e10-k

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

The aggregate market value of the common stock held by non-affiliates of the registrant (assuming only for purposes of this computation that directors and executive officers may be affiliates) was $10,787,470,121 as determined by the February 28, 2001, closing price of $26.59 for one share of common stock, as reported for the New York Stock Exchange — Composite Transactions.

As of February 28, 2001, 405,696,507 shares of the common stock of the registrant were issued and outstanding.

Portions of the registrant’s Annual Report to Share Owners for the fiscal year ended December 31, 2000, are incorporated by reference into Part I, II, and Part IV of this Report.

Portions of the registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission for the Annual Meeting of Share Owners to be held April 27, 2001, are incorporated by reference into Part III of this Report.

The Company. Kellogg Company, incorporated in Delaware in 1922, and its subsidiaries are engaged in the manufacture and marketing of ready-to-eat cereal and convenience foods products.

Kellogg Company reached agreement in October 2000 to acquire Keebler Foods Company in an acquisition which is currently expected to close in late March 2001. Unless otherwise specified or indicated by the context, the information given, or incorporated by reference, in this report does not reflect this acquisition.

The address of the principal business office of Kellogg Company is One Kellogg Square, P.O. Box 3599, Battle Creek, Michigan 49016-3599. Unless otherwise specified or indicated by the context, the term “Company” as used in this report means Kellogg Company, its divisions and subsidiaries.

Financial Information About Segments. The information called for by this Item is incorporated herein by reference from Note 14 to the Consolidated Financial Statements on page 38 of the Company’s Annual Report.

Principal Products. The principal products of the Company are ready-to-eat cereals and convenience foods products, such as toaster pastries, cereal bars, frozen waffles, wholesome snacks and meat alternatives. These cereals and products were, as of December 31, 2000, manufactured in 19 countries and distributed in more than 160 countries. The Company’s products are generally marketed under the Kellogg’s and Morningstar Farms names and are sold principally to the grocery trade through direct sales forces for resale to consumers. The Company uses broker and distribution arrangements for certain products. It also generally uses these, or similar arrangements, in less-developed market areas or in those market areas outside of its focus.

After completing the Keebler Foods Company acquisition, the Company also plans to market cookies, crackers and other convenience food products of the Keebler Foods Company under other brands such as Keebler, Cheez-It, Murray, and Famous Amos, and manufacture private label cookies, crackers, and other products. These branded products are generally to be marketed to supermarkets in the United States through a direct store door (DSD) delivery system, although other distribution methods are also to be used. The Company also plans to market some of its other convenience foods products in the United States through this DSD system.

Additional information pertaining to the relative sales of ready-to-eat cereals and the Company’s convenience foods products for the years 1998 through 2000 is found in Note 14 to the Consolidated Financial Statements on page 38 of the Company’s Annual Report.

Raw Materials. Agricultural commodities are the principal raw materials used in the Company’s products. Cartonboard, corrugated, and plastic are the principal packaging materials used by the Company. World supplies and prices of such commodities (which include such packaging materials) are constantly monitored, as are government trade policies. The cost of such commodities may fluctuate widely due to government policy and regulation, weather conditions, or other unforeseen circumstances. Continuous efforts are made to maintain and improve the qualities and supplies of such commodities for purposes of the Company’s short-term and long-term requirements.

The principal ingredients in the products produced by the Company in the United States include corn grits, oats, rice, soybeans, various fruits, sweeteners, wheat, and wheat derivatives. These commodities are purchased principally from sources in the United States. In producing convenience foods products, the Company may use flour, shortening, sweeteners, dairy products, eggs, fruit, chocolate, and other filling ingredients, which ingredients are obtained from various sources.

The Company both enters into long-term contracts for the commodities described in this section and purchases these items on the open market, depending on the Company’s view of possible price fluctuations, supply levels, and the Company’s relative negotiating power. While the cost of these commodities may

increase over time, the Company believes that it will be able to purchase an adequate supply of these items as needed. The Company also uses commodity futures and options to hedge some of its costs.

Raw materials and packaging needed for internationally based operations are available in adequate supply and are sometimes imported from countries other than those where used in manufacture.

Cereal processing ovens at major domestic and international facilities are regularly fueled by natural gas or propane, commodities obtained from local utilities or other local suppliers. Short-term standby propane storage exists at several plants for use in the event of interruption in natural gas supplies. Additionally, oil may be used to fuel certain operations at various plants in the event of natural gas shortages or when its use presents economic advantages.

Trademarks and Technology. Generally, the Company’s products are marketed under trademarks owned by the Company. The Company’s principal trademarks are its housemark, brand names, slogans, and designs related to cereals and other convenience foods products manufactured and marketed by the Company as well as licensed uses of these marks on various goods. These trademarks include Kellogg’s for cereals and other products of the Company, and the brand names of certain ready-to-eat cereals, including All-Bran, Apple Jacks, Bran Buds, Complete Bran Flakes, Complete Wheat Flakes, Cocoa Krispies, Common Sense, Country Inn Specialties, Cruncheroos, Kellogg’s Corn Flakes, Cracklin’ Oat Bran, Crispix, Froot Loops, Kellogg’s Frosted Flakes, Frosted Mini-Wheats, Just Right, Kellogg’s Low Fat Granola, Nut & Honey Crunch, Nut & Honey Crunch O’s, Mueslix, Nutri-Grain, Corn Pops, Product 19, Kellogg’s Two Scoops Raisin Bran, Rice Krispies, Rice Krispies Treats, Raisin Bran Crunch, Smacks, Smart Start, Special K, Special K Plus, Kellogg’s Cocoa Frosted Flakes, Razzle Dazzle Rice Krispies, and Kellogg’s Honey Crunch Corn Flakes in the United States; Zucaritas, Sucrilhos, Forticalcio, and Choco Krispis for cereals in Latin America; Muslix, Honey O’s, Chocos, Pop, and Optima for cereals in Europe; and Cerola, Supercharged & Design, and Bebig for cereals in Asia. Additional Company trademarks are the names of certain combinations of Kellogg’s ready-to-eat cereals, including Handi-Pak, Snack-Pak, Snack-A-Longs, Fun Pak, Jumbo, Tri-Fun-Pak, and Variety Pak. Other Company brand names include Kellogg’s Corn Flake Crumbs; Croutettes for herb season stuffing mix; Kellogg’s Nutri-Grain, Nutri-Grain Squares, and Nutri-Grain Twists for cereal bars; Kaudri Krispies and Milkers for cereal bars, Keloketas for cookies in Mexico; Pop-Tarts Pastry Swirls for toaster danish; Pop-Tarts and Pop-Tarts Snak Stix for toaster pastries; Eggo, Special K, Waf-fuls, and Nutri-Grain for frozen waffles and pancakes; Toaster Delights for toaster muffins; Snack ’Ums, Big Rollin Froot Loops, Big Boomin Pops, Rice Krispies Treats Krunch, and Big Cinnamon Blast for baked snacks; Rice Krispies Treats for crispy marshmallow squares; Kellogg’s Krave for refueling snack bars; Kashi for certain cereals, nutrition bars, and mixes; and Morningstar Farms, Loma Linda, Natural Touch, and Worthington for certain meat and dairy alternatives.

Company trademarks also include depictions of certain animated characters in conjunction with the Company’s products, including Snap!Crackle!Pop! for Kellogg’s Razzle Dazzle Rice Krispies and Rice Krispies cereals; Tony the Tiger for Kellogg’s Frosted Flakes and Kellogg’s Cocoa Frosted Flakes cereals; Toucan Sam for Froot Loops; Dig ’Em for Smacks; Coco for Cocoa Krispies; Corny for Kellogg’s Corn Flakes; and Eet & Ern for a consumer loyalty program.

The slogans The Best To You Each Morning, The Original and Best, They’re Gr-r-reat!, Eat it For Breakfast. Eat it For Life, and What Does Your Cereal Do For You? used in connection with the Company’s ready-to-eat cereals, along with L’ Eggo my Eggo, used in connection with the Company’s frozen waffles and pancakes, are also important Company trademarks. The Company’s use of the advertising themes Better Breakfast, Get A Taste For The Healthy Life, and Cereal...Eat It For Life represent part of its effort to establish throughout the United States and the world the concept of a nutritious breakfast.

After completing the Keebler Foods Company acquisition, the Company also plans to market Keebler Foods Company products under trademarks and tradenames which include Keebler, Cheez-It, EL Fudge, Murray, Famous Amos, Austin, Ready Crust, Plantation, Chips Deluxe, Club, Fudge Shoppe, Hi-Ho, Hydrox, Sunshine, Munch’Ems, Olde New England, Pecan Sandies, Soft Batch, Toasteds, Vienna Fingers, Wheatables, and Zesta. Other Keebler Foods Company trademarks include Ernie the Keebler Elf and the

Hollow Tree logo, which are used in connection with Keebler Foods Company products. The Keebler Foods Company is also the exclusive licensee of the CARR’S brand name in the United States.

The trademarks listed above, among others, when taken as a whole, are important to the Company’s business. Certain individual trademarks are also important to the Company’s business. Depending on the jurisdiction, trademarks are generally valid as long as they are in use and/or their registrations are properly maintained and they have not been found to have become generic. Registrations of trademarks can also generally be renewed indefinitely as long as the trademarks are in use.

The Company considers that, taken as a whole, the rights under its various patents, which expire from time to time, are a valuable asset, but the Company does not believe that its businesses are materially dependent on any single patent or group of related patents. The Company’s activities under licenses or other franchises or concessions are not material.

Seasonality. Demand for the Company’s products has been approximately level throughout the year.

Working Capital. Although terms vary around the world, in the United States the Company generally has required payment for goods sold 11 days subsequent to the date of invoice, with a 2% discount allowed for payment within ten days. Receipts from goods sold, supplemented as required by borrowings, provide for the Company’s payment of dividends, capital expansion, and for other operating expenses and working capital needs.

Customers. The Company has not been, and does not expect to be during 2001, dependent on any single customer or a few customers for a material part of its sales. However, the Company’s top five customers, collectively, accounted for approximately 16.4% of consolidated net sales, with one of those customers accounting for 9.2%. In addition, three of those customers accounted for 17.6% of the Company’s U.S. sales, with one of those customers accounting for approximately 12% of the Company’s U.S. sales. There has been significant worldwide consolidation in the grocery industry in recent years and the Company believes that this trend is likely to continue. Although the loss of any large customer for an extended length of time could negatively impact the Company’s sales and profits, the Company does not anticipate that this will occur to a significant extent due to the consumer demand for the Company’s products and the Company’s relationships with its customers. Products of the Company have been generally sold through its own sales forces and through broker and distributor arrangements and have been generally resold to consumers in retail stores, restaurants, and other food service establishments.

Backlog. For the most part, orders are filled within a few days of receipt and are subject to cancellation at any time prior to shipment. The backlog of any unfilled orders at December 31, 2000, and December 31, 1999, was not material to the Company.

Competition. The Company has experienced, and expects to continue to experience, intense competition for sales of all of its principal products in its major markets, both domestically and internationally. The Company’s products compete with advertised and branded products of a similar nature as well as unadvertised and private label products, which are typically distributed at lower prices, and generally with other food products with different characteristics. Principal methods and factors of competition include new product introductions, product quality, composition and nutritional value, price, advertising, and promotion. As part of a strategy adopted in October 2000, the Company intends during 2001 to focus its efforts on five key market areas and to increase its investment in advertising and promotional activities related to its U.S. cereal business.

Research and Development. Research to support and expand the use of the Company’s existing products and to develop new food products is carried on at the W.K. Kellogg Institute for Food and Nutrition Research in Battle Creek, Michigan, and at other locations around the world. The Company’s expenditures for research and development were approximately $118.4 million in 2000, $104.1 million in 1999, and $121.9 million in 1998.

Regulation. The Company’s activities are subject to regulation by various government agencies, including the Food and Drug Administration, Department of Agriculture, Federal Trade Commission, and

Department of Commerce in the U.S., and similar agencies outside of the U.S., as well as various state and local agencies.

Environmental Matters. The Company’s facilities are subject to various foreign, federal, state, and local laws and regulations regarding the discharge of material into the environment and the protection of the environment in other ways. The Company is not a party to any material proceedings arising under these regulations. The Company believes that compliance with existing environmental laws and regulations will not materially affect the consolidated financial condition or the competitive position of the Company. The Company is currently in substantial compliance with all material environmental regulations affecting the Company and its properties.

Employees. At December 31, 2000, the Company had approximately 15,200 employees.

Financial Information About Geographic Areas. The information called for by this Item is incorporated herein by reference from Note 14 to the Consolidated Financial Statements on page 38 of the Company’s Annual Report.

Forward-Looking Statements. This Report contains, or incorporates by reference, “forward-looking statements” with projections concerning, among other things, the Company’s strategy and plans for 2001; the Keebler Foods Company acquisition and the Company’s sales, products, distribution systems, business, and results after its completion; the 2001 effective income tax rate; charges, benefits and savings from restructuring actions and streamlining initiatives; 2001 amortization expense and property addition expenditures; the 2001 interest expense; the results of the Euro conversion; and the impact of any accounting and disclosure changes. Forward-looking statements include predictions of future results or activities and may contain the words “expects,” “believes,” “will,” “will deliver,” “anticipates,” “projects,” or words or phrases of similar meaning. For example, forward-looking statements are found in this Item 1 and several sections of Management’s Discussion and Analysis incorporated by reference. The Company’s actual results or activities may differ materially from these predictions. In particular, future results or activities could be affected by factors related to the pending Keebler acquisition, including integration problems, failures to achieve synergies, unanticipated liabilities and the substantial amount of indebtedness incurred to finance the acquisition (which could, among other things, hinder the Company’s ability to adjust rapidly to changing market conditions, make the Company more vulnerable in the event of a downturn, and place the Company at a competitive disadvantage in relation to less-leveraged competitors). The Company’s future results could be affected by a variety of other factors, including competitive conditions and their impact, pricing and promotional and marketing spending and/or incremental pricing actions on actual volumes and product mix; the effectiveness of advertising and marketing spending or programs; the success of new product introductions; the levels of spending on system initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; the availability of and interest rates on short-term financing; changes in consumer preferences; commodity price and labor cost fluctuations; expenditures necessary to carry out streamlining initiatives and savings derived therefrom; foreign currency exchange rate fluctuations; changes in statutory tax and other laws; and other items. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update them.

The Company’s corporate headquarters and principal research and development facilities are located in Battle Creek, Michigan.

The Company operated, as of December 31, 2000, manufacturing plants and warehouses totaling more than 12 million (12,000,000) square feet of building area in the United States and other countries. The Company’s plants have been designed and constructed to meet its specific production requirements, and the Company periodically invests money for capital and technological improvements. At the time of its selection, each location was considered to be favorable, based on the location of markets, sources of raw materials, availability of suitable labor, transportation facilities, location of other Company plants producing similar products, and other factors. Manufacturing facilities of the Company in the United States include four cereal plants and warehouses located in Battle Creek, Michigan; Lancaster, Pennsylvania; Memphis, Tennessee; and

Omaha, Nebraska. The Company’s United States convenience foods plants are located in San Jose, California; Atlanta, Georgia; Rome, Georgia; Pikeville, Kentucky; Blue Anchor, New Jersey; Worthington, Ohio; Zanesville, Ohio; Muncy, Pennsylvania; and Rossville, Tennessee.

Outside the United States, the Company had, as of December 31, 2000, additional manufacturing locations, some with warehousing facilities, in Argentina, Australia, Brazil, Canada, China, Colombia, Ecuador, Germany, Great Britain, Guatemala, India, Japan, Mexico, South Africa, South Korea, Spain, Thailand, and Venezuela.

The principal properties of the Company, including its major office facilities, are owned by the Company and none is subject to any major lien or other encumbrance. Distribution centers and offices of non-plant locations typically are leased. The Company considers its facilities generally suitable, adequate, and of sufficient capacity for its current operations.

The Company is not a party to any pending legal proceedings which, if decided adversely, would be material to the Company on a consolidated basis, nor are any of the Company’s properties or subsidiaries subject to any such proceedings.

The names, ages as of February 28, 2001, and positions of the executive officers of the Company are listed below together with their business experience. Executive officers are elected annually by the Board of Directors at the meeting immediately following the Annual Meeting of Share Owners.

Mr. Gutierrez is Chairman of the Board, a position he has held since April 2000, and President and Chief Executive Officer, a position he has held since April 1999. Mr. Gutierrez joined Kellogg de Mexico in 1975. He was appointed Executive Vice President and President, Kellogg Asia-Pacific in 1994, and Executive Vice President — Business Development in 1996. In 1998, Mr. Gutierrez was named President and Chief Operating Officer.

Mr. Mackay joined Kellogg Australia in 1985 and held several positions with Kellogg USA and Kellogg Australia and New Zealand before leaving Kellogg in 1992. He rejoined Kellogg Australia in 1998 as managing director and was appointed managing director of Kellogg United Kingdom and Republic of Ireland late in 1998. He was named Senior Vice President and President, Kellogg USA in July 2000 and Executive Vice President in November 2000.

Mr. Harris joined Kellogg Company of Great Britain Limited in 1984. In 1994, he was promoted to Executive Vice President — Marketing and Sales, Kellogg USA. Mr. Harris was promoted to Executive Vice President and President, Kellogg Latin America in 1997. He was appointed Executive Vice President and President, Kellogg Europe in March 1999 and was named to his current position in October 2000.

Executive Vice President — Corporate Development, General Counsel and Secretary.................................................................43

Ms. Kelly joined Kellogg Company as Executive Vice President — Corporate Development, General Counsel and Secretary in September 1999. Prior to joining Kellogg Company, Ms. Kelly served as Senior Vice

President, Secretary and General Counsel for Sara Lee Corporation. Before joining Sara Lee, Ms. Kelly was a partner at the law firm of Sidley & Austin.

Mr. Webb joined Kellogg Company as Executive Vice President and Chief Financial Officer in January 2000. Prior to joining Kellogg Company, Mr. Webb served in a variety of executive positions at Ford Motor Company for over 22 years, including three years as Chief Financial Officer of Visteon, an $18 billion enterprise of Ford.

Mr. Teale joined Kellogg Company of Great Britain Limited in 1966. He was named Senior Vice President — Worldwide Operations and Technology in 1994, Senior Vice President — Global Supply Chain in February 1999, and Executive Vice President and Assistant to the Chairman in November 2000.

Dr. Banks joined the Company in 1983. In 1991, she was promoted to Vice President — Research and Development. Dr. Banks became Senior Vice President — Research and Development in 1997, Senior Vice President — Global Innovation in June 1999, and Senior Vice President — Research, Quality and Technology in February 2001.

Mr. Stewart has been employed by the Company since 1980. He was named Senior Vice President — Corporate Affairs in 1988.

Mr. Pouw jointed the Company in 1978. In 1995, he was appointed Director, Operations and Technology, Latin America and in 1998, he was appointed Vice President, Global Supply Chain, Operations Effectiveness. In March 1999, he was promoted to Supply Chain Director, Europe and later to Vice President, Supply Chain, Europe. In November 2000, he was appointed Senior Vice President — Operations.

Mr. Boromisa joined Kellogg Company in 1981 as a senior auditor. He served in various financial positions until he was named Vice President — Purchasing of Kellogg North America in 1997. In November 1999, Mr. Boromisa was promoted to Vice President and Corporate Controller of Kellogg Company.

Item 5. Market for the Registrant’s Common Stock and Related Stockholder Matters

The information called for by this Item is set forth on pages 37 and 38 of the Company’s Annual Report in Note 13 to the Consolidated Financial Statements of the Company, which is incorporated by reference into Item 8 of this Report.

The information called for by this Item is incorporated herein by reference from the chart entitled “Selected Financial Data” on page 23 of the Company’s Annual Report. Such information should be read in conjunction with the Consolidated Financial Statements of the Company and Notes thereto included in Item 8 of this Report.

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

The information called for by this Item is incorporated herein by reference from pages 15 through 22 of the Company’s Annual Report.

The information called for by this Item is incorporated herein by reference from pages 39 and 40 of the Company’s Annual Report.

The information called for by this Item is incorporated herein by reference from pages 24 through 39 of the Company’s Annual Report. Supplementary quarterly financial data, also incorporated herein by reference, is set forth in Note 13 to the Consolidated Financial Statements on pages 37 and 38 of the Company’s Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Directors — Refer to the information in the Company’s Proxy Statement to be filed with the Securities and Exchange Commission for the Annual Meeting of Share Owners to be held on April 27, 2001 (the “Proxy Statement”), under the caption “Election of Directors,” which information is incorporated herein by reference.

Executive Officers of the Registrant — Refer to “Executive Officers of the Registrant” under Item 4A at pages 6 and 7 of this Report.

For information concerning Section 16(a) of the Securities Exchange Act of 1934, refer to the information under the caption “Security Ownership — Section 16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement, which information is incorporated herein by reference.

Refer to the information under the captions “Executive Compensation” and “About the Board of Directors — Non-Employee Director Compensation and Benefits” of the Proxy Statement, which is incorporated herein by reference. See also the information under the caption “Report of the Compensation Committee on Executive Compensation” of the Proxy Statement, which information is not incorporated by reference.

Refer to the information under the captions “Security Ownership — Five Percent Holders” and “Security Ownership — Officer and Director Stock Ownership” of the Proxy Statement, which information is incorporated herein by reference.

The following Consolidated Financial Statements and related Notes, together with the Report thereon of PricewaterhouseCoopers LLP dated January 24, 2001, appearing on pages 24 through 39 of the Company’s Annual Report to Share Owners for the fiscal year ended December 31, 2000, are incorporated herein by reference:

Consolidated Statement of Earnings for the years ended December 31, 2000, 1999, and 1998.

Consolidated Statement of Shareholders’ Equity for the years ended December 31, 2000, 1999, and 1998.

Consolidated Statement of Cash Flows for the years ended December 31, 2000, 1999, and 1998.

The Financial Schedule and related Report of Independent Accountants filed as part of this Report are as follows:

This Consolidated Financial Statement Schedule should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report to Share Owners for the fiscal year ended December 31, 2000.

All other financial statement schedules are omitted because they are not applicable.

The information called for by this Item is incorporated herein by reference from the Exhibit Index on pages 14 through 16 of this Report.

The Company filed a Form 8-K dated October 26, 2000, under Items 5 and 7, pertaining to the execution of certain agreements for the acquisition of the Keebler Foods Company.

Our audits of the consolidated financial statements referred to in our report dated January 24, 2001, appearing in the 2000 Annual Report to Shareholders of Kellogg Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

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, this 9th day of March 2001.


	KELLOGG COMPANY


	By:	/s/ CARLOS M. GUTIERREZ


	Carlos M. Gutierrez
	Chairman of the Board, President and
	Chief Executive Officer

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

The Company agrees to furnish to the Securities and Exchange Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of the Company and its Subsidiaries and any of its unconsolidated Subsidiaries for which Financial Statements are required to be filed.

The Company will furnish any of its share owners a copy of any of the above Exhibits not included herein upon the written request of such share owner and the payment to the Company of the reasonable expenses incurred by the Company in furnishing such copy or copies.

16 EX-4.07 2 k60557ex4-07.txt CREDIT AGREEMENT 1 EXHIBIT 4.07 ================================================================================ 364-DAY CREDIT AGREEMENT dated as of January 19, 2001 among KELLOGG COMPANY The Borrowing Subsidiaries Party Hereto The Lenders Party Hereto and THE CHASE MANHATTAN BANK, as Administrative Agent CHASE MANHATTAN INTERNATIONAL LIMITED, as London Agent CITIBANK, N.A., BANK OF AMERICA, N.A., as Co-Syndication Agents BARCLAYS BANK PLC, as Documentation Agent ---------- JP MORGAN, as Advisor, Sole Lead Arranger and Sole Book Manager ================================================================================ 2 TABLE OF CONTENTS

3 SECTION 3.02. Subsidiaries.............................................................................38 SECTION 3.03. Corporate Authority and Validity of Obligations..........................................39 SECTION 3.04. Margin Stock.............................................................................39 SECTION 3.05. Financial Reports........................................................................39 SECTION 3.06. No Material Adverse Change...............................................................40 SECTION 3.07. Litigation...............................................................................40 SECTION 3.08. Tax Returns..............................................................................40 SECTION 3.09. Approvals................................................................................40 SECTION 3.10. ERISA....................................................................................41 SECTION 3.11. Environmental Matters....................................................................41 SECTION 3.12. Properties...............................................................................41 SECTION 3.13. Compliance with Laws.....................................................................41 SECTION 3.14. Investment and Holding Company Status....................................................41 SECTION 3.15. Disclosure...............................................................................41 ARTICLE IV Conditions SECTION 4.01. Effective Date...........................................................................42 SECTION 4.02. Each Borrowing...........................................................................44 SECTION 4.03. Initial Borrowing by each Borrowing Subsidiary...........................................45 ARTICLE V Affirmative Covenants SECTION 5.01. Corporate Existence......................................................................45 SECTION 5.02. Maintenance..............................................................................45 SECTION 5.03. Taxes....................................................................................45 SECTION 5.04. Insurance................................................................................46 SECTION 5.05. Financial Reports and Other Information..................................................46 SECTION 5.06. Books and Records; Inspection Rights.....................................................47 SECTION 5.07. Compliance with Laws.....................................................................47 ARTICLE VI Negative Covenants SECTION 6.01. Indebtedness.............................................................................47 SECTION 6.02. Liens....................................................................................48 SECTION 6.03. Sale and Leaseback Transactions..........................................................49 SECTION 6.04. Fundamental Changes......................................................................49 SECTION 6.05. Use of Proceeds..........................................................................49 SECTION 6.06. Minimum Net Worth........................................................................50 SECTION 6.07. Interest Expense Coverage Ratio..........................................................50 ARTICLE VII...........................................Events of Default 50 ARTICLE VIII.................................................The Agents 53 ARTICLE IX....................................................Guarantee 55

4 ARTICLE X Miscellaneous SECTION 10.01. Notices.................................................................................56 SECTION 10.02. Waivers; Amendments.....................................................................57 SECTION 10.03. Expenses; Indemnity; Damage Waiver......................................................58 SECTION 10.04. Successors and Assigns..................................................................59 SECTION 10.05. Survival................................................................................61 SECTION 10.06. Counterparts; Integration; Effectiveness................................................62 SECTION 10.07. Severability............................................................................62 SECTION 10.08. Right of Setoff.........................................................................62 SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process..............................62 SECTION 10.10. WAIVER OF JURY TRIAL....................................................................63 SECTION 10.11. Headings................................................................................63 SECTION 10.12. Confidentiality.........................................................................63 SECTION 10.13. Interest Rate Limitation................................................................64 SECTION 10.14. Conversion of Currencies................................................................64

5 SCHEDULES Schedule 2.01 -- Commitments Schedule 3.02 -- Significant Subsidiaries Schedule 3.07 -- Litigation Schedule 3.10 -- ERISA Schedule 3.11 -- Environmental Matters Schedule 4.01(h) -- Indebtedness to be Refinanced on the Acquisition Date Schedule 6.01 -- Outstanding Indebtedness After Giving Effect to the Acquisition Schedule 6.02 -- Existing Liens Schedule 6.03 -- Sale-Leaseback Transactions EXHIBITS: Exhibit A -- Form of Assignment and Acceptance Exhibit B-1 -- Form of Borrowing Subsidiary Agreement Exhibit B-2 -- Form of Borrowing Subsidiary Termination Exhibit C -- Reserve Costs Exhibit D-1 -- Form of Opinion of Gary H. Pilnick, Vice President and Deputy General Counsel Exhibit D-2 -- Form of Opinion of Kirkland & Ellis, Counsel for the Borrowers Exhibit E -- Form of Compliance Certificate Exhibit F -- Form of Note

6 1 364-DAY CREDIT AGREEMENT dated as of January 19, 2001, among KELLOGG COMPANY, a Delaware corporation, the BORROWING SUBSIDIARIES party hereto, the LENDERS party hereto, THE CHASE MANHATTAN BANK, as Administrative Agent, CHASE MANHATTAN INTERNATIONAL LIMITED, as London Agent, CITIBANK, N.A. and BANK OF AMERICA, N.A., as Co-Syndication Agents, and BARCLAYS BANK PLC, as Documentation Agent. The Company intends to acquire (the "Acquisition") Keebler (such term and each other capitalized term used but not defined herein having the meaning given it in Article I) for cash in the amount of approximately US$4,600,000,000. In connection with the Acquisition, the Company will (a) refinance certain Indebtedness of the Company and Keebler, (b) obtain the credit facilities provided under this Agreement and under the Five-Year Credit Agreement, and (c) issue Senior Notes in a public offering or in a Rule 144A or other private placement or, to the extent it shall not have issued Senior Notes by the date of the Acquisition, establish the Bridge Facility, in an aggregate principal amount taken together not in excess of US$4,000,000,000. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Acquisition" has the meaning assigned to such term in the preamble to this Agreement. "Acquisition Agreements" means collectively, (a) the Agreement and Plan of Restructuring and Merger, dated October 26, 2000, among Flowers Industries, Inc., Kellogg Company and Kansas Merger Subsidiary, Inc., and (b) the Agreement and Plan of Merger dated as of October 26, 2000, among Keebler Foods Company, Kellogg Company and FK Acquisition Corp. "Acquisition Date" means the date on which the conditions specified in paragraphs (g), (h) and (i) of Section 4.01 are satisfied (or waived in accordance with Section 10.02). "Adjusted LIBO Rate" means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 7 2 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" means The Chase Manhattan Bank, in its capacity as administrative agent for the Lenders hereunder, or any successor thereto appointed in accordance with Article VIII. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Agents" means, collectively, the Administrative Agent and the London Agent. "Agreement Currency" has the meaning assigned to such term in Section 10.14(b). "Alternate Base Rate" means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, or the Federal Funds Effective Rate, respectively. "Applicable Agent" means (a) with respect to a Loan or Borrowing denominated in US Dollars, or with respect to any payment that does not relate to any Loan or Borrowing, the Administrative Agent, and (b) with respect to a Loan or Borrowing denominated in any Designated Foreign Currency, the London Agent. "Applicable Creditor" has the meaning assigned to such term in Section 10.14(b). "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day, with respect to any Eurocurrency Revolving Loan, or with respect to the facility fees and utilization fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "Eurocurrency Spread", "Facility Fee Rate" or "Utilization Fee Rate", as the case may be, based upon the ratings by Moody's and S&P, respectively, applicable on such date to the Index Debt:
INDEX DEBT RATINGS EUROCURRENCY SPREAD FACILITY FEE RATE UTILIZATION FEE RATE - ------------------ ------------------- ----------------- -------------------- Category 1 0.295 0.080 0.125 A-/A3 or higher Category 2 0.400 0.100 0.125 BBB+/Baa1 Category 3 0.500 0.125 0.125 BBB/Baa2 Category 4 0.700 0.175 0.125 BBB-/Baa3 Category 5 1.000 0.250 0.250 lower than BBB-/Baa3 or unrated
8 3 For purposes of the foregoing, (i) if either Moody's or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 5; (ii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the higher of the two ratings unless (A) one of the two ratings is more than two Categories lower than the other and neither rating is in Category 5, in which case the Applicable Rate shall be determined by reference to the Category next above that of the lower of the two ratings or (B) either rating is or is deemed to be in Category 5, in which case the Applicable Rate shall be determined by reference to Category 5 and (iii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Company and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent and the Company. "Attributable Debt" means, with respect to any Sale-Leaseback Transaction, the present value (discounted at the rate set forth or implicit in the terms of the lease included in such Sale-Leaseback Transaction, compounded semiannually) of the total obligations of the lessee for rental payments (other than amounts required to be paid on account of taxes, maintenance, repairs, insurance, assessments, utilities, operating and labor costs and other items which do not constitute 9 4 payments for property rights or amounts related to contingent rents (such as those based on sales)) during the remaining term of the lease included in such Sale-Leaseback Transaction (including any period for which such lease has been extended). In the case of any lease which is terminable by the lessee upon payment of a penalty, the Attributable Debt shall be the lesser of the Attributable Debt determined assuming termination upon the first date such lease may be terminated (in which case the Attributable Debt shall also include the amount of the penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated) or the Attributable Debt determined assuming no such termination. Any determination of any rate implicit in the terms of the lease included in such Sale-Leaseback Transaction made in accordance with generally accepted financial practices by the Company shall absent manifest error be binding and conclusive. "Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Termination Date and the date of termination of the Commitments. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means the Company or any Borrowing Subsidiary. "Borrowing" means (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect, or (b) a Competitive Loan or group of Competitive Loans of the same Type and currency made on the same date and as to which a single Interest Period is in effect. "Borrowing Minimum" means (a) in the case of a Borrowing denominated in US Dollars, US$25,000,000 and (b) in the case of a Borrowing denominated in any Designated Foreign Currency, the smallest amount of such Designated Foreign Currency that has a US Dollar Equivalent in excess of US$5,000,000. "Borrowing Multiple" means (a) in the case of a Borrowing denominated in US Dollars, US$5,000,000 and (b) in the case of a Borrowing denominated in any Designated Foreign Currency, 1,000,000 units of such currency. "Borrowing Request" means a request by a Borrower for a Revolving Borrowing in accordance with Section 2.03. "Borrowing Subsidiary" means, at any time, each of the Subsidiaries that (a) is named on the signature pages to this Agreement or (b) has been designated as a Borrowing Subsidiary by the Company pursuant to Section 2.20, other than any such Subsidiary that has ceased to be a Borrowing Subsidiary as provided in Section 2.20. "Borrowing Subsidiary Agreement" means a Borrowing Subsidiary Agreement substantially in the form of Exhibit B-1. "Borrowing Subsidiary Termination" means a Borrowing Subsidiary Termination substantially in the form of Exhibit B-2. 10 5 "Bridge Facility" means the US$4,000,000,000 senior unsecured bridge credit facility made available to the Company under the Bridge Agreement dated as of January 19, 2001, among the Company, the lenders named therein and Chase, as administrative agent, with no changes therefrom adverse to the Lenders, as amended from time to time. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, (a) when used in connection with a Eurocurrency Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in deposits in the applicable currency in the London interbank market and (b) when used in connection with a Loan denominated in Euro, the term "Business Day" shall also exclude any day on which the TARGET payment system is not open for the settlement of payments in Euro. "Calculation Date" means (a) the last Business Day of each calendar quarter and (b) solely with respect to any Designated Foreign Currency for a requested new Borrowing for which an Exchange Rate was not established on the immediately preceding Calculation Date, the Business Day immediately preceding the date on which such Borrowing is to be made, provided that the Administrative Agent may in addition designate the last day of any other month as a Calculation Date if it reasonably determines that there has been significant volatility in the foreign currency markets. "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Change in Control" means (a) any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 40% or more in voting power of the outstanding Voting Stock of the Company or (b) members of the Board of Directors of the Company on the date hereof plus any additional members of such Board whose nomination for election to such Board is recommended or approved by a majority of the then current members of such Board shall at any time fail to constitute a majority of such Board. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Chase" means The Chase Manhattan Bank and its successors. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Competitive Loans. 11 6 "CMIL" means Chase Manhattan International Limited and its successors. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders' Commitments is US$1,150,000,000. "Company" means Kellogg Company, a Delaware corporation. "Competitive Bid" means an offer by a Lender to make a Competitive Loan in accordance with Section 2.04. "Competitive Bid Rate" means, with respect to any Competitive Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making such Competitive Bid. "Competitive Bid Request" means a request by a Borrower for Competitive Bids in accordance with Section 2.04. "Competitive Loan" means a Loan made pursuant to Section 2.04. "Competitive Loan Exposure" means, with respect to any Lender at any time, the sum of (a) the aggregate principal amount of the outstanding Competitive Loans of such Lender denominated in US Dollars and (b) the sum of the US Dollar Equivalents of the aggregate principal amounts of the outstanding Competitive Loans of such Lender denominated in Designated Foreign Currencies. "Consolidated EBITDA" means, for any period, Consolidated Net Income for such period plus, without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period, (ii) consolidated income tax expense (including, without duplication, foreign withholding taxes and any state single business unitary or other similar taxes) for such period, (iii) all amounts attributable to depreciation and amortization for such period, (iv) any non-cash charges for such period, (v) fees and expenses incurred in connection with the Transactions, (vi) fees and expenses in an aggregate amount for any fiscal year not in excess of $20,000,000 incurred in connection with the issuance of any Indebtedness or equity, acquisitions, investments or asset sales or divestitures permitted hereunder and (vii) any (A) cash charges in an aggregate amount for any fiscal year not in excess of $50,000,000 or (B) any noncash charges, in each case arising out of the restructuring, consolidation, severance or discontinuance of any portion of the operations, employees and/or management of any entities or businesses of the Company or any of the Subsidiaries, determined without giving effect to any extraordinary gains or losses for such period to the extent included in 12 7 determining Consolidated Net Income, all determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, for any period, the sum of (a) the cash interest expense (including imputed interest expense in respect of Capital Lease Obligations) of the Company and the Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, and (b) any interest accrued during such period in respect of Indebtedness of the Company or any Subsidiary that is required to be capitalized rather than included in consolidated interest expense for such period in accordance with GAAP; provided that there shall be excluded from Consolidated Interest Expense (i) any fees paid to the Administrative Agent and (ii) any payments made to obtain any interest rate hedging agreements; and provided further, solely for purposes of determining compliance with Section 6.07, in the event the Company or any Subsidiary acquired any Person or line of business during the relevant period, Consolidated Interest Expense will be determined giving pro forma effect to any incurrence of Indebtedness related to such acquisition as if such incurrence of Indebtedness had occurred on the first day of the relevant period. "Consolidated Net Income" means, for any period, the net income or loss of the Company and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that (a) there shall be excluded the income of any Person (other than the Company) in which any other Person (other than the Company or any Subsidiary or any director holding qualifying shares or other third parties holding nominal amounts of shares, as required by or in compliance with applicable law) owns an Equity Interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of the Subsidiaries during such period, and (b) solely for purposes of determining compliance with Section 6.07, in the event the Company or any Subsidiary acquired any Person or line of business during the relevant period, Consolidated Net Income will be determined giving pro forma effect to such acquisition as if such acquisition and any related incurrence of Indebtedness had occurred on the first day of the relevant period, but shall not take into account any cost savings projected to be realized as a result of such acquisition other than cost savings permitted to be included under Regulation S-X of the Securities and Exchange Commission. "Consolidated Net Sales" means, for any period, the net sales of the Company and the Subsidiaries for such period, as reported as a line item in the Company's income statements as filed with the Company's Form 10-Q Report or Form 10-K Report, as applicable. "Consolidated Net Worth" means the excess of Consolidated Total Assets over the consolidated total liabilities of the Company and its consolidated Subsidiaries. "Consolidated Total Assets" means the total assets of the Company and its Subsidiaries determined in accordance with GAAP; provided that for purposes of determining compliance with Sections 6.01, 6.02 and 6.03, in the event the Company or any Subsidiary acquires any Person or line of business after the fiscal quarter end referred to in such Section, "Consolidated Total Assets" as of such fiscal quarter end shall be deemed to include the assets of such Person or line of business from and after the date of such acquisition. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to 13 8 exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Controlled Group" means all of a controlled group of corporations and all trades and businesses (whether or not incorporated) under common control that, together with the Company or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Designated Foreign Currency" means (a) Euro, Sterling and Yen and (b) any other currency specified by the Company in a notice to the Administrative Agent for a proposed Competitive Borrowing which, at the time such Borrowing is made, is freely transferable and convertible into US Dollars in the London market and for which, at such time, LIBO Rates can be determined by reference to the Telerate screen as provided in the definition of "LIBO Rate". "Effective Date" means the date on which the conditions specified in paragraphs (a) through (f) of Section 4.01 are satisfied (or waived in accordance with Section 10.02). "Environmental Laws" means all federal, state, local and foreign statutes, laws (including common law), regulations, ordinances, judgments, permits and other governmental rules or restrictions relating to human health, safety (including occupational safety and health standards), and protection of the environment or to emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into the environment, including ambient air, surface or ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the cleanup or other remediation thereof. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Company or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Laws, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Equity Interests" means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest. "ERISA" has the meaning assigned to such term in Section 3.10. 14 9 "Euro" or "E." means the single currency of the European Union as constituted by the Treaty on European Union and as referred to in the EMU Legislation. "Eurocurrency", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate (or, in the case of a Competitive Loan, the LIBO Rate). "Event of Default" has the meaning assigned to such term in Article VII. "Exchange Rate" means on any day, with respect to any Designated Foreign Currency, the rate at which such Designated Foreign Currency may be exchanged into US Dollars, as set forth at approximately 11:00 a.m., London time, on such day on the Reuters World Currency Page for such Designated Foreign Currency. In the event that such rate does not appear on any Reuters World Currency Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Company, or, in the absence of such an agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such Designated Foreign Currency are then being conducted, at or about 10:00 a.m., Local Time, on such date for the purchase of US Dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error. "Excluded Taxes" means, with respect to any Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of any Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Company under Section 2.19(b)), any withholding tax imposed by the United States of America that (i) is in effect and would apply to amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from any Borrower with respect to any withholding tax pursuant to Section 2.17, or (ii) is attributable to such Foreign Lender's failure to comply with Section 2.17(e). "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received 15 10 by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financed Portion" means, at any time, with respect to a Securitization, the greatest amount of the claims of the parties providing financing (whether through direct purchases of receivables or interests therein or through other financing arrangements), however evidenced, including direct claims on collections of a party providing financing and including debt or equity interests or securities (other than any seller's interests retained by any wholly owned Subsidiary) of a purchasing vehicle, permitted to be outstanding at such time under such Securitization (assuming the satisfaction of all conditions to issuance) or, if greater, the maximum purchase limit, however denominated, under such Securitization. "Financial Officer" means the chief financial officer, principal accounting officer, treasurer, assistant treasurer or controller of the Company. "Five-Year Credit Agreement" means the Company's Five-Year Credit Agreement dated as of the date hereof. "Fixed Rate" means, with respect to any Competitive Loan (other than a Eurocurrency Competitive Loan), the fixed rate of interest per annum specified by the Lender making such Competitive Loan in its related Competitive Bid. "Fixed Rate Loan" means a Competitive Loan bearing interest at a Fixed Rate. "Foreign Lender" means, as to any Borrower, any Lender that is organized under the laws of a jurisdiction other than that in which such Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles in the United States of America or, when reference is made to another jurisdiction, generally accepted accounting principles in effect from time to time in such jurisdiction. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or 16 11 liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include (i) endorsements for collection or deposit, (ii) standard contractual indemnities not related to the borrowing of money or Indebtedness, in each case in the ordinary course of business, or (iii) recourse at customary levels in connection with Securitizations accounted for as sales. The amount of any Guarantee of any guaranteeing Person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made and (b) the maximum amount for which such guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guarantee, unless such primary obligation and the maximum amount for which such guaranteeing Person may be liable are not stated or determinable, in which case the amount of such Guarantee shall be such guaranteeing Person's maximum reasonably anticipated liability (assuming such Person is required to perform) in respect thereof as determined by such Person in good faith. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Laws. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, currency swap agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. The "principal amount" of any Hedging Agreement of the Company or any Subsidiary at any time shall be deemed to be the aggregate amount at such time of the payments that would be required to be made by the Company or such Subsidiary in the event of any early termination at such time of such Hedging Agreement. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Indebtedness shall not include trade payables and accrued expenses arising in the ordinary course of business. 17 12 "Indemnified Taxes" means Taxes other than Excluded Taxes. "Index Debt" means senior, unsecured, long-term indebtedness for borrowed money of the Company that is not guaranteed by any other Person or subject to any other credit enhancement. "Information Memorandum" means the Confidential Information Memorandum dated November 2000 relating to the Company and the Transactions. "Interest Election Request" means a request by a Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.08. "Interest Payment Date" means (a) with respect to any ABR Loan, the last day of each March, June, September and December, (b) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, and (c) with respect to any Fixed Rate Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Fixed Rate Borrowing with an Interest Period of more than 90 days' duration (unless otherwise specified in the applicable Competitive Bid Request), each day prior to the last day of such Interest Period that occurs at intervals of 90 days' duration after the first day of such Interest Period, and any other dates that are specified in the applicable Competitive Bid Request as Interest Payment Dates with respect to such Borrowing. "Interest Period" means (a) with respect to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the applicable Borrower may elect, or any other period agreed to by the applicable Borrower and each Lender, and (b) with respect to any Fixed Rate Borrowing, the period (which shall not be less than 7 days or more than 360 days) commencing on the date of such Borrowing and ending on the date specified in the applicable Competitive Bid Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurocurrency Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurocurrency Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Judgment Currency" has the meaning assigned to such term in Section 10.14(b). "Keebler" means Keebler Foods Company, a Delaware corporation. 18 13 "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, with respect to any Eurocurrency Borrowing for any Interest Period, the rate per annum determined by the Applicable Agent at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period by reference to the British Bankers' Association Interest Settlement Rates for deposits in the currency of such Borrowing (as reflected on the applicable Telerate screen), for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the "LIBO Rate" shall be the average (rounded upward, if necessary, to the next 1/100 of 1%) of the respective interest rates per annum at which deposits in the currency of such Borrowing are offered for such Interest Period to major banks in the London interbank market by Chase at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan Documents" means this Agreement, each Borrowing Subsidiary Agreement, each Borrowing Subsidiary Termination and each promissory note delivered pursuant to this Agreement, as such documents may be amended, modified, supplemented or restated from time to time. "Loans" means the loans made by the Lenders to the Borrowers pursuant to this Agreement. "Local Time" means (a) with respect to a Loan or Borrowing denominated in US Dollars, New York City time, and (b) with respect to a Loan or Borrowing denominated in any Designated Foreign Currency, London time. "London Agent" means CMIL, in its capacity as London agent for the Lenders hereunder. "Margin" means, with respect to any Competitive Loan bearing interest at a rate based on the LIBO Rate, the marginal rate of interest, if any, to be added to or subtracted from the LIBO Rate to determine the rate of interest applicable to such Loan, as specified by the Lender making such Loan in its related Competitive Bid. "Margin Stock" means "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System. "Material Adverse Effect" means (a) any condition or change that has affected or would reasonably be expected to affect materially and adversely the business, assets, liabilities or 19 14 financial condition of the Company and the Subsidiaries taken as a whole or (b) a material adverse effect on the rights of or benefits available to the Lenders under any Loan Document. "Maturity Date" means the Termination Date, unless the Maturity Date is extended pursuant to Section 2.05(a) to the first anniversary of the Termination Date. "Moody's" means Moody's Investors Service, Inc. "Obligations" means (a)(i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Company or any other Borrower under this Agreement or any other Loan Document and (b) all obligations of the Borrowers under each Hedging Agreement entered into with a counterparty that was a Lender or an Affiliate of a Lender at the time such Hedging Agreement was entered into. "Offering Memorandum" means the offering memorandum relating to the Senior Notes. "Other Taxes" means any and all present or future recording, stamp, documentary, excise, transfer, sales, property or similar taxes, charges or levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document. "PBGC" has the meaning assigned to such term in Section 3.10. "Permitted Encumbrances" means: (a) Liens imposed by law for taxes, assessments or other governmental charges that are not yet due or are being contested in compliance with Section 5.03; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days, are in de minimis amounts or are being contested in good faith and by appropriate proceedings with adequate reserves under GAAP being provided therefor; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance, health insurance and other social security laws or regulations and withholding taxes; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; 20 15 (e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; (f) easements, zoning restrictions, rights-of-way, minor defects or irregularities in title and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not interfere with the ordinary conduct of business of the Company or any Subsidiary; (g) rights of set-off in favor of financial institutions (other than in respect of amounts deposited to secure Indebtedness); (h) liens in the nature of trustee's liens granted pursuant to any indenture securing obligations to pay compensation to such trustee, to reimburse its expenses and to indemnify it under the terms thereof; (i) licenses, leases or subleases (other than Capital Leases and other financing leases) granted to third parties (other than to secure Indebtedness) not interfering in any material respect with the business of the Company or any Subsidiary; (j) liens arising in connection with contracts with or made at the request of the United States of America, any State of the United States of America or any department, agency or instrumentality of the foregoing; and (k) liens arising from deposits with or the giving of any form of security to any Governmental Authority required as a condition to the transaction of business or exercise of any privilege, franchise or license; provided that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means, for the Company and each Subsidiary at any time, an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (a) is maintained by a member of the Controlled Group for employees of a member of the Controlled Group, (b) is maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, or (c) under which a member of the Controlled Group has any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years or by reason of being deemed a contributing sponsor under Section 4069 of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its principal office in New York City; each change in 21 16 the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, whether now owned or hereafter acquired. "Quotation Day" means, with respect to any Eurocurrency Borrowing and any Interest Period, the day on which it is market practice in the relevant interbank market for prime banks to give quotations for deposits in the currency of such Borrowing for delivery on the first day of such Interest Period. If such quotations would normally be given by prime banks on more than one day, the Quotation Day will be the last of such days. "Register" has the meaning set forth in Section 10.04. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Required Lenders" means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures and unused Commitments at such time; provided that, for all purposes after the Loans become due and payable pursuant to Article VII or the Commitments expire or terminate, "Required Lenders" will mean, at any time, Lenders having Revolving Credit Exposures and outstanding Competitive Loans representing more than 50% of the sum of the total Revolving Credit Exposures and outstanding Competitive Loans at such time. "Reset Date" has the meaning assigned to such term in Section 1.05. "Revolving Credit Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans at such time. "Revolving Loan" means a Loan made pursuant to Section 2.03. "Sale-Leaseback Transaction" means any arrangement whereby the Company or a Subsidiary shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease property that it intends to use for substantially the same purpose or purposes as the property sold or transferred; provided that any such arrangement (a) involving no party other than the Company and any Wholly Owned Subsidiary or (b) entered into within 180 days after the acquisition, construction or substantial improvement of the subject property shall not be deemed to be a "Sale-Leaseback Transaction". "SEC" means the Securities and Exchange Commission or any successor. "Securitization" means the transfer or pledge of accounts receivable or interests in accounts receivable (a) to a trust, partnership, corporation or other entity, which transfer or pledge is funded by such entity in whole or in part by the issuance to one or more lenders or investors of indebtedness or securities that are paid principally from the cash flow derived from such accounts receivable or interests in accounts receivable, or (b) directly to an investor or other purchaser. 22 17 "Senior Notes" means the Company's unsecured Senior Notes to be issued by the Company pursuant to the Senior Note Documents. "Senior Note Documents" means the indenture providing for the issuance of the Senior Notes substantially in the form approved prior to the date hereof by the Lenders, which form shall provide that the Senior Notes are unsecured and are not Guaranteed by any Subsidiary and shall otherwise have customary market terms reasonably acceptable to the Lenders, with no changes therefrom adverse to the Lenders, and all other instruments, agreements and other documents evidencing or governing the Senior Notes or providing for any other right in respect thereof. "S&P" means Standard & Poor's. "Significant Subsidiary" means (a) each Borrowing Subsidiary, (b) any Subsidiary that directly or indirectly owns or Controls any other Significant Subsidiary, (c) each Subsidiary identified as a Significant Subsidiary on Schedule 3.02, (d) any Subsidiary designated from time to time by the Company as a Significant Subsidiary by written notice to the Administrative Agent and (e) any other Subsidiary (i) the consolidated net sales of which were greater than 5% of the Company's Consolidated Net Sales as of the last day of the most recent fiscal period for which financial statements have been delivered pursuant to Section 5.05(a) or (b) (or, prior to the first delivery of such financial statements, greater than 5% of the consolidated net sales of the Person in whose financial statements such Subsidiary is included in the most recent financial statements referred to in Section 3.05(a) or (b)) or (ii) the consolidated assets of which as of the last day of such fiscal period were greater than 5% of Consolidated Total Assets as of such date (or, prior to the first delivery of such financial statements, greater than 5% of the consolidated total assets of the Person in whose financial statements such Subsidiary is included in the most recent financial statements referred to in Section 3.05(a) or (b)). The Company will not permit the total consolidated assets or the consolidated net sales of the Significant Subsidiaries (together with the directly owned assets of the Company) to at any time represent less than 90% of Consolidated Total Assets or Consolidated Net Sales of the Company and its Subsidiaries, respectively, in each case as of and for the period of four fiscal quarters ended on the last day of the most recent fiscal period for which financial statements have been delivered pursuant to Section 5.05(a) or (b) (or, prior to the first delivery of such financial statements, the consolidated total assets or consolidated net sales as of such date or for such period of the Persons in whose financial statements the Significant Subsidiaries are included in the most recent financial statements referred to in Section 3.05(a) or (b)). For purposes of making the determinations required by this definition, net sales and assets of foreign Subsidiaries shall be converted into US Dollars at the rates used in preparing the consolidated balance sheet of the Company (or, prior to the first delivery of financial statements pursuant to Section 5.05(a) or (b), the Person in whose financial statements such foreign Subsidiary is included in the most recent financial statements referred to in Section 3.05(a) or (b)) included in the applicable financial statements. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in 23 18 Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Sterling" or "L." means the lawful money of the United Kingdom. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" means any direct or indirect subsidiary of the Company. At all times on and after the Acquisition Date, Keebler and the subsidiaries of Keebler acquired in the Acquisition will constitute Subsidiaries. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Termination Date" means, at any time, the later of January 17, 2002 and the most recent date, if any, to which the Termination Date has been extended pursuant to Section 2.05(b). "Transactions" means the execution, delivery and performance by the Borrowers of this Agreement and the other Loan Documents, the borrowing of Loans and the use of the proceeds thereof, the establishment of the Company's commercial paper program, the Acquisition and the refinancing of Indebtedness and the other transactions contemplated to be effected on the Acquisition Date in connection therewith. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Alternate Base Rate or, in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed Rate. "Unfunded Vested Liabilities" means, for any Plan at any time, the amount (if any) by which (a) the present value of all vested nonforfeitable accrued benefits under such Plan exceeds (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA. 24 19 "US Dollars" or "US$" refers to lawful money of the United States of America. "US Dollar Equivalent" means, on any date of determination, (a) with respect to any amount in US Dollars, such amount, and (b) with respect to any amount in any Designated Foreign Currency, the equivalent in US Dollars of such amount, determined by the Administrative Agent pursuant to Section 1.05 using the Exchange Rate with respect to such Designated Foreign Currency at the time in effect under the provisions of such Section. "Voting Stock" of any Person means capital stock of any class of classes or other Equity Interests (however designated) having ordinary voting power for the election of directors or the equivalent governing body of such Person, other than stock or other Equity Interests having such power only by reason of happening of a contingency. "Welfare Plan" means a "welfare plan" as defined in Section 3(l) of ERISA. "Wholly Owned Subsidiary" means any Subsidiary all the Equity Interests in which, other than directors' qualifying shares and/or other nominal amounts of Equity Interests that are required to be held by Persons (other than the Company or its Wholly Owned Subsidiaries, as applicable) under applicable law, are owned, directly or indirectly, by the Company. "Yen" or "Y." means the lawful money of Japan. SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurocurrency Loan") or by Class and Type (e.g., a "Eurocurrency Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurocurrency Borrowing") or by Class and Type (e.g., a "Eurocurrency Revolving Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. References herein to the taking of any action hereunder of an administrative nature by any Borrower shall be deemed to include references to the Company taking such action on such Borrower's behalf and the Agents are expressly authorized to accept any such action taken by the 25 20 Company as having the same effect as if taken by such Borrower. Each reference herein to the "knowledge" of the Company or any Subsidiary shall be deemed to be a reference to the knowledge of any member of senior management of the Company or such Subsidiary, any Financial Officer and, in the case of any reference to knowledge of any specific subject matter, the senior manager of the department or office of the Company responsible for such matter. SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Company notifies the Administrative Agent that the Company requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Company that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. SECTION 1.05. Exchange Rates. (a) Not later than 1:00 p.m., New York City time, on each Calculation Date, the Administrative Agent shall (i) determine the Exchange Rate as of such Calculation Date with respect to each Designated Foreign Currency that is represented by an outstanding Borrowing as of such Calculation Date and (ii) give notice thereof to the Lenders and the Company. The Exchange Rates so determined shall become effective on the first Business Day immediately following the relevant Calculation Date (a "Reset Date"), shall remain effective until the next succeeding Reset Date, and shall for all purposes of this Agreement (other than Section 10.14 or any other provision expressly requiring the use of a current Exchange Rate) be the Exchange Rates employed in converting any amounts between US Dollars and Designated Foreign Currencies. (b) Not later than 5:00 p.m., New York City time, on each Reset Date and each date on which Revolving Loans denominated in any Designated Foreign Currency are made, the Administrative Agent shall (i) determine the aggregate amount of the US Dollar Equivalent of the principal amounts of the Loans denominated in Designated Foreign Currencies then outstanding (after giving effect to any Loans denominated in Designated Foreign Currencies made or repaid on such date) and (ii) notify the Lenders and the Company of the results of such determination. SECTION 1.06. Determinations Made in Good Faith. All determinations hereunder made by any party hereto shall be made in good faith. 26 21 ARTICLE II The Credits SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans to the Borrowers from time to time during the Availability Period in US Dollars in an aggregate principal amount that will not result in (a) such Lender's Revolving Credit Exposure exceeding such Lender's Commitment or (b) the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Revolving Loans during the Availability Period. Revolving Loans repaid or prepaid after the Termination Date may not be reborrowed. SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments. Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.04. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments and Competitive Bids of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.14, (i) each Revolving Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans as the applicable Borrower may request in accordance herewith, and (ii) each Competitive Borrowing shall be comprised entirely of Eurocurrency Loans or Fixed Rate Loans as the applicable Borrower may request in accordance herewith. Each Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of any Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurocurrency Revolving Borrowing, such Borrowing shall be an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of US$1,000,000 and not less than US$5,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. Each Competitive Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 10 Eurocurrency Revolving Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, no Borrower shall be entitled to request, or to elect to convert or continue, any Revolving Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date, or to request any Competitive Borrowing if the Interest Period requested with respect thereto would end after the Termination Date. 27 22 SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing, the applicable Borrower shall notify the Administrative Agent of such request by telephone or by telecopy (a) in the case of a Eurocurrency Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the Business Day of the proposed Borrowing. Each such Borrowing Request shall be irrevocable and, if telephonic, shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form agreed to by the Administrative Agent and the Company and signed by the applicable Borrower, or by the Company on behalf of the applicable Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the Borrower requesting such Borrowing (or on whose behalf the Company is requesting such Borrowing); (ii) the aggregate amount of the requested Borrowing; (iii) the date of such Borrowing, which shall be a Business Day; (iv) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; (v) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (vi) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.07. If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. 28 23 SECTION 2.04. Competitive Bid Procedure. (a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period any Borrower may request Competitive Bids and may (but shall not have any obligation to) accept Competitive Bids and borrow Competitive Loans denominated in US Dollars or any Designated Foreign Currency; provided that after giving effect to any Borrowing of Competitive Loans the sum of the total Revolving Credit Exposures plus the total Competitive Loans shall not exceed the total Commitments. To request Competitive Bids, the Company or the applicable Borrowing Subsidiary shall notify the Applicable Agent of such request by telephone or by telecopy, in the case of a Eurocurrency Borrowing, not later than 11:00 a.m., Local Time, four Business Days before the date of the proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., Local Time, one Business Day before the date of the proposed Borrowing; provided that the Borrowers may submit up to (but not more than) five Competitive Bid Requests on the same day, but a Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request, unless any and all such previous Competitive Bid Requests shall have been withdrawn or all Competitive Bids received in response thereto rejected. Each such telephonic Competitive Bid Request shall be confirmed promptly by hand delivery or telecopy to the Applicable Agent of a written Competitive Bid Request in a form approved by the Applicable Agent and signed by the applicable Borrower, or by the Company on behalf of the applicable Borrower. Each such telephonic and written Competitive Bid Request shall specify the following information in compliance with Section 2.02: (i) the Borrower requesting such Borrowing (or on whose behalf the Company is requesting such Borrowing); (ii) the aggregate principal amount and currency of the requested Borrowing; (iii) the date of such Borrowing, which shall be a Business Day; (iv) whether such Borrowing is to be a Eurocurrency Borrowing or a Fixed Rate Borrowing; (v) the Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term "Interest Period" and shall end no later than the Termination Date; and (vi) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.07. Promptly following receipt of a Competitive Bid Request in accordance with this Section, the Applicable Agent shall notify the Lenders of the details thereof by telecopy, inviting the Lenders to submit Competitive Bids. (b) Each Lender may (but shall not have any obligation to) make one or more Competitive Bids to the applicable Borrower in response to a Competitive Bid Request. Each Competitive Bid by a Lender must be in a form approved by the Applicable Agent and must be received by the Applicable Agent by telecopy, in the case of a Eurocurrency Competitive Borrowing, not later than 9:30 a.m., Local Time, three Business Days before the proposed date of such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., Local 29 24 Time, on the proposed date of such Competitive Borrowing. Competitive Bids that do not conform substantially to the form approved by the Applicable Agent may be rejected by the Applicable Agent, and the Applicable Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall specify (i) the principal amount (which shall be an amount at least equal to the Borrowing Minimum and an integral multiple of the Borrowing Multiple and which may equal the entire principal amount of the Competitive Borrowing requested by the applicable Borrower) of the Competitive Loan or Loans that the Lender is willing to make, (ii) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan or Loans (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) and (iii) the Interest Period applicable to each such Loan and the last day thereof. (c) The Applicable Agent shall promptly notify the applicable Borrower by telecopy of the Competitive Bid Rate and the principal amount specified in each Competitive Bid and the identity of the Lender that shall have made such Competitive Bid. (d) Subject only to the provisions of this paragraph, a Borrower may accept or reject any Competitive Bid. The applicable Borrower shall notify the Applicable Agent by telecopy or by telephone, confirmed by telecopy in a form approved by the Applicable Agent, whether and to what extent it has decided to accept or reject each Competitive Bid, in the case of a Eurocurrency Competitive Borrowing, not later than 11:00 a.m., Local Time, three Business Days before the date of the proposed Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 11:00 a.m., Local Time, on the proposed date of the Competitive Borrowing; provided that (i) the failure of a Borrower to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) a Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if such Borrower rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by a Borrower shall not exceed the aggregate amount of the requested Competitive Borrowing specified in the related Competitive Bid Request, (iv) to the extent necessary to comply with clause (iii) above, a Borrower may accept Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid, and (v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of at least the Borrowing Minimum that is an integral multiple of the Borrowing Multiple; provided further that if a Competitive Loan must be in an amount less than the Borrowing Minimum because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of US$1,000,000 (or, in the case of a Competitive Loan denominated in a Designated Foreign Currency, the smallest amount of such currency that (i) is an integral multiple of 1,000,000 units of such currency and (ii) has a US Dollar Equivalent in excess of US$1,000,000) or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of the Borrowing Multiple in a manner determined by the applicable Borrower. A notice given by a Borrower pursuant to this paragraph shall be irrevocable. (e) The Applicable Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Bid has been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms 30 25 and conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted. (f) If the Applicable Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to the applicable Borrower at least one quarter of an hour earlier than the time by which the other Lenders are required to submit their Competitive Bids to the Applicable Agent pursuant to paragraph (b) of this Section. SECTION 2.05. Extension of Maturity Date; Extension of Termination Date. (a) The Company may by written notice delivered to the Administrative Agent not less than 10 and not more than 20 days prior to the Termination Date extend the Maturity Date from the Termination Date to the first anniversary of the Termination Date. (b) The Company may by written notice delivered to the Administrative Agent not less than 45 days and not more than 60 days prior to the Termination Date at any time in effect, request that the Lenders extend the Termination Date for an additional period of not more than 364 days as specified in such notice. Each Lender shall, by notice to the Company and the Administrative Agent given not earlier than the 30th day and not later than the 20th day prior to the Termination Date then in effect, advise the Company whether or not it agrees to such extension on the terms set forth in such notice. Any Lender that has not so advised the Company and the Administrative Agent by such day shall be deemed to have declined to agree to such extension. If the Company shall have requested and Lenders representing at least 50% of the aggregate Commitments shall have agreed to an extension of the Termination Date, then the Termination Date shall be extended for the additional period and on the terms specified in the Company's notice. The decision to agree or withhold agreement to any extension of the Termination Date hereunder shall be at the sole discretion of each Lender. The Commitment of any Lender that has declined to agree to any requested extension of the Termination Date (a "Non-Extending Lender") shall terminate on the Termination Date in effect prior to giving effect to any such extension (the "Existing Termination Date"), and the principal amount of any outstanding Loans made by such Lender, together with any accrued interest thereon, and any accrued fees and other amounts payable to or for the account of such Lender hereunder, shall be due and payable on the Existing Termination Date. Notwithstanding the foregoing provisions of this paragraph, (i) the Company shall have the right, pursuant to Section 2.19(b), to replace a Non-Extending Lender with a Lender or other financial institution that will agree to an extension of the Termination Date and (ii) the Company shall have the right, any time prior to the Existing Termination Date, to withdraw its request for an extension of the Termination Date by written notice to the Administrative Agent, in which case the Commitments of all the Lenders will terminate on the Existing Termination Date. SECTION 2.06. Redenomination of Certain Designated Foreign Currencies. (a) Each obligation of any party to this Agreement to make a payment denominated in the national currency unit of any member state of the European Union that adopts the Euro as its lawful currency after the date hereof shall be redenominated into Euro at the time of such adoption (in accordance with the EMU Legislation). If, in relation to the currency of any such member state, the basis of accrual of interest expressed in this Agreement in respect of that currency shall be inconsistent with any convention or practice in the London Interbank Market for the basis of accrual of interest in respect of the Euro, such expressed basis shall be replaced by such convention or practice with effect from the date on which such member state adopts the Euro as its lawful currency; provided that if any Borrowing in the currency of such member state is 31 26 outstanding immediately prior to such date, such replacement shall take effect, with respect to such Borrowing, at the end of the then current Interest Period. (b) Without prejudice and in addition to any method of conversion or rounding prescribed by any EMU Legislation and (i) without limiting the liability of any Borrower for any amount due under this Agreement and (ii) without increasing any Commitment of any Lender, all references in this Agreement to minimum amounts (or integral multiples thereof) denominated in the national currency unit of any member state of the European Union that adopts the Euro as its lawful currency after the date hereof shall, immediately upon such adoption, be replaced by references to such minimum amounts (or integral multiples thereof) as shall be specified herein with respect to Borrowings denominated in Euro. (c) Each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent (in consultation with the Company) may from time to time specify to be appropriate to reflect the adoption of the Euro by any member state of the European Union and any relevant market conventions or practices relating to the Euro. SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., Local Time, to the account of the Applicable Agent most recently designated by it for such purpose by notice to the Lenders. The Applicable Agent will make such Loans available to the applicable Borrower by promptly crediting the amounts so received, in like funds, to an account of such Borrower maintained with the Applicable Agent (i) in New York City, in the case of Loans denominated in US Dollars and (ii) in London, in the case of Loans denominated in any Designated Foreign Currency, and designated by such Borrower in the applicable Borrowing Request or Competitive Bid Request. (b) Unless the Applicable Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Applicable Agent such Lender's share of such Borrowing, the Applicable Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Applicable Agent, then the applicable Lender and the Borrowers severally agree to pay to the Applicable Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the applicable Borrower to but excluding the date of payment to the Applicable Agent, at (i) in the case of such Lender, the greater of (x)(A) the Federal Funds Effective Rate, in the case of Loans denominated in US Dollars and (B) the rate reasonably determined by the London Agent to be the cost to it of funding such amount, in the case of Loans denominated in a Designated Foreign Currency, and (y) a rate determined by the Applicable Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of a Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Applicable Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.08. Interest Elections. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the applicable Borrower may elect to convert such Borrowing to a different Type or to 32 27 continue such Borrowing and, in the case of a Eurocurrency Revolving Borrowing, may elect Interest Periods therefor, all as provided in this Section. The applicable Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Competitive Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, a Borrower (or the Company on its behalf) shall notify the Administrative Agent of such election by telephone or by telecopy by the time that a Borrowing Request would be required under Section 2.03 if such Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such Interest Election Request shall be irrevocable and, if telephonic, shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the applicable Borrower (or the Company on its behalf). (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and (iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the applicable Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If a Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Revolving Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the 33 28 request of the Required Lenders, so notifies the Company, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each Eurocurrency Revolving Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.09. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Termination Date. (b) The Company may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of US$1,000,000 and not less than US$5,000,000 and (ii) the Company shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.11, the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures would exceed the total Commitments. (c) The Company shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Company pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Company may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Company (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.10. Repayment of Loans; Evidence of Debt. (a) Each Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the unpaid principal amount of each Revolving Loan on the Maturity Date, and (ii) to the Applicable Agent for the account of each Lender the unpaid principal amount of each Competitive Loan on the last day of the Interest Period applicable to such Loan. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of each Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period, if any, applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Agents hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or Agent to maintain such accounts or 34 29 any error therein shall not in any manner affect the obligation of any Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, each Borrower shall execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in substantially the form attached hereto as Exhibit F. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.11. Prepayment of Loans. (a) The Borrowers shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (c) of this Section and payment of any amounts required under Section 2.16; provided that the Borrowers shall not have the right to prepay any Competitive Loan without the prior consent of the Lender thereof. (b) In the event and on each occasion that the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures exceeds the total Commitments, the Borrowers shall promptly prepay Revolving Borrowings in an aggregate amount sufficient to eliminate such excess. (c) The Company shall notify the Applicable Agent by telephone (confirmed by telecopy) or by telecopy of any prepayment hereunder (i) in the case of prepayment of a Eurocurrency Revolving Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New York City time, on the Business Day of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.09, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.09. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13. SECTION 2.12. Fees (a) (i) The Borrowers agree to pay to the Administrative Agent, in US Dollars, for the account of each Lender a facility fee, which shall accrue at the relevant Facility Fee Rate specified in the definition of Applicable Rate on the daily amount of the Commitment of such Lender (whether used or unused) and, following the Termination Date, on the Revolving Credit Exposure of such Lender, during the period from and including the date of this Agreement to but excluding the Maturity Date; provided that, if such Lender continues to have any Revolving Credit Exposure after the Maturity Date, then such facility fee shall continue to accrue on the daily amount of such Lender's Revolving Credit Exposure from and including the 35 30 Maturity Date to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall be payable in arrears on the last day of March, June, September and December of each year, on any date prior to the Termination Date on which the Commitments terminate and on the Maturity Date, commencing on the first such date to occur after the date hereof; provided that any facility fees accruing after the Maturity Date shall be payable on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (ii) For each day on which the US Dollar Equivalent of the aggregate principal amount of the Loans outstanding under this Agreement is in excess of 50% of the total Commitments as of such day (and for each day after the day on which the Commitments terminate) the Borrowers agree to pay to the Administrative Agent, in US Dollars, for the account of each Lender a utilization fee, which shall accrue at the relevant Utilization Fee Rate specified in the definition of Applicable Rate on the daily amount of the outstanding Loans of such Lender on such day. Accrued utilization fees shall be payable in arrears on the last day of March, June, September and December of each year, on any date prior to the Termination Date on which the Commitments terminate and on the Maturity Date, commencing on the first such date to occur after the date hereof; provided that any utilization fees accruing after the Maturity Date shall be payable on demand. All utilization fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) The Borrowers agree to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between any Borrower and the Administrative Agent. (c) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for its own account or, in the case of facility fees and utilization fees, for distribution to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate. (b) The Loans comprising each Eurocurrency Borrowing shall bear interest (i) in the case of a Eurocurrency Revolving Loan, at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate, or (ii) in the case of a Eurocurrency Competitive Loan, at the LIBO Rate for the Interest Period in effect for such Borrowing plus (or minus, as applicable) the Margin applicable to such Loan. (c) Each Fixed Rate Loan shall bear interest at the Fixed Rate applicable to such Loan. (d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by any Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any 36 31 Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Commitments; provided that (i) interest accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (f) All interest hereunder shall be computed on the basis of a year of 360 days, except that (i) interest on Borrowings denominated in Sterling and (ii) interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or, except in the case of Borrowings denominated in Sterling, 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing denominated in any currency: (a) the Applicable Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or (b) the Applicable Agent is advised by the Required Lenders (or, in the case of a Eurocurrency Competitive Loan, the Lender that is required to make such Loan) that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period; then the Applicable Agent shall give notice thereof to the Company and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Applicable Agent notifies the Company and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurocurrency Borrowing shall be ineffective, and such Borrowing shall be converted to or continued as an ABR Borrowing on the last day of the Interest Period applicable thereto, (ii) if any Borrowing Request requests a Eurocurrency Revolving Borrowing, such Borrowing shall be made as an ABR Borrowing (or such Borrowing shall not be made if the applicable Borrower revokes (and in such circumstances, such Borrowing Request may be revoked notwithstanding any other provision of this Agreement) such Borrowing Request by telephonic notice, confirmed promptly in writing, not later than one Business Day prior to the proposed date of such Borrowing) and (iii) any request by a Borrower for a Eurocurrency 37 32 Competitive Borrowing denominated in such currency shall be ineffective; provided that (A) if the circumstances giving rise to such notice do not affect all the Lenders, then requests by a Borrower for Eurocurrency Competitive Borrowings may be made to Lenders that are not affected thereby and (B) if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted. SECTION 2.15. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except to the extent any such reserve requirement is reflected in the Adjusted LIBO Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurocurrency Loans or Fixed Rate Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan or Fixed Rate Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrowers will pay to such Lender such additional amount or amounts as will compensate such Lender on an after-tax basis for such additional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Company will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. It is acknowledged that this Agreement is being entered into by the Lenders on the understanding that the Lenders will not be required to maintain capital against their Commitments under currently applicable laws, regulations and regulatory guidelines. In the event Lenders shall be advised by any Governmental Authority or shall otherwise determine on the basis of pronouncements of any Governmental Authority that such understanding is incorrect, it is agreed that a Change in Law will be deemed to have occurred and that the Lenders will be entitled to make claims under this paragraph based upon market requirements prevailing on the date hereof for commitments under comparable credit facilities against which capital is required to be maintained. (c) If the cost to any Lender of making or maintaining any Loan to any Borrowing Subsidiary is increased (or the amount of any sum received or receivable by any Lender (or its applicable lending office) is reduced) by an amount deemed in good faith by such Lender to be material, by reason of the fact that such Borrowing Subsidiary is incorporated in, or conducts business in, a jurisdiction outside the United States, such Borrowing Subsidiary shall indemnify such Lender for such increased cost or reduction within 15 days after demand by such Lender 38 33 (with a copy to the Administrative Agent). A certificate of such Lender claiming compensation under this paragraph and setting forth the additional amount or amounts to be paid to it hereunder (and the basis for the calculation of such amount or amounts) shall be conclusive in the absence of manifest error. (d) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section, together with supporting documentation or computations, shall be delivered to the Company and shall be conclusive absent manifest error. The Company shall pay such Lender the amount shown as due on any such certificate within 10 Business Days after receipt thereof. (e) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Company shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Company of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. (f) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section in respect of any Competitive Loan if the Change in Law that would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Competitive Bid pursuant to which such Loan was made. SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan or Fixed Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(c) and is revoked in accordance therewith), (d) the failure to borrow any Competitive Loan after accepting the Competitive Bid to make such Loan, or (e) the assignment of any Eurocurrency Loan or Fixed Rate Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Company pursuant to Section 2.19, then, in any such event, the Borrowers shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in the applicable currency of a comparable amount and period from other banks in the eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section, together 39 34 with supporting documentation or computations, shall be delivered to the Company and shall be conclusive absent manifest error. The Borrowers shall pay such Lender the amount shown as due on any such certificate within 10 Business Days after receipt thereof. SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation of the Borrowers hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if any Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions of Indemnified Taxes or Other Taxes (including deductions applicable to additional sums payable under this Section) the Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrowers shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrowers shall indemnify each Agent and each Lender, within 10 Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by such Agent or such Lender on or with respect to any payment by or on account of any obligation of the Borrowers hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate setting forth in reasonable detail the amount and nature of such payment or liability delivered to the Company by a Lender, or by an Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Borrower to a Governmental Authority, the Company shall deliver to the Applicable Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Applicable Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which a Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Company (with a copy to the Applicable Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Company as will permit such payments to be made without withholding or at a reduced rate, provided that such Foreign Lender has received written notice from the Company advising it of the availability of such exemption or reduction and containing all applicable documentation. (f) If an Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by a Borrower or with 40 35 respect to which a Borrower has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to the Company (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under this Section 2.17 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Borrowers, upon the request of such Agent or such Lender, agree to repay the amount paid over to such Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Agent or such Lender in the event such Agent or such Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require any Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to any Borrower or any other Person. SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Each Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest or fees, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to 2:00 p.m., Local Time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Applicable Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Applicable Agent at its offices at (i) in the case of any amount denominated in US Dollars, 270 Park Avenue, New York, New York, or (ii) in the case of any amount denominated in a Designated Foreign Currency, Trinity Tower, 9 Thomas Moore Street, London, England E19YT, in each case except that payments pursuant to Sections 2.15, 2.16, 2.17 and 10.03 shall be made directly to the Persons entitled thereto. The Applicable Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder of principal or interest in respect of any Loan (or of any breakage indemnity in respect of any Loan) shall be made in the currency of such Loan; all other payments hereunder and under each other Loan Document shall be made in US Dollars, except as otherwise expressly provided. Any payment required to be made by an Agent hereunder shall be deemed to have been made by the time required if such Agent shall, at or before such time, have taken the necessary steps to make such payment in accordance with the regulations or operating procedures of the clearing or settlement system used by such Agent to make such payment. Any amount payable by any Agent to one or more Lenders in the national currency of a member state of the European Union that has adopted the Euro as its lawful currency shall be paid in Euro. (b) If at any time insufficient funds are received by and available to the Applicable Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. 41 36 (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by any Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to a Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation. (d) Unless the Applicable Agent shall have received notice from the Company prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the applicable Borrower will not make such payment, the Applicable Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders, the amount due. In such event, if such Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Applicable Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Applicable Agent, at (i) the greater of the Federal Funds Effective Rate and a rate determined by the Applicable Agent in accordance with banking industry rules on interbank compensation (in the case of an amount denominated in US Dollars) and (ii) the rate reasonably determined by the Applicable Agent to be the cost to it of funding such amount (in the case of an amount denominated in a Designated Foreign Currency). (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.07(b) or 2.18(d), then the Applicable Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Applicable Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.15, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Borrower is required to pay any additional interest to any Lender pursuant to Section 2.21, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment 42 37 of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15, 2.17 or 2.21 as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Each Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.15, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Borrower is required to pay any additional interest to any Lender pursuant to Section 2.21, or if any Lender defaults in its obligation to fund Loans hereunder, or if any Lender becomes a "Non-Extending Lender" under Section 2.05(b), then the Company may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans held by it) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Company shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans (other than Competitive Loans), accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Company (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17 or additional interest required pursuant to Section 2.21, such assignment will result in a material reduction in such compensation, payments or additional interest. SECTION 2.20. Borrowing Subsidiaries. On or after the Effective Date, the Company may designate any wholly owned Subsidiary of the Company as a Borrowing Subsidiary by delivery to the Administrative Agent of a Borrowing Subsidiary Agreement executed by such Subsidiary and the Company, and upon such delivery such Subsidiary shall for all purposes of this Agreement be a Borrowing Subsidiary and a party to this Agreement. Upon the execution by the Company and delivery to the Administrative Agent of a Borrowing Subsidiary Termination with respect to any Borrowing Subsidiary, such Subsidiary shall cease to be a Borrowing Subsidiary and a party to this Agreement; provided that no Borrowing Subsidiary Termination will become effective as to any Borrowing Subsidiary (other than to terminate such Borrowing Subsidiary's right to make further Borrowings under this Agreement) at a time when any principal of or interest on any Loan to such Borrowing Subsidiary shall be outstanding hereunder. Promptly following receipt of any Borrowing Subsidiary Agreement or Borrowing Subsidiary Termination, the Administrative Agent shall send a copy thereof to each Lender. SECTION 2.21. Additional Reserve Costs. (a) If and so long as any Lender is required to make special deposits with the Bank of England, to maintain reserve asset ratios or to pay fees, in each case in respect of such Lender's Eurocurrency Loans in any Designated Foreign Currency, such Lender may require the relevant Borrower to pay, contemporaneously with each payment of interest on each of such Loans, additional interest on such Loan at a rate per annum equal to the Mandatory Costs Rate calculated in accordance with the formula and in the manner set forth in Exhibit C hereto. 43 38 (b) If and so long as any Lender is required to comply with reserve assets, liquidity, cash margin or other requirements of any monetary or other authority (including any such requirement imposed by the European Central Bank or the European System of Central Banks, but excluding requirements reflected in the Statutory Reserve Rate or the Mandatory Costs Rate) in respect of any of such Lender's Eurocurrency Loans in any Designated Foreign Currency, such Lender may require the relevant Borrower to pay, contemporaneously with each payment of interest on each of such Lender's Eurocurrency Loans subject to such requirements, additional interest on such Loan at a rate per annum specified by such Lender to be the cost to such Lender of complying with such requirements in relation to such Loan. (c) Any additional interest owed pursuant to paragraph (a) or (b) above shall be determined by the relevant Lender, which determination shall be conclusive absent manifest error, and notified to the relevant Borrower (with a copy to the Administrative Agent) at least five Business Days before each date on which interest is payable for the relevant Loan, and such additional interest so notified to the relevant Borrower by such Lender shall be payable to the Administrative Agent for the account of such Lender on each date on which interest is payable for such Loan. ARTICLE III Representations and Warranties Each of the Company and the Borrowing Subsidiaries represents and warrants to the Lenders that: SECTION 3.01. Organization and Qualification. Each Borrower is duly organized, validly existing and in good standing (to the extent such concept is relevant to such Person in its jurisdiction of organization) under the laws of the jurisdiction of its organization, has full and adequate corporate power to carry on its business as now conducted, and is duly licensed or qualified and, to the extent relevant, in good standing in each jurisdiction in which the nature of the business transacted by it or the nature of the Property owned or leased by it makes such licensing or qualification necessary, except where such failure to be so licensed or qualified and in good standing would not have a Material Adverse Effect. SECTION 3.02. Subsidiaries. Each Significant Subsidiary is duly organized, validly existing and in good standing (to the extent such concept is relevant to such Person in its jurisdiction of organization) under the laws of the jurisdiction of its organization, has the requisite power to carry on its business as now conducted, and is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business transacted by it or the nature of the Property owned or leased by it makes such licensing or qualification necessary, except where such failure would not have a Material Adverse Effect. All the issued and outstanding Equity Interests in each Significant Subsidiary are validly issued and outstanding and fully paid and nonassessable and all such shares owned by the Company or a Subsidiary are owned, beneficially and of record, by the Company or such Subsidiary, free of any Lien other than Permitted Encumbrances. The Significant Subsidiaries after giving effect to the transactions to occur on the Acquisition Date are listed on Schedule 3.02. 44 39 SECTION 3.03. Corporate Authority and Validity of Obligations. Each Borrower has the requisite right and authority to consummate the Transactions, to enter into this Agreement and each other Loan Document to which it is a party, to make the Borrowings herein provided for, to issue its notes in evidence thereof and to perform all of its obligations hereunder and under each other Loan Document to which it is a party; each of the Transactions has been duly authorized by the Borrowers and the execution, delivery and performance of this Agreement and the other Loan Documents have been duly authorized by all necessary corporate, company or partnership action by each Borrower party thereto and constitute valid and binding obligations of the Borrowers enforceable in accordance with their terms; and none of the Transactions, this Agreement, the other Loan Documents and the performance or observance by any Borrower or any Subsidiary of any of the matters or things herein or therein provided for contravene any provision of law or judgment or any charter or by-law provision of any Borrower or any material covenant, indenture or agreement of or affecting any Borrower or a substantial portion of any of their respective Properties. SECTION 3.04. Margin Stock. None of the Borrowers nor any of the Subsidiaries is engaged principally, or as one of its primary activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and none of the Borrowers nor any of the Subsidiaries will use the proceeds of any Loan in a manner that violates any provision of Regulation U or X of the Board of Governors of the Federal Reserve System. SECTION 3.05. Financial Reports. (a) The consolidated balance sheet of the Company and the Subsidiaries and the related consolidated statements of earnings, shareholders' equity and cash flows of the Company and the Subsidiaries and accompanying notes thereto (i) as at December 31, 1999, and for the year then ended, which financial statements are accompanied by the report of PriceWaterhouseCoopers LLP, and (ii) as at September 30, 2000, and for the fiscal quarter and the portion of the fiscal year then ended, certified by the Company's chief financial officer, heretofore furnished to the Administrative Agent, fairly present in all material respects the consolidated financial condition of the Company and the Subsidiaries as at such dates and their consolidated results of operations, shareholders' equity and cash flows for the periods then ended in conformity with GAAP, subject to year-end adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) The consolidated balance sheet of Keebler and its subsidiaries and the related consolidated statements of earnings, shareholders' equity and cash flows of Keebler and its subsidiaries and accompanying notes thereto (i) as at January 1, 2000, and for the year then ended, which financial statements are accompanied by the report of PriceWaterhouseCoopers LLP, and (ii) as at September 30, 2000, and for the fiscal quarter and the portion of the fiscal year then ended, certified by Keebler's chief financial officer, heretofore furnished to the Administrative Agent, to the best of the Company's knowledge, fairly present in all material respects the consolidated financial condition of Keebler and its subsidiaries as at such dates and their consolidated results of operations, shareholders' equity and cash flows for the periods then ended in conformity with GAAP, subject to year-end adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (c) The Company has heretofore furnished to the Lenders its pro forma consolidated balance sheet as of September 30, 2000, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) has 45 40 been prepared in good faith based on the same assumptions used to prepare the pro forma financial statements included in the Information Memorandum (which assumptions are believed by the Company to be reasonable), (ii) is based on the best information available to the Company after due inquiry, (iii) accurately reflects all adjustments necessary to give effect to the Transactions and (iv) presents fairly, in all material respects, the pro forma financial position of the Company and its consolidated Subsidiaries as of September 30, 2000, as if the Transactions had occurred on such date. The representations and warranties set forth in clauses (iii) and (iv) are limited to the best of the Company's knowledge to the extent they relate to Keebler and its subsidiaries. SECTION 3.06. No Material Adverse Change. Since September 30, 2000, there has not occurred or become known any condition or change that has affected or would reasonably be expected to affect materially and adversely the business, assets, liabilities or financial condition of the Company, and its Subsidiaries taken as a whole. SECTION 3.07. Litigation. There is no litigation or governmental proceeding pending, or to the knowledge of the Company threatened, against the Company, any Subsidiary or Keebler or any of its subsidiaries which if adversely determined would (a) impair the validity or enforceability of, or materially impair the ability of the Company or any other Borrower to perform its obligations under, this Agreement or any other Loan Document or (b) except as disclosed on Schedule 3.07 or in the Company's Form 10-Ks and 10-Qs filed with the SEC covering periods through September 30, 2000, or in Keebler's Form 10-Ks and 10-Qs filed with the SEC covering periods through October 7, 2000, result in any Material Adverse Effect. SECTION 3.08. Tax Returns. The Company has filed consolidated United States federal income tax returns for all taxable years ended on or before December 31, 1999 and such returns of the Company for the taxable year ended December 31, 1996 and all taxable years ended before such date have been examined and approved by the Internal Revenue Service as filed, and any additional assessments for any such year have been paid or the applicable statute of limitations therefor has expired. To the best of the Company's knowledge, Keebler has filed consolidated United States federal income tax returns for all taxable years ended on or before January 1, 2000 and such returns of Keebler for the taxable year ended December 31, 1994 and all taxable years ended before such date have been examined and approved by the Internal Revenue Service as filed, and any additional assessments for any such year have been paid or the applicable statute of limitations therefor has expired. There are no assessments pending for the consolidated United States federal income tax returns of the Company and the Subsidiaries of a material nature for any taxable year ended after December 31, 1999, or, to the best of the Company's knowledge, of Keebler and its subsidiaries of a material nature for any year ended after January 1, 2000, nor to the knowledge of the Company is any such assessment threatened, other than those provided for by adequate reserves under GAAP. SECTION 3.09. Approvals. No authorization, consent, license, exemption, filing or registration with any court or governmental department, agency or instrumentality, or any other Person, is necessary to the consummation of the Transactions or the valid execution, delivery or performance by any Borrower of this Agreement or any other Loan Document except for those obtained on or before the Effective Date or those the failure of which to obtain would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. 46 41 SECTION 3.10. ERISA. The Company and each Subsidiary are in compliance in all material respects with the Employee Retirement Income Security Act of 1974 ("ERISA") to the extent applicable to them and have received no notice to the contrary from the Pension Benefit Guaranty Corporation or any successor thereto ("PBGC") or any other governmental entity or agency. No condition exists or event or transaction has occurred under or relating to any Plan which could reasonably be expected to result in the incurrence by the Company or any Subsidiary of any material liability, fine or penalty. Except as disclosed on Schedule 3.10, neither the Company nor any Subsidiary has any contingent liability for any post-retirement benefits under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title 1 of ERISA. SECTION 3.11. Environmental Matters. Except as set forth on Schedule 3.11, or except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, none of the Company and its Subsidiaries (a) has failed to comply with any Environmental Laws or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Laws, (b) has become subject to any liability under any Environmental Laws, (c) has received notice of any claim with respect to any Environmental Laws or (d) knows of any basis for any liability under any Environmental Laws. SECTION 3.12. Properties. (a) Each of the Company and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, subject only to Liens permitted by Section 6.02 and except for defects in title that could not individually or in the aggregate reasonably be expected to result in a Material Adverse Effect. (b) Each of the Company and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by them does not infringe upon the rights of any other Person, except for any such defects in ownership or license rights or other infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.13. Compliance with Laws. Each of the Company and its Subsidiaries is in compliance with all laws, regulations and orders of the Food and Drug Administration and each other Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.14. Investment and Holding Company Status. None of the Company and its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.15. Disclosure. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of the Company to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Company represents 47 42 only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Company's control, and that no assurance can be given that such projections will be realized); and provided further that the representations and warranties set forth in this sentence are limited to the best of the Company's knowledge to the extent they relate to information or materials obtained by the Company from Keebler and its subsidiaries prior to the Acquisition Date. ARTICLE IV Conditions SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.02): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of each of (i) Gary H. Pilnick, Vice President and Deputy General Counsel of the Company, substantially in the form of Exhibit D-1, and (ii) Kirkland & Ellis, counsel for the Borrowers, substantially in the form of Exhibit D-2. Each Borrower hereby requests such counsel to deliver such opinion. (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing (to the extent such concept is relevant to such Person in its jurisdiction of organization) of each Borrower and the authorization of the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel. (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Company, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02. (e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses required to be reimbursed or paid on or prior to the Effective Date by the Borrowers hereunder. (f) The Five-Year Credit Agreement shall have been executed and delivered. 48 43 The Administrative Agent shall notify the Company and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.02) at or prior to 3:00 p.m., New York City time, on April 30, 2001 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). The effectiveness of the obligations to make Loans (other than Loans made solely for the purpose of repaying commercial paper issued on or after the Effective Date but prior to the date of such termination, to the extent the proceeds of such commercial paper shall have been deposited in the cash collateral account referred to in the last paragraph of this Section 4.01) hereunder shall terminate, and any outstanding Obligations (other than Obligations under Hedging Agreements) shall become immediately due and payable (or, in the case of Obligations incurred after such time shall become due and payable immediately following their incurrence), at 3:00 p.m. on April 30, 2001, unless each of the following conditions is satisfied (or waived in accordance with Section 10.02): (g) The Acquisition shall have been completed on terms substantially similar to those set forth in the Acquisition Agreements as heretofore provided to the Lenders, without modification or waiver of any material term or condition thereof that would reasonably be expected to materially and adversely affect the Company and its Subsidiaries, taken as a whole, or the rights or interests of the Lenders, and the assets and liabilities of Keebler and its subsidiaries shall to the best knowledge of the Company be consistent with the pro forma consolidated balance sheet referred to in Section 3.05(c). (h) The Company shall have established a commercial paper program on terms and subject to conditions satisfactory to the Lenders which permits the issuance of commercial paper supported by this Agreement, the Five-Year Credit Agreement and, if effective, the Bridge Facility, in an aggregate principal amount sufficient to consummate the Acquisition, refinance and replace the Indebtedness and credit facilities set forth on Schedule 4.01(h) as being repaid or permanently terminated in connection with the Acquisition, pay related fees and expenses and provide for the working capital needs and other general corporate purposes of the Company and its Subsidiaries. After giving effect to the Acquisition and the other transactions contemplated hereby, the Indebtedness and credit facilities set forth on Schedule 4.01(h) as being repaid or terminated shall have been repaid in full and permanently terminated, as applicable, and the Company and its Subsidiaries shall have outstanding no Indebtedness other than (a) commitments and Indebtedness under this Agreement and the Five-Year Credit Agreement, Indebtedness under the Company's commercial paper program, Senior Notes and commitments or loans under the Bridge Facility, in an aggregate principal amount taken together, without duplication, not to exceed US$6,300,000,000, and (b) the other Indebtedness set forth on Schedule 6.01 as remaining outstanding after giving effect to the Acquisition. (i) All governmental authorities and material third parties shall have approved or consented to the Acquisition to the extent such approvals or consents are required under applicable laws or agreements or otherwise and the failure to obtain such approvals or consents would reasonably be expected to result in a Material Adverse Effect; all applicable appeal periods of Governmental Authorities shall have expired and there shall 49 44 be no governmental or judicial action, actual or threatened, that could reasonably be expected to restrain, prevent or impose materially burdensome conditions on the Acquisition. There shall be no litigation or administrative action that could reasonably be expected to have a Material Adverse Effect. The Administrative Agent shall have received a favorable written opinion (which is addressed to the Administrative Agent and the Lenders or permits reliance on it by the Administrative Agent and the Lenders and is dated as of the Acquisition Date) from counsel and in a form reasonably satisfactory to the Administrative Agent to the effect that no authorization, approval or action by, and no notice to, consent of, order of or filing with, any governmental authority, and no shareholder approval, is required in connection with the Acquisition, other than such as have been obtained or made or those the failure to obtain or make which are not material to the consummation of the Transactions or to the Company. The Administrative Agent shall notify the Company and the Lenders of the Acquisition Date, and such notice shall be conclusive and binding. All proceeds of any commercial paper issued by the Company on or after the Effective Date but prior to the Acquisition Date (other than proceeds of commercial paper issued under the Company's existing commercial paper programs) shall be held in a cash collateral account of the Company maintained with the Administrative Agent and shall (A) be made available to the Company to finance the consummation of the Acquisition and the related Transactions on the date on which all the conditions set forth in paragraphs (g) through (i) are satisfied, or (B) if all such conditions are not satisfied on or prior to April 30, 2001 or any earlier date on which the Commitments shall have terminated, be applied to repay such commercial paper as it matures and all Obligations that may from time to time be outstanding on or after April 30, 2001 or any earlier date on which the Commitments shall have terminated. SECTION 4.02. Each Borrowing. The obligation of each Lender to make a Loan on the occasion of any Borrowing, is subject to the satisfaction (or waiver in accordance with Section 10.02) of the following conditions: (a) The representations and warranties (other than those set forth in Sections 3.06 and 3.07 in the case of Borrowings made after the Effective Date) of the Borrowers set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing. (b) At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the Company on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. On and after the Acquisition Date, the conditions specified in paragraphs (a) and (b) of this Section shall be construed giving effect to the Acquisition and the other transactions contemplated to be effected in connection therewith. 50 45 SECTION 4.03. Initial Borrowing by each Borrowing Subsidiary. The obligation of each Lender to make Loans to any Borrowing Subsidiary (other than the Borrowing Subsidiaries party hereto on the date hereof) is subject to the satisfaction (or waiver in accordance with Section 10.02) of the following conditions: (a) The Administrative Agent (or its counsel) shall have received such Borrowing Subsidiary's Borrowing Subsidiary Agreement, duly executed by all parties thereto. (b) The Administrative Agent shall have received such documents and certificates, including such opinions of counsel, as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing (to the extent such concept is relevant to such Person in its jurisdiction of organization) of such Borrowing Subsidiary, the authorization of the Transactions insofar as they relate to such Borrowing Subsidiary and any other legal matters reasonably relating to such Borrowing Subsidiary, its Borrowing Subsidiary Agreement or such Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. ARTICLE V Affirmative Covenants Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, the Company covenants and agrees with the Lenders as to itself and its subsidiaries and each Borrowing Subsidiary covenants and agrees with the Lenders as to itself and its subsidiaries that: SECTION 5.01. Corporate Existence. The Company shall, and shall cause each Significant Subsidiary to, preserve and maintain its corporate existence, subject to the provisions of Section 6.04. SECTION 5.02. Maintenance. The Company will maintain, preserve and keep its Property necessary to the proper conduct of its business in reasonably good repair, working order and condition (ordinary wear and tear and damage by casualty excepted) and will from time to time make all necessary repairs, renewals, replacements, additions and betterments thereto so that in the judgment of the Company at all times such Property shall be reasonably preserved and maintained, and will cause each Significant Subsidiary so to do for Property owned or used by it, the failure of which to maintain or preserve could reasonably be expected to have a Material Adverse Effect; provided, however, that nothing in this Section 5.02 shall prevent the Company or a Significant Subsidiary from discontinuing the operation or maintenance of any such Property if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of the Subsidiary and in the reasonable opinion of the Company is not disadvantageous in any material respect to the Lenders. SECTION 5.03. Taxes. The Company will duly pay and discharge, and will cause each Subsidiary to pay and discharge, all material taxes, rates, assessments, fees and governmental charges upon or against the Company or such Subsidiary or against their respective Property, in each case before the same becomes delinquent and before penalties accrue thereon, 51 46 unless and to the extent that (a) the same is being contested in good faith and by appropriate proceedings and adequate reserves under GAAP are provided therefor or (b) the same could not reasonably be expected to give rise to a Lien that would not be permitted under Section 6.02(d). SECTION 5.04. Insurance. The Company will insure, and keep insured, and will cause each Subsidiary to insure, and keep insured, with reputable insurance companies, all insurable Property owned by it which is of a character usually insured by companies similarly situated and operating like Property. To the extent usually insured (subject to self-insured retentions) by companies similarly situated and conducting similar businesses, the Company will also insure, and cause each Subsidiary to insure, employers' and public and product liability risks with reputable insurance companies. It is understood and agreed that the Company will be deemed to be in compliance with this Section 5.04 with respect to Keebler and its subsidiaries at all times between the Acquisition Date and the date that is one year thereafter to the extent that Keebler and its Subsidiaries maintain insurance consistent with their past practices. The Company will upon request of the Administrative Agent furnish to the Administrative Agent, for distribution to each Lender, a summary setting forth the nature and extent of the insurance maintained pursuant to this Section 5.04. SECTION 5.05. Financial Reports and Other Information. The Company will, and will cause each Subsidiary to, maintain a standard system of accounting substantially in accordance with GAAP and will furnish to the Lenders and their respective duly authorized representatives such information respecting the business and financial condition of the Company and the Subsidiaries as they may reasonably request; and without any request will furnish to the Administrative Agent, which will make available by means of electronic posting to each Lender: (a) within 60 days after the end of each of the first three quarterly fiscal periods of the Company, a copy of the Company's Form 10-Q Report filed with the SEC; (b) within 120 days after the end of each fiscal year of the Company, a copy of the Company's Form 10-K Report filed with the SEC, including a copy of the annual report of the Company and the Subsidiaries for such year with accompanying financial statements, prepared by the Company and certified by independent public accountants of recognized standing, in accordance with GAAP; (c) promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports the Company sends to its shareholders, and copies of all other regular, periodic and special reports and all registration statements the Company files with the SEC, or with any national securities exchange; and (d) (i) promptly after the Company has knowledge thereof, notice (including a description in reasonable detail) of the occurrence of any Default or Event of Default, and (ii) within five Business Days after the Company has knowledge thereof, notice of any change to any rating of the Index Debt by S&P or Moody's. In addition, in the event that Subsidiaries not constituting Significant Subsidiaries shall at any time (as a result of any acquisition or disposition of any Person or line of business involving any party other than the Company and the Subsidiaries or any reorganization of the Company or any Subsidiaries) represent more than 10% of Consolidated Total Assets or Consolidated Net Sales as 52 47 of such date or for such period, the Company will promptly designate additional Significant Subsidiaries by written notice to the Administrative Agent until such excess has been eliminated. Each of the financial statements furnished to the Lenders pursuant to subsections (a) and (b) of this Section 5.05 shall be accompanied by a compliance certificate in substantially the form of Exhibit E signed by a Financial Officer of the Company. Each such financial statement shall also be accompanied by a certificate signed by a Financial Officer of the Company confirming compliance with the requirements set forth in the definition of "Significant Subsidiary" and in the last sentence of the immediately preceding paragraph, attaching a revised form of Schedule 3.02 showing all additions to and removals from the Significant Subsidiaries since the date of the most recently delivered form of Schedule 3.02 (or confirming that there have been no changes from such most recently delivered form of Schedule 3.02). If the Company is no longer required to file Form 10Q and 10K Reports with the SEC, the Company will nevertheless furnish to the Lenders at the time herein above set forth all the financial and other information that would have comprised such filings. SECTION 5.06. Books and Records; Inspection Rights. The Company will, and will cause each of its Subsidiaries to, keep proper books of record and account in which in all material respects full, true and correct entries are made of all dealings and transactions in relation to its business and activities as consistent with good business practices in the judgment of the Company. The Company will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.07. Compliance with Laws. The Company will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of the Food and Drug Administration and each other Governmental Authority applicable to it or its property, including all Environmental Laws, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. ARTICLE VI Negative Covenants Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full the Company covenants and agrees with the Lenders as to itself and its subsidiaries and each Borrowing Subsidiary covenants and agrees with the Lenders as to itself and its subsidiaries that: SECTION 6.01. Indebtedness. The Company will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist at any time: (a) any Indebtedness of the Company secured by any Lien encumbering any asset of the Company or any Subsidiary (other than Indebtedness of the Company set forth on Schedule 6.01); 53 48 (b) any Indebtedness of any Subsidiary (other than (i) Indebtedness under this Agreement or the Five-Year Credit Agreement, (ii) the Indebtedness of any Subsidiary set forth on Schedule 6.01, (iii) Indebtedness to the Company or any other Wholly Owned Subsidiary and (iv) Indebtedness of any Person that becomes a Subsidiary after the date hereof that existed at the time such Person became a Subsidiary and was not created in contemplation of or in connection with such Person becoming a Subsidiary); or (c) any Capital Lease Obligation; if such creation, incurrence, assumption or existence would result in the sum, without duplication, of (i) the aggregate principal amount of Indebtedness outstanding under clauses (a), (b) and (c) above, (ii) the aggregate principal amount of outstanding obligations secured by Liens permitted by Section 6.02(d), (iii) the aggregate amount of the Financed Portions of all outstanding Securitizations and (iv) the outstanding Attributable Debt in respect of Sale-Leaseback Transactions permitted by Section 6.03(b) exceeding 10% of Consolidated Total Assets as of the most recent fiscal quarter end for which financial statements for the Company and its Subsidiaries are available. SECTION 6.02. Liens. The Company will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances and Liens solely for the benefit of the Company or any Wholly Owned Subsidiary; (b) any Lien on any property or asset of the Company or any Subsidiary existing on the date hereof and set forth in Schedule 6.02; provided that (i) such Lien shall not apply to any other property or asset of the Company or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Company or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Company or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; and (d) Liens not expressly permitted by clauses (a) through (c) above and Securitizations; provided that the sum, without duplication, at any time of (i) the aggregate principal amount of Indebtedness outstanding under Sections 6.01(a), (b) and (c), (ii) the 54 49 aggregate principal amount of outstanding obligations secured by Liens permitted by this clause (d), (iii) the aggregate amount of the Financed Portions of all outstanding Securitizations and (iv) the outstanding Attributable Debt in respect of Sale-Leaseback Transactions permitted by Section 6.03(b) shall not exceed 10% of Consolidated Total Assets as of the most recent fiscal quarter end for which financial statements for the Company and its Subsidiaries are available. SECTION 6.03. Sale and Leaseback Transactions. The Company will not, and will not permit any of its Subsidiaries to, enter into any Sale-Leaseback Transaction except: (a) Sale-Leaseback Transactions existing on the date hereof and set forth on Schedule 6.03; and (b) other Sale-Leaseback Transactions; provided that the sum, without duplication, at any time of (i) the aggregate principal amount of Indebtedness outstanding under Sections 6.01(a), (b) and (c), (ii) the aggregate principal amount of outstanding obligations secured by Liens permitted by Section 6.02(d), (iii) the aggregate amount of the Financed Portions of all outstanding Securitizations and (iv) the aggregate outstanding Attributable Debt in respect of Sale-Leaseback Transactions permitted by this clause (b) does not at any time exceed 10% of Consolidated Total Assets as of the most recent fiscal quarter end for which financial statements for the Company and its Subsidiaries are available. SECTION 6.04. Fundamental Changes. (a) The Company will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired and whether directly or through any merger or consolidation of, or any sale, transfer, lease or other disposition of Equity Interests in, or the assets of, any Subsidiary), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Person may merge into the Company in a transaction in which the Company is the surviving corporation, (ii) any Person may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Company or to another Subsidiary and (iv) any Subsidiary may liquidate or dissolve if the Company determines in good faith that such liquidation or dissolution is in the best interests of the Company and is not materially disadvantageous to the Lenders. (b) The Company will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Company and its Subsidiaries and Keebler and its subsidiaries on the date of execution of this Agreement and businesses reasonably related, ancillary, similar or supportive thereto. SECTION 6.05. Use of Proceeds. The proceeds of the Loans will be used only to provide liquidity in connection with the Company's commercial paper program and for other general corporate purposes, provided that the proceeds of Loans made prior to the Acquisition Date will be used solely for the purpose of repaying commercial paper issued on or after the Effective Date to the extent the proceeds of such commercial paper shall have been deposited in the cash collateral account referred to in the last paragraph of Section 4.01. No part of the 55 50 proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. Following the application of the proceeds of each Loan, not more than 25% of the value of the assets of the Company and its Subsidiaries which are subject to any arrangement hereunder whereby the Company's or any Subsidiary's right or ability to sell, pledge or otherwise dispose of assets is in any way restricted will be Margin Stock. SECTION 6.06. Minimum Net Worth. The Company will not permit Consolidated Net Worth as of any date to be less than US$700,000,000. SECTION 6.07. Interest Expense Coverage Ratio. The Company will not permit the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense, in each case for any period of four consecutive fiscal quarters ending on or after the last day of the first fiscal quarter beginning after the Acquisition Date, to be less than 3.0; provided that for purposes of determining compliance with this Section 6.07 on the last day of such first fiscal quarter and on the last day of each of the two next succeeding fiscal quarters, Consolidated EBITDA and Consolidated Interest Expense shall be determined for the period commencing with the first day of such first fiscal quarter and ending at the end of the applicable period, rather than for a four-fiscal-quarter period. ARTICLE VII Events of Default If any of the following events ("Events of Default") shall occur: (a) (i) default in the payment when due of any principal on any Loan, whether at the stated, maturity thereof or at any other time provided in this Agreement, or (ii) default for a period of five days in the payment when due of interest on any Loan, or (iii) default for a period of 10 days in the payment when due of any other sum required to be paid pursuant to this Agreement; (b) default by any Borrower in the observance or performance of any of the covenants set forth in Sections 5.01 (with respect to the Company's existence) or 5.05(d) or in Article VI; (c) default by any Borrower in the observance or performance of any other provision hereof not mentioned in (a) or (b) above, which is not remedied within 30 days after notice thereof to the Company by the Administrative Agent or any Lender; (d) any representation or warranty made (or deemed made) herein by any Borrower, or in any statement or certificate furnished by any Borrower pursuant hereto or in connection with any Loan, proves untrue in any material respect as of the date of the issuance or making (or deemed making) thereof; (e) default in the payment when due, after any applicable grace period, of any Indebtedness or any amount due under any Hedging Agreement the US Dollar Equivalent of the aggregate principal amount of which exceeds in the aggregate US$50,000,000 (the 56 51 "Aggregate Amount") issued, assumed or guaranteed by the Company or any Subsidiary (other than Indebtedness owing by any Subsidiary to the Company or to another Subsidiary); or default or other event under any indenture, agreement or other instrument under which any such Indebtedness is outstanding or under any such Hedging Agreement (other than a default under any provision of any other indenture, agreement or other instrument to which any Lender is party that restricts the ability of the Company or any Subsidiary to sell, pledge or otherwise dispose of Margin Stock), and such default or event shall result in the acceleration of the maturity or the required redemption or repurchase of Indebtedness, or the early termination of and a required payment under such Hedging Agreement, exceeding in the aggregate such Aggregate Amount; (f) any "reportable event" (as defined in ERISA) which constitutes grounds for the termination of any Plan by the PBGC, or for the appointment by an appropriate court of a trustee to administer or liquidate any Plan, or could reasonably be expected to result in a Material Adverse Effect, shall have occurred and be continuing 30 days after written notice to such effect shall have been given to the Company by the Administrative Agent; or any Plan shall be terminated by the PBGC; or a trustee shall be appointed to administer any Plan; or the PBGC shall institute proceedings to administer or terminate any Plan; and in the case of any such event the aggregate amount of unfunded liabilities under any affected Plan shall exceed (either singly or in the aggregate in the case of any such liability arising under more than one Plan) US$50,000,000; or the Company or any of its Subsidiaries or any member of the Controlled Group of any of them shall withdraw (completely or partially) from any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) and the aggregate amount of the liability of the Company and its Subsidiaries to such plan under Title IV of ERISA shall exceed (either singly or in the aggregate in the case of any such liability arising under more than one such plan) US$50,000,000; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Company or any Significant Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) the Company or any Significant Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; 57 52 (i) the Company or any Significant Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due; (j) one or more judgments for the payment of money in an aggregate amount in excess of US$50,000,000 (except to the extent covered by insurance as to which the insurer has acknowledged such coverage in writing) shall be rendered against the Company, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Company or any Subsidiary to enforce any such judgment; (k) an "Event of Default" shall have occurred and be continuing as defined in either the Five-Year Credit Agreement or, if it remains outstanding, the Bridge Facility; or (l) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Company described in clause (g) or (h) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Company, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Company accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company; and in case of any event with respect to the Company described in clause (g) or (h) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower. If a Default or Event of Default shall have occurred with respect to any Borrowing Subsidiary (other than any Default or Event of Default under a provision of this Agreement that applies to such Borrowing Subsidiary by virtue of its status as a Subsidiary or a Significant Subsidiary and regardless of whether it is a Borrowing Subsidiary), then immediately upon the repayment in full of all Loans outstanding to such Borrowing Subsidiary and the delivery to the Administrative Agent of a Borrowing Subsidiary Termination Agreement in accordance with Section 2.20 such Default or Event of Default shall cease to be effective with respect to such Borrowing Subsidiary. 58 53 ARTICLE VIII The Agents In order to expedite the transactions contemplated by this Agreement, Chase is hereby appointed to act as Administrative Agent and CMIL is hereby appointed to act as London Agent on behalf of the Lenders. Each of the Lenders hereby irrevocably authorizes the Agents to take such actions on its behalf and to exercise such powers as are delegated to the Agents by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. Any bank serving as Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not such Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Company, any Borrower or any Subsidiary or other Affiliate thereof as if it were not such Agent hereunder. The Agents shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) no Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that such Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02), and (c) except as expressly set forth in the Loan Documents, no Agent shall have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Company, any Borrower or any Subsidiary that is communicated to or obtained by the bank serving as Agent or any of its Affiliates in any capacity. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02) or in the absence of its own bad faith, gross negligence or wilful misconduct. No Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by a Borrower or a Lender, and no such Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to such Agent. Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for any Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. 59 54 Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Such Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs and the provisions of Section 10.03 shall apply to any such sub-agent and to the Related Parties of the Agents and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent. Subject to the appointment and acceptance of a successor Agent as provided in this paragraph, any Agent may resign at any time by notifying the Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right (in consultation with, and with the consent of, the Company, which shall not be unreasonably withheld) to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may (in consultation with, and with the consent of (unless an Event of Default has occurred and is continuing pursuant to clause (g) or (h) of Article VII), the Company, which shall not unreasonably withhold such consent and which shall, if the retiring Agent shall so request, designate and approve a successor Agent) on behalf of the Lenders, appoint a successor Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Company to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Company and such successor. After an Agent's resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Agent. Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any related agreement or any document furnished hereunder or thereunder. None of the institutions named as Co-Syndication Agents or Documentation Agent in the heading of this Agreement shall, in their capacities as such, have any duties or responsibilities of any kind under this Agreement. 60 55 ARTICLE IX Guarantee In order to induce the Lenders to extend credit to the Borrowing Subsidiaries hereunder, the Company hereby irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, the Obligations of the Borrowing Subsidiaries. The Company further agrees that the due and punctual payment of the Obligations of the Borrowing Subsidiaries may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee hereunder notwithstanding any such extension or renewal of any Obligation. The Company waives presentment to, demand of payment from and protest to any Borrowing Subsidiary of any of the Obligations, and also waives notice of acceptance of its obligations and notice of protest for nonpayment. The obligations of the Company hereunder shall not be affected by (a) the failure of any Lender to assert any claim or demand or to enforce any right or remedy against any Borrowing Subsidiary under the provisions of this Agreement any Borrowing Subsidiary Agreement, any other Loan Document or otherwise; (b) any extension or renewal of any of the Obligations; (c) any rescission, waiver, amendment or modification of, or release from, any of the terms or provisions of this Agreement, any Borrowing Subsidiary Agreement or any other Loan Document or agreement; (d) the failure or delay of any Lender to exercise any right or remedy against any other guarantor of the Obligations; (e) the failure of any Lender to assert any claim or demand or to enforce any remedy under any Loan Document or any other agreement or instrument; (f) any default, failure or delay, wilful or otherwise, in the performance of the Obligations; or (g) any other act, omission or delay to do any other act which may or might in any manner or to any extent vary the risk of the Company or otherwise operate as a discharge of the Company as a matter of law or equity or which would impair or eliminate any right of the Company to subrogation. The Company further agrees that its guarantee hereunder constitutes a promise of payment when due (whether or not any bankruptcy or similar proceeding shall have stayed the accrual or collection of any of the Obligations or operated as a discharge thereof) and not merely of collection, and waives any right to require that any resort be had by any Lender to any balance of any deposit account or credit on the books of any Lender in favor of any Borrower or Subsidiary or any other Person. The obligations of the Company hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or unenforceability of the Obligations, any impossibility in the performance of the Obligations or otherwise. The Company further agrees that its obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Lender upon the bankruptcy or reorganization of any Borrower or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Lender may have at law or in equity against the Company by virtue hereof, upon the failure of any Borrowing Subsidiary to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Company hereby promises to and will, upon receipt of written demand by the Administrative Agent, forthwith pay, or cause 61 56 to be paid, to the Administrative Agent for distribution to the Lenders in cash an amount equal the unpaid principal amount of such Obligation. The Company further agrees that if payment in respect of any Obligation shall be due in a currency other than US Dollars and/or at a place of payment other than New York and if, by reason of any legal prohibition, disruption of currency or foreign exchange markets, war or civil disturbance or other event, payment of such Obligation in such currency or at such place of payment shall be impossible or, in the reasonable judgment of any Lender, not consistent with the protection of its rights or interests, then, at the election of such Lender, the Company shall make payment of such Obligation in US Dollars (based upon the applicable Exchange Rate in effect on the date of payment) and/or in New York, and shall indemnify such Lender against any losses or expenses (including losses or expenses resulting from fluctuations in exchange rates) that it shall sustain as a result of such alternative payment. Upon payment in full by the Company of any Obligation of any Borrowing Subsidiary, each Lender shall, in a reasonable manner, assign to the Company the amount of such Obligation owed to such Lender and so paid, such assignment to be pro tanto to the extent to which the Obligation in question was discharged by the Company, or make such disposition thereof as the Company shall direct (all without recourse to any Lender and without any representation or warranty by any Lender). Upon payment by the Company of any sums as provided above, all rights of the Company against any Borrowing Subsidiary arising as a result thereof by way of right of subrogation or otherwise shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Obligations owed by such Borrowing Subsidiary to the Lenders (it being understood that, after the discharge of all the Obligations due and payable from such Borrowing Subsidiary, such rights may be exercised by the Company notwithstanding that such Borrowing Subsidiary may remain contingently liable for indemnity or other Obligations). ARTICLE X Miscellaneous SECTION 10.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Company, to it at One Kellogg Square, P.O. Box 3599, Battle Creek, MI 49016-3599, Attention of each of the Treasurer and the General Counsel (Telecopy No. (616) 961-3494); (b) if to any Borrowing Subsidiary, to it in care of the Company as provided in paragraph (a) above; (c) if to the Administrative Agent, to The Chase Manhattan Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Sonia Rosario-Cancar (Telecopy No. (212) 552-5650), with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York 10017, Attention of Tina Ruyter (Telecopy No. (212) 270-1063); 62 57 (d) if to the London Agent, to it at Chase Manhattan International Limited, Trinity Tower, 9 Thomas More Street, London, England E19YT, Attention of Loans Agency Division (Telecopy No. 011-44-171-777-2360), with a copy to the Administrative Agent as provided in paragraph (c) above; and (e) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 10.02. Waivers; Amendments. (a) No failure or delay by any Agent or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agents and the Lenders hereunder and under any other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether any Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Company and the Required Lenders or by the Company and the Administrative Agent with the consent of the Required Lenders and, in the case of any other Loan Document, each applicable Borrower (or the Company on behalf of such Borrower); provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable to any Lender hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender affected thereby, (v) change Section 2.09(c) in a manner that would alter the pro rata reduction of Commitments required thereby, without the written consent of each Lender affected thereby, (vi) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision of any Loan Document specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, or (vii) release the Company from its obligations under Article IX, without the written 63 58 consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of any Agent hereunder without the prior written consent of such Agent. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by the Company, the Required Lenders and the Administrative Agent (and, if its rights or obligations are affected thereby, the London Agent) if (i) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement. SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) The Borrowers shall pay (i) all reasonable out-of-pocket expenses incurred by the Agents and their Affiliates, including the reasonable fees, charges and disbursements of one outside counsel for the Administrative Agent and the London Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers (requested by or for the benefit of any Borrower) of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all reasonable out-of-pocket expenses incurred by any Agent or any Lender, including the fees, charges and disbursements of any counsel for any Agent or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made hereunder, including all such reasonable out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans. (b) The Borrowers shall indemnify each Agent, and each Lender, and each Related Party of any of the foregoing Persons involved directly or indirectly in the Transactions (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (other than Excluded Taxes), including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated thereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Company or any of its Subsidiaries, or any Environmental Liability related in any way to the Company or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (A) do not result in actual out-of-pocket loss or expense by such Indemnitee or (B) result from the bad faith, wilful misconduct or gross negligence of such Indemnitee or the breach by such Indemnitee of its agreements set forth in the Loan Documents. (c) To the extent that the Borrowers fail to pay any amount required to be paid by them to any Agent under paragraph (a) or (b) of this Section each Lender severally agrees to pay to such Agent, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the 64 59 unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Agent in its capacity as such. (d) To the extent permitted by applicable law, no Borrower shall assert, and each hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (e) All amounts due under this Section shall be payable promptly after written demand therefor setting forth the amount and the nature of the expense or claim, as applicable. SECTION 10.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Borrower may assign or otherwise transfer any of its rights or obligations hereunder or under any Borrowing Subsidiary Agreement without the prior written consent of each Lender (and any attempted assignment or transfer by any Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Company and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than US$5,000,000 unless each of the Company and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause (iii) shall not apply to rights in respect of outstanding Competitive Loans, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of US$3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided further that any consent of the Company otherwise required under this paragraph shall not be required if an Event of Default under clause (g) or (h) of Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and 65 60 obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 10.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Administrative Agent, acting for this purpose as an agent of each Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrowers, the Agents and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by any Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of any Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Agents, and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such Participant. Subject to paragraph (f) of this Section, each Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to 66 61 the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Company's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Company is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Company, to comply with Section 2.17(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (h) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Bank") may grant to a special purpose funding vehicle (an "SPC") of such Granting Bank, identified as such in writing from time to time by the Granting Bank to the Administrative Agent and the Borrowers, the option to provide to the Borrowers all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Borrowers pursuant to Section 2.01; provided that (i) nothing herein shall constitute a commitment to make any Loan by any SPC and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall be deemed to utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan were made by the Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any payment under this Agreement for which a Lender would otherwise be liable, for so long as, and to the extent, the related Granting Bank makes such payment. In furtherance of the foregoing, each party hereto hereby agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 10.04, any SPC may (i) with notice to, but without the prior written consent of, the Borrowers and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Bank or to any financial institutions (if consented to by the Borrowers and Administrative Agent) providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans (but not relating to any Borrower, except with the Company's consent) to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. SECTION 10.05. Survival. All covenants, agreements, representations and warranties made by the Borrowers herein, in the other Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that any Agent or any Lender may have had notice or knowledge of any Default or incorrect 67 62 representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 10.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 10.07. Severability. Any provision of any Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions of such Loan Document; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Borrower (other than payroll accounts and trust accounts) against any of and all the obligations of the Borrowers now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement. The rights of each Lender under this Section are in addition to and shall not limit other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) Each Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to 68 63 any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that any Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Borrower or its properties in the courts of any jurisdiction. (c) Each Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement or any other Loan Document will affect the right of any party hereto or thereto to serve process in any other manner permitted by law. SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 10.12. Confidentiality. Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any 69 64 remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty to any swap or derivative transaction relating to the Borrowers and their obligations, or any advisor of any such counterparty, (g) with the consent of any Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any Agent, or any Lender on a nonconfidential basis from a source other than a Borrower. For the purposes of this Section, "Information" means all information received from the Borrowers relating to the Borrowers or their business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by a Borrower; provided that, in the case of information received from a Borrower after the date hereof, such information is identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as a prudent Person engaged in the same business or following customary procedures for such business would accord to its own confidential information. SECTION 10.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 10.14. Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto (including any Borrowing Subsidiary) agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given. (b) The obligations of each Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the 70 65 Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrowers contained in this Section 10.14 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. 71 66 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. KELLOGG COMPANY, by /s/ Thomas J. Webb -------------------------------------- Name: Thomas J. Webb Title: Executive Vice President, Chief Financial Officer THE CHASE MANHATTAN BANK, individually and as Administrative Agent, by /s/ Tina Ruyter -------------------------------------- Name: Tina Ruyter Title: Vice President CHASE MANHATTAN INTERNATIONAL LIMITED, as London Agent, by /s/ Stuard C. Walsh --------------------------------------- Name: Stuard C. Walsh Title: Vice President Barclay's Bank, PLC by /s/ L. Peter Yetman --------------------------------------- Name: L. Peter Yetman Title: Director 72 BANK OF AMERICA, NA., by /s/ Casey Cosgrove ----------------------- Name: Casey Cosgrove Title: Vice President 73 CITIBANK, N.A., by /s/ HENRY J. MATTHEWS ------------------------------ Name: HENRY J. MATTHEWS Title: Vice President 74 ABN AMRO BANK N.V., by /s/ W. Stephen Jones ------------------------------ Name: W. Stephen Jones Title: Senior Vice President /s/ Peter J. Hallan ---------------------------- Peter J. Hallan Assistant Vice President 75 BNP PARIBAS, by /s/ Jo Ellen Bender ----------------------------- Name: Jo Ellen Bender Title: Director /s/ Christine Howatt ------------------------------- Christine Howatt Vice President 76 THE BANK OF NOVA SCOTIA, by /s/ F.C.H. Ashby -------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations 77 THE BANK OF TOKYO-MITSUBISHI, LTD. CHICAGO BRANCH, by /s/ Hisashi Miyashiro --------------------------- Name: Hisashi Miyashiro Title: Deputy General Manager 78 BANK ONE NA, by /s/ William J. Maxbauer ------------------------------ Name: William J. Maxbauer Title: First Vice President 79 CREDIT LYONNAIS, NEW YORK BRANCH, by: /s/ ATTILA KOC ------------------------------- Name: ATTILA KOC Title: SENIOR VICE PRESIDENT 80 DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLAND BRANCHES, by /s/ Karow Thomas A. Foley ----------------------------- Name: Alexander Karow Title: Vice President Name: Thomas A. Foley Title: Vice President 81 THE FUJI BANK, LIMITED, by /s/ Peter L. Chinnici ------------------------------ Name: Peter L. Chinnici Title: Senior Vice President & Group Head 82 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, by /s/ Walter T. Duffy III --------------------------------------- Name: Walter T. Duffy III Title: Associate Director by /s/ Lisa Walker --------------------------------------- Name: Lisa Walker Title: Associate Director 83 MELLON BANK, N.A. by /s/ Louis E. Flori ----------------------- Name: Louis E. Flori Title: Vice President 84 THE SANWA BANK, LIMITED by /s/ KENNETH C. EICHWALD ----------------------------------- Name: KENNETH C. EICHWALD Title: SENIOR VICE PRESIDENT 85 THE SUMITOMO BANK LIMITED by /s/ John H. Kemper ---------------------------------- Name: John H. Kemper Title: Senior Vice President 86 SUNTRUST BANK, by /s/ Michael Pugsley --------------------------- Name: Michael Pugsley Title: Vice President 87 THE NORINCHUKIN BANK, NEW YORK BRANCH by /s/ Yoshiro Niiro ---------------------------- Name: Yoshiro Niiro Title: General Manager 88 THE NORTHERN TRUST COMPANY, by /s/ Roger McDougal ------------------------- Name: Roger McDougal Title: Second Vice President 89 COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH by /s/ Thomas F. Kelly --------------------------- Name: Thomas F. Kelly Title: Vice President by /s/ Edward Peyser --------------------------- Name: Edward Peyser Title: Executive Director 90 THE TOKAI BANK, LIMITED-NEW YORK BRANCH, by /s/ Shinichi Nakatani ------------------------------ Name: Shinichi Nakatani Title: Assistant General Manager 91 BANCO BILBAO VIZCAYA ARGENTARIA, by /s/ Santiago Hernandez Monsalve -------------------------------------- Name: Santiago Hernandez Monsalve Title: Vice President Global Corporate Banking by /s/ John Martini -------------------------------------- Name: John Martini Title: Vice President Corporate Banking 92 STATE STREET BANK AND TRUST COMPANY by /s/ Juan G. Sierra -------------------------------------- Name: Juan G. Sierra Title: Assistant Vice President 93 UNICREDITO ITALIANO S.P.A., NEW YORK BRANCH, by /s/ Christopher J. Eldin -------------------------------------- Name: Christopher J. Eldin Title: First Vice President & Deputy Manager by /s/ Saiyed A. Abbas -------------------------------------- Name: Saiyed A. Abbas Title: Vice President EX-4.08 3 k60557ex4-08.txt CREDIT AGREEMENT 1 EXHIBIT 4.08 ================================================================================ FIVE-YEAR CREDIT AGREEMENT dated as of January 19, 2001 among KELLOGG COMPANY The Borrowing Subsidiaries Party Hereto The Lenders Party Hereto and THE CHASE MANHATTAN BANK, as Administrative Agent CHASE MANHATTAN INTERNATIONAL LIMITED, as London Agent THE CHASE MANHATTAN BANK OF CANADA, as Canadian Agent the Australian Agent CITIBANK, N.A., BANK OF AMERICA, N.A., as Co-Syndication Agents BARCLAYS BANK PLC, as Documentation Agent ---------- JP MORGAN, as Advisor, Sole Lead Arranger and Sole Book Manager ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions SECTION 1.01. Defined Terms.........................................................1 SECTION 1.02. Classification of Loans and Borrowings...............................28 SECTION 1.03. Terms Generally......................................................28 SECTION 1.04. Accounting Terms; GAAP...............................................28 SECTION 1.05. Exchange Rates.......................................................29 SECTION 1.06. Determinations Made in Good Faith....................................29 ARTICLE II The Credits SECTION 2.01. Commitments..........................................................30 SECTION 2.02. Loans and Borrowings.................................................31 SECTION 2.03. Requests for Revolving Borrowings....................................33 SECTION 2.04. Competitive Bid Procedure............................................34 SECTION 2.05. Canadian Bankers' Acceptances........................................36 SECTION 2.06. Australian Reliquification Bills.....................................39 SECTION 2.07. Funding of Borrowings and B/A Drawings...............................39 SECTION 2.08. Interest Elections...................................................40 SECTION 2.09. Termination and Reduction of Commitments; Adjustment of Tranche Commitments..........................................................42 SECTION 2.10. Repayment of Loans and B/As; Evidence of Debt........................44 SECTION 2.11. Prepayment of Loans..................................................45 SECTION 2.12. Fees.................................................................46 SECTION 2.13. Interest.............................................................48 SECTION 2.14. Alternate Rate of Interest...........................................49 SECTION 2.15. Increased Costs......................................................49 SECTION 2.16. Break Funding Payments...............................................51 SECTION 2.17. Taxes................................................................51 SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs..........52 SECTION 2.19. Mitigation Obligations; Replacement of Lenders.......................54 SECTION 2.20. Borrowing Subsidiaries...............................................55 SECTION 2.21. Additional Reserve Costs.............................................55 SECTION 2.22. Redenomination of Certain Designated Foreign Currencies..............56
3 ARTICLE III Representations and Warranties SECTION 3.01. Organization and Qualification.......................................56 SECTION 3.02. Subsidiaries.........................................................57 SECTION 3.03. Corporate Authority and Validity of Obligations......................57 SECTION 3.04. Margin Stock.........................................................57 SECTION 3.05. Financial Reports....................................................57 SECTION 3.06. No Material Adverse Change...........................................58 SECTION 3.07. Litigation...........................................................58 SECTION 3.08. Tax Returns..........................................................58 SECTION 3.09. Approvals............................................................59 SECTION 3.10. ERISA................................................................59 SECTION 3.11. Environmental Matters................................................59 SECTION 3.12. Properties...........................................................59 SECTION 3.13. Compliance with Laws.................................................59 SECTION 3.14. Investment and Holding Company Status................................60 SECTION 3.15. Disclosure...........................................................60 ARTICLE IV Conditions SECTION 4.01. Effective Date.......................................................60 SECTION 4.02. Each Borrowing.......................................................63 SECTION 4.03. Initial Borrowing by each Borrowing Subsidiary.......................63 ARTICLE V Affirmative Covenants SECTION 5.01. Corporate Existence..................................................63 SECTION 5.02. Maintenance..........................................................64 SECTION 5.03. Taxes................................................................64 SECTION 5.04. Insurance............................................................64 SECTION 5.05. Financial Reports and Other Information..............................64 SECTION 5.06. Books and Records; Inspection Rights.................................65 SECTION 5.07. Compliance with Laws.................................................65 ARTICLE VI Negative Covenants SECTION 6.01. Indebtedness.........................................................66 SECTION 6.02. Liens................................................................66 SECTION 6.03. Sale and Leaseback Transactions......................................67 SECTION 6.04. Fundamental Changes..................................................67 SECTION 6.05. Use of Proceeds......................................................68 SECTION 6.06. Minimum Net Worth....................................................68 SECTION 6.07. Interest Expense Coverage Ratio......................................68 ARTICLE VII Events of Default.................................69

4 ARTICLE VIII The Agents.....................................72 ARTICLE IX Guarantee.....................................74 ARTICLE X Miscellaneous SECTION 10.01. Notices.............................................................75 SECTION 10.02. Waivers; Amendments.................................................76 SECTION 10.03. Expenses; Indemnity; Damage Waiver..................................77 SECTION 10.04. Successors and Assigns..............................................78 SECTION 10.05. Survival............................................................81 SECTION 10.06. Counterparts; Integration; Effectiveness............................81 SECTION 10.07. Severability........................................................81 SECTION 10.08. Right of Setoff.....................................................82 SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process..........82 SECTION 10.10. WAIVER OF JURY TRIAL................................................82 SECTION 10.11. Headings............................................................83 SECTION 10.12. Confidentiality.....................................................83 SECTION 10.13. Interest Rate Limitation............................................83 SECTION 10.14. Conversion of Currencies............................................84 SECTION 10.15. Australian Agent....................................................84

5
SCHEDULES Schedule 2.01 -- Commitments Schedule 2.18 -- Payment Accounts Schedule 3.02 -- Significant Subsidiaries Schedule 3.07 -- Litigation Schedule 3.10 -- ERISA Schedule 3.11 -- Environmental Matters Schedule 4.01(h) -- Indebtedness to be Refinanced on the Acquisition Date Schedule 6.01 -- Outstanding Indebtedness After Giving Effect to the Acquisition Schedule 6.02 -- Existing Liens Schedule 6.03 -- Sale-Leaseback Transactions

EXHIBITS: Exhibit A -- Form of Assignment and Acceptance Exhibit B-1 -- Form of Borrowing Subsidiary Agreement Exhibit B-2 -- Form of Borrowing Subsidiary Termination Exhibit C -- Reserve Costs Exhibit D-1 -- Form of Opinion of Gary H. Pilnick, Vice President and Deputy General Counsel Exhibit D-2 -- Form of Opinion of Kirkland & Ellis, Counsel for the Borrowers Exhibit E -- Form of Compliance Certificate Exhibit F -- Form of Note
6 1 FIVE-YEAR CREDIT AGREEMENT dated as of January 19, 2001, among KELLOGG COMPANY, a Delaware corporation, the BORROWING SUBSIDIARIES party hereto, the LENDERS party hereto, THE CHASE MANHATTAN BANK, as Administrative Agent, CHASE MANHATTAN INTERNATIONAL LIMITED, as London Agent, THE CHASE MANHATTAN BANK OF CANADA, as Canadian Agent, the Australian Agent, CITIBANK, N.A. and BANK OF AMERICA, N.A., as Co-Syndication Agents, and BARCLAYS BANK PLC, as Documentation Agent. The Company intends to acquire (the "Acquisition") Keebler (such term and each other capitalized term used but not defined herein having the meaning given it in Article I) for cash in the amount of approximately US$4,600,000,000. In connection with the Acquisition, the Company will (a) refinance certain Indebtedness of the Company and Keebler, (b) obtain the credit facilities provided under this Agreement and under the 364-Day Credit Agreement, and (c) issue Senior Notes in a public offering or in a Rule 144A or other private placement or, to the extent it shall not have issued Senior Notes by the date of the Acquisition, establish the Bridge Facility, in an aggregate principal amount taken together not in excess of US$4,000,000,000. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Acquisition" has the meaning assigned to such term in the preamble to this Agreement. "Acquisition Agreements" means collectively, (a) the Agreement and Plan of Restructuring and Merger, dated October 26, 2000, among Flowers Industries, Inc., Kellogg Company and Kansas Merger Subsidiary, Inc., and (b) the Agreement and Plan of Merger dated as of October 26, 2000, among Keebler Foods Company, Kellogg Company and FK Acquisition Corp. "Acquisition Date" means the date on which the conditions specified in paragraphs (g), (h) and (i) of Section 4.01 are satisfied (or waived in accordance with Section 10.02). 7 2 "Adjusted LIBO Rate" means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserves applicable to such Eurocurrency Borrowing. "Administrative Agent" means The Chase Manhattan Bank, in its capacity as administrative agent for the Lenders hereunder, or any successor thereto appointed in accordance with Article VIII. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Agents" means, collectively, the Administrative Agent, the London Agent, the Canadian Agent and the Australian Agent. "Agreement Currency" has the meaning assigned to such term in Section 10.14(b). "Alternate Base Rate" means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, or the Federal Funds Effective Rate, respectively. "Applicable Agent" means (a) with respect to a Loan or Borrowing denominated in US Dollars, or with respect to any payment that does not relate to any Loan or Borrowing, the Administrative Agent, (b) with respect to a Loan or Borrowing denominated in Euro or Sterling, the London Agent, (c) with respect to a Loan or Borrowing denominated in Canadian Dollars or a B/A, the Canadian Agent, and (d) with respect to a Loan or a Borrowing denominated in Australian Dollars, the Australian Agent. "Applicable Creditor" has the meaning assigned to such term in Section 10.14(b). "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day, with respect to any Eurocurrency Revolving Loan, B/A Drawing or Bill Rate Loan or with respect to the facility fees and utilization fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "Eurocurrency, B/A Drawing and Bill Rate Spread", "Facility Fee Rate" or "Utilization Fee Rate", as the case may be, based upon the ratings by Moody's and S&P, respectively, applicable on such date to the Index Debt: 8 3
EUROCURRENCY, B/A DRAWING AND BILL INDEX DEBT RATINGS RATE SPREAD FACILITY FEE RATE UTILIZATION FEE RATE - ----------------------- ----------------- ----------------- -------------------- Category 1 0.275 0.100 0.125 A-/A3 or higher Category 2 0.375 0.125 0.125 BBB+/Baa1 Category 3 0.475 0.150 0.125 BBB/Baa2 Category 4 0.675 0.200 0.125 BBB-/Baa3 Category 5 0.950 0.300 0.250 lower than BBB-/Baa3 or unrated
For purposes of the foregoing, (i) if either Moody's or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 5; (ii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the higher of the two ratings unless (A) one of the two ratings is more than two Categories lower than the other and neither rating is in Category 5, in which case the Applicable Rate shall be determined by reference to the Category next above that of the lower of the two ratings or (B) either rating is or is deemed to be in Category 5, in which case the Applicable Rate shall be determined by reference to Category 5 and (iii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Company and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by 9 4 Section 10.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent and the Company. "Attributable Debt" means, with respect to any Sale-Leaseback Transaction, the present value (discounted at the rate set forth or implicit in the terms of the lease included in such Sale-Leaseback Transaction, compounded semiannually) of the total obligations of the lessee for rental payments (other than amounts required to be paid on account of taxes, maintenance, repairs, insurance, assessments, utilities, operating and labor costs and other items which do not constitute payments for property rights or amounts related to contingent rents (such as those based on sales)) during the remaining term of the lease included in such Sale-Leaseback Transaction (including any period for which such lease has been extended). In the case of any lease which is terminable by the lessee upon payment of a penalty, the Attributable Debt shall be the lesser of the Attributable Debt determined assuming termination upon the first date such lease may be terminated (in which case the Attributable Debt shall also include the amount of the penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated) or the Attributable Debt determined assuming no such termination. Any determination of any rate implicit in the terms of the lease included in such Sale-Leaseback Transaction made in accordance with generally accepted financial practices by the Company shall absent manifest error be binding and conclusive. "Australian Agent" means the financial institution that has been designated as such by the Company pursuant to Section 10.15. "Australian Bank Bill Rate" means, for any Interest Period, the rate per annum which is: (a) the average determined bid rate (rounded upwards if necessary to the nearest four decimal places) for Bills accepted by a bank having a tenor which is closest to that Interest Period and published on the "BBSY" reference page of the Reuters Monitor System at or about 10:10 a.m. (Local Time) on the first day of that Interest Period; or (b) if on that day that rate is not published by 10:30 a.m., the rate determined by the Australian Agent in good faith to be the average determined bid rate for Bills accepted by a bank on that day having a tenor which is closest to that Interest Period. "Australian Borrowing Subsidiary" means any Subsidiary that is incorporated or otherwise organized under the laws of Australia or any political subdivision thereof that has been designated as such pursuant to Section 2.20 and that has not ceased to be an Australian Borrowing Subsidiary as provided in such Section. "Australian Dollars" or "A$" means the lawful currency of Australia. "Australian Lending Office" means, as to any Australian Tranche Lender, the applicable branch, office or Affiliate of such Australian Tranche Lender designated by such Australian Tranche Lender to make Loans in Australian Dollars. 10 5 "Australian Tranche Commitment" means, with respect to each Australian Tranche Lender, the commitment of such Australian Tranche Lender to make Australian Tranche Revolving Loans pursuant to Section 2.01(e), expressed as an amount representing the maximum aggregate permitted amount of such Lender's Australian Tranche Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Australian Tranche Lender's Australian Tranche Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Australian Tranche Lender shall have assumed its Australian Tranche Commitment, as applicable. The aggregate amount of the Australian Tranche Commitments on the date hereof is US$40,000,000. "Australian Tranche Lender" means a Lender with an Australian Tranche Commitment or with outstanding Australian Tranche Revolving Loans. "Australian Tranche Percentage" means, with respect to any Australian Tranche Lender, the percentage of the total Australian Tranche Commitments represented by such Lender's Australian Tranche Commitment. If the Australian Tranche Commitments have terminated or expired, the Australian Tranche Percentages shall be determined based upon the Australian Tranche Commitments most recently in effect, giving effect to any assignments. "Australian Tranche Revolving Borrowing" means a Borrowing comprised of Australian Tranche Revolving Loans. "Australian Tranche Revolving Credit Exposure" means, at any time, the sum of (a) the aggregate principal amount of the Australian Tranche Revolving Loans denominated in US Dollars at such time and (b) the US Dollar Equivalent of the aggregate principal amount of the Australian Tranche Revolving Loans denominated in Australian Dollars outstanding at such time. The Australian Tranche Revolving Credit Exposure of any Lender at any time shall be such Lender's Australian Tranche Percentage of the total Australian Tranche Revolving Credit Exposure at such time. "Australian Tranche Revolving Loan" means a Loan made by an Australian Tranche Lender pursuant to Section 2.01(e). Each Australian Tranche Revolving Loan denominated in US Dollars shall be a Eurocurrency Loan or an ABR Loan, and each Australian Tranche Revolving Loan denominated in Australian Dollars shall be a Bill Rate Loan. "Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments. "B/A" means a bill of exchange, including a depository bill issued in accordance with the Depository Bills and Notes Act (Canada), denominated in Canadian Dollars, drawn by a Canadian Borrowing Subsidiary and accepted by a Canadian Tranche Lender in accordance with the terms of this Agreement. "B/A Drawing" means B/As accepted and purchased on the same date and as to which a single Contract Period is in effect including any B/A Equivalent Loans accepted and purchased on the same date and as to which a single Contract Period is in effect. For greater 11 6 certainty, all provisions of this Agreement which are applicable to B/As are also applicable, mutatis mutandis, to B/A Equivalent Loans "B/A Equivalent Loan" is defined in Section 2.5(k). "Bill" has the meaning assigned to such term in the Bills of Exchange Act 1909 (Cwlth) and a reference to the drawing or acceptance or endorsement of, or other dealing with, a Bill is to be interpreted in accordance with that Act. "Bill Rate", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Australian Bank Bill Rate. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means the Company or any Borrowing Subsidiary. "Borrowing" means (a) Revolving Loans of the same Type and currency, made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect, or (b) a Competitive Loan or group of Competitive Loans of the same Type and currency made on the same date and as to which a single Interest Period is in effect. "Borrowing Minimum" means (a) in the case of a Borrowing denominated in US Dollars, US$25,000,000 and (b) in the case of a Borrowing denominated in any other currency, the smallest amount of such other currency that is a multiple of 1,000,000 units of such currency that has a US Dollar Equivalent in excess of US$5,000,000. "Borrowing Multiple" means (a) in the case of a Borrowing denominated in US Dollars, US$5,000,000 and (b) in the case of a Borrowing denominated in any other currency, 1,000,000 units of such currency. "Borrowing Request" means a request by a Borrower for a Revolving Borrowing in accordance with Section 2.03. "Borrowing Subsidiary" means, at any time, each of the Subsidiaries that (a) is named on the signature pages to this Agreement or (b) has been designated as a Borrowing Subsidiary by the Company pursuant to Section 2.20, other than any such Subsidiary that has ceased to be a Borrowing Subsidiary as provided in Section 2.20. "Borrowing Subsidiary Agreement" means a Borrowing Subsidiary Agreement substantially in the form of Exhibit B-1. "Borrowing Subsidiary Termination" means a Borrowing Subsidiary Termination substantially in the form of Exhibit B-2. 12 7 "Bridge Facility" means the US$4,000,000,000 senior unsecured bridge credit facility made available to the Company under the Bridge Agreement dated as of the date hereof, 2001, among the Company, the lenders named therein and Chase, as administrative agent, with no changes therefrom adverse to the Lenders, as amended from time to time. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, (a) when used in connection with a Eurocurrency Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in deposits in the applicable currency in the London interbank market, (b) when used in connection with a Loan denominated in Euro, the term "Business Day" shall also exclude any day on which the TARGET payment system is not open for the settlement of payments in Euro, (c) when used in connection with a Loan denominated in Canadian Dollars or a B/A, the term "Business Day" shall also exclude any day on which banks are not open for dealings in deposits in Toronto and (d) when used in connection with a Loan denominated in Australian Dollars, the term "Business Day" shall also exclude any day on which banks are not open for dealings in deposits in Australian Dollars in the Sydney or Melbourne markets. "Calculation Date" means (a) the last Business Day of each calendar quarter and (b) solely with respect to any Designated Foreign Currency for a requested new Borrowing for which an Exchange Rate was not established on the immediately preceding Calculation Date, the Business Day immediately preceding the date on which such Borrowing is to be made, provided that the Administrative Agent may in addition designate the last day of any other month as a Calculation Date if it reasonably determines that there has been significant volatility in the foreign currency markets. "CAM" shall mean the mechanism for the allocation and exchange of interests in Loans and other extensions of credit under the several Tranches and collections thereunder established under the final paragraph of Article VII. "CAM Exchange" shall mean the exchange of the Lender's interests provided for in final paragraph of Article VII. "CAM Exchange Date" shall mean the date on which any event referred to in paragraph (g) or (h) of Article VII shall occur in respect of the Company. "CAM Percentage" shall mean, as to each Lender, a fraction, expressed as a decimal, of which (a) the numerator shall be the aggregate US Dollar Equivalent (determined on the basis of Exchange Rates prevailing on the CAM Exchange Date) of the Obligations owed to such Lender (whether or not at the time due and payable) immediately prior to the CAM Exchange Date and (b) the denominator shall be the aggregate US Dollar Equivalent (as so determined) of the Obligations owed to all the Lenders (whether or not at the time due and payable) immediately prior to the CAM Exchange Date. "Canadian Agent" means The Chase Manhattan Bank of Canada, in its capacity as Canadian agent for the Lenders hereunder, or any successor thereto appointed in accordance with Article VIII. 13 8 "Canadian Base Rate" means, for any day, the rate of interest per annum (rounded upwards, if necessary, to the next 1/16 or 1%) equal to the greater of (a) the interest rate per annum publicly announced from time to time by Canadian Agent as its reference rate in effect on such day at its principal office in Toronto for determining interest rates applicable to commercial loans denominated in Canadian Dollars in Canada (each change in such reference rate being effective from and including the date such change in publicly announced as being effective) and (b) the interest rate per annum equal to the sum of (i) the CDOR Rate on such day (or, if such rate is not so reported on the Reuters Screen CDOR Page, the average of the rate quotes for bankers' acceptances denominated in Canadian Dollars with a term of 30 days received by the Canadian Agent at approximately 10:00 a.m., Toronto time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) from one or more banks of recognized standing selected by it) and (ii) 0.50% per annum. "Canadian Borrowing Subsidiary" means any Subsidiary that is incorporated or otherwise organized under the laws of Canada or any political subdivision thereof that has been designated as such pursuant to Section 2.20 and that has not ceased to be a Canadian Borrowing Subsidiary as provided in such Section. "Canadian Dollars" or "C$" means the lawful money of Canada. "Canadian Lending Office" means, as to any Canadian Tranche Lender, the applicable branch, office or Affiliate of such Canadian Tranche Lender designated by such Canadian Tranche Lender to make Loans in Canadian Dollars and to accept and purchase or arrange for the purchase of B/As. "Canadian Tranche Commitment" means, with respect to each Canadian Tranche Lender, the commitment of such Canadian Tranche Lender to make Canadian Tranche Revolving Loans pursuant to Section 2.01(d) and to accept and purchase or arrange for the purchase of B/As pursuant to Section 2.05, expressed as an amount representing the maximum aggregate permitted amount of such Canadian Tranche Lender's Canadian Tranche Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Canadian Tranche Lender's Canadian Tranche Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Canadian Tranche Lender shall have assumed its Canadian Tranche Commitment, as applicable. The aggregate amount of the Canadian Tranche Commitments on the date hereof is US$60,000,000. "Canadian Tranche Lender" means a Lender with a Canadian Tranche Commitment or with outstanding Canadian Tranche Revolving Loans. "Canadian Tranche Percentage" means, with respect to any Canadian Tranche Lender, the percentage of the total Canadian Tranche Commitments represented by such Lender's Canadian Tranche Commitment. If the Canadian Tranche Commitments have terminated or expired, the Canadian Tranche Percentages shall be determined based upon the Canadian Tranche Commitments most recently in effect, giving effect to any assignments. "Canadian Tranche Revolving Borrowing" means a Borrowing comprised of Canadian Tranche Revolving Loans. 14 9 "Canadian Tranche Revolving Credit Exposure" means, at any time, the sum of (a) the aggregate principal amount of the Canadian Tranche Revolving Loans denominated in US Dollars outstanding at such time, (b) the US Dollar Equivalent of the aggregate principal amount of the Canadian Tranche Revolving Loans denominated in Canadian Dollars outstanding at such time, and (c) the US Dollar Equivalent of the aggregate face amount of the B/As accepted by the Canadian Lenders and outstanding at such time. The Canadian Tranche Revolving Credit Exposure of any Lender at any time shall be such Lender's Canadian Tranche Percentage of the total Canadian Tranche Revolving Credit Exposure at such time. "Canadian Tranche Revolving Loan" means a Loan made by a Canadian Tranche Lender pursuant to Section 2.01(d). Each Canadian Tranche Revolving Loan denominated in US Dollars shall be a Eurocurrency Loan or an ABR Loan, and each Canadian Tranche Revolving Loan denominated in Canadian Dollars shall be a Canadian Base Rate Loan. "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "CDOR Rate" means, on any date, an interest rate per annum equal to the average discount rate applicable to bankers' acceptances denominated in Canadian Dollars with a term of 30 days (for purposes of the definition of "Canadian Base Rate") or with a term equal to the Contract Period of the relevant B/As (for purposes of the definition of "Discount Rate") appearing on the Reuters Screen CDOR Page (or on any successor or substitute page of such Screen, or any successor to or substitute for such Screen, providing rate quotations comparable to those currently provided on such page of such Screen, as determined by the Canadian Agent from time to time) at approximately 10:00 a.m., Toronto time, on such date (or, if such date is not a Business Day, on the next preceding Business Day). "Change in Control" means (a) any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 40% or more in voting power of the outstanding Voting Stock of the Company or (b) members of the Board of Directors of the Company on the date hereof plus any additional members of such Board whose nomination for election to such Board is recommended or approved by a majority of the then current members of such Board shall at any time fail to constitute a majority of such Board. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. 15 10 "Chase" means The Chase Manhattan Bank and its successors. "Class", when used in reference to (a) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are US Tranche Revolving Loans, UK Tranche Revolving Loans, Euro Tranche Revolving Loans, Canadian Tranche Revolving Loans, Australian Tranche Revolving Loans or Competitive Loans and (b) any Commitment, refers to whether such Commitment is a US Tranche Commitment, a UK Tranche Commitment, a Euro Tranche Commitment, a Canadian Tranche Commitment or an Australian Tranche Commitment. "CMIL" means Chase Manhattan International Limited and its successors. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commitment" means a US Tranche Commitment, a UK Tranche Commitment, a Euro Tranche Commitment, a Canadian Tranche Commitment or an Australian Tranche Commitment. "Company" means Kellogg Company, a Delaware corporation. "Competitive Bid" means an offer by a Lender to make a Competitive Loan in accordance with Section 2.04. "Competitive Bid Rate" means, with respect to any Competitive Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making such Competitive Bid. "Competitive Bid Request" means a request by a Borrower for Competitive Bids in accordance with Section 2.04. "Competitive Loan" means a Loan made pursuant to Section 2.04. "Competitive Loan Exposure" means, with respect to any Lender at any time, the sum of (a) the aggregate principal amount of the outstanding Competitive Loans of such Lender denominated in US Dollars and (b) the sum of the US Dollar Equivalents of the aggregate principal amounts of the outstanding Competitive Loans of such Lender denominated in Designated Foreign Currencies. "Consolidated EBITDA" means, for any period, Consolidated Net Income for such period plus, without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period, (ii) consolidated income tax expense (including, without duplication, foreign withholding taxes and any state single business unitary or other similar taxes) for such period, (iii) all amounts attributable to depreciation and amortization for such period, (iv) any non-cash charges for such period, (v) fees and expenses incurred in connection with the Transactions, (vi) fees and expenses in an aggregate amount for any fiscal year not in excess of $20,000,000 incurred in connection with the issuance of any Indebtedness or equity, acquisitions, investments or asset sales or divestitures permitted hereunder and (vii) any (A) cash charges in an aggregate amount for any fiscal year not in excess of $50,000,000 or (B) any noncash charges, in each case arising out of the restructuring, consolidation, severance or discontinuance of any portion of the operations, employees and/or 16 11 management of any entities or businesses of the Company or any of the Subsidiaries, determined without giving effect to any extraordinary gains or losses for such period to the extent included in determining Consolidated Net Income, all determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, for any period, the sum of (a) the cash interest expense (including imputed interest expense in respect of Capital Lease Obligations) of the Company and the Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, and (b) any interest accrued during such period in respect of Indebtedness of the Company or any Subsidiary that is required to be capitalized rather than included in consolidated interest expense for such period in accordance with GAAP; provided that there shall be excluded from Consolidated Interest Expense (i) any fees paid to the Administrative Agent and (ii) any payments made to obtain any interest rate hedging agreements; and provided further, solely for purposes of determining compliance with Section 6.07, in the event the Company or any Subsidiary acquired any Person or line of business during the relevant period, Consolidated Interest Expense will be determined giving pro forma effect to any incurrence of Indebtedness related to such acquisition as if such incurrence of Indebtedness had occurred on the first day of the relevant period. "Consolidated Net Income" means, for any period, the net income or loss of the Company and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that (a) there shall be excluded the income of any Person (other than the Company) in which any other Person (other than the Company or any Subsidiary or any director holding qualifying shares or other third parties holding nominal amounts of shares, as required by or in compliance with applicable law) owns an Equity Interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of the Subsidiaries during such period, and (b) solely for purposes of determining compliance with Section 6.07, in the event the Company or any Subsidiary acquired any Person or line of business during the relevant period, Consolidated Net Income will be determined giving pro forma effect to such acquisition as if such acquisition and any related incurrence of Indebtedness had occurred on the first day of the relevant period, but shall not take into account any cost savings projected to be realized as a result of such acquisition other than cost savings permitted to be included under Regulation S-X of the Securities and Exchange Commission. "Consolidated Net Sales" means, for any period, the net sales of the Company and the Subsidiaries for such period, as reported as a line item in the Company's income statements as filed with the Company's Form 10-Q Report or Form 10-K Report, as applicable. "Consolidated Net Worth" means the excess of Consolidated Total Assets over the consolidated total liabilities of the Company and its consolidated Subsidiaries. "Consolidated Total Assets" means the total assets of the Company and its Subsidiaries determined in accordance with GAAP; provided that for purposes of determining compliance with Sections 6.01, 6.02 and 6.03, in the event the Company or any Subsidiary acquires any Person or line of business after the fiscal quarter end referred to in such Section, "Consolidated Total Assets" as of such fiscal quarter end shall be deemed to include the assets of such Person or line of business from and after the date of such acquisition. 17 12 "Contract Period" means, with respect to any B/A, the period commencing on the date such B/A is issued and accepted and ending on the date 30, 60, 90 or 180 days thereafter, as the applicable Canadian Borrowing Subsidiary may elect (in each case subject to availability); provided that if such Contract Period would end on a day other than a Business Day, such Contract Period shall be extended to the next succeeding Business Day. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Controlled Group" means all of a controlled group of corporations and all trades and businesses (whether or not incorporated) under common control that, together with the Company or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Designated Foreign Currency" means (a) Sterling, Euro, Canadian Dollars, Australian Dollars and Yen and (b) any other currency specified by the Company in a notice to the Administrative Agent for a proposed Competitive Borrowing which, at the time such Borrowing is made, is freely transferable and convertible into US Dollars in the London market and for which, at such time, LIBO Rates can be determined by reference to the Telerate screen as provided in the definition of "LIBO Rate". "Discount Proceeds" means, with respect to any B/A, an amount (rounded upward, if necessary, to the nearest C$.01) calculated by multiplying (a) the face amount of such B/A by (b) the quotient obtained by dividing (i) one by (ii) the sum of (A) one and (B) the product of (x) the Discount Rate (expressed as a decimal) applicable to such B/A and (y) a fraction of which the numerator is the Contract Period applicable to such B/A and the denominator is 365, with such quotient being rounded upward or downward to the fifth decimal place and .000005 being rounded upward. "Discount Rate" means, with respect to a B/A being accepted and purchased on any day, (a) for a Lender which is a Schedule I Lender, (i) the CDOR Rate applicable to such B/A or, (ii) if the discount rate for a particular Contract Period is not quoted on the Reuters Screen CDOR Page, the arithmetic average (as determined by the Canadian Agent) of the percentage discount rates (expressed as a decimal and rounded upward, if necessary, to the nearest 1/100 of 1%) quoted to the Canadian Agent by the Schedule I Reference Lenders as the percentage discount rate at which each such bank would, in accordance with its normal practices, at approximately 10:00 a.m., Toronto time, on such day, be prepared to purchase bankers' acceptances accepted by such bank having a face amount and term comparable to the face amount and Contract Period of such B/A, and (b) for a lender which is a Schedule II Lender or a Schedule III Lender, the lesser of (i) the CDOR Rate applicable to such B/A plus 0.10% per annum and (ii) the arithmetic average (as determined by the Canadian Agent) of the percentage discount rates (expressed as a decimal and rounded upward, if necessary, to the nearest 1/100 of 1%) quoted to the Canadian Agent by 18 13 the Schedule II Reference Lenders as the percentage discount rate at which each such bank would, in accordance with its normal practices, at approximately 10:00 a.m., Toronto time, on such day, be prepared to purchase bankers' acceptances accepted by such bank having a face amount and term comparable to the face amount and Contract Period of such B/A. "Effective Date" means the date on which the conditions specified in paragraphs (a) through (f) of Section 4.01 are satisfied (or waived in accordance with Section 10.02). "EMU Legislation" means the legislative measures of the European Union for the introduction of, changeover to or operation of the Euro in one or more member states. "Environmental Laws" means all federal, state, local and foreign statutes, laws (including common law), regulations, ordinances, judgments, permits and other governmental rules or restrictions relating to human health, safety (including occupational safety and health standards), and protection of the environment or to emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into the environment, including ambient air, surface or ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the cleanup or other remediation thereof. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Company or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Laws, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Equity Interests" means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest. "ERISA" has the meaning assigned to such term in Section 3.10. "Euro" or "E." means the single currency of the European Union as constituted by the Treaty on European Union and as referred to in the EMU Legislation. "Euro Borrowing Subsidiary" means any Subsidiary that is incorporated or otherwise organized under the laws of any member state of the European Union or any political subdivision thereof that has been designated as such pursuant to Section 2.20 and that has not ceased to be a Euro Borrowing Subsidiary as provided in such Section. "Eurocurrency", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate 19 14 determined by reference to the Adjusted LIBO Rate (or, in the case of a Competitive Loan, the LIBO Rate). "Euro Lending Office" means, as to any Euro Tranche Lender, the applicable branch, office or Affiliate of such Euro Tranche Lender designated by such Euro Tranche Lender to make Loans in Euro. "Euro Tranche Commitment" means, with respect to each Euro Tranche Lender, the commitment of such Euro Tranche Lender to make Euro Tranche Revolving Loans pursuant to Section 2.01(c), expressed as an amount representing the maximum aggregate permitted amount of such Euro Tranche Lender's Euro Tranche Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender under Section 10.04. The initial amount of each Euro Tranche Lender's Euro Tranche Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Euro Tranche Lender shall have assumed its Euro Tranche Commitment, as applicable. The aggregate amount of the Euro Tranche Commitments on the date hereof is US$55,000,000. "Euro Tranche Lender" means a Lender with a Euro Tranche Commitment or with outstanding Euro Tranche Revolving Loans. "Euro Tranche Percentage" means, with respect to any Euro Tranche Lender, the percentage of the total Euro Tranche Commitments represented by such Lender's Euro Tranche Commitment. If the Euro Tranche Commitments have terminated or expired, the Euro Tranche Percentages shall be determined based upon the Euro Tranche Commitments most recently in effect, giving effect to any assignments. "Euro Tranche Revolving Borrowing" means a Borrowing comprised of Euro Tranche Revolving Loans. "Euro Tranche Revolving Credit Exposure" means, at any time, the sum of (a) the aggregate principal amount of the Euro Tranche Revolving Loans denominated in US Dollars outstanding at such time and (b) the US Dollar Equivalent of the aggregate principal amount of the Euro Tranche Revolving Loans denominated in Euros outstanding at such time. The Euro Tranche Revolving Credit Exposure of any Lender at any time shall be such Lender's Euro Tranche Percentage of the total Euro Tranche Revolving Credit Exposure at such time. "Euro Tranche Revolving Loan" means a Loan made by a Euro Tranche Lender pursuant to Section 2.01(c). Each Euro Tranche Revolving Loan denominated in US Dollars shall be a Eurocurrency Loan or an ABR Loan, and each Euro Tranche Revolving Loan denominated in Euro shall be a Eurocurrency Loan. "Event of Default" has the meaning assigned to such term in Article VII. "Exchange Rate" means on any day, for purposes of determining the US Dollar Equivalent of any other currency, the rate at which such other currency may be exchanged into US Dollars, as set forth at approximately 11:00 a.m., London time, on such day on the Reuters World Currency Page for such currency. In the event that such rate does not appear on any Reuters 20 15 World Currency Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Company, or, in the absence of such an agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 a.m., Local Time, on such date for the purchase of US Dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error. "Excluded Taxes" means, with respect to any Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of any Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above, (c) in the case of a Lender, any withholding tax imposed by the United States of America that is in effect and would apply to amounts payable by the Company from an office within such jurisdiction to the US Lending Office of such Lender at the time such Lender becomes a party to this Agreement (or designates a new US Lending Office), (d) in the case of a UK Tranche Lender (other than an assignee pursuant to a request by the Company under Section 2.19(b) or by operation of the CAM), any withholding tax imposed by the United Kingdom (or any political subdivision thereof) that is in effect and would apply to amounts payable by a UK Borrowing Subsidiary from an office within such jurisdiction to the UK Lending Office of such UK Tranche Lender at the time such UK Tranche Lender becomes a party to this Agreement (or designates a new UK Lending Office), (e) in the case of a Euro Tranche Lender (other than an assignee pursuant to a request by the Company under Section 2.19(b) or by operation of the CAM), any withholding tax imposed by Germany or Spain (or any political subdivision thereof) that is in effect and would apply to amounts payable by a Euro Borrowing Subsidiary from an office within such jurisdiction to the applicable Euro Lending Office of such Euro Tranche Lender at the time such Euro Tranche Lender becomes a party to this Agreement (or designates a new Euro Lending Office), (f) in the case of a Canadian Tranche Lender (other than an assignee pursuant to a request by the Company under Section 2.19(b) or by operation of the CAM), any withholding tax imposed by Canada (or any political subdivision thereof) that is in effect and would apply to amounts payable by a Canadian Borrowing Subsidiary from an office within such jurisdiction to the Canadian Lending Office of such Canadian Tranche Lender at the time such Canadian Tranche Lender becomes a party to this Agreement (or designates a new Canadian Lending Office), (g) in the case of an Australian Tranche Lender (other than an assignee pursuant to a request by the Company under Section 2.19(b) or by operation of the CAM), any withholding tax imposed by Australia (or any political subdivision thereof) that is in effect and would apply to amounts payable by an Australian Borrowing Subsidiary from an office within such jurisdiction to the Australian Lending Office of such Australian Tranche Lender at the time such Australian Tranche Lender becomes a party to this Agreement (or designates a new Australian Lending Office), and (h) any withholding tax that is attributable to such Lender's failure to comply with Section 2.17(e), except, in the case of clauses (c), (d), (e), (f) or (g) above, to the extent that (i) such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional 21 16 amounts from any Borrower with respect to any withholding tax pursuant to Section 2.17, or (ii) such withholding tax shall have resulted from the making of any payment to a location other than the office designated by the Applicable Agent or such Lender for the receipt of payments of the applicable type. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financed Portion" means, at any time, with respect to a Securitization, the greatest amount of the claims of the parties providing financing (whether through direct purchases of receivables or interests therein or through other financing arrangements), however evidenced, including direct claims on collections of a party providing financing and including debt or equity interests or securities (other than any seller's interests retained by any wholly owned Subsidiary) of a purchasing vehicle, permitted to be outstanding at such time under such Securitization (assuming the satisfaction of all conditions to issuance) or, if greater, the maximum purchase limit, however denominated, under such Securitization. "Financial Officer" means the chief financial officer, principal accounting officer, treasurer, assistant treasurer or controller of the Company. "Fixed Rate" means, with respect to any Competitive Loan (other than a Eurocurrency Competitive Loan), the fixed rate of interest per annum specified by the Lender making such Competitive Loan in its related Competitive Bid. "Fixed Rate Loan" means a Competitive Loan bearing interest at a Fixed Rate. "Foreign Lender" means, as to any Borrower, any Lender that is organized under the laws of a jurisdiction other than that in which such Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles in the United States of America or, when reference is made to another jurisdiction, generally accepted accounting principles in effect from time to time in such jurisdiction. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. 22 17 "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include (i) endorsements for collection or deposit, (ii) standard contractual indemnities not related to the borrowing of money or Indebtedness, in each case in the ordinary course of business, or (iii) recourse at customary levels in connection with Securitizations accounted for as sales. The amount of any Guarantee of any guaranteeing Person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made and (b) the maximum amount for which such guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guarantee, unless such primary obligation and the maximum amount for which such guaranteeing Person may be liable are not stated or determinable, in which case the amount of such Guarantee shall be such guaranteeing Person's maximum reasonably anticipated liability (assuming such Person is required to perform) in respect thereof as determined by such Person in good faith. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Laws. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, currency swap agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. The "principal amount" of any Hedging Agreement of the Company or any Subsidiary at any time shall be deemed to be the aggregate amount at such time of the payments that would be required to be made by the Company or such Subsidiary in the event of any early termination at such time of such Hedging Agreement. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, 23 18 (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Indebtedness shall not include trade payables and accrued expenses arising in the ordinary course of business. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Index Debt" means senior, unsecured, long-term indebtedness for borrowed money of the Company that is not guaranteed by any other Person or subject to any other credit enhancement. "Information Memorandum" means the Confidential Information Memorandum dated November 2000 relating to the Company and the Transactions. "Interest Election Request" means a request by a Borrower to convert or continue a Revolving Borrowing or B/A Drawing in accordance with Section 2.08. "Interest Payment Date" means (a) with respect to any ABR Loan or Canadian Base Rate Loan, the last day of each March, June, September and December, (b) with respect to any Eurocurrency Loan or Bill Rate Borrowing, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, and (c) with respect to any Fixed Rate Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Fixed Rate Borrowing with an Interest Period of more than 90 days' duration (unless otherwise specified in the applicable Competitive Bid Request), each day prior to the last day of such Interest Period that occurs at intervals of 90 days' duration after the first day of such Interest Period, and any other dates that are specified in the applicable Competitive Bid Request as Interest Payment Dates with respect to such Borrowing. "Interest Period" means (a) with respect to any Eurocurrency Borrowing or Bill Rate Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the applicable Borrower may elect, or any other period agreed to by the applicable Borrower and each Lender, and (b) with respect to any Fixed Rate Borrowing, the period (which shall not be less than 7 days or more than 360 days) commencing on the date of such Borrowing and ending on the date specified in the applicable Competitive Bid Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurocurrency Borrowing or Bill Rate Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurocurrency Borrowing or Bill Rate Borrowing that 24 19 commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Judgment Currency" has the meaning assigned to such term in Section 10.14(b). "Keebler" means Keebler Foods Company, a Delaware corporation. "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, with respect to any Eurocurrency Borrowing for any Interest Period, the rate per annum determined by the Applicable Agent at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period by reference to the British Bankers' Association Interest Settlement Rates for deposits in the currency of such Borrowing (as reflected on the applicable Telerate screen), for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the "LIBO Rate" shall be the average (rounded upward, if necessary, to the next 1/100 of 1%) of the respective interest rates per annum at which deposits in the currency of such Borrowing are offered for such Interest Period to major banks in the London interbank market by Chase at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan Documents" means this Agreement, each Borrowing Subsidiary Agreement, each Borrowing Subsidiary Termination and each promissory note delivered pursuant to this Agreement, as such documents may be amended, modified, supplemented or restated from time to time. "Loans" means the loans made by the Lenders to the Borrowers pursuant to this Agreement. "Local Time" means (a) with respect to a Loan or Borrowing denominated in US Dollars, New York City time, (b) with respect to a Loan or Borrowing denominated in any Designated Foreign Currency (other than Canadian Dollars and Australian Dollars), London time, (c) with respect to a Loan or Borrowing denominated in Canadian Dollars or a B/A, Toronto time, and (d) with respect to a Loan or Borrowing denominated in Australian Dollars, Sydney time. 25 20 "London Agent" means CMIL, in its capacity as London agent for the Lenders hereunder, or any successor thereto appointed in accordance with Article VIII. "Margin" means, with respect to any Competitive Loan bearing interest at a rate based on the LIBO Rate, the marginal rate of interest, if any, to be added to or subtracted from the LIBO Rate to determine the rate of interest applicable to such Loan, as specified by the Lender making such Loan in its related Competitive Bid. "Margin Stock" means "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System. "Material Adverse Effect" means (a) any condition or change that has affected or would reasonably be expected to affect materially and adversely the business, assets, liabilities or financial condition of the Company and the Subsidiaries taken as a whole or (b) a material adverse effect on the rights of or benefits available to the Lenders under any Loan Document. "Maturity Date" means the fifth anniversary of the date of this Agreement. "Moody's" means Moody's Investors Service, Inc. "Obligations" means (a)(i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) all reimbursement obligations of the Canadian Borrowing Subsidiaries in respect of B/As accepted hereunder and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Company or any other Borrower under this Agreement or any other Loan Document and (b) all obligations of the Borrowers under each Hedging Agreement entered into with a counterparty that was a Lender or an Affiliate of a Lender at the time such Hedging Agreement was entered into, provided that for purposes of the final paragraph of Article VII "Obligations" shall include only the obligations described in clause (a)(i) and (ii) above. "Offering Memorandum" means the offering memorandum relating to the Senior Notes. "Other Taxes" means any and all present or future recording, stamp, documentary, excise, transfer, sales, property or similar taxes, charges or levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document. "PBGC" has the meaning assigned to such term in Section 3.10. 26 21 "Permitted Encumbrances" means: (a) Liens imposed by law for taxes, assessments or other governmental charges that are not yet due or are being contested in compliance with Section 5.03; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days, are in de minimis amounts or are being contested in good faith and by appropriate proceedings with adequate reserves under GAAP being provided therefor; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance, health insurance and other social security laws or regulations and withholding taxes; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; (f) easements, zoning restrictions, rights-of-way, minor defects or irregularities in title and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not interfere with the ordinary conduct of business of the Company or any Subsidiary; (g) rights of set-off in favor of financial institutions (other than in respect of amounts deposited to secure Indebtedness); (h) liens in the nature of trustee's liens granted pursuant to any indenture securing obligations to pay compensation to such trustee, to reimburse its expenses and to indemnify it under the terms thereof; (i) licenses, leases or subleases (other than Capital Leases and other financing leases) granted to third parties (other than to secure Indebtedness) not interfering in any material respect with the business of the Company or any Subsidiary; (j) liens arising in connection with contracts with or made at the request of the United States of America, any State of the United States of America or any department, agency or instrumentality of the foregoing; and (k) liens arising from deposits with or the giving of any form of security to any Governmental Authority required as a condition to the transaction of business or exercise of any privilege, franchise or license; provided that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. 27 22 "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means, for the Company and each Subsidiary at any time, an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (a) is maintained by a member of the Controlled Group for employees of a member of the Controlled Group, (b) is maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, or (c) under which a member of the Controlled Group has any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years or by reason of being deemed a contributing sponsor under Section 4069 of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, whether now owned or hereafter acquired. "Quotation Day" means, with respect to any Eurocurrency Borrowing and any Interest Period, the day on which it is market practice in the relevant interbank market for prime banks to give quotations for deposits in the currency of such Borrowing for delivery on the first day of such Interest Period. If such quotations would normally be given by prime banks on more than one day, the Quotation Day will be the last of such days. "Register" has the meaning set forth in Section 10.04. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Required Lenders" means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures and unused Commitments at such time; provided that, for all purposes after the Loans become due and payable pursuant to Article VII or the Commitments expire or terminate, "Required Lenders" will mean, at any time, Lenders having Revolving Credit Exposures and outstanding Competitive Loans representing more than 50% of the sum of the total Revolving Credit Exposures and outstanding Competitive Loans at such time. "Reset Date" has the meaning assigned to such term in Section 1.05. "Reuters Screen CDOR Page" means the display designated as page CDOR on the Reuters Monitor Money Rates Service or such other page as may, from time to time, replace 28 23 that page on that service for the purpose of displaying bid quotations for bankers' acceptances accepted by leading Canadian banks. "Revolving Credit Exposure" means, with respect to any Lender at any time, the sum of such Lender's US Tranche Revolving Credit Exposure, UK Tranche Revolving Credit Exposure, Euro Tranche Revolving Credit Exposure, Canadian Tranche Revolving Credit Exposure and Australian Tranche Revolving Credit Exposure at such time. "Revolving Loan" means a Loan made pursuant to Sections 2.01 and 2.03. "Sale-Leaseback Transaction" means any arrangement whereby the Company or a Subsidiary shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease property that it intends to use for substantially the same purpose or purposes as the property sold or transferred; provided that any such arrangement (a) involving no party other than the Company and any Wholly Owned Subsidiary or (b) entered into within 180 days after the acquisition, construction or substantial improvement of the subject property shall not be deemed to be a "Sale-Leaseback Transaction". "Schedule I Lender" means any Lender named on Schedule I to the Bank Act (Canada). "Schedule I Reference Lenders" means Royal Bank of Canada, Canadian Imperial Bank of Commerce, The Toronto-Dominion Bank, Bank of Montreal and Bank of Nova Scotia, and any other Schedule I Lender as may be agreed by the applicable Borrowers and the Canadian Agent from time to time. "Schedule II Lender" means any Lender named on Schedule II to the Bank Act (Canada). "Schedule II Reference Lender" means The Chase Manhattan Bank of Canada. "Schedule III Lender" means any Lender named on Schedule III to the Bank Act (Canada). "SEC" means the Securities and Exchange Commission or any successor. "Securitization" means the transfer or pledge of accounts receivable or interests in accounts receivable (a) to a trust, partnership, corporation or other entity, which transfer or pledge is funded by such entity in whole or in part by the issuance to one or more lenders or investors of indebtedness or securities that are paid principally from the cash flow derived from such accounts receivable or interests in accounts receivable, or (b) directly to an investor or other purchaser. "Senior Notes" means the Company's unsecured Senior Notes to be issued by the Company pursuant to the Senior Note Documents. "Senior Note Documents" means the indenture providing for the issuance of the Senior Notes substantially in the form approved prior to the date hereof by the Lenders, which form shall provide that the Senior Notes are unsecured and are not Guaranteed by any Subsidiary 29 24 and shall otherwise have customary market terms reasonably acceptable to the Lenders, with no changes therefrom adverse to the Lenders, and all other instruments, agreements and other documents evidencing or governing the Senior Notes or providing for any other right in respect thereof. "S&P" means Standard & Poor's. "Significant Subsidiary" means (a) each Borrowing Subsidiary, (b) any Subsidiary that directly or indirectly owns or Controls any other Significant Subsidiary, (c) each Subsidiary identified as a Significant Subsidiary on Schedule 3.02, (d) any Subsidiary designated from time to time by the Company as a Significant Subsidiary by written notice to the Administrative Agent and (e) any other Subsidiary (i) the consolidated net sales of which were greater than 5% of the Company's Consolidated Net Sales as of the last day of the most recent fiscal period for which financial statements have been delivered pursuant to Section 5.05(a) or (b) (or, prior to the first delivery of such financial statements, greater than 5% of the consolidated net sales of the Person in whose financial statements such Subsidiary is included in the most recent financial statements referred to in Section 3.05(a) or (b)) or (ii) the consolidated assets of which as of the last day of such fiscal period were greater than 5% of Consolidated Total Assets as of such date (or, prior to the first delivery of such financial statements, greater than 5% of the consolidated total assets of the Person in whose financial statements such Subsidiary is included in the most recent financial statements referred to in Section 3.05(a) or (b)). The Company will not permit the total consolidated assets or the consolidated net sales of the Significant Subsidiaries (together with the directly owned assets of the Company) to at any time represent less than 90% of Consolidated Total Assets or Consolidated Net Sales of the Company and its Subsidiaries, respectively, in each case as of and for the period of four fiscal quarters ended on the last day of the most recent fiscal period for which financial statements have been delivered pursuant to Section 5.05(a) or (b) (or, prior to the first delivery of such financial statements, the consolidated total assets or consolidated net sales as of such date or for such period of the Persons in whose financial statements the Significant Subsidiaries are included in the most recent financial statements referred to in Section 3.05(a) or (b)). For purposes of making the determinations required by this definition, net sales and assets of foreign Subsidiaries shall be converted into US Dollars at the rates used in preparing the consolidated balance sheet of the Company (or, prior to the first delivery of financial statements pursuant to Section 5.05(a) or (b), the Person in whose financial statements such foreign Subsidiary is included in the most recent financial statements referred to in Section 3.05(a) or (b)) included in the applicable financial statements. "Statutory Reserves" means, with respect to any currency, any reserve, liquid asset or similar requirements established by any Governmental Authority of the United States or of the jurisdiction of such currency or any jurisdiction in which Loans in such currency are made to which banks in such jurisdiction are subject for any category of deposits or liabilities customarily used to fund loans in such currency or by reference to which interest rates applicable to Loans in such currency are determined. "Sterling" or "L." means the lawful money of the United Kingdom. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial 30 25 statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" means any direct or indirect subsidiary of the Company. At all times on and after the Acquisition Date, Keebler and the subsidiaries of Keebler acquired in the Acquisition will constitute Subsidiaries. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "364-Day Credit Agreement" means the Company's 364-Day Credit Agreement dated as of the date hereof. "Tranche" means a category of Commitments and extensions of credits thereunder. For purposes hereof, each of the following comprises a separate Tranche: (a) the US Tranche Commitments and the US Tranche Revolving Loans, (b) the UK Tranche Commitments and the UK Tranche Revolving Loans, (c) the Euro Tranche Commitments and the Euro Tranche Revolving Loans, (d) the Canadian Tranche Commitments, the Canadian Tranche Revolving Loans and Obligation in respect of outstanding B/As and (e) the Australian Tranche Commitments and the Australian Tranche Revolving Loans. "Tranche Percentage" means, with respect to any Lender holding any Commitment or Loan under any Tranche, such Lender's US Tranche Percentage, UK Tranche Percentage, Euro Tranche Percentage, Canadian Tranche Percentage or Australian Tranche Percentage, as applicable. "Transactions" means the execution, delivery and performance by the Borrowers of this Agreement and the other Loan Documents, the borrowing of Loans and purchases and acceptances of B/As hereunder and the use of the proceeds thereof, the establishment of the Company's commercial paper program, the Acquisition and the refinancing of Indebtedness and the other transactions contemplated to be effected on the Acquisition Date in connection therewith. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Alternate Base Rate, Canadian Base Rate, the Australian Bank Bill Rate or, in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed Rate. "UK Borrowing Subsidiary" means any Subsidiary that is incorporated or otherwise organized under the laws of the United Kingdom or any political subdivision thereof that has been designated as such pursuant to Section 2.20 and that has not ceased to be a UK Borrowing Subsidiary as provided in such Section. 31 26 "UK Lending Office" means, as to any UK Tranche Lender, the applicable branch, office or Affiliate of such UK Tranche Lender designated by such UK Tranche Lender to make Loans in Sterling. "UK Tranche Commitment" means, with respect to each UK Tranche Lender, the commitment of such UK Tranche Lender to make UK Tranche Revolving Loans pursuant to Section 2.01(b), expressed as an amount representing the maximum aggregate permitted amount of such UK Tranche Lender's UK Tranche Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender under Section 10.04. The initial amount of each UK Tranche Lender's UK Tranche Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such UK Tranche Lender shall have assumed its UK Tranche Commitment, as applicable. The aggregate amount of the UK Tranche Commitments on the date hereof is US$250,000,000. "UK Tranche Lender" means a Lender with a UK Tranche Commitment or with outstanding UK Tranche Revolving Loans. "UK Tranche Percentage" means, with respect to any UK Tranche Lender, the percentage of the total UK Tranche Commitments represented by such Lender's UK Tranche Commitment. If the UK Tranche Commitments have terminated or expired, the UK Tranche Percentages shall be determined based upon the UK Tranche Commitments most recently in effect, giving effect to any assignments. "UK Tranche Revolving Borrowing" means a Borrowing comprised of UK Tranche Revolving Loans. "UK Tranche Revolving Credit Exposure" means, at any time, the sum of (a) the aggregate principal amount of the UK Tranche Revolving Loans denominated in US Dollars outstanding at such time and (b) the US Dollar Equivalent of the aggregate principal amount of the UK Tranche Revolving Loans denominated in Sterling outstanding at such time. The UK Tranche Revolving Credit Exposure of any Lender at any time shall be such Lender's UK Tranche Percentage of the total UK Tranche Revolving Credit Exposure at such time. "UK Tranche Revolving Loan" means a Loan made by a UK Tranche Lender pursuant to Section 2.01(b). Each UK Tranche Revolving Loan denominated in US Dollars shall be a Eurocurrency Loan or an ABR Loan, and each UK Tranche Revolving Loan denominated in Sterling shall be a Eurocurrency Loan. "Unfunded Vested Liabilities" means, for any Plan at any time, the amount (if any) by which (a) the present value of all vested nonforfeitable accrued benefits under such Plan exceeds (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA. "US Borrowing Subsidiary" means any Subsidiary that is incorporated or otherwise organized under the laws of the United States or any political subdivision thereof that 32 27 has been designated as such pursuant to Section 2.20 and that has not ceased to be a US Borrowing Subsidiary as provided in such Section. "US Dollars" or "US$" refers to lawful money of the United States of America. "US Dollar Equivalent" means, on any date of determination, (a) with respect to any amount in US Dollars, such amount, and (b) with respect to any amount in any Designated Foreign Currency, the equivalent in US Dollars of such amount, determined by the Administrative Agent pursuant to Section 1.05 using the Exchange Rate with respect to such Designated Foreign Currency at the time in effect under the provisions of such Section. "US Lending Office" means, as to any Lender, the applicable branch, office or Affiliate of such US Tranche Lender designated by such US Tranche Lender to make Loans in US Dollars. "US Tranche Commitment" means, with respect to each US Tranche Lender, the commitment of such US Tranche Lender to make US Tranche Revolving Loans pursuant to Section 2.01(a), expressed as an amount representing the maximum aggregate permitted amount of such Lender's US Tranche Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each US Tranche Lender's US Tranche Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such US Tranche Lender shall have assumed its US Tranche Commitment, as applicable. The aggregate amount of the US Tranche Commitments on the date hereof is US$745,000,000. "US Tranche Lender" means a Lender with a US Tranche Commitment or with outstanding US Tranche Revolving Loans. "US Tranche Percentage" means, with respect to any US Tranche Lender, the percentage of the total US Tranche Commitments represented by such Lender's US Tranche Commitment. If the US Tranche Commitments have terminated or expired, the US Tranche Percentages shall be determined based upon the US Tranche Commitments most recently in effect, giving effect to any assignments. "US Tranche Revolving Borrowing" means a Borrowing comprised of US Tranche Revolving Loans. "US Tranche Revolving Credit Exposure" means, at any time, the aggregate principal amount of the US Tranche Revolving Loans outstanding at such time. The US Tranche Revolving Credit Exposure of any Lender at any time shall be such Lender's US Tranche Percentage of the total US Tranche Revolving Credit Exposure at such time. "US Tranche Revolving Loan" means a Loan made by a US Tranche Lender pursuant to Section 2.01(a). Each US Tranche Revolving Loan shall be a Eurocurrency Loan or an ABR Loan. 33 28 "Voting Stock" of any Person means capital stock of any class of classes or other Equity Interests (however designated) having ordinary voting power for the election of directors or the equivalent governing body of such Person, other than stock or other Equity Interests having such power only by reason of happening of a contingency. "Welfare Plan" means a "welfare plan" as defined in Section 3(l) of ERISA. "Wholly Owned Subsidiary" means any Subsidiary all the Equity Interests in which, other than directors' qualifying shares and/or other nominal amounts of Equity Interests that are required to be held by Persons (other than the Company or its Wholly Owned Subsidiaries, as applicable) under applicable law, are owned, directly or indirectly, by the Company. "Yen" or "Y." means the lawful money of Japan. SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "US Tranche Revolving Loan" or a "Revolving Loan") or by Type (e.g., a "Eurocurrency Loan") or by Class and Type (e.g., a "Eurocurrency Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "US Tranche Revolving Borrowing" or a "Revolving Borrowing") or by Type (e.g., a "Eurocurrency Borrowing") or by Class and Type (e.g., a "Eurocurrency Revolving Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. References herein to the taking of any action hereunder of an administrative nature by any Borrower shall be deemed to include references to the Company taking such action on such Borrower's behalf and the Agents are expressly authorized to accept any such action taken by the Company as having the same effect as if taken by such Borrower. Each reference herein to the "knowledge" of the Company or any Subsidiary shall be deemed to be a reference to the knowledge of any member of senior management of the Company or such Subsidiary, any Financial Officer and, in the case of any reference to knowledge of any specific subject matter, the senior manager of the department or office of the Company responsible for such matter. SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance 34 29 with GAAP, as in effect from time to time; provided that, if the Company notifies the Administrative Agent that the Company requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Company that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. SECTION 1.05. Exchange Rates. (a) Not later than 1:00 p.m., New York City time, on each Calculation Date (determined without regard to clause (b) of the definition of such term), the Administrative Agent shall (i) determine the Exchange Rate as of such Calculation Date with respect to Sterling, Euro, Canadian Dollars, Australian Dollars and each Designated Foreign Currency that is represented by an outstanding Borrowing as of such Calculation Date and (ii) give notice thereof to the Lenders and the Company. Not later than 1:00 p.m., New York City time, on the Business Day immediately preceding the date of any Borrowing in a Designated Foreign Currency for which no Exchange Rate shall have been determined on the most recent Calculation Date, the Administrative Agent shall (i) determine the Exchange Rate as of such Business Day with respect to each Designated Foreign Currency and (ii) give notice thereof to the Lenders and the Company. The Exchange Rates so determined shall become effective on the first Business Day immediately following the relevant Calculation Date (a "Reset Date") or other date of determination, shall remain effective until the next succeeding Reset Date, and shall for all purposes of this Agreement (other than Section 10.14 or any other provision expressly requiring the use of a current Exchange Rate) be the Exchange Rates employed in converting any amounts between US Dollars and Designated Foreign Currencies. (b) Not later than 5:00 p.m., New York City time, on each Reset Date and each date on which Revolving Loans denominated in any Designated Foreign Currency are made, the Administrative Agent shall (i) determine the aggregate amount of each of the UK Tranche Revolving Credit Exposure, the Euro Tranche Revolving Credit Exposure, the Canadian Tranche Revolving Credit Exposure and the Australian Tranche Revolving Credit Exposure and the aggregate US Dollar Equivalent of the principal amounts of the Competitive Loans denominated in Designated Foreign Currencies then outstanding (after giving effect to any Loans made or repaid on such date) and (ii) notify the Lenders and the Company of the results of such determination. SECTION 1.06. Determinations Made in Good Faith. All determinations hereunder made by any party hereto shall be made in good faith. 35 30 ARTICLE II The Credits SECTION 2.01. Commitments. (a) Subject to the terms and conditions set forth herein, each US Tranche Lender agrees to make US Tranche Revolving Loans to the Company and the US Borrowing Subsidiaries from time to time during the Availability Period in US Dollars in an aggregate principal amount that will not result in (i) such Lender's US Tranche Revolving Credit Exposure exceeding such Lender's US Tranche Commitment, (ii) the sum of the total US Tranche Revolving Credit Exposures exceeding the total US Tranche Commitments or (iii) the sum of the aggregate Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Commitments. (b) Subject to the terms and conditions set forth herein, each UK Tranche Lender agrees from time to time during the Availability Period (i) to make UK Tranche Revolving Loans in Sterling to the UK Borrowing Subsidiaries from its UK Lending Office and (ii) to make UK Tranche Revolving Loans in US Dollars to the Company and the US Borrowing Subsidiaries from its US Lending Office in an aggregate principal amount that will not result in (A) such Lender's UK Tranche Revolving Credit Exposure exceeding such Lender's UK Tranche Commitment, (B) the sum of the total UK Tranche Revolving Credit Exposures exceeding the total UK Tranche Commitments or (C) the sum of the aggregate Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Commitments. (c) Subject to the terms and conditions set forth herein, each Euro Tranche Lender agrees from time to time during the Availability Period (i) to make Euro Tranche Revolving Loans in Euro to the Euro Borrowing Subsidiaries from its Euro Lending Office and (ii) to make Euro Tranche Revolving Loans in US Dollars to the Company and the US Borrowing Subsidiaries from its US Lending Office in an aggregate principal amount that will not result in (A) such Lender's Euro Tranche Revolving Credit Exposure exceeding such Lender's Euro Tranche Commitment, (B) the sum of the total Euro Tranche Revolving Credit Exposures exceeding the total Euro Tranche Commitments or (C) the sum of the aggregate Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Commitments. (d) Subject to the terms and conditions set forth herein, each Canadian Tranche Lender agrees from time to time during the Availability Period (i) to make Canadian Tranche Revolving Loans in Canadian Dollars to the Canadian Borrowing Subsidiaries from its Canadian Lending Office and/or to cause its Canadian Lending Office to accept and purchase or arrange for the acceptance and purchase of drafts drawn by the Canadian Borrowing Subsidiaries in Canadian Dollars as B/As, and (ii) to make Canadian Tranche Revolving Loans in US Dollars to the Company and the US Borrowing Subsidiaries from its US Lending Office in an aggregate principal amount that will not result in (A) such Lender's Canadian Tranche Revolving Credit Exposure exceeding such Lender's Canadian Tranche Commitment, (B) the sum of the total Canadian Tranche Revolving Credit Exposures exceeding the total Canadian Tranche Commitments or (C) the sum of the aggregate Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Commitments. 36 31 (e) Subject to the terms and conditions set forth herein, each Australian Tranche Lender agrees from time to time during the Availability Period (i) to make Australian Tranche Revolving Loans in Australian Dollars to the Australian Borrowing Subsidiaries from its Australian Lending Office and (ii) to make Australian Tranche Revolving Loans in US Dollars to the Company and the US Borrowing Subsidiaries from its US Lending Office in an aggregate principal amount that will not result in (A) such Lender's Australian Tranche Revolving Credit Exposure exceeding such Lender's Australian Tranche Commitment, (B) the sum of the total Australian Tranche Revolving Credit Exposures exceeding the total Australian Tranche Commitments or (C) the sum of the aggregate Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Commitments. (f) Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Revolving Loans during the Availability Period. SECTION 2.02. Loans and Borrowings. (a) Each US Tranche Revolving Loan shall be made as part of a Borrowing consisting of US Tranche Revolving Loans made by the US Tranche Lenders (or their Affiliates as provided in paragraph (b) below) ratably in accordance with their respective US Tranche Commitments. Each UK Tranche Revolving Loan shall be made as part of a Borrowing consisting of UK Tranche Revolving Loans made by the UK Tranche Lenders (or their Affiliates as provided in paragraph (b) below) ratably in accordance with their respective UK Tranche Commitments. Each Euro Tranche Revolving Loan shall be made as part of a Borrowing consisting of Euro Tranche Revolving Loans made by the Euro Tranche Lenders (or their Affiliates as provided in paragraph (b) below) ratably in accordance with their respective Euro Tranche Commitments. Each Canadian Tranche Revolving Loan shall be made as part of a Borrowing consisting of Canadian Tranche Revolving Loans made by the Canadian Tranche Lenders (or their Affiliates as provided in paragraph (b) below) ratably in accordance with their respective Canadian Tranche Commitments. Each Australian Tranche Revolving Loan shall be made as part of a Borrowing consisting of Australian Tranche Revolving Loans made by the Australian Tranche Lenders (or their Affiliates as provided in paragraph (b) below) ratably in accordance with their respective Australian Tranche Commitments. Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.04. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments and Competitive Bids of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.14, (i) each US Tranche Revolving Borrowing shall be comprised entirely of Eurocurrency Loans or ABR Loans, as the applicable Borrower may request in accordance herewith; (ii) each UK Tranche Revolving Borrowing shall be comprised entirely of (A) in the case of a UK Tranche Revolving Borrowing denominated in Sterling, Eurocurrency Loans, and (B) in the case of a UK Tranche Revolving Borrowing denominated in US Dollars, Eurocurrency Loans or ABR Loans, as the applicable Borrower may request in accordance herewith; (iii) each Euro Tranche Revolving Borrowing shall be comprised entirely of (A) in the case of a Euro Tranche Revolving Borrowing denominated in Euros, Eurocurrency Loans, and (B) in the case of a Euro Tranche Revolving Borrowing denominated in US Dollars, Eurocurrency Loans or ABR Loans, as the applicable Borrower may request in accordance herewith; (iv) each Canadian Tranche Revolving Borrowing shall be comprised entirely of (A) in the case of a Canadian Tranche Revolving Borrowing denominated in Canadian Dollars, Canadian Base Rate 37 32 Loans, and (B) in the case of a Canadian Tranche Revolving Borrowing denominated in US Dollars, Eurocurrency Loans or ABR Loans, as the applicable Borrower may request in accordance herewith; (v) each Australian Tranche Revolving Borrowing shall be comprised entirely of (A) in the case of an Australian Tranche Revolving Borrowing denominated in Australian Dollars, Bill Rate Loans, and (B) in the case of an Australian Tranche Revolving Borrowing denominated in US Dollars, Eurocurrency Loans or ABR Loans, as the applicable Borrower may request in accordance therewith; and (vi) each Competitive Borrowing shall be comprised entirely of Eurocurrency Loans or Fixed Rate Loans as the applicable Borrower may request in accordance herewith. Each Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of any Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurocurrency Revolving Borrowing, such Borrowing shall be an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of US$1,000,000 and not less than US$5,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total US Tranche Commitments, UK Tranche Commitments, Euro Tranche Commitments, Canadian Tranche Commitments or Australian Tranche Commitments, as the case may be, and a Canadian Base Rate Borrowing denominated in Canadian Dollars may be in an aggregate amount that is equal to the entire unused balance of the Canadian Tranche Commitments. Each Competitive Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be outstanding more than a total of (i) 10 Eurocurrency Revolving Borrowings denominated in US Dollars or (ii) 3 Eurocurrency Revolving Borrowings denominated in any single other currency. (d) Notwithstanding any other provision of this Agreement, no Borrower shall be entitled to request, or to elect to convert or continue, any Revolving Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date, or to request any Competitive Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. 38 33 SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing, the applicable Borrower shall notify the Applicable Agent of such request by telephone or by telecopy (a) in the case of a Eurocurrency Borrowing, not later than 11:00 a.m., Local Time, three Business Days before the date of the proposed Borrowing, (b) in the case of an ABR Borrowing, not later than 11:00 a.m., Local Time, on the Business Day of the proposed Borrowing or (c) in the case of a Canadian Base Rate Borrowing, not later than 11:00 a.m., Local Time on the Business Day of the proposed Borrowing. Each such Borrowing Request shall be irrevocable and, if telephonic, shall be confirmed promptly by hand delivery or telecopy to the Applicable Agent of a written Borrowing Request in a form agreed to by the Applicable Agent and the Company and signed by the applicable Borrower, or by the Company on behalf of the applicable Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the Borrower requesting such Borrowing (or on whose behalf the Company is requesting such Borrowing); (ii) whether the requested Borrowings is to be a US Tranche Borrowing, a UK Tranche Borrowing, a Euro Tranche Borrowing, a Canadian Tranche Borrowing or an Australian Tranche Borrowing; (iii) the currency and aggregate amount of the requested Borrowing; (iv) the date of such Borrowing, which shall be a Business Day; (v) the Type of the requested Borrowing; (vi) in the case of a Eurocurrency Borrowing or a Bill Rate Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (vii) the location and number of the relevant Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.07. If no currency is specified with respect to any requested Eurocurrency Borrowing, then the relevant Borrower shall be deemed to have selected (i) in the case of any UK Borrowing Subsidiary, Sterling, (ii) the case of any Euro Borrowing Subsidiary, Euro, (iii) in the case of any Canadian Borrowing Subsidiary, Canadian Dollars, (iv) in the case of any Australian Borrowing Subsidiary, Australian Dollars, and (v) in the case of the Company and any other Borrowing Subsidiary, US Dollars. If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be (A) in the case of a Borrowing denominated in US Dollars, an ABR Borrowing (ii) in the case of a Borrowing denominated in Canadian Dollars, a Canadian Base Rate Borrowing, (iii) in the case of a Borrowing denominated in Australian Dollars, a Bill Rate Borrowing, and (iv) in the case of a Borrowing denominated in any other currency, a Eurocurrency Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing or Bill Rate Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Applicable Agent shall advise each 39 34 Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Competitive Bid Procedure. (a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period any Borrower may request Competitive Bids and may (but shall not have any obligation to) accept Competitive Bids and borrow Competitive Loans denominated in US Dollars or any Designated Foreign Currency (excluding Australian Dollars); provided that after giving effect to any Borrowing of Competitive Loans the sum of the total Revolving Credit Exposures plus the total Competitive Loans shall not exceed the total Commitments. To request Competitive Bids, the Company or the applicable Borrowing Subsidiary shall notify the Applicable Agent of such request by telephone or by telecopy, in the case of a Eurocurrency Borrowing, not later than 11:00 a.m., Local Time, four Business Days before the date of the proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., Local Time, one Business Day before the date of the proposed Borrowing; provided that the Borrowers may submit up to (but not more than) five Competitive Bid Requests on the same day, but a Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request, unless any and all such previous Competitive Bid Requests shall have been withdrawn or all Competitive Bids received in response thereto rejected. Each such telephonic Competitive Bid Request shall be confirmed promptly by hand delivery or telecopy to the Applicable Agent of a written Competitive Bid Request in a form approved by the Applicable Agent and signed by the applicable Borrower, or by the Company on behalf of the applicable Borrower. Each such telephonic and written Competitive Bid Request shall specify the following information in compliance with Section 2.02: (i) the Borrower requesting such Borrowing (or on whose behalf the Company is requesting such Borrowing); (ii) the aggregate principal amount and currency of the requested Borrowing; (iii) the date of such Borrowing, which shall be a Business Day; (iv) whether such Borrowing is to be a Eurocurrency Borrowing or a Fixed Rate Borrowing; (v) the Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term "Interest Period" and shall end no later than the Maturity Date; and (vi) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.07. Promptly following receipt of a Competitive Bid Request in accordance with this Section, the Applicable Agent shall notify the Lenders of the details thereof by telecopy, inviting the Lenders to submit Competitive Bids. (b) Each Lender may (but shall not have any obligation to) make one or more Competitive Bids to the applicable Borrower in response to a Competitive Bid Request. Each Competitive Bid by a Lender must be in a form approved by the Applicable Agent and must be received 40 35 by the Applicable Agent by telecopy, in the case of a Eurocurrency Competitive Borrowing, not later than 9:30 a.m., Local Time, three Business Days before the proposed date of such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., Local Time, on the proposed date of such Competitive Borrowing. Competitive Bids that do not conform substantially to the form approved by the Applicable Agent may be rejected by the Applicable Agent, and the Applicable Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall specify (i) the principal amount (which shall be an amount at least equal to the Borrowing Minimum and an integral multiple of the Borrowing Multiple and which may equal the entire principal amount of the Competitive Borrowing requested by the applicable Borrower) of the Competitive Loan or Loans that the Lender is willing to make, (ii) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan or Loans (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) and (iii) the Interest Period applicable to each such Loan and the last day thereof. (c) The Applicable Agent shall promptly notify the applicable Borrower by telecopy of the Competitive Bid Rate and the principal amount specified in each Competitive Bid and the identity of the Lender that shall have made such Competitive Bid. (d) Subject only to the provisions of this paragraph, a Borrower may accept or reject any Competitive Bid. The applicable Borrower shall notify the Applicable Agent by telecopy or by telephone, confirmed by telecopy in a form approved by the Applicable Agent, whether and to what extent it has decided to accept or reject each Competitive Bid, in the case of a Eurocurrency Competitive Borrowing, not later than 11:00 a.m., Local Time, three Business Days before the date of the proposed Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 11:00 a.m., Local Time, on the proposed date of the Competitive Borrowing; provided that (i) the failure of a Borrower to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) a Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if such Borrower rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by a Borrower shall not exceed the aggregate amount of the requested Competitive Borrowing specified in the related Competitive Bid Request, (iv) to the extent necessary to comply with clause (iii) above, a Borrower may accept Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid, and (v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of at least the Borrowing Minimum that is an integral multiple of the Borrowing Multiple; provided further that if a Competitive Loan must be in an amount less than the Borrowing Minimum because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of US$1,000,000 (or, in the case of a Competitive Loan denominated in a Designated Foreign Currency, the smallest amount of such currency that (i) is an integral multiple of 1,000,000 units of such currency and (ii) has a US Dollar Equivalent in excess of US$1,000,000) or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of the Borrowing Multiple in a manner determined by the applicable Borrower. A notice given by a Borrower pursuant to this paragraph shall be irrevocable. 41 36 (e) The Applicable Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Bid has been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted. (f) If the Applicable Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to the applicable Borrower at least one quarter of an hour earlier than the time by which the other Lenders are required to submit their Competitive Bids to the Applicable Agent pursuant to paragraph (b) of this Section. SECTION 2.05. Canadian Bankers' Acceptances. (a) Each acceptance and purchase of B/As of a single Contract Period pursuant to Section 2.01(d) or Section 2.08 shall be made ratably by the Canadian Tranche Lenders in accordance with the amounts of their Canadian Tranche Commitments. The failure of any Canadian Tranche Lender to accept any B/A required to be accepted by it shall not relieve any other Canadian Tranche Lender of its obligations hereunder; provided that the Canadian Tranche Commitments are several and no Canadian Tranche Lender shall be responsible for any other Canadian Tranche Lender's failure to accept B/As as required. (b) The B/As of a single Contract Period accepted and purchased on any date shall be in an aggregate amount that is an integral multiple of C$1,000,000 and not less than C$5,000,000. The face amount of each B/A shall be C$100,000 or any whole multiple thereof. If any Canadian Tranche Lender's ratable share of the B/As of any Contract Period to be accepted on any date would not be an integral multiple of C$100,000, the face amount of the B/As accepted by such Lender may be increased or reduced to the nearest integral multiple of C$100,000 by the Canadian Agent in its sole discretion. B/As of more than one Contract Period may be outstanding at the same time; provided that there shall not at any time be more than a total of three B/A Drawings outstanding. (c) To request an acceptance and purchase of B/As, a Borrower shall notify the Canadian Agent of such request by telephone or by telecopy not later than 10:00 a.m., Local Time, one Business Day before the date of such acceptance and purchase. Each such request shall be irrevocable and, if telephonic, shall be confirmed promptly by hand delivery or telecopy to the Canadian Agent of a written request in a form approved by the Canadian Agent and signed by such Borrower. Each such telephonic and written request shall specify the following information: (i) the aggregate face amount of the B/As to be accepted and purchased; (ii) the date of such acceptance and purchase, which shall be a Business Day; (iii) the Contract Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Contract Period" (and which shall in no event end after the Maturity Date); and (iv) the location and number of the Borrower's account to which any funds are to be disbursed, which shall comply with the requirements of Section 2.07. If no Contract Period is specified with respect to any requested acceptance and purchase of B/As, then the Borrower shall be deemed to have selected a Contract Period of 30 days' duration. 42 37 Promptly following receipt of a request in accordance with this paragraph, the Canadian Agent shall advise each Canadian Tranche Lender of the details thereof and of the amount of B/As to be accepted and purchased by such Lender. (d) Each Borrower hereby appoints each Canadian Tranche Lender as its attorney to sign and endorse on its behalf, manually or by facsimile or mechanical signature, as and when deemed necessary by such Lender, blank forms of B/As. It shall be the responsibility of each Canadian Tranche Lender to maintain an adequate supply of blank forms of B/As for acceptance under this Agreement. Each Borrower recognizes and agrees that all B/As signed and/or endorsed on its behalf by any Canadian Tranche Lender shall bind such Borrower as fully and effectually as if manually signed and duly issued by authorized officers of such Borrower. Each Canadian Tranche Lender is hereby authorized to issue such B/As endorsed in blank in such face amounts as may be determined by such Lender; provided that the aggregate face amount thereof is equal to the aggregate face amount of B/As required to be accepted by such Lender. No Canadian Tranche Lender shall be liable for any damage, loss or claim arising by reason of any loss or improper use of any such instrument unless such loss or improper use results from the bad faith, gross negligence or willful misconduct of such Lender. Each Canadian Tranche Lender shall maintain a record with respect to B/As (i) received by it from the Canadian Agent in blank hereunder, (ii) voided by it for any reason, (iii) accepted and purchased by it hereunder and (iv) canceled at their respective maturities. Each Canadian Tranche Lender further agrees to retain such records in the manner and for the periods provided in applicable provincial or Federal statutes and regulations of Canada and to provide such records to each Borrower upon its request and at its expense. Upon request by any Borrower, a Lender shall cancel all forms of B/A that have been pre-signed or pre-endorsed on behalf of such Borrower and that are held by such Lender and are not required to be issued pursuant to this Agreement. (e) Drafts of each Borrower to be accepted as B/As hereunder shall be signed as set forth in paragraph (d) above. Notwithstanding that any Person whose signature appears on any B/A may no longer be an authorized signatory for any of the Lenders or such Borrower at the date of issuance of such B/A, such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such issuance and any such B/A so signed shall be binding on such Borrower. (f) Upon acceptance of a B/A by a Lender, such Lender shall purchase, or arrange the purchase of, such B/A from the applicable Borrower at the Discount Rate for such Lender applicable to such B/A accepted by it and provide to the Canadian Agent the Discount Proceeds for the account of such Borrower as provided in Section 2.07. The acceptance fee payable by the Applicable Borrower to a Lender under Section 2.12 in respect of each B/A accepted by such Lender shall be set off against the Discount Proceeds payable by such Lender under this paragraph. Notwithstanding the foregoing, in the case of any B/A Drawing resulting from the conversion or continuation of a B/A Drawing or Canadian Tranche Revolving Loan pursuant to Section 2.08, the net amount that would otherwise be payable to such Borrower by each Lender pursuant to this paragraph will be applied as provided in Section 2.08(f). (g) Each Lender may at any time and from time to time hold, sell, rediscount or otherwise dispose of any or all B/A's accepted and purchased by it. 43 38 (h) Each B/A accepted and purchased hereunder shall mature at the end of the Contract Period applicable thereto. (i) Each Borrower waives presentment for payment and any other defense to payment of any amounts due to a Lender in respect of a B/A accepted and purchased by it pursuant to this Agreement which might exist solely by reason of such B/A being held, at the maturity thereof, by such Lender in its own right and each Borrower agrees not to claim any days of grace if such Lender as holder sues each Borrower on the B/A for payment of the amounts payable by such Borrower thereunder. On the specified maturity date of a B/A, or such earlier date as may be required pursuant to the provisions of this Agreement, each Borrower shall pay the Lender that has accepted and purchased such B/A the full face amount of such B/A, and after such payment such Borrower shall have no further liability in respect of such B/A and such Lender shall be entitled to all benefits of, and be responsible for all payments due to third parties under, such B/A. (j) At the option of each Borrower and any Lender, B/As under this Agreement to be accepted by that Lender may be issued in the form of depository bills for deposit with The Canadian Depository for Securities Limited pursuant to the Depository Bills and Notes Act (Canada). All depository bills so issued shall be governed by the provisions of this Section 2.22. (k) If a Canadian Tranche Lender is not a chartered bank under the Bank Act (Canada) or if a Canadian Tranche Lender notifies the Canadian Agent in writing that it is otherwise unable to accept B/As, such Canadian Tranche Lender will, instead of accepting and purchasing B/As, make a Loan (a "B/A Equivalent Loan") to the Canadian Borrower in the amount and for the same term as the draft which such Canadian Tranche Lender would otherwise have been required to accept and purchase hereunder. Each such Canadian Tranche Lender will provide to the Canadian Agent the Discount Proceeds of such B/A Equivalent Loan for the account of the Canadian Borrower in the same manner as such Canadian Tranche Lender would have provided the Discount Proceeds in respect of the draft which such Canadian Tranche Lender would otherwise have been required to accept and purchase hereunder. Each such B/A Equivalent Loan will bear interest at the same rate which would result if such Canadian Tranche Lender had accepted (and been paid an acceptance fee) and purchased (on a discounted basis) a B/A for the relevant Contract Period (it being the intention of the parties that each such B/A Equivalent Loan shall have the same economic consequences for the Lenders and the Borrower as the B/A which such B/A Equivalent Loan replaces). All such interest shall be paid in advance on the date such B/A Equivalent Loan is made, and will be deducted from the principal amount of such B/A Equivalent Loan in the same manner in which the Discount Proceeds of a B/A would be deducted from the face amount of the B/A. Subject to the repayment requirements of this Agreement, on the last day of the relevant Contract Period for such B/A Equivalent Loan, the Borrower shall be entitled to convert each such B/A Equivalent Loan into another type of Loan, or to roll over each such B/A Equivalent Loan into another B/A Equivalent Loan, all in accordance with the applicable provisions of this Agreement. 44 39 SECTION 2.06. Australian Reliquification Bills. Each Australian Borrowing Subsidiary (the "Applicable Subsidiary") agrees, with respect to Loans denominated in Australian Dollars made to it: (a) To draw Bills when and in the form required by the Australian Agent on behalf of an Australian Tranche Lender. However, (i) the discounted value of those Bills, when added to the total of the discounted value of all other Bills drawn as required by the Australian Agent on behalf of the Australian Tranche Lender under this clause and which are outstanding, may not exceed the Australian Tranche Lender's Loans to which the Bills relate and (ii) no Bill is to be drawn which would mature after the Maturity Date. (b) The Applicable Subsidiary irrevocably appoints each Australian Tranche Lender and each authorized officer of each Australian Tranche Lender individually as its attorney to draw, accept or endorse the Bills and agrees to ratify all action taken by an attorney under this Section 2.06. (c) The Applicable Subsidiary's obligation to draw Bills ceases, and the appointment of an Australian Tranche Lender and its authorized officers as attorney for this purpose is revoked, on payment by the Applicable Subsidiary to the Australian Agent of all amounts owing to that Australian Tranche Lender under this Agreement. (d) Each Australian Tranche Lender unconditionally and irrevocably indemnifies the Applicable Subsidiary against liability or loss arising from, and any costs, charges and expenses (including stamp duty) incurred in connection with, any Bill drawn at such Australian Tranche Lender's request under this Section 2.06. SECTION 2.07. Funding of Borrowings and B/A Drawings. (a) Each Lender shall make each Loan to be made by it and disburse the Discount Proceeds (net of applicable acceptance fees) of each B/A to be accepted and purchased by it hereunder on the proposed date thereof by wire transfer of immediately available funds in the applicable currency by 1:00 p.m., Local Time, to the account of the Applicable Agent most recently designated by it for such purpose by notice to the applicable Lenders. The Applicable Agent will make such Loans or Discount Proceeds (net of applicable acceptance fees) available to the applicable Borrower by promptly crediting the amounts so received, in like funds, to an account of such Borrower maintained with the Applicable Agent (i) in New York City, in the case of Loans denominated in US Dollars, (ii) in London, in the case of Loans denominated in Sterling, Euro or any Designated Foreign Currency other than Canadian Dollars and Australian Dollars, (iii) in Toronto, in the case of Loans denominated in Canadian Dollars or B/As, and (iv) in Sydney, in the case of Loans denominated in Australian Dollars, and designated by such Borrower in the applicable Borrowing Request or Competitive Bid Request. (b) Unless the Applicable Agent shall have received notice from a Lender prior to the proposed date of any Borrowing or acceptance and purchase of B/As that such Lender will not make available to the Applicable Agent such Lender's share of such Borrowing or the applicable Discount Proceeds (net of applicable acceptance fees), the Applicable Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable 45 40 Borrowing or the applicable Discount Proceeds (net of applicable acceptance fees) available to the Applicable Agent, then the applicable Lender and the Borrowers severally agree to pay to the Applicable Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the applicable Borrower to but excluding the date of payment to the Applicable Agent, at (i) in the case of such Lender, the greater of (x)(A) the Federal Funds Effective Rate, in the case of Loans denominated in US Dollars and (B) the rate reasonably determined by the Applicable Agent to be the cost to it of funding such amount, in the case of Loans denominated in any other currency, and (y) a rate determined by the Applicable Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of a Borrower, the interest rate applicable to such Borrowing or the applicable Discount Rate, as the case may be. If such Lender pays such amount to the Applicable Agent, then such amount shall constitute such Lender's Loan included in such Borrowing or such Lender's purchase of B/As. SECTION 2.08. Interest Elections. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Revolving Borrowing or a Bill Rate Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Each B/A Drawing shall have a Contract Period as specified in the applicable request therefor. Thereafter, the applicable Borrower may elect to convert such Borrowing or B/A Drawing to a different Type or to continue such Borrowing or B/A Drawing and, in the case of a Eurocurrency Revolving Borrowing or a Bill Rate Borrowing, may elect Interest Periods therefor, all as provided in this Section, it being understood that no B/A Drawing may be converted or continued other than at the end of the Contract Period applicable thereto. The applicable Borrower may elect different options with respect to different portions of the affected Borrowing or B/A Drawing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing or accepting the B/As comprising such B/A Drawing, as the case may be, and any Loans or B/As resulting from an election made with respect to any such portion shall be considered a separate Borrowing or B/A Drawing. Notwithstanding any other provision of this Section, no Borrowing or B/A Drawing may be converted into or continued as a Borrowing or B/A Drawing with an Interest Period ending after the Maturity Date. This Section shall not apply to Competitive Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, a Borrower (or the Company on its behalf) shall notify the Applicable Agent of such election by telephone or by telecopy (i) in the case of an election that would result in a Borrowing, by the time and date that a Borrowing Request would be required under Section 2.03 if such Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election, and (ii) in the case of an election that would result in a B/A Drawing or the continuation of a B/A Drawing, by the time and date that a request would be required under Section 2.05 if such Borrower were requesting an acceptance and purchase of B/As to be made on the effective date of such election. Each such Interest Election Request shall be irrevocable and, if telephonic, shall be confirmed promptly by hand delivery or telecopy to the Applicable Agent of a written Interest Election Request in a form approved by the Applicable Agent and signed by the applicable Borrower (or the Company on its behalf). Notwithstanding any other provision of this Section, no Borrower shall be permitted to (i) change the currency of any Borrowing, (ii) elect an Interest Period for Eurocurrency Loans or Bill Rate Loans that does not comply with Section 2.02(d) or 46 41 (iii) convert any Borrowing or B/A Drawing to a Borrowing or B/A Drawing not available under the Class of Commitments pursuant to which such Borrowing or B/A Drawing was made. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing or B/A Drawing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing or B/A Drawing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing or B/A Drawing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing, a Eurocurrency Borrowing, a Canadian Base Rate Borrowing, a B/A Drawing or a Bill Rate Borrowing; and (iv) if the resulting Borrowing is a Eurocurrency Borrowing or a Bill Rate Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period", and in the case of an election of a B/A Drawing, the Contract Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Contract Period". If any such Interest Election Request requests a Eurocurrency Borrowing, a B/A Drawing or a Bill Rate Borrowing but does not specify an Interest Period or a Contract Period, then the applicable Borrower shall be deemed to have selected an Interest Period or Contract Period of one month's or 30 days' duration, as applicable. (d) Promptly following receipt of an Interest Election Request, the Applicable Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing or B/A Drawing. (e) If a Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Revolving Borrowing, Bill Rate Borrowing or B/A Drawing prior to the end of the Interest Period or Contract Period applicable thereto, then, unless such Borrowing or B/A Drawing is repaid as provided herein, at the end of such Interest Period or Contract Period, such Borrowing, Bill Rate Borrowing or B/A Drawing shall (i) in the case of a Borrowing denominated in US Dollars, be converted to an ABR Borrowing, (ii) in the case of a Borrowing or B/A Drawing denominated in Canadian Dollars, be converted to a Canadian Base Rate Borrowing, and (iii) in the case of any other Eurocurrency Borrowing or any Bill Rate Borrowing, become due and payable on the last day of such Interest Period. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Company, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing denominated in US Dollars may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each Eurocurrency Revolving 47 42 Borrowing denominated in US Dollars shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. (f) Upon the conversion of any Canadian Tranche Borrowing (or portion thereof), or the continuation of any B/A Drawing (or portion thereof), to or as a B/A Drawing, the net amount that would otherwise be payable to a Borrower by each Lender pursuant to Section 2.05(f) in respect of such new B/A Drawing shall be applied against the principal of the Canadian Tranche Revolving Loan made by such Lender as part of such Canadian Tranche Borrowing (in the case of a conversion), or the reimbursement obligation owed to such Lender under Section 2.05(i) in respect of the B/As accepted by such Lender as part of such maturing B/A Drawing (in the case of a continuation), and such Borrower shall pay to such Lender an amount equal to the difference between the principal amount of such Canadian Tranche Revolving Loan or the aggregate face amount of such maturing B/As, as the case may be, and such net amount. SECTION 2.09. Termination and Reduction of Commitments; Adjustment of Tranche Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date. (b) The Company may at any time terminate, or from time to time reduce, the Commitments under any Tranche; provided that (i) each reduction of the Commitments under any Tranche shall be in an amount that is an integral multiple of US$1,000,000 and not less than US$5,000,000 and (ii) the Company shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.11, the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures would exceed the total Commitments or the sum of the Revolving Credit Exposures under any Tranche would exceed the sum of the Commitments under such Tranche. (c) The Company shall notify the Administrative Agent of any election to terminate or reduce the Commitments under any Tranche under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the other Agents and the applicable Lenders of the contents thereof. Each notice delivered by the Company pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Company may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Company (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments under any Tranche shall be made ratably among the Lenders in accordance with their respective Commitments under such Tranche. (d) (i) The Company may, by written notice to the Administrative Agent, request that the total Commitments under any Tranche be increased by an amount for each increased Tranche of not less than US$5,000,000, and that simultaneous decreases be made to the Commitments under other Tranches in amounts that will result in the sum of the total Commitments remaining unchanged after giving effect to such increases and decreases. Such notice shall set forth the amount of the requested increase or decrease in each Tranche, and the date on which such adjustment is requested to become effective (which shall be not less than 48 43 10 Business Days or more than 30 days after the date of such notice), and shall offer each Lender holding a Commitment under any increasing Tranche the opportunity to increase its Commitment in such Tranche by its Tranche Percentage of the proposed increased amount. Each such Lender shall, by notice to the Company and the Administrative Agent given not more than 5 Business Days after the date of the Company's notice, either agree to increase its applicable Commitment by all or a portion of the offered amount (each Lender so agreeing being an "Increasing Lender" with respect to such Tranche) or decline to increase its applicable Commitment (and any Lender that does not deliver such a notice within such period of 5 Business Days shall be deemed to have declined to increase its Commitment) (each Lender so declining or deemed to have declined being a "Non-Increasing Lender" with respect to such Tranche). In the event that on the 5th Business Day after the Company shall have delivered a notice pursuant to the first sentence of this paragraph the Lenders shall have agreed pursuant to the preceding sentence to increase their Commitments under any Tranche by an aggregate amount less than the increase in the total Commitments requested by the Company, the Company may arrange for one or more banks or other financial institutions (any such bank or other financial institution being called an "Augmenting Lender" with respect to such Tranche), which may include any Lender, to extend Commitments in an aggregate amount equal to the unsubscribed amount; provided that each Augmenting Lender, if not already a Lender hereunder, shall be subject to the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and the Borrowers and each Augmenting Lender shall execute all such documentation as the Administrative Agent shall reasonably specify to evidence the Commitment of such Augmenting Lender and/or its status as a Lender hereunder. Any increase in the Commitments under any Tranche may be made in an amount which is less than the increase requested by the Company if the Company is unable to arrange for, or chooses not to arrange for, Augmenting Lenders. Not less than three Business Days prior to the effective date (the "Increase Effective Date") of any increase (each a "Commitment Increase") in the total Commitments under any Tranche pursuant to this Section 2.09(d), the Company shall by written notice to the Administrative Agent confirm the decreases (each a "Commitment Decrease") to be made to the Commitments under the other Tranches specified in the original notice given in respect of the proposed adjustments or shall specify the Commitment Decreases to made in lieu thereof that will result in the sum of the total Commitments remaining unchanged after giving effect to the Commitment Increases and Commitment Decreases to be made on the Increase Effective Date. (ii) On the Increase Effective Date, (A) the aggregate principal amount of the Revolving Loans outstanding under each Tranche under which a Commitment Increase will become effective (the "Initial Loans" under such Tranche) immediately prior to giving effect to the applicable Commitment Increase on the Increase Effective Date shall be deemed to be repaid, (B) after the effectiveness of the Commitment Increase, the Borrowers holding Commitments under such Tranche shall be deemed to have made new Borrowings (the "Subsequent Borrowings") in an aggregate principal amount equal to the aggregate principal amount of the Initial Loans under such Tranche and of the types and for the Interest Periods specified in a Borrowing Request delivered to the Administrative Agent in accordance with Section 2.03, (C) each Lender under such Tranche shall pay to the Applicable Agent in same day funds an amount equal to the difference, if positive, between (x) such Lender's Tranche Percentage (calculated after giving effect to the Commitment Increase) of the Subsequent Borrowings and (y) such Lender's Tranche Percentage (calculated without giving effect to the Commitment Increase) of the Initial Loans, (D) after the Applicable Agent receives the funds specified in clause (C) above, the Applicable Agent shall pay to each Lender under such Tranche the portion of such 49 44 funds that is equal to the difference, if positive, between (1) such Lender's Tranche Percentage (calculated without giving effect to the Commitment Increase) of the Initial Loans and (2) such Lender's Tranche Percentage (calculated after giving effect to the Commitment Increase) of the amount of the Subsequent Borrowings, (E) each Non-Increasing Lender, each Increasing Lender and each Augmenting Lender shall be deemed to hold its Tranche Percentage of each Subsequent Borrowing (each calculated after giving effect to the Commitment Increase) and (F) each applicable Borrower shall pay each Increasing Lender and each Non-Increasing Lender any and all accrued but unpaid interest on the Initial Loans. The deemed payments made pursuant to clause (A) above in respect of each Eurocurrency Loan or Bill Rate Loan shall be subject to indemnification by the Borrowers pursuant to the provisions of Section 2.16 if the Increase Effective Date occurs other than on the last day of the Interest Period relating thereto and breakage costs result. (iii) On the Increase Effective Date, each Commitment Decrease shall be made ratably among the Lenders holding Commitments under the decreasing Tranche in accordance with their respective Commitments under such Tranche. (iv) Commitment Increases, Commitment Decreases and new Commitments created pursuant to this Section 2.09(d) shall become effective on the date specified in the original notice delivered by the Company pursuant to the first sentence of paragraph (d)(i) above. (v) Notwithstanding the foregoing, no increase in the Commitments under any Tranche (or in any Commitment of any Lender) or addition of an Augmenting Lender shall become effective under this Section unless, (A) the Company shall not have withdrawn its request under paragraph (d)(i) above by written notice to the Administrative Agent not less than three Business Days prior to the Increase Effective Date, (B) on the date of such increase, the conditions set forth in paragraphs (a) and (b) of Section 4.02 shall be satisfied and the Administrative Agent shall have received a certificate to that effect dated such date and executed by a financial officer of the Company, and (C) the Administrative Agent shall have received (with sufficient copies for each of the Lenders) documents consistent with those delivered pursuant to Section 4.03(b) in connection with the designation of a new Borrowing Subsidiary as to the corporate power and authority of the applicable Borrowers to borrow hereunder after giving effect to such increase. SECTION 2.10. Repayment of Loans and B/As; Evidence of Debt. (a) Each Borrower hereby unconditionally promises to pay (i) to the Applicable Agent for the account of each Lender the unpaid principal amount of each Revolving Loan on the Maturity Date and the face amount of each B/A, if any, accepted by such Lender as provided in Section 2.05, and (ii) to the Applicable Agent for the account of each Lender the unpaid principal amount of each Competitive Loan on the last day of the Interest Period applicable to such Loan. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of each Borrower to such Lender resulting from each Loan made or B/A accepted by such Lender, including the amounts of principal and interest and amounts in respect of B/As payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period, if any, applicable thereto, and the amount of each B/A and the Contract Period applicable thereto, (ii) the amount of any principal, interest or other amount in respect of any B/A due and payable or 50 45 to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Agents hereunder for the account of the Lenders and each Lender's share thereof. Each other Agent shall promptly provide the Administrative Agent with all information needed to maintain such accounts in respect of the Loans or B/A Drawings administered by such Agent. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of any Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, each Borrower shall execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in substantially the form attached hereto as Exhibit F. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.11. Prepayment of Loans. (a) The Borrowers shall have the right at any time and from time to time to prepay any Borrowing and amounts owed in respect of outstanding B/As in whole or in part, subject to prior notice in accordance with paragraph (d) of this Section and payment of any amounts required under Section 2.16; provided that the Borrowers shall not have the right to prepay any Competitive Loan without the prior consent of the Lender thereof. (b) In the event and on each occasion that the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures exceeds the total Commitments, or the sum of the Revolving Credit Exposures under any Tranche exceeds the sum of the Commitments under such Tranche, the Borrowers shall promptly prepay Revolving Borrowings in an aggregate amount sufficient to eliminate such excess. If on any Reset Date, the aggregate amount of the sum of the Revolving Credit Exposures under any Tranche exceeds 105% of the sum of the Commitments under such Tranche, then each applicable Borrower shall, not later than the next Business Day, prepay one or more Borrowings or amounts owing in respect of outstanding B/As in an aggregate amount sufficient to eliminate such excess. (c) Prior to any optional or mandatory prepayment of Borrowings or amounts owing in respect of outstanding B/A Drawings, the applicable Borrower shall select the Borrowing or Borrowings and the B/A Drawing or B/A Drawings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (d) below. (d) The Company shall notify the Applicable Agent by telephone (confirmed by telecopy) or by telecopy of any prepayment hereunder (i) in the case of prepayment of a Eurocurrency Revolving Borrowing or a Bill Rate Borrowing, not later than 11:00 a.m., Local time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Revolving Borrowing, a Canadian Base Rate Borrowing or a B/A Drawing, not later than 51 46 11:00 a.m., Local time, on the Business Day of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof, or amount owed in respect of an outstanding B/A Drawing or portion thereof, to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.09, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.09. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing or amounts owing in respect of a B/A Drawing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02 or an acceptance and purchase of B/As as provided in Section 2.05. Each prepayment of a Revolving Borrowing or B/A Drawing shall be applied ratably to the Loans included in the prepaid Borrowing or the B/As included in such B/A Drawing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13. (e) Amounts to be applied pursuant to this Section or Article VII to prepay or repay amounts to become due with respect to outstanding B/As shall be deposited in the Prepayment Account (as defined below). The Canadian Agent shall apply any cash deposited in the Prepayment Account allocable to amounts to become due in respect of B/As on the last day of their respective Contract Periods until all amounts due in respect of outstanding B/As have been prepaid or until all the allocable cash on deposit has been exhausted. For purposes of this Agreement, the term "Prepayment Account" shall mean an account established by a Borrower with the Canadian Agent and over which the Canadian Agent shall have exclusive dominion and control, including the exclusive right of withdrawal for application in accordance with this paragraph (e). The Canadian Agent will, at the request of such Borrower, invest amounts on deposit in the Prepayment Account in short-term, cash equivalent investments selected by the Canadian Agent in consultation with such Borrower that mature prior to the last day of the applicable Contract Periods of the B/As to be prepaid; provided, however, that the Canadian Agent shall have no obligation to invest amounts on deposit in the Prepayment Account if an Event of Default shall have occurred and be continuing. Such Borrower shall indemnify the Canadian Administrative Agent for any losses relating to the investments so that the amount available to prepay amounts due in respect of B/As on the last day of the applicable Contract Period is not less than the amount that would have been available had no investments been made pursuant thereto. Other than any interest earned on such investments (which shall be for the account of such Borrower, to the extent not necessary for the prepayment of B/As in accordance with this Section), the Prepayment Account shall not bear interest. Interest or profits, if any, on such investments shall be deposited in the Prepayment Account and reinvested and disbursed as specified above. If the maturity of the Loans and all amounts due hereunder has been accelerated pursuant to Article VII, the Canadian Agent may, in its sole discretion, apply all amounts on deposit in the Prepayment Account to satisfy any of the Obligations in respect of Canadian Tranche Revolving Loans and B/As (and each Borrower hereby grants to the Canadian Agent a security interest in its Prepayment Account to secure such Obligations). SECTION 2.12. Fees (a) (i) The Borrowers agree to pay to the Administrative Agent, in US Dollars, for the account of the office (or Affiliate) of each Lender from which such Lender would make Loans to the Company in US Dollars hereunder (which office or Affiliate shall be specified by each Lender in each Tranche in a notice delivered to the Administrative Agent prior to the initial payment to such Lender under this paragraph) a facility fee, which shall 52 47 accrue at the relevant Facility Fee Rate specified in the definition of Applicable Rate on the daily amount of the Commitments of such Lender (whether used or unused) during the period from and including the date of this Agreement to but excluding the Maturity Date; provided that, if such Lender continues to have any Revolving Credit Exposure after the Maturity Date, then such facility fee shall continue to accrue on the daily amount of such Lender's Revolving Credit Exposure from and including the Maturity Date to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall be payable in arrears on the last day of March, June, September and December of each year, on any date prior to the Maturity Date on which all the Commitments shall have terminated and on the Maturity Date, commencing on the first such date to occur after the date hereof; provided that any facility fees accruing after the Maturity Date shall be payable on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (ii) For each day on which the US Dollar Equivalent of the aggregate principal amount of the Loans and B/As outstanding under this Agreement is in excess of 50% of the total Commitments as of such day (and for each day after the day on which the Commitments terminate) the Borrowers agree to pay to the Administrative Agent, in US Dollars, for the account of the office (or Affiliate) of each Lender specified as the payment office for the facility fee under paragraph (a) above (each a "Payment Date") a utilization fee, which shall accrue at the relevant Utilization Fee Rate specified in the definition of Applicable Rate on the daily amount of the outstanding Loans and B/As of such Lender on such day. On each day on which a utilization fee is not due under the immediately preceding sentence, the Borrowers agree to pay to the Administrative Agent, in US Dollars, for the account of the Payment Office of each Lender in each Tranche under which the aggregate principal amount of the Loans and, if applicable, B/As outstanding is in excess of 50% of the total Commitments under such Tranche as of such day, a utilization fee which shall accrue at the relevant Utilization Fee Rate specified in the definition of Applicable Rate on the daily amount of the outstanding Loans and, if applicable, B/As under such Tranche of such Lender on such day. Accrued utilization fees shall be payable in arrears on the last day of March, June, September and December of each year, on any date prior to the Maturity Date on which the Commitments terminate and on the Maturity Date, commencing on the first such date to occur after the date hereof; provided that any utilization fees accruing after the Maturity Date shall be payable on demand. All utilization fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) Each Canadian Borrowing Subsidiary agrees to pay to the Canadian Agent, for the account of each Canadian Tranche Lender, on each date on which B/As drawn by such Canadian Borrowing Subsidiary are accepted hereunder, in Canadian Dollars, an acceptance fee computed by multiplying (i) the Applicable Rate for B/A Drawings on such date by (ii) a fraction, the numerator of which is the number of days in the Contract Period applicable to such B/A and the denominator of which is 365. (c) The Borrowers agree to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between any Borrower and the Administrative Agent. 53 48 (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for its own account or, in the case of facility fees and utilization fees, for distribution to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate and the Loans comprising each Canadian Base Rate Borrowing shall bear interest at the Canadian Base Rate. (b) The Loans comprising each Eurocurrency Borrowing shall bear interest (i) in the case of a Eurocurrency Revolving Borrowing, at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate, (ii) in the case of a Bill Rate Borrowing, at the Australian Bank Bill Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate or (iii) in the case of a Eurocurrency Competitive Borrowing, at the LIBO Rate for the Interest Period in effect for such Borrowing plus (or minus, as applicable) the Margin applicable to such Borrowing. (c) Each Fixed Rate Loan shall bear interest at the Fixed Rate applicable to such Loan. (d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by any Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section, (ii) in the case of any other amount payable in Canadian Dollars, 2% plus the rate applicable to Canadian Base Rate Loans as provided in paragraph (a) above or (iii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Commitments; provided that (i) interest accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan or Canadian Base Rate Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Revolving Loan or Bill Rate Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (f) All interest hereunder shall be computed on the basis of a year of 360 days, except that (i) interest on Borrowings denominated in Sterling or Australian Dollars and (ii) interest computed by reference to the Canadian Base Rate or to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or, except in the case of Borrowings denominated in Sterling, 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Canadian Base Rate, 54 49 Adjusted LIBO Rate, LIBO Rate or Australian Bank Bill Rate shall be determined by the Applicable Agent, and such determination shall be conclusive absent manifest error. SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing denominated in any currency: (a) the Applicable Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or (b) the Applicable Agent is advised by the Required Lenders (or, in the case of a Eurocurrency Competitive Loan, the Lender that is required to make such Loan) that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period; then the Applicable Agent shall give notice thereof to the Company and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Applicable Agent notifies the Company and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurocurrency Borrowing in such currency shall be ineffective, and such Borrowing shall be converted to or continued on the last day of the Interest Period applicable thereto (A) if such Borrowing is denominated in US Dollars, as an ABR Borrowing, or (B) if such Borrowing is denominated in any other currency, as a Borrowing bearing interest at such rate as the Lenders and the Company may agree adequately reflects the costs to the Lenders of making or maintaining their Loans (or, in the absence of such agreement, shall be repaid as of the last day of the current Interest Period applicable thereto), (ii) if any Borrowing Request requests a Eurocurrency Revolving Borrowing in such currency, such Borrowing shall be made as an ABR Borrowing (or such Borrowing shall not be made if the applicable Borrower revokes (and in such circumstances, such Borrowing Request may be revoked notwithstanding any other provision of this Agreement) such Borrowing Request by telephonic notice, confirmed promptly in writing, not later than one Business Day prior to the proposed date of such Borrowing) and (iii) any request by a Borrower for a Eurocurrency Competitive Borrowing denominated in such currency shall be ineffective; provided that (A) if the circumstances giving rise to such notice do not affect all the Lenders, then requests by a Borrower for Eurocurrency Competitive Borrowings may be made to Lenders that are not affected thereby and (B) if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted. SECTION 2.15. Increased Costs. (a) If any Change in Law or the applicability of any Statutory Reserves shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except to the extent any such reserve requirement is reflected in the Adjusted LIBO Rate); or 55 50 (ii) impose on any Lender or the London, Canadian or Australian interbank markets any other condition affecting this Agreement or Eurocurrency Loans, Fixed Rate Loans, B/A Drawings or Bill Rate Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan, Fixed Rate Loan or Bill Rate Loan or obtaining funds for the purchase of B/As (or of maintaining its obligation to make any such Loan or to accept and purchase B/As) or to increase the cost to such Lender or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrowers will pay to such Lender such additional amount or amounts as will compensate such Lender on an after-tax basis for such additional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Company will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) If the cost to any Lender of making or maintaining any Loan to or obtaining funds for the purchase of B/As from any Borrowing Subsidiary is increased (or the amount of any sum received or receivable by any Lender (or its applicable lending office) is reduced) by an amount deemed in good faith by such Lender to be material, by reason of the fact that such Borrowing Subsidiary is incorporated in, or conducts business in, a jurisdiction outside the United States, such Borrowing Subsidiary shall indemnify such Lender for such increased cost or reduction within 15 days after demand by such Lender (with a copy to the Administrative Agent). A certificate of such Lender claiming compensation under this paragraph and setting forth the additional amount or amounts to be paid to it hereunder (and the basis for the calculation of such amount or amounts) shall be conclusive in the absence of manifest error. (d) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section, together with supporting documentation or computations, shall be delivered to the Company and shall be conclusive absent manifest error. The Company shall pay such Lender the amount shown as due on any such certificate within 10 Business Days after receipt thereof. (e) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Company shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Company of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. 56 51 (f) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section in respect of any Competitive Loan if the Change in Law that would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Competitive Bid pursuant to which such Loan was made. SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan, Fixed Rate Loan or Bill Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan or Bill Rate Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan or to issue B/As for acceptance and purchase on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(c) and is revoked in accordance therewith), (d) the failure to borrow any Competitive Loan after accepting the Competitive Bid to make such Loan, or (e) the assignment of any Eurocurrency Loan, Fixed Rate Loan or Bill Rate Loan or the right to receive payment in respect of a B/A other than on the last day of the Interest Period or Contract Period, as the case may be, applicable thereto as a result of a request by the Company pursuant to Section 2.19 or the CAM Exchange, then, in any such event, the Borrowers shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan or Bill Rate Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate or Australian Bank Bill Rate, as applicable, that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in the applicable currency of a comparable amount and period from other banks in the eurocurrency market or bill rate market, as applicable. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section, together with supporting documentation or computations, shall be delivered to the Company and shall be conclusive absent manifest error. The Borrowers shall pay such Lender the amount shown as due on any such certificate within 10 Business Days after receipt thereof. SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation of the Borrowers hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if any Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions of Indemnified Taxes or Other Taxes (including deductions applicable to additional sums payable under this Section) the Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrowers shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. 57 52 (c) The Borrowers shall indemnify each Agent and each Lender, within 10 Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by such Agent or such Lender on or with respect to any payment by or on account of any obligation of the Borrowers hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate setting forth in reasonable detail the amount and nature of such payment or liability delivered to the Company by a Lender, or by an Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Borrower to a Governmental Authority, the Company shall deliver to the Applicable Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Applicable Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which a Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Company (with a copy to the Applicable Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Company as will permit such payments to be made without withholding or at a reduced rate, provided that such Foreign Lender has received written notice from the Company advising it of the availability of such exemption or reduction and containing all applicable documentation. (f) If an Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by a Borrower or with respect to which a Borrower has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to the Company (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under this Section 2.17 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Borrowers, upon the request of such Agent or such Lender, agree to repay the amount paid over to such Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Agent or such Lender in the event such Agent or such Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require any Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to any Borrower or any other Person. SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Each Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest or fees, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to 2:00 p.m., Local Time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such 58 53 time on any date may, in the discretion of the Applicable Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Applicable Agent to the applicable account specified on Schedule 2.18 for the account of the applicable Lenders or, in any such case, to such other account as the Applicable Agent shall from time to time specify in a notice delivered to the Company, except that payments pursuant to Sections 2.15, 2.16, 2.17 and 10.03 shall be made directly to the Persons entitled thereto. The Applicable Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder of principal or interest in respect of any Loan or amounts owing in respect of any B/A Drawing (or of any breakage indemnity in respect of any Loan or B/A Drawing) shall be made in the currency of such Loan or B/A Drawing; all other payments hereunder and under each other Loan Document shall be made in US Dollars, except as otherwise expressly provided. Any payment required to be made by an Agent hereunder shall be deemed to have been made by the time required if such Agent shall, at or before such time, have taken the necessary steps to make such payment in accordance with the regulations or operating procedures of the clearing or settlement system used by such Agent to make such payment. Any amount payable by any Agent to one or more Lenders in the national currency of a member state of the European Union that has adopted the Euro as its lawful currency shall be paid in Euro. (b) If at any time insufficient funds are received by and available to any Agent from any Borrower to pay fully all amounts of principal, interest and fees then due from such Borrower hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due from such Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due from such Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or amounts owing in respect of any B/A Drawing resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans or amounts owing in respect of any B/A Drawing and accrued interest thereon under any Tranche than the proportion received by any other Lender under such Tranche, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans or amounts owing in respect of any B/A Drawing, as applicable, of other Lenders under such Tranche to the extent necessary so that the benefit of all such payments shall be shared by the Lenders under such Tranche ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans or amounts owing in respect of any B/A Drawing under such Tranche; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by any Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to a Borrower or any Subsidiary or Affiliate thereof (as to which the 59 54 provisions of this paragraph shall apply). Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation. (d) Unless the Applicable Agent shall have received notice from the Company prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the applicable Borrower will not make such payment, the Applicable Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders, the amount due. In such event, if such Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Applicable Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Applicable Agent, at (i) the greater of the Federal Funds Effective Rate and a rate determined by the Applicable Agent in accordance with banking industry rules on interbank compensation (in the case of an amount denominated in US Dollars) and (ii) the rate reasonably determined by the Applicable Agent to be the cost to it of funding such amount (in the case of an amount denominated in any other currency). (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.07(b) or paragraph (d) of this Section 2.18, then the Applicable Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Applicable Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.15, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Borrower is required to pay any additional interest to any Lender pursuant to Section 2.21, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15, 2.17 or 2.21 as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Each Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.15, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Borrower is required to pay any additional interest to any Lender pursuant to Section 2.21, or if any Lender defaults in its obligation to fund Loans hereunder, then the Company may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans held by it) to an assignee that shall assume such obligations (which assignee may be another 60 55 Lender, if a Lender accepts such assignment); provided that (i) the Company shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans (other than Competitive Loans), accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Company (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17 or additional interest required pursuant to Section 2.21, such assignment will result in a material reduction in such compensation, payments or additional interest. SECTION 2.20. Borrowing Subsidiaries. On or after the Effective Date, the Company may designate any Wholly Owned Subsidiary of the Company as a US Borrowing Subsidiary, a UK Borrowing Subsidiary, a Euro Borrowing Subsidiary, a Canadian Borrowing Subsidiary or an Australian Borrowing Subsidiary, as applicable, by delivery to the Administrative Agent of a Borrowing Subsidiary Agreement executed by such Subsidiary and the Company, and upon such delivery such Subsidiary shall for all purposes of this Agreement be a Borrowing Subsidiary and a party to this Agreement. Upon the execution by the Company and delivery to the Administrative Agent of a Borrowing Subsidiary Termination with respect to any Borrowing Subsidiary, such Subsidiary shall cease to be a Borrowing Subsidiary and a party to this Agreement; provided that no Borrowing Subsidiary Termination will become effective as to any Borrowing Subsidiary (other than to terminate such Borrowing Subsidiary's right to make further Borrowings under this Agreement) at a time when any principal of or interest on any Loan to such Borrowing Subsidiary shall be outstanding hereunder. Promptly following receipt of any Borrowing Subsidiary Agreement or Borrowing Subsidiary Termination, the Administrative Agent shall send a copy thereof to each Lender. SECTION 2.21. Additional Reserve Costs. (a) If and so long as any Lender is required to make special deposits with the Bank of England, to maintain reserve asset ratios or to pay fees, in each case in respect of such Lender's Eurocurrency Loans in any Designated Foreign Currency, such Lender may require the relevant Borrower to pay, contemporaneously with each payment of interest on each of such Loans, additional interest on such Loan at a rate per annum equal to the Mandatory Costs Rate calculated in accordance with the formula and in the manner set forth in Exhibit C hereto. (b) If and so long as any Lender is required to comply with reserve assets, liquidity, cash margin or other requirements of any monetary or other authority (including any such requirement imposed by the European Central Bank or the European System of Central Banks, but excluding requirements reflected in the Statutory Reserves or the Mandatory Costs Rate) in respect of any of such Lender's Eurocurrency Loans in any Designated Foreign Currency, such Lender may require the relevant Borrower to pay, contemporaneously with each payment of interest on each of such Lender's Eurocurrency Loans subject to such requirements, additional interest on such Loan at a rate per annum specified by such Lender to be the cost to such Lender of complying with such requirements in relation to such Loan. (c) Any additional interest owed pursuant to paragraph (a) or (b) above shall be determined by the relevant Lender, which determination shall be conclusive absent manifest error, and notified to the relevant Borrower (with a copy to the Administrative Agent) at least five 61 56 Business Days before each date on which interest is payable for the relevant Loan, and such additional interest so notified to the relevant Borrower by such Lender shall be payable to the Administrative Agent for the account of such Lender on each date on which interest is payable for such Loan. SECTION 2.22. Redenomination of Certain Designated Foreign Currencies. (a) Each obligation of any party to this Agreement to make a payment denominated in the national currency unit of any member state of the European Union that adopts the Euro as its lawful currency after the date hereof shall be redenominated into Euro at the time of such adoption (in accordance with the EMU Legislation). If, in relation to the currency of any such member state, the basis of accrual of interest expressed in this Agreement in respect of that currency shall be inconsistent with any convention or practice in the London Interbank Market for the basis of accrual of interest in respect of the Euro, such expressed basis shall be replaced by such convention or practice with effect from the date on which such member state adopts the Euro as its lawful currency; provided that if any Borrowing in the currency of such member state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Borrowing, at the end of the then current Interest Period. (b) Without prejudice and in addition to any method of conversion or rounding prescribed by any EMU Legislation and (i) without limiting the liability of any Borrower for any amount due under this Agreement and (ii) without increasing any Commitment of any Lender, all references in this Agreement to minimum amounts (or integral multiples thereof) denominated in the national currency unit of any member state of the European Union that adopts the Euro as its lawful currency after the date hereof shall, immediately upon such adoption, be replaced by references to such minimum amounts (or integral multiples thereof) as shall be specified herein with respect to Borrowings denominated in Euro. (c) Each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent (in consultation with the Company) may from time to time specify to be appropriate to reflect the adoption of the Euro by any member state of the European Union and any relevant market conventions or practices relating to the Euro. ARTICLE III Representations and Warranties Each of the Company and the Borrowing Subsidiaries represents and warrants to the Lenders that: SECTION 3.01. Organization and Qualification. Each Borrower is duly organized, validly existing and in good standing (to the extent such concept is relevant to such Person in its jurisdiction of organization) under the laws of the jurisdiction of its organization, has full and adequate corporate power to carry on its business as now conducted, and is duly licensed or qualified and, to the extent relevant, in good standing in each jurisdiction in which the nature of the business transacted by it or the nature of the Property owned or leased by it makes such licensing or qualification necessary, except where such failure to be so licensed or qualified and in good standing would not have a Material Adverse Effect. 62 57 SECTION 3.02. Subsidiaries. Each Significant Subsidiary is duly organized, validly existing and in good standing (to the extent such concept is relevant to such Person in its jurisdiction of organization) under the laws of the jurisdiction of its organization, has the requisite power to carry on its business as now conducted, and is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business transacted by it or the nature of the Property owned or leased by it makes such licensing or qualification necessary, except where such failure would not have a Material Adverse Effect. All the issued and outstanding Equity Interests in each Significant Subsidiary are validly issued and outstanding and fully paid and nonassessable and all such shares owned by the Company or a Subsidiary are owned, beneficially and of record, by the Company or such Subsidiary, free of any Lien other than Permitted Encumbrances. The Significant Subsidiaries after giving effect to the transactions to occur on the Acquisition Date are listed on Schedule 3.02. SECTION 3.03. Corporate Authority and Validity of Obligations. Each Borrower has the requisite right and authority to consummate the Transactions, to enter into this Agreement and each other Loan Document to which it is a party, to make the Borrowings herein provided for, to issue its notes in evidence thereof and to perform all of its obligations hereunder and under each other Loan Document to which it is a party; each of the Transactions has been duly authorized by the Borrowers and the execution, delivery and performance of this Agreement and the other Loan Documents have been duly authorized by all necessary corporate, company or partnership action by each Borrower party thereto and constitute valid and binding obligations of the Borrowers enforceable in accordance with their terms; and none of the Transactions, this Agreement, the other Loan Documents and the performance or observance by any Borrower or any Subsidiary of any of the matters or things herein or therein provided for contravene any provision of law or judgment or any charter or by-law provision of any Borrower or any material covenant, indenture or agreement of or affecting any Borrower or a substantial portion of any of their respective Properties. SECTION 3.04. Margin Stock. None of the Borrowers nor any of the Subsidiaries is engaged principally, or as one of its primary activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and none of the Borrowers nor any of the Subsidiaries will use the proceeds of any Loan in a manner that violates any provision of Regulation U or X of the Board of Governors of the Federal Reserve System. SECTION 3.05. Financial Reports. (a) The consolidated balance sheet of the Company and the Subsidiaries and the related consolidated statements of earnings, shareholders' equity and cash flows of the Company and the Subsidiaries and accompanying notes thereto (i) as at December 31, 1999, and for the year then ended, which financial statements are accompanied by the report of PriceWaterhouseCoopers LLP, and (ii) as at September 30, 2000, and for the fiscal quarter and the portion of the fiscal year then ended, certified by the Company's chief financial officer, heretofore furnished to the Administrative Agent, fairly present in all material respects the consolidated financial condition of the Company and the Subsidiaries as at such dates and their consolidated results of operations, shareholders' equity and cash flows for the periods then ended in conformity with GAAP, subject to year-end adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. 63 58 (b) The consolidated balance sheet of Keebler and its subsidiaries and the related consolidated statements of earnings, shareholders' equity and cash flows of Keebler and its subsidiaries and accompanying notes thereto (i) as at January 1, 2000, and for the year then ended, which financial statements are accompanied by the report of PriceWaterhouseCoopers LLP, and (ii) as at September 30, 2000, and for the fiscal quarter and the portion of the fiscal year then ended, certified by Keebler's chief financial officer, heretofore furnished to the Administrative Agent, to the best of the Company's knowledge, fairly present in all material respects the consolidated financial condition of Keebler and its subsidiaries as at such dates and their consolidated results of operations, shareholders' equity and cash flows for the periods then ended in conformity with GAAP, subject to year-end adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (c) The Company has heretofore furnished to the Lenders its pro forma consolidated balance sheet as of September 30, 2000, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) has been prepared in good faith based on the same assumptions used to prepare the pro forma financial statements included in the Information Memorandum (which assumptions are believed by the Company to be reasonable), (ii) is based on the best information available to the Company after due inquiry, (iii) accurately reflects all adjustments necessary to give effect to the Transactions and (iv) presents fairly, in all material respects, the pro forma financial position of the Company and its consolidated Subsidiaries as of September 30, 2000, as if the Transactions had occurred on such date. The representations and warranties set forth in clauses (iii) and (iv) are limited to the best of the Company's knowledge to the extent they relate to Keebler and its subsidiaries. SECTION 3.06. No Material Adverse Change. Since September 30, 2000, there has not occurred or become known any condition or change that has affected or would reasonably be expected to affect materially and adversely the business, assets, liabilities or financial condition of the Company, and its Subsidiaries taken as a whole. SECTION 3.07. Litigation. There is no litigation or governmental proceeding pending, or to the knowledge of the Company threatened, against the Company, any Subsidiary or Keebler or any of its subsidiaries which if adversely determined would (a) impair the validity or enforceability of, or materially impair the ability of the Company or any other Borrower to perform its obligations under, this Agreement or any other Loan Document or (b) except as disclosed on Schedule 3.07 or in the Company's Form 10-Ks and 10-Qs filed with the SEC covering periods through September 30, 2000, or in Keebler's Form 10-Ks and 10-Qs filed with the SEC covering periods through October 7, 2000, result in any Material Adverse Effect. SECTION 3.08. Tax Returns. The Company has filed consolidated United States federal income tax returns for all taxable years ended on or before December 31, 1999 and such returns of the Company for the taxable year ended December 31, 1996 and all taxable years ended before such date have been examined and approved by the Internal Revenue Service as filed, and any additional assessments for any such year have been paid or the applicable statute of limitations therefor has expired. To the best of the Company's knowledge, Keebler has filed consolidated United States federal income tax returns for all taxable years ended on or before January 1, 2000 and such returns of Keebler for the taxable year ended December 31,1994 and all taxable years ended before such date have been examined and approved by the Internal Revenue Service as filed, and any additional assessments for any such year have been paid or the applicable statute of 64 59 limitations therefor has expired. There are no assessments pending for the consolidated United States federal income tax returns of the Company and the Subsidiaries of a material nature for any taxable year ended after December 31, 1999, or, to the best of the Company's knowledge, of Keebler and its subsidiaries of a material nature for any year ended after January 1, 2000, nor to the knowledge of the Company is any such assessment threatened, other than those provided for by adequate reserves under GAAP. SECTION 3.09. Approvals. No authorization, consent, license, exemption, filing or registration with any court or governmental department, agency or instrumentality, or any other Person, is necessary to the consummation of the Transactions or the valid execution, delivery or performance by any Borrower of this Agreement or any other Loan Document except for those obtained on or before the Effective Date or those the failure of which to obtain would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. SECTION 3.10. ERISA. The Company and each Subsidiary are in compliance in all material respects with the Employee Retirement Income Security Act of 1974 ("ERISA") to the extent applicable to them and have received no notice to the contrary from the Pension Benefit Guaranty Corporation or any successor thereto ("PBGC") or any other governmental entity or agency. No condition exists or event or transaction has occurred under or relating to any Plan which could reasonably be expected to result in the incurrence by the Company or any Subsidiary of any material liability, fine or penalty. Except as disclosed on Schedule 3.10, neither the Company nor any Subsidiary has any contingent liability for any post-retirement benefits under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title 1 of ERISA. SECTION 3.11. Environmental Matters. Except as set forth on Schedule 3.11, or except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, none of the Company and its Subsidiaries (a) has failed to comply with any Environmental Laws or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Laws, (b) has become subject to any liability under any Environmental Laws, (c) has received notice of any claim with respect to any Environmental Laws or (d) knows of any basis for any liability under any Environmental Laws. SECTION 3.12. Properties. (a) Each of the Company and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, subject only to Liens permitted by Section 6.02 and except for defects in title that could not individually or in the aggregate reasonably be expected to result in a Material Adverse Effect. (b) Each of the Company and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by them does not infringe upon the rights of any other Person, except for any such defects in ownership or license rights or other infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.13. Compliance with Laws. Each of the Company and its Subsidiaries is in compliance with all laws, regulations and orders of the Food and Drug Administration and each other Governmental Authority applicable to it or its property, except 65 60 where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.14. Investment and Holding Company Status. None of the Company and its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.15. Disclosure. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of the Company to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Company represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Company's control, and that no assurance can be given that such projections will be realized); and provided further that the representations and warranties set forth in this sentence are limited to the best of the Company's knowledge to the extent they relate to information or materials obtained by the Company from Keebler and its subsidiaries prior to the Acquisition Date. ARTICLE IV Conditions SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.02): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of each of (i) Gary H. Pilnick, Vice President and Deputy General Counsel of the Company, substantially in the form of Exhibit D-1, and (ii) Kirkland & Ellis, counsel for the Borrowers, substantially in the form of Exhibit D-2. Each Borrower hereby requests such counsel to deliver such opinion. (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing (to the extent such concept is relevant to such 66 61 Person in its jurisdiction of organization) of each Borrower and the authorization of the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel. (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Company, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02. (e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses required to be reimbursed or paid on or prior to the Effective Date by the Borrowers hereunder. (f) The 364-Day Credit Agreement shall have been executed and delivered. The Administrative Agent shall notify the Company and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.02) at or prior to 3:00 p.m., New York City time, on April 30, 2001 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). The effectiveness of the obligations to make Loans (other than Loans made solely for the purpose of repaying commercial paper issued on or after the Effective Date but prior to the date of such termination, to the extent the proceeds of such commercial paper shall have been deposited in the cash collateral account referred to in the last paragraph of this Section 4.01) hereunder shall terminate, and any outstanding Obligations (other than Obligations under Hedging Agreements) shall become immediately due and payable (or, in the case of Obligations incurred after such time shall become due and payable immediately following their incurrence), at 3:00 p.m. on April 30, 2001, unless each of the following conditions is satisfied (or waived in accordance with Section 10.02): (g) The Acquisition shall have been completed on terms substantially similar to those set forth in the Acquisition Agreements as heretofore provided to the Lenders, without modification or waiver of any material term or condition thereof that would reasonably be expected to materially and adversely affect the Company and its Subsidiaries, taken as a whole, or the rights or interests of the Lenders, and the assets and liabilities of Keebler and its subsidiaries shall to the best knowledge of the Company be consistent with the pro forma consolidated balance sheet referred to in Section 3.05(c). (h) The Company shall have established a commercial paper program on terms and subject to conditions satisfactory to the Lenders which permits the issuance of commercial paper supported by this Agreement, the 364-Day Credit Agreement and, if effective, the Bridge Facility, in an aggregate principal amount sufficient to consummate the Acquisition, refinance and replace the Indebtedness and credit facilities set forth on Schedule 4.01(h) as being repaid or permanently terminated in connection with the Acquisition, pay related fees and expenses and provide for the working capital needs and 67 62 other general corporate purposes of the Company and its Subsidiaries. After giving effect to the Acquisition and the other transactions contemplated hereby, the Indebtedness and credit facilities set forth on Schedule 4.01(h) as being repaid or terminated shall have been repaid in full and permanently terminated, as applicable, and the Company and its Subsidiaries shall have outstanding no Indebtedness other than (a) commitments and Indebtedness under this Agreement and the 364-Day Credit Agreement, Indebtedness under the Company's commercial paper program, Senior Notes and commitments or loans under the Bridge Facility, in an aggregate principal amount taken together, without duplication, not to exceed US$6,300,000,000, and (b) the other Indebtedness set forth on Schedule 6.01 as remaining outstanding after giving effect to the Acquisition. (i) All governmental authorities and material third parties shall have approved or consented to the Acquisition to the extent such approvals or consents are required under applicable laws or agreements or otherwise and the failure to obtain such approvals or consents would reasonably be expected to result in a Material Adverse Effect; all applicable appeal periods of Governmental Authorities shall have expired and there shall be no governmental or judicial action, actual or threatened, that could reasonably be expected to restrain, prevent or impose materially burdensome conditions on the Acquisition. There shall be no litigation or administrative action that could reasonably be expected to have a Material Adverse Effect. The Administrative Agent shall have received a favorable written opinion (which is addressed to the Administrative Agent and the Lenders or permits reliance on it by the Administrative Agent and the Lenders and is dated as of the Acquisition Date) from counsel and in a form reasonably satisfactory to the Administrative Agent to the effect that no authorization, approval or action by, and no notice to, consent of, order of or filing with, any governmental authority, and no shareholder approval, is required in connection with the Acquisition, other than such as have been obtained or made or those the failure to obtain or make which are not material to the consummation of the Transactions or to the Company. The Administrative Agent shall notify the Company and the Lenders of the Acquisition Date, and such notice shall be conclusive and binding. All proceeds of any commercial paper issued by the Company on or after the Effective Date but prior to the Acquisition Date (other than proceeds of commercial paper issued under the Company's existing commercial paper programs) shall be held in a cash collateral account of the Company maintained with the Administrative Agent and shall (A) be made available to the Company to finance the consummation of the Acquisition and the related Transactions on the date on which all the conditions set forth in paragraphs (g) through (i) are satisfied, or (B) if all such conditions are not satisfied on or prior to April 30, 2001 or any earlier date on which the Commitments shall have terminated, be applied to repay such commercial paper as it matures and all Obligations that may from time to time be outstanding on or after April 30, 2001 or any earlier date on which the Commitments shall have terminated. 68 63 SECTION 4.02. Each Borrowing. The obligation of each Lender to make a Loan on the occasion of any Borrowing, is subject to the satisfaction (or waiver in accordance with Section 10.02) of the following conditions: (a) The representations and warranties (other than those set forth in Sections 3.06 and 3.07 in the case of Borrowings made after the Effective Date) of the Borrowers set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing. (b) At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the Company on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. On and after the Acquisition Date, the conditions specified in paragraphs (a) and (b) of this Section shall be construed giving effect to the Acquisition and the other transactions contemplated to be effected in connection therewith. SECTION 4.03. Initial Borrowing by each Borrowing Subsidiary. The obligation of each Lender to make Loans to any Borrowing Subsidiary (other than the Borrowing Subsidiaries party hereto on the date hereof) is subject to the satisfaction (or waiver in accordance with Section 10.02) of the following conditions: (a) The Administrative Agent (or its counsel) shall have received such Borrowing Subsidiary's Borrowing Subsidiary Agreement, duly executed by all parties thereto. (b) The Administrative Agent shall have received such documents and certificates, including such opinions of counsel, as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing (to the extent such concept is relevant to such Person in its jurisdiction of organization) of such Borrowing Subsidiary, the authorization of the Transactions insofar as they relate to such Borrowing Subsidiary and any other legal matters reasonably relating to such Borrowing Subsidiary, its Borrowing Subsidiary Agreement or such Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. ARTICLE V Affirmative Covenants Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, the Company covenants and agrees with the Lenders as to itself and its subsidiaries and each Borrowing Subsidiary covenants and agrees with the Lenders as to itself and its subsidiaries that: SECTION 5.01. Corporate Existence. The Company shall, and shall cause each Significant Subsidiary to, preserve and maintain its corporate existence, subject to the provisions of Section 6.04. 69 64 SECTION 5.02. Maintenance. The Company will maintain, preserve and keep its Property necessary to the proper conduct of its business in reasonably good repair, working order and condition (ordinary wear and tear and damage by casualty excepted) and will from time to time make all necessary repairs, renewals, replacements, additions and betterments thereto so that in the judgment of the Company at all times such Property shall be reasonably preserved and maintained, and will cause each Significant Subsidiary so to do for Property owned or used by it, the failure of which to maintain or preserve could reasonably be expected to have a Material Adverse Effect; provided, however, that nothing in this Section 5.02 shall prevent the Company or a Significant Subsidiary from discontinuing the operation or maintenance of any such Property if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of the Subsidiary and in the reasonable opinion of the Company is not disadvantageous in any material respect to the Lenders. SECTION 5.03. Taxes. The Company will duly pay and discharge, and will cause each Subsidiary to pay and discharge, all material taxes, rates, assessments, fees and governmental charges upon or against the Company or such Subsidiary or against their respective Property, in each case before the same becomes delinquent and before penalties accrue thereon, unless and to the extent that (a) the same is being contested in good faith and by appropriate proceedings and adequate reserves under GAAP are provided therefor or (b) the same could not reasonably be expected to give rise to a Lien that would not be permitted under Section 6.02(d). SECTION 5.04. Insurance. The Company will insure, and keep insured, and will cause each Subsidiary to insure, and keep insured, with reputable insurance companies, all insurable Property owned by it which is of a character usually insured by companies similarly situated and operating like Property. To the extent usually insured (subject to self-insured retentions) by companies similarly situated and conducting similar businesses, the Company will also insure, and cause each Subsidiary to insure, employers' and public and product liability risks with reputable insurance companies. It is understood and agreed that the Company will be deemed to be in compliance with this Section 5.04 with respect to Keebler and its subsidiaries at all times between the Acquisition Date and the date that is one year thereafter to the extent that Keebler and its Subsidiaries maintain insurance consistent with their past practices. The Company will upon request of the Administrative Agent furnish to the Administrative Agent, for distribution to each Lender, a summary setting forth the nature and extent of the insurance maintained pursuant to this Section 5.04. SECTION 5.05. Financial Reports and Other Information. The Company will, and will cause each Subsidiary to, maintain a standard system of accounting substantially in accordance with GAAP and will furnish to the Lenders and their respective duly authorized representatives such information respecting the business and financial condition of the Company and the Subsidiaries as they may reasonably request; and without any request will furnish to the Administrative Agent, which will make available by means of electronic posting to each Lender: (a) within 60 days after the end of each of the first three quarterly fiscal periods of the Company, a copy of the Company's Form 10-Q Report filed with the SEC; (b) within 120 days after the end of each fiscal year of the Company, a copy of the Company's Form 10-K Report filed with the SEC, including a copy of the annual report of 70 65 the Company and the Subsidiaries for such year with accompanying financial statements, prepared by the Company and certified by independent public accountants of recognized standing, in accordance with GAAP; (c) promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports the Company sends to its shareholders, and copies of all other regular, periodic and special reports and all registration statements the Company files with the SEC, or with any national securities exchange; and (d) (i) promptly after the Company has knowledge thereof, notice (including a description in reasonable detail) of the occurrence of any Default or Event of Default, and (ii) within five Business Days after the Company has knowledge thereof, notice of any change to any rating of the Index Debt by S&P or Moody's. In addition, in the event that Subsidiaries not constituting Significant Subsidiaries shall at any time (as a result of any acquisition or disposition of any Person or line of business involving any party other than the Company and the Subsidiaries or any reorganization of the Company or any Subsidiaries) represent more than 10% of Consolidated Total Assets or Consolidated Net Sales as of such date or for such period, the Company will promptly designate additional Significant Subsidiaries by written notice to the Administrative Agent until such excess has been eliminated. Each of the financial statements furnished to the Lenders pursuant to subsections (a) and (b) of this Section 5.05 shall be accompanied by a compliance certificate in substantially the form of Exhibit E signed by a Financial Officer of the Company. Each such financial statement shall also be accompanied by a certificate signed by a Financial Officer of the Company confirming compliance with the requirements set forth in the definition of "Significant Subsidiary" and in the last sentence of the immediately preceding paragraph, attaching a revised form of Schedule 3.02 showing all additions to and removals from the Significant Subsidiaries since the date of the most recently delivered form of Schedule 3.02 (or confirming that there have been no changes from such most recently delivered form of Schedule 3.02). If the Company is no longer required to file Form 10Q and 10K Reports with the SEC, the Company will nevertheless furnish to the Lenders at the time herein above set forth all the financial and other information that would have comprised such filings. SECTION 5.06. Books and Records; Inspection Rights. The Company will, and will cause each of its Subsidiaries to, keep proper books of record and account in which in all material respects full, true and correct entries are made of all dealings and transactions in relation to its business and activities as consistent with good business practices in the judgment of the Company. The Company will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.07. Compliance with Laws. The Company will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of the Food and Drug Administration and each other Governmental Authority applicable to it or its property, including 71 66 all Environmental Laws, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. ARTICLE VI Negative Covenants Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full the Company covenants and agrees with the Lenders as to itself and its subsidiaries and each Borrowing Subsidiary covenants and agrees with the Lenders as to itself and its subsidiaries that: SECTION 6.01. Indebtedness. The Company will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist at any time: (a) any Indebtedness of the Company secured by any Lien encumbering any asset of the Company or any Subsidiary (other than Indebtedness of the Company set forth on Schedule 6.01); (b) any Indebtedness of any Subsidiary (other than (i) Indebtedness under this Agreement or the 364-Day Credit Agreement, (ii) the Indebtedness of any Subsidiary set forth on Schedule 6.01, (iii) Indebtedness to the Company or any other Wholly Owned Subsidiary and (iv) Indebtedness of any Person that becomes a Subsidiary after the date hereof that existed at the time such Person became a Subsidiary and was not created in contemplation of or in connection with such Person becoming a Subsidiary); or (c) any Capital Lease Obligation; if such creation, incurrence, assumption or existence would result in the sum, without duplication, of (i) the aggregate principal amount of Indebtedness outstanding under clauses (a), (b) and (c) above, (ii) the aggregate principal amount of outstanding obligations secured by Liens permitted by Section 6.02(d), (iii) the aggregate amount of the Financed Portions of all outstanding Securitizations and (iv) the outstanding Attributable Debt in respect of Sale-Leaseback Transactions permitted by Section 6.03(b) exceeding 10% of Consolidated Total Assets as of the most recent fiscal quarter end for which financial statements for the Company and its Subsidiaries are available. SECTION 6.02. Liens. The Company will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances and Liens solely for the benefit of the Company or any Wholly Owned Subsidiary; (b) any Lien on any property or asset of the Company or any Subsidiary existing on the date hereof and set forth in Schedule 6.02; provided that (i) such Lien shall not 72 67 apply to any other property or asset of the Company or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Company or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Company or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; and (d) Liens not expressly permitted by clauses (a) through (c) above and Securitizations; provided that the sum, without duplication, at any time of (i) the aggregate principal amount of Indebtedness outstanding under Sections 6.01(a), (b) and (c), (ii) the aggregate principal amount of outstanding obligations secured by Liens permitted by this clause (d), (iii) the aggregate amount of the Financed Portions of all outstanding Securitizations and (iv) the outstanding Attributable Debt in respect of Sale-Leaseback Transactions permitted by Section 6.03(b) shall not exceed 10% of Consolidated Total Assets as of the most recent fiscal quarter end for which financial statements for the Company and its Subsidiaries are available. SECTION 6.03. Sale and Leaseback Transactions. The Company will not, and will not permit any of its Subsidiaries to, enter into any Sale-Leaseback Transaction except: (a) Sale-Leaseback Transactions existing on the date hereof and set forth on Schedule 6.03; and (b) other Sale-Leaseback Transactions; provided that the sum, without duplication, at any time of (i) the aggregate principal amount of Indebtedness outstanding under Sections 6.01(a), (b) and (c), (ii) the aggregate principal amount of outstanding obligations secured by Liens permitted by Section 6.02(d), (iii) the aggregate amount of the Financed Portions of all outstanding Securitizations and (iv) the aggregate outstanding Attributable Debt in respect of Sale-Leaseback Transactions permitted by this clause (b) does not at any time exceed 10% of Consolidated Total Assets as of the most recent fiscal quarter end for which financial statements for the Company and its Subsidiaries are available. SECTION 6.04. Fundamental Changes. (a) The Company will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired and whether directly or through any merger or consolidation of, or any sale, transfer, lease or other disposition of Equity Interests in, or the assets of, any Subsidiary), or liquidate or dissolve, except that, if at the time 73 68 thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Person may merge into the Company in a transaction in which the Company is the surviving corporation, (ii) any Person may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Company or to another Subsidiary and (iv) any Subsidiary may liquidate or dissolve if the Company determines in good faith that such liquidation or dissolution is in the best interests of the Company and is not materially disadvantageous to the Lenders. (b) The Company will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Company and its Subsidiaries and Keebler and its subsidiaries on the date of execution of this Agreement and businesses reasonably related, ancillary, similar or supportive thereto. SECTION 6.05. Use of Proceeds. The proceeds of the Loans will be used only to provide liquidity in connection with the Company's commercial paper program and for other general corporate purposes, provided that the proceeds of Loans made prior to the Acquisition Date will be used solely for the purpose of repaying commercial paper issued on or after the Effective Date to the extent the proceeds of such commercial paper shall have been deposited in the cash collateral account referred to in the last paragraph of Section 4.01. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. Following the application of the proceeds of each Loan, not more than 25% of the value of the assets of the Company and its Subsidiaries which are subject to any arrangement hereunder whereby the Company's or any Subsidiary's right or ability to sell, pledge or otherwise dispose of assets is in any way restricted will be Margin Stock. SECTION 6.06. Minimum Net Worth. The Company will not permit Consolidated Net Worth as of any date to be less than US$700,000,000. SECTION 6.07. Interest Expense Coverage Ratio. The Company will not permit the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense, in each case for any period of four consecutive fiscal quarters ending on or after the last day of the first fiscal quarter beginning after the Acquisition Date, to be less than 3.0; provided that for purposes of determining compliance with this Section 6.07 on the last day of such first fiscal quarter and on the last day of each of the two next succeeding fiscal quarters, Consolidated EBITDA and Consolidated Interest Expense shall be determined for the period commencing with the first day of such first fiscal quarter and ending at the end of the applicable period, rather than for a four-fiscal-quarter period. 74 69 ARTICLE VII Events of Default If any of the following events ("Events of Default") shall occur: (a) (i) default in the payment when due of any principal on any Loan, whether at the stated maturity thereof or at any other time provided in this Agreement, or (ii) default for a period of five days in the payment when due of interest on any Loan, or (iii) default for a period of 10 days in the payment when due of any other sum required to be paid pursuant to this Agreement; (b) default by any Borrower in the observance or performance of any of the covenants set forth in Sections 5.01 (with respect to the Company's existence) or 5.05(d) or in Article VI; (c) default by any Borrower in the observance or performance of any other provision hereof not mentioned in (a) or (b) above, which is not remedied within 30 days after notice thereof to the Company by the Administrative Agent or any Lender; (d) any representation or warranty made (or deemed made) herein by any Borrower, or in any statement or certificate furnished by any Borrower pursuant hereto or in connection with any Loan, proves untrue in any material respect as of the date of the issuance or making (or deemed making) thereof; (e) default in the payment when due, after any applicable grace period, of any Indebtedness or any amount due under any Hedging Agreement the US Dollar Equivalent of the aggregate principal amount of which exceeds US$50,000,000 (the "Aggregate Amount") issued, assumed or guaranteed by the Company or any Subsidiary (other than Indebtedness owing by any Subsidiary to the Company or to another Subsidiary); or default or other event under any indenture, agreement or other instrument under which any such Indebtedness is outstanding or under any such Hedging Agreement (other than a default under any provision of any other indenture, agreement or other instrument to which any Lender is party that restricts the ability of the Company or any Subsidiary to sell, pledge or otherwise dispose of Margin Stock), and such default or event shall result in the acceleration of the maturity or the required redemption or repurchase of Indebtedness, or the early termination of and a required payment under such Hedging Agreement, exceeding in the aggregate such Aggregate Amount; (f) any "reportable event" (as defined in ERISA) which constitutes grounds for the termination of any Plan by the PBGC, or for the appointment by an appropriate court of a trustee to administer or liquidate any Plan, or could reasonably be expected to result in a Material Adverse Effect, shall have occurred and be continuing 30 days after written notice to such effect shall have been given to the Company by the Administrative Agent; or any Plan shall be terminated by the PBGC; or a trustee shall be appointed to administer any Plan; or the PBGC shall institute proceedings to administer or terminate any Plan; and in the case of any such event the aggregate amount of unfunded liabilities under any 75 70 affected Plan shall exceed (either singly or in the aggregate in the case of any such liability arising under more than one Plan) US$50,000,000; or the Company or any of its Subsidiaries or any member of the Controlled Group of any of them shall withdraw (completely or partially) from any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) and the aggregate amount of the liability of the Company and its Subsidiaries to such plan under Title IV of ERISA shall exceed (either singly or in the aggregate in the case of any such liability arising under more than one such plan) US$50,000,000; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Company or any Significant Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) the Company or any Significant Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (i) the Company or any Significant Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due; (j) one or more judgments for the payment of money in an aggregate amount in excess of US$50,000,000 (except to the extent covered by insurance as to which the insurer has acknowledged such coverage in writing) shall be rendered against the Company, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Company or any Subsidiary to enforce any such judgment; (k) an "Event of Default" shall have occurred and be continuing as defined in either the 364-Day Credit Agreement or, if it remains outstanding, the Bridge Facility; or (l) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Company described in clause (g) or (h) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the 76 71 Company, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Company accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company; and in case of any event with respect to the Company described in clause (g) or (h) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower. If a Default or Event of Default shall have occurred with respect to any Borrowing Subsidiary (other than any Default or Event of Default under a provision of this Agreement that applies to such Borrowing Subsidiary by virtue of its status as a Subsidiary or a Significant Subsidiary and regardless of whether it is a Borrowing Subsidiary), then immediately upon the repayment in full of all Loans outstanding to such Borrowing Subsidiary and the delivery to the Administrative Agent of a Borrowing Subsidiary Termination Agreement in accordance with Section 2.20 such Default or Event of Default shall cease to be effective with respect to such Borrowing Subsidiary. On the CAM Exchange Date, (i) the Commitments shall automatically and without further act be terminated as provided in this Article VII and (ii) the Lenders shall automatically and without further act be deemed to have exchanged interests in the Obligations under the Tranches such that, in lieu of the interests of each Lender in the Obligations under each Tranche in which it shall participate as of such date (including the principal, interest and fee obligations of the Company and each Borrower in respect of each such Tranche), such Lender shall own an interest equal to such Lender's CAM Percentage in the Obligations under each of the Tranches (including the principal, interest and fee obligations of the Company and each Borrower in respect of each such Tranche). It is understood and agreed that Lenders holding interests in B/As on the CAM Exchange Date shall discharge the obligations to fund such B/As at maturity in exchange for the interests acquired by such Lenders in funded Loans in the CAM Exchange. Each Lender, each person acquiring a participation from any Lender as contemplated by Section 10.04, the Company and each Borrower hereby consents and agrees to the CAM Exchange. Each of the Company, the Borrowers and the Lenders agrees from time to time to execute and deliver to the Administrative Agent or the Applicable Agent all such promissory notes and other instruments and documents as the Administrative Agent or such Applicable Agent shall reasonably request to evidence and confirm the respective interests and obligations of the Lenders after giving effect to the CAM Exchange, and each Lender agrees to surrender any promissory notes originally received by it in connection with its Loans hereunder to the Administrative Agent against delivery of any promissory notes so executed and delivered; provided that the failure of the Company or any Borrower to execute or deliver or of any Lender to accept any such promissory note, instrument or document shall not affect the validity or effectiveness of the CAM Exchange. 77 72 ARTICLE VIII The Agents In order to expedite the transactions contemplated by this Agreement, Chase is hereby appointed to act as Administrative Agent and CMIL is hereby appointed to act as London Agent on behalf of the Lenders. Each of the Lenders hereby irrevocably authorizes the Agents to take such actions on its behalf and to exercise such powers as are delegated to the Agents by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. Any bank serving as Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not such Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Company, any Borrower or any Subsidiary or other Affiliate thereof as if it were not such Agent hereunder. The Agents shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) no Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that such Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02), and (c) except as expressly set forth in the Loan Documents, no Agent shall have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Company, any Borrower or any Subsidiary that is communicated to or obtained by the bank serving as Agent or any of its Affiliates in any capacity. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02) or in the absence of its own bad faith, gross negligence or wilful misconduct. No Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by a Borrower or a Lender, and no such Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to such Agent. Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for any Borrower), independent accountants and 78 73 other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Such Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs and the provisions of Section 10.03 shall apply to any such sub-agent and to the Related Parties of the Agents and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent. Subject to the appointment and acceptance of a successor Agent as provided in this paragraph, any Agent may resign at any time by notifying the Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right (in consultation with, and with the consent of (unless an Event of Default has occurred and is continuing pursuant to clause (g) or (h) of Article VII), the Company, which shall not be unreasonably withheld) to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may (in consultation with, and with the consent of, the Company, which shall not unreasonably withhold such consent and which shall, if the retiring Agent shall so request, designate and approve a successor Agent) on behalf of the Lenders, appoint a successor Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Company to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Company and such successor. After an Agent's resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Agent. Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any related agreement or any document furnished hereunder or thereunder. None of the institutions named as Co-Syndication Agents or Documentation Agent in the heading of this Agreement shall, in their capacities as such, have any duties or responsibilities of any kind under this Agreement. 79 74 ARTICLE IX Guarantee In order to induce the Lenders to extend credit to the Borrowing Subsidiaries hereunder, the Company hereby irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, the Obligations of the Borrowing Subsidiaries. The Company further agrees that the due and punctual payment of the Obligations of the Borrowing Subsidiaries may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee hereunder notwithstanding any such extension or renewal of any Obligation. The Company waives presentment to, demand of payment from and protest to any Borrowing Subsidiary of any of the Obligations, and also waives notice of acceptance of its obligations and notice of protest for nonpayment. The obligations of the Company hereunder shall not be affected by (a) the failure of any Lender to assert any claim or demand or to enforce any right or remedy against any Borrowing Subsidiary under the provisions of this Agreement any Borrowing Subsidiary Agreement, any other Loan Document or otherwise; (b) any extension or renewal of any of the Obligations; (c) any rescission, waiver, amendment or modification of, or release from, any of the terms or provisions of this Agreement, any Borrowing Subsidiary Agreement or any other Loan Document or agreement; (d) the failure or delay of any Lender to exercise any right or remedy against any other guarantor of the Obligations; (e) the failure of any Lender to assert any claim or demand or to enforce any remedy under any Loan Document or any other agreement or instrument; (f) any default, failure or delay, wilful or otherwise, in the performance of the Obligations; or (g) any other act, omission or delay to do any other act which may or might in any manner or to any extent vary the risk of the Company or otherwise operate as a discharge of the Company as a matter of law or equity or which would impair or eliminate any right of the Company to subrogation. The Company further agrees that its guarantee hereunder constitutes a promise of payment when due (whether or not any bankruptcy or similar proceeding shall have stayed the accrual or collection of any of the Obligations or operated as a discharge thereof) and not merely of collection, and waives any right to require that any resort be had by any Lender to any balance of any deposit account or credit on the books of any Lender in favor of any Borrower or Subsidiary or any other Person. The obligations of the Company hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or unenforceability of the Obligations, any impossibility in the performance of the Obligations or otherwise. The Company further agrees that its obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Lender upon the bankruptcy or reorganization of any Borrower or otherwise. In furtherance of the foregoing and not in limitation of any other right which any 80 75 Lender may have at law or in equity against the Company by virtue hereof, upon the failure of any Borrowing Subsidiary to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Company hereby promises to and will, upon receipt of written demand by the Administrative Agent, forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the Lenders in cash an amount equal the unpaid principal amount of such Obligation. The Company further agrees that if payment in respect of any Obligation shall be due in a currency other than US Dollars and/or at a place of payment other than New York and if, by reason of any legal prohibition, disruption of currency or foreign exchange markets, war or civil disturbance or other event, payment of such Obligation in such currency or at such place of payment shall be impossible or, in the reasonable judgment of any Lender, not consistent with the protection of its rights or interests, then, at the election of such Lender, the Company shall make payment of such Obligation in US Dollars (based upon the applicable Exchange Rate in effect on the date of payment) and/or in New York, and shall indemnify such Lender against any losses or expenses (including losses or expenses resulting from fluctuations in exchange rates) that it shall sustain as a result of such alternative payment. Upon payment in full by the Company of any Obligation of any Borrowing Subsidiary, each Lender shall, in a reasonable manner, assign to the Company the amount of such Obligation owed to such Lender and so paid, such assignment to be pro tanto to the extent to which the Obligation in question was discharged by the Company, or make such disposition thereof as the Company shall direct (all without recourse to any Lender and without any representation or warranty by any Lender). Upon payment by the Company of any sums as provided above, all rights of the Company against any Borrowing Subsidiary arising as a result thereof by way of right of subrogation or otherwise shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Obligations owed by such Borrowing Subsidiary to the Lenders (it being understood that, after the discharge of all the Obligations due and payable from such Borrowing Subsidiary, such rights may be exercised by the Company notwithstanding that such Borrowing Subsidiary may remain contingently liable for indemnity or other Obligations). ARTICLE X Miscellaneous SECTION 10.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Company, to it at One Kellogg Square, P.O. Box 3599, Battle Creek, MI 49016-3599, Attention of each of the Treasurer and the General Counsel (Telecopy No. (616) 961-3494); (b) if to any Borrowing Subsidiary, to it in care of the Company as provided in paragraph (a) above; (c) if to the Administrative Agent, to The Chase Manhattan Bank, Loan and 81 76 Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Sonia Rosario-Cancar (Telecopy No. (212) 552-5650), with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York 10017, Attention of Tina Ruyter (Telecopy No.(212) 270-1063); (d) if to the London Agent, to it at Chase Manhattan International Limited, Trinity Tower, 9 Thomas More Street, London, England E19YT, Attention of Loans Agency Division (Telecopy No. 011-44-171-777-2360), with a copy to the Administrative Agent as provided in paragraph (c) above; (e) if to the Canadian Agent, to it at The Chase Manhattan Bank of Canada, 1 First Canadian Place, 100 King Street West, Suite 6900, Toronto, Ontario M5X 1A4, Canada, Attention of: Portfolio Management Associates (Telecopy No. (416) 216-4162); with a copy to the Administrative Agent as provided in paragraph (c) above; (f) if to the Australian Agent, to it at the address specified by it when it is named by the Company pursuant to Section 10.15; with a copy to the Administrative Agent as provided in paragraph (c) above; and (g) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 10.02. Waivers; Amendments. (a) No failure or delay by any Agent or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agents and the Lenders hereunder and under any other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether any Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Company and the Required Lenders or by the Company and the Administrative Agent with the consent of the Required Lenders and, in the case of any other Loan Document, each applicable Borrower (or the Company on behalf of such Borrower); provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of 82 77 interest thereon, or reduce any fees payable to any Lender hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender affected thereby, (v) change Section 2.09(c) or (d)(iii) in a manner that would alter the pro rata reduction of the Commitments required thereby, without the written consent of each Lender affected thereby, (vi) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Tranche) required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, (vii) change any provision of the last paragraph of Article VII without the written consent of each Lender, (viii) change any provision of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders under any Tranche differently from those of Lenders under any other Tranche without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each adversely affected Tranche (treating Competitive Loans in the same way as in determining the Required Lenders for purposes of determining any majority), or (ix) release the Company from its obligations under Article IX, without the written consent of each Lender; provided further that (A) no such agreement shall amend, modify or otherwise affect the rights or duties of any Agent hereunder without the prior written consent of such Agent and (B) any waiver, amendment or modification that by its terms is limited in effect to the rights or duties of Lenders under one or more (but less than all) the Tranches, such waiver, amendment or modification may be effected by an agreement or agreements in writing entered into by the Company and the requisite percentage in interest of Lenders under each affected Tranche. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by the Company, the Required Lenders and the Administrative Agent (and, if its rights or obligations are affected thereby, the London Agent) if (i) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement. SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) The Borrowers shall pay (i) all reasonable out-of-pocket expenses incurred by the Agents and their Affiliates, including the reasonable fees, charges and disbursements of one outside counsel for the Administrative Agent and the London Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers (requested by or for the benefit of any Borrower) of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all reasonable out-of-pocket expenses incurred by any Agent or any Lender, including the fees, charges and disbursements of any counsel for any Agent or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or the B/As accepted and purchased hereunder, including all such reasonable out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans. 83 78 (b) The Borrowers shall indemnify each Agent, and each Lender, and each Related Party of any of the foregoing Persons involved directly or indirectly in the Transactions (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (other than Excluded Taxes), including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated thereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or B/A or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Company or any of its Subsidiaries, or any Environmental Liability related in any way to the Company or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (A) do not result in actual out-of-pocket loss or expense by such Indemnitee or (B) result from the bad faith, wilful misconduct or gross negligence of such Indemnitee or the breach by such Indemnitee of its agreements set forth in the Loan Documents. (c) To the extent that the Borrowers fail to pay any amount required to be paid by them to any Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to such Agent such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Agent in its capacity as such. (d) To the extent permitted by applicable law, no Borrower shall assert, and each hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (e) All amounts due under this Section shall be payable promptly after written demand therefor setting forth the amount and the nature of the expense or claim, as applicable. SECTION 10.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Borrower may assign or otherwise transfer any of its rights or obligations hereunder or under any Borrowing Subsidiary Agreement without the prior written consent of each Lender (and any attempted assignment or transfer by any Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. 84 79 (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Company and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than US$5,000,000 unless each of the Company and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause (iii) shall not apply to rights in respect of outstanding Competitive Loans, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of US$3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided further that any consent of the Company otherwise required under this paragraph shall not be required if an Event of Default under clause (g) or (h) of Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 10.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Administrative Agent, acting for this purpose as an agent of each Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and amounts in respect of B/As owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrowers, the Agents and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by any Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be 85 80 effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of any Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Agents, and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such Participant. Subject to paragraph (f) of this Section, each Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Company's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Company is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Company, to comply with Section 2.17(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (h) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Bank") may grant to a special purpose funding vehicle (an "SPC") of such Granting Bank, identified as such in writing from time to time by the Granting Bank to the Administrative Agent and the Borrowers, the option to provide to the Borrowers all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Borrowers pursuant to Section 2.01; provided that (i) nothing herein shall constitute a commitment to make any Loan by any SPC and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall be deemed to utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan were made by the Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any payment under 86 81 this Agreement for which a Lender would otherwise be liable, for so long as, and to the extent, the related Granting Bank makes such payment. In furtherance of the foregoing, each party hereto hereby agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 10.04, any SPC may (i) with notice to, but without the prior written consent of, the Borrowers and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Bank or to any financial institutions (if consented to by the Borrowers and Administrative Agent) providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans (but not relating to any Borrower, except with the Company's consent) to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. SECTION 10.05. Survival. All covenants, agreements, representations and warranties made by the Borrowers herein, in the other Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that any Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 10.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 10.07. Severability. Any provision of any Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to 87 82 the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions of such Loan Document; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Borrower (other than payroll accounts and trust accounts) against any of and all the obligations of the Borrowers now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement. The rights of each Lender under this Section are in addition to and shall not limit other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) Each Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that any Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Borrower or its properties in the courts of any jurisdiction. (c) Each Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement or any other Loan Document will affect the right of any party hereto or thereto to serve process in any other manner permitted by law. SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, 88 83 ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 10.12. Confidentiality. Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty to any swap or derivative transaction relating to the Borrowers and their obligations, or any advisor of any such counterparty, (g) with the consent of any Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any Agent, or any Lender on a nonconfidential basis from a source other than a Borrower. For the purposes of this Section, "Information" means all information received from the Borrowers relating to the Borrowers or their business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by a Borrower; provided that, in the case of information received from a Borrower after the date hereof, such information is identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as a prudent Person engaged in the same business or following customary procedures for such business would accord to its own confidential information. SECTION 10.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in 89 84 accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 10.14. Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto (including any Borrowing Subsidiary) agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given. (b) The obligations of each Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrowers contained in this Section 10.14 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. SECTION 10.15. Australian Agent. So long as there shall be no Australian Tranche Commitment, no Australian Agent need be party hereto and this Agreement will be effective without the signature of such party. Before the passage of any amendment, amendment and restatement or other modification of this Agreement to establish an Australian Tranche Commitment, the Company will appoint an Australian Agent reasonably satisfactory to the Administrative Agent. 90 85 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. KELLOGG COMPANY, by /s/ Thomas J. Webb -------------------------------------- Name: Thomas J. Webb Title: Executive Vice President, Chief Financial Officer THE CHASE MANHATTAN BANK, individually and as Administrative Agent, by /s/ Tina Ruyter -------------------------------------- Name: Tina Ruyter Title: Vice President CHASE MANHATTAN INTERNATIONAL LIMITED, as London Agent, by /s/ Stuard C. Walsh -------------------------------------- Name: Stuard C. Walsh Title: Vice-President THE CHASE MANHATTAN BANK OF CANADA, as Canadian Agent by /s/ D. McDonald -------------------------------------- Name: Drew McDonald Title: Vice President by /s/ Christine Chan -------------------------------------- Name: Christine Chan Title: Vice President THE CHASE MANHATTAN BANK, TORONTO BRANCH, as Lender by /s/ D. McDonald -------------------------------------- Drew McDonald Authorized Representative by /s/ Christine Chan -------------------------------------- Christine Chan Authorized Representative 91 BANK OF AMERICA, N.A., by /s/ Casey Cosgrove -------------------------- Name: Casey Cosgrove Title: Vice President 92 BARCLAYS BANK PLC by /s/ L. Peter Yetman ------------------------ Name: L. Peter Yetman Title: Director 93 CITIBANK, N.A., by /s/ Henry J. Matthews -------------------------- Name: Henry J. Matthews Title: Vice President 94 ABN AMRO BANK N.V., by /s/ W. Stephen Jones --------------------------- Name: W. Stephen Jones Title: Senior Vice President by /s/ Peter J. Hallan --------------------------- Name: Peter J. Hallan Title: Assistant Vice President 95 THE BANK OF NOVA SCOTIA, by /s/ F.C.H. Ashby -------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations 96 BANK ONE CANADA, by /s/ William J. Maxbauer ------------------------------ Name: William J. Maxbauer Title: First Vice President 97 BNP PARIBAS, by /s/ Jo Ellen Bender ----------------------------- Name: Jo Ellen Bender Title: Director /s/ Christine Howatt ------------------------------- Christine Howatt Vice President 98 THE BANK OF TOKYO-MITSUBISHI, LTD. CHICAGO BRANCH, by /s/ HISASHI MIYASHIRO ------------------------------- Name: HISASHI MIYASHIRO Title: DEPUTY GENERAL MANAGER 99 BANK ONE NA, by /s/ William J. Maxbauer ------------------------------ Name: William J. Maxbauer Title: First Vice President 100 CREDIT LYONNAIS, NEW YORK BRANCH, by /s/ ATTILA KOC ------------------------------- Name: ATTILA KOC Title: SENIOR VICE PRESIDENT 101 DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLAND BRANCHES, by /s/ Alexander Karow -------------------------------------- Name: Alexander Karow Title: Vice President by /s/ Thomas A. Foley -------------------------------------- Name: Thomas A. Foley Title: Vice President 102 THE FUJI BANK, LIMITED, by /s/ Peter L. Chinnici ------------------------------------------ Name: Peter L. Chinnici Title: Senior Vice President & Group Head 103 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, by /s/ Walter T. Duffy III ----------------------------- Name: Walter T. Duffy III Title: Associate Director by /s/ Lisa Walker ----------------------------- Name: Lisa Walker Title: Associate Director 104 MELLON BANK, N.A. by /s/ Louis E. Flori --------------------------------------- Name: Louis E. Flori Title: Vice President 105 THE SANWA BANK, LIMITED by /s/ Kenneth L. Eichwald ---------------------------------- Name: Kenneth L. Eichwald Title: Senior Vice President 106 THE SUMITOMO BANK, LIMITED by /s/ John H. Kemper --------------------------------------- Name: John H. Kemper Title: Senior Vice President 107 SUNTRUST BANK, by /s/ Michael Pugsley ------------------------ Name: Michael Pugsley Title: Vice President 108 THE NORINCHUKIN BANK, NEW YORK BRANCH by /s/ Yoshiro Niiro -------------------------------- Name: Yoshiro Niiro Title: General Manager 109 THE NORTHERN TRUST COMPANY, by /s/ Roger McDougal ------------------------------ Name: Roger McDougal Title: Second Vice President 110 COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH, by /s/ Thomas F. Kelly ------------------------------ Name: Thomas F. Kelly Title: Vice President by /s/ Edward Peyser ------------------------------ Name: Edward Peyser Title: Executive Director 111 THE TOKAI BANK, LIMITED - NEW YORK BRANCH by /s/ Shinichi Nakatani --------------------------------------- Name: Shinichi Nakatani Title: Assistant General Manager 112 BANCO BILBAO VIZCAYA ARGENTARIA, by /s/ Santiago Hernandez Monsalve --------------------------------------- Name: Santiago Hernandez Monsalve Title: Vice President Global Corporate Banking by /s/ John Martino --------------------------------------- Name: John Martino Title: Vice President Corporate Banking 113 STATE STREET BANK AND TRUST COMPANY by /s/ Juan G. Sierra ------------------------ Name: Juan G. Sierra Title: Assistant Vice President 114 UNICREDITO ITALIANO S.P.A., NEW YORK BRANCH, by /s/ Christopher J. Eldin Saiyed A. Abbas ------------------------------------------------------ Name: Christopher J. Eldin Saiyed A. Abbas Title: First Vice President & Vice President Deputy Manager EX-4.09 4 k60557ex4-09.txt CREDIT AGREEMENT 1 EXHIBIT 4.09 ================================================================================ BRIDGE CREDIT AGREEMENT dated as of January 19, 2001 among KELLOGG COMPANY The Lenders Party Hereto and THE CHASE MANHATTAN BANK, as Administrative Agent CITIBANK, N.A., BANK OF AMERICA, N.A., as Co-Syndication Agents BARCLAYS BANK PLC, as Documentation Agent ---------- SALOMON SMITH BARNEY INC., BANC OF AMERICA SECURITIES LLC, as Joint Lead Arrangers and Joint Book Managers ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions SECTION 1.01. Defined Terms.............................................................................1 SECTION 1.02. Classification of Loans and Borrowings...................................................17 SECTION 1.03. Terms Generally..........................................................................17 SECTION 1.04. Accounting Terms; GAAP...................................................................18 SECTION 1.05. [omitted]................................................................................18 SECTION 1.06. Determinations Made in Good Faith........................................................18 ARTICLE II The Credits SECTION 2.01. Commitments..............................................................................18 SECTION 2.02. Loans and Borrowings.....................................................................18 SECTION 2.03. Requests for Revolving Borrowings........................................................19 SECTION 2.04. Competitive Bid Procedure................................................................20 SECTION 2.05. [omitted]................................................................................22 SECTION 2.06. [omitted]................................................................................22 SECTION 2.07. Funding of Borrowings....................................................................22 SECTION 2.08. Interest Elections.......................................................................22 SECTION 2.09. Termination and Reduction of Commitments.................................................23 SECTION 2.10. Repayment of Loans; Evidence of Debt.....................................................24 SECTION 2.11. Prepayment of Loans......................................................................25 SECTION 2.12. Fees.....................................................................................25 SECTION 2.13. Interest.................................................................................26 SECTION 2.14. Alternate Rate of Interest...............................................................27 SECTION 2.15. Increased Costs..........................................................................28 SECTION 2.16. Break Funding Payments...................................................................29 SECTION 2.17. Taxes....................................................................................29 SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Setoffs...............................30 SECTION 2.19. Mitigation Obligations; Replacement of Lenders...........................................32 ARTICLE III Representations and Warranties SECTION 3.01. Organization and Qualification...........................................................33 SECTION 3.02. Subsidiaries.............................................................................33 SECTION 3.03. Corporate Authority and Validity of Obligations..........................................33 SECTION 3.04. Margin Stock.............................................................................33 SECTION 3.05. Financial Reports........................................................................34
3 SECTION 3.06. No Material Adverse Change...............................................................34 SECTION 3.07. Litigation...............................................................................34 SECTION 3.08. Tax Returns..............................................................................35 SECTION 3.09. Approvals................................................................................35 SECTION 3.10. ERISA....................................................................................35 SECTION 3.11. Environmental Matters....................................................................35 SECTION 3.12. Properties...............................................................................36 SECTION 3.13. Compliance with Laws.....................................................................36 SECTION 3.14. Investment and Holding Company Status....................................................36 SECTION 3.15. Disclosure...............................................................................36 SECTION 3.16. Representations Regarding Keebler........................................................36 ARTICLE IV Conditions SECTION 4.01. Effective Date...........................................................................37 SECTION 4.02. Each Borrowing...........................................................................39 ARTICLE V Affirmative Covenants SECTION 5.01. Corporate Existence......................................................................40 SECTION 5.02. Maintenance..............................................................................40 SECTION 5.03. Taxes....................................................................................40 SECTION 5.04. Insurance................................................................................40 SECTION 5.05. Financial Reports and Other Information..................................................41 SECTION 5.06. Books and Records; Inspection Rights.....................................................41 SECTION 5.07. Compliance with Laws.....................................................................42 SECTION 5.08. Preliminary Offering Document............................................................42 ARTICLE VI Negative Covenants SECTION 6.01. Indebtedness.............................................................................42 SECTION 6.02. Liens....................................................................................43 SECTION 6.03. Sale and Leaseback Transactions..........................................................44 SECTION 6.04. Fundamental Changes......................................................................44 SECTION 6.05. Use of Proceeds..........................................................................44 SECTION 6.06. Minimum Net Worth........................................................................45 SECTION 6.07. Interest Expense Coverage Ratio..........................................................45 ARTICLE VII Events of Default.....................................................45 ARTICLE VIII The Administrative Agent.............................................48 ARTICLE IX [omitted]..............................................................50

4 ARTICLE X Miscellaneous SECTION 10.01. Notices.................................................................................50 SECTION 10.02. Waivers; Amendments.....................................................................50 SECTION 10.03. Expenses; Indemnity; Damage Waiver......................................................51 SECTION 10.04. Successors and Assigns..................................................................52 SECTION 10.05. Survival................................................................................55 SECTION 10.06. Counterparts; Integration; Effectiveness................................................55 SECTION 10.07. Severability............................................................................56 SECTION 10.08. Right of Setoff.........................................................................56 SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process..............................56 SECTION 10.10. WAIVER OF JURY TRIAL....................................................................57 SECTION 10.11. Headings................................................................................57 SECTION 10.12. Confidentiality.........................................................................57 SECTION 10.13. Interest Rate Limitation................................................................57

5 SCHEDULES: Schedule 2.01 -- Commitments Schedule 3.02(a) -- Significant Subsidiaries as of the Effective Date Schedule 3.02(b) -- Significant Subsidiaries After Giving Effect to the Acquisition Schedule 3.07 -- Litigation Schedule 3.10 -- ERISA Schedule 3.11 -- Environmental Matters Schedule 4.01(h) -- Indebtedness to be Refinanced on the Acquisition Date Schedule 6.01 -- Outstanding Indebtedness After Giving Effect to the Acquisition Schedule 6.02 -- Existing Liens Schedule 6.03 -- Sale-Leaseback Transactions EXHIBITS: Exhibit A -- Form of Assignment and Acceptance Exhibit B-1 -- [omitted] Exhibit B-2 -- [omitted] Exhibit C -- [omitted] Exhibit D-1 -- Form of Opinion of Gary H. Pilnick, Vice President and Deputy General Counsel Exhibit D-2 -- Form of Opinion of Kirkland & Ellis, Counsel for the Company Exhibit E -- Form of Compliance Certificate Exhibit F -- Form of Note

6 1 BRIDGE CREDIT AGREEMENT dated as of January 19, 2001, among KELLOGG COMPANY, a Delaware corporation, the LENDERS party hereto, THE CHASE MANHATTAN BANK, as Administrative Agent, CITIBANK, N.A. and BANK OF AMERICA, N.A., as Co-Syndication Agents, and BARCLAYS BANK PLC, as Documentation Agent. The Company intends to acquire (the "Acquisition") Keebler (such term and each other capitalized term used but not defined herein having the meaning given it in Article I) for cash in the amount of approximately US$4,600,000,000. In connection with the Acquisition, the Company will (a) refinance certain Indebtedness of the Company and Keebler, including the Maturing Indebtedness, (b) obtain the credit facilities provided under the 364-Day Credit Agreement and under the Five-Year Credit Agreement, and (c) issue Senior Notes in a public offering or in a Rule 144A or other private placement or, to the extent it shall not have issued Senior Notes by the date of the Acquisition, establish the Commitments hereunder, in an aggregate principal amount taken together not in excess of US$4,000,000,000. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Acquisition" has the meaning assigned to such term in the preamble to this Agreement. "Acquisition Agreements" means collectively, (a) the Agreement and Plan of Restructuring and Merger, dated October 26, 2000, among Flowers Industries, Inc., Kellogg Company and Kansas Merger Subsidiary, Inc., and (b) the Agreement and Plan of Merger dated as of October 26, 2000, among Keebler Foods Company, Kellogg Company and FK Acquisition Corp. "Acquisition Date" means the date on which the conditions specified in paragraphs (f) through (k) of Section 4.01 are satisfied (or waived in accordance with Section 10.02). "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. 7 2 "Administrative Agent" means The Chase Manhattan Bank, in its capacity as administrative agent for the Lenders hereunder, or any successor thereto appointed in accordance with Article VIII. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Alternate Base Rate" means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, or the Federal Funds Effective Rate, respectively. "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day, with respect to any Eurodollar Revolving Loan, or with respect to the facility fees and utilization fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "Eurodollar Spread", "Facility Fee Rate" or "Utilization Fee Rate", as the case may be, based upon the ratings by Moody's and S&P, respectively, applicable on such date to the Index Debt:
INDEX DEBT RATINGS EURODOLLAR SPREAD FACILITY FEE RATE UTILIZATION FEE RATE - ------------------ ----------------- ----------------- -------------------- Category 1 0.295 0.080 0.125 A-/A3 or higher Category 2 0.400 0.100 0.125 BBB+/Baa1 Category 3 0.500 0.125 0.125 BBB/Baa2 Category 4 0.700 0.175 0.125 BBB-/Baa3 Category 5 1.000 0.250 0.250 lower than BBB-/Baa3 or unrated
8 3 For purposes of the foregoing, (i) if either Moody's or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 5; (ii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the higher of the two ratings unless (A) one of the two ratings is more than two Categories lower than the other and neither rating is in Category 5, in which case the Applicable Rate shall be determined by reference to the Category next above that of the lower of the two ratings or (B) either rating is or is deemed to be in Category 5, in which case the Applicable Rate shall be determined by reference to Category 5 and (iii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Company and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent and the Company. "Attributable Debt" means, with respect to any Sale-Leaseback Transaction, the present value (discounted at the rate set forth or implicit in the terms of the lease included in such Sale-Leaseback Transaction, compounded semiannually) of the total obligations of the lessee for rental payments (other than amounts required to be paid on account of taxes, maintenance, repairs, insurance, assessments, utilities, operating and labor costs and other items which do not constitute payments for property rights or amounts related to contingent rents (such as those based on sales)) during the remaining term of the lease included in such Sale-Leaseback Transaction (including any period for which such lease has been extended). In the case of any lease which is terminable by the lessee upon payment of a penalty, the Attributable Debt shall be the lesser of the Attributable Debt determined assuming termination upon the first date such lease may be terminated (in which case the Attributable Debt shall also include the amount of the penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated) or the Attributable Debt determined assuming no such termination. Any determination of any rate implicit in the terms of the lease included in such Sale-Leaseback Transaction made in accordance with generally accepted financial practices by the Company shall absent manifest error be binding and conclusive. "Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments. 9 4 "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrowing" means (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (b) a Competitive Loan or group of Competitive Loans of the same Type made on the same date and as to which a single Interest Period is in effect. "Borrowing Minimum" means US$25,000,000. "Borrowing Multiple" means US$5,000,000. "Borrowing Request" means a request by the Company for a Revolving Borrowing in accordance with Section 2.03. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in US Dollar deposits in the London interbank market. "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Change in Control" means (a) any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 40% or more in voting power of the outstanding Voting Stock of the Company or (b) members of the Board of Directors of the Company on the date hereof plus any additional members of such Board whose nomination for election to such Board is recommended or approved by a majority of the then current members of such Board shall at any time fail to constitute a majority of such Board. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Chase" means The Chase Manhattan Bank and its successors. 10 5 "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Competitive Loans. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders' Commitments is US$4,000,000,000. "Company" means Kellogg Company, a Delaware corporation. "Competitive Bid" means an offer by a Lender to make a Competitive Loan in accordance with Section 2.04. "Competitive Bid Rate" means, with respect to any Competitive Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making such Competitive Bid. "Competitive Bid Request" means a request by the Company for Competitive Bids in accordance with Section 2.04. "Competitive Loan" means a Loan made pursuant to Section 2.04. "Competitive Loan Exposure" means, with respect to any Lender at any time, the aggregate principal amount of the outstanding Competitive Loans of such Lender. "Consolidated EBITDA" means, for any period, Consolidated Net Income for such period plus, without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period, (ii) consolidated income tax expense (including, without duplication, foreign withholding taxes and any state single business unitary or other similar taxes) for such period, (iii) all amounts attributable to depreciation and amortization for such period, (iv) any noncash charges for such period, (v) fees and expenses incurred in connection with the Transactions, (vi) fees and expenses in an aggregate amount for any fiscal year not in excess of $20,000,000 incurred in connection with the issuance of any Indebtedness or equity, acquisitions, investments or asset sales or divestitures permitted hereunder and (vii) any (A) cash charges in an aggregate amount for any fiscal year not in excess of $50,000,000 or (B) any noncash charges, in each case arising out of the restructuring, consolidation, severance or discontinuance of any portion of the operations, employees and/or management of any entities or businesses of the Company or any of the Subsidiaries, determined without giving effect to any extraordinary gains or losses for such period to the extent included in determining Consolidated Net Income, all determined on a consolidated basis in accordance with GAAP. 11 6 "Consolidated Interest Expense" means, for any period, the sum of (a) the cash interest expense (including imputed interest expense in respect of Capital Lease Obligations) of the Company and the Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, and (b) any interest accrued during such period in respect of Indebtedness of the Company or any Subsidiary that is required to be capitalized rather than included in consolidated interest expense for such period in accordance with GAAP; provided that there shall be excluded from Consolidated Interest Expense (i) any fees paid to the Administrative Agent and (ii) any payments made to obtain any interest rate hedging agreements; and provided further, solely for purposes of determining compliance with Section 6.07, in the event the Company or any Subsidiary acquired any Person or line of business during the relevant period, Consolidated Interest Expense will be determined giving pro forma effect to any incurrence of Indebtedness related to such acquisition as if such incurrence of Indebtedness had occurred on the first day of the relevant period. "Consolidated Net Income" means, for any period, the net income or loss of the Company and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that (a) there shall be excluded the income of any Person (other than the Company) in which any other Person (other than the Company or any Subsidiary or any director holding qualifying shares or other third parties holding nominal amounts of shares, as required by or in compliance with applicable law) owns an Equity Interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of the Subsidiaries during such period, and (b) solely for purposes of determining compliance with Section 6.07, in the event the Company or any Subsidiary acquired any Person or line of business during the relevant period, Consolidated Net Income will be determined giving pro forma effect to such acquisition as if such acquisition and any related incurrence of Indebtedness had occurred on the first day of the relevant period, but shall not take into account any cost savings projected to be realized as a result of such acquisition other than cost savings permitted to be included under Regulation S-X of the Securities and Exchange Commission. "Consolidated Net Sales" means, for any period, the net sales of the Company and the Subsidiaries for such period, as reported as a line item in the Company's income statements as filed with the Company's Form 10-Q Report or Form 10-K Report, as applicable. "Consolidated Net Worth" means the excess of Consolidated Total Assets over the consolidated total liabilities of the Company and its consolidated Subsidiaries. "Consolidated Total Assets" means the total assets of the Company and its Subsidiaries determined in accordance with GAAP; provided that for purposes of determining compliance with Sections 6.01, 6.02 and 6.03, in the event the Company or any Subsidiary acquires any Person or line of business after the fiscal quarter end referred to in such Section, "Consolidated Total Assets" as of such fiscal quarter end shall be deemed to include the assets of such Person or line of business from and after the date of such acquisition. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. 12 7 "Controlled Group" means all of a controlled group of corporations and all trades and businesses (whether or not incorporated) under common control that, together with the Company or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Effective Date" means the date on which the conditions specified in paragraphs (a) through (e) of Section 4.01 are satisfied (or waived in accordance with Section 10.02). "Environmental Laws" means all federal, state, local and foreign statutes, laws (including common law), regulations, ordinances, judgments, permits and other governmental rules or restrictions relating to human health, safety (including occupational safety and health standards), and protection of the environment or to emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into the environment, including ambient air, surface or ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the cleanup or other remediation thereof. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Company or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Laws, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Equity Interests" means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest. "ERISA" has the meaning assigned to such term in Section 3.10. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate (or, in the case of a Competitive Loan, the LIBO Rate). "Event of Default" has the meaning assigned to such term in Article VII. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Company hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending 13 8 office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Company under Section 2.19(b)), any withholding tax imposed by the United States of America that (i) is in effect and would apply to amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Company with respect to any withholding tax pursuant to Section 2.17, or (ii) is attributable to such Foreign Lender's failure to comply with Section 2.17(e). "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financed Portion" means, at any time, with respect to a Securitization, the greatest amount of the claims of the parties providing financing (whether through direct purchases of receivables or interests therein or through other financing arrangements), however evidenced, including direct claims on collections of a party providing financing and including debt or equity interests or securities (other than any seller's interests retained by any wholly owned Subsidiary) of a purchasing vehicle, permitted to be outstanding at such time under such Securitization (assuming the satisfaction of all conditions to issuance) or, if greater, the maximum purchase limit, however denominated, under such Securitization. "Financial Officer" means the chief financial officer, principal accounting officer, treasurer, assistant treasurer or controller of the Company. "Five-Year Credit Agreement" means the Company's Five-Year Credit Agreement in respect of the Company's US$1,150,000,000 five-year senior unsecured credit facilities, as described in the Information Memorandum. "Fixed Rate" means, with respect to any Competitive Loan (other than a Eurodollar Competitive Loan), the fixed rate of interest per annum specified by the Lender making such Competitive Loan in its related Competitive Bid. "Fixed Rate Loan" means a Competitive Loan bearing interest at a Fixed Rate. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Company is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. 14 9 "GAAP" means generally accepted accounting principles in the United States of America or, when reference is made to another jurisdiction, generally accepted accounting principles in effect from time to time in such jurisdiction. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include (i) endorsements for collection or deposit, (ii) standard contractual indemnities not related to the borrowing of money or Indebtedness, in each case in the ordinary course of business, or (iii) recourse at customary levels in connection with Securitizations accounted for as sales. The amount of any Guarantee of any guaranteeing Person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made and (b) the maximum amount for which such guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guarantee, unless such primary obligation and the maximum amount for which such guaranteeing Person may be liable are not stated or determinable, in which case the amount of such Guarantee shall be such guaranteeing Person's maximum reasonably anticipated liability (assuming such Person is required to perform) in respect thereof as determined by such Person in good faith. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Laws. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, currency swap agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. The "principal amount" of any Hedging Agreement of the Company or any Subsidiary at any time shall be deemed to be the aggregate amount at such time of the payments that would be required to be made by the Company or such Subsidiary in the event of any early termination at such time of such Hedging Agreement. 15 10 "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Indebtedness shall not include trade payables and accrued expenses arising in the ordinary course of business. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Index Debt" means senior, unsecured, long-term indebtedness for borrowed money of the Company that is not guaranteed by any other Person or subject to any other credit enhancement. "Information Memorandum" means the Confidential Information Memorandum dated November 2000 relating to the Company and the Transactions. "Interest Election Request" means a request by the Company to convert or continue a Revolving Borrowing in accordance with Section 2.08. "Interest Payment Date" means (a) with respect to any ABR Loan, the last day of each March, June, September and December, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, and (c) with respect to any Fixed Rate Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Fixed Rate Borrowing with an Interest Period of more than 90 days' duration (unless otherwise specified in the applicable Competitive Bid Request), each day prior to the last day of such Interest Period that occurs at intervals of 90 days' duration after the first day of such Interest Period, and any other dates that are specified in the applicable Competitive Bid Request as Interest Payment Dates with respect to such Borrowing. "Interest Period" means (a) with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Company may elect, or 16 11 any other period agreed to by the Company and each Lender, and (b) with respect to any Fixed Rate Borrowing, the period (which shall not be less than 7 days or more than 360 days) commencing on the date of such Borrowing and ending on the date specified in the applicable Competitive Bid Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Keebler" means Keebler Foods Company, a Delaware corporation. "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for US Dollar deposits (as reflected on the applicable Telerate screen) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the "LIBO Rate" shall be the average (rounded upward, if necessary, to the next 1/100 of 1%) of the respective interest rates per annum at which US Dollar deposits are offered for such Interest Period to major banks in the London interbank market by Chase at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan Documents" means this Agreement and each promissory note delivered pursuant to this Agreement, as such documents may be amended, modified, supplemented or restated from time to time. "Loans" means the loans made by the Lenders to the Company pursuant to this Agreement. "Margin" means, with respect to any Competitive Loan bearing interest at a rate based on the LIBO Rate, the marginal rate of interest, if any, to be added to or subtracted from the 17 12 LIBO Rate to determine the rate of interest applicable to such Loan, as specified by the Lender making such Loan in its related Competitive Bid. "Margin Stock" means "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System. "Material Adverse Effect" means (a) any condition or change that has affected or would reasonably be expected to affect materially and adversely the business, assets, liabilities or financial condition of the Company and the Subsidiaries taken as a whole or (b) a material adverse effect on the rights of or benefits available to the Lenders under any Loan Document. "Maturing Indebtedness" means (i) the US$400,000,000 aggregate principal amount of the Company's 5-3/4% Extendible Notes maturing on February 2, 2001 and (ii) amounts related to such Notes not to exceed an aggregate amount of US$35,000,000. "Maturity Date" means January 17, 2002. "Moody's" means Moody's Investors Service, Inc. "Net Proceeds" means, with respect to any event (a) the cash proceeds received in respect of such event, net of (b) the sum of (i) all fees and out-of-pocket expenses paid by the Company to third parties (other than Affiliates) in connection with such event, and (ii) the amount of all taxes paid (or reasonably estimated to be payable) by the Company during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by a Financial Officer). "Obligations" means (a)(i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Company under this Agreement or any other Loan Document and (b) all obligations of the Company under each Hedging Agreement entered into with a counterparty that was a Lender or an Affiliate of a Lender at the time such Hedging Agreement was entered into. "Offering Memorandum" means the offering memorandum relating to the Senior Notes. "Other Taxes" means any and all present or future recording, stamp, documentary, excise, transfer, sales, property or similar taxes, charges or levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document. "PBGC" has the meaning assigned to such term in Section 3.10. 18 13 "Permitted Encumbrances" means: (a) Liens imposed by law for taxes, assessments or other governmental charges that are not yet due or are being contested in compliance with Section 5.03; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days, are in de minimis amounts or are being contested in good faith and by appropriate proceedings with adequate reserves under GAAP being provided therefor; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance, health insurance and other social security laws or regulations and withholding taxes; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; (f) easements, zoning restrictions, rights-of-way, minor defects or irregularities in title and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not interfere with the ordinary conduct of business of the Company or any Subsidiary; (g) rights of set-off in favor of financial institutions (other than in respect of amounts deposited to secure Indebtedness); (h) liens in the nature of trustee's liens granted pursuant to any indenture securing obligations to pay compensation to such trustee, to reimburse its expenses and to indemnify it under the terms thereof; (i) licenses, leases or subleases (other than Capital Leases and other financing leases) granted to third parties (other than to secure Indebtedness) not interfering in any material respect with the business of the Company or any Subsidiary; (j) liens arising in connection with contracts with or made at the request of the United States of America, any State of the United States of America or any department, agency or instrumentality of the foregoing; and (k) liens arising from deposits with or the giving of any form of security to any Governmental Authority required as a condition to the transaction of business or exercise of any privilege, franchise or license; provided that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. 19 14 "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means, for the Company and each Subsidiary at any time, an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (a) is maintained by a member of the Controlled Group for employees of a member of the Controlled Group, (b) is maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, or (c) under which a member of the Controlled Group has any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years or by reason of being deemed a contributing sponsor under Section 4069 of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, whether now owned or hereafter acquired. "Register" has the meaning set forth in Section 10.04. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Required Lenders" means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures and unused Commitments at such time; provided that, for all purposes after the Loans become due and payable pursuant to Article VII or the Commitments expire or terminate, "Required Lenders" will mean, at any time, Lenders having Revolving Credit Exposures and outstanding Competitive Loans representing more than 50% of the sum of the total Revolving Credit Exposures and outstanding Competitive Loans at such time. "Revolving Credit Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans at such time. "Revolving Loan" means a Loan made pursuant to Section 2.03. "Sale-Leaseback Transaction" means any arrangement whereby the Company or a Subsidiary shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease property that it intends to use for substantially the same purpose or purposes as the property sold or transferred; provided that any such arrangement (a) involving no party other than the Company and any Wholly Owned 20 15 Subsidiary or (b) entered into within 180 days after the acquisition, construction or substantial improvement of the subject property shall not be deemed to be a "Sale-Leaseback Transaction". "SEC" means the Securities and Exchange Commission or any successor. "Securitization" means the transfer or pledge of accounts receivable or interests in accounts receivable (a) to a trust, partnership, corporation or other entity, which transfer or pledge is funded by such entity in whole or in part by the issuance to one or more lenders or investors of indebtedness or securities that are paid principally from the cash flow derived from such accounts receivable or interests in accounts receivable, or (b) directly to an investor or other purchaser. "Senior Notes" means the Company's unsecured Senior Notes to be issued by the Company pursuant to the Senior Note Documents. "Senior Note Documents" means the indenture providing for the issuance of the Senior Notes substantially in the form approved prior to the date hereof by the Lenders, which form shall provide that the Senior Notes are unsecured and are not Guaranteed by any Subsidiary and shall otherwise have customary market terms reasonably acceptable to the Lenders, with no changes therefrom adverse to the Lenders, and all other instruments, agreements and other documents evidencing or governing the Senior Notes or providing for any other right in respect thereof. "S&P" means Standard & Poor's. "Significant Subsidiary" means (a) any Subsidiary that directly or indirectly owns or Controls any other Significant Subsidiary, (b) each Subsidiary identified as a Significant Subsidiary on Schedule 3.02, (c) any Subsidiary designated from time to time by the Company as a Significant Subsidiary by written notice to the Administrative Agent and (d) any other Subsidiary (i) the consolidated net sales of which were greater than 5% of the Company's Consolidated Net Sales as of the last day of the most recent fiscal period for which financial statements have been delivered pursuant to Section 5.05(a) or (b) (or, prior to the first delivery of such financial statements, greater than 5% of the consolidated net sales of the Person in whose financial statements such Subsidiary is included in the most recent financial statements referred to in Section 3.05(a) or (b)) or (ii) the consolidated assets of which as of the last day of such fiscal period were greater than 5% of Consolidated Total Assets as of such date (or, prior to the first delivery of such financial statements, greater than 5% of the consolidated total assets of the Person in whose financial statements such Subsidiary is included in the most recent financial statements referred to in Section 3.05(a) or (b)). The Company will not permit the total consolidated assets or the consolidated net sales of the Significant Subsidiaries (together with the directly owned assets of the Company) to at any time represent less than 90% of Consolidated Total Assets or Consolidated Net Sales of the Company and its Subsidiaries, respectively, in each case as of and for the period of four fiscal quarters ended on the last day of the most recent fiscal period for which financial statements have been delivered pursuant to Section 5.05(a) or (b) (or, prior to the first delivery of such financial statements, the consolidated total assets or consolidated net sales as of such date or for such period of the Persons in whose financial statements the Significant Subsidiaries are included in the most recent financial statements referred to in Section 3.05(a) or (b)). For purposes of making the determinations required by this definition, net sales and assets of foreign Subsidiaries shall be converted into US Dollars at the rates used in preparing the consolidated balance sheet of the Company (or, prior to the first delivery of financial statements 21 16 pursuant to Section 5.05(a) or (b), the Person in whose financial statements such foreign Subsidiary is included in the most recent financial statements referred to in Section 3.05(a) or (b)) included in the applicable financial statements. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" means any direct or indirect subsidiary of the Company. At all times on and after the Acquisition Date, Keebler and the subsidiaries of Keebler acquired in the Acquisition will constitute Subsidiaries. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "364-Day Credit Agreement" means the Company's 364-Day Credit Agreement in respect of the Company's US$1,150,000,000 364-day senior unsecured credit facilities, as described in the Information Memorandum. "Transactions" means the execution, delivery and performance by the Company of this Agreement and the other Loan Documents, the borrowing of Loans and the use of the proceeds thereof, the establishment of the Company's commercial paper program, the Acquisition and the refinancing of Indebtedness and the other transactions contemplated to be effected on the Acquisition Date in connection therewith. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Alternate Base Rate or, in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed Rate. 22 17 "Unfunded Vested Liabilities" means, for any Plan at any time, the amount (if any) by which (a) the present value of all vested nonforfeitable accrued benefits under such Plan exceeds (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA. "US Dollars" or "US$" refers to lawful money of the United States of America. "Voting Stock" of any Person means capital stock of any class of classes or other Equity Interests (however designated) having ordinary voting power for the election of directors or the equivalent governing body of such Person, other than stock or other Equity Interests having such power only by reason of happening of a contingency. "Welfare Plan" means a "welfare plan" as defined in Section 3(l) of ERISA. "Wholly Owned Subsidiary" means any Subsidiary all the Equity Interests in which, other than directors' qualifying shares and/or other nominal amounts of Equity Interests that are required to be held by Persons (other than the Company or its Wholly Owned Subsidiaries, as applicable) under applicable law, are owned, directly or indirectly, by the Company. SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. Each reference herein to the "knowledge" of the Company or any Subsidiary shall be deemed to be a reference to the knowledge of any member of senior management of the Company or such Subsidiary, any Financial Officer and, in the case of any reference to knowledge of any 23 18 specific subject matter, the senior manager of the department or office of the Company responsible for such matter. SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Company notifies the Administrative Agent that the Company requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Company that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. SECTION 1.05. [omitted] SECTION 1.06. Determinations Made in Good Faith. All determinations hereunder made by any party hereto shall be made in good faith. ARTICLE II The Credits SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans to the Company from time to time during the Availability Period in US Dollars in an aggregate principal amount that will not result in (a) such Lender's Revolving Credit Exposure exceeding such Lender's Commitment or (b) the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Company may borrow, prepay and reborrow Revolving Loans during the Availability Period. SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments. Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.04. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments and Competitive Bids of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.14, (i) each Revolving Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Company may request in accordance herewith, and (ii) each Competitive Borrowing shall be comprised entirely of Eurodollar Loans or Fixed Rate Loans as the Company may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender 24 19 to make such Loan; provided that any exercise of such option shall not affect the obligation of the Company to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurodollar Revolving Borrowing, such Borrowing shall be an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of US$1,000,000 and not less than US$5,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. Each Competitive Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 10 Eurodollar Revolving Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, the Company shall not be entitled to request, or to elect to convert or continue, any Revolving Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date, or to request any Competitive Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing, the Company shall notify the Administrative Agent of such request by telephone or by telecopy (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the Business Day of the proposed Borrowing. Each such Borrowing Request shall be irrevocable and, if telephonic, shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form agreed to by the Administrative Agent and the Company and signed by the Company. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Company's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.07. If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Revolving Borrowing, then the Company shall be deemed to have selected 25 20 an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Competitive Bid Procedure. (a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period the Company may request Competitive Bids and may (but shall not have any obligation to) accept Competitive Bids and borrow Competitive Loans; provided that after giving effect to any Borrowing of Competitive Loans the sum of the total Revolving Credit Exposures plus the total Competitive Loans shall not exceed the total Commitments. To request Competitive Bids, the Company shall notify the Administrative Agent of such request by telephone or by telecopy, in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, four Business Days before the date of the proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing; provided that the Company may submit up to (but not more than) five Competitive Bid Requests on the same day, but a Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request, unless any and all such previous Competitive Bid Requests shall have been withdrawn or all Competitive Bids received in response thereto rejected. Each such telephonic Competitive Bid Request shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Competitive Bid Request in a form approved by the Administrative Agent and signed by the Company. Each such telephonic and written Competitive Bid Request shall specify the following information in compliance with Section 2.02: (i) the aggregate principal amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be a Eurodollar Borrowing or a Fixed Rate Borrowing; (iv) the Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term "Interest Period" and shall end no later than the Maturity Date; and (v) the location and number of the Company's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.07. Promptly following receipt of a Competitive Bid Request in accordance with this Section, the Administrative Agent shall notify the Lenders of the details thereof by telecopy, inviting the Lenders to submit Competitive Bids. (b) Each Lender may (but shall not have any obligation to) make one or more Competitive Bids to the Company in response to a Competitive Bid Request. Each Competitive Bid by a Lender must be in a form approved by the Administrative Agent and must be received by the Administrative Agent by telecopy, in the case of a Eurodollar Competitive Borrowing, not later than 9:30 a.m., New York City time, three Business Days before the proposed date of such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 9:30 a.m., New York City time, on the proposed date of such Competitive Borrowing. Competitive Bids that do 26 21 not conform substantially to the form approved by the Administrative Agent may be rejected by the Administrative Agent, and the Administrative Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall specify (i) the principal amount (which shall be an amount at least equal to the Borrowing Minimum and an integral multiple of the Borrowing Multiple and which may equal the entire principal amount of the Competitive Borrowing requested by the Company) of the Competitive Loan or Loans that the Lender is willing to make, (ii) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan or Loans (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) and (iii) the Interest Period applicable to each such Loan and the last day thereof. (c) The Administrative Agent shall promptly notify the Company by telecopy of the Competitive Bid Rate and the principal amount specified in each Competitive Bid and the identity of the Lender that shall have made such Competitive Bid. (d) Subject only to the provisions of this paragraph, the Company may accept or reject any Competitive Bid. The Company shall notify the Administrative Agent by telecopy or by telephone, confirmed by telecopy in a form approved by the Administrative Agent, whether and to what extent it has decided to accept or reject each Competitive Bid, in the case of a Eurodollar Competitive Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 11:00 a.m., New York City time, on the proposed date of the Competitive Borrowing; provided that (i) the failure of the Company to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) the Company shall not accept a Competitive Bid made at a particular Competitive Bid Rate if the Company rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by the Company shall not exceed the aggregate amount of the requested Competitive Borrowing specified in the related Competitive Bid Request, (iv) to the extent necessary to comply with clause (iii) above, the Company may accept Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid, and (v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of at least the Borrowing Minimum that is an integral multiple of the Borrowing Multiple; provided further that if a Competitive Loan must be in an amount less than the Borrowing Minimum because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of US$1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of the Borrowing Multiple in a manner determined by the Company. A notice given by the Company pursuant to this paragraph shall be irrevocable. (e) The Administrative Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Bid has been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted. (f) If the Administrative Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to the Company at least one 27 22 quarter of an hour earlier than the time by which the other Lenders are required to submit their Competitive Bids to the Administrative Agent pursuant to paragraph (b) of this Section. SECTION 2.05. [omitted] SECTION 2.06. [omitted] SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Company by promptly crediting the amounts so received, in like funds, to an account of the Company maintained with the Administrative Agent in New York City, and designated by the Company in the applicable Borrowing Request or Competitive Bid Request. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Company a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Company severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Company to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of (x) the Federal Funds Effective Rate and (y) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Company, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.08. Interest Elections. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Company may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Company may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Competitive Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, the Company shall notify the Administrative Agent of such election by telephone or by telecopy by the time that a Borrowing Request would be required under Section 2.03 if the Company were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such Interest Election Request shall be irrevocable and, if telephonic, shall be 28 23 confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Company. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Company shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If the Company fails to deliver a timely Interest Election Request with respect to a Eurodollar Revolving Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Company, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.09. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date. (b) The Company may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of US$1,000,000 and not less than US$5,000,000 and (ii) the Company shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.11, the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures would exceed the total Commitments. 29 24 (c) In the event and on each occasion that the Company receives Net Proceeds from the sale of the Senior Notes or any offering of debt or equity securities of the Company made in lieu of an offering of the Senior Notes, the Commitments shall immediately upon the receipt of such Net Proceeds be automatically reduced by an amount equal to such Net Proceeds. (d) The Company shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section or of any sale or issuance of Senior Notes or other debt or equity securities that will result in a reduction of the Commitments under paragraph (c) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election or transaction and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Company pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Company may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Company (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.10. Repayment of Loans; Evidence of Debt. (a) The Company hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the unpaid principal amount of each Revolving Loan on the Maturity Date, and (ii) to the Administrative Agent for the account of each Lender the unpaid principal amount of each Competitive Loan on the last day of the Interest Period applicable to such Loan. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Company to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period, if any, applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Company to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Company to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Company shall execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in substantially the form attached hereto as Exhibit F. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after 30 25 assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.11. Prepayment of Loans. (a) The Company shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (c) of this Section and payments of any amounts required under Section 2.16; provided that the Company shall not have the right to prepay any Competitive Loan without the prior consent of the Lender thereof. (b) In the event and on each occasion that the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures exceeds the total Commitments, the Company shall promptly prepay Revolving Borrowings in an aggregate amount sufficient to eliminate such excess. (c) The Company shall notify the Administrative Agent by telephone (confirmed by telecopy) or by telecopy of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New York City time, on the Business Day of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.09, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.09. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13. SECTION 2.12. Fees (a) (i) The Company agrees to pay to the Administrative Agent, in US Dollars, for the account of each Lender a facility fee, which shall accrue at the relevant Facility Fee Rate specified in the definition of Applicable Rate on the daily amount of the Commitment of such Lender (whether used or unused) during the period from and including the date of this Agreement to but excluding the Maturity Date; provided that, if such Lender continues to have any Revolving Credit Exposure after the Maturity Date, then such facility fee shall continue to accrue on the daily amount of such Lender's Revolving Credit Exposure from and including the Maturity Date to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall be payable in arrears on the last day of March, June, September and December of each year, on any date prior to the Maturity Date on which the Commitments terminate and on the Maturity Date, commencing on the first such date to occur after the date hereof; provided that any facility fees accruing after the Maturity Date shall be payable on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). 31 26 (ii) For each day on which the aggregate principal amount of the Loans outstanding under this Agreement is in excess of 50% of the total Commitments as of such day (and for each day after the day on which the Commitments terminate) the Company agrees to pay to the Administrative Agent, in US Dollars, for the account of each Lender a utilization fee, which shall accrue at the relevant Utilization Fee Rate specified in the definition of Applicable Rate on the daily amount of the outstanding Loans of such Lender on such day. Accrued utilization fees shall be payable in arrears on the last day of March, June, September and December of each year, on any date prior to the Maturity Date on which the Commitments terminate and on the Maturity Date, commencing on the first such date to occur after the date hereof; provided that any utilization fees accruing after the Maturity Date shall be payable on demand. All utilization fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) The Company agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Company and the Administrative Agent. (c) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for its own account or, in the case of facility fees and utilization fees, for distribution to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate. (b) The Loans comprising each Eurodollar Borrowing shall bear interest (i) in the case of a Eurodollar Revolving Loan, at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate, or (ii) in the case of a Eurodollar Competitive Loan, at the LIBO Rate for the Interest Period in effect for such Borrowing plus (or minus, as applicable) the Margin applicable to such Loan. (c) Each Fixed Rate Loan shall bear interest at the Fixed Rate applicable to such Loan. (d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Company hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Commitments; provided that (i) interest accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment 32 27 or prepayment and (iii) in the event of any conversion of any Eurodollar Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (f) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or, 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders (or, in the case of a Eurodollar Competitive Loan, the Lender that is required to make such Loan) that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Company and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Company and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective, and such Borrowing shall be converted to or continued as an ABR Borrowing on the last day of the Interest Period applicable thereto, (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Borrowing (or such Borrowing shall not be made if the Company revokes (and in such circumstances, such Borrowing Request may be revoked notwithstanding any other provision of this Agreement) such Borrowing Request by telephonic notice, confirmed promptly in writing, not later than one Business Day prior to the proposed date of such Borrowing) and (iii) any request by the Company for a Eurodollar Competitive Borrowing shall be ineffective; provided that (A) if the circumstances giving rise to such notice do not affect all the Lenders, then requests by the Company for Eurodollar Competitive Borrowings may be made to Lenders that are not affected thereby and (B) if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted. 33 28 SECTION 2.15. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except to the extent any such reserve requirement is reflected in the Adjusted LIBO Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans or Fixed Rate Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Company will pay to such Lender such additional amount or amounts as will compensate such Lender on an after-tax basis for such additional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Company will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. It is acknowledged that this Agreement is being entered into by the Lenders on the understanding that the Lenders will not be required to maintain capital against their Commitments under currently applicable laws, regulations and regulatory guidelines. In the event Lenders shall be advised by any Governmental Authority or shall otherwise determine on the basis of pronouncements of any Governmental Authority that such understanding is incorrect, it is agreed that a Change in Law will be deemed to have occurred and that the Lenders will be entitled to make claims under this paragraph based upon market requirements prevailing on the date hereof for commitments under comparable credit facilities against which capital is required to be maintained. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section, together with supporting documentation or computations, shall be delivered to the Company and shall be conclusive absent manifest error. The Company shall pay such Lender the amount shown as due on any such certificate within 10 Business Days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Company shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Company of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if 34 29 the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. (f) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section in respect of any Competitive Loan if the Change in Law that would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Competitive Bid pursuant to which such Loan was made. SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan or Fixed Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(c) and is revoked in accordance therewith), (d) the failure to borrow any Competitive Loan after accepting the Competitive Bid to make such Loan, or (e) the assignment of any Eurodollar Loan or Fixed Rate Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Company pursuant to Section 2.19, then, in any such event, the Company shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits of a comparable amount and period from other banks in the eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section, together with supporting documentation or computations, shall be delivered to the Company and shall be conclusive absent manifest error. The Company shall pay such Lender the amount shown as due on any such certificate within 10 Business Days after receipt thereof. SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation of the Company hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Company shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions of Indemnified Taxes or Other Taxes (including deductions applicable to additional sums payable under this Section) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make such deductions and (iii) the Company shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Company shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. 35 30 (c) The Company shall indemnify the Administrative Agent and each Lender, within 10 Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender on or with respect to any payment by or on account of any obligation of the Company hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate setting forth in reasonable detail the amount and nature of such payment or liability delivered to the Company by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Company to a Governmental Authority, the Company shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Company is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Company (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Company as will permit such payments to be made without withholding or at a reduced rate, provided that such Foreign Lender has received written notice from the Company advising it of the availability of such exemption or reduction and containing all applicable documentation. (f) If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Company or with respect to which the Company has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to the Company (but only to the extent of indemnity payments made, or additional amounts paid, by the Company under this Section 2.17 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Company, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Company (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Company or any other Person. SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Setoffs. (a) The Company shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest or fees, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to 2:00 p.m., New York City time, on the date when 36 31 due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, New York, except that payments pursuant to Sections 2.15, 2.16, 2.17 and 10.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder and under each other Loan Document shall be made in US Dollars. Any payment required to be made by the Administrative Agent hereunder shall be deemed to have been made by the time required if the Administrative Agent shall, at or before such time, have taken the necessary steps to make such payment in accordance with the regulations or operating procedures of the clearing or settlement system used by the Administrative Agent to make such payment. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Company pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Company or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Company consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Company rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Company in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Company prior to the date on which any payment is due to the Administrative Agent for the 37 32 account of the Lenders hereunder that the Company will not make such payment, the Administrative Agent may assume that the Company has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders, the amount due. In such event, if the Company has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.07(b) or 2.18(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.15, or if the Company is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Company hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.15, or if the Company is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then the Company may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans held by it) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Company shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans (other than Competitive Loans), accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Company (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a material reduction in such compensation or payments. 38 33 ARTICLE III Representations and Warranties The Company represents and warrants to the Lenders that: SECTION 3.01. Organization and Qualification. The Company is duly organized, validly existing and in good standing (to the extent such concept is relevant to such Person in its jurisdiction of organization) under the laws of the jurisdiction of its organization, has full and adequate corporate power to carry on its business as now conducted, and is duly licensed or qualified and, to the extent relevant, in good standing in each jurisdiction in which the nature of the business transacted by it or the nature of the Property owned or leased by it makes such licensing or qualification necessary, except where such failure to be so licensed or qualified and in good standing would not have a Material Adverse Effect. SECTION 3.02. Subsidiaries. Each Significant Subsidiary is duly organized, validly existing and in good standing (to the extent such concept is relevant to such Person in its jurisdiction of organization) under the laws of the jurisdiction of its organization, has the requisite power to carry on its business as now conducted, and is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business transacted by it or the nature of the Property owned or leased by it makes such licensing or qualification necessary, except where such failure would not have a Material Adverse Effect. All the issued and outstanding Equity Interests in each Significant Subsidiary are validly issued and outstanding and fully paid and nonassessable and all such shares owned by the Company or a Subsidiary are owned, beneficially and of record, by the Company or such Subsidiary, free of any Lien other than Permitted Encumbrances. The Significant Subsidiaries (i) as of the Effective Date, are listed on Schedule 3.02(a) and (ii) after giving effect to the transactions to occur on the Acquisition Date, are listed on Schedule 3.02(b). SECTION 3.03. Corporate Authority and Validity of Obligations. The Company has the requisite right and authority to consummate the Transactions, to enter into this Agreement and each other Loan Document to which it is a party, to make the Borrowings herein provided for, to issue its notes in evidence thereof and to perform all of its obligations hereunder and under each other Loan Document to which it is a party; each of the Transactions has been duly authorized by the Company and the execution, delivery and performance of this Agreement and the other Loan Documents have been duly authorized by all necessary corporate, company or partnership action by the Company and constitute valid and binding obligations of the Company enforceable in accordance with their terms; and none of the Transactions, this Agreement, the other Loan Documents and the performance or observance by the Company or any Subsidiary of any of the matters or things herein or therein provided for contravene any provision of law or judgment or any charter or by-law provision of the Company or any material covenant, indenture or agreement of or affecting the Company or a substantial portion of any of its Properties. SECTION 3.04. Margin Stock. Neither the Company nor any of the Subsidiaries is engaged principally, or as one of its primary activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and neither the Company nor any of the Subsidiaries will use the proceeds of any Loan in a manner that violates any provision of Regulation U or X of the Board of Governors of the Federal Reserve System. 39 34 SECTION 3.05. Financial Reports. (a) The consolidated balance sheet of the Company and the Subsidiaries and the related consolidated statements of earnings, shareholders' equity and cash flows of the Company and the Subsidiaries and accompanying notes thereto (i) as at December 31, 1999, and for the year then ended, which financial statements are accompanied by the report of PriceWaterhouseCoopers LLP, and (ii) as at September 30, 2000, and for the fiscal quarter and the portion of the fiscal year then ended, certified by the Company's chief financial officer, heretofore furnished to the Administrative Agent, fairly present in all material respects the consolidated financial condition of the Company and the Subsidiaries as at such dates and their consolidated results of operations, shareholders' equity and cash flows for the periods then ended in conformity with GAAP, subject to year-end adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) The consolidated balance sheet of Keebler and its subsidiaries and the related consolidated statements of earnings, shareholders' equity and cash flows of Keebler and its subsidiaries and accompanying notes thereto (i) as at January 1, 2000, and for the year then ended, which financial statements are accompanied by the report of PriceWaterhouseCoopers LLP, and (ii) as at September 30, 2000, and for the fiscal quarter and the portion of the fiscal year then ended, certified by Keebler's chief financial officer, heretofore furnished to the Administrative Agent, to the best of the Company's knowledge, fairly present in all material respects the consolidated financial condition of Keebler and its subsidiaries as at such dates and their consolidated results of operations, shareholders' equity and cash flows for the periods then ended in conformity with GAAP, subject to year-end adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (c) The Company has heretofore furnished to the Lenders its pro forma consolidated balance sheet as of September 30, 2000, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) has been prepared in good faith based on the same assumptions used to prepare the pro forma financial statements included in the Information Memorandum (which assumptions are believed by the Company to be reasonable), (ii) is based on the best information available to the Company after due inquiry, (iii) accurately reflects all adjustments necessary to give effect to the Transactions and (iv) presents fairly, in all material respects, the pro forma financial position of the Company and its consolidated Subsidiaries as of September 30, 2000 as if the Transactions had occurred on such date. The representations and warranties set forth in clauses (iii) and (iv) are limited to the best of the Company's knowledge to the extent they relate to Keebler and its subsidiaries. SECTION 3.06. No Material Adverse Change. Since September 30, 2000, there has not occurred or become known any condition or change that has affected or would reasonably be expected to affect materially and adversely the business, assets, liabilities or financial condition of the Company, and its Subsidiaries taken as a whole. SECTION 3.07. Litigation. There is no litigation or governmental proceeding pending, or to the knowledge of the Company threatened, against the Company, any Subsidiary or Keebler or any of its subsidiaries which if adversely determined would (a) impair the validity or enforceability of, or materially impair the ability of the Company to perform its obligations under, this Agreement or any other Loan Document or (b) except as disclosed on Schedule 3.07 or in the Company's Form 10-Ks and 10-Qs filed with the SEC covering periods through September 30, 40 35 2000, or in Keebler's Form 10-Ks and 10-Qs filed with the SEC covering periods through October 7, 2000, result in any Material Adverse Effect. SECTION 3.08. Tax Returns. The Company has filed consolidated United States federal income tax returns for all taxable years ended on or before December 31, 1999 and such returns of the Company for the taxable year ended December 31, 1996 and all taxable years ended before such date have been examined and approved by the Internal Revenue Service as filed, and any additional assessments for any such year have been paid or the applicable statute of limitations therefor has expired. To the best of the Company's knowledge, Keebler has filed consolidated United States federal income tax returns for all taxable years ended on or before January 1, 2000 and such returns of Keebler for the taxable year ended December 31, 1994 and all taxable years ended before such date have been examined and approved by the Internal Revenue Service as filed, and any additional assessments for any such year have been paid or the applicable statute of limitations therefor has expired. There are no assessments pending for the consolidated United States federal income tax returns of the Company and the Subsidiaries of a material nature for any taxable year ended after December 31, 1999, or, to the best of the Company's knowledge, of Keebler and its subsidiaries of a material nature for any year ended after January 1, 2000, nor to the knowledge of the Company is any such assessment threatened, other than those provided for by adequate reserves under GAAP. SECTION 3.09. Approvals. No authorization, consent, license, exemption, filing or registration with any court or governmental department, agency or instrumentality, or any other Person, is necessary to the consummation of the Transactions or the valid execution, delivery or performance by the Company of this Agreement or any other Loan Document except for those obtained on or before the Effective Date or those the failure of which to obtain would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. SECTION 3.10. ERISA. The Company and each Subsidiary are in compliance in all material respects with the Employee Retirement Income Security Act of 1974 ("ERISA") to the extent applicable to them and have received no notice to the contrary from the Pension Benefit Guaranty Corporation or any successor thereto ("PBGC") or any other governmental entity or agency. No condition exists or event or transaction has occurred under or relating to any Plan which could reasonably be expected to result in the incurrence by the Company or any Subsidiary of any material liability, fine or penalty. Except as disclosed on Schedule 3.10, neither the Company nor any Subsidiary has any contingent liability for any post-retirement benefits under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title 1 of ERISA. SECTION 3.11. Environmental Matters. Except as set forth on Schedule 3.11, or except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, none of the Company and its Subsidiaries (a) has failed to comply with any Environmental Laws or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Laws, (b) has become subject to any liability under any Environmental Laws, (c) has received notice of any claim with respect to any Environmental Laws or (d) knows of any basis for any liability under any Environmental Laws. 41 36 SECTION 3.12. Properties. (a) Each of the Company and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, subject only to Liens permitted by Section 6.02 and except for defects in title that could not individually or in the aggregate reasonably be expected to result in a Material Adverse Effect. (b) Each of the Company and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by them does not infringe upon the rights of any other Person, except for any such defects in ownership or license rights or other infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.13. Compliance with Laws. Each of the Company and its Subsidiaries is in compliance with all laws, regulations and orders of the Food and Drug Administration and each other Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.14. Investment and Holding Company Status. None of the Company and its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.15. Disclosure. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of the Company to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Company represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Company's control, and that no assurance can be given that such projections will be realized); and provided further that the representations and warranties set forth in this sentence are limited to the best of the Company's knowledge to the extent they relate to information or materials obtained by the Company from Keebler and its subsidiaries prior to the Acquisition Date. SECTION 3.16. Representations Regarding Keebler. It is understood and agreed that no Default or Event of Default shall exist with respect to the representations and warranties set forth in Sections 3.05(b) and (c), 3.07, 3.08 and 3.15 to the extent they relate to Keebler and its subsidiaries (i) prior to the Acquisition Date, with respect to Loans made or to be made to refinance the Maturing Indebtedness or commercial paper the proceeds of which were used to refinance the Maturing Indebtedness and (ii) on or after the abandonment of the Acquisition by the Company. 42 37 ARTICLE IV Conditions SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.02): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of each of (i) Gary H. Pilnick, Vice President and Deputy General Counsel of the Company, substantially in the form of Exhibit D-1, and (ii) Kirkland & Ellis, counsel for the Company, substantially in the form of Exhibit D-2. The Company hereby requests such counsel to deliver such opinion. (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing (to the extent such concept is relevant to such Person in its jurisdiction of organization) of the Company and the authorization of the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel. (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Company, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02. (e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses required to be reimbursed or paid on or prior to the Effective Date by the Company hereunder. The Administrative Agent shall notify the Company and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.02) at or prior to 3:00 p.m., New York City time, on February 9, 2001 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). The effectiveness of the obligations to make Loans (other than Loans made solely for the purpose of repaying commercial paper issued on or after the Effective Date but prior to the date of such termination, to the extent the proceeds of such commercial paper shall have been deposited in the cash collateral account referred to in the last paragraph of this Section 4.01) 43 38 hereunder shall terminate, and any outstanding Obligations (other than obligations under Hedging Agreements) shall become immediately due and payable (or, in the case of Obligations incurred after such time shall become due and payable immediately following their incurrence), at 3:00 p.m. on April 30, 2001, unless each of the following conditions is satisfied (or waived in accordance with Section 10.02): (f) The Maturing Indebtedness shall have been repaid in full. (g) The Acquisition shall have been completed on terms substantially similar to those set forth in the Acquisition Agreements as heretofore provided to the Lenders, without modification or waiver of any material term or condition thereof that would reasonably be expected to materially and adversely affect the Company and its Subsidiaries, taken as a whole, or the rights or interests of the Lenders, and the assets and liabilities of Keebler and its subsidiaries shall to the best knowledge of the Company be consistent with the pro forma consolidated balance sheet referred to in Section 3.05(c). (h) The Company shall have established a commercial paper program on terms and subject to conditions satisfactory to the Lenders which permits the issuance of commercial paper supported by this Agreement, the 364-Day Credit Agreement and the Five-Year Credit Agreement, in an aggregate principal amount sufficient to consummate the Acquisition, refinance and replace the Indebtedness and credit facilities set forth on Schedule 4.01(h) as being repaid or permanently terminated in connection with the Acquisition, pay related fees and expenses and provide for the working capital needs and other general corporate purposes of the Company and its Subsidiaries. After giving effect to the Acquisition and the other transactions contemplated hereby, the Indebtedness and credit facilities set forth on Schedule 4.01(h) as being repaid or terminated shall have been repaid in full and permanently terminated, as applicable, and the Company and its Subsidiaries shall have outstanding no Indebtedness other than (a) commitments and Indebtedness under this Agreement, the 364-Day Credit Agreement and the Five-Year Credit Agreement, Indebtedness under the Company's commercial paper program, Senior Notes, in an aggregate principal amount taken together with the Commitments under this Agreement, without duplication, not to exceed US$6,300,000,000, and (b) the other Indebtedness set forth on Schedule 6.01 as remaining outstanding after giving effect to the Acquisition. (i) All governmental authorities and material third parties shall have approved or consented to the Acquisition to the extent such approvals or consents are required under applicable laws or agreements or otherwise and the failure to obtain such approvals or consents would reasonably be expected to result in a Material Adverse Effect; all applicable appeal periods of Governmental Authorities shall have expired and there shall be no governmental or judicial action, actual or threatened, that could reasonably be expected to restrain, prevent or impose materially burdensome conditions on the Acquisition. There shall be no litigation or administrative action that could reasonably be expected to have a Material Adverse Effect. The Administrative Agent shall have received a favorable written opinion (which is addressed to the Administrative Agent and the Lenders or permits reliance on it by the Administrative Agent and the Lenders and is dated as of the Acquisition Date) from counsel and in a form reasonably satisfactory to the Administrative Agent to the effect that no authorization, approval or action by, and no 44 39 notice to, consent of, order of or filing with, any governmental authority, and no shareholder approval, is required in connection with the Acquisition, other than such as have been obtained or made or those the failure to obtain or make which are not material to the consummation of the Transactions or to the Company. (j) Each of the 364-Day Credit Agreement and the Five-Year Credit Agreement shall have been executed and delivered. (k) The issuance and sale of the Senior Notes shall not have occurred or, to the extent that such issuance and sale has occurred, the Commitments shall have been reduced to the extent provided in Section 2.09. The Administrative Agent shall notify the Company and the Lenders of the Acquisition Date, and such notice shall be conclusive and binding. All proceeds of any commercial paper issued by the Company on or after the Effective Date but prior to the Acquisition Date (other than proceeds of commercial paper issued under the Company's existing commercial paper programs) shall be held in a cash collateral account of the Company maintained with the Administrative Agent and shall (A) be made available to the Company to finance the repayment of the Maturing Indebtedness on the date on which the Maturing Indebtedness shall be repaid in full, (B) be made available to the Company to finance the consummation of the Acquisition and the related Transactions on the date on which all the conditions set forth in paragraphs (f) through (k) are satisfied, or (C) if all such conditions are not satisfied on or prior to April 30, 2001 or any earlier date on which the Commitments shall have terminated, be applied to repay such commercial paper as it matures and all Obligations that may from time to time be outstanding on or after April 30, 2001 or any earlier date on which the Commitments shall have terminated. SECTION 4.02. Each Borrowing. The obligation of each Lender to make a Loan on the occasion of any Borrowing, is subject to the satisfaction (or waiver in accordance with Section 10.02) of the following conditions: (a) The representations and warranties (other than those set forth in Sections 3.06 and 3.07 in the case of Borrowings made after the Effective Date) of the Company set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing. (b) At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the Company on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. On and after the Acquisition Date, the conditions specified in paragraphs (a) and (b) of this Section shall be construed giving effect to the Acquisition and the other transactions contemplated to be effected in connection therewith. 45 40 ARTICLE V Affirmative Covenants Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, the Company covenants and agrees with the Lenders as to itself and its subsidiaries that: SECTION 5.01. Corporate Existence. The Company shall, and shall cause each Significant Subsidiary to, preserve and maintain its corporate existence, subject to the provisions of Section 6.04. SECTION 5.02. Maintenance. The Company will maintain, preserve and keep its Property necessary to the proper conduct of its business in reasonably good repair, working order and condition (ordinary wear and tear and damage by casualty excepted) and will from time to time make all necessary repairs, renewals, replacements, additions and betterments thereto so that in the judgment of the Company at all times such Property shall be reasonably preserved and maintained, and will cause each Significant Subsidiary so to do for Property owned or used by it, the failure of which to maintain or preserve could reasonably be expected to have a Material Adverse Effect; provided, however, that nothing in this Section 5.02 shall prevent the Company or a Significant Subsidiary from discontinuing the operation or maintenance of any such Property if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of the Subsidiary and in the reasonable opinion of the Company is not disadvantageous in any material respect to the Lenders. SECTION 5.03. Taxes. The Company will duly pay and discharge, and will cause each Subsidiary to pay and discharge, all material taxes, rates, assessments, fees and governmental charges upon or against the Company or such Subsidiary or against their respective Property, in each case before the same becomes delinquent and before penalties accrue thereon, unless and to the extent that (a) the same is being contested in good faith and by appropriate proceedings and adequate reserves under GAAP are provided therefor or (b) the same could not reasonably be expected to give rise to a Lien that would not be permitted under Section 6.02(d). SECTION 5.04. Insurance. The Company will insure, and keep insured, and will cause each Subsidiary to insure, and keep insured, with reputable insurance companies, all insurable Property owned by it which is of a character usually insured by companies similarly situated and operating like Property. To the extent usually insured (subject to self-insured retentions) by companies similarly situated and conducting similar businesses, the Company will also insure, and cause each Subsidiary to insure, employers' and public and product liability risks with reputable insurance companies. It is understood and agreed that the Company will be deemed to be in compliance with this Section 5.04 with respect to Keebler and its subsidiaries at all times between the Acquisition Date and the date that is one year thereafter to the extent that Keebler and its Subsidiaries maintain insurance consistent with their past practices. The Company will upon request of the Administrative Agent furnish to the Administrative Agent, for distribution to each Lender, a summary setting forth the nature and extent of the insurance maintained pursuant to this Section 5.04. 46 41 SECTION 5.05. Financial Reports and Other Information. The Company will, and will cause each Subsidiary to, maintain a standard system of accounting substantially in accordance with GAAP and will furnish to the Lenders and their respective duly authorized representatives such information respecting the business and financial condition of the Company and the Subsidiaries as they may reasonably request; and without any request will furnish to the Administrative Agent, which will make available by means of electronic posting to each Lender: (a) within 60 days after the end of each of the first three quarterly fiscal periods of the Company, a copy of the Company's Form 10-Q Report filed with the SEC; (b) within 120 days after the end of each fiscal year of the Company, a copy of the Company's Form 10-K Report filed with the SEC, including a copy of the annual report of the Company and the Subsidiaries for such year with accompanying financial statements, prepared by the Company and certified by independent public accountants of recognized standing, in accordance with GAAP; (c) promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports the Company sends to its shareholders, and copies of all other regular, periodic and special reports and all registration statements the Company files with the SEC, or with any national securities exchange; and (d) (i) promptly after the Company has knowledge thereof, notice (including a description in reasonable detail) of the occurrence of any Default or Event of Default, and (ii) within five Business Days after the Company has knowledge thereof, notice of any change to any rating of the Index Debt by S&P or Moody's. In addition, in the event that Subsidiaries not constituting Significant Subsidiaries shall at any time (as a result of any acquisition or disposition of any Person or line of business involving any party other than the Company and the Subsidiaries or any reorganization of the Company or any Subsidiaries) represent more than 10% of Consolidated Total Assets or Consolidated Net Sales as of such date or for such period, the Company will promptly designate additional Significant Subsidiaries by written notice to the Administrative Agent until such excess has been eliminated. Each of the financial statements furnished to the Lenders pursuant to subsections (a) and (b) of this Section 5.05 shall be accompanied by a compliance certificate in substantially the form of Exhibit E signed by a Financial Officer of the Company. Each such financial statement shall also be accompanied by a certificate signed by a Financial Officer of the Company confirming compliance with the requirements set forth in the definition of "Significant Subsidiary" and in the last sentence of the immediately preceding paragraph, attaching a revised form of Schedule 3.02 showing all additions to and removals from the Significant Subsidiaries since the date of the most recently delivered form of Schedule 3.02 (or confirming that there have been no changes from such most recently delivered form of Schedule 3.02). If the Company is no longer required to file Form 10Q and 10K Reports with the SEC, the Company will nevertheless furnish to the Lenders at the time herein above set forth all the financial and other information that would have comprised such filings. SECTION 5.06. Books and Records; Inspection Rights. The Company will, and will cause each of its Subsidiaries to, keep proper books of record and account in which in all 47 42 material respects full, true and correct entries are made of all dealings and transactions in relation to its business and activities as consistent with good business practices in the judgment of the Company. The Company will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.07. Compliance with Laws. The Company will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of the Food and Drug Administration and each other Governmental Authority applicable to it or its property, including all Environmental Laws, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.08. Preliminary Offering Document. The Company shall provide to the Administrative Agent no later than March 30, 2001, a complete preliminary prospectus or preliminary offering memorandum or preliminary private placement memorandum (the "Preliminary Offering Document") suitable for use in a customary "road show" relating to the Senior Notes and containing all financial statements and other data required to be included therein (including all audited financial statements, all unaudited financial statements (which shall have been reviewed by the independent accountants for the Company as provided in Statement on Auditing Standards No. 71) and all appropriate pro forma financial statements prepared in accordance with, or reconciled to, generally accepted accounting principles in the United States and prepared in accordance with Regulation S-X under the Securities Act of 1933, as amended) and all other data (including selected financial data) that, in the Company's and the co-underwriters' judgment, is necessary to assure that the Preliminary Offering Document does not contain a misstatement of, or a failure to state, a material fact, taking into account that which the Securities and Exchange Commission would require in a registered offering of the Senior Notes or that would be necessary to receive customary "comfort" (including "negative assurance" comfort) from independent accountants in connection with the offering of the Senior Notes. ARTICLE VI Negative Covenants Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full the Company covenants and agrees with the Lenders as to itself and its subsidiaries that: SECTION 6.01. Indebtedness. The Company will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist at any time: 48 43 (a) any Indebtedness of the Company secured by any Lien encumbering any asset of the Company or any Subsidiary (other than Indebtedness of the Company set forth in Schedule 6.01); (b) any Indebtedness of any Subsidiary (other than (i) Indebtedness under the 364-Day Credit Agreement or the Five-Year Credit Agreement, (ii) the Indebtedness of any Subsidiary set forth on Schedule 6.01, (iii) Indebtedness to the Company or any other Wholly Owned Subsidiary and (iv) Indebtedness of any Person that becomes a Subsidiary after the date hereof that existed at the time such Person became a Subsidiary and was not created in contemplation of or in connection with such Person becoming a Subsidiary); or (c) any Capital Lease Obligation; if such creation, incurrence, assumption or existence would result in the sum, without duplication, of (i) the aggregate principal amount of Indebtedness outstanding under clauses (a), (b) and (c) above, (ii) the aggregate principal amount of outstanding obligations secured by Liens permitted by Section 6.02(d), (iii) the aggregate amount of the Financed Portions of all outstanding Securitizations and (iv) the outstanding Attributable Debt in respect of Sale-Leaseback Transactions permitted by Section 6.03(b) exceeding 10% of Consolidated Total Assets as of the most recent fiscal quarter end for which financial statements for the Company and its Subsidiaries are available. SECTION 6.02. Liens. The Company will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances and Liens solely for the benefit of the Company or any Wholly Owned Subsidiary; (b) any Lien on any property or asset of the Company or any Subsidiary existing on the date hereof and set forth in Schedule 6.02; provided that (i) such Lien shall not apply to any other property or asset of the Company or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Company or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Company or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; and 49 44 (d) Liens not expressly permitted by clauses (a) through (c) above and Securitizations; provided that the sum, without duplication, at any time of (i) the aggregate principal amount of Indebtedness outstanding under Sections 6.01(a), (b) and (c), (ii) the aggregate principal amount of outstanding obligations secured by Liens permitted by this clause (d), (iii) the aggregate amount of the Financed Portions of all outstanding Securitizations and (iv) the outstanding Attributable Debt in respect of Sale-Leaseback Transactions permitted by Section 6.03(b) shall not exceed 10% of Consolidated Total Assets as of the most recent fiscal quarter end for which financial statements for the Company and its Subsidiaries are available. SECTION 6.03. Sale and Leaseback Transactions. The Company will not, and will not permit any of its Subsidiaries to, enter into any Sale-Leaseback Transaction except: (a) Sale-Leaseback Transactions existing on the date hereof and set forth on Schedule 6.03; and (b) other Sale-Leaseback Transactions; provided that the sum, without duplication, at any time of (i) the aggregate principal amount of Indebtedness outstanding under Sections 6.01(a), (b) and (c), (ii) the aggregate principal amount of outstanding obligations secured by Liens permitted by Section 6.02(d), (iii) the aggregate amount of the Financed Portions of all outstanding Securitizations and (iv) the aggregate outstanding Attributable Debt in respect of Sale-Leaseback Transactions permitted by this clause (b) does not at any time exceed 10% of Consolidated Total Assets as of the most recent fiscal quarter end for which financial statements for the Company and its Subsidiaries are available. SECTION 6.04. Fundamental Changes. (a) The Company will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired and whether directly or through any merger or consolidation of, or any sale, transfer, lease or other disposition of Equity Interests in, or the assets of, any Subsidiary), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Person may merge into the Company in a transaction in which the Company is the surviving corporation, (ii) any Person may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Company or to another Subsidiary and (iv) any Subsidiary may liquidate or dissolve if the Company determines in good faith that such liquidation or dissolution is in the best interests of the Company and is not materially disadvantageous to the Lenders. (b) The Company will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Company and its Subsidiaries and Keebler and its subsidiaries on the date of execution of this Agreement and businesses reasonably related, ancillary, similar or supportive thereto. SECTION 6.05. Use of Proceeds. The proceeds of the Loans will be used only to provide liquidity in connection with the Company's commercial paper program and for other general corporate purposes, provided that the proceeds of Loans made prior to the Acquisition 50 45 Date will be used solely for the purpose of repaying the Maturing Indebtedness or commercial paper issued on or after the Effective Date to the extent the proceeds of such commercial paper shall have been deposited in the cash collateral account referred to in the last paragraph of Section 4.01. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. Following the application of the proceeds of each Loan, not more than 25% of the value of the assets of the Company and its Subsidiaries which are subject to any arrangement hereunder whereby the Company's or any Subsidiary's right or ability to sell, pledge or otherwise dispose of assets is in any way restricted will be Margin Stock. SECTION 6.06. Minimum Net Worth. The Company will not permit Consolidated Net Worth as of any date to be less than US$700,000,000. SECTION 6.07. Interest Expense Coverage Ratio. (a) Prior to the Acquisition Date, the Company will not permit the ratio of (i) Consolidated EBITDA to (ii) Consolidated Interest Expense, in each case for any period of four consecutive fiscal quarters to be less than 3.0. (b) On and after the Acquisition Date, the Company will not permit the ratio of (i) Consolidated EBITDA to (ii) Consolidated Interest Expense, in each case for any period of four consecutive fiscal quarters ending on or after the last day of the first fiscal quarter beginning after the Acquisition Date, to be less than 3.0; provided that for purposes of determining compliance with this Section 6.07 on the last day of such first fiscal quarter and on the last day of each of the two next succeeding fiscal quarters, Consolidated EBITDA and Consolidated Interest Expense shall be determined for the period commencing with the first day of such first fiscal quarter and ending at the end of the applicable period, rather than for a four-fiscal-quarter period. ARTICLE VII Events of Default If any of the following events ("Events of Default") shall occur: (a) (i) default in the payment when due of any principal on any Loan, whether at the stated, maturity thereof or at any other time provided in this Agreement, or (ii) default for a period of five days in the payment when due of interest on any Loan, or (iii) default for a period of 10 days in the payment when due of any other sum required to be paid pursuant to this Agreement; (b) default by the Company in the observance or performance of any of the covenants set forth in Sections 5.01 (with respect to the Company's existence) or 5.05(d) or in Article VI; (c) default by the Company in the observance or performance of any other provision hereof not mentioned in (a) or (b) above, which is not remedied within 30 days after notice thereof to the Company by the Administrative Agent or any Lender; 51 46 (d) any representation or warranty made (or deemed made) herein by the Company, or in any statement or certificate furnished by the Company pursuant hereto or in connection with any Loan, proves untrue in any material respect as of the date of the issuance or making (or deemed making) thereof; (e) default in the payment when due, after any applicable grace period, of any Indebtedness or any amount due under any Hedging Agreement the aggregate principal amount of which exceeds in the aggregate US$50,000,000 (the "Aggregate Amount") issued, assumed or guaranteed by the Company or any Subsidiary (other than Indebtedness owing by any Subsidiary to the Company or to another Subsidiary); or default or other event under any indenture, agreement or other instrument under which any such Indebtedness is outstanding or under any such Hedging Agreement (other than a default under any provision of any other indenture, agreement or other instrument to which any Lender is party that restricts the ability of the Company or any Subsidiary to sell, pledge or otherwise dispose of Margin Stock), and such default or event shall result in the acceleration of the maturity or the required redemption or repurchase of Indebtedness, or the early termination of and a required payment under such Hedging Agreement, exceeding in the aggregate such Aggregate Amount; (f) any "reportable event" (as defined in ERISA) which constitutes grounds for the termination of any Plan by the PBGC, or for the appointment by an appropriate court of a trustee to administer or liquidate any Plan, or could reasonably be expected to result in a Material Adverse Effect, shall have occurred and be continuing 30 days after written notice to such effect shall have been given to the Company by the Administrative Agent; or any Plan shall be terminated by the PBGC; or a trustee shall be appointed to administer any Plan; or the PBGC shall institute proceedings to administer or terminate any Plan; and in the case of any such event the aggregate amount of unfunded liabilities under any affected Plan shall exceed (either singly or in the aggregate in the case of any such liability arising under more than one Plan) US$50,000,000; or the Company or any of its Subsidiaries or any member of the Controlled Group of any of them shall withdraw (completely or partially) from any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) and the aggregate amount of the liability of the Company and its Subsidiaries to such plan under Title IV of ERISA shall exceed (either singly or in the aggregate in the case of any such liability arising under more than one such plan) US$50,000,000; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Company or any Significant Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) the Company or any Significant Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or 52 47 hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Significant Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (i) the Company or any Significant Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due; (j) one or more judgments for the payment of money in an aggregate amount in excess of US$50,000,000 (except to the extent covered by insurance as to which the insurer has acknowledged such coverage in writing) shall be rendered against the Company, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Company or any Subsidiary to enforce any such judgment; (k) an "Event of Default" shall have occurred and be continuing as defined in the 364-Day Credit Agreement or the Five-Year Credit Agreement; or (l) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Company described in clause (g) or (h) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Company, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Company accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company; and in case of any event with respect to the Company described in clause (g) or (h) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Company accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company. 53 48 ARTICLE VIII The Administrative Agent In order to expedite the transactions contemplated by this Agreement, Chase is hereby appointed to act as Administrative Agent on behalf of the Lenders. Each of the Lenders hereby irrevocably authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. Any bank serving as Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Company or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Company or any Subsidiary that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02) or in the absence of its own bad faith, gross negligence or wilful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Company or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. 54 49 The Administrative Agent may consult with legal counsel (who may be counsel for the Company), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs and the provisions of Section 10.03 shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right (in consultation with, and with the consent of, the Company, which shall not be unreasonably withheld) to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may (in consultation with, and with the consent of (unless an Event of Default has occurred and is continuing pursuant to clause (g) or (h) of Article VII), the Company, which shall not unreasonably withhold such consent and which shall, if the retiring Administrative Agent shall so request, designate and approve a successor Administrative Agent) on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Company to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Company and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any related agreement or any document furnished hereunder or thereunder. 55 50 None of the institutions named as Co-Syndication Agents or Documentation Agent in the heading of this Agreement shall, in their capacities as such, have any duties or responsibilities of any kind under this Agreement. ARTICLE IX [omitted] ARTICLE X Miscellaneous SECTION 10.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Company, to it at One Kellogg Square, P.O. Box 3599, Battle Creek, MI 49016-3599, Attention of each of the Treasurer and the General Counsel (Telecopy No. (616) 961-3494); (b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Sonia Rosario-Cancar (Telecopy No. (212) 552-5650), with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York 10017, Attention of Tina Ruyter (Telecopy No. (212) 270-1063); and (c) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 10.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder and under any other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any 56 51 departure by the Company therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Company and the Required Lenders or by the Company and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable to any Lender hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender affected thereby, (v) change Section 2.09(d) in a manner that would alter the pro rata reduction of Commitments required thereby, without the written consent of each Lender affected thereby, or (vi) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision of any Loan Document specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by the Company, the Required Lenders and the Administrative Agent if (i) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement. SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) The Company shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of one outside counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers (requested by or for the benefit of the Company) of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all reasonable out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made hereunder, including all such reasonable out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans. 57 52 (b) The Company shall indemnify the Administrative Agent, and each Lender, and each Related Party of any of the foregoing Persons involved directly or indirectly in the Transactions (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (other than Excluded Taxes), including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated thereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Company or any of its Subsidiaries, or any Environmental Liability related in any way to the Company or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (A) do not result in actual out-of-pocket loss or expense by such Indemnitee or (B) result from the bad faith, wilful misconduct or gross negligence of such Indemnitee or the breach by such Indemnitee of its agreements set forth in the Loan Documents. (c) To the extent that the Company fails to pay any amount required to be paid by them to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such. (d) To the extent permitted by applicable law, the Company shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (e) All amounts due under this Section shall be payable promptly after written demand therefor setting forth the amount and the nature of the expense or claim, as applicable. SECTION 10.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Company may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Company without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. 58 53 (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Company and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than US$5,000,000 unless each of the Company and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause (iii) shall not apply to rights in respect of outstanding Competitive Loans, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of US$3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided further that any consent of the Company otherwise required under this paragraph shall not be required if an Event of Default under clause (g) or (h) of Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 10.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Administrative Agent, acting for this purpose as an agent of the Company, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Company, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Company and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be 59 54 effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of the Company or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Company, the Administrative Agent, and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Company agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Company's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Company is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Company, to comply with Section 2.17(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (h) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Bank") may grant to a special purpose funding vehicle (an "SPC") of such Granting Bank, identified as such in writing from time to time by the Granting Bank to the Administrative Agent and the Company, the option to provide to the Company all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Company pursuant to Section 2.01; provided that (i) nothing herein shall constitute a commitment to make any Loan by any SPC and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall be deemed to utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan were made by the 60 55 Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any payment under this Agreement for which a Lender would otherwise be liable, for so long as, and to the extent, the related Granting Bank makes such payment. In furtherance of the foregoing, each party hereto hereby agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 10.04, any SPC may (i) with notice to, but without the prior written consent of, the Company and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Bank or to any financial institutions (if consented to by the Company and Administrative Agent) providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans (but not relating to the Company, except with the Company's consent) to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. SECTION 10.05. Survival. All covenants, agreements, representations and warranties made by the Company herein, in the other Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 10.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. 61 56 SECTION 10.07. Severability. Any provision of any Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions of such Loan Document; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Company (other than payroll accounts and trust accounts) against any of and all the obligations of the Company now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement. The rights of each Lender under this Section are in addition to and shall not limit other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) The Company hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Company or its properties in the courts of any jurisdiction. (c) The Company hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement or any other Loan Document will affect the right of any party hereto or thereto to serve process in any other manner permitted by law. 62 57 SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 10.12. Confidentiality. The Administrative Agent and each of the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty to any swap or derivative transaction relating to the Company or any Subsidiary and their obligations, or any advisor of any such counterparty, (g) with the consent of the Company or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, or any Lender on a nonconfidential basis from a source other than the Company. For the purposes of this Section, "Information" means all information received from the Company relating to the Company or their business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Company; provided that, in the case of information received from the Company after the date hereof, such information is identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as a prudent Person engaged in the same business or following customary procedures for such business would accord to its own confidential information. SECTION 10.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges 63 58 and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. 64 59 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. KELLOGG COMPANY, by /s/ Thomas J. Webb ---------------------------------- Name: Thomas J. Webb Title: Executive Vice President, Chief Financial Officer THE CHASE MANHATTAN BANK, individually and as Administrative Agent, by /s/ Tina Ruyter ---------------------------------- Name: Tina Ruyter Title: Vice President THE CHASE MANHATTAN BANK, individually and as Administrative Agent, by /s/ Tina Ruyter ---------------------------------- Name: Tina Ruyter Title: Vice President 65 CITIBANK, N.A., by /s/ Henry J. Matthews ------------------------------ Name: Henry J. Matthews Title: Vice President 66 BANK OF AMERICA, N.A., by /s/ Casey Cosgrove ----------------------- Name: Casey Cosgrove Title: Vice President 67 BARCLAYS BANK PLC by /s/ L. Peter Yetman ----------------------- Name: L. Peter Yetman Title: Director 68 ABN AMRO BANK N.V., by /s/ W. Stephen Jones ------------------------------ Name: W. Stephen Jones Title: Senior Vice President /s/ Peter J. Hallan ------------------------------ Peter J. Hallan Assistant Vice President 69 THE BANK OF NOVA SCOTIA, by /s/ F.C.H. ASHBY --------------------------------------- Name: F.C.H. ASHBY Title: Senior Manager Loan Operations 70 THE BANK OF TOKYO-MITSUBISHI, LTD. CHICAGO BRANCH, by /s/ Hisashi Miyashiro --------------------------------------- Name: Hisashi Miyashiro Title: Deputy General Manager 71 BANK ONE NA, by /s/ William J. Maxbauer ----------------------------- Name: William J. Maxbauer Title: First Vice President 72 BNP PARIBAS, by /s/ Jo Ellen Bender --------------------------- Name: Jo Ellen Bender Title: Director by /s/ Christine Howatt --------------------------- Name: Christine Howatt Title: Vice President 73 CREDIT LYONNAIS, NEW YORK BRANCH, by /S/ ATTILA KOC ------------------------------- Name: ATTILA KOC Title: SENIOR VICE PRESIDENT 74 DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLAND BRANCHES, by /s/ Alexander Karow --------------------------------------- Name: Alexander Karow Title: Vice President by /s/ Thomas A. Foley --------------------------------------- Name: Thomas A. Foley Title: Vice President 75 THE FUJI BANK, LIMITED, by /s/ Peter L. Chinnici --------------------------- Name: Peter L. Chinnici Title: Senior Vice President & Group Head EX-10.18 5 k60557ex10-18.txt ADDITIONAL AGREEMENT 1 EXHIBIT 10.18 Carlos M. Gutierrez Chairman of the Board President Chief Executive Officer November 20, 2000 ALAN HARRIS KELLOGG INTERNATIONAL Dear Alan: I am pleased to confirm your promotion to Executive Vice President, Kellogg Company and President, Kellogg International. Your annual base salary will be $500,000, retroactive to October 1, 2000. Your next salary review will be April 1, 2001 and annually thereafter. Your cash bonus target is currently 70% of base salary. Your current stock option target is 96,000 shares. I am also happy to provide you with a lump sum payment of $100,000, less appropriate withholding, in order to help facilitate your relocation to the U.S. Please see the attached for specific information regarding a termination agreement. Alan, I am looking forward to working with you and continuing our partnership. I am confident that you will make the International business a tremendous success through your leadership and guidance. /s/ Carlos M. Gutierrez /d Attachment Accepted by: /s/ Alan F. Harris Executive Vice President, Kellogg Company President, Kellogg International 2 EMPLOYMENT AGREEMENT THIS AGREEMENT, dated and effective as of this 26th day of July, 2000 by and between Kellogg Company, a Delaware Corporation (the "Company") and Alan Harris (the "Executive"). WHEREAS, the Company has entered into a previous Agreement with the Executive by letter dated March 19, 1999 setting out terms and benefits in the event of termination of the Executive. WHEREAS, the Company and the Executive desire to amend the Letter Agreement dated March 19,1999. WHEREAS, the Company has assigned the Executive to a position within the United States and the Executive has accepted such assignment. NOW THEREFORE, the parties hereto, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, agree as follows: 1) In the event that the Executive's employment is terminated for any reason other than malfeasance, theft or immorality, or the Executive is required to relocate outside of the United States, in each case prior to July 1, 2004, the Executive shall be paid an amount of severance pay equal to two years' pay. The severance payment shall be calculated by paying the greater of the average of the two years' base pay and actual bonus or two times the salary and target bonus for the year in which the termination occurs. 2) In that Executive's employment is terminated for any reason other than malfeasance, theft or immorality, or the Executive is required to relocate outside the United States, in each case prior to July 1, 2004, the Executive will, in addition to the payment owing pursuant to Section (1) above, be paid his base salary then in effect from the date of such termination through July 1, 2002. No bonus payment shall be included in this calculation or payment. 3) The Employment Agreement between the Company and the Executive dated July 26, 2000, (the "Change of Control Agreement") shall remain in full force and effect and shall supercede sections (1) and (2) hereof in the event of a Change of Control (as defined therein). If that Executive's employment is terminated for any reason other than Cause (as defined in the Change of Control Agreement), or the Executive resigns for Good Reason (as defined in the Change of Control Agreement), after a Change of Control but prior to July 1, 2001, the Executive will be paid his base salary then in effect from the date of such termination through July 1, 2001 in addition to any benefits provided under the Change of Control Agreement. 4) All payments pursuant to this Agreement shall be subject to applicable federal, state, local and/or foreign taxes as required by law or regulation. 5) Except as noted herein, this Agreement shall constitute the entire agreement of the parties with respect to the subject matter hereof and shall supercede all prior agreements with respect thereto, specifically amending and superceding the letter agreement dated March 19, 1999 between the parties. 2 3 6) For purposes of construction or interpretation, this Agreement and all terms and provisions therein shall be deemed to have been mutually drafted by both parties. 7) Regarding Successors, this Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (a) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (b) The Company may assign this Agreement to any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company that expressly agrees to assume and perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such assignment had taken place. As used in this Agreement, "Company" shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise. 8) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Michigan, without reference to principles of conflict of laws. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives. 9) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law. IN WITNESS HEREOF, the undersigned has caused this Agreement to be executed as of the day and year first above written. Accepted by: /s/ Alan F. Harris Executive Vice President, Kellogg Company President, Kellogg International 3 EX-10.19 6 k60557ex10-19.txt AGREEMENT BETWEEN THE COMPANY AND DAVID MACKAY 1 EXHIBIT 10.19 INTERNATIONAL REPATRIATION AGREEMENT David Mackay Repatriation Provisions July 28, 2000 This letter confirms our mutual understanding of the terms and conditions applying to your transfer to the U.S. as SVP Kellogg Company and President, Kellogg USA, effective August 1, 2000 (the actual relocation will take place after obtaining a U.S. work visa which is anticipated to be between September 1 and October 1). This relocation is subject to obtaining a U.S. government work visa. BASE SALARY Effective August 1, 2000, your base salary will be US$400,000. Next salary review April 1, 2001 and annually thereafter. HOUSING If you sold your home as a result of taking your international assignment, you will be reimbursed normal buyer's closing costs upon purchasing a new residence when you relocate to the U.S. EXPENSE REIMBURSEMENTS For your actual relocation, the Company will provide business-class air and will reimburse you for travel expenses. If your housing arrangements are not completed by the time you return to your home country, the Company will pay reasonable living costs (auto rental, hotel or motel, laundry, meals not related to business, normal gratuities, telephone charges related to relocation, and reasonable valet services ) for you and your family for a period of up to 30 days. Expense reimbursements will be made by the U.S. RELOCATION ALLOWANCE A relocation allowance of US$10,472, net of income tax (not Social Taxes) will be paid to you upon your official relocation. This allowance is designed to aid in the payment of relocation expenses such as the replacement of personal items, small electrical appliances, and other incidental expenses related to your move. Additionally, as agreed in the July 13, 2000 memo signed by Carlos Gutierrez and Claudio Gonzalez, you will receive a one-time lump sum payment of US$50,000, net of income tax (not Social Taxes), upon your official relocation. 2 Page 2 HOME LEAVE/EMERGENCY LEAVE You and your dependents will be allowed three (3) home leave occasions. They may be scheduled once a year during the first 3 years of the transfer to the U.S. You may obtain additional tickets by downgrading to coach class. The leave time shall not exceed or be in addition to vacation entitlement. No reimbursement will be made in lieu of home leave not taken. Transportation will allow business class air fare. Transportation will be allowed to designated home city only. Home, for the purpose of home leave, is established as Rockhampton, Australia. In the event of death or critical illness of an immediate family member (including in-laws), business class-air tickets (or the equivalent) will be provided for you and your dependents through the first three (3) years following relocation to the U.S. For the purposes of this policy, "immediate family" is defined as mother, father, brother, sister, child, child by a former marriage, spouse of a child, grandparents, and any other key relatives as deemed appropriate and approved by the CEO. SHIPMENT OF PERSONAL EFFECTS The Company will make arrangements to insure and ship your personal effects and furniture if applicable. An exception has been approved to insure and ship your personal wine collection from Australia to the U.S. The Company will also pay for any import duties and other expenses necessary for the actual delivery of these goods. Household goods and other personal effects will be transported by ocean freight/by the most economical means. A limited amount of persona! items may be shipped by air transport. Arrangements for shipping will be handled by the Logistics Department of your Host country. All fees for moving, shipping and import duties will be paid by the home country. TAX EQUALIZATION POLICY The accounting firm of PricewaterhouseCoopers will assist you in the preparation and filing of your 2000 and 2001 foreign and domestic income tax returns and any tax issue that may result from your international assignment. The cost of PricewaterhouseCoopers services will be borne by the U.K. It is your responsibility to file returns and provide required documentation on a timely basis to comply with home and host country tax laws. Please contact the local office in the U.S. (Chris Sliva at 565-2207) soon after your arrival so that you can be briefed on tax documentation and filing requirements. 3 Page 3 Once your tax compliance work is completed as a result of your expatriate assignment, your U.S. income tax preparation will be provided as a part of the U.S. officer program. AUTOMOBILE The compensation and benefits program for U.S. employees (except for Field Sales) does not include a Company-provided automobile. As a result, you will not be provided an automobile when you relocate to the U.S. since you have been a U.S. expatriate (paid according to the U.S. compensation schedule and received U.S. benefits) and will remain on the U.S. payroll and benefit program. TERMINATION/BENEFIT PAY (IF APPLICABLE) In some locations, host country severance (termination indemnity) payments, or payments from a host country benefit plan are required by local law. Should you qualify and/or receive additional compensation required by local law at repatriation, transfer to another Kellogg assignment, or termination, you will turn such benefits (payments) over to the Company. Alternatively, payments received will be offset against home country benefits or other allowances or differentials. RELOCATION IN EVENT OF TERMINATION If you terminate while in the U.S., either at your own or the Company's option, the Company will pay to relocate you and your family (business class airfare) to your point of origin or alternate of your choice, if lesser cost to the Company, as well as your personal and household effects, provided you return to that point within 30 days of termination, provided these expenses are not covered by a new employer. TERMINATION CLAUSE In the event your employment is terminated, within five years from the effective date of this appointment, for reasons other than malfeasance, theft, or immorality, you will be provided an amount of severance pay equal to two years' pay. The severance pay shall equal two times the salary and target bonus for the year in which the termination occurs. Any severance pay is conditional upon signing a release and waiver of all claims against the Kellogg Company and its subsidiaries. /s/ Carlos M. Gutierrez Chairman of the Board and Chief Executive Officer /s/ David Mackay EX-13.01 7 k60557ex13-01.txt PAGES FROM THE COMPANY'S ANNUAL REPORT 1 EXHIBIT 13.01 FINANCIAL RESULTS TABLE OF CONTENTS Management's Discussion and Analysis ........................................... 15 Selected Financial Data ........................................................ 23 Consolidated Financial Statements .............................................. 24 Notes to Consolidated Financial Statements ..................................... 28 Report of Independent Accountants .............................................. 39 Supplemental Financial Information ............................................. 39

2 MANAGEMENT'S DISCUSSION AND ANALYSIS KELLOGG COMPANY AND SUBSIDIARIES RESULTS OF OPERATIONS OVERVIEW Kellogg Company is the world's leading producer of ready-to-eat cereal and a leading producer of convenience foods, including toaster pastries, cereal bars, frozen waffles, wholesome snacks, and meat alternatives. Principal markets for these products include the United States and United Kingdom. Additionally, the Company expects to complete its acquisition of Keebler Foods Company in March 2001. Keebler ranks second in U.S. market share in the cookie and cracker categories and has the third largest food direct store door (DSD) delivery system in the United States. Beginning in the fourth quarter of 2000, the Company's operations are managed in two major divisions - U.S. and International - - with International further delineated into Europe, Latin America, Canada, Australia, and Asia. This geographic organization is the basis of the Company's operating segment information in this report. In 2000, the Company achieved growth in net earnings and earnings per share, excluding charges, despite softness in the Company's U.S. convenience foods business, higher energy prices and interest rates, weak foreign currencies, and inventory write-offs in Southeast Asia. The Company was able to more than offset these factors through manufacturing efficiencies, reduced advertising and overhead expenses, and recognition of benefits related to U.S. tax credits. During 1999, the Company increased sales and achieved double-digit growth in net earnings and earnings per share, excluding charges. Volume gains in the Company's Latin America, Australia, and Asian cereal markets, continued expansion of the Company's global convenience foods business, and cost savings from ongoing streamlining and efficiency initiatives contributed significantly to these results. During 1998, the Company realized declines in earnings per share, both with and without charges. The Company experienced significant competitive pressure combined with category softness in its major ready-to-eat cereal markets, to which it responded by accelerating investment in long-term growth strategies, including product development, technology, and efficiency initiatives. Net earnings (in millions) and earnings per share (both basic and diluted), as reported, were:
2000 1999 1998 ------- ------- ------- ~~Net earnings $ 587.7 $ 338.3 $ 502.6 Net earnings per share $ 1.45 $ .83 $ 1.23 ======= ======= =======~~
During the current and prior years, the Company reported restructuring and disposition-related charges. The table below summarizes the amounts that have been excluded from results of operations in the following sections for purposes of comparison between years. These items are discussed in detail in the sections on restructuring charges (page 18) and dispositions (page 20).
IMPACT ON -------------------------------------------------- Earnings before Net (millions, except Operating income Net earnings per share data) profit taxes earnings per share -------- --------- -------- --------- 2000 RESTRUCTURING CHARGES $ 86.5 $ 86.5 $ 64.2 $ .16 -------- -------- -------- -------- 1999 Restructuring charges $ 244.6 $ 244.6 $ 156.4 $ .40 Disposition-related charges -- 168.5 111.5 .27 -------- -------- -------- -------- TOTAL CHARGES $ 244.6 $ 413.1 $ 267.9 $ .67 -------- -------- -------- -------- 1998 RESTRUCTURING CHARGES $ 70.5 $ 70.5 $ 46.3 $ .12 ======== ======== ======== ========
2000 COMPARED TO 1999 Excluding charges, net earnings (in millions) and earnings per share were:
2000 1999 Change ------- ------- ------- ~~Net earnings $ 651.9 $ 606.2 +7.5% Net earnings per share $ 1.61 $ 1.50 +7.3% ======= ======= =======~~
The full-year increase in earnings per share of $.11 consisted of $.02 from business growth and $.11 from favorable tax-rate movements, partially offset by $.02 from unfavorable foreign currency movements. The Company continued to lead the global ready-to-eat cereal category in 2000 with an estimated 38% annualized share of worldwide dollar sales. Category share for the Company's operating segments was approximately 31% in the United States, 43% in Europe, 60% in Latin America, 45% in Canada, 57% in Australia, and 50% in Asia. During the fourth quarter of 1999, the Company divested the Lender's Bagels business and acquired Worthington Foods, Inc. While the net impact of these events on net sales was insignificant during 2000, convenience foods volume results were negatively affected, due to the higher density of Worthington's products versus Lender's products. Volume results for 2000 were:
Comparable Change vs. prior year As reported business (a) - ------------------------ --------------- --------------- Global cereal +1.0% +.6% Global convenience foods -5.0% +1.4% --------------- --------------- Consolidated -.5% +.9% =============== =============== United States -2.4% +.3% Europe -.8% -.8% Latin America +7.7% +7.7% Other operating +1.8% +1.4% --------------- --------------- Consolidated -.5% +.9% =============== ===============
(a) Excluding acquisitions and dispositions. Refer to pages 19-20. 15 3 Excluding volume from the Kashi business acquired in June 2000, U.S. cereal volume for the year was essentially flat, negatively impacted by a sluggish category, heavy price promotion by competitors, and trade inventory reductions late in the year. Excluding volume from acquisitions and dispositions, U.S. convenience foods volume grew approximately 1%, a significantly slower rate than the last several years. Management believes factors reducing the growth rate in 2000 included having fewer new products in 2000 and lack of sustained marketing support for products introduced in 1999. The volume shortfall in Europe during the year was attributable to decreased cereal sales. While management believes successful consumer promotions increased cereal volume growth approximately 1% in the United Kingdom, volume shortfalls in most other European markets more than offset this gain. Convenience foods volume in Europe was approximately even with the prior year. Latin America continued to achieve solid growth in both cereal and convenience foods volume, particularly in the Mexican market, where an all-time annual cereal volume record was achieved. In other segments - consisting of Canada, Australia, and Asia - volume results were mixed. In Canada, the Company achieved modest volume growth in both the cereal and convenience foods businesses, with total volume increasing approximately 2%. Excluding volume from The Healthy Snack People(TM) convenience foods business acquired in July 2000, total shipments increased nearly 1% in Australia, as strong growth in convenience foods volume more than offset a shortfall in cereal sales. Cereal volume increased in Asia, led by strong shipments in Korea. Asian convenience foods volume decreased significantly, as the Company undertook restructuring initiatives to refocus these markets on sustainable growth. Net sales by major product group were:
Comparable Total business (millions) 2000 1999 change change (b) -------- -------- -------- --------- Global cereal $5,177.6 $5,304.7 -2.4% +.7% Global convenience foods 1,777.1 1,679.5 +5.8% +2.5% -------- -------- -------- -------- Consolidated $6,954.7 $6,984.2 -.4% +1.1% ======== ======== ======== ========
(b) Excluding foreign exchange, acquisitions, and dispositions. On an operating segment basis, net sales versus the prior year were:
United Latin Other States Europe America operating Consolidated ---------- ---------- ---------- ---------- ------------ Volume +.3% -.8% +7.7% +1.4% +.9% Pricing/mix -.6% +1.4% +4.7% -.4% +.2% Acquisitions & dispositions +1.6% -- -- +.5% +1.0% Foreign currency impact -- -10.0% -1.9% -3.0% -2.5% ---------- ---------- ---------- ---------- ------------ Total change +1.3% -9.4% +10.5% -1.5% -.4% ========== ========== ========== ========== ============
For 2000, the comparable business sales decline in the United States was .3% (favorable volume of .3% less unfavorable pricing/mix impact of .6%) versus a comparable business operating profit decline of 5.9%. The operating profit decline was attributable primarily to increased production, distribution, and promotional expenditures for convenience foods products, and higher energy costs. In Europe, operating efficiencies and a decline in marketing expense resulted in comparable business growth in operating profit of 14.0%, building on a sales increase of .6% (unfavorable volume of .8% offset by favorable pricing/mix of 1.4%). In Latin America, comparable business sales growth of 12.4% (favorable volume of 7.7% plus favorable pricing/mix of 4.7%) combined with operating efficiencies resulted in comparable business operating profit growth of 16.0%. In other operating segments, comparable business operating profit declined 1.8%, despite a sales increase of 1.0% (favorable volume of 1.4% less unfavorable pricing/mix impact of .4%). Significantly contributing to this operating profit decline was approximately $14 million in aged inventory write-offs and related expenses in Southeast Asia as management initiated restructuring actions to refocus certain Asian markets on sustainable growth. Operating profit on an operating segment basis was:
United Latin Other (millions) States Europe America operating (d) Corporate Consolidated ---------- ---------- ---------- ------------- ---------- ------------ 2000 operating profit $ 744.2 $ 208.5 $ 146.5 $ 60.5 $ (169.9) $ 989.8 2000 restructuring charges (c) 2.0 26.7 14.6 28.7 14.5 86.5 ---------- ---------- ---------- ---------- ---------- ---------- 2000 OPERATING PROFIT EXCLUDING RESTRUCTURING CHARGES $ 746.2 $ 235.2 $ 161.1 $ 89.2 $ (155.4) $ 1,076.3 1999 operating profit $ 605.1 $ 201.7 $ 139.6 $ 89.1 $ (206.7) $ 828.8 1999 restructuring charges (c) 197.9 22.4 1.7 4.6 18.0 244.6 ---------- ---------- ---------- ---------- ---------- ---------- 1999 OPERATING PROFIT EXCLUDING RESTRUCTURING CHARGES $ 803.0 $ 224.1 $ 141.3 $ 93.7 $ (188.7) $ 1,073.4 ---------- ---------- ---------- ---------- ---------- ---------- % change - 2000 vs. 1999: Comparable business -5.9% +14.0% +16.0% -1.8% +6.8% +1.8% Acquisitions & dispositions -1.2% -- -- +1.1% -- -.9% Foreign currency impact -- -9.1% -2.0% -4.1% +10.9% -.6% ---------- ---------- ---------- ---------- ---------- ---------- TOTAL CHANGE -7.1% +4.9% +14.0% -4.8% +17.7% +.3% ========== ========== ========== ========== ========== ==========
(c) Refer to section on restructuring charges on page 18. (d) Other operating includes Canada, Australia, and Asia. In 1999, other operating also includes the Company's functional foods division. This division was closed in 1999. 16 4 Consolidated margin performance was:
2000 1999 Change -------- -------- -------- Gross margin 52.2% 52.4% -.2% SGA% (e) 36.7% 37.0% +.3% -------- -------- -------- Operating margin 15.5% 15.4% +.1% ======== ======== ========
(e) Selling, general, and administrative expense as a percentage of net sales. For 2000, the gross margin was relatively flat versus the prior year, as higher costs of production for Worthington and other new products, aged inventory write-offs in Southeast Asia, and increased energy costs offset productivity gains and lower employee benefit costs. The decrease in SGA% versus the prior year was due to reduced advertising and overhead expenses. Gross interest expense, prior to amounts capitalized, was up versus the prior year, due primarily to an increase in short-term interest rates.
(millions) 2000 1999 Change ---------- ---------- ---------- ~~Gross interest expense $ 143.1 $ 127.2 +12.5% ========== ========== ==========~~
Other income (expense), net includes non-operating items such as interest income, foreign exchange gains and losses, charitable donations, and gains on asset sales. Other income (expense), net for 2000 includes a credit of approximately $12 million related to the 1999 sale of the Lender's Bagels business. The total amount consists of approximately $9 million for disposal of assets associated with the business which were not purchased by Aurora Foods Inc. (refer to Note 2) and approximately $3 million for final working capital settlement with Aurora. During the fourth quarter of 2000, the Company recorded $24 million in tax benefits, primarily related to utilization of U.S. foreign tax credit carryforwards. During the third quarter, the Company recorded a $9 million tax benefit, based on completing studies with respect to U.S. research and experimentation credits for prior years. As a result, the effective income tax rate was down significantly from the prior year. Also contributing to the lower rate were the impact of lower statutory rates throughout the year in the United Kingdom and Australia and enactment of a statutory rate reduction in Germany in the fourth quarter. Excluding the impact of the Keebler acquisition, management expects the Company's 2001 effective income tax rate to return to historical levels.
Consolidated effective tax rate 2000 1999 Change - ------------------------------- ---------- ---------- --------- Excluding charges (f) 31.7% 36.2% -4.5% As reported 32.3% 37.0% -4.7% ========== ========== =========
(f) Refer to sections on restructuring charges (page 18) and dispositions (page 20). The variance in the reported rates (as compared to the rates excluding the impact of restructuring and disposition-related charges) relates primarily to the disposition of nondeductible goodwill in 1999 and certain restructuring charges in both years for which no tax benefit was provided, based on management's assessment of the likelihood of recovering such benefit in future years. 1999 COMPARED TO 1998 Excluding charges, net earnings (in millions) and earnings per share were:
1999 1998 Change ---------- ---------- --------- Net earnings $ 606.2 $ 548.9 +10.4% Net earnings per share $ 1.50 $ 1.35 +11.1% ========== ========== =========
The $.15 increase in earnings per share consisted of $.14 from business growth, $.01 from favorable foreign exchange movements, and $.01 from prior-year share repurchase, partially offset by $.01 due to a higher effective tax rate. The Company realized the following volume results during 1999:
Comparable Change vs. prior year As reported business (a) - --------------------- ----------- ------------ Global cereal +1.6% +1.6% Global convenience foods +8.8% +13.9% ---------- ---------- Consolidated +3.4% +4.1% ========== ========== United States +2.3% +3.7% Europe +1.3% +1.3% Latin America +8.8% +8.8% Other operating +9.1% +9.1% ---------- ---------- Consolidated +3.4% +4.1% ========== ==========
(a) Excluding acquisitions and dispositions. Refer to pages 19-20. In the United States, cereal volume was relatively flat, due primarily to a significant reduction in volume during the fourth quarter. Management believes this reduction resulted from a non-competitive level of marketing spending by the Company during the period. Excluding the impact of acquisitions and dispositions, the U.S. convenience foods business achieved low double-digit volume growth. Cereal volume increased slightly in the Company's European segment amid extremely competitive conditions and the loss of a major customer in Germany. The Company's Latin America segment achieved a record for annual cereal volume delivery. The Company experienced solid cereal volume gains in other operating segments of Canada, Australia, and Asia. Convenience foods volumes significantly exceeded the prior year in all operating segments, due primarily to continued new product rollouts and market expansion. Net sales by major product group were:
(millions) 1999 1998 Change ---------- ---------- --------- Global cereal $ 5,304.7 $ 5,265.4 +.7% Global convenience foods 1,679.5 1,496.7 +12.2% ---------- ---------- --------- CONSOLIDATED $ 6,984.2 $ 6,762.1 +3.3% ========== ========== =========
On an operating segment basis, net sales versus the prior year were:
United Latin Other States Europe America operating Consolidated ---------- ---------- ---------- ---------- ------------ Volume +3.7% +1.3% +8.8% +9.1% +4.1% Pricing/mix +.9% -2.4% +11.3% +.9% +.8% Acquisitions & dispositions -.6% -- -- -- -.3% Foreign currency impact -- -3.9% -9.1% +3.5% -1.3% ---------- ---------- ---------- ---------- ---------- TOTAL CHANGE +4.0% -5.0% +11.0% +13.5% +3.3% ========== ========== ========== ========== ==========
17 5 Operating profit on an operating segment basis was:
United Latin Other (millions) States Europe America operating (d) Corporate Consolidated ---------- ---------- ---------- ------------- ---------- ------------ 1999 operating profit excluding restructuring charges $ 803.0 $ 224.1 $ 141.3 $ 93.7 $ (188.7) $ 1,073.4 ---------- ---------- ---------- ---------- ---------- ---------- 1998 operating profit $ 753.9 $ 208.1 $ 107.2 $ 65.0 $ (239.1) $ 895.1 1998 restructuring charges (c) 32.8 3.3 -- 11.4 23.0 70.5 ---------- ---------- ---------- ---------- ---------- ---------- 1998 operating profit excluding restructuring charges $ 786.7 $ 211.4 $ 107.2 $ 76.4 $ (216.1) $ 965.6 % change - 1999 vs. 1998: Comparable business -1.1% +10.3% +39.1% +18.3% +12.0% +9.7% Acquisitions & dispositions +3.2% -- -- -- -- +2.7% Foreign currency impact -- -4.3% -7.3% +4.4% +.7% -1.2% ---------- ---------- ---------- ---------- ---------- ---------- Total change +2.1% +6.0% +31.8% +22.7% +12.7% +11.2% ========== ========== ========== ========== ========== ==========
(c) Refer to section on restructuring charges on page 18. (d) Other operating includes Canada, Australia, Asia, and the Company's functional foods division. Margin performance for 1999 and 1998 was:
1999 1998 Change -------- -------- -------- Gross margin 52.4% 51.5% +.9% SGA% (e) 37.0% 37.2% +.2% -------- -------- -------- Operating margin 15.4% 14.3% +1.1% ======== ======== ========
(e) Selling, general, and administrative expense as a percentage of net sales. The 1999 gross margin improved versus the prior year, due primarily to global manufacturing efficiencies. The SGA% was relatively flat, as increased spending on promotional activities offset benefits from overhead streamlining initiatives around the world. This level of spending is consistent with management's strategy to drive growth through increased marketing investment in the Company's established cereal markets, as well as supporting the introduction of new convenience food products around the world. Gross interest expense, prior to amounts capitalized, was comparable to the prior year:
(millions) 1999 1998 Change -------- -------- -------- ~~Gross interest expense $ 127.2 $ 127.3 -.1% ======== ======== ========~~
Other income (expense), net for 1998 includes a credit of approximately $6 million related to settlement of certain litigation. During 1996, the Company included in operating profit a provision of $15 million for the potential settlement of this litigation, which brought the total settlement reserve to $18 million. This litigation was settled during the second quarter of 1998 for a cost of approximately $12 million, and the remaining reserve of approximately $6 million was reversed. The consolidated effective income tax rate was:
Consolidated effective tax rate 1999 1998 Change -------- -------- ------- Excluding charges (f) 36.2% 35.7% +.5% As reported 37.0% 35.8% +1.2% ======== ======== =======
(f) Refer to sections on restructuring charges (page 18) and dispositions (page 20). A statutory rate reduction in Australia favorably impacted the consolidated 1999 tax rate by .6%. A statutory rate reduction in the United Kingdom reduced the consolidated 1998 effective rate by .3%. The variance in the 1999 reported rate (as compared to the rate excluding the impact of charges) relates primarily to the disposition of nondeductible goodwill from the Lender's Bagels business and certain restructuring charges for which no tax benefit was provided, based on management's assessment of the likelihood of recovering such benefit in future years. RESTRUCTURING CHARGES During the past several years, management has commenced major productivity and operational streamlining initiatives in an effort to optimize the Company's cost structure and align resources with the Company's growth strategy. The incremental costs of these programs have been reported during these years as restructuring charges. The 2000 charges of $86.5 million consist of $65.2 million for actions supporting the Company's "focus and align" strategy and $21.3 million for a supply chain efficiency initiative in Europe. In the fourth quarter of 2000, management adopted the "focus and align" strategy, emphasizing a stricter prioritization for resource allocation to the United States and the Company's other core markets. In conjunction with this strategy, the Company was reorganized from four operating areas into two divisions - U.S. and International. As a result, management initiated restructuring actions around the world to support this strategy and organization, including staff reductions in its global supply chain and innovation organization, rationalization of international convenience foods capacity, and restructuring of various non-core markets to improve return on investment. Approximately one-half of the total charges are comprised of asset write-offs with the remainder consisting primarily of cash costs associated with involuntary employee separation programs. Approximately 500 salaried and hourly positions were eliminated, primarily during the fourth quarter of 2000. As a result of these initiatives, the Company currently expects to realize approximately $45 million on a pretax basis from cost reductions and elimination of operating losses in 2001. During the second quarter of 2000, the Company implemented a supply chain efficiency initiative in Europe. The restructuring charges from this program were comprised principally of voluntary employee retirement and separation benefits. This program resulted in hourly and salaried headcount reductions of 190 during 2000 and is currently expected to generate approximately $13 million in pretax savings in 2001. 18 6 The 1999 restructuring charges consist of $193.2 million for closing the South Operations portion of the Company's Battle Creek, Michigan, cereal plant, $32.7 million for workforce reduction initiatives around the world, and $18.7 million, primarily for manufacturing equipment write-offs related to previously closed or impaired facilities in various locations. Approximately one-half of the 1999 charges for the South Operations closing are comprised of asset write-offs, with the remainder consisting primarily of cash costs for employee retirement and separation benefits, equipment removal, and building demolition. As part of the Company's strategy of continuing cost reduction and efficiency improvement, these operations were closed in October 1999. Some production capacity was relocated to the Company's other U.S. cereal plants. Approximately 525 hourly and salaried positions at the Battle Creek plant were eliminated by the end of the first quarter of 2000 through a combination of voluntary and involuntary separation programs. These actions resulted in pretax savings of approximately $30 million in 2000 and are currently expected to result in a further $10 million of savings in 2001, for a total 2001 benefit of $40 million. The 1999 charges for workforce reduction initiatives are comprised principally of employee retirement and separation benefit costs in all of the Company's operating segments and in corporate operations. These initiatives eliminated approximately 325 employee positions in Europe, Latin America, Australia, and Asia during 1999 and generated approximately $15 million of pretax savings during 1999, and a further $10 million in pretax savings in 2000, for a total 2000 benefit of $25 million. The 1998 restructuring charges of $70.5 million relate primarily to an overhead activity analysis that resulted in the elimination of approximately 550 employees and 240 contractors from the Company's headquarters and U.S. and Canadian operations through a combination of involuntary early retirement and severance programs. The charges consist mainly of employee retirement and separation benefits. This program generated approximately $100 million of pretax savings during 1999. Refer to Note 3 within Notes to Consolidated Financial Statements for information on the components of the restructuring charges by initiative, as well as reserve balances remaining at December 31, 2000, 1999, and 1998. Incremental pretax savings achieved or expected from streamlining initiatives by year, and the relative impact on captions within the Consolidated Statement of Earnings, are:
Relative impact on ----------------------- Incremental pretax Cost of (millions) savings goods sold SGA (a) ----------- ---------- -------- 1998 $ 10 75% 25% 1999 125 10% 90% 2000 50 80% 20% 2001 expected 75 50% 50% ======== ======== ========
(a) Selling, general, and administrative expense. Total cash outlays incurred or expected for streamlining initiatives by year are:
(millions) ~~1998 $ 47 1999 69 2000 68 2001 expected 38 2002 expected 2 =====~~
The Company's streamlining initiatives are expected to continue in 2001, related primarily to the integration of the Kellogg and Keebler business models. In addition to incurring integration costs throughout 2001, during the first quarter of 2001 the Company expects to report restructuring charges for staff reductions and inventory and capacity rationalization as a result of this integration. As many of these initiatives are in the early stages of completion, management is currently unable to estimate the total amount of charges to be reported. Expected cash outlays and savings related to this integration are not included in the tables above. ACQUISITIONS AND DISPOSITIONS KEEBLER ACQUISITION The Company expects to complete its acquisition of Keebler Foods Company in March 2001, in a transaction entered into with Keebler and with Flowers Industries, Inc., the majority shareholder of Keebler. Keebler Foods Company, headquartered in Elmhurst, Illinois, ranks second in U.S. market share in the cookie and cracker categories and has the third largest food direct store door (DSD) delivery system in the United States. Under the purchase agreement, the Company will pay $42 in cash for each common share of Keebler or approximately $3.6 billion, including related acquisition costs. As a result of the acquisition, the Company will assume approximately $700 million of Keebler debt and $216 million in obligations to cash out employee stock options, for a total projected cash outlay of approximately $4.5 billion. The Company will finance the acquisition through a combination of short and long-term debt. The acquisition will be accounted for as a purchase. During 2001, goodwill and intangibles amortization resulting from the acquisition is expected to be approximately $125 million. A proposed FASB Statement of Financial Accounting Standards on Business Combinations, which would eliminate goodwill amortization, could reduce the total annual amortization expense by approximately one-half in periods subsequent to issuance of the final standard. OTHER ACQUISITIONS AND INVESTMENTS In January 2000, the Company purchased certain assets and liabilities of the Mondo Baking Company Division of Southeastern Mills, Inc. for approximately $93 million in cash, including related acquisition costs. Mondo Baking Company, located in Rome, Georgia, has manufactured convenience foods for Kellogg since 1993. The acquisition was accounted for as a purchase and was financed through short-term borrowings. Assets acquired consist primarily of a manufacturing facility and assembled workforce. During June 2000, the Company acquired the outstanding stock of Kashi Company for approximately $32 million in cash. Kashi is a leading natural cereal company located in La Jolla, California. Also during June, the Company committed to invest $7 million of cash in Transora, a new global business-to-business e-marketplace for the consumer products industry. As of year-end 2000, the Company has paid 19 7 $3.5 million under this commitment. The investment in Transora has been accounted for under the cost method. In July 2000, the Company acquired certain assets and liabilities of a convenience foods operation located in Australia for approximately $12 million in cash. The Company is operating this business under the The Healthy Snack People(TM) name. In November 1999, the Company purchased the outstanding common stock of Worthington Foods, Inc. for approximately $300 million in cash, including related acquisition costs. Additionally, during December 1999, the Company paid off approximately $50 million of Worthington debt existing at the acquisition date. Worthington Foods, Inc. is the leading manufacturer and marketer of soy protein-based meat alternatives and other healthful foods. The acquisition was accounted for as a purchase and was financed through short-term borrowings. Results of Worthington Foods, Inc. operations have been included in the Company's consolidated results from the date of acquisition. The purchase price allocation included approximately $12 million of exit liabilities, comprised principally of employee involuntary separation and relocation benefits, of which approximately $3 million remained as of December 31, 2000. Refer to Note 2 within Notes to Consolidated Financial Statements for further information. DISPOSITIONS In November 1999, the Company sold certain assets and liabilities of the Lender's Bagels business to Aurora Foods Inc. for $275 million in cash. As a result of this transaction, the Company recorded a pretax charge during the third quarter of 1999 of $178.9 million. This charge included approximately $57 million for the future disposal of other assets associated with the Lender's business, which were not purchased by Aurora. Disposal of these other assets was completed during 2000. The original reserve of $57 million exceeded actual losses from asset sales and related disposal costs by approximately $9 million. This amount was recorded as a credit to other income (expense), net during the year. During July 1999, the Company sold its 51% interest in a United Kingdom corn milling operation to Cargill Inc., which owned the remaining 49%. As a result of this sale, the Company recorded a pretax gain of $10.4 million during the third quarter of 1999. LIQUIDITY AND CAPITAL RESOURCES Management believes the Company's strong cash flow, combined with a program of issuing commercial paper and maintaining worldwide credit facilities, provides adequate liquidity to meet the Company's operational needs. In addition, during the second quarter of 2000, the Company's shareholders approved an increase in the Company's authorized number of shares from 500 million to one billion. This increase allows the Company to issue shares in the future for corporate purposes, including financings. For 2000, net cash provided by operating activities was $880.9 million, up 10.8% from $795.2 million in 1999. The increase was due primarily to higher earnings (excluding charges) and favorable working capital movements. The favorable working capital movements were attributable principally to reduced inventory and lengthening of trade payable terms, partially offset by reductions in other accrued liabilities. The favorable inventory movement was driven by comparison to unusually high levels in the prior year, related primarily to temporary inventory build due to the South Operations plant closing, as discussed on page 19. The unfavorable movement in other accrued liabilities was due primarily to utilization of pre-2000 reserves for restructuring and disposition-related activities. At December 31, 2000, the ratio of current assets to current liabilities was .6, down from 1.0 at December 31, 1999. This decrease was due primarily to a reclassification of $900 million in long-term debt to current maturities during 2000. Net cash used in investing activities was $379.3 million, up from $244.2 million in 1999. The increase was due primarily to an increase in the cost of business acquisitions net of dispositions, partially offset by a reduction in property additions. Excluding the impact of the Keebler acquisition, management believes 2001 expenditures for property additions will be approximately $225 million. Net cash used in financing activities was $441.8 million, related primarily to dividend payments of $403.9 million and a net reduction in total debt of $42.4 million. The Company's total 2000 per share dividend payment of $.995, up from $.96 in 1999, represents the 44th consecutive year the Company has increased its dividend. For 2000, the Company's Board of Directors authorized management to repurchase up to $150.0 million in common shares. There were no repurchases during the year. Notes payable at December 31, 2000, consisted primarily of commercial paper and other short-term borrowings in the United States in the amount of $429.8 million with an effective interest rate of 6.6%. Long-term debt consisted primarily of fixed rate issuances of U.S. and Euro Dollar Notes, including $900 million due in 2001, $500 million due in 2004, and $200 million due in 2005. The amount due in 2001 included $400 million in Notes which provided an option to holders to extend the obligation for an additional four years at a predetermined interest rate of 5.63% plus the Company's then-current credit spread. In February 2001, the Company will pay holders $11.6 million to extinguish the Notes prior to the extension date. Thus, the Company will report an extraordinary loss, net of tax, of $7.4 million during the first quarter of 2001. Associated with the debt due in 2001, the Company has entered into $600 million notional in fixed-to-floating interest rate swaps, which expire in conjunction with the debt issues. These swaps are indexed to either three-month LIBOR or the Federal Reserve AA Composite Rate on 30-day commercial paper. As discussed on page 19, the Company expects to complete its acquisition of Keebler Foods Company in March 2001, resulting in a total projected cash outlay of approximately $4.5 billion. To finance this transaction, the Company plans to 20 8 issue a combination of short and long-term debt during the first quarter of 2001. In anticipation of these future issuances, during December 2000 the Company entered into $1.5 billion notional amount of forward-starting interest rate swaps that effectively fixed a portion of the interest rate on an equivalent amount of debt prior to issuance. These swaps will be settled in conjunction with the issuances, resulting in cash payments or receipts that will be amortized to interest expense over periods of five to thirty years. If these swaps had been settled at December 31, 2000, the Company would have made a total cash payment to counterparties of approximately $26 million. The incremental amount of interest expense related to this payment will generally be offset by a lower coupon rate on the underlying future debt issuance. Refer to Supplemental Financial Information on pages 39-40 for further information. Following the Company's announcement of its agreement to acquire Keebler, Moody's and Standard & Poor's (S&P) placed the credit ratings of the Company's senior unsecured debt and commercial paper under review for possible downgrade. Due to the significant amount of incremental debt to be created in this transaction, S&P downgraded the Company's senior unsecured debt from AA to BBB and the Company's commercial paper from A-1 to A-2. Moody's downgraded the Company's senior unsecured debt from Aa2 to Baa2 and the Company's commercial paper from P-1 to P-2. These ratings are subject to revision or withdrawal at any time. S&P assigns a 'BBB' credit rating to obligations which it considers to "exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation." Similarly, Moody's assigns a 'Baa' credit rating to obligations it considers to "be medium-grade obligations, i.e. neither highly protected nor poorly secured. Interest payments and principal security are considered adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time." As a result of these downgrades, the Company believes it will be moderately more expensive to finance its activities through the issuance of debt. During 2001, the Company believes that it will be able to continue paying dividends at current levels and will have sufficient flexibility to borrow additional funds as needed under the anticipated covenants in the debt it currently expects to issue during the first quarter of 2001. As a result of issuing debt to finance the Keebler acquisition, combined with the downgrade of the Company's credit rating, management believes the Company's total 2001 interest expense will increase to approximately $400-$425 million. The percentage of total debt to market capitalization at December 31, 2000, was 20%, up from 17% at December 31, 1999, due primarily to a lower stock price since year-end 1999. EURO CONVERSION On January 1, 1999, eleven European countries (Germany, France, Spain, Italy, Ireland, Portugal, Finland, Luxembourg, Belgium, Austria, and the Netherlands) implemented a single currency zone, the Economic and Monetary Union (EMU). The new currency, the Euro, has become the official currency of the participating countries. Those countries' financial markets and banking systems have been quoting financial and treasury data in Euros since January 1, 1999. The Euro is existing alongside the old national currencies during a transition period from January 1, 1999, to January 1, 2002. During this period, entities within participating countries must complete changes that enable them to transact in the Euro. National currencies will be withdrawn no later than July 1, 2002, and current plans indicate that Central Banks in most member countries expect to have withdrawn notes and coins by February 2002. This transition to the Euro currency involves changing budgetary, accounting, pricing, costing, and fiscal systems in companies and public administrations, as well as the simultaneous handling of parallel currencies and conversion of data. During 1999 and 2000, the Euro weakened against the U.S. Dollar and the British Pound. The Euro needs to be observed over a longer period before conclusions can be drawn on the currency's long-term strength. In early 1998, management formed a task force to monitor EMU developments, evaluate the impact of the Euro conversion on the Company's operations, and develop and execute action plans, as necessary. Required business strategy, system, and process changes within the Company's European region have been completed in accordance with the Company's timetable, in order to be ready to transact with those suppliers and customers with whom it was agreed to do so during 2001. The Company's Euro program consists of two phases. Phase I aims to provide the business with the capability to recognize the Euro as the local currency for customer order-taking, invoice processing, and supplier payment purposes. The Company has completed the necessary changes to order management and related financial systems based on the current systems architecture and software. During December 2000, the Company successfully converted over 600 customers across Europe to Euro-based order-taking and invoicing. In Phase II, the more significant portion of the program, all business systems (for example, raw materials management, manufacturing, warehousing, and human resource systems) and associated business processes will be reviewed and modified, as necessary, to handle the Euro as a functional currency. Legally, this capability must exist in Company business units operating in EMU member countries from January 1, 2002. Operational systems and business processes will continue to be analyzed and modified during 2001 in order to comply with the legal timetable. Management believes the project is on target to meet this date. Although management currently believes the Company will be able to accommodate any required changes in its operations, there can be no assurance that the Company, its customers, suppliers, financial service providers, or government agencies will meet all of the Euro currency requirements on a timely basis. This is, in part, because new requirements may 21 9 emerge from individual national governments at later stages. Such failure to complete the necessary work could result in material financial risk. ACCOUNTING AND DISCLOSURE CHANGES Through June 2000, operations were managed via four major geographic areas - North America, Europe, Asia-Pacific, and Latin America. Beginning in July 2000, the Company changed its organizational structure, such that U.S. operations were managed separately. In October 2000, management announced a reorganization of the Company into two major divisions - U.S. and International - with International further delineated into Europe, Latin America, Canada, Australia, and Asia. Thus, beginning in the fourth quarter of 2000, the Company's reportable operating segments under Statement of Financial Accounting Standards (SFAS) No. 131 "Disclosures about Segments of an Enterprise and Related Information" consist of the United States, Europe, and Latin America. All other geographic areas have been combined under the quantitative threshold guidelines of SFAS No. 131 for purposes of disclosure. In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities." This Statement establishes accounting and reporting standards for derivative instruments, requiring recognition of the fair value of all derivatives as assets or liabilities on the balance sheet. SFAS No. 133, as amended by Statements No. 137 and No. 138, is effective for fiscal years beginning after June 15, 2000. The Company adopted SFAS No. 133 on January 1, 2001. Management does not expect the adoption to have a significant impact on the Company's 2001 financial results. In May 2000, the Emerging Issues Task Force (EITF) of the FASB reached consensus on Issue No. 00-14 "Accounting for Certain Sales Incentives." This Issue addresses the recognition, measurement, and income statement classification of sales incentives offered by vendors (including manufacturers) that have the effect of reducing the price of a product or service to a customer at the point of sale. For cash sales incentives within the scope of this Issue, costs are generally recognized at the date on which the related revenue is recorded by the vendor and are to be classified as a reduction of revenue. For non-cash sales incentives, such as package inserts, costs are to be classified within cost of sales. Companies are to apply this consensus no later than in (a) annual financial statements for the fiscal year beginning after December 15, 1999, or (b) financial statements for the fiscal quarter beginning after March 15, 2001, whichever is later. The effect of adoption resulting from changes in recognition and measurement is reported either prospectively or as a cumulative effect of a change in accounting principle. As a result of adopting EITF No. 00-14 in the quarter ended June 30, 2001, the Company will report the cost of consumer coupons as a reduction of net sales and the cost of package inserts and similar items within cost of goods sold. The Company has historically reported these costs as promotional expenditures within selling, general, and administrative expense. As a result, full-year 2001 net sales are expected to decrease by $90-$100 million and cost of goods sold is expected to increase by $60-$70 million. (These estimates exclude the impact of the expected acquisition of Keebler Foods Company during the first quarter 2001.) Selling, general, and administrative expense will correspondingly decrease, such that net earnings will not be affected. The Statement of Earnings for all comparative periods will be consistently reclassified resulting in the following impacts for the full-year 2000: net sales decrease of approximately $94 million, cost of goods sold increase of approximately $75 million, and selling, general, and administrative expense decrease of approximately $169 million. FORWARD-LOOKING STATEMENTS This Report contains "forward-looking statements" with projections concerning, among other things, the Company's strategy and plans for 2001; the Keebler acquisition and the Company's sales, products, distribution systems, business, and results after its completion; the 2001 effective income tax rate; charges, benefits, and savings from restructuring actions and streamlining initiatives; 2001 amortization expense and property addition expenditures; the terms of the debt to be issued to finance the Keebler acquisition; the 2001 interest expense; the results of the Euro conversion; and the impact of any accounting and disclosure changes. Forward-looking statements include predictions of future results or activities and may contain the words "expects," "believes," "will," "will deliver," "anticipates," "projects," or words or phrases of similar meaning. For example, forward-looking statements are found in several sections of Management's Discussion and Analysis above. The Company's actual results or activities may differ materially from these predictions. In particular, future results or activities could be affected by factors related to the pending Keebler acquisition, including integration problems, failures to achieve synergies, unanticipated liabilities, and the substantial amount of indebtedness incurred to finance the acquisition (which could, among other things, hinder the Company's ability to adjust rapidly to changing market conditions, make the Company more vulnerable in the event of a downturn, and place the Company at a competitive disadvantage in relation to less-leveraged competitors). The Company's future results could be affected by a variety of other factors, including competitive conditions and their impact, pricing and promotional and marketing spending, and/or incremental pricing actions on actual volumes and product mix; the effectiveness of advertising and marketing spending or programs; the success of new product introductions; the levels of spending on system initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; the availability of and interest rates on short-term financing; changes in consumer preferences; commodity price and labor cost fluctuations; expenditures necessary to carry out streamlining initiatives and savings derived therefrom; foreign currency exchange rate fluctuations; changes in statutory tax and other laws; and other items. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update them. 22 10 KELLOGG COMPANY AND SUBSIDIARIES SELECTED FINANCIAL DATA (millions, except per share data and number of employees)
2000 1999 1998 1997 1996 ------------ ------------ ------------ ------------ ------------ OPERATING TRENDS Net sales $ 6,954.7 $ 6,984.2 $ 6,762.1 $ 6,830.1 $ 6,676.6 Gross profit as a % of net sales 52.2% 52.4% 51.5% 52.1% 53.2% Depreciation 275.6 273.6 261.8 272.0 251.5 Amortization 15.0 14.4 16.3 15.3 5.5 Advertising expense 604.2 674.1 695.3 780.4 778.9 R&D expense 118.4 104.1 121.9 106.1 84.3 Operating profit (a) 989.8 828.8 895.1 1,009.1 958.9 Operating profit, excluding charges 1,076.3 1,073.4 965.6 1,193.2 1,095.0 Operating profit, excluding charges, as a % of net sales 15.5% 15.4% 14.3% 17.5% 16.4% Interest expense 137.5 118.8 119.5 108.3 65.6 Earnings before accounting change (a)(b) 587.7 338.3 502.6 564.0 531.0 Average shares outstanding (c) 405.6 405.2 407.8 414.1 424.9 Earnings before accounting change per common share (a)(b)(c) 1.45 .83 1.23 1.36 1.25 ============ ============ ============ ============ ============
(a) Operating profit for 2000 includes restructuring charges of $86.5 ($64.2 after tax or $.16 per share). Operating profit for 1999 includes restructuring charges of $244.6 ($156.4 after tax or $.40 per share). Earnings before accounting change for 1999 include disposition-related charges of $168.5 million ($111.5 million after tax or $.27 per share). Operating profit for 1998 includes restructuring charges of $70.5 ($46.3 after tax or $.12 per share). Operating profit for 1997 includes restructuring charges of $161.1 and asset impairment losses of $23.0 ($140.5 after tax or $.34 per share). Operating profit for 1996 includes restructuring charges of $136.1 ($97.8 after tax or $.23 per share). Earnings before accounting change for 1996 include a charge of $35.0 ($22.3 after tax or $.05 per share) for a contribution to the Kellogg's Corporate Citizenship Fund. Refer to the Management's Discussion and Analysis on pages 15-22 and Notes 2 and 3 within Notes to Consolidated Financial Statements for further explanation of charges for years 1998-2000.
2000 1999 1998 1997 1996 ------------- ------------- ------------- ------------- ------------- CASH FLOW TRENDS Net cash provided from operating activities $ 880.9 $ 795.2 $ 719.7 $ 879.8 $ 711.5 Capital expenditures 230.9 266.2 373.9 312.4 307.3 Net cash provided from operating activities reduced by capital expenditures 650.0 529.0 345.8 567.4 404.2 Net cash used in investing activities (379.3) (244.2) (398.0) (329.3) (786.8) Net cash (used in) provided from financing activities (441.8) (527.6) (358.3) (607.3) 94.0 Interest coverage ratio (d) 9.9 11.5 10.4 13.7 20.6 ------------- ------------- ------------- ------------- ------------- CAPITAL STRUCTURE TRENDS Total assets $ 4,896.3 $ 4,808.7 $ 5,051.5 $ 4,877.6 $ 5,050.0 Property, net 2,526.9 2,640.9 2,888.8 2,773.3 2,932.9 Short-term debt 1,386.3 521.5 621.5 579.8 1,153.8 Long-term debt 709.2 1,612.8 1,614.5 1,415.4 726.7 Shareholders' equity 897.5 813.2 889.8 997.5 1,282.4 ------------- ------------- ------------- ------------- ------------- SHARE PRICE TRENDS Stock price range (c) $ 21-32 $ 30-42 $ 30-50 $ 32-50 $ 31-40 Cash dividends per common share (c) .995 .96 .92 .87 .81 ------------- ------------- ------------- ------------- ------------- Number of employees 15,196 15,051 14,498 14,339 14,511 ============= ============= ============= ============= =============
(b) Earnings before accounting change for 1997 exclude the effect of a charge of $18.0 after tax ($.04 per share) to write off business process reengineering costs in accordance with guidance issued by the Emerging Issues Task Force of the FASB. (c) All share data retroactively restated to reflect a 2-for-1 stock split in 1997. All earnings per share data represent both basic and diluted earnings per share. (d) Interest coverage ratio was calculated based on operating profit excluding charges [refer to note (a)], depreciation, and amortization divided by interest expense. 23 11 KELLOGG COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS Year ended December 31,
(millions, except per share data) 2000 1999 1998 - --------------------------------- ------------ ------------ ------------ NET SALES $ 6,954.7 $ 6,984.2 $ 6,762.1 ------------ ------------ ------------ Cost of goods sold 3,327.0 3,325.1 3,282.6 Selling, general, and administrative expense 2,551.4 2,585.7 2,513.9 Restructuring charges 86.5 244.6 70.5 ------------ ------------ ------------ OPERATING PROFIT $ 989.8 $ 828.8 $ 895.1 ------------ ------------ ------------ Interest expense 137.5 118.8 119.5 Disposition-related charges -- 168.5 -- Other income (expense), net 15.4 (4.8) 6.9 ------------ ------------ ------------ EARNINGS BEFORE INCOME TAXES $ 867.7 $ 536.7 $ 782.5 Income taxes 280.0 198.4 279.9 ------------ ------------ ------------ NET EARNINGS $ 587.7 $ 338.3 $ 502.6 ------------ ------------ ------------ NET EARNINGS PER SHARE (BASIC AND DILUTED) $ 1.45 $ .83 $ 1.23 ============ ============ ============
Refer to Notes to Consolidated Financial Statements. 24 12 EXHIBIT 13 KELLOGG COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common stock Capital in --------------------------- excess of Retained (millions) shares amount par value earnings -------- -------- ---------- -------- Balance, January 1, 1998 414.8 $ 103.7 $ 92.6 $1,240.4 Common stock repurchases Net earnings 502.6 Dividends (375.3) Other comprehensive income Stock options exercised and other .5 .1 12.4 -------- -------- -------- -------- BALANCE, DECEMBER 31, 1998 415.3 $ 103.8 $ 105.0 $1,367.7 Common stock repurchases Net earnings 338.3 Dividends (388.7) Other comprehensive income Stock options exercised and other .2 (.5) (.1) -------- -------- -------- -------- BALANCE, DECEMBER 31, 1999 415.5 $ 103.8 $ 104.5 $1,317.2 Common stock repurchases Net earnings 587.7 Dividends (403.9) Other comprehensive income Stock options exercised and other (2.5) -------- -------- -------- -------- BALANCE, DECEMBER 31, 2000 415.5 $ 103.8 $ 102.0 $1,501.0 ======== ======== ======== ======== Accumulated Treasury stock other Total Total -------------------------- comprehensive shareholders' comprehensive (millions) shares amount income equity income -------- -------- ------------- ------------- ------------- Balance, January 1, 1998 4.1 $ (157.3) $ (281.9) $ 997.5 Common stock repurchases 6.3 (239.7) (239.7) Net earnings 502.6 $ 502.6 Dividends (375.3) Other comprehensive income (10.5) (10.5) (10.5) Stock options exercised and other (.1) 2.7 15.2 -------- -------- -------- -------- -------- BALANCE, DECEMBER 31, 1998 10.3 $ (394.3) $ (292.4) $ 889.8 $ 492.1 -------- Common stock repurchases -- Net earnings 338.3 338.3 Dividends (388.7) Other comprehensive income (39.0) (39.0) (39.0) Stock options exercised and other (.3) 13.4 12.8 -------- -------- -------- -------- -------- BALANCE, DECEMBER 31, 1999 10.0 $ (380.9) $ (331.4) $ 813.2 $ 299.3 -------- Common stock repurchases -- Net earnings 587.7 587.7 Dividends (403.9) Other comprehensive income (103.9) (103.9) (103.9) Stock options exercised and other (.2) 6.9 4.4 -------- -------- -------- -------- -------- BALANCE, DECEMBER 31, 2000 9.8 $ (374.0) $ (435.3) $ 897.5 $ 483.8 ======== ======== ======== ======== ========
Refer to Notes to Consolidated Financial Statements. 25 13 KELLOGG COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET At December 31,
(millions, except share data) 2000 1999 ------------ ------------ CURRENT ASSETS Cash and cash equivalents $ 204.4 $ 150.6 Accounts receivable, net 685.3 678.5 Inventories 443.8 503.8 Other current assets 273.3 236.3 ------------ ------------ TOTAL CURRENT ASSETS $ 1,606.8 $ 1,569.2 ------------ ------------ PROPERTY, NET 2,526.9 2,640.9 OTHER ASSETS 762.6 598.6 ------------ ------------ TOTAL ASSETS $ 4,896.3 $ 4,808.7 ============ ============ CURRENT LIABILITIES Current maturities of long-term debt $ 901.1 $ 2.9 Notes payable 485.2 518.6 Accounts payable 388.2 305.3 Other current liabilities 718.1 761.0 ------------ ------------ TOTAL CURRENT LIABILITIES $ 2,492.6 $ 1,587.8 ------------ ------------ LONG-TERM DEBT 709.2 1,612.8 OTHER LIABILITIES 797.0 794.9 SHAREHOLDERS' EQUITY Common stock, $.25 par value, 1,000,000,000 shares authorized Issued: 415,451,198 shares in 2000 and 415,451,198 in 1999 103.8 103.8 Capital in excess of par value 102.0 104.5 Retained earnings 1,501.0 1,317.2 Treasury stock at cost: 9,812,543 shares in 2000 and 9,995,564 shares in 1999 (374.0) (380.9) Accumulated other comprehensive income (435.3) (331.4) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY $ 897.5 $ 813.2 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,896.3 $ 4,808.7 ============ ============
Refer to Notes to Consolidated Financial Statements. 26 14 KELLOGG COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, (millions) 2000 1999 1998 -------- -------- -------- OPERATING ACTIVITIES Net earnings $ 587.7 $ 338.3 $ 502.6 Items in net earnings not requiring (providing) cash: Depreciation and amortization 290.6 288.0 278.1 Deferred income taxes (1.4) (60.5) 46.2 Restructuring charges, net of cash paid 62.5 220.1 62.2 Disposition-related charges -- 168.5 -- Other (1.2) 65.7 21.7 Pension and other postretirement benefit contributions (84.3) (78.1) (88.8) Changes in operating assets and liabilities 27.0 (146.8) (102.3) -------- -------- -------- NET CASH PROVIDED FROM OPERATING ACTIVITIES $ 880.9 $ 795.2 $ 719.7 -------- -------- -------- INVESTING ACTIVITIES Additions to properties (230.9) (266.2) (373.9) Acquisitions of businesses (137.2) (298.2) (27.8) Dispositions of businesses -- 291.2 -- Property disposals 4.8 36.6 6.8 Other (16.0) (7.6) (3.1) -------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES $ (379.3) $ (244.2) $ (398.0) -------- -------- -------- FINANCING ACTIVITIES Net increase (reduction) of notes payable, with maturities less than or equal to 90 days 290.5 (410.8) (152.9) Issuances of notes payable, with maturities greater than 90 days 3.5 292.1 5.5 Reductions of notes payable, with maturities greater than 90 days (331.6) (19.0) (.8) Issuances of long-term debt -- -- 600.0 Reductions of long-term debt (4.8) (14.1) (210.3) Net issuances of common stock 4.5 12.9 15.2 Common stock repurchases -- -- (239.7) Cash dividends (403.9) (388.7) (375.3) -------- -------- -------- NET CASH USED IN FINANCING ACTIVITIES $ (441.8) $ (527.6) $ (358.3) -------- -------- -------- Effect of exchange rate changes on cash (6.0) (9.2) (.2) -------- -------- -------- Increase (decrease) in cash and cash equivalents 53.8 14.2 (36.8) Cash and cash equivalents at beginning of year 150.6 136.4 173.2 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 204.4 $ 150.6 $ 136.4 ======== ======== ========
Refer to Notes to Consolidated Financial Statements. 27 15 KELLOGG COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES CONSOLIDATION The consolidated financial statements include the accounts of Kellogg Company and its majority-owned subsidiaries. Intercompany balances and transactions are eliminated. Certain amounts in the prior-year financial statements have been reclassified to conform to the current-year presentation. CASH AND CASH EQUIVALENTS Highly liquid temporary investments with original maturities of less than three months are considered to be cash equivalents. The carrying amount approximates fair value. INVENTORIES Inventories are valued at the lower of cost (principally average) or market. PROPERTY Fixed assets are recorded at cost and depreciated over estimated useful lives using straight-line methods for financial reporting and accelerated methods for tax reporting. Cost includes an amount of interest associated with significant capital projects. GOODWILL AND OTHER INTANGIBLE ASSETS Intangible assets are amortized principally on a straight-line basis over the estimated periods benefited, generally 40 years for goodwill and periods ranging from 5 to 40 years for other intangible assets. The realizability of goodwill and other intangibles is evaluated periodically when events or circumstances indicate a possible inability to recover the carrying amount. Evaluation is based on undiscounted cash flow projections over the remaining life of the asset. An excess of carrying value over cash flows would result in recognition of an impairment loss. The amount of the loss would be based on the difference between carrying value and fair value of the asset, as measured by market comparables or discounted cash flows in the absence of market data. REVENUE RECOGNITION The Company recognizes sales upon delivery of its products to customers net of applicable provisions for discounts, returns, and allowances. ADVERTISING The costs of advertising are generally expensed as incurred. RECENTLY ADOPTED PRONOUNCEMENTS Effective January 1, 1999, the Company adopted two Statements of Position (SOP) issued by the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants. SOP 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" provides guidance on the classification of software project costs between expense and capital. SOP 98-5 "Reporting on Costs of Start-up Activities" prescribes that the costs of opening a new facility, commencing business in a new market, or similar start-up activities must be expensed as incurred. SOP 98-1 has been applied on a prospective basis from January 1, 1999. The initial application of SOP 98-5 was to be reported as a cumulative effect of a change in accounting principle, if material. The adoption of these SOPs did not have a significant impact on the Company's financial results during 1999. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative Instruments and Hedging Activities." This Statement establishes accounting and reporting standards for derivative instruments, requiring recognition of the fair value of all derivatives as assets or liabilities on the balance sheet. SFAS No. 133, as amended by Statements No. 137 and No. 138, is effective for fiscal years beginning after June 15, 2000. The Company adopted SFAS No. 133 on January 1, 2001. Management does not expect the adoption to have a significant impact on the Company's 2001 financial results. RECENTLY ISSUED PRONOUNCEMENTS In May 2000, the Emerging Issues Task Force (EITF) of the FASB reached consensus on Issue No. 00-14 "Accounting for Certain Sales Incentives." This Issue addresses the recognition, measurement, and income statement classification of sales incentives offered by vendors (including manufacturers) that have the effect of reducing the price of a product or service to a customer at the point of sale. For cash sales incentives within the scope of this Issue, costs are generally recognized at the date on which the related revenue is recorded by the vendor and are to be classified as a reduction of revenue. For non-cash sales incentives, such as package inserts, costs are to be classified within cost of sales. Companies are to apply this consensus no later than in (a) annual financial statements for the fiscal year beginning after December 15, 1999, or (b) financial statements for the fiscal quarter beginning after March 15, 2001, whichever is later. The effect of adoption resulting from changes in recognition and measurement is reported either prospectively or as a cumulative effect of a change in accounting principle. As a result of adopting EITF No. 00-14 in the quarter ended June 30, 2001, the Company will report the cost of consumer coupons as a reduction of net sales and the cost of package inserts and similar items within cost of goods sold. The Company has historically reported these costs as promotional expenditures within selling, general, and administrative expense. As a result, full-year 2001 net sales are expected to decrease by $90-$100 million and cost of goods sold is expected to increase by $60-$70 million. (These estimates exclude the impact of the expected acquisition of Keebler Foods Company during the first quarter 2001.) Selling, general, and administrative expense will correspondingly decrease, such that net earnings will not be affected. The Statement of Earnings for all comparative periods will be consistently reclassified resulting in the following impacts for the full-year 2000: net sales decrease of approximately $94 million, cost of goods sold increase of approximately $75 million, and selling, general, and administrative expense decrease of approximately $169 million. 28 16 STOCK COMPENSATION The Company follows Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," in accounting for its employee stock options and other stock-based compensation. Under APB No. 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized. As permitted, the Company has elected to adopt the disclosure provisions only of SFAS No.123, "Accounting for Stock-Based Compensation." Refer to Note 8 for further information. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 ACQUISITIONS, INVESTMENTS, AND DISPOSITIONS ACQUISITIONS AND INVESTMENTS In January 2000, the Company purchased certain assets and liabilities of the Mondo Baking Company Division of Southeastern Mills, Inc. for approximately $93 million in cash, including related acquisition costs. Mondo Baking Company, located in Rome, Georgia, has manufactured convenience foods for Kellogg since 1993. The acquisition was accounted for as a purchase and was financed through short-term borrowings. Assets acquired consist primarily of a manufacturing facility and assembled workforce. During June 2000, the Company acquired the outstanding stock of Kashi Company for approximately $32 million in cash. Kashi is a leading natural cereal company located in La Jolla, California. Also during June, the Company committed to invest $7 million of cash in Transora, a new global business-to-business e-marketplace for the consumer products industry. As of year-end 2000, the Company has paid $3.5 million under this commitment. The investment in Transora has been accounted for under the cost method. In July 2000, the Company acquired certain assets and liabilities of a convenience foods operation located in Australia for approximately $12 million in cash. The Company is operating this business under The Healthy Snack People(TM) name. In November 1999, the Company purchased the outstanding common stock of Worthington Foods, Inc. for approximately $300 million in cash, including related acquisition costs. Additionally, during December 1999, the Company paid off approximately $50 million of Worthington debt existing at the acquisition date. Worthington Foods, Inc. is the leading manufacturer and marketer of soy protein-based meat alternatives and other healthful foods. The acquisition was accounted for as a purchase and was financed through short-term borrowings. Results of Worthington Foods, Inc. operations have been included in the Company's consolidated results from the date of acquisition. The components of intangible assets included in the final allocation of purchase price, along with the related straight-line amortization periods, were:
Amount Amortization (millions) period (yrs.) ---------- ------------- Trademarks and tradenames $ 100.0 40 Goodwill 190.0 40 ---------- ---------- Total $ 290.0 ========== ==========
The purchase price allocation included approximately $12 million of exit liabilities, comprised principally of employee involuntary separation and relocation benefits, of which approximately $3 million remained as of December 31, 2000. The unaudited pro forma combined historical results, as if Worthington Foods, Inc. had been acquired at the beginning of fiscal 1999 and 1998, respectively, are estimated to be:
(millions, except per share data) 1999 1998 ------------ ------------ Net sales $ 7,130.1 $ 6,901.6 Net earnings $ 323.6 $ 493.3 Net earnings per share $ .80 $ 1.21 ============ ============
The pro forma results include amortization of the intangibles presented above and interest expense on debt assumed issued to finance the purchase. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of each of the fiscal periods presented, nor are they necessarily indicative of future consolidated results. DISPOSITIONS During November 1999, the Company sold certain assets and liabilities of the Lender's Bagels business to Aurora Foods Inc. for $275 million in cash. As a result of this transaction, the Company recorded a pretax charge of $178.9 million ($119.3 million after tax or $.29 per share). This charge included approximately $57 million for disposal of other assets associated with the Lender's business, which were not purchased by Aurora. Disposal of these other assets was completed during 2000. The original reserve of $57 million exceeded actual losses from asset sales and related disposal costs by approximately $9 million. This amount was recorded as a credit to other income (expense), net during the year. During July 1999, the Company sold its 51% interest in a United Kingdom corn milling operation to Cargill Inc., which owned the remaining 49%. As a result of this sale, the Company recorded a pretax gain of $10.4 million ($7.8 million after tax or $.02 per share). In total, the Company recorded net disposition-related charges of $168.5 million ($111.5 million after tax or $.27 per share) during the third quarter of 1999. KEEBLER ACQUISITION The Company expects to complete its acquisition of Keebler Foods Company in March 2001, in a transaction entered into with Keebler and with Flowers Industries, Inc., the majority shareholder of Keebler. Keebler Foods Company, headquartered in Elmhurst, Illinois, ranks second in the U.S. in the cookie and cracker categories and has the third largest food direct store door (DSD) delivery system in the United States. Under the purchase agreement, the Company will pay $42 in cash for each common share of Keebler or approximately $3.6 billion, including related acquisition costs. As a result of the acquisition, the Company will assume approximately $700 million of Keebler debt and $216 million in obligations to cash out employee stock options, for a total projected cash outlay of approximately $4.5 billion. The Company will finance the acquisition through a combination of short and long-term debt. The acquisition will be accounted for as a purchase. 29 17 NOTE 3 RESTRUCTURING CHARGES Operating profit for 2000 includes restructuring charges of $86.5 million ($64.2 million after tax or $.16 per share) for streamlining initiatives. Operating profit for 1999 includes restructuring charges of $244.6 million ($156.4 million after tax or $.40 per share) for streamlining initiatives. Operating profit for 1998 includes restructuring charges of $70.5 million ($46.3 million after tax or $.12 per share) for streamlining initiatives. During the past several years, management has commenced major productivity and operational streamlining initiatives in an effort to optimize the Company's cost structure and align resources with the Company's growth strategy. The incremental costs of these programs have been reported during these years as restructuring charges. The 2000 charges of $86.5 million consist of $65.2 million for actions supporting the Company's "focus and align" strategy and $21.3 million for a supply chain efficiency initiative in Europe. In the fourth quarter of 2000, management adopted the "focus and align" strategy, emphasizing a stricter prioritization for resource allocation to the United States and the Company's other core markets. In conjunction with this strategy, the Company was reorganized from four operating areas into two divisions - U.S. and International. As a result, management initiated restructuring actions around the world to support this strategy and organization, including staff reductions in its global supply chain and innovation organization, rationalization of international convenience foods capacity, and restructuring of various non-core markets to improve return on investment. Approximately one-half of the total charges are comprised of asset write-offs with the remainder consisting primarily of cash costs associated with involuntary employee separation programs. Approximately 500 salaried and hourly positions were eliminated, primarily during the fourth quarter of 2000. As a result of these initiatives, the Company currently expects to realize approximately $45 million on a pretax basis from cost reductions and elimination of operating losses in 2001. During the second quarter of 2000, the Company implemented a supply chain efficiency initiative in Europe. The restructuring charges from this program were comprised principally of voluntary employee retirement and separation benefits. This program resulted in hourly and salaried headcount reductions of 190 during 2000 and is currently expected to generate approximately $13 million in pretax savings in 2001. The 1999 restructuring charges consist of $193.2 million for closing the South Operations portion of the Company's Battle Creek, Michigan, cereal plant, $32.7 million for workforce reduction initiatives around the world, and $18.7 million, primarily for manufacturing equipment write-offs related to previously closed or impaired facilities in various locations. Approximately one-half of the 1999 charges for the South Operations closing are comprised of asset write-offs, with the remainder consisting primarily of cash costs for employee retirement and separation benefits, equipment removal, and building demolition. As part of the Company's strategy of continuing cost reduction and efficiency improvement, these operations were closed in October 1999. Some production capacity was relocated to the Company's other U.S. cereal plants. Approximately 525 hourly and salaried positions at the Battle Creek plant were eliminated by the end of the first quarter of 2000 through a combination of voluntary and involuntary separation programs. These actions resulted in pretax savings of approximately $30 million in 2000 and are currently expected to result in a further $10 million in savings in 2001, for a total 2001 benefit of $40 million. The 1999 charges for workforce reduction initiatives are comprised principally of employee retirement and separation benefit costs in all of the Company's operating segments and in corporate operations. These initiatives eliminated approximately 325 employee positions in Europe, Latin America, Australia, and Asia during 1999 and generated approximately $15 million of pretax savings during 1999, and a further $10 million in pretax savings in 2000, for a total 2000 benefit of $25 million. The 1998 restructuring charges of $70.5 million relate primarily to an overhead activity analysis that resulted in the elimination of approximately 550 employees and 240 contractors from the Company's headquarters and U.S. and Canadian operations through a combination of involuntary early retirement and severance programs. The charges consist mainly of employee retirement and separation benefits. This program generated approximately $100 million of pretax savings during 1999. Incremental pretax savings achieved or expected from streamlining initiatives by year, and the relative impact on captions within the Consolidated Statement of Earnings, are:
Relative impact on ---------------------------- Incremental pretax Cost of (millions) savings goods sold SGA(a) ----------- ---------- -------- 1998 $ 10 75% 25% 1999 125 10% 90% 2000 50 80% 20% 2001 expected 75 50% 50% ======== ======== ========
(a) Selling, general, and administrative expense. Total cash outlays incurred or expected for streamlining initiatives by year are:
(millions) 1998 $ 47 1999 69 2000 68 2001 expected 38 2002 expected 2 =========
The Company's streamlining initiatives are expected to continue in 2001, related primarily to the integration of the Kellogg and Keebler business models. In addition to incurring integration costs throughout 2001, during the first quarter of 2001 the Company expects to report restructuring charges for staff reductions and inventory and capacity rationalization as a result of this integration. As many of these initiatives are in the early stages of completion, management is currently unable to estimate the total amount of charges to be reported. Cash outlays and savings related to this integration are not included in the tables above. The components of the restructuring charges by initiative, as well as reserve balances remaining at December 31, 2000, 1999, and 1998, were: 30 18 EXHIBIT 13
U.S. OPERATIONAL Employee STREAMLINING retirement & severance Asset Asset Other (millions) benefits(a) write-offs removal costs(c) Total ------------ ---------- -------- -------- -------- Remaining reserve at December 31, 1997 $ -- $ -- $ 15.1 $ -- $ 15.1 1998 restructuring charges -- -- -- -- -- Amounts utilized during 1998 -- -- (6.6) -- (6.6) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1998 -- -- 8.5 -- 8.5 1999 restructuring charges 55.5 108.4 28.2 1.1 193.2 Amounts utilized during 1999 (34.1) (108.4) (8.6) (1.1) (152.2) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1999 21.4 -- 28.1 -- 49.5 2000 restructuring charges -- -- -- -- -- Amounts utilized during 2000 (20.0) -- (17.4) -- (37.4) -------- -------- -------- -------- -------- Remaining reserve at December 31, 2000 $ 1.4 $ -- $ 10.7 $ -- $ 12.1 ======== ======== ======== ======== ========

PAN-EUROPEAN Employee REORGANIZATION retirement & severance Asset Asset Other (millions) benefit(a) write-offs removal costs(c) Total ------------ ---------- -------- -------- -------- Remaining reserve at December 31, 1997 $ 19.4 $ -- $ 10.1 $ -- $ 29.5 1998 restructuring charges -- -- -- -- -- Amounts utilized during 1998 (17.6) -- (11.5) -- (29.1) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1998 (b) 1.8 -- (1.4) -- .4 1999 restructuring charges 10.9 10.9 .6 -- 22.4 Amounts utilized during 1999 (10.0) (10.9) (.4) -- (21.3) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1999 (b) 2.7 -- (1.2) -- 1.5 2000 restructuring charges 19.6 -- -- 1.7 21.3 Amounts utilized during 2000 (21.3) -- 1.2 (1.7) (21.8) -------- -------- -------- -------- -------- Remaining reserve at December 31, 2000 $ 1.0 $ -- $ -- $ -- $ 1.0 ======== ======== ======== ======== ========

AUSTRALIAN PLANT Employee PRODUCTIVITY retirement & PROGRAM severance Asset Asset Other (millions) benefits write-offs removal costs(c) Total ------------ ---------- -------- -------- -------- Remaining reserve at December 31, 1997 $ 4.0 $ -- $ 2.5 $ -- $ 6.5 1998 restructuring charges -- -- -- -- -- Amounts utilized during 1998 (1.4) -- (.9) -- (2.3) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1998 2.6 -- 1.6 -- 4.2 1999 restructuring charges 1.5 .2 (.4) .1 1.4 Amounts utilized during 1999 (1.0) (.2) (.6) (.1) (1.9) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1999 3.1 -- .6 -- 3.7 2000 restructuring charges -- -- -- -- -- Amounts utilized during 2000 (3.1) -- (.6) -- (3.7) -------- -------- -------- -------- -------- Remaining reserve at December 31, 2000 $ -- $ -- $ -- $ -- $ -- ======== ======== ======== ======== ========

NORTH AMERICAN Employee OVERHEAD ACTIVITY retirement & ANALYSIS severance Asset Asset Other (millions) benefits(a) write-offs removal costs(c) Total ------------ ---------- -------- -------- -------- Remaining reserve at December 31, 1997 $ -- $ -- $ -- $ -- $ -- 1998 restructuring charges 57.1 5.2 3.0 1.8 67.1 Amounts utilized during 1998 (22.7) (5.2) (.1) (1.8) (29.8) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1998 34.4 -- 2.9 -- 37.3 1999 restructuring charges 5.5 -- 1.1 4.5 11.1 Amounts utilized during 1999 (35.7) -- (3.0) (4.5) (43.2) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1999 4.2 -- 1.0 -- 5.2 2000 restructuring charges -- -- -- -- -- Amounts utilized during 2000 (3.1) -- (.5) -- (3.6) -------- -------- -------- -------- -------- Remaining reserve at December 31, 2000 $ 1.1 $ -- $ .5 $ -- $ 1.6 ======== ======== ======== ======== ========

GLOBAL STRATEGY Employee REALIGNMENT retirement & severance Asset Asset Other (millions) benefits(a) write-offs removal costs(c) Total ------------ ---------- -------- -------- -------- Remaining reserve at December 31, 1997 $ -- $ -- $ -- $ -- $ -- 1998 restructuring charges -- -- -- -- -- Amounts utilized during 1998 -- -- -- -- -- -------- -------- -------- -------- -------- Remaining reserve at December 31, 1998 -- -- -- -- -- 1999 restructuring charges -- -- -- -- -- Amounts utilized during 1999 -- -- -- -- -- -------- -------- -------- -------- -------- Remaining reserve at December 31, 1999 -- -- -- -- -- 2000 restructuring charges 25.7 29.9 7.3 2.3 65.2 Amounts utilized during 2000 (5.9) (29.9) (1.6) (2.3) (39.7) -------- -------- -------- -------- -------- Remaining reserve at December 31, 2000 $ 19.8 $ -- $ 5.7 $ -- $ 25.5 ======== ======== ======== ======== ========

ALL OTHER Employee retirement & severance Asset Asset Other (millions) benefits write-offs removal costs(c) Total ------------ ---------- -------- -------- -------- Remaining reserve at December 31, 1997 $ .2 $ -- $ .6 $ -- $ .8 1998 restructuring charges 2.7 .3 -- .4 3.4 Amounts utilized during 1998 (2.1) (.3) (.3) (.4) (3.1) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1998 .8 -- .3 -- 1.1 1999 restructuring charges 4.8 11.7 -- -- 16.5 Amounts utilized during 1999 (5.6) (11.7) (.3) -- (17.6) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1999 -- -- -- -- -- 2000 restructuring charges -- -- -- -- -- Amounts utilized during 2000 -- -- -- -- -- -------- -------- -------- -------- -------- Remaining reserve at December 31, 2000 $ -- $ -- $ -- $ -- $ -- ======== ======== ======== ======== ========

CONSOLIDATED Employee retirement & severance Asset Asset Other (millions) benefits(a) write-offs removal costs(c) Total ------------ ---------- -------- -------- -------- Remaining reserve at December 31, 1997 $ 23.6 $ -- $ 28.3 $ -- $ 51.9 1998 restructuring charges 59.8 5.5 3.0 2.2 70.5 Amounts utilized during 1998 (43.8) (5.5) (19.4) (2.2) (70.9) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1998 39.6 -- 11.9 -- 51.5 1999 restructuring charges 78.2 131.2 29.5 5.7 244.6 Amounts utilized during 1999 (86.4) (131.2) (12.9) (5.7) (236.2) -------- -------- -------- -------- -------- Remaining reserve at December 31, 1999 31.4 -- 28.5 -- 59.9 2000 restructuring charges 45.3 29.9 7.3 4.0 86.5 Amounts utilized during 2000 (53.4) (29.9) (18.9) (4.0) (106.2) -------- -------- -------- -------- -------- Remaining reserve at December 31, 2000 $ 23.3 $ -- $ 16.9 $ -- $ 40.2 ======== ======== ======== ======== ========
(a) Includes pension and postretirement health care curtailment losses and special termination benefits recognized as follows (refer to Notes 9 and 10):
2000 1999 1998 ----- ----- ----- U.S. operational streamlining $ -- $ 32 $ -- Pan-European reorganization 5 -- -- North American overhead activity analysis -- 4 18 Global strategy realignment 3 -- -- ----- ----- ----- Consolidated $ 8 $ 36 $ 18 ===== ===== =====
(b) Negative removal reserves in Europe result from netting of anticipated proceeds from asset sales with removal costs. (c) Consist primarily of program-related non-exit costs incurred during the period of the reported charge. 31 19 NOTE 4 OTHER INCOME (EXPENSE), NET Other income (expense), net includes non-operating items such as interest income, foreign exchange gains and losses, charitable donations, and gains on asset sales. Other income (expense), net for 2000 includes a credit of approximately $12 million related to the 1999 sale of the Lender's Bagels business. The total amount consists of approximately $9 million for disposal of assets associated with the business which were not purchased by Aurora Foods Inc. (refer to Note 2) and approximately $3 million for final working capital settlement with Aurora. Other income (expense), net for 1998 includes a credit of approximately $6 million related to settlement of certain litigation. During 1996, the Company included in operating profit a provision of $15 million for the potential settlement of this litigation, which brought the total settlement reserve to $18 million. This litigation was settled during the second quarter of 1998 for a cost of approximately $12 million, and the remaining reserve of approximately $6 million was reversed. NOTE 5 EQUITY EARNINGS PER SHARE Basic net earnings per share is determined by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted net earnings per share is similarly determined, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Dilutive potential common shares are comprised principally of employee stock options issued by the Company and had an insignificant impact on earnings per share during the periods presented. Basic net earnings per share is reconciled to diluted net earnings per share as follows:
Average Net (millions, except Net shares earnings per share data) earnings outstanding per share ---------- ---------- ---------- 2000 Basic $ 587.7 405.6 $ 1.45 Dilutive employee stock options -- .2 -- ---------- ---------- ---------- Diluted $ 587.7 405.8 $ 1.45 ========== ========== ========== 1999 Basic $ 338.3 405.2 $ .83 Dilutive employee stock options -- .5 -- ---------- ---------- ---------- Diluted $ 338.3 405.7 $ .83 ========== ========== ========== 1998 Basic $ 502.6 407.8 $ 1.23 Dilutive employee stock options -- .8 -- ---------- ---------- ---------- Diluted $ 502.6 408.6 $ 1.23 ========== ========== ==========
COMPREHENSIVE INCOME Comprehensive income includes all changes in equity during a period except those resulting from investments by or distributions to shareholders. For the Company, comprehensive income for the periods presented consists of net earnings, minimum pension liability adjustments (refer to Note 9), and foreign currency translation adjustments pursuant to SFAS No. 52 "Foreign Currency Translation" as follows:
(millions) 2000 1999 1998 -------- -------- -------- Net earnings $ 587.7 $ 338.3 $ 502.6 Other comprehensive income: Foreign currency translation adjustments (97.4) (39.0) (11.1) Minimum pension liability adjustments (10.0) -- -- Related tax effect 3.5 -- .6 -------- -------- -------- (103.9) (39.0) (10.5) -------- -------- -------- Total comprehensive income $ 483.8 $ 299.3 $ 492.1 ======== ======== ========
NOTE 6 LEASES Operating leases are generally for equipment and warehouse space. Rent expense on all operating leases was $36.7 million in 2000, $31.5 million in 1999, and $36.5 million in 1998. At December 31, 2000, future minimum annual rental commitments under non-cancelable operating leases totaled $71 million consisting of (in millions): 2001-$23; 2002-$15; 2003-$13; 2004-$9; 2005-$8; 2006 and beyond-$3. NOTE 7 DEBT Notes payable consist of commercial paper and other short-term borrowings in the United States and, to a lesser extent, bank loans of foreign subsidiaries at competitive market rates. U.S. borrowings at December 31, 2000, were $429.8 million with an effective interest rate of 6.6%. U.S. borrowings at December 31, 1999, were $448.3 million with an effective interest rate of 5.9%. Additionally, the Company has entered into financing arrangements that provide for the sale of future foreign currency revenues. As of December 31, 2000, the Company had committed to borrowings during 2001 in the cumulative principal amount of approximately $160 million. As of December 31, 1999, the Company had committed to borrowings during 2000 in the cumulative principal amount of approximately $366 million. No borrowings were outstanding under these arrangements at December 31, 2000 or 1999. On January 1, 2001, these borrowing commitments were cancelled and replaced with foreign currency forward contracts. At December 31, 2000, the Company had $796.0 million of total short-term lines of credit, of which $747.9 million were unused and available for borrowing on an unsecured basis. 32 20 Long-term debt at year-end consisted of:
(millions) 2000 1999 ---------- ---------- (a) Seven-Year Notes due 2005 $ 200.0 $ 200.0 (b) Seven-Year Notes due 2004 500.0 500.0 (c) Four-Year Notes due 2001 500.0 500.0 (d) Three-Year Notes due 2001 400.0 400.0 Other 10.3 15.7 ---------- ---------- 1,610.3 1,615.7 Less current maturities (901.1) (2.9) ---------- ---------- Balance, December 31 $ 709.2 $ 1,612.8 ========== ==========
(a) In October 1998, the Company issued $200 of seven-year 4.875% fixed rate U.S. Dollar Notes to replace maturing long-term debt. The Company entered into a series of interest rate hedges throughout 1998 to effectively fix the interest rate prior to issuance. The effect of the hedges, when combined with original issue discounts, resulted in an effective interest rate on this debt of 6.07%. (b) In January 1997, the Company issued $500 of seven-year 6.625% fixed rate Euro Dollar Notes. In conjunction with this issuance, the Company settled $500 notional amount of interest rate forward swap agreements, which effectively fixed the interest rate on the debt at 6.354%. Associated with this debt, during September 1997, the Company entered into a $225 notional, 4 1/2-year fixed-to-floating interest rate swap, indexed to the three-month London Interbank Offered Rate (LIBOR). Under the terms of this swap, if three-month LIBOR decreased to 4.71% or below, the swap would expire. The Company terminated this swap agreement in November 1999. The amount paid to discharge the agreement was insignificant. (c) In August 1997, the Company issued $500 of four-year 6.125% Euro Dollar Notes. In conjunction with this issuance, the Company settled $400 notional amount of interest rate forward swap agreements that effectively fixed the interest rate on the debt at 6.4%. Associated with this debt, during September 1997, the Company entered into a $200 notional, four-year fixed-to-floating interest rate swap, indexed to three-month LIBOR. (d) In February 1998, the Company issued $400 of three-year 5.75% fixed rate U.S. Dollar Notes. These Notes were issued under an existing "shelf registration" with the Securities and Exchange Commission, and provided an option to holders to extend the obligation for an additional four years at a predetermined interest rate of 5.63% plus the Company's then-current credit spread. As a result of this option, the effective interest rate on the three-year Notes was 5.23%. Concurrent with this issuance, the Company entered into a $400 notional, three-year fixed-to-floating interest rate swap, indexed to the Federal Reserve AA Composite Rate on 30-day commercial paper. In February 2001, the Company will pay holders $11.6 to extinguish the Notes prior to the extension date. Thus, the Company will report an extraordinary loss, net of tax, of $7.4 during the first quarter of 2001. Scheduled principal repayments on long-term debt are (in millions): 2001-$901; 2002-$1; 2003-$1; 2004-$500; 2005-$200; 2006 and beyond-$7. Interest paid was (in millions): 2000-$141; 1999-$124; 1998-$113. Interest expense capitalized as part of the construction cost of fixed assets was (in millions): 2000-$5.6; 1999-$8.4; 1998-$7.8. As discussed in Note 2, the Company expects to complete its acquisition of Keebler Foods Company in March 2001, resulting in a total projected cash outlay of approximately $4.5 billion. To finance this transaction, the Company plans to issue a combination of short and long-term debt during the first quarter of 2001. In anticipation of these future issuances, during December 2000 the Company entered into $1.5 billion notional amount of forward-starting interest rate swaps that effectively fixed a portion of the interest rate on an equivalent amount of debt prior to issuance. These swaps will be settled in conjunction with the issuances, resulting in cash payments or receipts that will be amortized to interest expense over periods of five to thirty years. If these swaps had been settled at December 31, 2000, the Company would have made a total cash payment to counterparties of approximately $26 million. The incremental amount of interest expense related to this payment will generally be offset by a lower coupon rate on the underlying future debt issuance. Following the Company's announcement of its agreement to acquire Keebler, Moody's and Standard & Poor's (S&P) placed the credit ratings of the Company's senior unsecured debt and commercial paper under review for possible downgrade. Due to the significant amount of incremental debt to be created in this transaction, S&P downgraded the Company's senior unsecured debt from AA to BBB and the Company's commercial paper from A-1 to A-2. Moody's downgraded the Company's senior unsecured debt from Aa2 to Baa2 and the Company's commercial paper from P-1 to P-2. These ratings are subject to revision or withdrawal at any time. S&P assigns a 'BBB' credit rating to obligations which it considers to "exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation." Similarly, Moody's assigns a 'Baa' credit rating to obligations it considers to "be medium-grade obligations, i.e. neither highly protected nor poorly secured. Interest payments and principal security are considered adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time." NOTE 8 STOCK OPTIONS The Key Employee Long Term Incentive Plan provides for benefits to be awarded to executive-level employees in the form of incentive and non-qualified stock options, performance units, restricted stock grants and other stock-based awards. Options granted under this plan generally vest over two years with the restricted stock grants under this plan generally vesting in three years. Under the Key Employee Long Term Incentive Plan, approximately 100,000 shares were granted to eligible employees during 2000. The 2001 Long Term Incentive Plan, approved by shareholders in 2000, provides for benefits to be awarded to employees and officers in the form of incentive and non-qualified stock options, performance shares, performance units, restricted stock grants, and other stock-based awards. Options granted under this plan generally vest over two years, subject to earlier vesting if a change of control occurs. The Bonus Replacement Stock Option Plan allows certain key executives to receive stock options that generally vest immediately in lieu of part or all of their respective bonus. Options granted under this plan are issued from the Key Employee Long Term Incentive Plan. The Kellogg Employee Stock Ownership Plan is designed to offer stock and other incentive awards based on Company performance to employees who are not eligible to participate in the Key Employee Long Term Incentive Plan. Options awarded under this plan generally vest over five years. Options under all the plans described above are granted with exercise prices equal to the fair market value of the Company's common stock at the time of the grant and have a term of no more than ten years, if they are incentive stock options, or no more than ten years and one day, if they are non-qualified options. The Key Employee Long Term Incentive Plan and the 2001 Long Term Incentive Plan contain an accelerated ownership feature ("AOF"). An AOF option is generally granted when Company stock is used to pay the exercise price of a stock option or any taxes owed. The holder of the option is generally granted an AOF option for the number of shares so used with the exercise price equal to the then fair market value of the Company's common stock. For all AOF options, the original expiration date is not changed but the options vest immediately. 33 21 The Non-Employee Director Stock Plan was approved by shareholders in 2000 and allows each eligible non-employee director to receive 1,700 shares of the Company's common stock and annual grants of options to purchase 5,000 shares of the Company's common stock. The shares are placed in the Kellogg Company Grantor Trust for Non-Employee Directors (the "Grantor Trust"). Under the terms of the Grantor Trust, shares are available to a director only upon termination of service on the Board. During 2000, there were 57,500 options and 20,000 shares of common stock granted under this plan. As permitted by SFAS No.123 "Accounting for Stock-Based Compensation", the Company has elected to account for the stock option plans under APB No. 25 "Accounting for Stock Issued to Employees." Accordingly, no compensation cost has been recognized for these plans. For the purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. Had compensation cost for the stock option plans been determined based on the fair value at the grant date consistent with SFAS No.123, the Company's net earnings and earnings per share are estimated as follows:
(millions, except per share data) 2000 1999 1998 -------- -------- -------- Net earnings As reported $ 587.7 $ 338.3 $ 502.6 Pro forma $ 569.2 $ 311.4 $ 484.4 Net earnings per share (basic and diluted) As reported $ 1.45 $ .83 $ 1.23 Pro forma $ 1.40 $ .77 $ 1.19 ======== ======== ========
The fair value of each option grant was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
2000 1999 1998 ------ ------ ------ Risk-free interest rate 6.59% 4.83% 5.56% Dividend yield 3.90% 3.00% 2.00% Volatility 25.43% 23.16% 21.28% Average expected term (years) 3.17 3.76 3.47 Fair value of options granted $ 4.60 $ 6.38 $ 8.45 ====== ====== ======
Transactions under these plans were:
(millions, except per share data) 2000 1999 1998 -------- -------- -------- Under option, January 1 19.9 16.4 12.4 Granted 6.4 6.6 6.8 Exercised (.1) (1.1) (1.7) Cancelled (2.8) (2.0) (1.1) -------- -------- -------- Under option, December 31 23.4 19.9 16.4 ======== ======== ======== Excercisable, December 31 13.7 10.1 8.7 ======== ======== ======== Shares available, December 31, for options that may be granted under the following plans: Key Employee Long Term Incentive Plan 3.2 7.1 9.8 Kellogg Employee Stock Ownership Plan 4.8 4.6 6.0 2000 Non-employee Directors Stock Plan .9 -- -- 2001 Long Term Incentive Plan 26.0 -- -- -------- -------- -------- Total shares available, December 31, for options that may be granted 34.9 11.7 15.8 ======== ======== ========

Average prices per share -------------------------------------------- Under option, January 1 $ 38 $ 38 $ 35 Granted 24 36 43 Exercised 26 32 34 Cancelled 36 39 33 -------- -------- -------- Under option, December 31 $ 34 $ 38 $ 38 ======== ======== ======== Exercisable, December 31 $ 38 $ 39 $ 36 ======== ======== ========
Employee stock options outstanding and exercisable under these plans as of December 31, 2000, were:
(millions, except per share data) Outstanding Exercisable ------------------------------------------ -------------------------- Weighted Weighted average Weighted Range of average remaining average exercise Number exercise contractual Number exercise prices of options price life (yrs.) of options price - ---------- ---------- ---------- ---------- ---------- ---------- $15-29 7.6 $ 25 8.7 1.5 $ 27 30-39 9.3 36 7.1 6.2 36 40-44 5.8 43 7.3 5.3 43 45-50 0.7 48 6.7 0.7 48 ---------- ---------- ---------- ---------- ---------- 23.4 13.7 ========== ========== ========== ========== ==========
NOTE 9 PENSION BENEFITS The Company has a number of U.S. and foreign pension plans to provide retirement benefits for its employees. Benefits for salaried employees are generally based on salary and years of service, while union employee benefits are generally a negotiated amount for each year of service. Plan funding strategies are influenced by tax regulations. Plan assets consist primarily of equity securities with smaller holdings of bonds, real estate, and other investments. Investment in Company common stock represented 1.9% of consolidated plan assets at December 31, 2000 and 1999. The components of pension expense were:
(millions) 2000 1999 1998 -------- -------- -------- Service cost $ 34.5 $ 42.6 $ 41.3 Interest cost 91.1 83.7 81.3 Expected return on plan assets (143.3) (125.1) (113.9) Amortization of unrecognized transition obligation .6 2.0 .7 Amortization of unrecognized prior service cost 7.0 7.4 7.5 Recognized net (gain) loss (4.2) 10.9 10.0 Curtailment loss and special termination benefits 8.5 33.5 17.4 -------- -------- -------- Pension (income) expense - Company plans (5.8) 55.0 44.3 Pension expense - multiemployer plans 2.2 1.4 1.2 -------- -------- -------- Total pension (income) expense $ (3.6) $ 56.4 $ 45.5 ======== ======== ========
34 22 The worldwide weighted average actuarial assumptions were:
2000 1999 1998 ------ ------ ------ Discount rate 7.0% 7.2% 6.7% Long-term rate of compensation increase 4.6% 4.2% 4.9% Long-term rate of return on plan assets 10.4% 10.4% 10.5% ====== ====== ======
The aggregate change in projected benefit obligation, change in plan assets, and funded status were:
(millions) 2000 1999 ------------ ------------ Change in projected benefit obligation Projected benefit obligation at beginning of year $ 1,350.4 $ 1,331.2 Service cost 34.5 42.6 Interest cost 91.1 83.7 Plan participants' contributions 1.4 1.3 Amendments 5.3 36.6 Actuarial (gain) loss 32.1 (58.4) Benefits paid (91.8) (76.1) Foreign currency adjustments (42.4) (9.8) Other .9 (.7) ------------ ------------ Projected benefit obligation at end of year $ 1,381.5 $ 1,350.4 ============ ============ Change in plan assets Fair value of plan assets at beginning of year $ 1,578.0 $ 1,318.3 Actual return on plan assets (86.4) 299.8 Employer contribution 41.7 42.9 Plan participants' contributions 1.4 1.3 Benefits paid (91.8) (76.1) Foreign currency adjustments (38.1) (3.5) Other .2 (4.7) ------------ ------------ Fair value of plan assets at end of year $ 1,405.0 $ 1,578.0 ============ ============ Funded status $ 23.5 $ 227.6 Unrecognized net (gain) loss 118.5 (135.4) Unrecognized transition amount 2.7 3.4 Unrecognized prior service cost 34.8 38.4 ------------ ------------ Prepaid pension $ 179.5 $ 134.0 ============ ============ Amounts recognized in statement of financial position consist of Prepaid benefit cost $ 252.0 $ 207.9 Accrued benefit liability (87.1) (86.9) Intangible asset 4.6 13.0 Minimum pension liability 10.0 -- ------------ ------------ Net amount recognized $ 179.5 $ 134.0 ============ ============
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were:
(millions) 2000 1999 ---------- ---------- Projected benefit obligation $ 104.6 $ 89.7 Accumulated benefit obligation 86.1 76.1 Fair value of plan assets 7.1 -- ========== ==========
All gains and losses, other than curtailment gains and losses and special termination benefits, are recognized over the average remaining service period of active plan participants. Curtailment losses and special termination benefits recognized in 1998-2000 were recorded as a component of restructuring charges. Refer to Note 3 for further information. Certain of the Company's subsidiaries sponsor 401(k) or similar savings plans for active employees. Expense related to these plans was (in millions): 2000-$16; 1999-$17; 1998-$16. NOTE 10 NONPENSION POSTRETIREMENT BENEFITS Certain of the Company's U.S. and Canadian subsidiaries provide health care and other benefits to substantially all retired employees, their covered dependents, and beneficiaries. Generally, employees are eligible for these benefits when one of the following service/age requirements is met: 30 years and any age; 20 years and age 55; 5 years and age 62. Plan assets consist primarily of equity securities with smaller holdings of bonds. Components of postretirement benefit expense were:
(millions) 2000 1999 1998 -------- -------- -------- Service cost $ 7.7 $ 9.3 $ 9.1 Interest cost 44.4 37.4 36.8 Expected return on plan assets (21.4) (17.8) (15.0) Amortization of unrecognized prior service cost (1.1) (.5) (.5) Recognized net gains (3.2) (4.8) (5.3) Curtailment loss (gain) and special termination benefits (.1) .5 1.0 -------- -------- -------- Postretirement benefit expense $ 26.3 $ 24.1 $ 26.1 ======== ======== ========
The weighted average actuarial assumptions were:
2000 1999 1998 ------ ------ ------ Discount rate 7.5% 8.0% 7.0% Long-term rate of return on plan assets 10.5% 10.5% 10.5% ====== ====== ======
The aggregate change in accumulated postretirement benefit obligation, change in plan assets, and funded status were:
(millions) 2000 1999 ---------- ---------- Change in accumulated benefit obligation Accumulated benefit obligation at beginning of year $ 580.2 $ 548.8 Service cost 7.7 9.3 Interest cost 44.4 37.4 Actuarial loss 28.9 15.3 Amendments -- (.2) Benefits paid (42.3) (30.6) Other (.3) .2 ---------- ---------- Accumulated benefit obligation at end of year $ 618.6 $ 580.2 ========== ========== Change in plan assets Fair value of plan assets at beginning of year $ 230.0 $ 177.4 Actual return on plan assets (7.4) 48.0 Employer contribution 42.6 35.2 Benefits paid (42.3) (30.6) ---------- ---------- Fair value of plan assets at end of year $ 222.9 $ 230.0 ========== ========== Funded status $ (395.7) $ (350.2) Unrecognized net gain (26.4) (88.9) Unrecognized prior service cost (9.4) (10.7) ---------- ---------- Accrued postretirement benefit cost $ (431.5) $ (449.8) ========== ========== Amounts recognized in the statement of financial position consist of Accrued benefit liability $ (431.5) $ (449.8) ========== ==========
The assumed health care cost trend rate was 5% for 2000, decreasing gradually to 4.75% by the year 2003 and remaining at that level thereafter. These trend rates reflect the Company's prior experience and management's expectation that future rates will decline. A one percentage point change in assumed health care cost trend rates would have the following effects:
One percentage One percentage (millions) point increase point decrease -------------- -------------- Effect on total of service and interest cost components $ 7.2 $ (6.0) Effect on postretirement benefit obligation $ 71.5 $ (60.0) ============ ============
All gains and losses, other than curtailment gains and losses and special termination benefits, are recognized over the average remaining service period of active plan participants. Curtailment gains or losses and special termination benefits recognized in 1998 and 2000 were recorded as a component of restructuring charges. The net curtailment loss and special termination benefits for 1999 include a $2.2 million loss recorded as a component of 35 23 restructuring charges and a $1.7 million gain recorded as a component of disposition-related charges. The Company contributes to a voluntary employee benefit association (VEBA) trust for funding of its nonpension postretirement benefit obligations. NOTE 11 INCOME TAXES Earnings before income taxes, and the provision for U.S. federal, state, and foreign taxes on these earnings, were:
(millions) 2000 1999 1998 ---------- ---------- ---------- Earnings before income taxes United States $ 561.9 $ 235.1 $ 564.0 Foreign 305.8 301.6 218.5 ---------- ---------- ---------- $ 867.7 $ 536.7 $ 782.5 ---------- ---------- ---------- Income taxes Currently payable Federal $ 134.0 $ 135.9 $ 128.7 State 20.3 20.6 17.8 Foreign 127.1 102.4 87.2 ---------- ---------- ---------- 281.4 258.9 233.7 ---------- ---------- ---------- Deferred Federal (1.2) (60.7) 30.6 State 4.1 (4.5) 1.7 Foreign (4.3) 4.7 13.9 ---------- ---------- ---------- (1.4) (60.5) 46.2 ---------- ---------- ---------- Total income taxes $ 280.0 $ 198.4 $ 279.9 ========== ========== ==========
The difference between the U.S. federal statutory tax rate and the Company's effective rate was:
2000 1999 1998 ------ ------ ------ U.S. statutory rate 35.0% 35.0% 35.0% Foreign rates varying from 35% (.6) (.5) (2.0) State income taxes, net of federal benefit 1.8 2.0 2.4 Net change in valuation allowances (3.0) (1.3) 2.9 Statutory rate changes, deferred tax impact (.3) (.6) (.3) Other (.6) 2.4 (2.2) ------ ------ ------ Effective income tax rate 32.3% 37.0% 35.8% ====== ====== ======
The changes in valuation allowances on deferred tax assets and corresponding impacts on the effective income tax rate, as presented above, result from management's assessment of the Company's ability to utilize certain operating loss and tax credit carryforwards. For 2000, the change in valuation allowance relates primarily to utilization of U.S. foreign tax credit carryforwards. As a result, the effective income tax rate was down significantly from the prior year. Also contributing to the lower rate were the impact of lower statutory rates throughout the year in the United Kingdom and Australia and enactment of a statutory rate reduction in Germany in the fourth quarter. Total tax benefits of carryforwards at year-end 2000 and 1999 were $20.3 million and $43.2 million, respectively, and expire principally after five years. The deferred tax assets and liabilities included in the balance sheet at year-end were:
Deferred Deferred Tax Assets Tax Liabilities (millions) 2000 1999 2000 1999 -------- -------- -------- -------- Current: Promotion and advertising $ 14.0 $ 18.0 $ 8.1 $ 7.4 Wages and payroll taxes 16.8 17.3 .3 -- Inventory valuation 8.7 9.6 11.0 11.4 Health and postretirement benefits 20.2 34.3 .2 .3 State taxes 6.9 6.7 -- -- Operating loss and credit carryforwards .5 1.5 .1 -- Deferred intercompany revenue 53.3 -- 7.0 -- Other 32.9 35.0 7.3 7.1 -------- -------- -------- -------- 153.3 122.4 34.0 26.2 Less valuation allowance (3.6) (2.2) -- -- -------- -------- -------- -------- 149.7 120.2 34.0 26.2 ======== ======== ======== ======== Noncurrent: Depreciation and asset disposals 12.8 16.7 289.1 291.9 Health and postretirement benefits 151.0 158.9 69.5 68.9 Capitalized interest -- -- 23.3 24.0 State taxes -- 1.6 5.2 -- Operating loss and credit carryforwards 19.8 41.7 -- -- Trademarks -- -- 30.6 29.8 Other 25.2 32.2 7.8 14.4 -------- -------- -------- -------- 208.8 251.1 425.5 429.0 Less valuation allowance (32.5) (59.6) -- -- -------- -------- -------- -------- 176.3 191.5 425.5 429.0 -------- -------- -------- -------- Total deferred taxes $ 326.0 $ 311.7 $ 459.5 $ 455.2 ======== ======== ======== ========
At December 31, 2000, foreign subsidiary earnings of approximately $1.0 billion were considered permanently invested in those businesses. Accordingly, U.S. income taxes have not been provided on these earnings. Foreign withholding taxes of approximately $58 million would be payable upon remittance of these earnings. Subject to certain limitations, the withholding taxes would then be available for use as credits against the U.S. tax liability. Cash paid for income taxes was (in millions): 2000-$246; 1999-$242; 1998-$211. NOTE 12 FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION The fair values of the Company's financial instruments are based on carrying value in the case of short-term items, quoted market prices for derivatives and investments, and, in the case of long-term debt, incremental borrowing rates currently available on loans with similar terms and maturities. The carrying amounts of the Company's cash, cash equivalents, receivables, notes payable, and long-term debt approximate fair value. The Company is exposed to certain market risks which exist as a part of its ongoing business operations and uses derivative financial and commodity instruments, where appropriate, to manage these risks. In general, instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. Deferred gains or losses related to any instrument 1) designated but ineffective as a hedge of existing assets, liabilities, or firm commitments, or 2) designated as a hedge of an anticipated transaction which is no longer likely to occur, are recognized immediately in the statement of earnings. For all derivative financial and commodity instruments held by the Company, changes in fair values of these instruments and the resultant impact on the Company's cash flows and/or earnings would generally be offset by changes in value of underlying exposures. The impact on the Company's results and financial position of holding derivative financial and commodity instruments was insignificant during the periods presented. FOREIGN EXCHANGE RISK The Company is exposed to fluctuations in foreign currency cash flows related primarily to third-party purchases, intercompany product shipments, and intercompany loans. The Company is also exposed to fluctuations in the value of foreign currency investments in subsidiaries and cash flows related to repatriation of these investments. Additionally, the Company is exposed to volatility in the translation of foreign currency earnings to U.S. Dollars. The Company assesses foreign currency risk based on transactional cash flows and enters into forward contracts and other commitments to sell foreign currency revenues, generally less than twelve months duration, to reduce fluctuations in net long or 36 24 short currency positions. Foreign currency contracts are marked to market with net amounts due to or from counterparties recorded in accounts receivable or payable. For contracts hedging firm commitments, mark-to-market gains and losses are deferred and recognized as adjustments to the basis of the transaction. For contracts hedging subsidiary investments, mark-to-market gains and losses are recorded in the accumulated other comprehensive income component of shareholders' equity. For all other contracts, mark-to-market gains and losses are recognized currently in other income or expense. Commitments to sell future foreign currency revenues are accounted for as contingent borrowings. The notional amounts of open forward contracts were $238.6 million and $3.8 million at December 31, 2000 and 1999, respectively. No borrowings were outstanding under commitments to sell foreign currency revenues at December 31, 2000 or 1999. INTEREST RATE RISK The Company is exposed to interest rate volatility with regard to future issuances of fixed rate debt and existing issuances of variable rate debt. The Company uses interest rate caps, and currency and interest rate swaps, including forward swaps, to reduce interest rate volatility and funding costs associated with certain debt issues, and to achieve a desired proportion of variable versus fixed rate debt, based on current and projected market conditions. Mark-to-market gains and losses on interest rate forward swaps are deferred and recognized over the life of the debt issue as a component of interest expense. For other caps and swaps entered into concurrently with the debt issue, the interest or currency differential to be paid or received on the instrument is recognized in the statement of earnings as incurred, as a component of interest expense. If a position were to be terminated prior to maturity, the gain or loss realized upon termination would be deferred and amortized to interest expense over the remaining term of the underlying debt issue or would be recognized immediately if the underlying debt issue were settled prior to maturity. The notional amounts of interest rate swaps were $2.1 billion and $600.0 million at December 31, 2000 and 1999, respectively. Refer to Note 7 for further information regarding these swaps. PRICE RISK The Company is exposed to price fluctuations primarily as a result of anticipated purchases of raw and packaging materials. The Company uses the combination of long cash positions with suppliers, and exchange-traded futures and option contracts to reduce price fluctuations in a desired percentage of forecasted purchases over a duration of generally less than one year. Commodity contracts are marked to market with net amounts due to or from brokers recorded in accounts receivable or payable. Mark-to-market gains and losses are deferred and recognized as adjustments to the basis of the underlying material purchase. CREDIT RISK CONCENTRATION The Company is exposed to credit loss in the event of nonperformance by counterparties on derivative financial and commodity contracts. This credit loss is limited to the cost of replacing these contracts at current market rates. Management believes that the probability of such loss is remote. Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents, and accounts receivable. The Company places its investments in highly rated financial institutions and investment grade short-term debt instruments, and limits the amount of credit exposure to any one entity. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers, generally short payment terms, and their dispersion across geographic areas. NOTE 13 QUARTERLY FINANCIAL DATA (UNAUDITED)
(millions, except per share data) Net Sales Gross Profit ------------------------- ------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- First $ 1,751.9 $ 1,745.3 $ 915.0 $ 908.9 Second 1,801.1 1,784.4 951.6 946.1 Third 1,845.7 1,868.4 970.0 984.7 Fourth 1,556.0 1,586.1 791.1 819.4 ---------- ---------- ---------- ---------- $ 6,954.7 $ 6,984.2 $ 3,627.7 $ 3,659.1 ========== ========== ========== ========== Net earnings Net earnings(a) per share(a)(b) ------------------------- ------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- First $ 161.7 $ 118.8 $ .40 $ .29 Second 150.9 154.2 .37 .38 Third 181.9 (35.6) .45 (.08) Fourth 93.2 100.9 .23 .25 ---------- ---------- ---------- ---------- $ 587.7 $ 338.3 ========== ==========
(a) The quarterly results of 2000 and 1999 include the following restructuring and disposition-related charges. Refer to Notes 2 and 3 for further information.
Net Earnings Net Earnings Per Share(b) -------------------- -------------------- 2000 1999 2000 1999 -------- -------- -------- -------- First $ -- $ (25.6) $ -- $ (.07) Second (14.7) -- (.04) -- Third -- (206.4) -- (.50) Fourth (49.5) (35.9) (.12) (.09) ------ -------- ------ -------- $(64.2) ($267.9) ====== ========
(b) Earnings per share presented represents both basic and diluted earnings per share. The principal market for trading Kellogg shares is the New York Stock Exchange (NYSE). The shares are also traded on the Boston, Chicago, Cincinnati, Pacific, and Philadelphia Stock Exchanges. At year-end 2000, the closing price (on the NYSE) was $26.25 and there were 46,711 shareholders of record. 37 25 Dividends paid and the quarterly price ranges on the NYSE during the last two years were:
Stock Price ------------------ 2000 - QUARTER Dividend High Low -------- -------- -------- Fourth $ .2525 $ 28.75 $ 21.56 Third .2525 30.75 22.63 Second .2450 32.00 23.31 First .2450 30.50 20.75 -------- -------- -------- $ .9950 ======== 1999 - QUARTER Fourth $ .245 $ 40.94 $ 30.00 Third .245 39.00 31.50 Second .235 38.13 31.38 First .235 42.25 33.69 -------- -------- -------- $ .960 ========
NOTE 14 OPERATING SEGMENTS Kellogg Company is the world's leading producer of ready-to-eat cereal and a leading producer of convenience foods, including toaster pastries, cereal bars, frozen waffles, and meat alternatives. Principal markets for these products include the United States and United Kingdom. Through June 2000, operations were managed via four major geographic areas - North America, Europe, Asia-Pacific, and Latin America. Beginning in July 2000, the Company changed its organizational structure, such that U.S. operations were managed separately. In October 2000, management announced a reorganization of the Company into two major divisions -- the United States and International -- with International further delineated into Europe, Latin America, Canada, Australia, and Asia. Thus, beginning in the fourth quarter of 2000, the Company's reportable operating segments under SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" consist of the United States, Europe, and Latin America. All other geographic areas have been combined under the quantitative threshold guidelines of SFAS No. 131 for purposes of the information presented below. Comparative periods have been restated to conform to the current-year presentation. The measurement of operating segment results is generally consistent with the presentation of the Consolidated Statement of Earnings and Balance Sheet. Intercompany transactions between reportable operating segments were insignificant in all periods presented.
(millions) 2000 1999 1998 ---------- ---------- ---------- NET SALES United States $ 4,067.4 $ 4,014.1 $ 3,858.0 Europe 1,463.4 1,614.4 1,700.2 Latin America 626.7 567.0 510.7 All other operating segments 776.7 788.8 694.8 Corporate 20.5 (.1) (1.6) ---------- ---------- ---------- Consolidated $ 6,954.7 $ 6,984.2 $ 6,762.1 ========== ========== ========== OPERATING PROFIT EXCLUDING CHARGES(a) United States $ 746.2 $ 803.0 $ 786.8 Europe 235.2 224.1 211.4 Latin America 161.1 141.3 107.2 All other operating segments 89.2 93.7 76.3 Corporate (155.4) (188.7) (216.1) ---------- ---------- ---------- Consolidated $ 1,076.3 $ 1,073.4 $ 956.6 Charges(a) (86.5) (244.6) (70.5) ---------- ---------- ---------- OPERATING PROFIT AS REPORTED $ 989.8 $ 828.8 $ 895.1 ========== ========== ========== CHARGES(a) United States $ 2.0 $ 197.9 $ 32.8 Europe 26.7 22.4 3.3 Latin America 14.6 1.7 -- All other operating segments 28.7 4.6 11.4 Corporate 14.5 18.0 23.0 ---------- ---------- ---------- Consolidated $ 86.5 $ 244.6 $ 70.5 ========== ========== ========== DEPRECIATION AND AMORTIZATION United States $ 131.4 $ 138.1 $ 138.9 Europe 57.1 57.8 54.6 Latin America 17.2 14.5 14.2 All other operating segments 40.8 35.7 34.5 Corporate 44.1 41.9 35.9 ---------- ---------- ---------- Consolidated $ 290.6 $ 288.0 $ 278.1 ========== ========== ========== INTEREST EXPENSE United States $ -- $ .2 $ .2 Europe 4.7 9.3 4.4 Latin America .1 .6 .9 All other operating segments .4 (.1) .4 Corporate 132.3 108.8 113.6 ---------- ---------- ---------- Consolidated $ 137.5 $ 118.8 $ 119.5 ========== ========== ========== INCOME TAXES EXCLUDING CHARGES(b) United States $ 197.1 $ 214.9 $ 214.1 Europe 43.4 28.8 37.0 Latin America 40.0 34.4 28.1 All other operating segments 11.1 26.7 18.0 Corporate 10.7 38.8 6.9 ---------- ---------- ---------- Consolidated $ 302.3 $ 343.6 $ 304.1 Effect of charges (22.3) (145.2) (24.2) ---------- ---------- ---------- INCOME TAXES AS REPORTED $ 280.0 $ 198.4 $ 279.9 ========== ========== ========== (millions) 2000 1999 1998 ---------- ---------- ---------- TOTAL ASSETS United States $ 2,188.9 $ 2,214.9 $ 2,216.9 Europe 1,102.5 1,157.3 1,336.0 Latin America 444.6 414.3 380.9 All other operating segments 627.8 641.3 542.2 Corporate 2,061.2 1,755.9 1,760.6 Elimination entries (1,528.7) (1,375.0) (1,185.1) ---------- ---------- ---------- Consolidated $ 4,896.3 $ 4,808.7 $ 5,051.5 ========== ========== ========== ADDITIONS TO LONG-LIVED ASSETS United States $ 135.4 $ 460.0 $ 79.3 Europe 71.7 67.4 169.1 Latin America 39.7 47.4 41.7 All other operating segments 42.7 37.0 44.2 Corporate 138.1 41.7 98.5 ---------- ---------- ---------- Consolidated $ 427.6 $ 653.5 $ 432.8 ========== ========== ==========
(a) Charges include restructuring charges in 2000, 1999, and 1998. Refer to Note 3 for further information. (b) Charges include those described in (a) and disposition-related charges in 1999 reported in earnings before income taxes. Refer to Note 2 for further information. Supplemental geographic information is provided below for revenues from external customers and long-lived assets:
(millions) 2000 1999 1998 ---------- ---------- ---------- NET SALES United States $ 4,067.4 $ 4,014.1 $ 3,858.0 United Kingdom 652.8 689.3 743.6 Other foreign countries 2,234.5 2,280.8 2,160.5 ---------- ---------- ---------- Consolidated $ 6,954.7 $ 6,984.2 $ 6,762.1 ========== ========== ========== LONG-LIVED ASSETS United States $ 1,553.5 $ 1,549.3 $ 1,644.2 United Kingdom 535.4 552.3 553.0 Other foreign countries 1,154.0 1,110.3 1,330.3 ---------- ---------- ---------- Consolidated $ 3,242.9 $ 3,211.9 $ 3,527.5 ========== ========== ==========
Supplemental product information is provided below for revenues from external customers:
(millions) 2000 1999 1998 ---------- ---------- ---------- Ready-to-eat cereal net sales $ 5,177.6 $ 5,304.7 $ 5,265.4 Convenience foods net sales 1,777.1 1,679.5 1,496.7 ---------- ---------- ---------- Consolidated $ 6,954.7 $ 6,984.2 $ 6,762.1 ========== ========== ==========
38 26 NOTE 15 SUPPLEMENTAL FINANCIAL STATEMENT DATA
(millions) CONSOLIDATED STATEMENT OF EARNINGS 2000 1999 1998 ---------- ---------- ---------- Research and development expense $ 118.4 $ 104.1 $ 121.9 Advertising expense $ 604.2 $ 674.1 $ 695.3 ========== ========== ========== CONSOLIDATED STATEMENT OF CASH FLOWS 2000 1999 1998 ---------- ---------- ---------- Accounts receivable $ 1.1 $ 21.0 $ (102.6) Inventories 54.5 (39.1) (15.0) Other current assets (20.2) 14.7 33.2 Accounts payable 75.1 (84.8) 58.9 Other current liabilities (83.5) (58.6) (76.8) ---------- ---------- ---------- CHANGES IN OPERATING ASSETS AND LIABILITIES $ 27.0 $ (146.8) $ (102.3) ========== ========== ==========

CONSOLIDATED BALANCE SHEET 2000 1999 ---------- ---------- Trade receivables $ 607.2 $ 561.5 Allowance for doubtful accounts (8.6) (8.6) Other receivables 86.7 125.6 ---------- ---------- ACCOUNTS RECEIVABLE, NET $ 685.3 $ 678.5 ---------- ---------- Raw materials and supplies $ 138.2 $ 141.2 Finished goods and materials in process 305.6 362.6 ---------- ---------- INVENTORIES $ 443.8 $ 503.8 ---------- ---------- Deferred income taxes $ 136.5 $ 108.5 Other prepaid assets 136.8 127.8 ---------- ---------- OTHER CURRENT ASSETS $ 273.3 $ 236.3 ---------- ---------- Land $ 40.5 $ 44.1 Buildings 1,197.1 1,255.3 Machinery and equipment 3,683.1 3,595.5 Construction in progress 114.5 261.8 Accumulated depreciation (2,508.3) (2,515.8) ---------- ---------- PROPERTY, NET $ 2,526.9 $ 2,640.9 ---------- ---------- Goodwill $ 218.7 $ 205.1 - Accumulated amortization (10.5) (4.4) Other intangibles 217.8 144.5 - Accumulated amortization (18.6) (9.6) Other 355.2 263.0 ---------- ---------- OTHER ASSETS $ 762.6 $ 598.6 ---------- ---------- Accrued income taxes $ 130.8 $ 83.5 Accrued salaries and wages 96.6 126.0 Accrued advertising and promotion 178.2 211.8 Other 312.5 339.7 ---------- ---------- OTHER CURRENT LIABILITIES $ 718.1 $ 761.0 ---------- ---------- Nonpension postretirement benefits $ 408.5 $ 424.9 Deferred income taxes 266.7 251.3 Other 121.8 118.7 ---------- ---------- OTHER LIABILITIES $ 797.0 $ 794.9 ========== ==========
39 27 REPORT OF INDEPENDENT ACCOUNTANTS PRICEWATERHOUSECOOPERS LLP To the Shareholders and Board of Directors of Kellogg Company In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of earnings, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Kellogg Company and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP Battle Creek, Michigan January 24, 2001 40 28 SUPPLEMENTAL FINANCIAL INFORMATION QUANTITATIVE AND QUALITATIVE DISCLOSURES RELATED TO MARKET RISK SENSITIVE INSTRUMENTS The Company is exposed to certain market risks which exist as a part of its ongoing business operations and uses derivative financial and commodity instruments, where appropriate, to manage these risks. The Company, as a matter of policy, does not engage in trading or speculative transactions. Refer to Note 12 within Notes to Consolidated Financial Statements for further information on accounting policies related to derivative financial and commodity instruments. FOREIGN EXCHANGE RISK The Company is exposed to fluctuations in foreign currency cash flows related to third-party purchases, intercompany product shipments, and intercompany loans. The Company is also exposed to fluctuations in the value of foreign currency investments in subsidiaries and cash flows related to repatriation of these investments. Additionally, the Company is exposed to volatility in the translation of foreign currency earnings to U.S. Dollars. Primary exposures include the U.S. Dollar versus the British Pound, member currencies of the European Monetary Union, Australian Dollar, Canadian Dollar, and Mexican Peso, and in the case of inter-subsidiary transactions, the British Pound versus other European currencies. The Company assesses foreign currency risk based on transactional cash flows and enters into forward contracts and other commitments to sell foreign currency revenues, generally less than twelve months duration, to reduce fluctuations in net long or short currency positions. No borrowings were outstanding under commitments to sell foreign currency revenues at December 31, 2000 or 1999. As of December 31, 2000, the Company had committed to borrowings during 2001 in the cumulative principal amount of approximately $160 million. As of December 31, 1999, the Company had committed to borrowings during 2000 in the cumulative principal amount of approximately $366 million. On January 1, 2001, these borrowing commitments were cancelled and replaced with foreign currency forward contracts. The tables below summarize forward contracts held at year-end 2000 and 1999. All contracts are valued in U.S. Dollars using year-end exchange rates, are hedges of existing assets, liabilities, or anticipated transactions, and mature within one year, except where indicated.
CONTRACTS TO SELL FOREIGN CURRENCY Notional Exchange Fair Currency value rate value Currency sold received (millions) (fc/1US$) (millions) - ------------- -------- ----------------- ----------------- ------------------ 2000 1999 2000 1999 2000 1999 ------ ------ ------ ------ ------ ------ Japanese Yen U.S. Dollar $ -- $ 3.8 -- 102.12 $ -- $ -- New Zealand Australian Dollar Dollar 4.0 -- 2.38 -- (.2) -- Pound Sterling(a) Danish Kroner 18.3 -- .63 -- 1.0 -- Spanish Peseta Pound Sterling 21.4 -- 179.45 -- (.3) -- Euro U.S. Dollar 15.9 -- 1.12 -- (.7) -- Australian Dollar U.S. Dollar 27.4 -- 1.84 -- (.6) -- Mexican Peso U.S. Dollar 67.4 -- 9.51 -- 1.5 -- Canadian Dollar U.S. Dollar 33.0 -- 1.51 -- (.3) -- ------ ------ ------ ------ ------ ------ TOTAL $187.4 $ 3.8 $ .4 $ -- ====== ====== ====== ======
(a) Several contracts maturing 2001-2003.
CONTRACTS TO PURCHASE FOREIGN CURRENCY Notional Exchange Fair Currency Currency value rate value purchased exchanged (millions) (fc/1US$) (millions) - --------- --------- ----------------- ----------------- ------------------ 2000 1999 2000 1999 2000 1999 ------ ------ ------ ------ ------ ------ U.S. Dollar Australian Dollar $ 3.5 $ -- 1.86 -- $ (.1) $ -- Pound Sterling South African Rand 1.8 -- .70 -- .1 -- U.S. Dollar South African Rand .2 -- 7.07 -- -- -- Swiss Franc Euro 5.2 -- 1.44 -- -- -- Pound Sterling U.S. Dollar 40.5 -- .68 -- .6 -- ------ ------ ------ ------ ------ ------ TOTAL $ 51.2 $ -- $ .6 $ -- ====== ====== ====== ======
INTEREST RATE RISK The Company is exposed to interest rate volatility with regard to future issuances of fixed rate debt and existing issuances of variable rate debt. Primary exposures include movements in U.S. Treasury rates, London Interbank Offered Rates (LIBOR), and commercial paper rates. The Company uses interest rate caps, and currency and interest rate swaps, including forward swaps, to reduce interest rate volatility and funding costs associated with certain debt issues, and to achieve a desired proportion of variable versus fixed rate debt, based on current and projected market conditions. The tables below provide information on the Company's significant debt issues and related hedging instruments at year-end 2000 and 1999. For foreign currency-denominated debt, the information is presented in U.S. Dollar equivalents. Variable interest rates are based on effective rates or implied forward rates as of year-end 2000. Refer to Note 7 within Notes to Consolidated Financial Statements for further information.
SIGNIFICANT DEBT ISSUES (MILLIONS) Principal by year of maturity Fair value Debt -------------------------------------- ------------------ characteristics 2000 2001 2004 2005 2000 1999 - --------------- ------ ------ ------ ------ ------ ------ Euro Dollar $500.0 $500.0 $494.7 fixed rate 6.125% effective rate (a) 6.400% ------ U.S. Dollar $400.0 $409.0 $397.1 fixed rate 5.75% effective rate (b) 5.23% ------ Euro Dollar $500.0 $499.7 $488.9 fixed rate 6.625% effective rate (a) 6.354% ------ U.S. Dollar $200.0 $189.7 $179.4 fixed rate 4.875% effective rate (a) 6.070% ------ U.S. commercial paper $448.3 $429.8 $429.8 $448.3 weighted avg. variable 5.9% 6.6% ------ ------ Multi-currency revolving credit facility $ 16.2 $ -- $ 16.2 effective rate 5.6% ====== ====== ======
(a) Effective fixed interest rate paid, as a result of settlement of forward interest rate swap at date of debt issuance. (b) Effective fixed interest rate paid, as a result of extendable feature. Refer to Note 7 within Notes to Consolidated Financial Statements for further information.
INTEREST RATE SWAPS (millions) Year of maturity Fair value Instrument -------- -------------- characteristics 2001 2000 1999 - --------------- -------- ------ ------ Interest rate swap - Notional amt. $ 200.0 ($.4) ($1.1) pay variable/receive fixed - Pay 6.60% hedge of existing debt issue Receive 6.40% -------- Interest rate swap - Notional amt. $ 400.0 ($2.2) ($3.2) pay variable/receive fixed - Pay 5.99% hedge of existing debt issue Receive 5.23% -------- Interest rate swap - Notional amt. $ 100.0 $ -- $ -- pay fixed/receive variable - Pay 5.98% hedge of future debt issue(a) Receive 6.36% -------- Interest rate swap - Notional amt. $ 975.0 ($26.9) $ -- pay fixed/receive variable - Pay 6.53% hedge of future debt issue(a) Receive 6.36% -------- Interest rate swap - Notional amt. $ 425.0 $ .5 $ -- pay fixed/receive variable - Pay 6.13% hedge of future debt issue(a) Receive 6.36% --------
(a) Forward-starting interest rate swaps which will be settled in conjunction with a future debt issuance in 2001. PRICE RISK The Company is exposed to price fluctuations primarily as a result of anticipated purchases of raw and packaging materials. Primary exposures include corn, wheat, soybeans, soybean oil, sugar, and paperboard. The Company uses the combination of long cash positions with suppliers, and exchange-traded futures and option contracts to reduce price fluctuations in a desired percentage of forecasted purchases over a duration of generally less than one year. The fair values of commodity contracts held at year-end 2000 and 1999 were insignificant, and potential near-term changes in commodity prices were not expected to have a significant impact on the Company's future earnings or cash flows. For all derivative financial and commodity instruments presented in the tables above, changes in fair values of these instruments and the resultant impact on the Company's cash flows and/or earnings would generally be offset by changes in values of underlying transactions and positions. Therefore, it should be noted that the exclusion of certain of the underlying exposures from the tables above may be a limitation in assessing the net market risk of the Company. 41 EX-21.01 8 k60557ex21-01.txt DOMESTIC & FOREIGN SUBSIDIARIES 1 EXHIBIT 21.01 KELLOGG COMPANY SUBSIDIARIES* NORTH AMERICA Argkel, Inc. - Battle Creek, MI Ensemble Functional Food Company - Battle Creek, MI Gollek Inc. - Battle Creek, MI K-One Inc. - Battle Creek, MI K-Two Inc. - Battle Creek, MI K (China) Limited - Battle Creek, MI K India Private Limited - Battle Creek, MI Kashi Company - LaJolla, California Kelarg, Inc. - Battle Creek, MI Kellogg Asia Inc. - Battle Creek, MI Kellogg Asia Marketing Inc. - Battle Creek, MI Kellogg Brasil, Inc. - Battle Creek, MI Kellogg Caribbean Inc. - Battle Creek, MI Kellogg Caribbean Services Company, Inc. - Guayabo, Puerto Rico Kellogg Chile Inc. - Battle Creek, MI Kellogg Fearn, Inc. - Battle Creek, MI Kellogg Italia S.p.A. - Battle Creek, MI Kellogg Latvia, Inc. - Battle Creek, MI Kellogg Sales Company - Battle Creek, MI Kellogg Services Group, Inc. - Battle Creek, MI Kellogg (Thailand) Limited - Battle Creek, MI Kellogg USA Inc. - Battle Creek, MI KFSC, Inc. - Barbados Mountaintop Baking Company - Battle Creek, MI The Eggo Company - Battle Creek, MI Trafford Park Insurance Limited - Bermuda Kellogg Canada Inc. - Rexdale, Ontario, Canada Gollek Interamericas, S. de R. L. de C.V.- Queretaro, Mexico (subsidiary of Kellogg Canada) Kellogg's Malaysia Manufacturing SDN. BHD - Kuala Lumpur, Malaysia (subsidiary of Kellogg Canada) Worthington Foods, Inc. - Worthington, Ohio Specialty Foods Investment Company (subsidiary of Worthington Foods, Inc.) Kellogg A$ - Cayman Islands Kellogg Yen - Cayman Islands Kellogg Bolivar - Cayman Islands Kellogg C$ - Cayman Islands Kellogg Euro - Cayman Islands Kellogg Sterling - Cayman Islands Kellogg Mpeso - Cayman Islands ASIA-PACIFIC Kellogg Asia Pacific Limited - Hong Kong Kellogg (Aust.) Pty. Ltd. - Sydney, Australia Day Dawn (Aust.) Pty. Ltd. - Pagewood, Australia (subsidiary of Kellogg Australia) Kellogg (N.Z.) Limited - Auckland, New Zealand (subsidiary of Kellogg Australia) Kellogg Superannuation Pty. Ltd. - Sydney, Australia (subsidiary of Kellogg Australia) Kellogg (China) Limited - Guangzhou, China Kellogg Company of South Africa (Pty.) Ltd. - Springs, South Africa Kellogg Project 1995 (Pty.) Ltd. - Springs, South Africa (subsidiary of Kellogg South Africa) Kellogg India Private Limited - Mumbai, India Kellogg (Japan) K.K. - Tokyo, Japan Kellogg (Thailand) Limited - Bangkok,Thailand Nhong Shim Kellogg Co. Ltd. - Seoul, South Korea 2 2 The Kellogg Healthy Snak People Pty Limited - Carmahaven, NSW, Australia Worthington Australia (subsidiary of Worthington Foods, Inc.) Kellogg South East Asia Sdn. Bhd. - Malaysia Kellogg Asia Marketing (Shanghai) Trading Co. Ltd. - Shanghai EUROPE Gollek B.V. - Amsterdam, The Netherlands Kellogg Company of Great Britain Limited - Manchester, England Favorite Food Products Limited - Manchester, England (subsidiary of Kellogg Great Britain) Garden City Bakery Limited - Manchester, England (subsidiary of Lender's Bakery Limited) Kelcone Limited - Aylesbury, England (subsidiary of Kellogg Great Britain) Kelcorn Limited - Manchester, England (subsidiary of Kellogg Great Britain) Kellogg Company of Ireland, Limited - Dublin, Ireland (subsidiary of Kellogg Great Britain) Kellogg Management Services (Europe) Limited - Manchester, England (subsidiary of Kellogg UK Holding) Kellogg Marketing and Sales Company (UK) Limited - Manchester, England (subsidiary of Kellogg UK Holding) Kellogg Supply Services (Europe) Limited - Manchester, England (subsidiary of Kellogg UK Holding Co) Kellogg U.K. Holding Company Limited - Manchester, England Kellogg Espana, S.A. - Valls, Spain (subsidiary of Kellogg Great Britain) Kelmill Limited - Liverpool, England (subsidiary of Kellogg Great Britain) Kelpac Limited - Manchester, England (subsidiary of Kellogg Great Britain) Lender's Bakery Limited - Manchester, England (subsidiary of Kellogg UK Holding) Portable Foods Manufacturing Company Limited - Manchester, England Saragusa Frozen Foods Limited - Manchester, England (subsidiary of Kellogg Great Britain) Kellogg (Deutschland) GmbH - Bremen, Germany Gebrueder Nielsen Reismuehlen und Staerke-Fabrik mit Beschraenkter Haftung - Bremen, Germany (subsidiary of Kellogg Deutschland) Reis-und Handels AG Unterstuetzungskasse GmbH - Bremen, Germany (subsidiary of Kellogg Deutschland) Kellogg (Hungary) Trading Limited Liability Company - Budapest, Hungary Kellogg Italia S.p.A. - Milan, Italy Kellogg Latvia, Inc. - Riga, Latvia Kellogg (Poland) Sp. zo.o. - Warsaw, Poland Kellogg's Produits Alimentaires, S.A. - Rosny, France Nordisk Kellogg's A/S - Svendborg, Denmark NK Leasing - Svendborg, Denmark (subsidiary of Nordisk Kellogg's A/S) Kellogg (Schweiz) AG - Kanton, Zug, Switzerland (subsidiary of Kellogg Deutschland) Kellogg (Osterreich) GmbH - Vienna, Austria (subsidiary of Kellogg Deutschland) LATIN AMERICA Alimentos Kellogg, S.A. - Caracas, Venezuela Gollek, S.A. - Caracas, Venezuela (subsidiary of Alimentos Kellogg) Gollek Servicios, S.C. - Queretaro, Mexico Gollek Argkel - Queretaro, Mexico Kellogg Argentina S.A. - Buenos Aires, Argentina Kellogg Brasil & Cia. - Sao Paulo, Brasil Kellogg Chile Limited - Santiago, Chile Kellogg de Centro America, S.A. - Guatemala, Centro America Kellogg de Colombia, S.A. - Bogota, Colombia Kellogg de Mexico, S.A. de C.V. - Queretaro, Mexico Kellogg El Salvador Ltda. de D.V. - El Salvador CELNASA (La Compania de Cereales Nacionales S.A.) - Ecuador *As of February 2, 2001 EX-23.01 9 k60557ex23-01.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.01 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 2-77316, 33-27293, 33-27294, 33-40651, 33-53403, 333-56536 and 333-56542) of Kellogg Company of our report dated January 24, 2001 relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated January 24, 2001 relating to the financial statement schedules, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP Battle Creek, Michigan March 9, 2001 EX-24.01 10 k60557ex24-01.txt POWERS OF ATTORNEY 1 EXHIBIT 24.01 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Benjamin S. Carson ------------------------- Director Dated: January 24, 2001 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ John L. Zabriskie, Jr. ------------------------------- Director Dated: January 23, 2001 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ William C. Richardson -------------------------- Director Dated: January 23, 2001 4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ William D. Perez ------------------------- Director Dated: January 28, 2001 5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ J. Richard Munro ------------------------- Director Dated: January 24, 2001 6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Dorothy A. Johnson ------------------------- Director Dated: January 23, 2001 7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ James M. Jenness ------------------------- Director Dated: January 24, 2001 8 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Carlos M. Gutierrez ------------------------- Director Dated: January 30, 2001 9 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Gordon Gund ------------------------- Director Dated: January 31, 2001 10 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Claudio Gonzalez ------------------------- Director Dated: January 24, 2001 11 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ John T. Dillon ------------------------- Director Dated: January 24, 2001 12 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Janet L. Kelly, Executive Vice President - Corporate Development, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and filing the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2000, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said filing shall be for the purpose of fulfilling applicable legal requirements. Whereupon, I grant unto said Janet Langford Kelly full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and confirm all that said attorney-in-fact and agent, or her substitute, may lawfully do, or cause to be done, by virtue hereof. /s/ Ann McLaughlin Korologos ---------------------------- Director Dated: January 24, 2001 EX-99.01 11 k60557ex99-01.txt UNAUDITED PRO FORMA FINANCIAL INFORMATION 1 EXHIBIT 99.1 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The following unaudited pro forma combined financial statements give effect to (1) our proposed acquisition of Keebler and (2) the offering of the securities and application of the proceeds of the offering to repay indebtedness incurred in connection with the acquisition of Keebler. To implement the Keebler acquisition, we will acquire all of the outstanding stock of Keebler's controlling stockholder, Flowers Industries, Inc., in a merger, subject to approval of Flower's stockholders. Prior to our acquisition of Flowers, Flowers will transfer all of its assets, other than its Keebler stock, and certain of its liabilities to a wholly owned subsidiary, and will then distribute all of the stock of this subsidiary to its stockholders in a spin-off. Keebler will then merge with a wholly owned subsidiary of Kellogg. As part of this merger, all of the outstanding stock of Keebler, other than the stock owned by Flowers, will convert into the right to receive the cash merger consideration. As a result of these transactions, Kellogg will own 100% of the outstanding stock of Keebler. Pro forma adjustments related to the pro forma combined balance sheet have been determined assuming these transactions were consummated on December 31, 2000. The pro forma combined balance sheet combines our consolidated balance sheet as of December 31, 2000 with Keebler's consolidated balance sheet as of December 30, 2000. The pro forma combined income statement combines the companies' respective income statements as if the combination had occurred at the beginning of the period presented. The unaudited pro forma combined financial statements are based on the assumptions and adjustments described in the accompanying notes. The pro forma combined income statement is not necessarily indicative of operating results that would have been achieved had the combination been consummated as of the beginning of the period presented and should not be construed as representative of future operations. You should read the pro forma combined financial statements in conjunction with our historical consolidated financial statements, including the related notes, filed as part of our Annual Report on Form 10-K for the year ended December 31, 2000. 2 UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (IN MILLIONS, EXCEPT PER SHARE DATA)
KELLOGG KEEBLER PRO FORMA ACTUAL ACTUAL(A) ADJUSTMENTS PRO FORMA -------- --------- ----------- --------- Net sales......................................... $6,954.7 $2,757.0 $ (61.7) (1) $9,650.0 Cost of goods sold................................ 3,327.0 1,119.1 (61.7) (1) 4,545.2 160.8 (2) Selling, general & administrative expense......... 2,551.4 1,310.4 97.1 (3) 3,798.4 (160.5) (2) Restructuring charges............................. 86.5 (1.0) 85.5 -------- -------- ------- -------- Operating profit................................ 989.8 328.5 (97.4) 1,220.9 Interest expense.................................. 137.5 48.8 282.9 (4) 469.2 Other income (expense), net....................... 15.4 4.7 0.3 (2) 20.4 -------- -------- ------- -------- Income before taxes............................. 867.7 284.4 (380.0) 772.1 Income taxes...................................... 280.0 108.8 (125.8) (5) 263.0 -------- -------- ------- -------- Net income...................................... $ 587.7 $ 175.6 $(254.2) $ 509.1 ======== ======== ======= ======== Net earnings per share: basic and diluted......... $ 1.45 $ 1.26 Average shares outstanding........................ 405.6 405.6
- --------------- (a) Keebler's operating results are for the fiscal year ended December 30, 2000. 3 UNAUDITED PRO FORMA BALANCE SHEET AS OF DECEMBER 31, 2000 (IN MILLIONS)
KELLOGG KEEBLER PRO FORMA ACTUAL ACTUAL(A) ADJUSTMENTS PRO FORMA -------- --------- ----------- --------- Current assets:................................. Cash and cash equivalents..................... $ 204.4 $ 34.2 $ -- $ 238.6 Accounts receivable, net...................... 685.3 43.5 -- 728.8 Inventories................................... 443.8 164.8 1.2 (6) 609.8 Income tax receivable......................... -- 19.4 84.3 (7) 103.7 Other current assets.......................... 273.3 66.9 (13.7) (8) 326.5 -------- -------- -------- --------- Total current assets.................. 1,606.8 328.8 71.8 2,007.4 Property, net................................... 2,526.9 629.5 (29.5) (9) 3,126.9 Other assets.................................... 762.6 814.6 3,936.0 (10) 5,513.2 -------- -------- -------- --------- Total assets.......................... $4,896.3 $1,772.9 $3,978.3 $10,647.5 ======== ======== ======== ========= Current liabilities:............................ Current maturities of long-term debt.......... $ 901.1 $ 55.1 $ 146.8 (12) $ 1,103.0 Notes payable................................. 485.2 -- -- 485.2 Accounts payable.............................. 388.2 145.1 -- 533.3 Income taxes payable.......................... 130.8 -- -- 130.8 Other current liabilities..................... 587.3 231.3 87.7 (11) 906.3 -------- -------- -------- --------- Total current liabilities............. 2,492.6 431.5 234.5 3,158.6 Long-term debt.................................. 709.2 527.6 3,696.8 (12) 4,933.6 Deferred income taxes........................... 266.7 134.6 537.6 (8) 938.9 Other liabilities............................... 530.3 116.5 72.1 (13) 718.9 -------- -------- -------- --------- Total liabilities..................... 3,998.8 1,210.2 4,541.0 9,750.0 -------- -------- -------- --------- Shareholders' equity:........................... Common stock.................................. 103.8 0.9 (0.9) (14) 103.8 Capital in excess of par value................ 102.0 208.5 (208.5) (14) 102.0 Retained earnings............................. 1,501.0 393.3 (393.3) (14) 1,501.0 Treasury stock................................ (374.0) (40.0) 40.0 (14) (374.0) Accumulated other comprehensive income........ (435.3) -- -- (435.3) -------- -------- -------- --------- Total shareholders' equity............ 897.5 562.7 (562.7) 897.5 -------- -------- -------- --------- Total liabilities and shareholders' equity.............................. $4,896.3 $1,772.9 $3,978.3 $10,647.5 ======== ======== ======== =========
- --------------- (a) Keebler's balance sheet is as of December 30, 2000. 4 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION A. General The pro forma combined balance sheet reflects our proposed acquisition of Keebler for an aggregate estimated purchase price of approximately $4,426.3 million. We calculated the purchase price as follows (in millions): Acquisition of equity ($42 per share)...................... $3,572.4 Assumed debt of Keebler.................................... 587.8 Payment to Keebler option holders.......................... 216.1 Transaction costs.......................................... 50.0 -------- $4,426.3 ========

The actual amount of debt assumed will depend on the actual amount of debt outstanding on the date of the acquisition. (Keebler debt outstanding at the date of consummation of the transaction is expected to be approximately $700 million, which will increase the total value of the transaction to approximately $4.5 billion). The excess of the purchase price over the fair value of net tangible and intangible assets acquired has been allocated to goodwill. B. Computation of Net Earnings Per Share Basic net earnings per share is determined by dividing net income by the weighted average number of common shares outstanding. Diluted net earnings per share is determined by dividing net income by the weighted average number of common shares outstanding, giving effect to all potentially dilutive issuances of common shares. Dilution in all periods presented was less than $.01 per share. C. Pro Forma Combined Financial Data Compared to Historical Data Pro forma adjustments related to the pro forma combined balance sheet have been determined assuming the acquisition was consummated at December 31, 2000. The assets and liabilities of Keebler have been included on the pro forma combined balance sheet at fair value, as determined by appraisal and valuation, where appropriate. Pro forma adjustments to the combined balance sheet also reflect certain accruals for employee termination and facility exit costs. Pro forma adjustments related to the pro forma combined income statement have been determined assuming the combination was consummated as of the beginning of the period presented. The pro forma combined results of operations vary from the combined historical results of Kellogg and Keebler due to the following: (1) Adjustment to eliminate sales from Keebler to Kellogg, which are treated as intercompany sales for the purposes of the combined pro forma financial statements. (2) Adjustment to conform the classification of expenses between cost of goods sold, selling, general and administrative expense and other income (expense). (3) Adjustment to amortization expense to reflect the amortization of intangible assets, including goodwill, which would have resulted, had the combination occurred at the beginning of the period presented. Intangible assets have been amortized on the straight-line basis over the following useful lives (in millions):
INTANGIBLE CATEGORY ESTIMATED VALUE USEFUL LIFE - ------------------- --------------- ----------- Goodwill............................................ $2,824.3 40 years Direct store door delivery system................... 590.0 40 years Trademarks.......................................... 1,310.0 40 years
This adjustment is based on our current estimates and is lower than the earlier estimate in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Annual Report to Share Owners. 5 (4) Adjustment to interest expense to recognize additional debt of $4,301.9 million to be incurred to finance the Keebler acquisition. The amount of this additional debt is equal to the estimated purchase price of $4,426.3 million less the $124.4 million of indebtedness assumed that is not currently contemplated to be repaid. An average rate of 7.4% to was used to compute the incremental interest expense. Financing of the transaction will be through the issuance of $4.1 billion in aggregate principal amount of long-term securities and through the issuance of $201.9 million of short-term notes. (5) Adjustment to present the tax effect of additional interest expense and deductible amortization of intangible assets computed at the rate of 39%. (6) Fair value adjustment of acquired finished goods inventory to retail value, less selling and distribution expenses. (7) Adjustment to record tax receivable related to the payments made to holders of Keebler stock options. (8) Adjustment to record deferred tax effect of fair value adjustments to Keebler's opening balance sheet. (9) Fair value adjustment for Keebler property and equipment. (10) Adjustment primarily to record goodwill and other intangible assets. (11) Adjustment primarily to record liabilities for facility exit costs and employee severance. (12) Adjustment to record the issuance of long-term securities and the additional short-term notes, as described in Note 4 above. (13) Fair value adjustment for certain Keebler pension and other post-retirement benefit plans based upon actuarial valuations. (14) Adjustment to eliminate Keebler's equity accounts as a result of the acquisition. GRAPHIC 12 k60557pi5-178.gif begin 775 pi5-178.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!PA>`/]%8T:PH,%_ M&0`H7,@0(3UF_R)&C*8N`T)P"O1(1"4@F$6+UB@0^H=*P2V$*/]94\!$P$F4 J%B/^`1!%XL>('#-EC'BSY,F0(S]& GRAPHIC 13 k60557pi5-110.gif begin 775 pi5-110.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!P@Z`/\)'$APX)L? M"!,J_/<#F;B'$!\:8"BNX,`#%"T*Q/BCHD:.'BV"U/AOY,>,)SN2Y&C@@,N7 &+@$$!``[ ` end -----END PRIVACY-ENHANCED MESSAGE-----






Delaware		38-0710690
State of Incorporation		I.R.S. Employer Identification No.






Title of each class:		Name of each exchange on which registered:




Common Stock, $0.25 par value per share		New York Stock Exchange


	2000			1999			1998

Deferred Income Tax Asset Valuation Allowance




Balance at January 1	$	61.8		$	68.6		$	45.9




Additions charged to income tax expense		3.3			15.6			23.0




Deductions credited to income tax expense		(29.0	)		(22.4	)		(0.3	)

Balance at December 31	$	36.1		$	61.8		$	68.6


Name	Capacity	Date

/s/ CARLOS M. GUTIERREZ Carlos M. Gutierrez	Chairman of the Board, President and Chief Director (Principal Executive Officer)		March 9, 2001

/s/ THOMAS J. WEBB Thomas J. Webb	Executive Vice President and Chief Financial Officer (Principal Financial Officer)		March 9, 2001

/s/ JEFFREY M. BOROMISA Jeffrey M. Boromisa	Vice President and Corporate Controller (Principal Accounting Officer)		March 9, 2001

* Benjamin S. Carson Sr.	Director

* John T. Dillon	Director

* Claudio X. Gonzalez	Director

* Gordon Gund	Director

* James M. Jenness	Director

* Dorothy A. Johnson	Director


Name	Capacity	Date

* Ann McLaughlin Korologos	Director

* J. Richard Munro	Director

* William D. Perez	Director

* William C. Richardson	Director

* John L. Zabriskie	Director

By: /s/ JANET LANGFORD KELLY *Janet Langford Kelly As Attorney-in-Fact			March 9, 2001


Item 14.	Exhibits, Consolidated Financial Statements and Schedules, and Reports on Form 8-K


	Page

Schedule II — Valuation Reserves		10




Report of Independent Accountants		11


	(a)3. Exhibits required to be filed by Item 601 of Regulation S-K


			Electronic(E),
			Paper(P) or
			Incorp. By
Exhibit No.		Description	Ref. (IBRF)

	2.01	Agreement and Plan of Restructuring and Merger dated as of October 26, 2000 between Flowers Industries, Inc., Kellogg Company and Kansas Merger Subsidiary, Inc., incorporated by reference to Exhibit 2.02 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2000, Commission file number 1-4171.		IBRF
	2.02	Agreement and Plan of Merger dated as of October 26, 2000 between Keebler Foods Company, Kellogg Company and FK Acquisition Corporation, incorporated by reference to Exhibit 2.03 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2000, Commission file number 1-4171.		IBRF
	3.01	Amended Restated Certificate of Incorporation of Kellogg Company, incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8, file number 333-56536.		IBRF
	3.02	Bylaws of Kellogg Company, as amended, incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8, file number 333-56536.		IBRF
	4.01	Fiscal Agency Agreement dated as of January 29, 1997, between the Company and Citibank, N.A., Fiscal Agent, incorporated by reference to Exhibit 4.01 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission file number 1-4171.		IBRF
	4.02	Form of Debt Security related to the Fiscal Agency Agreement described in Exhibit 4.01 above, incorporated by reference to Exhibit 4.02 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission file number 1-4171.		IBRF
	4.03	Indenture dated as of August 5, 1997, between the Company and Citibank, N.A., Trustee and Collateral Agent, incorporated by reference to Exhibit 4.03 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission file number 1-4171.		IBRF
	4.04	Form of Debt Security related to the Indenture described in Exhibit 4.03 above, incorporated by reference to Exhibit 4.04 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission file number 1-4171.		IBRF
	4.05	Indenture dated August 1, 1993, between the Company and Harris Trust and Savings Bank, incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3, Commission file number 33-49875.		IBRF
	4.06	Kellogg Company 4 7/8% Notes Due 2005; US $200,000,000, incorporated by reference to Exhibit 4.06 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Commission file number 1-4171.		IBRF
	4.07	364-Day Credit Agreement dated as of January 19, 2001 among Kellogg Company, specified borrowing subsidiaries, specified lenders and Chase Manhattan Bank, as Administrative Agent, Chase Manhattan International Limited, as London Agent, Citibank, N.A. and Bank of America, N.A., as Co-Syndication Agents and Barclays Bank PLC, as Documentation Agent		E


	(a)1. Consolidated Financial Statements