============= ======== ========== ==========
-3- EXHIBIT A-2 REGISTERED NOTE THIS REGISTERED NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS REGISTERED NOTE MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT. $_____________ ___________ __, 1997 FOR VALUE RECEIVED, the undersigned, KEEBLER FOODS COMPANY, a Delaware corporation (the "BORROWER"), promises to pay to the order of _____ (the "LENDER") the principal sum of _____ DOLLARS ($_____) or, if less, the aggregate unpaid principal amount of all Revolving Loans made by the Lender pursuant to the Credit Agreement, dated as of September 28, 1998 (as so amended, supplemented, amended and restated, or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the Borrower, The Bank of Nova Scotia, as Administrative Agent, the various financial institutions as are, or may from time to time become, parties thereto. Unless otherwise defined, terms used herein have the meanings provided in the Credit Agreement. The Borrower also promises to pay interest on the unpaid principal amount hereof from time to time outstanding from the date hereof until maturity (whether by acceleration or otherwise) and, after maturity, until paid, at the rates per annum and on the dates specified in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America in same day or immediately available funds to the account designated by the Administrative Agent pursuant to the Credit Agreement. This Registered Note is one of the Notes referred to in, and evidences Indebtedness incurred under, the Credit Agreement, to which reference is made for a description of the security for this Registered Note and for a statement of the terms and conditions on which the Borrower is permitted and required to make prepayments and repayments of principal of the Indebtedness evidenced by this Registered Note and on which such Indebtedness may be declared to be immediately due and payable. As provided in Section 10.11.1 of the Credit Agreement, this Registered Note and the Obligation(s) evidenced hereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of this Registered Note and the Obligation(s) evidenced hereby on the Register described in clause (b) of Section 2.8 of the Long Term Credit Agreement. Any assignment or transfer of all or part of such Obligations(s) and this Registered Note evidencing the same shall be registered on the Register only upon surrender for registration of assignment or transfer of this Registered Note evidencing such Obligations(s), duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the Registered Noteholder hereof, and thereupon one or more new Registered Note(s) in the same aggregate principal amount shall be issued to the designated Assignee Lender, and this Registered Note shall be returned by the Administrative Agent to the Borrower marked "canceled". Prior to the due presentment for registration of assignment or transfer of this Registered Note, the Borrower and the Administrative Agent shall treat the Person in whose name such Obligation(s) and this Registered Note(s) evidencing the same is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding any notice to the contrary. This Registered Note may not be exchanged for promissory notes that are not Registered Notes. All parties hereto, whether as makers, endorsers, or otherwise, severally waive presentment for payment, demand, protest and notice of dishonor. THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. KEEBLER FOODS COMPANY By: ---------------------------------- Title: 2 TERM LOANS AND PRINCIPAL PAYMENTS
Amount of Amount of Term Principal Unpaid Principal Loan Made Repaid Balance ======================= ========================= ======================== Base LIBO Interest Period Base LIBO Base LIBO Notation Date Rate Rate (If Applicable) Rate Rate Rate Rate Total Made By ========== =========== =========== ===================== ============ ============ ============ =========== =========== ===========
3
Amount of Amount of Term Principal Unpaid Principal Loan Made Repaid Balance ======================= ========================= ======================== Base LIBO Interest Period Base LIBO Base LIBO Notation Date Rate Rate (If Applicable) Rate Rate Rate Rate Total Made By ========== =========== =========== ===================== ============ ============ ============ =========== =========== ===========
4 EXHIBIT B BORROWING REQUEST The Bank of Nova Scotia One Liberty Plaza New York, New York 10006 Attention:_______________ KEEBLER FOODS COMPANY Gentlemen and Ladies: This Borrowing Request is delivered to you pursuant to Section 2.3 of the Credit Agreement, dated as of September 28, 1998 (as so amended, modified, amended and restated or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Keebler Foods Company, a Delaware corporation (the "BORROWER"), the various financial institutions as are, or may from time to time become, parties thereto (the "LENDERS") and The Bank of Nova Scotia, as Administrative Agent. Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Credit Agreement. The Borrower hereby requests that a Revolving Loan be made in the aggregate principal amount of $____ on ____, ___ as a [LIBO Rate Loan having an Interest Period of ___ months] [Base Rate Loan]. The Borrower hereby acknowledges that, pursuant to Section 5.2.2 of the Credit Agreement, each of the delivery of this Borrowing Request and the acceptance by the Borrower of the proceeds of the Loans requested hereby constitute a representation and warranty by the Borrower that, on the date of such Loans, and before and after giving effect thereto and to the application of the proceeds therefrom, all statements set forth in Section 5.2.1 are true and correct in all material respects. The Borrower agrees that if prior to the time of the Borrowing requested hereby, any matter certified to herein by it will not be true and correct in all material respects at such time as if then made, it will immediately so notify the Administrative Agent. Except to the extent, if any, that prior to the time of the Borrowing requested hereby, the Administrative Agent shall receive written notice to the contrary from the Borrower, each matter certified to herein shall be deemed once again to be certified as true and correct in all material respects at the date of such Borrowing as if then made. Please wire transfer the proceeds of the Borrowing to the accounts of the following persons at the financial institutions indicated respectively:
Amount to be PERSON TO BE PAID Name, Address, etc. TRANSFERRED NAME ACCOUNT NO. OF TRANSFEREE LENDER - ----------- --------- -------------- ------------------------ $_________ _________ ______________ ________________________ ________________________ Attention:______________ $_________ _________ ______________ ________________________ ________________________ Attention:______________ Balance of The Borrower ______________ ________________________ such proceeds ________________________ Attention:______________
-2- IN WITNESS WHEREOF, the undersigned has caused this request to be executed and delivered by its duly Authorized Officer this ______ day of _______ ,______. KEEBLER FOODS COMPANY By: --------------------- Title: -3- EXHIBIT C CONTINUATION/CONVERSION NOTICE The Bank of Nova Scotia One Liberty Plaza New York, New York 10006 Attention: ______________ KEEBLER FOODS COMPANY Gentlemen and Ladies: This Continuation/Conversion Notice is delivered to you pursuant to Section 2.3 of the Credit Agreement, dated as of September 28, 1998 (as so amended, modified, amended and restated or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Keebler Foods Company, a Delaware corporation (the "BORROWER"), the various financial institutions as are, or may from time to time become, parties thereto (the "LENDERS") and The Bank of Nova Scotia, as Administrative Agent. Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Credit Agreement. The Borrower hereby requests that on ____________, (1) $_____ of the presently outstanding principal amount of the Revolving Loans originally made on _____, [and $_____ of the presently outstanding principal amount of the Revolving Loans originally made on _____], (2) and all presently being maintained as 1/[Base Rate Loans] [LIBO Rate Loans], (3) be [converted into] [continued as], - ---------------- 1/ Select appropriate interest rate option. (4) [LIBO Rate Loans having an Interest Period of _____ months] [Base Rate Loans]. The Borrower hereby: (a) certifies and warrants that no Default has occurred and is continuing; and (b) agrees that if prior to the time of such continuation or conversion any matter certified to herein by it will not be true and correct at such time as if then made, it will immediately so notify the Administrative Agent. Except to the extent, if any, that prior to the time of the continuation or conversion requested hereby the Administrative Agent shall receive written notice to the contrary from the Borrower, each matter certified to herein shall be deemed to be certified at the date of such continuation or conversion as if then made. The Borrower has caused this Continuation/Conversion Notice to be executed and delivered, and the certification and warranties contained herein to be made, by its Authorized Officer this _______ day of ________. KEEBLER FOODS COMPANY By: ----------------------- Title: -2- EXHIBIT D LENDER ASSIGNMENT AGREEMENT To: KEEBLER FOODS COMPANY 677 Larch Avenue Elmhurst, Illinois 60126 Attention: E. Nichol McCully To: THE BANK OF NOVA SCOTIA, as the Administrative Agent One Liberty Plaza New York, New York 10006 Attention: _____________________ KEEBLER FOODS COMPANY Gentlemen and Ladies: We refer to clause (d) of Section 10.11.1 of the Credit Agreement, dated as of September 28, 1998 (as amended, supplemented, amended and restated, or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Keebler Foods Company, a Delaware corporation (the "BORROWER"), the various financial institutions as are, or may from time to time become, parties thereto (the "LENDERS") and The Bank of Nova Scotia, as Administrative Agent. Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Credit Agreement. As of ________ __, ____ (the "ASSIGNMENT DATE"), _____________ (the "ASSIGNOR") irrevocably sells, transfers, conveys and assigns, without recourse, representation or warranty (except as expressly set forth herein), to _____________ (the "ASSIGNEE") and the Assignee irrevocably purchases from the Assignor ___% (the "ASSIGNED PORTION") of the Loans and Commitments of the Assignor such that after giving effect to the foregoing assignment and delegation, the Assignor's and the Assignee's Percentages for the purposes of the Credit Agreement will be as set forth on SCHEDULE I hereto. [Add paragraph dealing with accrued interest and fees with respect to the Loans assigned.] The Assignee hereby acknowledges and confirms that it has received a copy of the Credit Agreement and the exhibits related thereto, together with copies of the documents which were required to be delivered under the Credit Agreement as a condition to the making of the Loans thereunder. The Assignee further confirms and agrees that in becoming a Lender and in making its Commitments and Loans under the Credit Agreement, the Assignee has performed its own analysis of the creditworthiness and financial condition of the Borrower and the other Obligors and such actions have and will be made without recourse to, or representation or warranty by the Administrative Agent. The Assignor represents and warrants that it is legally authorized to enter into and deliver this agreement and represents that it is the legal and beneficial owner of the Assigned Portion. Except as set forth in the previous sentence, the Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made pursuant to or in connection with this agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this agreement, the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or thereto, including the financial condition of the Borrower or any of its Subsidiaries or the performance or observance by any Lender of any of its obligations under the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or thereto. The Assignee represents and warrants that it is legally authorized to enter into and deliver this agreement and confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this agreement. In addition, the Assignee independently and without reliance upon the Assignor, the Administrative Agent or any other Agent or Lender, and based on such documents and information as it shall deem appropriate at the time, shall continue to make its own credit decisions in taking or not taking action under the Credit Agreement, the other Loan Documents and the other instruments and documents delivered in connection therewith. Except as otherwise provided in the Credit Agreement, effective as of the date of acceptance hereof by the Administrative Agent (a) the Assignee (i) shall be deemed automatically to have become a party to the Credit Agreement, have all the rights and obligations of a "Lender" under the Credit Agreement and the other Loan Documents as if it were an original signatory thereto to the extent specified in the second paragraph hereof; (ii) agrees to be bound by the terms and conditions set forth in the Credit Agreement and the other Loan Documents as if it were an original signatory thereto; and -2- (b) the Assignor shall be released from its obligations under the Credit Agreement and the other Loan Documents to the extent specified in the second paragraph hereof. The Assignor and the Assignee hereby agree that the [Assignor] [Assignee] will pay to the Administrative Agent the processing fee referred to in Section 10.11.1 of the Credit Agreement upon the delivery hereof. The Assignee hereby advises each of you that set forth in SCHEDULE I hereto are its administrative details with respect to the assigned Loans and Commitments and requests the Administrative Agent to acknowledge receipt of this document. The Assignee agrees to furnish the tax form required by the second to last sentence of Section 4.6 (if so required) of the Credit Agreement no later than the date of acceptance hereof by the Administrative Agent. This Agreement may be executed by the Assignor and Assignee in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. -3- [THE ASSIGNOR], as Assignor By: ----------------------------- Title: [THE ASSIGNEE], as Assignee By: ----------------------------- Title: Accepted and Acknowledged this __ day of _______, ____ THE BANK OF NOVA SCOTIA, as Administrative Agent By:________________________ Title: KEEBLER FOODS CORPORATION By:_______________________ Title: -4- SCHEDULE I LENDER INFORMATION
LENDER PERCENTAGE DOMESTIC OFFICE LIBOR OFFICE - ------ ---------- --------------- ------------ _______________, Revolving Loans, participations ON FILE WITH ON FILE WITH as Assignor in Letters of Credit Outstandings, ADMINISTRATIVE ADMINISTRATIVE and Revolving Loan Commitment...............__________% AGENT AGENT Term Loans..................................__________% _______________, Revolving Loans, participations [ADDRESS] [ADDRESS] as Assignee in Letters of Credit Outstandings, Fax:______________ Fax:______________ and Revolving Loan Commitment...............__________% Attention:________ Attention:________ Term Loans..................................__________%
Wiring Instructions for the Assignee: - --------------- - --------------- - --------------- -5- -----END PRIVACY-ENHANCED MESSAGE-----