UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------
                                    FORM 10-K

(Mark One)

   |X|    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED JANUARY 3, 1998

                                       OR

   | |    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                    FOR THE TRANSITION PERIOD FROM         TO

                      COMMISSION FILE NUMBER: NO. 001-13705
                             
                              KEEBLER FOODS COMPANY
             (Exact name of Registrant as specified in its charter)

              DELAWARE                                   36-1894790
   (State or other jurisdiction of                    (I.R.S. Employer
    incorporation or organization)                   Identification No.)

      677 LARCH AVE., ELMHURST, IL                         60126
(Address of principal executive offices)                 (Zip Code)

                                  630-833-2900
              (Registrant's telephone number, including area code)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

    TITLE OF EACH CLASS            NAME OF EACH EXCHANGE ON WHICH REGISTERED
    -------------------            -----------------------------------------
       Common Stock                           New York Stock Exchange

        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

              $125,000,000 OF ITS 10 3/4% SENIOR SUBORDINATED NOTES
                  DUE 2006 WHICH ARE FULLY AND UNCONDITIONALLY
                      GUARANTEED BY RESTRICTED SUBSIDIARIES

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE  PRECEDING 12 MONTHS (OR FOR SUCH  SHORTER  PERIOD THAT THE  REGISTRANT  WAS
REQUIRED  TO FILE  SUCH  REPORTS)  AND  (2)  HAS  BEEN  SUBJECT  TO SUCH  FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES |X| NO | |

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT  FILERS  PURSUANT TO ITEM 405
OF REGULATION  S-K IS NOT CONTAINED  HEREIN,  AND WILL NOT BE CONTAINED,  TO THE
BEST OF REGISTRANT'S  KNOWLEDGE,  IN DEFINITIVE PROXY OR INFORMATION  STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. YES |X| NO | |

THE AGGREGATE MARKET VALUE OF ALL STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT
AS OF MARCH 17,  1998,  BASED  UPON THE  CLOSING  PRICE OF THE  COMMON  STOCK AS
REPORTED  ON THE NEW  YORK  STOCK  EXCHANGE  ON  SUCH  DATE,  WAS  APPROXIMATELY
$582,400,000.

NUMBER OF SHARES OF COMMON STOCK,  $0.01 PAR VALUE,  OUTSTANDING AS OF THE CLOSE
OF BUSINESS ON MARCH 17, 1998: 83,799,316.

                   DOCUMENTS INCORPORATED BY REFERENCE: NONE.
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

    Keebler Foods Company and its  subsidiaries  (the "Company" or "Keebler") is
the second largest cookie and cracker manufacturer in the United States ("U.S.")
with annual net sales of $2.1  billion and a 24.4% share of the U.S.  cookie and
cracker  market as reported by Information  Resources,  Inc.  ("IRI"),  based on
sales to supermarkets which have annual sales of $2.0 million or more,  measured
in pounds sold. The Company,  primarily through its Keebler Company and Sunshine
Biscuits, Inc. ("Sunshine") subsidiaries,  produces and distributes a broad line
of cookie and cracker products, as well as other consumer food products.

RECENT HISTORY

    The  Company  was  organized  under the laws of the State of  Delaware as UB
Investments  US Inc.  ("UBIUS" or  "predecessor  company") on July 14, 1992. The
Company was acquired from UB Investments  (Netherlands) B.V. on January 26, 1996
(the  "Keebler   acquisition")  by  INFLO  Holdings  Corporation   ("INFLO"),  a
corporation  which was  jointly  owned by Artal  Luxembourg  S.A.  ("Artal"),  a
private investment company, and Flowers Industries, Inc. ("Flowers"), a New York
Stock Exchange-listed company and one of the country's largest manufacturers and
marketers  of fresh and  frozen  baked  foods.  Immediately  after  the  Keebler
acquisition,  the Company was renamed Keebler  Corporation.  In conjunction with
the Keebler acquisition,  INFLO sold 2.5% of the outstanding shares of $0.01 par
value  common  stock to certain  members  of  management.  On June 4, 1996,  the
Company acquired  Sunshine (the "Sunshine  acquisition")  from G.F.  Industries,
Inc.  ("GFI").  As part of consideration  paid in the sale of Sunshine,  GFI was
issued common stock and a warrant to purchase  6,135,781 shares of common stock.
On November 20, 1997,  INFLO was merged into Keebler  Corporation (the "Merger")
and  subsequently  changed its name to Keebler Foods Company.  After the Merger,
the  stock  and  warrant  held  by GFI  were  transferred  to  Bermore,  Limited
("Bermore"),  a privately held  corporation  and the parent of GFI, and reissued
for the same value in the name of the Company.  On February 3, 1998, the Company
completed an initial public  offering (the  "Offering") of 13,386,661  shares of
common stock.  Concurrent  with the Offering,  Bermore  exercised the warrant in
exchange  for  6,135,781  shares of common  stock.  The  exercise of the warrant
resulted in the Company  receiving  $19.8 million of cash  proceeds.  All of the
shares in the Offering were sold by Artal and Bermore, with no proceeds from the
Offering  going to the Company.  As part of the  transaction,  Flowers  acquired
additional  shares of common stock from Artal and Bermore  which  increased  its
ownership  from  approximately  45% to 55%.  Artal,  having  sold shares to both
Flowers  and the  public,  retained  ownership  of  approximately  21%.  Bermore
exercised the warrant,  sold shares to both Flowers and the public, and retained
ownership of approximately 6%.

GENERAL BUSINESS DESCRIPTION

    The Company  competes in the U.S.  retail cookie and cracker market which in
1997 generated sales of  approximately  $8.3 billion measured in retail sales to
consumers.  The U.S. cookie and cracker market,  which is relatively stable, has
experienced  slow but steady  growth  over the past twenty  years.  Supermarkets
accounted  for 77.1% of 1997 retail  sales in the cookie and  cracker  industry,
with mass merchandisers,  convenience stores, and drug stores accounting for the
balance.  Since  1992,  U.S.  annual  dollar  supermarket  sales of cookies  and
crackers have increased by an average of 1.6% per year. The Company believes the
non-supermarket   channels  of  distribution  are  becoming   increasingly  more
important.

    The Company  produces a number of well  recognized  brands under the Keebler
and Sunshine labels. Major brands include:  CHEEZ-IT,  CHIPS DELUXE, CLUB, FUDGE
SHOPPE, HYDROX, SUNSHINE KRISPY, MUNCH'EMS, SANDIES, TOWN HOUSE, VIENNA FINGERS,
WHEATABLES,  and ZESTA. The Company also imports and distributes CARR'S crackers
in the U.S. under an exclusive  long-term  licensing and distribution  agreement
with United Biscuits.  CARR'S crackers are the best-selling specialty cracker in
the U.S.

                                       1
<PAGE>

    In addition to retail branded  products,  the Company also produces  private
label cookies and crackers,  which are sold by retailers under their own brands.
Keebler is also the number one  manufacturer  of cookies  and  crackers  for the
foodservice market, as reported by the International  Foodservice  Manufacturers
Association ("IFMATRAC").  The Company is the top manufacturer of retail branded
ice cream cones in the U.S., as well as the leader of preformed  retail  branded
pie crusts which are sold under the KEEBLER READY CRUST brand name. Keebler also
produces custom-baked products for other marketers of branded food products.

    Following  the  Keebler  acquisition  in January  1996,  the  Company's  new
management began  implementing a business strategy designed to capitalize on the
Company's  competitive  strengths,  which include strong  national  brands and a
national direct store door sales and distribution system ("DSD system"). The key
elements of the Company's  strategy  include (i) building  brand strength in new
and existing product lines, (ii) increasing sales in  non-supermarket  channels,
(iii)  increasing the efficiency of operations,  and (iv) pursuing  acquisitions
that complement or provide further opportunities to use existing brands, product
lines, or distribution systems.

    The Company completed the planned integration of Sunshine's  operations into
those of Keebler by the end of 1996.  The  combination  of Keebler and  Sunshine
allowed  the  Company to achieve  efficiencies  in  administration,  purchasing,
production,  marketing,  sales, and distribution.  In particular,  the sales and
distribution  of  Sunshine  retail  branded  products  were   incorporated  into
Keebler's DSD  distribution  system which had excess  capacity.  Filling  excess
capacity with  Sunshine  products made  Keebler's DSD  distribution  system more
efficient and allowed the Company to focus sales and  marketing  efforts on more
profitable retail branded products.

    The Company has focused on new  product  introductions  and line  extensions
within its core segments,  such as KEEBLER  CHOCOLATE CHEWY CHIPS DELUXE cookies
and  Nacho  CHEEZ-IT  crackers,  as  well  as  introductions  into  new or  less
competitive  segments,  such as KEEBLER COOKIE STIX cookies and KEEBLER SNACKIN'
GRAHAMS  crackers.  The  Company  has also  developed  new sizes of its  leading
products to enable it to expand into non-supermarket channels.

    The Company  recognizes that the mass distribution of consumer food products
is an important  element in  maintaining  sales growth and providing  service to
customers.  The Company  attempts to meet the  changing  demands of customers by
planning  appropriate stock levels and reasonable delivery times consistent with
achieving  optimal  economics  of  distribution.   In  order  to  achieve  these
objectives,  Keebler has developed a network of manufacturing  plants,  shipping
centers,  and  distribution  warehouses  strategically  located  throughout  the
continental U.S. to provide high national in-store presence.  The Company uses a
combination of Keebler-owned,  public, and contract carriers to deliver products
from its distribution points to customers.

    The Company  distributes  retail branded cookie and cracker products through
its DSD distribution  system,  which services  substantially all supermarkets in
the U.S., as measured by IRI. The Company believes its DSD  distribution  system
provides  certain  competitive  advantages.  Members of  Keebler's  sales force,
rather than store employees,  stock and arrange the Company's  products on store
shelves and build end-aisle and free-standing  product displays.  Frequent store
presence of  Keebler's  sales force  employees  provides the Company with a high
level of control over the  availability  and  presentation of its products.  The
Company  believes  this  control  allows  it  to  maintain  shelf  space,   more
effectively  introduce new products,  and permits  better  execution of in-store
promotions.   In  addition,   store  presence  allows  the  Company  to  monitor
competitors'  in-store product promotions.  Keebler believes in-store promotions
are  important  because  purchases  of cookies and  crackers  are often  impulse
driven.

    In  addition  to  Keebler's  DSD  system,  the  Company  uses a  network  of
independent  distributors  and brokers to serve  convenience  stores and vending
distributors.  In the case of club stores and foodservice distribution,  Keebler
uses a dedicated  sales force and ships its products  directly to the customers'
warehouses.  The Company uses a warehouse sales and distribution  system to sell
and  distribute  KEEBLER  READY CRUST pie crusts and private  label  cookies and
crackers  to  its  customers,  including  retail  outlets  otherwise  served  by
Keebler's DSD distribution system. CARR'S crackers are sold through a network of
independent specialty distributors.

                                       2
<PAGE>

COMPETITION

    The U.S.  branded cookie and cracker industry is led by Keebler and Nabisco,
Inc. ("Nabisco"),  which together account for 58.5% of sales volume, as reported
by IRI. Smaller  competitors  include  numerous  national,  regional,  and local
manufacturers  of both  branded  and  private  label  products.  Competition  in
Keebler's target markets takes many forms including (i)  establishing  favorable
brand  recognition,   (ii)  developing  products  sought  by  consumers,   (iii)
implementing  appropriate pricing,  (iv) providing strong marketing support, and
(v) obtaining access to retail outlets and sufficient shelf space.

    Nabisco is the largest manufacturer in the U.S. cookie and cracker industry.
Keebler has a 24.4% share of the retail cookie and cracker market, while Nabisco
has a 34.1%  share,  as measured by IRI.  The  remaining  industry  participants
primarily   target  certain  segments  of  the  industry  or  focus  on  certain
geographical  regions of the U.S.  Keebler  and Nabisco are also the only cookie
and cracker producers that have national wholly-owned DSD distribution  systems,
although  Pepperidge Farms operates a national DSD  distribution  system through
independent distributors.

SEASONALITY

    The  Company's  net sales,  net income,  and cash flows are  affected by the
timing of new product introductions,  promotional  activities,  price increases,
and a seasonal  sales bias toward the second half of the year due to events such
as back-to-school,  Thanksgiving, and Christmas. The relative mix between cookie
and cracker sales varies  throughout the year with stronger cracker sales in the
last quarter of the calendar year.

CUSTOMERS

    The Company's top ten customers in 1997 accounted for 27.7% of Keebler's net
sales. No single customer accounted for more than 4.6% of net sales.

RAW MATERIALS

    The principal raw materials used in the Company's  food products  consist of
flour, sugar, chocolate, shortening, and milk. Keebler also uses paper products,
such as  corrugated  cardboard,  as well as films and  plastics  to package  its
products.  Raw  materials  and  packaging  supplies are readily  available  from
various  suppliers.  There is no significant  reliance on any one supplier.  The
Company uses hedging  techniques to minimize the impact of price fluctuations in
raw  materials  but  not  for  speculative  or  trading  purposes.  The  hedging
techniques, however, may not result in a reduction in the Company's raw material
costs or protect the Company from sharp increases in certain raw material costs,
which the Company has experienced in the past.

INTELLECTUAL PROPERTY

    The Company owns a number of patents, licenses, trademarks, and trade names.
Principal trademarks and trade names include KEEBLER, Ernie the Keebler Elf, the
Hollow Tree logo,  CHEEZ-IT,  CHIPS DELUXE,  CLUB, FUDGE SHOPPE,  HI-HO, HYDROX,
SUNSHINE  KRISPY,  MUNCH'EMS,   READY  CRUST,  SANDIES,  SOFT  BATCH,  SUNSHINE,
TOASTEDS, TOWN HOUSE, VIENNA FINGERS,  WHEATABLES, and ZESTA. The Company is the
exclusive  licensee of the CARR'S  brand name in the U.S.  Such  trademarks  and
trade names are  considered to be of material  importance to the business of the
Company  since  they have the  effect of  developing  brand  identification  and
maintaining  consumer  loyalty.  Management  is not aware of any fact that would
negatively impact the continuing use of any patents,  licenses,  trademarks,  or
trade names.

                                       3
<PAGE>

RESEARCH AND DEVELOPMENT

    The  Company  engages in  research  activities,  which  principally  involve
development of new products,  improvement  of the quality of existing  products,
and  improvement and  modernization  of production  processes.  The Company also
carries out  development  and evaluation of new  processing  techniques for both
current and proposed product lines.  Identifiable research and development costs
are set forth on page F-12 of the Company's consolidated financial statements.

REGULATION

    As a manufacturer and marketer of food items,  the Company's  operations are
subject to regulation by various federal government agencies, including the Food
and Drug  Administration,  the  Department  of  Agriculture,  the Federal  Trade
Commission (the "FTC"), the Environmental  Protection Agency, and the Department
of Commerce,  as well as various  state  agencies,  with  respect to  production
processes,  product quality,  packaging,  labeling,  storage,  and distribution.
Under various statutes and regulations, such agencies prescribe requirements and
establish standards for quality,  purity, and labeling. The finding of a failure
to comply with one or more  regulatory  requirements  can result in a variety of
sanctions,  including  monetary fines or compulsory  withdrawal of products from
store shelves. In addition,  the Company is subject to certain health and safety
regulations  issued  under the  Occupational  Safety and Health  Act, as well as
regulation by the FTC of advertising performed by the Company.

ENVIRONMENTAL

    The Company's  operations and properties are subject to federal,  state, and
local laws and  regulations  relating to the storage,  handling,  emission,  and
discharge  of   materials   and  wastes  into  the   environment.   The  primary
environmental laws affecting Keebler's  operations are the Federal Clean Air Act
and Clean Water Act.  The Company may be required to spend  significant  sums in
order to maintain compliance with environmental laws,  particularly with respect
to  emission  control  equipment,   replacement  of  chlorofluorocarbons   (i.e.
ozone-depleting   substances)  in  cooling  equipment,  and  asbestos  abatement
projects.  Although it is  difficult  to  estimate  the cost of  complying  with
environmental  laws,  the Company  does not believe  that  compliance  with,  or
liability under, any  environmental  laws  individually or in the aggregate will
have a  material  adverse  effect on its  results  of  operations  or  financial
condition.

EMPLOYEES

    The Company  employs  approximately  9,500 persons,  of which  approximately
5,200 are  represented  by  unions.  Keebler  believes  its  relations  with its
employees to be good.


ITEM 2.  PROPERTIES

    The Company  operates eleven  manufacturing  facilities in the U.S. of which
ten are owned and one is leased.  The  manufacturing  facilities  are located in
Athens, Georgia; Chicago, Illinois; Cincinnati, Ohio; Columbus, Georgia; Denver,
Colorado; Des Plaines,  Illinois;  Florence,  Kentucky;  Grand Rapids, Michigan;
Kansas City, Kansas;  Macon, Georgia; and Sayreville,  New Jersey.  Keebler also
owns  and  operates  a dairy in  Fremont,  Ohio  that  produces  cheese  under a
proprietary  formula  that is used as an  ingredient  in CHEEZ-IT  crackers.  In
addition,  the Company owns one idle manufacturing  facility located in Atlanta,
Georgia that is held for sale. As a result of capital expenditures made over the
past decade,  management  believes the  manufacturing  facilities are modern and
efficient. Management also believes manufacturing capacity is sufficient to meet
foreseeable needs.

                                       4
<PAGE>

    Distribution  facilities  consist of eleven shipping centers attached to the
manufacturing facilities,  ten stand-alone shipping centers (two owned and eight
leased; of which one is idle), and sixty-six  distribution centers (eleven owned
and  fifty-five  leased)  throughout  the  U.S.  Of the  sixty-six  distribution
centers,  seven were subleased and seven were idle.  These seven idle facilities
have been accrued for in the plant and facility closing costs.  In addition, one
of the owned,  but idle,  distribution  facilities is held for sale. The Company
also  leases  thirty-two   warehouses  and  eighteen  depots  that  are  located
throughout the U.S. and are utilized by the sales force in the  distribution  of
the Company's  products.  Management  believes there is sufficient  distribution
capacity to meet foreseeable needs.

    In addition to manufacturing and distribution  facilities,  the Company owns
two office  buildings  and leases  two  others as part of its  corporate  office
facility. The Company also leases numerous sales offices throughout the country.


ITEM 3.  LEGAL PROCEEDINGS

    Not applicable.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    On November 6, 1997, the  majority  of the  shareholders  of the Company, by
written consent without a meeting, re-elected the previous  members of the Board
of Directors in its entirety.

    On November 20, 1997, the  majority of the  shareholders  of the Company, by
written  consent  without  a  meeting,  approved  a  merger  of  INFLO  Holdings
Corporation with and into the Company.

    On December 11, 1997, the majority of the  shareholders  of the Company,  by
written  consent  without a meeting,  approved  changing the name of the Company
from Keebler Corporation to Keebler Foods Company.


                                     PART II


ITEM 5.  MARKET FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  SHARE  OWNER
         MATTERS

MARKET INFORMATION FOR COMMON STOCK

    The New York Stock  Exchange (the  "Exchange")  is the  principal  market on
which the Company's common stock is traded. The common stock was first traded on
the  Exchange on January 29,  1998,  concurrent  with the  underwritten  initial
public offering of 13,386,661 shares of the Company's common stock at an initial
price to the  public of $24.00 per share.  Prior to the  Offering,  there was no
established public trading market for the Company's shares.

HOLDERS

    The approximate  number of holders of record of common stock as of March 17,
1998 was 300.  This number does not include  beneficial  owners of the Company's
securities held in the name of nominees.

                                       5
<PAGE>

DIVIDENDS

    No dividends  were declared on the  Company's  common stock in 1997 or 1996.
Historically,  the  Company  has not paid  dividends  on its  common  stock  and
currently  intends to retain all future  earnings  to fund the  development  and
growth of the business.  Therefore,  the Company does not  currently  anticipate
paying  any cash  dividends.  Additionally,  the  existing  Second  Amended  and
Restated Credit Agreement ("Credit Agreement") and the Senior Subordinated Notes
(the "Notes")  place  limitations  on the Company's  ability to pay dividends or
make other  distributions  on its common stock.  Any future  determination as to
payment  of  dividends  will  be  subject  to such  limitations,  will be at the
discretion of the Board of Directors,  and will depend on the Company's  results
of operations,  financial  condition,  capital  requirements,  and other factors
deemed relevant by the Board of Directors.  See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations."

ITEM 6.  SELECTED FINANCIAL DATA

    The selected  historical  financial data  presented  below as of and for the
year ended January 3, 1998, the  forty-eight  weeks ended December 28, 1996, the
four weeks ended  January 26,  1996,  and the year ended  December 30, 1995 have
been  derived  from,  and  should  be read in  conjunction  with the  historical
consolidated  financial  statements  of the Company and UBIUS,  the  predecessor
company,  including  the  respective  notes  thereto,  included  elsewhere.  The
selected  historical  financial  data  presented  below as of and for the fiscal
years ended  December  31, 1994 and January 1, 1994 have been  derived  from the
consolidated  financial  statements  of the  predecessor  company  that  are not
included  herein.  The  distinction  between the Company's  and the  predecessor
company's  selected financial data, as shown below, has been made by inserting a
double  line.  The results of  operations  presented  below are not  necessarily
indicative of results to be expected for any future period.  The information set
forth below should be read in conjunction with "Item 7. Management's  Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations"  and  the
consolidated  financial  statements  and  respective  notes  thereto,   included
elsewhere herein.

<TABLE>
<CAPTION>
                                                   Keebler Foods Company  ||                      UBIUS
                                                  ------------------------||  -----------------------------------------------
                                                              Forty-Eight ||     Four                 Year Ended    
                                                  Year Ended  Weeks Ended ||  Weeks Ended -----------------------------------
                                                   January 3, December 28,||  January 26, December 30,December 31, January 1,
                                                      1998      1996 (a)  ||     1996        1995        1994         1994    
                                                  ----------- ------------||  ----------- ----------- ----------- -----------
                                                   (In Millions Except    ||                   (In Millions)
                                                      Per Share Data)     ||
<S>                                               <C>         <C>         ||  <C>         <C>         <C>         <C>
OPERATING DATA:                                                           ||
Net sales .......................................   $2,065.2    $1,645.5  ||      $101.7   $1,578.6   $1,599.7    $1,650.1          
Gross profit ....................................    1,177.2       871.3  ||        46.8      831.8      894.2       931.5
Restructuring charges ...........................          -           -  ||           -          -          -       120.1
Loss on impairment of Salty Snacks business .....          -           -  ||           -       86.5          -           -
Income (loss) from continuing operations ........      141.4        70.1  ||       (25.5)    (137.9)      46.4       (67.6)
Income tax expense (benefit) ....................       45.2        14.0  ||           -       (0.5)      (1.1)      (22.3)
Discontinued operations:                                                  ||  
    Income from operations of discontinued Frozen                         ||
     Food businesses, net of tax ................          -           -  ||           -        7.4        3.4         0.6
    Gain on disposal of Frozen Food businesses,                           || 
     net of tax .................................          -           -  ||        18.9          -          -           -
Extraordinary item:                                                       ||
    Loss on early extinguishment of debt,                                 || 
     net of tax .................................        5.4         1.9  ||           -          -          -           -
Net income (loss) ...............................   $   57.0    $   15.8  ||      $ (6.5)  $ (158.3)  $  (23.0)   $ (147.2)         
                                                                          ||
Basic Net Income per Share:                                               || 
    Income from continuing operations                                     ||
     before extraordinary item ..................   $    0.80   $    0.24 ||                                                        
    Extraordinary item ..........................        0.07        0.03 || 
                                                    ---------   --------- || 
    Net income ..................................   $    0.73   $    0.21 || 
                                                    =========   ========= || 
Weighted Average Shares Outstanding .............       77.6        75.2  ||
                                                    =========   ========= || 
</TABLE>

                                       6
<PAGE>
<TABLE>
<CAPTION>
                                                   Keebler Foods Company  ||                      UBIUS
                                                  ------------------------||  -----------------------------------------------
                                                              Forty-Eight ||     Four                 Year Ended    
                                                  Year Ended  Weeks Ended ||  Weeks Ended -----------------------------------
                                                   January 3, December 28,||  January 26, December 30,December 31, January 1,
                                                      1998      1996 (a)  ||     1996        1995        1994         1994    
                                                  ----------- ------------||  ----------- ----------- ----------- -----------
                                                   (In Millions Except    ||                   (In Millions)
                                                      Per Share Data)     ||
<S>                                               <C>         <C>         ||  <C>         <C>         <C>         <C>
OTHER DATA:                                                               ||
EBITDA, as adjusted (b) .........................   $  202.1    $  119.6  ||    $  (23.5)  $  (93.3)  $   89.5    $   98.4          
Depreciation and amortization (excluding items                            ||   
    related to discontinued operations) .........       60.7        49.5  ||         2.0       44.6       43.1        45.9
Capital expenditures (excluding expenditures                              || 
    related to discontinued operations) .........       48.4        29.4  ||         3.2       54.2       54.6        30.6
                                                                          ||
CASH FLOW DATA:                                                           ||
Cash Provided from (Used by)                                              ||
    Operating activities ........................   $  218.3    $   53.2  ||    $   (0.4)  $  (61.4)  $  (17.4)   $   22.0          
    Investing activities ........................      (41.5)     (130.1) ||        65.2      (52.6)     (45.9)      (92.1)
    Financing activities ........................     (161.6)       86.8  ||       (65.7)     104.4       69.4        58.3
                                                    ---------   --------- ||    ---------  ---------  ---------   ---------
Increase (decrease) in cash and cash equivalents    $   15.2    $    9.9  ||    $   (0.9)  $   (9.6)  $    6.1    $  (11.8)         
                                                    =========   ========= ||    =========  =========  =========   =========         

---------------------------------------------
 
<FN>

(a)  Includes the  operating  results of Sunshine from  acquisition  date of June 4, 1996 through  December 28, 1996.  Other matters
     affecting  comparability are detailed in  Item 7.  Management's  Discussion and Analysis of Financial  Condition and Results of
     Operations.

(b)  EBITDA, as adjusted, is defined as income (loss) from continuing operations before interest, taxes, depreciation, amortization,
     and restructuring charges (gains).

</FN>
</TABLE>      

<TABLE>                                                                   
<CAPTION>                                                                 
                                                          As of           ||                       As of
                                                  ------------------------||  --------------------------------------------------
                                                   January 3, December 28,||  January 26,  December 30, December 31,  January 1,
                                                      1998        1996    ||     1996         1995         1994          1994 
                                                  ----------- ------------||  -----------  -----------  -----------  -----------
                                                       (In Millions)      ||                    (In Millions)
<S>                                               <C>         <C>         ||  <C>          <C>          <C>          <C>
BALANCE SHEET DATA:                                                       || 
Cash and cash equivalents .......................  $    27.2   $    12.0  ||     $   2.1      $   3.0     $   12.5     $    6.4     
Total assets ....................................    1,042.9     1,102.1  ||       849.1        926.9      1,001.2      1,043.0
Due to affiliate ................................         --          --  ||       105.0        108.0        551.6        872.7
Total debt (including capital leases) ...........      298.8       457.9  ||       371.4        437.6        333.2        263.8
Shareholders' equity (deficit) ..................      222.0       165.1  ||        45.3         51.8       (234.9)      (511.9)

</TABLE>


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

SET FORTH  BELOW IS A  DISCUSSION  OF THE  FINANCIAL  CONDITION  AND  RESULTS OF
OPERATIONS FOR THE YEARS ENDED JANUARY 3, 1998,  DECEMBER 28, 1996, AND DECEMBER
30, 1995. THE YEAR ENDED DECEMBER 28, 1996 INCLUDES BOTH THE  FORTY-EIGHT  WEEKS
OF KEEBLER FOODS COMPANY  UNDER CURRENT  MANAGEMENT  AND THE FOUR WEEKS OF UBIUS
UNDER  FORMER   MANAGEMENT.   THE  1995  FINANCIAL   RESULTS  INCLUDE  FINANCIAL
INFORMATION  RELATING TO THE SALTY SNACKS BUSINESS AND PRESENTS THE FROZEN FOODS
BUSINESSES  AS A  DISCONTINUED  OPERATION  (BOTH  DEFINED  ON  PAGE  F-11 OF THE
COMPANY'S  CONSOLIDATED  FINANCIAL  STATEMENTS),  BOTH  OF  WHICH  WERE  SOLD OR
LIQUIDATED BY UBIUS PRIOR TO THE  ACQUISITION  OF UBIUS BY INFLO.  THE FOLLOWING
DISCUSSION OF RESULTS OF OPERATIONS AND LIQUIDITY AND CAPITAL  RESOURCES  SHOULD
BE READ IN CONJUNCTION  WITH THE  CONSOLIDATED  FINANCIAL  STATEMENTS OF KEEBLER
FOODS COMPANY AND THE RELATED NOTES THERETO APPEARING ELSEWHERE.

                                       7
<PAGE>

RESULTS OF OPERATIONS

    MATTERS AFFECTING COMPARABILITY

    The Company's fiscal year consists of thirteen four week periods  (fifty-two
or  fifty-three  weeks) and ends on the Saturday  nearest  December 31. The 1997
fiscal  year  consists  of  fifty-three  weeks.  As  a  result  of  the  Keebler
acquisition, which closed on the last day of the first four week period of 1996,
the fiscal year for 1996 consisted of the  forty-eight  weeks ended December 28,
1996. The 1995 fiscal year of the predecessor company was comprised of fifty-two
weeks.

    The Company's operating results for the forty-eight weeks ended December 28,
1996 have been combined with the operating  results of the  predecessor  company
for the four weeks ended January 26, 1996 to compare the year ended December 28,
1996 to the years ended  January 3, 1998 and December 30,  1995.  The  Company's
operating  results for the year ended  December 28, 1996  include the  operating
results of Sunshine from the acquisition date of June 4, 1996,  whereas the year
ended January 3, 1998 includes the operating  results of Sunshine for the entire
year.  Additionally,  the  Company's  operating  results  have been  restated to
reflect the Merger as if it had been effective January 26, 1996.

    For  the  year  ended  December  30,  1995,  the  financial  results  of the
predecessor  company include the operating results of the Salty Snacks business.
The Salty Snacks business was liquidated by prior  management in connection with
the Keebler  acquisition.  The 1995 results of  operations  include net sales of
$135.7 million and a loss from  operations of $25.6 million related to the Salty
Snacks  business.  The 1995  operating  results  for the Salty  Snacks  business
excluded  an  allocation  of the fixed  portion of  selling,  distribution,  and
general  administrative  expenses. In addition,  the December 30, 1995 financial
results of the predecessor company also include the results of operations of the
Frozen Food businesses presented as a discontinued operation.

    The Company's results of operations, expressed as a percentage of net sales,
for the last three years ended January 3, 1998,  December 28, 1996, and December
30, 1995 are set forth below:

<TABLE>
<CAPTION>
                                                                                      Years Ended
                                                                    ------------------------------------------------
                                                                      January 3,      December 28,     December 30,
                                                                         1998            1996              1995
                                                                    --------------   --------------   --------------
<S>                                                                 <C>              <C>              <C>    
NET SALES .......................................................         100.0%           100.0%           100.0%
 COSTS AND EXPENSES:
   Cost of sales.................................................          43.0             47.5             47.3
   Selling, marketing, and administrative expenses...............          49.7             49.6             56.0
   Loss on impairment of Salty Snacks business ..................            --               --              5.5
   Other.........................................................           0.5              0.4             (0.1)
                                                                    --------------   --------------   --------------
 INCOME (LOSS) FROM CONTINUING OPERATIONS........................           6.8              2.5             (8.7)
 INTEREST EXPENSE, NET...........................................           1.6              2.2              1.8
                                                                    --------------   --------------   --------------
 INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX
    EXPENSE......................................................           5.2              0.3            (10.5)
   Income tax expense............................................           2.2              0.8               --
                                                                    --------------   --------------   --------------
 INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY
    ITEM ........................................................           3.0             (0.5)           (10.5)
 DISCONTINUED OPERATIONS:
   Income from operations of discontinued Frozen Food businesses,
     net of tax..................................................            --               --              0.5
   Gain on disposal of discontinued Frozen Food businesses,
     net of tax .................................................            --              1.1               --
                                                                    --------------   --------------   --------------
 INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ........................           3.0              0.6            (10.0)
 EXTRAORDINARY ITEM:
   Loss on early extinguishment of debt, net of tax..............           0.3              0.1               --
                                                                    --------------   --------------   --------------
 NET INCOME (LOSS)...............................................           2.7%             0.5%           (10.0)%
                                                                    ==============   ==============   ==============
</TABLE>

                                       8
<PAGE>

    COMPARISON OF FISCAL 1997 TO 1996

    NET SALES.  Net sales of $2,065.2  million in 1997 were $318.0  million,  or
18.2%,  higher  than net sales of  $1,747.2  million in 1996.  The growth in net
sales for 1997 was  achieved  through  incremental  sales from both the Sunshine
acquisition and increased volumes.  Sunshine results for 1996 were only included
from the  acquisition  date of June 4, 1996. In 1996,  net sales of Sunshine for
the twenty-two weeks ended June 4, 1996 were $229.8 million. Sunshine net sales,
in a full  year-on-year  comparison,  were 27.3% and 29.6% of total  Company net
sales in 1997 and 1996,  respectively.  In addition to the  incremental  revenue
associated  with the Sunshine  acquisition,  increased  volumes in 1997 provided
4.5% growth in net sales over the prior  year.  The volume  growth was  achieved
through  emphasis  on  more  profitable  cookie  and  cracker  products,   while
discontinuing or repositioning less strategic products,  and the introduction of
new products and line extensions.

    GROSS PROFIT.  Gross profit in 1997 of $1,177.2  million was $259.0  million
higher than the prior year and 4.5 percentage  points better as a percent of net
sales.  The  increase  in gross  profit in 1997 was due to higher  sales,  lower
commodity and package material prices,  and the implementation of cost reduction
and productivity  programs.  Of the total improvement,  approximately  64.5% was
attributed to incremental  sales  associated with both the Sunshine  acquisition
and increased volume. The balance of the improvement was achieved through a more
profitable  sales mix and cost savings and  productivity  improvements  achieved
mainly through  further  automation of the  manufacturing  facilities and higher
capacity  utilization  attributed to streamlining the manufacturing  facilities.
The shift toward higher margin  brands  benefited  gross profit by $11.8 million
compared to the prior year. Also contributing to the increase in gross profit in
1997  were  lower  prices  paid for raw  materials,  particularly  for flour and
soybean oil, and lower prices paid for package materials, primarily for cartons,
corrugated cardboard, and flexible film.

    SELLING,  MARKETING,  AND ADMINISTRATIVE EXPENSES.  Selling,  marketing, and
administrative  expenses  for 1997 of $1,026.2  million,  or 49.7% of net sales,
increased $160.0 million from 1996, but remained  relatively stable as a percent
of net sales.  Spending  rose in 1997 due to both the impact of higher sales and
increased  marketing  expense.  The impact of higher  sales  contributed  $126.9
million to the  increase in selling,  marketing,  and  administrative  expenses.
Marketing  expense  represented  23.8% of net sales in 1997 compared to 22.2% in
1996.  The  higher  spending  rate in 1997 was due to  increased  brand-building
national  advertising and consumer  promotions  which were up $29.2 million over
the prior year. The increased spending as a result of these factors,  along with
inflation,  was  offset by the  impact of higher  volumes  in a more  efficient,
relatively fixed cost,  selling and distribution  network.  Therefore,  selling,
marketing,  and  administrative  expenses  as a percent  of net  sales  remained
comparable to the prior year.

    OTHER. Other expense for 1997 was $2.3 million,  or 32.0%,  higher than 1996
due to higher bank fees and amortization of intangibles.  Bank fees in 1997 were
higher than the prior year due to several amendments to the Company's  financing
agreement.  Other  expense  for 1997  included  a full year of  amortization  of
trademarks and goodwill recorded as part of the Sunshine acquisition compared to
only twenty-eight weeks in 1996.

    INCOME (LOSS) FROM CONTINUING OPERATIONS.  Income from continuing operations
of $141.4  million was $96.7  million  higher  than 1996.  The  improvement  was
attributed to a 18.2%  increase in net sales driven by volume growth  compounded
by enhanced gross margins resulting from a more profitable mix, cost reductions,
and improved productivity.  Total benefits realized more than offset incremental
marketing and amortization expense.

    INTEREST  EXPENSE.  Interest  expense  of  $33.8  million  for 1997 was $4.5
million  lower than in 1996,  primarily  due to a lower  average debt balance in
1997.  The  decrease in the  average  debt  balance was the result of  principal
pre-payments of $113.8 million on the term loans and a $29.0 million pre-payment
of the Seller Note. In addition, the weighted average interest rate for 1997 was
0.28 percentage points lower than the 1996 weighted average rate.

    INCOME  TAXES.  Income taxes for the year were  provided at an effective tax
rate of  42%.  The  effective  tax  rate  exceeded  the  statutory  rate  due to
nondeductible  expenses,  principally  amortization  of  intangibles,  including
trademarks,  trade names, and goodwill.  In 1996, the effective tax rate for the
forty-eight weeks ended December 28, 1996 was 44.2% and was higher than the 1997
rate due to a preliminary estimate of nondeductible expenses. Income tax expense
was not provided for during the first four weeks of 1996. As part of the Keebler
acquisition,  the

                                       9
<PAGE>

Company  adjusted the valuation  allowance on deferred taxes by $25.1 million to
reflect the elimination of certain  deferred tax assets revalued in the purchase
price  allocation.  The Company  carried a deferred tax  valuation  allowance of
$84.4  million at  January  3, 1998 and  December  28,  1996 to provide  for the
uncertainty in realizing the  deductibility  of deferred tax assets  recognized.
Pursuant  to the  terms of the  Keebler  acquisition,  the  predecessor  company
retained the right to use the net operating losses for potential carrybacks. Any
unused  operating  losses are then available to Keebler,  but are  significantly
restricted   under  current  tax  law.   Therefore,   all  net  operating   loss
carryforwards  have  been  fully  reserved  due  to  the  uncertainty  of  their
realization.

    DISCONTINUED  OPERATIONS.  In 1995, the predecessor company adopted plans to
discontinue the operations of the Frozen Food businesses,  and in the first four
weeks of 1996, a gain of $18.9 million,  net of income taxes,  was recognized on
the disposal of the Frozen Food businesses.

    EXTRAORDINARY  ITEM NET OF INCOME TAXES. In 1997 and 1996,  Keebler recorded
extraordinary charges net of tax of $5.4 million and $1.9 million, respectively.
In 1997, $3.8 million of the extraordinary  charges,  net of tax, related to the
write-off of debt issuance  costs  associated  with the early  retirement of the
term loans.  An  additional  $1.6  million net of tax  extraordinary  charge was
recorded  due to a loss on the early  extinguishment  of the Seller Note entered
into  at the  time  of the  Keebler  acquisition.  In  1996,  the  $1.9  million
extraordinary  charge,  net of tax,  related to the  write-off of debt  issuance
costs associated with the $125.0 million early extinguishment of increasing rate
notes.

    NET INCOME  (LOSS).  Net income of $57.0  million in 1997 was $47.7  million
higher than net income of $9.3 million for 1996. The  substantial  growth in net
income  was the  result of  increased  volume,  the  inclusion  of the  Sunshine
business for the entire year,  improved gross margins,  and savings  achieved by
leveraging the fixed cost structure of the sales and distribution network.

    COMPARISON OF FISCAL 1996 TO 1995

    NET SALES. Net sales in 1996 increased $168.6 million,  or 10.7%, over 1995.
The 1996 net sales included Sunshine revenues of $291.2 million, while net sales
in 1995 included  sales of the Salty Snacks  business of $135.7  million.  After
adjusting for these changes in the Company's  business,  the year-on-year  sales
increase was up $13.1 million.  Along with  achieving  this growth,  the Company
also  shifted its sales  focus to more  profitable  products.  The new focus was
accomplished  through  selected  price  increases on Keebler  branded cookie and
cracker products,  a more targeted  marketing  emphasis,  new products,  and the
discontinuation  of weaker products.  While volumes in 1996 were relatively flat
compared to volumes in 1995, higher revenues were achieved through these changes
in product mix and selected price increases. Temporary volume decreases in sales
to convenience stores,  associated with a change in the selling organization and
product  discontinuations,  were offset by volume  gains from new  products  and
broadened distribution.

    GROSS  PROFIT.  Gross profit as a percentage of net sales for 1996 was 52.6%
compared to 52.7% in 1995. While gross margins were down slightly  year-on-year,
this belies the significant improvements that were achieved. The change in sales
mix noted above, resulted in an emphasis on more profitable volume. However, the
value-added  products  emphasized  as part of the 1996  sales  strategy  carried
higher  production  costs than the  products  sold in 1995.  The impact on gross
profit of this change in sales mix along with higher flour prices contributed to
higher  cost of sales in 1996 versus  1995.  Gross  profit  margins in 1996 also
reflect the inclusion of Sunshine products,  which historically  carried a lower
gross  margin than  Keebler  products.  The impact of higher costs was more than
fully  offset  by  increasing  capacity  utilization,  cost  reductions  at  the
bakeries,  as well as  lowering  scrap  levels  and  achieving  a more  balanced
production.  In  addition,  reductions  in bakery  overhead  staffing and a more
efficient  balancing of internal and  co-packing  arrangements  achieved a lower
cost of production.

    SELLING,  MARKETING,  AND ADMINISTRATIVE EXPENSES.  Selling,  marketing, and
administrative  expenses  decreased $18.3 million and improved by 6.4 percentage
points as a percent  of net sales in 1996  compared  to 1995.  Included  in 1996
expenses were selling,  marketing, and administrative expenses of $131.9 million
directly attributable to the Sunshine business;  while 1995 included expenses of
$87.4 million  directly  associated  with the Salty Snacks  business  (excluding
allocation of the fixed portions of selling,  distribution,  and  administrative
expenses).  Excluding these influences,  selling,  marketing, and administrative
expenses  decreased in 1996 compared to 1995 by $62.8

                                       10
<PAGE>

million.  The  improvement  was  principally  accomplished  through  a  targeted
marketing plan behind Keebler  products and Keebler's cost reduction  program to
rationalize  the  selling  and  administrative  cost  structure.  In  1996,  the
Company's focus on spending for trade  promotions at the store level resulted in
higher  trade  allowances  which  were  more than  offset  by the $49.5  million
decrease in national advertising and consumer promotions. The cost reductions in
the  selling and  administrative  structures  were  achieved  primarily  through
headcount  reductions  of  approximately  1,740 and  changing  from a relatively
higher cost step-van selling  organization to independent  distributors to serve
the convenience  store channel.  A decrease in research and development costs of
$9.6 million was primarily attributed to headcount reductions,  more focused new
product  programs  in  1996,  and  lower  project  activity  due in  part to the
liquidation of the Salty Snacks business prior to the Keebler  acquisition.  The
cost reductions more than offset increased administrative expenses of management
incentives  and increased  depreciation  as a result of the Keebler and Sunshine
acquisitions.

    OTHER.  Other income and expense for 1996 was $7.2 million  compared to $1.4
million of income for 1995.  Other expense in 1996  consisted of $5.2 million of
amortization  resulting from both the Keebler and Sunshine acquisitions and bank
service charges.  In 1995, other income and expense consisted of $1.7 million of
amortization  expense,  $1.4 million of miscellaneous  expenses and bank service
charges,  and other income of $4.5 million  representing the gain on the sale of
interests  in  certain  logos,  trade  names,  trademarks,   and  service  marks
registered or pending registration in Australia, New Zealand, Asia, and Europe.

    INCOME (LOSS) FROM CONTINUING OPERATIONS.  Income from continuing operations
was $44.7 million in 1996, an  improvement  of $182.5 million over the loss from
continuing  operations for 1995.  After adjusting the 1995 net operating loss of
$137.9  million for the $25.6 million loss in the Salty Snacks  business and the
impairment  write  down of $86.5  million  associated  with that  business,  the
earnings  improvement  in 1996  over  1995 was  $70.5  million.  The  turnaround
resulted from improved gross margins on Keebler brands, more efficient marketing
expenditures,  and cost savings achieved in sales and distribution and corporate
overhead.  The  cumulative  savings  from  these  initiatives  more than  offset
incremental depreciation and amortization expense totaling $9.7 million recorded
as a result of the Keebler and Sunshine acquisitions.

    INTEREST EXPENSE.  For 1996, net interest expense was $38.4 million compared
to $28.3  million in 1995.  The  increase  was due to the  amortization  of debt
issuance costs and higher overall borrowings  carrying a higher average interest
rate as compared to the prior year.

    INCOME TAXES. The Company provided for income taxes at an effective tax rate
of 44.2% for the  forty-eight  weeks ended  December 28, 1996.  The  predecessor
company  did not  provide  for any income tax  expense  for the four weeks ended
January 26, 1996.  The  effective  tax rate was higher than the  statutory  rate
because of  nondeductible  expenses  (principally,  amortization of intangibles,
including trademarks,  trade names, and goodwill). In 1995, there was no current
provision for income taxes due to operating losses incurred and the inability to
carryback  the  losses to  recover  taxes  paid in prior  years.  As part of the
Keebler  acquisition,  the Company adjusted the valuation  allowance on deferred
taxes by $25.1 million to reflect the elimination of certain deferred tax assets
revalued in the purchase price allocation.  The deferred tax valuation allowance
of $84.4 million at December 28, 1996 provided for the  uncertainty in realizing
the deductibility of deferred tax assets  recognized.  The predecessor  company,
pursuant to the terms of the Keebler acquisition,  retained the right to use the
net operating losses for potential  carrybacks.  Any unused operating losses are
then available to Keebler,  but are  significantly  restricted under current tax
law.  Therefore,  all net operating loss  carryforwards have been fully reserved
due to the uncertainty of their realization.

    DISCONTINUED  OPERATIONS.  During 1995, the  predecessor  company decided to
dispose of the Frozen Food businesses and,  therefore,  presented the operations
of those  businesses as a discontinued  item in the statement of operations.  In
the first four weeks of 1996, a gain of $18.9 million net of income taxes on the
disposal of the Frozen Food businesses was recognized.

    EXTRAORDINARY  ITEM NET OF INCOME TAXES. A before-tax  extraordinary loss of
$3.2  million on the early  extinguishment  of debt was  recorded  in the second
quarter of 1996.  The loss  consisted  primarily of the write-off of unamortized
bank fees incurred when the Company replaced the Keebler acquisition bridge loan
with the Notes.  The tax  benefit  on the  extraordinary  loss was $1.3  million
resulting in an after-tax loss of $1.9 million.

                                       11
<PAGE>

    NET  INCOME  (LOSS).  Net  income of $9.3  million  for 1996  represented  a
substantial improvement over the $158.3 million net loss for the prior year. The
improvement was attributable to operating  improvements,  the divestiture of the
unprofitable Salty Snacks business,  and the recognized gain of $18.9 million on
the disposition of the Frozen Food businesses.

LIQUIDITY AND CAPITAL RESOURCES

    A condensed cash flow statement of the Company follows:

<TABLE>
<CAPTION>
                                                                   Years Ended
                                                  ------------------------------------------------
                                                    January 3,      December 28,     December 30, 
                                                       1998            1996              1995
                                                  --------------   --------------   --------------
                                                                   (IN MILLIONS)
<S>                                               <C>              <C>              <C>   
CASH PROVIDED FROM (USED BY)
  Operating activities...........................    $   218.3         $   52.8         $  (61.4)
  Investing activities...........................        (41.5)           (64.9)           (52.6)
  Financing activities...........................       (161.6)            21.1            104.4
                                                  --------------    -------------    -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.    $    15.2         $    9.0         $   (9.6)
                                                  ==============    =============    =============

</TABLE>

    CASH FLOW FOR 1997

    During 1997, cash provided from operating activities was $218.3 million. The
primary contributors to the positive cash flow for the year were net earnings of
$57.0  million,  a lower  investment in trade accounts  receivable,  and reduced
funding of current  liabilities and income taxes.  Improved accounts  receivable
collection  procedures  provided $38.2 million of working  capital.  The reduced
funding of  current  liabilities  was  attributable  primarily  to the timing of
payments, while the increase in income taxes payable was attributable to a $47.7
million  increase in earnings over the prior year.  Partially  offsetting  these
benefits was spending on plant and facility  closing costs and severance and the
payment of an arbitration  award.  Spending on plant and facility  closing costs
and severance  relating to exit costs  associated  with the Keebler and Sunshine
acquisitions,  although down from the prior year, accounted for $13.7 million of
cash used by operations  for the year ended  January 3, 1998.  Spending on plant
and facility  closing  costs and severance is expected to conclude by the end of
1998, with the exception of noncancellable  lease obligations which are expected
to continue  until 2004.  In  addition,  the Company paid an  arbitration  award
regarding  a contract  production  arrangement,  which was  entered  into by the
predecessor company, in the amount of $6.8 million plus legal fees.

    Cash used by investing  activities  of $41.5  million for 1997 was primarily
used to fund capital  expenditures.  Capital  spending of $48.4 million was made
principally to enhance, update or realign the existing production lines, provide
distribution and production efficiencies, and to achieve near-term cost savings.
Proceeds  received from asset disposals of $7.0 million partially offset capital
expenditures.  The sale of the Santa Fe Springs plant accounted for $3.6 million
of the year-to-date proceeds, with the remainder of the proceeds provided mainly
from the sale of trucks and machinery and  equipment.  The Company  continues to
carry the Atlanta,  Georgia manufacturing facility as an asset held for sale and
expects the  disposition  to occur before the end of 1998 without a  significant
gain or loss.

    Cash used by financing  activities in 1997 was $161.6 million.  In 1997, the
Company  entered  into an amendment  and  restatement  of the Credit  Agreement,
proceeds from which were used to extinguish existing term loans under the Credit
Agreement of $153.6 million.  The  extinguishment was funded primarily by a draw
down on the revolving loan facility and $109.8 million under a new term loan, in
each  case  under  the  Credit  Agreement.  During  1997,  the draw  down on the
revolving  loan  facility was  completely  repaid.  Additionally,  in the fourth
quarter of 1997, the Company  extinguished  $29.0 million of debt related to the
Seller Note and made $70.0  million in principal  pre-payments  on the term loan
under the Credit  Agreement using existing cash resources.  Scheduled  principal
payments of $18.7  million  were made during the year on the term loan and other
debt.

                                       12
<PAGE>

    CASH FLOW FOR 1996 AND 1995

    Cash provided from  operating  activities  increased  $114.2 million in 1996
over the cash used in operations in 1995. The significant  increase reflects the
net  earnings  improvement  along  with  improved  working  capital  management.
Adjusting  the 1995 net loss of $158.3  million by both the $86.5  million  loss
recorded on the  impairment  of the Salty  Snacks  business and the Salty Snacks
business  operating  loss of  $25.6  million,  yields  a 1995  net loss of $46.2
million  compared  to  1996  net  income  of  $9.3  million.  The  net  earnings
improvement of $55.5 million was achieved through increased revenues  attributed
to price  increases,  a more profitable  sales mix, and cost  reductions.  Lower
costs resulted from lower fixed overhead,  reduced  selling,  distribution,  and
administrative  expense resulting from headcount reductions,  and more effective
marketing spending.  The improved cash provided by working capital resulted from
a sustained  improvement in cash  collections of accounts  receivable and higher
accounts  payable.  The additional  cash provided from working capital more than
funded the  combined  $41.3  million of spending on plant and  facility  closing
costs and severance,  as a result of actions in connection  with the Keebler and
Sunshine  acquisitions.  Keebler  believes  that  spending on plant and facility
closing costs and severance should be substantially  completed over the next two
years.  Only  noncancellable  lease  obligations  are  expected  to exceed  such
two-year time frame.

    Cash used by  investing  activities  was $64.9  million in 1996  compared to
$52.6 million in 1995.  The cash used in 1996 was directly  attributable  to the
$142.7 million used to finance the Sunshine acquisition.  Offsetting this use of
cash was the receipt of $32.6  million  working  capital  adjustment  paid by UB
Investments  (Netherlands) B.V. in connection with the Keebler acquisition and a
$67.7 million source of cash received by the predecessor  company resulting from
the disposition of the Frozen Food businesses.  Capital  expenditures were $32.6
million and $55.4 million in 1996 and 1995, respectively.  In 1996 under current
management,  capital  projects were mostly  designed to generate  near-term cost
savings and to  complete  the  investment  in  improved  management  information
systems.  Capital expenditures in 1996 were down from the prior years reflecting
the near  completion of the  installation  of the  Company's SAP R/3  management
information system and tighter restrictions on additional capital  expenditures.
The Company  believes  that the capital  expenditure  program will continue at a
level sufficient to support its strategies and operating needs.

    Cash flow provided from financing activities decreased $83.3 million in 1996
from 1995. In 1996,  the $21.1 million cash provided from  financing  activities
was  comprised of $220.0  million in long-term  debt  borrowings  of which $95.0
million was used to finance  the  Sunshine  acquisition.  An  additional  $125.0
million of  borrowings  represents  the  issuance of the Notes which was done to
refinance  the bridge loan used to finance the Keebler  acquisition.  Draw downs
and  repayments on the revolving loan facility were $37.2 million of which $19.0
million was used to finance a portion of the Sunshine acquisition. The remaining
$18.2 million was used to finance working capital requirements. Offsetting these
sources was $63.3 million paid by the predecessor  company to settle  commercial
paper and revolving credit obligations and $2.4 million of principal payments on
equipment  obligations.  The cash provided from  financing  activities of $104.4
million  in 1995  was  through  commercial  paper  borrowings  used  to  finance
operating  losses,  capital  expenditures,   and  cash  spent  on  restructuring
initiatives.

LIQUIDITY

    The Company's  liquidity in 1997 and 1996 was provided from a revolving loan
facility.  In 1996 available  borrowings  under the revolving loan facility were
$155.0 million which was reduced to $140.0 million in 1997. Borrowings under the
revolving  loan facility in 1997 and 1996 were $32.8 million and $37.2  million,
respectively,  all of which had been  repaid as of January 3, 1998 and  December
28, 1996. In 1995,  borrowings  for the  predecessor  company were provided by a
$200.0 million  commercial paper program and a revolving credit agreement.  Both
the  commercial  paper program and  revolving  credit  agreement  were no longer
available after the Keebler acquisition.

    Capital  expenditures  for  1998  are  expected  to be  approximately  $50.0
million, up nearly $2.0  million from 1997. The majority of capital  spending in
1998 will be used to increase the  automation  in  production  and  distribution
facilities  to  obtain  cost  savings.  The  Company  anticipates  that  capital
expenditures will be funded from cash provided by working capital.

                                       13
<PAGE>

    The  Company  historically  has  not  paid  dividends,  currently  does  not
anticipate paying  dividends,  and intends to retain all future earnings to fund
the  development and growth of the business.  The existing Credit  Agreement and
the Notes place  limitations  on the Company's  ability to pay dividends or make
other  distributions  on its common stock.  Additionally,  the Credit  Agreement
requires the Company to meet certain  financial  covenants  including net worth;
earnings before interest, taxes, depreciation,  and amortization;  and cash flow
and interest  coverage  ratios.  In 1997 and 1996, the Company met all financial
covenants in all of its  financing  agreements.  Total debt was $298.8  million,
$457.9 million, and $437.6 million as of January 3, 1998, December 28, 1996, and
December  30,  1995,   respectively.   Current  maturities  on  the  total  debt
outstanding  were $26.4 million,  $18.6  million,  and $286.5 million as of such
respective  dates.  Cash and cash  equivalents on January 3, 1998,  December 28,
1996, and December 30, 1995 were $27.2 million, $12.0 million, and $3.0 million,
respectively.

    Concurrent  with the Offering,  Bermore  exercised a warrant in exchange for
6,135,781  shares of common stock.  The exercise of the warrant  resulted in the
Company  receiving  $19.8  million of cash  proceeds on February 3, 1998. At the
time of the  Offering,  the  Company  was also  required to make an offer to the
holders of the Notes to purchase the Notes at 101% of the principal amount. None
of the holders sold into the change of control  offer on the Notes.  The Company
believes  that  available  cash,  as well as  existing  credit  facilities,  are
sufficient  to  meet  the  Company's  normal  operating   requirements  for  the
foreseeable future.

NEW ACCOUNTING PRONOUNCEMENTS

    In June 1997, the Financial  Accounting  Standards Board (the "FASB") issued
Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  130,  "Reporting
Comprehensive Income," which is effective in fiscal year 1998. The new statement
establishes  standards for reporting and the display of comprehensive income and
its  components  (revenues,  expenses,  gains,  and  losses)  in  the  financial
statements.  The  statement  requires  all  items  recognized  under  accounting
standards  as  components  of  comprehensive  income be  reported in a financial
statement displayed with the same prominence as other financial statements.  The
Company  has  not yet  determined  the  impact  the new  statement  may  have on
disclosures in the consolidated financial statements.

    Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an  Enterprise  and Related  Information,"  which is effective in fiscal year
1999.  The new  statement  revises  standards  for  public  companies  to report
information  about  segments of the business  and also  requires  disclosure  of
selected segment information in quarterly financial reports.  The statement also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas, and major  customers.  The Company has not yet determined the
impact the new statement may have on disclosures in the  consolidated  financial
statements.

    In February  1998,  the FASB issued  SFAS No. 132,  "Employers'  Disclosures
about Pensions and Other Postretirement  Benefits," which is effective in fiscal
year 1998.  The new  statement  improves  disclosures  about  pensions and other
postretirement   benefits  to  provide  information  to  analyze:   the  benefit
obligation, the fair value of the plan assets, and changes to the obligation and
fair value of plan assets, including unrecognized gains and losses. In addition,
the  statement  provides  information  on the  quality  of  earnings,  including
recognized  and  unrecognized  amounts used when  projecting  benefit  costs and
earnings of future  periods.  The Company has not yet  determined the impact the
new statement may have on disclosures in the consolidated financial statements.

    The  FASB  also   issued   certain   other   disclosure-related   accounting
pronouncements  during 1997. While these new statements are effective for future
reporting  periods,   the  Company  does  not  anticipate  they  will  have  any
significant impact on the consolidated financial statements.

SEASONALITY

    The  Company's  net sales,  net income,  and cash flows are  affected by the
timing of new product introductions,  promotional  activities,  price increases,
and a seasonal  sales bias toward the second half of the year due to events such
as back-to-school,  Thanksgiving, and Christmas. The relative mix between cookie
and cracker sales varies  throughout the year with stronger cracker sales in the
last quarter of the calendar year.

                                       14
<PAGE>

SELF INSURANCE

    The Company purchases insurance coverage for worker's compensation, general,
product,  and vehicle  liability  maintaining  certain  levels of retained  risk
(self-insured   portion).   Potential   losses  relating  to  claims  under  the
self-insured  portion  of the  policies  are  accrued  in  accordance  with  the
requirements  of SFAS  No.  5,  "Accounting  for  Contingencies."  There  are no
unasserted  claims that require a reserve or disclosure in accordance  with SFAS
No. 5.

FORWARD-LOOKING STATEMENTS

    When used in this discussion, the words "believes" and "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain  risks and  uncertainties,  over which the Company has no
control,  which  could  cause  actual  results to differ  materially  from those
projected.   Readers  are  cautioned  not  to  place  undue  reliance  on  these
forward-looking  statements which speak only as of the date hereof.  The Company
undertakes no obligations  to republish  revised  forward-looking  statements to
reflect  events  or  circumstances  after the date  thereof  or to  reflect  the
occurrence of unanticipated  events.  Readers are also urged to carefully review
and consider the various  disclosures  made by the Company,  in this report,  as
well as the Company's  periodic  reports filed with the  Securities and Exchange
Commission.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    Refer to the Index to Financial  Statements and Financial Statement Schedule
on F-1 for the required information.

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

    Not applicable.


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The following are the executive officers of the Company:

    SAM K. REED, 51. Mr. Reed has been the President,  Chief Executive  Officer,
and Director of the Company since the Keebler  acquisition  in January 1996. Mr.
Reed has  twenty-four  years of experience  in the snack and baking  industries.
From  January  1994 to  January  1995 he served as Chief  Executive  Officer  of
Specialty Foods Corporation's $450 million Western Bakery Group division.  Prior
to that,  he was  President  and Chief  Executive  Officer of Mother's  Cake and
Cookie Co. from 1991 to 1994, and held  Executive  Vice  President  positions at
Wyndham Bakery  Products from 1988 to 1990 and Murray Bakery  Products from 1985
to 1988. Mr. Reed managed a natural foods company from 1984 to 1985, which later
became The Quaker Oats Company's  rice cake  division.  He started his career in
1974  with  Oroweat   Foods  Company  where  he  spent  ten  years  in  finance,
manufacturing,  and  general  management.  Mr.  Reed  received a B.A.  from Rice
University and an M.B.A. from Stanford University.

    DAVID B. VERMYLEN,  47. Mr. Vermylen has been the  President-Keebler  Brands
since the Keebler  acquisition in January 1996. Mr. Vermylen  manages  Keebler's
branded  biscuits,  pie crust, and imported products sector. He has twenty-three
years  experience  in  marketing  consumer  packaged  goods  including  cookies,
cereals,  beverages,  and  convenience  foods.  In 1995,  he served as Chairman,
President,  and Chief Executive  Officer of Brothers  Gourmet Coffee, a publicly
traded specialty beverage  manufacturer and retailer. He served as President and
Chief Operating Officer from 1994 to 1995 and Vice President-Marketing from 1991
to 1993 at Mother's Cake and Cookie Co. Mr.

                                       15
<PAGE>

Vermylen spent  fourteen years in product  management at General Foods from 1974
to 1988 managing a variety of businesses, including serving as Vice President of
Marketing  for Post  Cereals.  Mr.  Vermylen  was also a  founding  partner of a
consulting  firm  specializing  in food marketing and grocery  distribution.  He
holds a B.A. in economics from Georgetown University and an M.B.A. from New York
University.

    E. NICHOL MCCULLY,  43. Mr. McCully has been the Chief Financial Officer and
Senior Vice  President  Finance of the Company since the Keebler  acquisition in
January 1996.  Mr. McCully has over ten years  experience as a senior  financial
executive in the food industry,  most recently as group Chief Financial  Officer
for the Western Bakery Group division of Specialty Foods  Corporation  from 1993
to 1995. Mr. McCully was Vice President-Finance for Mother's Cake and Cookie Co.
from 1991 until its  acquisition by Specialty  Foods  Corporation in 1993.  From
1990 to 1991,  he was Vice  President-Finance,  and  from  1988 to 1990,  he was
Controller  for  Spreckels  Sugar Co. Prior to entering the food  industry,  Mr.
McCully held financial  management  positions with Triad Systems Corporation and
Wells Fargo  Leasing  Corporation,  and he has auditing  experience  with Arthur
Andersen & Co. Mr. McCully  received a B.A. from the University of California at
Berkeley and an M.B.A.  from the  University of  California at Los Angeles.  Mr.
McCully is also a Certified Public Accountant.

    JACK M. LOTKER, 54. Mr. Lotker has been President-Specialty  Products of the
Company since the Keebler  acquisition in January 1996. Mr. Lotker has worked in
the food industry for  twenty-three  years,  most recently at Homeland Stores of
Oklahoma from 1988 to 1995. His  experience in the baking  industry and with DSD
distribution  systems includes two years at CPC  International as Vice President
and General  Manager of Dry Products from 1986 to 1988 and eight years at Arnold
Food Company as Vice President and Group Executive from 1978 to 1986. Mr. Lotker
headed the American Bakers Association  Industrial Relations Committee from 1983
to 1986 and has an extensive  knowledge of the interaction among food retailing,
wholesale  bakery  distribution,  and unionized  bakery  operations.  Mr. Lotker
received  his  B.A.  from  Queens  College  and  his  M.B.A.  from  Long  Island
University.

    JAMES T. WILLARD, 57. Mr. Willard has been Senior Vice  President-Operations
of the Company since July 1996. With  thirty-three  years experience in the food
industry, Mr. Willard most recently was Senior Vice President at Nabisco Biscuit
Co.  from 1993 to 1996,  and  Senior  Vice  President-Operations  and  Technical
Services at Nabisco Specialty  Products Division from 1991 to 1993. From 1988 to
1991, Mr. Willard was Senior Vice  President-Operations at ALPO Pet Foods, Inc.,
and Mr. Willard was Senior Vice  President-North  American Operations at Cadbury
Schweppes, Inc. from 1986 to 1988. Prior to those assignments,  Mr. Willard held
various positions at Nestle Foods Corporation from 1964 to 1986. These positions
were  Vice  President-U.S.  Chocolate  Manufacturing  (1983  to  1986),  General
Manager-Chocolate  Manufacturing  (1980  to  1983  and  1975 to  1978),  General
Manager-Fruits,  Tomatoes & Meats (1978 to 1980), Division Manager-Manufacturing
(1971  to  1975),  Assistant   Manager-Quality   Control  (1970  to  1972),  and
Microbiologist  and  Chemist-Regional  Laboratory  (1964 to 1970).  Mr.  Willard
received a B.S. from Capital University and an M.S. from Ohio State University.

    THOMAS E. O'NEILL, 43. Mr. O'Neill has been Vice President,  Secretary,  and
General  Counsel of the Company since  December 1996. Mr. O'Neill has spent more
than twelve years in the food industry,  most recently serving as Vice President
and  Division  Counsel for the  Worldwide  Beverage  Division of The Quaker Oats
Company from December 1994 to December 1996. In that  position,  Mr. O'Neill was
responsible  for all legal  matters in both domestic and  international  markets
concerning the $2 billion division.  Mr. O'Neill was Vice President and Division
Counsel of the Gatorade  Worldwide Division of The Quaker Oats Company from 1991
through  1994.  Prior to joining  Quaker Oats in 1985,  Mr.  O'Neill spent three
years with Winston & Strawn,  a law firm based in Chicago.  Mr. O'Neill received
both his B.A. and J.D.  from the  University  of Notre Dame.  He also  completed
additional  work in the  executive  management  program at Harvard  University's
Graduate School of Business.

    JAMES T. SPEAR, 43. Mr. Spear has been Vice President  Finance and Corporate
Controller  of the Company  since July 1995.  He  originally  joined  Keebler in
February 1992 as Corporate  Controller.  Before  starting with the Company,  Mr.
Spear was Chief  Financial  Officer of Kirkland & Ellis from 1989 to 1991.  From
1979 to 1989, he was with Price  Waterhouse  as both an auditor and  consultant,
mainly with  clients in the food  industry.  Mr.  Spear holds a B.A.  from Miami
University and an M.B.A.  from Indiana  University  Graduate School of Business.
Mr. Spear is also a Certified Public Accountant.

                                       16
<PAGE>

    HARRY J. WALSH, 42. Mr. Walsh has been Vice President-Corporate Planning and
Development  of the Company  since  January  1997,  and was the Chief  Operating
Officer of Sunshine from June 1996 to January 1997.  Mr. Walsh has sixteen years
of  experience  with  baking and snack food  companies  with DSD  systems,  most
recently as Vice  President for G.F.  Industries,  Inc. from 1995 to 1996.  From
1994 to 1995,  he was President and Chief  Operating  Officer,  and from 1993 to
1994, Chief Financial  Officer for Granny Goose Foods,  Inc. Mr. Walsh served as
Vice  President-Operations  for Bell Carter  Distributing  Company  from 1992 to
1993,  Chief Financial  Officer for San Francisco  French Bread Co. from 1991 to
1992 and Vice  President-Finance  for Mother's  Cake and Cookie Co. from 1985 to
1991. From 1983 to 1985, he was Vice  President-Finance,  and from 1981 to 1983,
Controller  for Salerno  Megowen  Biscuit  Company.  Prior to entering  the food
industry, Mr. Walsh was an auditor with Arthur Andersen & Co. Mr. Walsh received
a B.A. from the University of Notre Dame and is a Certified Public Accountant.

    All executive officers serve at the pleasure of the Board of Directors.

    There is no family relationship between any of the executive officers of the
Company.

    The following sets forth the names,  ages, other positions and offices held,
and a  brief  account  of the  business  experience  of  each  of the  Company's
directors. Members of the Board of Directors with a term expiring on the date of
the 1999 annual  meeting of the  shareholders  of the  Company  are  Messrs.  G.
Anthony Campbell, Amos R. McMullian,  Wayne H. Pace, and Sam K. Reed. Members of
the  Board of  Directors  with a term  expiring  on the date of the 2000  annual
meeting of the  shareholders  of the Company are Messrs.  Franklin L. Burke,  C.
Martin Wood III, and Jimmy M. Woodward. Members of the Board of Directors with a
term expiring on the date of the 2001 annual meeting of the  shareholders of the
Company are Messrs.  Johnston C. Adams, Jr., Robert P. Crozer,  Raymond Debbane,
and Sacha Lainovic.  Directors can be removed from office only by an affirmative
vote of a majority  of holders  of common  stock.  Unless  otherwise  noted,  no
director  of the  Company  serves  as a  director  of any  other  company  whose
securities are registered under the Securities Exchange Act of 1934.

    ROBERT P.  CROZER,  51. Mr.  Crozer  was  elected  Chairman  of the Board of
Directors of Keebler in February 1998. Mr. Crozer has been a Director of Keebler
since  March  1996.  Mr.  Crozer  has  served as Vice  Chairman  of the Board of
Directors  of  Flowers  since  1989.  He joined  Flowers  in 1973 and has been a
director of Flowers since 1979. Mr. Crozer served as Vice President-Marketing of
Flowers from 1985 to 1989,  Corporate  Director of Marketing Planning of Flowers
from 1979 to 1985, as well as President and Chief Operating Officer, Convenience
Products Group of Flowers from 1979 to 1989.

    SAM K. REED, 51.  See "Executive Officers," above.

    JOHNSTON C. ADAMS,  JR.,  49. Mr.  Adams was elected  Director of Keebler in
February 1998. Mr. Adams has served as Chairman and Chief  Executive  Officer of
AutoZone, Inc. ("AutoZone") since March 1997. He has been a Director of AutoZone
since 1996. Mr. Adams had been President and Chief Executive Officer of AutoZone
since December 1996, and Vice Chairman and Chief  Operating  Officer of AutoZone
since   March   1996.    Previously,    in   1995,   he   was   Executive   Vice
President-Distribution. From 1990 to 1994, Mr. Adams was a co-owner of Nicotiana
Enterprises,  Inc., a company primarily engaged in food distribution.  From 1983
to 1990, Mr. Adams was President of the Miami  Division of Malone & Hyde,  Inc.,
the former parent company of AutoZone.

    FRANKLIN L. BURKE, 56. Mr. Burke was elected Director of Keebler in February
1998. Mr. Burke has been a Director of Flowers since 1994 and a private investor
since 1991.  Mr. Burke is also a Director of William Bird & Co. He is the former
Senior Executive Vice President and Chief Operating  Officer of Bank South Corp.
(OTC), Atlanta,  Georgia, and the former Chairman and Chief Executive Officer of
Bank South, N.A., the principal subsidiary of Bank South Corp. From 1993 through
1994, Mr. Burke was employed as an advisor by the J.B. Fuqua Foundation, Inc.

    G. ANTHONY  CAMPBELL,  45. Mr.  Campbell was elected  Director of Keebler in
February  1998. Mr.  Campbell has been General  Counsel and Secretary of Flowers
since January 1985. He has been a Director of Flowers since 1991.  Mr.  Campbell
joined Flowers in 1983 as Assistant General Counsel.

                                       17
<PAGE>


    RAYMOND  DEBBANE,  43. Mr.  Debbane has been a Director of Keebler since May
1996.  Mr.  Debbane  has  served  as the  President  of The  Invus  Group,  Ltd.
("INVUS"), the U.S. investment advisor for Artal, since 1985. From 1982 to 1985,
Mr.  Debbane was a Manager in the Paris office of The Boston  Consulting  Group,
where he was  employed  since  1979.  Since May  1997,  Mr.  Debbane  has been a
director of Artal Group S.A., a privately-held Luxembourg company and the parent
company of Artal.

    SACHA LAINOVIC,  41. Mr. Lainovic has been a Director of Keebler since March
1996.  Mr.  Lainovic  has served as an Executive  Vice  President of INVUS since
1985.  Mr.  Lainovic was a Manager in the Paris office of The Boston  Consulting
Group from 1984 to 1985, where he was employed since 1981.

    AMOS R.  MCMULLIAN,  60. Mr.  McMullian has been a Director of Keebler since
March 1996. Mr. McMullian has served as Chief Executive Officer of Flowers since
April 1981 and Chairman of the Board of Directors of Flowers since January 1985.
Since  joining  Flowers in 1963,  Mr.  McMullian  has also  served as  assistant
controller, data processing coordinator, assistant plant manager, plant manager,
plant president,  regional vice president, and President of the Bakery and Snack
Groups.  In 1976, he was  appointed  President  and Chief  Operating  Officer of
Flowers and was elected to the Board of Directors of Flowers.  He served as Vice
Chairman of the Board of Directors of Flowers from 1984 to 1985.

    WAYNE H. PACE,  51. Mr.  Pace was  elected  Director  of Keebler in February
1998.  Mr.  Pace has served as  Executive  Vice  President-Chief  Financial  and
Administrative  Officer  of Turner  Broadcasting  Systems,  Inc.  ("TBS")  since
October  1996.  From July 1993  until  October  1996,  Mr.  Pace  served as Vice
President-Finance  and Chief Financial Officer of TBS. Mr. Pace was a partner at
Price Waterhouse from 1981 until he joined TBS in July 1993.

    C. MARTIN WOOD III, 54. Mr. Wood has been a Director of Keebler  since March
1996. Mr. Wood has served as Senior Vice President and Chief  Financial  Officer
of Flowers since  September 1978. Mr. Wood joined Flowers in 1970 as Director of
New Product  Development.  He was  appointed  Director of Marketing  Services of
Flowers  the   following   year,   Director   of  Finance  in  1973,   and  Vice
President-Finance in 1976. Mr. Wood has been a Director of Flowers since 1975.

    JIMMY M.  WOODWARD,  37. Mr.  Woodward  was  elected  Director of Keebler in
February  1998.  Mr.  Woodward has served as Treasurer of Flowers since 1997. He
was  promoted to  Assistant  Treasurer  in 1990 after  joining  Flowers as a Tax
Manager in 1985.  Prior to his employment at Flowers,  Mr.  Woodward worked as a
Tax  Supervisor at Coopers & Lybrand.  Mr.  Woodward is also a Certified  Public
Accountant.

    Messrs. Robert P. Crozer and C. Martin Wood III are brothers-in-law. Messrs.
Raymond  Debbane  and Sacha  Lainovic  were  elected  to the Board of  Directors
pursuant to a contractual agreement between Artal and Flowers.

COMMITTEES OF THE BOARD OF DIRECTORS

    The Audit  Committee is responsible  for reviewing the Company's  accounting
controls  and  recommending  to the Board of  Directors  the  engagement  of the
Company's outside auditors.  The members of the Audit Committee as of the end of
1997 were Messrs.  Robert P. Crozer and  Christopher  J. Sobecki.  In connection
with the  Offering,  Mr.  Sobecki  tendered  his  resignation  from the Board of
Directors of the Company.  Subsequent to the Offering,  the members of the Audit
Committee are Messrs. Johnston C. Adams, Jr. and Wayne H. Pace.

    The  Compensation  Committee is responsible  for reviewing and approving the
amount and type of consideration to be paid to senior management.  As of the end
of 1997,  the  members of the  Compensation  Committee  were  Messrs.  Robert P.
Crozer,  Raymond Debbane, and Sam K. Reed. In connection with the Offering,  the
Company's Compensation  Committee was reconstituted to include Messrs.  Johnston
C. Adams, Jr., Franklin L. Burke, Raymond Debbane, and Wayne H. Pace.

    The Executive  Committee of the Company is empowered to take certain actions
on behalf of the Board of  Directors  pursuant  to powers  granted  to it by the
Company's  By-Laws or by direction of the Board of Directors as authorized  from
time to time. The members of the Company's  Executive  Committee are Messrs.  G.
Anthony Campbell,  Robert P. Crozer, Raymond Debbane, Amos R. McMullian, and Sam
K. Reed.

                                       18
<PAGE>

    The Nominating  Committee evaluates and recommends to the Board of Directors
candidates  for directors.  The members of the Nominating  Committee are Messrs.
Franklin L. Burke, Robert P. Crozer, Sacha Lainovic, and C. Martin Wood III.


ITEM 11.  EXECUTIVE COMPENSATION

    The following  table sets forth the cash  compensation  that was paid to the
top  five  executive  officers  of the  Company  in 1997 and  1996  (the  "Named
Executive  Officers")  and the number of shares of the common  stock  underlying
options to purchase shares of the common stock issued pursuant to the 1996 Stock
Purchase and Option Plan for Key  Employees of INFLO  Holdings  Corporation  and
Subsidiaries,  as amended (the "1996 Stock Option Plan"), that have been granted
to date for services in all  capacities  to be rendered to the Company.  Keebler
paid no  remuneration  to its current  executive  officers  prior to the Keebler
acquisition.

<TABLE>
                                                     SUMMARY COMPENSATION TABLE
<CAPTION>
                                                                                      LONG-TERM
                                                                                     COMPENSATION
                                                                                     -------------
                                                 ANNUAL COMPENSATION                    AWARDS
                                      -------------------------------------------    -------------
                                                                                      SECURITIES
                                                                     OTHER            UNDERLYING
     NAME AND                         SALARY ($)                     ANNUAL            OPTIONS/         ALL OTHER
     PRINCIPAL POSITION       YEAR        (1)        BONUS($)    COMPENSATION ($)       SARS(#)       COMPENSATION($)
     ------------------       ----    ----------   ------------  ----------------    -------------    ---------------
     <S>                      <C>     <C>          <C>           <C>                 <C>              <C>
                              
     Sam K. Reed............   1997     $650,000     $1,098,500         (2)                 --          $  4,750 (4)
       President and Chief     1996     $650,000     $  845,000     $167,818 (3)       1,289,813             --
       Executive Officer

     David B. Vermylen......   1997     $341,302     $  355,000         (2)                 --          $  4,750 (4)
       President - Keebler     1996     $325,000     $  300,000     $ 66,545 (3)         300,956             --
       Brands                                      

     E. Nichol McCully......   1997     $270,010     $  280,800         (2)                 --          $  4,750 (4)
       Senior Vice President   1996     $240,000     $  250,000     $ 77,029 (3)         300,956             --
       Finance and Chief                           
       Financial Officer

     Jack M. Lotker.........   1997     $260,000     $  187,200         (2)                 --          $  4,750 (4)
       President - Specialty   1996     $240,000     $  211,200     $ 87,650 (3)         300,956             --
       Products                                    

     James T. Willard.......   1997     $294,008     $  211,700         (2)                 --          $  4,750 (4)
       Senior Vice             1996     $280,000     $  271,581     $121,565 (3)         300,956             --
       President - Operations                                

------------
<FN>

(1) Amounts listed for the Named Executive  Officers are annual base salaries,  including  amounts to be deferred in accordance with
    any deferred salary option plan of the Company.

(2) Perquisites and other personal benefits,  securities,  and property in the aggregate do not exceed the threshold reporting level
    of the lesser of $50,000 or 10% of total salary and bonus reported for the Named Executive Officers.

(3) Includes amounts reimbursed during the fiscal year for the payment of taxes related to relocation  reimbursements.  For 1996 the
    amounts are: Mr. Reed, $140,515; Mr. Vermylen, $42,330; Mr. McCully, $53,604; Mr. Lotker, $63,496; and Mr. Willard, $95,964.

(4) Represents  company  matching  contributions  to the Named Executive  Officers'  accounts in the Keebler Foods Company  Salaried
    Savings Plan. Vesting occurs 20% per year over five years, based on years of service.

</FN>
</TABLE>
                                       19
<PAGE>

    The table below sets forth certain  information with respect to the value of
unexercised options held by the Named Executive Officers at the 1997 fiscal year
end. No options were granted to or exercised by the Named Executive  Officers in
fiscal 1997.

<TABLE>
                                                  OPTION VALUES AT JANUARY 3, 1998
<CAPTION>
                                                             NUMBER OF SECURITIES            VALUE OF UNEXERCISED IN-
                                                            UNDERLYING UNEXERCISED            THE-MONEY OPTIONS/SARS
                                                           OPTIONS/SARS AT FY-END(#)                AT FY-END($)
 NAME                                                      EXERCISABLE/UNEXERCISABLE         EXERCISABLE/UNEXERCISABLE
 --------------------------------------------------     ------------------------------     ------------------------------
<S>                                                     <C>                                <C>    
 Sam K. Reed.......................................            300,957 / 988,856                 6,699,303 / 22,011,934
 David B. Vermylen.................................             70,223 / 230,733                  1,563,164 / 5,136,117
 E. Nichol McCully.................................             70,223 / 230,733                  1,563,164 / 5,136,117
 Jack M. Lotker....................................             70,223 / 230,733                  1,563,164 / 5,136,117
 James T. Willard..................................             70,223 / 230,733                  1,563,164 / 5,136,117

</TABLE>

    The  Company's  principal   non-contributory  defined  benefit  plan  covers
qualifying salaried and certain hourly-paid  employees who have completed twelve
months of service.  The Named Executive Officers participate in this plan on the
same basis as do  approximately  14,300  other  eligible  participants.  Benefit
amounts are based on years of service and average monthly  compensation  for the
five highest  consecutive  years out of the last fifteen years of employment for
salaried  employees and some hourly  employees.  Certain  hourly groups can have
different  benefit  schedules than salaried  participants.  The following  table
illustrates the estimated  annual benefits to be paid upon normal  retirement at
age  65  to  individuals  in  specified   compensation   and  years  of  service
classifications. The table does not reflect benefit limitations contained in the
Internal  Revenue  Code.  Pursuant  to a  separate  plan  (the  "Excess  Plan"),
supplemental   payments  in  excess  of  those   limitations  will  be  made  to
participants  in  order to  maintain  benefits  upon  retirement  at the  levels
provided  under the defined  benefit  plan's  formula.  In addition to the plans
noted above, the Company also maintains an unfunded supplemental retirement plan
for certain former  executives.  No current Named Executive Officers are covered
by the supplemental plan.

<TABLE>
                                                        PENSION PLAN TABLE
<CAPTION>
                                            ESTIMATED ANNUAL NORMAL RETIREMENT BENEFITS
                      ---------------------------------------------------------------------------------- 
                                               YEARS OF SERVICE AT NORMAL RETIREMENT(1)
COMPENSATION(2)           10          15          20          25          30          35          40
---------------       ----------  ----------  ----------  ----------  ----------  ----------  ----------
<S>                   <C>         <C>         <C>         <C>         <C>         <C>         <C>
 $  400,000........... $ 58,000    $ 87,000    $116,000    $145,000    $174,000    $203,000   $  232,000
    600,000...........   88,000     132,000     176,000     220,000     264,000     308,000      352,000
    800,000...........  118,000     177,000     236,000     295,000     354,000     413,000      472,000
  1,000,000...........  148,000     222,000     296,000     370,000     444,000     518,000      592,000
  1,200,000...........  178,000     267,000     356,000     445,000     534,000     623,000      712,000
  1,400,000...........  208,000     312,000     416,000     520,000     624,000     728,000      832,000
  1,600,000...........  238,000     357,000     476,000     595,000     714,000     833,000      952,000
  1,800,000...........  268,000     402,000     536,000     670,000     804,000     938,000    1,072,000

------------
<FN>

(1) Years of service as of January 3, 1998 for the Named Executive  Officers were as follows:  Mr. Reed, Mr. Vermylen,  Mr. McCully,
    and Mr. Lotker, approximately 2.0 years, and Mr. Willard, approximately 1.5 years. In addition, a separate agreement between Mr.
    Willard and Keebler  provides a minimum  level of benefit to Mr.  Willard based on what he could have been entitled to under his
    previous employ.

(2) Compensation includes all amounts shown under the columns entitled "Annual Compensation" in the Summary Compensation Table.

</FN>
</TABLE>

                                       20
<PAGE>


COMPENSATION OF DIRECTORS

    As of the end of 1997, directors of the Company received no remuneration for
serving as director. Beginning with fiscal year 1998, no director of the Company
who is also an employee of Keebler or of Flowers,  or who is nominated by Artal,
will receive  remuneration for serving as a director.  The remaining  directors,
Messrs.  Johnston  C.  Adams,  Jr.,  Franklin  L.  Burke,  and Wayne H. Pace are
compensated as follows:

    A $24,000 annual retainer is paid, together with an attendance fee of $1,000
for each Board of Directors meeting and committee  meeting.  Committee  Chairmen
receive an additional $3,000 annual payment.

    In  connection  with  the  Non-Employee  Director  Stock  Plan,  each of the
non-employee  directors  was granted  7,500 fully vested  options at an exercise
price of $27.44 on February 10, 1998.

EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS

    The Company  entered into an  employment  agreement  with Mr. Sam K. Reed on
February 3, 1998 which  provides  for Mr.  Reed's  continued  employment  as the
Company's  President and Chief  Executive  Officer,  and continued  service as a
director. Mr. Reed's employment agreement has severance terms identical to those
for the other executive  officers set forth below.  Additionally,  the agreement
provides  that  Mr.  Reed's  cash  compensation  and  future   participation  in
management incentive and option plans is to be set by the Compensation Committee
of the  Board of  Directors,  and is based on the  compensation  of other  chief
executive  officers  of  branded  food  companies  comparable  to  Keebler.  The
Compensation Committee is charged with creating or maintaining a package for Mr.
Reed which ranks in the third quartile for chief  executives of such  companies,
but in no event  will his cash  compensation  be less  than its  level  prior to
entering the Employment and Severance Agreement. Mr. Reed's employment agreement
terminates  according to the  provisions  for  termination of the Employment and
Severance Agreements in general, as set forth below.

    The other  executive  officers  of the  Company  (excluding  Mr.  Reed) have
entered into a termination  of employment  and change of control  agreement (the
"Employment  and Severance  Agreements")  effective  February 3, 1998. Each such
Employment and Severance Agreement provides for the continuing employment of the
executive for three years on terms and  conditions no less  favorable than those
in effect before entering the Employment and Severance Agreement. If the Company
terminates  the  executive's  employment  without  "cause"  or if the  executive
terminates  his own  employment  for  "good  reason"  (each  as  defined  in the
Employment and Severance Agreements), at any time during the term, the executive
is  entitled  to receive  continued  benefits  equal to such  employee's  annual
compensation  (including  bonus) and  continuation  of certain  benefits for the
remainder of the term of the Employment and Severance Agreement, but in no event
less than twelve months or, if such termination  occurs within two years after a
"change of control" (as defined in the Employment and Severance Agreements),  in
no event less than  twenty-four  months.  In addition,  amendments to their 1996
Option  Agreements  also  provides  that in the event of (i) the  death,  normal
retirement, or  disability  of  the  participant  or  (ii)  termination  of  the
executive's  employment  with the Company  without  "cause" or for "good reason"
(each as defined in the  Employment  and  Severance  Agreements),  all remaining
unvested options under the 1996 Stock Option Plan will immediately vest with the
employee.  Each  Employment  and  Severance  Agreement  also provide that at the
option of the Company, under certain circumstances, the employee may not compete
for a period of up to one year following  termination.  Except for the Company's
obligations  to make  payments to the  executive  upon a change of control,  all
obligations  under the Employment and Severance  Agreements will terminate after
three years, including the non-competition agreement of the executive.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    The Company's on-going Compensation  Committee was appointed on February 10,
1998 and is  comprised  of Messrs.  Johnston C. Adams,  Jr.,  Franklin L. Burke,
Raymond  Debbane,  and Wayne H. Pace.  Mr.  Debbane was elected to the Company's
Compensation  Committee pursuant to a contractual  agreement between Flowers and
Artal. Mr. Burke is a member of the Company's  Compensation Committee as well as
a Director of Flowers.

                                       21
<PAGE>

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

    In 1997, the  Compensation  Committee of the Board of Directors  established
salary and bonus levels for the executive officers of the Company, including the
President  and Chief  Executive  Officer,  based on a  combination  of financial
performance and subjective criteria.  With respect to salary levels, such levels
were set subsequent to the Committee's  determination of the executive officers'
contribution,  progress,  and  development.  Bonuses  were  based  on  attaining
pre-established  levels of earnings before interest,  taxes,  depreciation,  and
amortization and subjective criteria.

                  Robert P. Crozer, MEMBER
                  Raymond Debbane, MEMBER
                  Sam K. Reed, MEMBER AND CHIEF EXECUTIVE OFFICER OF THE COMPANY

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth certain information  regarding the beneficial
ownership of common  stock as of March 17, 1998 by (i) all persons  known by the
Company to own  beneficially 5% or more of the common stock,  (ii) each director
of Company who is a shareholder,  (iii) the Chief Executive  Officer and each of
the  other  Named  Executive  Officers,  and (iv) all  directors  and  executive
officers as a group.  Unless otherwise  indicated,  each of the shareholders has
sole  voting and  investment  power with  respect to the shares of common  stock
beneficially owned by such shareholders.

<TABLE>
<CAPTION>
                                                                                    NUMBER OF       PERCENTAGE OF 
NAME AND ADDRESS OF BENEFICIAL OWNERS                                               SHARES (1)     COMMON STOCK (1)
----------------------------------------------------------------------------    ----------------   ----------------
<S>                                                                             <C>                <C>    
Flowers Industries, Inc. (2).............................................           46,197,466           55.2%
  1919 Flowers Circle
  Thomasville, Georgia 31757
Artal Luxembourg S.A. (3)................................................           17,228,729           20.6%
  39 Boulevard Royal
  Luxembourg City, Luxembourg 2449
Bermore, Limited (4).....................................................            4,997,770            6.0%
  c/o G.F. Industries, Inc.
  999 Baker Way, Suite 200
  San Mateo, California 94404
Sam K. Reed (5)..........................................................            1,476,119            1.7%
David B. Vermylen (6) ...................................................              310,987            0.4%
E. Nichol McCully (6) ...................................................              310,987            0.4%
Jack M. Lotker (6) ......................................................              310,987            0.4%
James T. Willard (6).....................................................              310,987            0.4%
Johnston C. Adams, Jr. (7)...............................................                8,900             --
Franklin L. Burke (7)....................................................                7,500             --
G. Anthony Campbell......................................................                1,000             --
Robert P. Crozer.........................................................               10,000             --
Wayne H. Pace (7)........................................................                8,500             --
Jimmy M. Woodward........................................................                2,000             --
All directors and executive officers as a group
 (consisting of 18 persons) (8)..........................................            3,158,207            3.7%

</TABLE>

------------

(1) Shares   beneficially  owned  and  percentage  of  ownership  are  based  on
    83,730,994 shares of common stock outstanding and exercisable stock options.

(2) Flowers is currently subject to the periodic reporting and other information
    requirements  of the  Securities  and  Exchange  Act of 1934 (the  "Exchange
    Act"). Flowers' common stock is listed on the New York Stock Exchange.

                                       22
<PAGE>

(3) The parent entity of Artal is Artal Group. The address of Artal Group is the
    same as the  address  of Artal.  INVUS  serves as  Artal's  U.S.  investment
    advisor and  receives  compensation  from Artal that is based in part on the
    performance  of Artal's U.S.  investments.  Since 1985,  Artal has completed
    more than twenty-five acquisitions in the U.S. with INVUS' advice.

(4) Bermore is a privately held Bermuda limited company and the parent of GFI.

(5) Includes  902,869  shares  subject  to  stock  options  that  are  currently
    exercisable;  excludes  386,944 shares subject to stock options that are not
    exercisable.

(6) Includes  210,669  shares  subject  to  stock  options  that  are  currently
    exercisable;  excludes  90,287 shares  subject to stock options that are not
    exercisable.

(7) Includes   7,500  shares   subject  to  stock  options  that  are  currently
    exercisable.

(8) Includes  2,038,906  shares  subject  to stock  options  that are  currently
    exercisable;  excludes  864,174 shares subject to stock options that are not
    exercisable.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Not applicable.


                                     PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)    1.   The   financial  statements  listed  in  the  accompanying  Index to
            Financial  Statements and Financial  Statement Schedule are filed as
            part of this report on pages F-2 to F-28.

       2.   The financial statement schedule listed in the accompanying Index to
            Financial  Statements and Financial  Statement  Schedule is filed as
            part of this report on page S-2.

       3.   The exhibits listed in the accompanying  Index to Exhibits are filed
            as part of this Form 10-K unless noted otherwise.

(b)    Reports on Form 8-K

       1.   Current  Report on Form 8-K dated as of November 20, 1997 related to
            the merger of Keebler  Corporation with INFLO Holdings  Corporation,
            with Keebler Foods Company being the surviving corporation.

(c)    Exhibits
 
       See Exhibit Index at page i.

(d)    Financial Statement Schedule

       See Index to Financial  Statements  and Financial  Statement  Schedule on
       page F-1. 


                                       23
<PAGE>
   

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        KEEBLER FOODS COMPANY
                                             (Registrant)
 
                                        /s/   SAM K. REED
                                        ----------------------------------------
                                        Sam K. Reed
                                        President and Chief Executive Officer

                                        Date:  March 20, 1998


     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 indicated on March 20, 1998.

<TABLE>
<CAPTION>

<S>                                                             <C>    

/s/  SAM K. REED                                                /s/   RAYMOND DEBBANE
----------------------------------------------------------      --------------------------------------------------------
Sam K. Reed                                                     Raymond Debbane
President, Chief Executive Officer, and Director                (Director)
(Principal Executive Officer)

     
/s/   E. NICHOL MCCULLY                                         /s/   SACHA LAINOVIC
----------------------------------------------------------      --------------------------------------------------------
E. Nichol McCully                                               Sacha Lainovic
Senior Vice President and Chief Financial Officer               (Director)
(Principal Financial Officer)

      
/s/  JAMES T. SPEAR                                             /s/  AMOS R. MCMULLIAN
----------------------------------------------------------      --------------------------------------------------------
James T. Spear                                                  Amos R. McMullian
Vice President Finance and Corporate Controller                 (Director)
(Chief Accounting Officer)

/s/  JOHNSTON C. ADAMS, JR.                                     /s/  WAYNE H. PACE 
----------------------------------------------------------      --------------------------------------------------------
Johnston C. Adams, Jr.                                          Wayne H. Pace
(Director)                                                      (Director)


/s/  FRANKLIN L. BURKE                                          /s/  C. MARTIN WOOD III
----------------------------------------------------------      --------------------------------------------------------
Franklin L. Burke                                               C. Martin Wood III
(Director)                                                      (Director)


/s/  G. ANTHONY CAMPBELL                                        /s/  JIMMY M. WOODWARD
----------------------------------------------------------      --------------------------------------------------------
G. Anthony Campbell                                             Jimmy M. Woodward
(Director)                                                      (Director)


/s/  ROBERT P. CROZER
----------------------------------------------------------
Robert P. Crozer
(Director)

</TABLE>


                                                                 24
<PAGE>

<TABLE>
<CAPTION>

                                   INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

                                  Keebler Foods Company and UB Investments US Inc. and Subsidiaries

<S>                                                                                                            <C>
FINANCIAL STATEMENTS:                                                                                          Page
                                                                                                               ----
  Report of Independent Accountants.......................................................................      F-2

  Consolidated Balance Sheets at January 3, 1998 and December 28, 1996....................................      F-3

  Consolidated  Statements of Operations for the year ended January 3, 1998, the  forty-eight  weeks
    ended  December 28, 1996, the four weeks ended January 26, 1996, and the year ended December 30,
    1995..................................................................................................      F-5

  Consolidated  Statements of Shareholders' Equity (Deficit) for the year ended January 3, 1998, the
    forty-eight  weeks ended  December 28, 1996, the four weeks ended January 26, 1996, and the year
    ended December 30, 1995...............................................................................      F-6

  Consolidated  Statements of Cash Flows for the year ended January 3, 1998, the  forty-eight  weeks
    ended  December 28, 1996, the four weeks ended January 26, 1996, and the year ended December 30,
    1995..................................................................................................      F-7

  Notes to Consolidated Financial Statements..............................................................      F-8

FINANCIAL STATEMENT SCHEDULE:

     Report of Independent Accountants....................................................................      S-1

     Schedule II - Valuation and Qualifying Accounts......................................................      S-2

</TABLE>

     Note: The  consolidated  financial  statements of the Company listed in the
           above  index  for  Keebler  Foods   Company   include  the  financial
           statements  of the  successor  company for the year ended  January 3,
           1998 and the  forty-eight  weeks ended  December  28,  1996,  and the
           predecessor  company for the four weeks ended  January 26, 1996,  the
           date on which  UBIUS  was  acquired  by  INFLO,  and the  year  ended
           December 30, 1995. The  distinction  between the successor  company's
           and the predecessor company's  consolidated  financial statements has
           been  made by  inserting  a double  line  between  such  consolidated
           financial statements.

                                       F-1
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS


THE BOARD OF DIRECTORS AND SHAREHOLDERS OF KEEBLER FOODS COMPANY

We have audited the  accompanying  consolidated  balance sheets of Keebler Foods
Company and  Subsidiaries  as of January 3, 1998 and  December  28, 1996 and the
related  consolidated  statement of operations,  shareholders'  equity, and cash
flows for the year and forty-eight  week period then ended. We have also audited
the consolidated statements of operations,  shareholders' equity, and cash flows
of UB  Investments  US Inc.  and  Subsidiaries  for the  four-week  period ended
January  26,  1996  and the  year  ended  December  30,  1995.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  consolidated  financial  position of Keebler Foods
Company and  Subsidiaries  as of January 3, 1998 and  December  28, 1996 and the
consolidated  results of operations  and cash flows of Keebler Foods Company and
Subsidiaries  for the year ended January 3, 1998 and the forty-eight  weeks then
ended  December 28, 1996 and the  consolidated  results of  operations  and cash
flows of UB Investments US Inc. and  Subsidiaries for the four week period ended
January  26,  1996 and the year  ended  December  30,  1995 in  conformity  with
generally accepted accounting principles.



                                              COOPERS & LYBRAND L.L.P.



Chicago, Illinois
February 18, 1998



                                      F-2
<PAGE>

<TABLE>

                                                        KEEBLER FOODS COMPANY

                                                     CONSOLIDATED BALANCE SHEETS

                                          (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

<CAPTION>

                                                                                     JANUARY 3,         December 28,
                                                                                        1998                1996
                                                                                 ------------------  -------------------
<S>                                                                              <C>                 <C>
ASSETS

CURRENT ASSETS:

     Cash and cash equivalents                                                         $    27,188          $    11,954
     Trade accounts and notes receivable, net                                               98,963              137,150
     Inventories, net:
        Raw materials                                                                       25,543               25,296
        Package materials                                                                    7,306                9,842
        Finished goods                                                                      78,131               76,054
        Other                                                                                1,482                1,473
                                                                                 ------------------  -------------------
                                                                                           112,462              112,665
     Deferred income taxes                                                                  42,730               55,929
     Other                                                                                  20,303               19,337
                                                                                 ------------------  -------------------
        Total current assets                                                               301,646              337,035

PROPERTY, PLANT, AND EQUIPMENT, NET                                                        478,121              486,080

TRADEMARKS AND TRADE NAMES, NET                                                            154,146              158,033

GOODWILL, NET                                                                               47,059               48,280

PREPAID PENSION                                                                             43,060               43,359

ASSETS HELD FOR SALE                                                                         3,742                6,785

OTHER ASSETS                                                                                15,077               22,502
                                                                                 ------------------  -------------------

        Total assets                                                                   $ 1,042,851          $ 1,102,074
                                                                                 ==================  ===================


                THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

                                                                 F-3

</TABLE>
<PAGE>

<TABLE>

                                                        KEEBLER FOODS COMPANY

                                                     CONSOLIDATED BALANCE SHEETS

                                          (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

<CAPTION>

                                                                                     JANUARY 3,         December 28,
                                                                                        1998                1996
                                                                                 ------------------  -------------------
<S>                                                                              <C>                 <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Current maturities of long-term debt                                              $    26,365          $    18,570
     Trade accounts payable                                                                126,213               96,754
     Other liabilities and accruals                                                        194,923              186,893
     Income taxes payable                                                                   13,784                    -
     Plant and facility closing costs and severance                                          6,900               19,860
                                                                                 ------------------  -------------------
        Total current liabilities                                                          368,185              322,077

LONG-TERM DEBT                                                                             272,390              439,369

OTHER LIABILITIES:
     Deferred income taxes                                                                  69,417               64,068
     Postretirement/postemployment obligations                                              60,605               56,382
     Plant and facility closing costs and severance                                         15,578               16,124
     Deferred compensation                                                                  18,669               18,205
     Other                                                                                  15,956               20,708
                                                                                 ------------------  -------------------
        Total other liabilities                                                            180,225              175,487

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
     Preferred stock ($.01 par value; 100,000,000 shares authorized and
        none issued)                                                                             -                    -
     Common stock ($.01 par value; 500,000,000 shares authorized and
        77,595,213 and 77,638,206 shares issued, respectively)                                 776                  776
     Additional paid-in capital                                                            148,538              148,613
     Retained earnings                                                                      72,737               15,752
                                                                                 ------------------  -------------------
        Total shareholders' equity                                                         222,051              165,141
                                                                                 ------------------  -------------------
        Total liabilities and shareholders' equity                                     $ 1,042,851          $ 1,102,074
                                                                                 ==================  ===================


                THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

                                                                 F-4

</TABLE>
<PAGE>

<TABLE>

                                                        KEEBLER FOODS COMPANY

                                                CONSOLIDATED STATEMENTS OF OPERATIONS

                                               (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<CAPTION>

                                              KEEBLER FOODS COMPANY      ||               UBIUS
                                       ----------------------------------||----------------------------------
                                                           Forty-Eight   ||     Four
                                          YEAR ENDED       Weeks Ended   ||  Weeks Ended        Year Ended
                                        JANUARY 3,1998   December 28,1996||January 26,1996   December 30,1995
                                       ----------------- ----------------||----------------- ----------------
<S>                                    <C>               <C>             ||<C>               <C>
                                                                         ||
NET SALES                                   $ 2,065,184      $ 1,645,532 ||       $ 101,656      $ 1,578,601
                                                                         ||
COSTS AND EXPENSES:                                                      ||
   Cost of sales                                888,031          774,198 ||          54,870          746,754
   Selling, marketing, and administrative                                ||
      expenses                                1,026,245          794,837 ||          71,427          884,591
   Loss on impairment of Salty Snacks                                    ||
      business                                        -                - ||               -           86,516
   Other                                          9,511            6,347 ||             857           (1,363)
                                       ----------------- ----------------||----------------- ----------------
INCOME (LOSS) FROM CONTINUING OPERATIONS        141,397           70,150 ||         (25,498)        (137,897)
                                                                         ||
   Interest (income) from affiliates                  -                - ||            (875)         (11,376)
   Interest (income)                             (1,191)            (450)||              (3)            (151)
   Interest expense to affiliates                     -                - ||             664           11,802
   Interest expense                              35,038           38,921 ||              98           27,976
                                       ----------------- ----------------||----------------- ----------------
INTEREST EXPENSE (INCOME), NET                   33,847           38,471 ||            (116)          28,251
                                       ----------------- ----------------||----------------- ----------------
                                                                         ||
INCOME (LOSS) FROM CONTINUING OPERATIONS                                 ||
   BEFORE INCOME TAX EXPENSE (BENEFIT)          107,550           31,679 ||         (25,382)        (166,148)
   Income tax expense (benefit)                  45,169           14,002 ||               -             (459)
                                       ----------------- ----------------||----------------- ----------------
                                                                         ||
INCOME (LOSS) FROM CONTINUING OPERATIONS                                 ||
   BEFORE EXTRAORDINARY ITEM                     62,381           17,677 ||         (25,382)        (165,689)
                                                                         ||
DISCONTINUED OPERATIONS:                                                 ||
   Income from operations of discontinued                                ||
      Frozen Food businesses, net of tax              -                - ||               -            7,344
   Gain on disposal of Frozen Food                                       ||
      businesses, net of tax                          -                - ||          18,910                -
                                       ----------------- ----------------||----------------- ----------------
                                                                         ||
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM          62,381           17,677 ||          (6,472)        (158,345)
EXTRAORDINARY ITEM:                                                      ||
   Loss on early extinguishment of debt,                                 ||
      net of tax                                  5,396            1,925 ||               -                -
                                       ----------------- ----------------||----------------- ----------------
                                                                         ||
NET INCOME (LOSS)                           $    56,985      $    15,752 ||       $  (6,472)     $  (158,345)
                                       ================= ================||================= ================
                                                                         ||
BASIC NET INCOME PER SHARE:                                              ||
   Income from continuing operations                                     ||
     before extraordinary item                   $ 0.80           $ 0.24 ||
   Extraordinary item                              0.07             0.03 ||
                                               ---------        ---------||
   Net income                                    $ 0.73           $ 0.21 ||
                                               =========        =========||
WEIGHTED AVERAGE SHARES OUTSTANDING              77,604           75,244 ||
                                               =========        =========||
                                                                         ||
DILUTED NET INCOME PER SHARE:                                            ||
   Income from continuing operations                                     ||
     before extraordinary item                   $ 0.77           $ 0.23 ||
   Extraordinary item                              0.07             0.02 ||
                                               ---------        ---------||
   Net income                                    $ 0.70           $ 0.21 ||
                                               =========        =========||
WEIGHTED AVERAGE SHARES OUTSTANDING              80,562           76,076 ||
                                               =========        =========||


          THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

                                                                 F-5

</TABLE>
<PAGE>

<TABLE>

                                                        KEEBLER FOODS COMPANY

                                      CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

                                                           (IN THOUSANDS)

<CAPTION>

                                                                COMMON STOCK          ADDITIONAL   RETAINED
                                                          --------------------------   PAID-IN     EARNINGS
                                                             SHARES       AMOUNT       CAPITAL     (DEFICIT)      TOTAL
                                                          ------------- ------------ ------------ ------------ ------------
<S>                                                       <C>           <C>          <C>          <C>          <C>
BALANCE AT DECEMBER 31, 1994 (UBIUS)                             1,000      $ 1,000    $ 300,000   $ (535,898)   $(234,898)

    Net loss                                                         -            -            -     (158,345)    (158,345)

    Capital contribution from UB Investments
       (Netherlands) B.V.                                            -            -      445,000            -      445,000
                                                          ------------- ------------ ------------ ------------ ------------

BALANCE AT DECEMBER 30, 1995 (UBIUS)                             1,000        1,000      745,000     (694,243)      51,757

    Net loss for the four weeks                                      -            -            -       (6,472)      (6,472)
                                                          ------------- ------------ ------------ ------------ ------------

BALANCE AT JANUARY 26, 1996 (UBIUS)                              1,000        1,000      745,000     (700,715)      45,285

    Write-off of predecessor company equity                     (1,000)      (1,000)    (745,000)     700,715      (45,285)

    Purchase of the Company by INFLO Holdings
       Corporation effective January 26, 1996                   71,656          717      124,284            -      125,001

    Management investment                                          306            2          786            -          788

    Issuance of common stock and warrants to Bermore             5,676           57       23,543            -       23,600

    Net income for the forty-eight weeks                             -            -            -       15,752       15,752
                                                          ------------- ------------ ------------ ------------ ------------

BALANCE AT DECEMBER 28, 1996 (KEEBLER FOODS COMPANY)            77,638          776      148,613       15,752      165,141

    Purchase of treasury shares                                    (43)           -          (75)           -          (75)

    Net income                                                       -            -            -       56,985       56,985
                                                          ------------- ------------ ------------ ------------ ------------

BALANCE AT JANUARY 3, 1998 (KEEBLER FOODS COMPANY)              77,595      $   776    $ 148,538   $   72,737    $ 222,051
                                                          ============= ============ ============ ============ ============


                 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

                                                                 F-6

</TABLE>
<PAGE>

<TABLE>

                                                        KEEBLER FOODS COMPANY

                                                CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                           (IN THOUSANDS)

<CAPTION>

                                                                  KEEBLER FOODS COMPANY       ||              UBIUS
                                                             ---------------------------------|| ---------------------------------
                                                                                Forty-Eight   ||      Four
                                                                YEAR ENDED      Weeks Ended   ||   Weeks Ended       Year Ended
                                                              JANUARY 3,1998  December 28,1996|| January 26,1996  December 30,1995
                                                             ---------------- ----------------|| ---------------- ----------------
<S>                                                          <C>              <C>             || <C>              <C>
CASH FLOWS PROVIDED FROM (USED BY) OPERATING ACTIVITIES                                       ||
    Net income (loss)                                               $ 56,985         $ 15,752 ||        $ (6,472)      $ (158,345)
    Adjustments to reconcile net income (loss) to cash from                                   ||
       operating activities:                                                                  ||
       Depreciation and amortization                                  60,708           49,461 ||           1,973           47,361
       Deferred income taxes                                          18,548           12,254 ||               -           (1,985)
       Accretion on Seller Note                                        2,376            2,246 ||               -                -
       Loss on early extinguishment of debt, net of tax                3,761            1,925 ||               -                -
       (Gain) loss on sale of property, plant, and equipment            (358)            (328)||              33              159
       Loss on impairment of the Salty Snacks business, net of tax         -                - ||               -           86,516
       Gain on the disposal of the Frozen Food businesses,                                    ||
         net of tax                                                        -                - ||         (18,910)               -
    Changes in assets and liabilities:                                                        ||
       Trade accounts and notes receivable, net                       38,187            3,842 ||          22,068          (11,716)
       Accounts receivable/payable from affiliates, net                    -                - ||          (1,941)          (4,737)
       Inventories, net                                                  203           (9,809)||           4,353            6,605
       Recoverable income taxes and income taxes payable              16,113                - ||              25           (1,304)
       Other current assets                                             (966)           1,644 ||           1,192            3,772
       Deferred debt issue costs                                      (1,344)          (8,032)||               -                -
       Trade accounts payable and other current liabilities           36,806           26,105 ||          11,550          (13,304)
       Plant and facility closing costs and severance                (13,715)         (41,279)||               -                -
       Restructuring reserves                                              -                - ||         (14,469)         (24,122)
    Other, net                                                         1,044             (553)||             246            9,702
                                                             ---------------- ----------------|| ---------------- ----------------
         Cash provided from (used by) operating activities           218,348           53,228 ||            (352)         (61,398)
                                                                                              ||
CASH FLOWS (USED BY) PROVIDED FROM INVESTING ACTIVITIES                                       ||
    Capital expenditures                                             (48,429)         (29,352)||          (3,228)         (55,386)
    Proceeds from property disposals                                   6,950            9,236 ||             644            2,797
    Working capital adjustment paid by UB Investment                                          ||
      (Netherlands) B.V.                                                   -           32,609 ||               -                -
    Purchase of Sunshine Biscuits, Inc., net of cash acquired              -         (142,670)||               -                -
    Disposition of the Frozen Food businesses                              -                - ||          67,749                -
                                                             ---------------- ----------------|| ---------------- ----------------
         Cash (used by) provided from investing activities           (41,479)        (130,177)||          65,165          (52,589)
                                                                                              ||
CASH FLOWS (USED BY) PROVIDED FROM FINANCING ACTIVITIES                                       ||
    Purchase of treasury shares/capital contributions                    (75)             788 ||               -          445,000
    Reduction of notes payable to affiliate                                -                - ||               -         (445,000)
    Long-term debt borrowings                                        109,750          220,000 ||               -                -
    Long-term debt repayments                                       (271,310)        (134,000)||          (2,377)         (30,078)
    Commercial paper and Revolving Loan facilities, net                    -                - ||         (63,300)         134,500
                                                             ---------------- ----------------|| ---------------- ----------------
         Cash (used by) provided from financing activities          (161,635)          86,788 ||         (65,677)         104,422
                                                             ---------------- ----------------|| ---------------- ----------------
         Increase (decrease) in cash and cash equivalents             15,234            9,839 ||            (864)          (9,565)
         Cash and cash equivalents at beginning of period             11,954            2,115 ||           2,978           12,543
                                                             ---------------- ----------------|| ---------------- ----------------
         Cash and cash equivalents at end of period                 $ 27,188         $ 11,954 ||        $  2,114       $    2,978
                                                             ================ ================|| ================ ================


                    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

                                                                 F-7

</TABLE>
<PAGE>

                              KEEBLER FOODS COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

     THE  CONSOLIDATED  FINANCIAL  STATEMENTS  OF  KEEBLER  FOODS  COMPANY  (THE
"COMPANY",  "KEEBLER",  OR "SUCCESSOR COMPANY") INCLUDE THE FINANCIAL STATEMENTS
OF THE SUCCESSOR  COMPANY FOR THE YEAR ENDED JANUARY 3, 1998 AND THE FORTY-EIGHT
WEEK PERIOD ENDED  DECEMBER 28, 1996,  AND UB  INVESTMENTS  US INC.  ("UBIUS" OR
"PREDECESSOR COMPANY") FOR THE FOUR WEEK PERIOD ENDED JANUARY 26, 1996, THE DATE
ON WHICH UBIUS WAS ACQUIRED BY INFLO,  AND THE YEAR ENDED DECEMBER 30, 1995. THE
DISTINCTION  BETWEEN THE  CONSOLIDATED  FINANCIAL  STATEMENTS  OF THE  SUCCESSOR
COMPANY AND PREDECESSOR COMPANY HAS BEEN MADE BY INSERTING A DOUBLE LINE BETWEEN
SUCH CONSOLIDATED FINANCIAL STATEMENTS AND RELATED FOOTNOTES.


1.    BASIS OF PRESENTATION

BUSINESS AND OWNERSHIP

    Keebler Foods Company, a manufacturer and distributor of food products,  was
acquired by INFLO Holdings Corporation  ("INFLO") on January 26, 1996. INFLO was
owned by Artal Luxembourg S. A. ("Artal"), a private investment company, Flowers
Industries, Inc. ("Flowers"), a New York Stock Exchange-listed company, Bermore,
Limited  ("Bermore"),  a  privately  held  corporation  and the  parent  of G.F.
Industries,   Inc.  ("GFI"),  and  certain  members  of  the  Company's  current
management. On November 20, 1997, INFLO was merged into Keebler Corporation (the
"Merger"),  and  subsequently  changed its name to Keebler  Foods  Company.  The
financial  statements  as of and for all periods  subsequent to January 26, 1996
have been restated to reflect the Merger as if it had been effective January 26,
1996. INFLO was legally established as of November 2, 1995, but did not have any
operating  activity,  assets,  or liabilities  until the Keebler  acquisition on
January  26,  1996.   The  Company  is  comprised  of  primarily  the  following
wholly-owned subsidiaries: Keebler Company, Bake-Line Products, Inc., Johnston's
Ready Crust Company,  Sunshine  Biscuits,  Inc.  ("Sunshine"),  Keebler  Leasing
Corp., Hollow Tree Company,  L.L.C., Hollow Tree Financial Company,  L.L.C., and
Elfin Equity Company, L.L.C.

    The Company,  formerly  UBIUS,  had previously  been owned by UB Investments
(Netherlands)  B.V., a Dutch company (See Note 4). UB Investments  (Netherlands)
B.V. is a member of the worldwide group of affiliated  companies owned by United
Biscuits (Holdings) plc., a publicly held company in the United Kingdom.

FISCAL YEAR

    The Company's fiscal year consists of thirteen four week periods  (fifty-two
or  fifty-three  weeks) and ends on the Saturday  nearest  December 31. The 1997
fiscal  year  consists  of  fifty-three  weeks.  As  a  result  of  the  Keebler
acquisition, which closed on the last day of the first four week period of 1996,
the fiscal year for 1996 consisted of the  forty-eight  weeks ended December 28,
1996. The 1995 fiscal year of the predecessor company was comprised of fifty-two
weeks.

PRINCIPLES OF CONSOLIDATION

    All subsidiaries are wholly-owned and included in the consolidated financial
statements  of the Company.  Intercompany  accounts and  transactions  have been
eliminated.

GUARANTEES OF NOTES

    The  subsidiaries  of the  Company  that are not  Guarantors  of the  Senior
Subordinated  Notes are  inconsequential  (which  means  that the total  assets,
revenues,  income, or equity of such non-guarantors,  both individually and on a
combined basis, is less than 3% of the Company's consolidated assets,  revenues,
income,  or equity),  individually  and in the  aggregate,  to the  consolidated
financial statements of the Company. The Guarantees are full, unconditional, and
joint and several.  Separate  financial  statements  of the  Guarantors  are not
presented  because  management has determined that they would not be material to
investors in the Senior Subordinated Notes.

                                      F-8

<PAGE>
                              KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


1.    BASIS OF PRESENTATION (CONTINUED)

RECLASSIFICATIONS

    Certain  reclassifications  of prior  years'  data have been made to conform
with the current year reporting.


2.   ACQUISITION OF KEEBLER FOODS COMPANY BY INFLO HOLDINGS CORPORATION

    On January 26, 1996, UB Investments (Netherlands) B.V. sold all the stock of
UBIUS to INFLO. Subsequent to the acquisition, UBIUS changed its name to Keebler
Corporation. On November 20, 1997, INFLO was merged into Keebler Corporation and
subsequently  changed its name to Keebler Foods Company.  The sale  specifically
excluded  the stock of the Frozen Food  businesses  as well as the Salty  Snacks
business  conducted by Keebler Company and other  subsidiaries of UBIUS, as well
as the UBIUS  finance  companies of  U.B.H.C.,  Inc. and  U.B.F.C.,  Inc.,  also
wholly-owned subsidiaries (See Note 4).

    The aggregate  gross purchase price of $487.5  million  (excluding  fees and
expenses paid at closing of approximately  $15.3 million) was financed by $125.0
million in equity  from  INFLO,  $200.0  million in Senior  Term  Notes,  $125.0
million in Increasing  Rate Notes,  the  assumption of $20.3 million in existing
senior indebtedness of the Company,  and a note payable ("Seller Note") by INFLO
to UB Investments (Netherlands) B.V. for $32.5 million. The Seller Note does not
bear interest until January 26, 1999, and has been accounted for at a discounted
value of $24.4 million. In addition, the Company,  subsequent to the purchase by
INFLO,  received a working  capital  adjustment  of $32.6  million  from  United
Biscuits  (Netherlands)  B.V.  pursuant  to  the  terms  of the  stock  purchase
agreement between INFLO and United Biscuits (Netherlands) B.V.

    The Keebler  acquisition  has been  accounted  for as a purchase.  The total
purchase price and the fair value of liabilities  assumed have been allocated to
the tangible and intangible  assets of the Company based on the respective  fair
values.

    The following provides an allocation of the purchase price:
<TABLE>
<CAPTION>
                                                                                                    (IN MILLIONS)
<S>                                                                                              <C>          <C>
Purchase Price..................................................................................              $ 487.5
Less: Net book value of assets acquired.........................................................                329.5
Less: Asset purchase price allocation
  - Working capital receivable from UB (Netherlands) B.V........................................ $  32.6
  - Inventories.................................................................................     4.4
  - Deferred income taxes.......................................................................    11.4
  - Property, plant, and equipment..............................................................    45.7
  - Prepaid pension.............................................................................    33.1
  - Other assets................................................................................   (14.2)
  - Trademarks and trade names..................................................................   104.0        217.0
                                                                                                 --------
Plus: Liability purchase price allocation
  - Other current liabilities and accruals......................................................     1.1
  - Plant and facility closing costs and severance..............................................    55.3
  - Deferred income taxes.......................................................................    13.8
  - Postretirement/postemployment obligations...................................................   (17.5)
  - Other.......................................................................................     6.3         59.0
                                                                                                 --------     --------
Unallocated excess purchase price over fair value of net
  assets acquired...............................................................................              $   0.0
                                                                                                              ========
</TABLE>

     See Note 3 for the unaudited pro forma  consolidated  results of operations
of the Keebler acquisition.

                                      F-9
<PAGE>
                             KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


3.   ACQUISITION OF SUNSHINE BISCUITS, INC.

    On June 4, 1996,  the Company  acquired  Sunshine  from GFI for an aggregate
consideration  of $171.7  million  (excluding  related fees and expenses paid at
closing of approximately $2.2 million).  The Sunshine  acquisition was funded by
$150.3  million in cash,  of which $36.3  million was provided by the  Company's
existing  cash sources and $114.0  million in  borrowings  under the Amended and
Restated Credit Agreement (See Note 9). In addition, approximately $23.6 million
of common  stock and  warrants  were  issued to GFI and was  accounted  for as a
capital  contribution.  Subsequent to the Merger, the stock and warrants held by
GFI were  transferred  to Bermore and reissued for the same value in the name of
the Company. These shares and warrants represented 13.1% of the Company's common
stock on a fully diluted basis.

    The  Sunshine  acquisition  by  the  Company  has  been  accounted  for as a
purchase.  The total purchase  price and the fair value of  liabilities  assumed
have been allocated to the tangible and  intangible  assets of Sunshine based on
the  respective  fair  values.  The  acquisition  resulted  in goodwill of $48.8
million, which is being amortized over a forty year period.

    The following provides an allocation of the purchase price:
<TABLE>
<CAPTION>

                                                                                                      (IN MILLIONS)
<S>                                                                                                <C>         <C>
Purchase Price....................................................................................              $171.7
Less: Net book value of assets acquired...........................................................                92.8
Less: Asset purchase price allocation
  - Trade accounts receivable..................................................................... $  0.3
  - Inventories...................................................................................    3.6
  - Deferred income taxes.........................................................................    8.4
  - Property, plant, and equipment................................................................    9.5
  - Other assets..................................................................................   (3.8)
  - Trademarks and trade names....................................................................   57.0         75.0
                                                                                                   -------
Plus: Liability purchase price allocation
  - Other current liabilities and accruals........................................................    8.4
  - Plant and facility closing costs and severance................................................   22.1
  - Deferred income taxes.........................................................................   (8.3)
  - Pension obligation............................................................................    5.0
  - Postretirement/postemployment obligations.....................................................   17.8
  - Other.........................................................................................   (0.1)        44.9
                                                                                                   -------      -------
Unallocated excess purchase price over fair value of net assets acquired..........................              $ 48.8
                                                                                                                =======
</TABLE>

    Results of  operations  for Sunshine  from June 4, 1996 to December 28, 1996
have been included in the consolidated  statements of operations.  The following
unaudited pro forma  information has been prepared  assuming the acquisition had
taken place at January 1, 1995.  The  unaudited pro forma  information  includes
adjustments  for interest  expense that would have been  incurred to finance the
purchase,   additional  depreciation  of  the  property,  plant,  and  equipment
acquired, and amortization of the trademarks,  trade names, and goodwill arising
from the acquisition. The unaudited pro forma consolidated results of operations
are not  necessarily  indicative  of the  results  that  would have been had the
Keebler and Sunshine acquisitions been effected on the assumed date.

<TABLE>
<CAPTION>

                                                                                  -----------------------------------
                                                                                               Unaudited
                                                                                          For The Year Ended
                                                                                  -----------------------------------
                                                                                    December 28,        December 30,
                                                                                        1996               1995
                                                                                  ---------------     ---------------
                                                                                             (IN THOUSANDS)
<S>                                                                               <C>                 <C>
Net sales.......................................................................  $   1,979,105       $   2,213,574
Loss from continuing operations before income taxes.............................  $     (10,894)      $    (241,323)
Net loss........................................................................  $      (6,793)      $    (253,924)

</TABLE>
                                      F-10
<PAGE>
                             KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


4.   PREDECESSOR COMPANY

    UBIUS, the predecessor company to Keebler Foods Company,  was formed in 1992
as a result  of the legal  restructuring  of United  Biscuit  (Holdings)  plc.'s
operations in the United States. UBIUS received the stock of the subsidiaries in
exchange for the $850 million in debt with UB Investments  (Netherlands) B.V. as
well as all of the capital stock of UBIUS.

    On May 20, 1995,  the  predecessor  company  adopted plans to sell the Salty
Snacks business. On January 24, 1996, the predecessor company sold to Kelly Food
Products,  Inc.  selected  assets of the Salty  Snacks  business  including  the
production plant in Bluffton,  Indiana, trademarks and other intangibles related
to the  business,  inventory,  and property,  plant,  and  equipment,  including
selected assets related to the convenience sales division.

    During July 1995, the  predecessor  company adopted plans to discontinue the
operations of its Frozen Food  businesses.  On January 9, 1996,  UB  Investments
(Netherlands)  B.V. sold the assets and stock of Bernardi Italian Foods Co., The
Original Chili Bowl,  Inc.,  Chinese Food Processing  Corporation  (wholly-owned
subsidiaries  collectively  known as the Frozen  Food  businesses),  and certain
assets of Keebler Company to Windsor Food Company Ltd. The sale was effective as
of December 31, 1995.

     On December  5, 1995,  Shaffer,  Clarke & Co.,  Inc.  ("Shaffer,  Clarke"),
formerly a  wholly-owned  subsidiary,  sold certain  assets  related to Shaffer,
Clarke's  KA-ME  business to Liberty  Richter,  Inc. for a gain of $2.6 million.
These assets included  inventory,  contractual  rights,  and other  intellectual
property.


5.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS

    All highly liquid  instruments  purchased with an original maturity of three
months or less are classified as cash  equivalents.  The carrying amount of cash
equivalents  approximates  fair value due to the  relatively  short  maturity of
these investments.

TRADE ACCOUNTS RECEIVABLE

    Substantially all of the Company's trade accounts receivable are from retail
dealers  and  wholesale  distributors.  The  Company  performs  periodic  credit
evaluations of its customers' financial condition and generally does not require
collateral.  Trade accounts  receivable,  as shown on the  consolidated  balance
sheets,  were net of  allowances  of $5.0 million as of January 3, 1998 and $5.4
million as of December 28, 1996.

INVENTORIES

    Inventories  are stated at the lower of cost or market with cost  determined
principally by the last-in,  first-out ("LIFO") method. Inventories stated under
the LIFO method represent  approximately  88% of total inventories at January 3,
1998 and 91% of total inventories at December 28, 1996.  Because the Company has
adopted a natural  business  unit  single  pool  approach  to  determining  LIFO
inventory  cost,  classification  of the LIFO reserve by inventory  component is
impractical.  The excess of the current production cost of inventories over LIFO
cost was  approximately  $2.2  million at January 3, 1998.  There was no reserve
required at December 28, 1996 to state inventory on a LIFO basis.

    At January 3, 1998 and December 28,  1996,  inventories  are shown net of an
allowance for  slow-moving  and aged inventory of $6.8 million and $5.5 million,
respectively.

                                      F-11
<PAGE>

                             KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


5.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY, PLANT, AND EQUIPMENT

    Property,  plant, and equipment is stated at cost.  Depreciation  expense is
computed using the  straight-line  method based on the estimated useful lives of
the  depreciable  assets.  Certain  facilities  and equipment held under capital
leases are classified as property,  plant, and equipment and amortized using the
straight-line  method  over the lease  terms,  and the related  obligations  are
recorded as liabilities. Lease amortization is included in depreciation expense.

TRADEMARKS AND TRADE NAMES

    Trademarks  and  trade  names  are  stated  at cost and are  amortized  on a
straight-line  basis over a period of forty years.  Accumulated  amortization of
trademarks  and trade names was $7.1 million and $3.1 million at January 3, 1998
and December 28, 1996, respectively.

GOODWILL

    Goodwill shown in the consolidated  financial  statements at January 3, 1998
and  December  28, 1996 is related to the excess cost over the fair value of the
tangible net assets  acquired from the Sunshine  purchase (See Note 3). Goodwill
is amortized on a straight-line basis over a period of forty years.  Accumulated
amortization  of goodwill  was $1.8  million and $0.5 million at January 3, 1998
and December 28, 1996, respectively.

RESEARCH AND DEVELOPMENT

    Activities  related to new product  development  and major  improvements  to
existing  products and processes are expensed as incurred and were $10.2 million
for the year ended January 3, 1998, $4.3 million for the forty-eight weeks ended
December 28, 1996,  $0.6 million for the four weeks ended January 26, 1996,  and
$14.5 million for the year ended December 30, 1995.

ADVERTISING AND CONSUMER PROMOTION

     Advertising  and consumer  production  costs are  generally  expensed  when
incurred  or no later than when the  advertisement  appears or the event is run.
Advertising and consumer  promotion expense was $67.6 million for the year ended
January 3, 1998,  $33.3  million for the  forty-eight  weeks ended  December 28,
1996,  $5.1 million for the four weeks ended January 26, 1996, and $87.9 million
for the year ended December 30, 1995. There were no deferred  advertising  costs
at January 3, 1998 and December 28, 1996.

DERIVATIVE FINANCIAL INSTRUMENTS

    The Company enters into derivative financial  transactions to hedge existing
or future exposures to changes in commodity  prices.  The Company does not enter
into  derivative  transactions  for  speculative  purposes.  Gains and losses on
commodity  futures and options  transactions are deferred in inventory until the
contracts are liquidated (See Note 20).

INCOME TAXES

     The consolidated  financial statements reflect the application of Statement
of  Financial  Accounting  Standards  ("SFAS") No. 109,  "Accounting  For Income
Taxes". The Company files a consolidated federal income tax return.

                                      F-12
<PAGE>
                             KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


5.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NET INCOME PER SHARE

    In 1997, the Financial  Accounting  Standards Board ("FASB") issued SFAS No.
128,  "Earnings Per Share".  The consolidated  financial  statements reflect the
application of SFAS No. 128 which replaced the  calculation of primary and fully
diluted  earnings  per share with basic and diluted  earnings  per share.  Basic
earnings  per share  excludes  any  dilutive  effects of options  and  warrants.
Diluted earnings per share is similar to fully diluted earnings per share.

USE OF ESTIMATES

    The preparation of the consolidated  financial statements in conformity with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.

IMPAIRMENT OF LONG-LIVED ASSETS

    In  accordance  with  SFAS  No.  121,  "Accounting  for  the  Impairment  of
Long-Lived  Assets and for  Long-Lived  Assets to be Disposed  Of",  the Company
determines  whether there has been an  impairment  of long-lived  assets and the
related unamortized goodwill,  based on whether certain indicators of impairment
are present. In the event that facts and circumstances indicate that the cost of
any long-lived assets and the related unamortized  goodwill may be impaired,  an
evaluation of recoverability  would be performed.  If an evaluation is required,
the estimated future  undiscounted cash flows associated with the asset would be
compared to the asset's  carrying  amount to determine if a write-down to market
value or discounted cash flow value is required.


6.    PROPERTY, PLANT, AND EQUIPMENT

    A summary of property,  plant, and equipment,  including related accumulated
depreciation follows:

<TABLE>
<CAPTION>

                                                                            JANUARY 3, 1998          December 28, 1996
                                                                        ----------------------    ----------------------
                                                                                          (IN THOUSANDS)
<S>                                                                     <C>                       <C>
Land..............................................................         $      16,487             $       16,344
Buildings.........................................................               130,241                    126,824
Machinery and equipment...........................................               328,473                    301,588
Office furniture and fixtures.....................................                56,559                     54,985
Delivery equipment................................................                 6,946                      6,785
Construction in progress..........................................                38,080                     23,980
                                                                        ----------------------    ----------------------
                                                                                 576,786                    530,506
Accumulated depreciation..........................................               (98,665)                   (44,426)
                                                                        ----------------------    ----------------------
                                                                           $     478,121             $      486,080
                                                                        ======================    ======================
</TABLE>
                                      F-13

<PAGE>
                             KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


6.    PROPERTY, PLANT, AND EQUIPMENT (CONTINUED)

    Property,  plant, and equipment is depreciated on a straight-line basis over
the estimated useful lives of the depreciable assets.  Buildings are depreciated
over a useful life of ten to forty years. Machinery and equipment is depreciated
over a useful life of five to twenty-five  years.  Office furniture and fixtures
are depreciated over a useful life of three to fifteen years. Delivery equipment
is depreciated over a useful life of two to twelve years.


7.   ASSETS HELD FOR SALE

    In  1996,  as part of the  Keebler  and  Sunshine  acquisitions,  management
executed  a  strategic  plan to reduce  inefficiencies  and excess  capacity  by
closing the manufacturing  facilities in Atlanta,  Georgia and Santa Fe Springs,
California.  In 1997, a distribution center in Kensington,  Connecticut was also
held for sale. The Santa Fe Springs,  California  facility was subsequently sold
on March 27, 1997 with no gain or loss  recognized.  Disposition of the Atlanta,
Georgia  manufacturing  facility  and  the  Kensington  distribution  center  is
expected to occur before the end of 1998 without a significant gain or loss.


8.   OTHER CURRENT LIABILITIES AND ACCRUALS

    Other current liabilities and accruals consisted of the following at January
3, 1998 and December 28, 1996:

<TABLE>
<CAPTION>
                                                                          JANUARY 3, 1998          December 28, 1996
                                                                       ----------------------   ------------------------
                                                                                        (IN THOUSANDS)
<S>                                                                    <C>                      <C>
Self insurance reserves...........................................          $      55,185             $      58,527
Employee compensation.............................................                 55,724                    42,555
Marketing and consumer promotions.................................                 52,838                    45,892
Other.............................................................                 31,176                    39,919
                                                                       ----------------------   ------------------------
                                                                            $     194,923             $     186,893
                                                                       ======================   ========================
</TABLE>

    The Company  obtains  insurance to manage  potential  losses and liabilities
related to workers' compensation, health and welfare claims, and general product
and vehicle liability.  The Company has elected to retain a significant  portion
of the expected losses through the use of deductibles and stop-loss limitations.
Provisions  for losses  expected  under these programs are recorded based on the
Company's estimates of aggregate liability for claims incurred.  These estimates
utilize the Company's prior experience and actuarial assumptions provided by the
Company's  insurance carrier.  The total estimated liability for these losses at
January 3, 1998 and  December  28,  1996 was $55.2  million  and $58.5  million,
respectively,  and is included in other current  liabilities  and accruals.  The
Company has collateralized its liability for potential  self-insurance losses in
several  states by  obtaining  standby  letters  of credit  which  aggregate  to
approximately $17.0 million.

                                      F-14
<PAGE>
                             KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


9.    DEBT AND LEASE COMMITMENTS

    Long-term  debt  consisted of the  following at January 3, 1998 and December
28, 1996:

<TABLE>
<CAPTION>
                                    Interest Rate        Final Maturity       JANUARY 3, 1998      December 28, 1996
                                   ----------------    ------------------   -------------------   -------------------
                                                                      (IN THOUSANDS)
<S>                                <C>                 <C>                  <C>                   <C>
Term-A Loans...................        6.683%              April 7, 2003    $          156,000    $          132,875
Term-B Loans...................     7.880-8.375%           July 31, 2003                    --                89,400
Term-C Loans...................     8.130-8.625%           July 31, 2004                    --                64,575
Senior Subordinated Notes......        10.750%              July 1, 2006               125,000               125,000
Seller Note....................        10.000%          January 26, 2007                    --                26,664
Other Senior Debt..............        various                 2001-2005                12,645                14,290
Capital Lease Obligations......        various                 2004-2005                 5,110                 5,135
                                                                            -------------------   -------------------
                                                                                       298,755               457,939
Less: Current maturities.......                                                         26,365                18,570
                                                                            -------------------   -------------------
                                                                            $          272,390    $          439,369
                                                                            ===================   ===================
</TABLE>

    At January 3, 1998, the Company's primary credit financing was provided by a
$380.0 million Second Amended and Restated Credit Agreement ("Credit Agreement")
consisting of a $140.0 million Revolving Loan facility and a $240.0 million Term
Loan of which the current  outstanding balance was $156.0 million with quarterly
scheduled  principal  payments  through the final  maturity  in April 2003.  The
amendment to the Credit  Agreement was entered into on April 8, 1997 in order to
obtain more favorable terms, fees, and interest rates.

    The available  balance on the Revolving Loan facility as of January 3, 1998,
was  $140.0  million.  Actual  available  borrowings  under the  Revolving  Loan
facility can be reduced by the level of qualifying working capital as defined in
the Credit Agreement. This gross available balance is further reduced by certain
letters of credit totaling $9.9 million and outstanding  borrowings.  There were
no amounts  outstanding  under this  facility as of January 3, 1998.  Any unused
borrowings  under the Revolving  Loan facility are subject to a commitment  fee,
which will vary from 0.125%-0.375% based on the relationship of debt to adjusted
earnings.

    Interest on the Revolving Loan facility and Term Loan is calculated based on
a base rate plus applicable  margin. The base rate can, at the Company's option,
be 1) the  higher  of the  base  domestic  lending  rate as  established  by the
Administrative Agent for the Lenders under the Credit Agreement,  or the Federal
Funds Rate plus one-half of  one-percent,  or 2) a reserve  percentage  adjusted
LIBO Rate as offered by the Administrative  Agent's office in London.  Base rate
loan interest rates fluctuate immediately based upon a change in the established
base rate by the Administrative Agent. The Credit Agreement requires the Company
to meet  certain  financial  covenants  including  net  worth;  earnings  before
interest,  taxes,  depreciation,  and  amortization;  and cash flow and interest
coverage ratios.

    During the fourth  quarter  of 1997,  using  existing  cash  resources,  the
Company  pre-paid $70.0 million of principal on the Term Loan;  $30.0 million on
December  8, 1997 and $40.0  million on  November  10,  1997.  The  pre-payments
resulted in the  recognition of a $1.1 million  after-tax  extraordinary  charge
related to the expensing of certain unamortized bank fees which were incurred at
the time the Term Loan was issued.

    On November 21, 1997, the Company  settled the Seller Note with a payment of
$31.7 million  funded through  working  capital.  The Company  assumed the $32.5
million Seller Note,  previously held by INFLO,  as a result of the Merger.  The
Seller Note did not bear  interest  until January 26, 1999 and was recorded at a
discounted  value of $24.4  million on January 26, 1996.  The discount was being
amortized over three years at an effective  interest rate of 10.0%.  The Company
recorded  a  before-tax  extraordinary  charge  of  $2.6  million  on the  early
extinguishment of debt. The related after-tax charge was $1.6 million.

                                      F-15
<PAGE>
                             KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


9.    DEBT AND LEASE COMMITMENTS (CONTINUED)

    In conjunction  with the amendment to the Credit Agreement on April 8, 1997,
Term Loans B and C were extinguished using $40.0 million of borrowings under the
Revolving Loan facility,  $109.8  million of increased  borrowings  against Term
Loan A, and $3.8 million from cash resources.  The Company recorded a before-tax
extraordinary  charge of $4.6 million  related  primarily  to expensing  certain
unamortized  bank fees which were  incurred  at the time Term Loans B and C were
issued. The related after-tax charge was $2.7 million.

    On October  23,  1996,  pursuant  to an  exchange  and  registration  rights
agreement,  the Company registered its 10.75% Senior Subordinated Notes due 2006
(the "Notes") under the Securities  Act of 1933 in exchange for previously  held
Increasing  Rate Notes.  The Notes were issued under an indenture dated June 15,
1996 between the Company, the Company's  Restricted  Subsidiaries (as defined in
the  indenture),  and the U.S. Trust Company of New York, as trustee.  The Notes
are unsecured,  senior subordinated obligations of the Company guaranteed by the
Restricted Subsidiaries.  Interest on the Notes is paid semi-annually on January
1 and July 1 of each year,  commencing January 1, 1997. At the Company's option,
up to 35.0% of the aggregate  original principal of the Notes can be redeemed at
a  redemption  price of 110.0% on or prior to July 1,  1999  following  a public
equity  offering.  In addition,  the Company's  ability to pay dividends or make
other distributions on its common stock is limited by the terms of the indenture
governing the Notes to an amount equal to 50% of the  consolidated net income of
the Company for the relevant period, subject to other limitations.

    The Increasing Rate Notes, issued to finance the Keebler  acquisition,  were
repaid in June 1996 with the proceeds from a private placement  offering for the
10.75% Senior  Subordinated Notes due in 2006. The Company recorded a before-tax
extraordinary loss of $3.2 million on the early extinguishment of the Increasing
Rate Notes.  The loss consisted  primarily of bank fees incurred at the time the
Increasing Rate Notes were issued. The after-tax loss was $1.9 million.

    On January 30, 1996, the Company  entered into a swap  transaction  with the
Bank of Nova Scotia, who also serves as the Administrative Agent for the Lenders
under the Credit  Agreement.  The swap  transaction had the effect of converting
the base rate on $170.0 million of the Term Loans to a fixed rate  obligation of
5.0185% plus  applicable  margin through  February 1, 1999. The maturity date on
the swap  transaction  can be  extended to February 1, 2001 at the option of the
Bank of Nova Scotia on January 28, 1999.

    Interest of $39.0 million,  $25.2 million,  $3.8 million,  and $37.6 million
was paid on debt for the year ended January 3, 1998, the forty-eight weeks ended
December 28,  1996,  the four weeks ended  January 26, 1996,  and the year ended
December 30, 1995, respectively.

    Aggregate  scheduled  annual  maturities of long-term  debt as of January 3,
1998 are as follows:

                                                       (IN THOUSANDS)

1998...............................................       $  26,365
1999...............................................          32,575
2000...............................................          32,990
2001...............................................          34,455
2002...............................................          34,225
2003 and thereafter................................         138,145
                                                        ------------
                                                          $ 298,755
                                                        ============

                                      F-16
<PAGE>
                             KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


9.    DEBT AND LEASE COMMITMENTS (CONTINUED)

    Assets recorded under  capitalized  lease  agreements  included in property,
plant, and equipment consist of the following:

                                             JANUARY 3,           December 28,
                                                1998                  1996
                                            ------------          ------------
                                                      (IN THOUSANDS)
Land.....................................    $    1,209            $    1,209
Buildings................................         2,165                 2,881
Machinery and equipment..................         1,740                 6,361
Other leased assets......................            --                   259
                                            ------------          ------------
                                                  5,114                10,710
Accumulated amortization.................          (527)               (1,000)
                                            ------------          ------------
                                             $    4,587            $    9,710
                                            ============          ============

    Future minimum lease payments under scheduled  capital and operating  leases
that have initial or remaining noncancellable terms in excess of one year are as
follows:

                                                  Capital           Operating
                                                  Leases             Leases
                                               ------------      -------------
                                                       (IN THOUSANDS)
1998.........................................   $     243         $   29,128
1999.........................................         263             24,330
2000.........................................         333             21,654
2001.........................................         351             17,603
2002.........................................         393             14,497
2003 and thereafter..........................       5,401             33,071
                                               ------------      -------------
Total minimum payments.......................       6,984         $  140,283
                                                                 =============
Amount representing interest.................      (1,874)
                                               ------------
Obligations under capital lease..............       5,110
Obligations due within one year..............         (25)
                                               ------------
Long-term obligations under capital leases...   $   5,085
                                               ============

    Rent expense for all operating leases was $36.1 million, $30.1 million, $2.7
million,  and $37.4 million for the year ended January 3, 1998, the  forty-eight
weeks ended  December 28, 1996,  the four weeks ended January 26, 1996,  and the
year ended December 30, 1995, respectively.


10.   PLANT AND FACILITY CLOSING COSTS AND SEVERANCE

    As part of  acquiring  Keebler and  Sunshine,  management  adopted and began
executing a plan to reduce costs and inefficiencies. Certain exit costs totaling
$77.4 million were provided for in the  allocation of the purchase price of both
the Keebler and Sunshine  acquisitions.  Management's plan included company-wide
staff reductions,  the closure of manufacturing,  distribution,  and sales force
facilities, and information system exit costs.

                                      F-17
<PAGE>
                             KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


10.   PLANT AND FACILITY CLOSING COSTS AND SEVERANCE (CONTINUED)

    Severance,  outplacement,  and other  related  costs  associated  with staff
reductions  were  estimated  at $30.7  million.  Costs  incurred  related to the
closing  of  manufacturing,  distribution,  and sales  force  facilities,  which
include  primarily  severance and lease  termination  and carrying  costs,  were
expected to total $39.9 million. In addition,  the Company expects to incur $6.8
million in lease costs related to exiting legacy information  systems.  Spending
against  the  reserves  established  for the year ended  January 3, 1998 and the
forty-eight  weeks ended  December  28,  1996  totaled  $16.2  million and $41.4
million,  respectively.  During the year ended January 3, 1998, the Company also
provided an additional $2.7 million principally for anticipated costs related to
the closure of  distribution  facilities  not included in the  original  plan to
reduce costs and inefficiencies.  No additional  provisions were made during the
forty-eight  weeks ended  December 28, 1996. At January 3, 1998 and December 28,
1996,  the plant and facility  closing costs and severance  reserve  balance was
$22.5 million and $36.0 million, respectively.

    The plans  initiated by management are expected to be completed prior to the
end of 1998. Only noncancellable lease obligations are expected to extend beyond
1998, to be paid out over the next seven years concluding in 2004.


11.    EMPLOYEE BENEFIT PLANS

    The  Retirement  Plan for  Salaried  and Certain  Hourly-Paid  Employees  of
Keebler   Company  (the   "pension   plan")  is  a  trusteed,   noncontributory,
defined-benefit,  pension  plan.  The pension plan covers  certain  salaried and
hourly-paid  employees.  Assets held by the pension  plan  consist  primarily of
common  stocks,  collective  trust  funds,  government  securities,  bonds,  and
guaranteed  insurance  contracts.  Benefits  provided under the pension plan are
primarily  based  on  years  of  service  and  the  employee's  final  level  of
compensation.  The Company's  funding policy is to contribute  annually not less
than the ERISA minimum  funding  requirements.  Effective  January 1, 1997,  the
pension plans of Sunshine Biscuits, Inc., Athens Packaging,  Bake-Line Products,
Inc., and Emerald Industries were merged with the Company's pension plan.

    Pension expense included the following components:

<TABLE>
<CAPTION>

                                                                   Forty-Eight      ||   Four Weeks
                                                 YEAR ENDED        Weeks Ended      ||     Ended            Year Ended
                                                 JANUARY 3,        December 28,     ||   January 26,        December 30,
                                                    1998               1996         ||      1996                1995
                                               ---------------   -----------------  || ---------------    ----------------
                                                                              (IN THOUSANDS)
<S>                                            <C>               <C>                || <C>                <C>
                                                                                    ||
Service cost...............................      $    8,560        $      7,711     ||   $      599         $     6,611
Interest cost..............................          29,673              21,338     ||        1,133              13,877
Actual return on plan assets...............         (63,745)            (12,752)    ||       (1,693)            (43,661)
Net amortization of transition obligation..              --                  --     ||           47                 616
Deferral of gains (losses).................          25,810             (15,495)    ||           --              24,468
Prior service cost.........................              --                  --     ||          (12)               (155)
Net gain...................................              --                  --     ||           --                (437)
                                               ---------------   -----------------  || ---------------    ----------------
Pension expense............................      $      298        $        802     ||   $       74         $     1,319
                                               ===============   =================  || ===============    ================
</TABLE>

                                      F-18
<PAGE>
                            KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


11.    EMPLOYEE BENEFIT PLANS (CONTINUED)

    The funded  status of the Company's  pension plan and amounts  recognized in
the consolidated balance sheets are as follows:

<TABLE>
<CAPTION>
                                                                              JANUARY 3, 1998        December 28, 1996
                                                                            -------------------    ---------------------
                                                                                          (IN THOUSANDS)
<S>                                                                         <C>                    <C>
Actuarial present value of accumulated benefit obligation:

  Vested..............................................................        $      (392,512)       $      (366,253)
  Nonvested...........................................................                (20,983)                (7,255)
                                                                            -------------------    ---------------------
                                                                              $      (413,495)       $      (373,508)
                                                                            ===================    =====================
Projected benefit obligation..........................................        $      (437,334)       $      (408,060)
Plan assets at fair value.............................................                499,379                464,433
                                                                            -------------------    ---------------------
Plan assets greater than projected benefit obligation.................                 62,045                 56,373
Unrecognized transition obligation....................................                     --                     --
Unrecognized prior service............................................                  5,044                     --
Unrecognized net gain.................................................                (24,029)               (13,014)
                                                                            -------------------    ---------------------
Prepaid pension.......................................................        $        43,060        $        43,359
                                                                            ===================    =====================
</TABLE>

    Assumptions  used  in  accounting  for  the  pension  plan  at  each  of the
respective period-ends are as follows:

<TABLE>
<CAPTION>
                                                                         Forty-Eight    ||   Four Weeks
                                                       YEAR ENDED        Weeks Ended    ||     Ended          Year Ended
                                                       JANUARY 3,        December 28,   ||   January 26,      December 30,
                                                          1998               1996       ||      1996              1995
                                                     --------------    ---------------- || ---------------   ---------------
<S>                                                  <C>               <C>              || <C>               <C>
Discount rate.....................................         7.3%               7.5%      ||       7.5%               7.5%
Rate of compensation level increases..............         4.0                4.0       ||       4.0             4.0-6.0
Expected long-term rate of return on plan assets..         9.0                8.6       ||      10.0             8.0-9.0
</TABLE>

    The plan assets, as of January 3, 1998 and December 28, 1996, include a real
estate  investment  of $3.1 million in a  distribution  center which is under an
operating lease to the Company.

    The Company,  in addition to the pension  plan,  also  maintains an unfunded
supplemental  retirement plan for certain highly  compensated former executives.
Benefits provided are based on years of service.  Vesting is graduated depending
on termination after age 55.

    The supplemental retirement plan expense includes the following components:

<TABLE>
<CAPTION>

                                                                   Forty-Eight  ||   Four Weeks
                                                   YEAR ENDED      Weeks Ended  ||     Ended         Year Ended
                                                   JANUARY 3,      December 28, ||   January 26,     December 30,
                                                      1998             1996     ||      1996             1995
                                                  ------------     ------------ ||  ------------     ------------
                                                                          (IN THOUSANDS)
<S>                                               <C>              <C>          ||  <C>              <C>
Service cost...............................        $     --         $     --    ||   $     35         $     452
Interest cost..............................             732              637    ||         66               854
Net amortization of transition obligation..              --               --    ||          8               111
Prior service cost.........................              --               --    ||         13               170
                                                  ------------     ------------ ||  ------------     ------------
Plan expense...............................        $    732         $    637    ||   $    122         $   1,587
                                                  ============     ============ ||  ============     ============
</TABLE>

                                      F-19
<PAGE>

                            KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


11.    EMPLOYEE BENEFIT PLANS (CONTINUED)

    The  unfunded  status of the  supplemental  retirement  plan and the amounts
recognized in the consolidated balance sheets are as follows:

<TABLE>
<CAPTION>
                                                                                       JANUARY 3,        December 28,
                                                                                         1998               1996
                                                                                     ---------------   -----------------
                                                                                               (IN THOUSANDS)
     <S>                                                                             <C>               <C>
     Actuarial present value of accumulated benefit obligation:

       Vested.....................................................................     $   (10,303)      $   (10,028)
       Nonvested..................................................................              --                --
                                                                                     ---------------   -----------------
                                                                                       $   (10,303)      $   (10,028)
                                                                                     ===============   =================
     Projected benefit obligation.................................................     $   (10,097)      $    (9,890)
     Plan assets at fair value....................................................              --                --
                                                                                     ---------------   -----------------
     Projected benefit obligation in excess of plan assets........................         (10,097)           (9,890)
     Unrecognized transition obligation...........................................              --                --
     Unrecognized prior service cost..............................................              --                --
     Unrecognized net (gain) loss.................................................            (458)             (754)
                                                                                     ---------------   -----------------
     Plan obligation included in other liabilities................................     $   (10,555)      $   (10,644)
                                                                                     ===============   =================
</TABLE>

    Assumptions used in accounting for the supplemental  retirement plan at each
of the respective period-ends are as follows:

<TABLE>
<CAPTION>

                                                                    Forty-Eight    ||   Four Weeks
                                                  YEAR ENDED        Weeks Ended    ||     Ended            Year Ended
                                                  JANUARY 3,        December 28,   ||   January 26,        December 30,
                                                     1998              1996        ||      1996               1995
                                                 --------------   ---------------- || ---------------    ---------------
<S>                                              <C>              <C>              || <C>                <C>
Discount rate.............................            7.3%              7.5%       ||       7.5%              7.5%
Rate of compensation level increase.......            N/A               N/A        ||       4.0               4.0

</TABLE>

    Contributions are also made by the Company to a retirement program for Grand
Rapids union  employees.  Benefits  provided  under the plan are based on a flat
monthly  amount  for each year of service  and are  unrelated  to  compensation.
Contributions  are made based on a negotiated  hourly  rate.  For the year ended
January 3, 1998, the  forty-eight  weeks ended December 28, 1996, the four weeks
ended  January 26,  1996,  and the year ended  December  30,  1995,  the Company
expensed  contributions of $2.6 million,  $2.3 million,  $0.2 million,  and $2.5
million, respectively.

    The  Company   contributes  to  various   multiemployer  union  administered
defined-benefit and defined-contribution  pension plans. Benefits provided under
the  multiemployer  pension  plans are  generally  based on years of service and
employee age.  Expense under these plans was $10.5 million,  $7.8 million,  $0.9
million,  and $9.6 million for the year ended January 3, 1998,  the  forty-eight
weeks ended  December 28, 1996,  the four weeks ended January 26, 1996,  and the
year ended December 30, 1995, respectively.

    The  Company  also offers  certain  employees  participation  in the Keebler
Company  Salaried  Savings Plan, a  defined-contribution  plan. Prior to July 1,
1995,  certain nonunion employees who met  length-of-service  requirements could
elect to participate in the plan.  Currently,  participation  in the plan can be
elected immediately.  Contributions made by participants are based on an elected
percentage of the participants' compensation within a specified range. Beginning
in 1997,  a  matching  program  was  established  whereby  the  Company  makes a
contribution ranging from zero to fifty cents, depending on Company performance,
for  every  before-tax  dollar  contributed  by  the  employee,  up to 6% of the
employees'  eligible pay. The Company's  matching  contribution was $3.1 million
for 1997. There was no Company  matching  contribution  prior to 1997.  Expenses
incurred by the Company to administer the plan were nominal.

                                      F-20
<PAGE>
                            KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


11.    EMPLOYEE BENEFIT PLANS (CONTINUED)

    During 1996, the Company  matched a portion of employee  contributions  to a
defined  contribution savings plan for qualified salaried employees of Sunshine.
Contributions  made by the  Company  were not to exceed 6% of gross  wages.  The
Company also  provided a savings plan for certain  hourly  employees of Sunshine
which provided no matching company contributions. Expenses in 1996 for the plans
were nominal.  Effective January 1, 1997, all Sunshine employees became eligible
for the Keebler Company  Salaried  Savings Plan,  thus  terminating the Sunshine
plans.

    A Voluntary Employee  Beneficiary  Association  ("VEBA") provided health and
welfare  benefits  for certain  Sunshine  employees.  Payments  were made by the
Company to the VEBA to fund  employee  health and  welfare  claims.  The Company
funded $6.6 million and $10.0 million  during the year ended January 3, 1998 and
the forty-eight weeks ended December 28, 1996,  respectively.  In July 1997, the
Company  integrated  all Sunshine  employees into the existing  Keebler  Welfare
Benefit Plan and no further VEBA payments were made.

    Prior  to 1997,  Bake-Line  Products,  Inc.  administered  a money  purchase
pension plan for certain hourly and salaried employees. Contributions were based
on 4% of employees'  annual  salary.  Effective  January 1, 1997,  the Bake-Line
money purchase pension plan was merged into the Company's pension plan. Expenses
paid to administer the Bake-Line money purchase pension plan were nominal.


12.   POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

    The  Company  provides  certain  medical  and life  insurance  benefits  for
eligible retired  employees.  The medical plan, which covers nonunion  employees
with ten or more years of service, is a comprehensive  indemnity-type  plan. The
plan incorporates an up-front  deductible,  coinsurance  payments,  and employee
contributions  which are based on length of  service.  The life  insurance  plan
offers a small  amount of  coverage  versus the amount the  employees  had while
employed. The Company does not fund the plan.

    The net periodic  postretirement  benefit  expense  includes  the  following
components:

<TABLE>
<CAPTION>
                                                                     Forty-Eight   ||      Four
                                                    YEAR ENDED       Weeks Ended   ||   Weeks Ended       Year Ended
                                                    JANUARY 3,       December 28,  ||   January 26,       December 30,
                                                       1998              1996      ||      1996              1995
                                                   -------------    -------------- || --------------   ---------------
                                                                             (IN THOUSANDS)
    <S>                                            <C>              <C>            || <C>              <C>
    Service cost..................................  $     2,242      $      2,142  ||  $        123     $       1,598
    Interest cost.................................        3,888             2,729  ||           246             3,194
                                                   -------------    -------------- || --------------   ---------------
    Net periodic postretirement benefit expense...  $     6,130      $      4,871  ||  $        369     $       4,792
                                                   =============    ============== || ==============   ===============
</TABLE>

    The unfunded status of the plan reconciled to the postretirement  obligation
in the Company's consolidated balance sheets are as follows:

<TABLE>
<CAPTION>
                                                                           JANUARY 3, 1998          December 28, 1996
                                                                       ----------------------    ----------------------
                                                                                        (IN THOUSANDS)
    <S>                                                                <C>                       <C>
    Accumulated postretirement benefit obligation:
      Retirees......................................................     $        (35,981)         $        (33,054)
      Fully eligible active participants............................               (7,154)                   (8,579)
      Other active participants.....................................              (12,941)                  (11,815)
                                                                       ----------------------    ----------------------
                                                                                  (56,076)                  (53,448)
    Unrecognized prior service cost.................................                 (689)                       --
    Unrecognized net gain...........................................               (4,215)                   (3,857)
                                                                       ----------------------    ----------------------
    Postretirement obligation.......................................     $        (60,980)         $        (57,305)
                                                                       ======================    ======================
</TABLE>
                                      F-21

<PAGE>
                            KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


12.  POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS (CONTINUED)

     The accumulated  postretirement  benefit  obligation was determined using a
weighted-average  discount rate of 7.3% for the year ended January 3, 1998,  and
7.5% for the  forty-eight  weeks ended  December 28, 1996,  the four weeks ended
January 26, 1996, and the year ended December 30, 1995.

     The weighted-average annual assumed rate of increase in the cost of covered
benefits is 7.0% for 1997 declining  gradually to an ultimate trend rate of 5.0%
by the year 1999.  A 1%  increase  in the trend rate for health care costs would
have increased the accumulated  benefit obligation as of January 3, 1998 by $2.4
million and the net periodic benefit cost by $0.5 million.

     The Company also provides  postemployment  medical benefits to employees on
long-term  disability.  The plan is a  comprehensive  indemnity-type  plan which
covers nonunion employees on long-term disability. There is no length of service
requirement.  The plan incorporates  coinsurance  payments and deductibles.  The
Company does not fund the plan. The  postemployment  obligation  included in the
consolidated  balance  sheets at January 3, 1998 and  December 28, 1996 was $4.7
million and $4.6 million, respectively.


13.   INCOME TAXES

    The components of income tax expense (benefit) were as shown below:

<TABLE>
<CAPTION>
                                                                        Forty-Eight    ||  Four Weeks
                                                     YEAR ENDED         Weeks Ended    ||    Ended            Year Ended
                                                     JANUARY 3,         December 28,   ||  January 26,       December 30,
                                                        1998                1996       ||     1996               1995
                                                   ---------------    ---------------- ||---------------   ----------------
                                                                                 (IN THOUSANDS)
<S>                                                <C>                <C>              ||<C>               <C>
Current:                                                                               ||
  Federal.......................................    $     22,172       $          --   || $         --      $       1,526
  State.........................................           3,840                  --   ||           --                 --
                                                   ---------------    ---------------- ||---------------   ----------------
Current provision for income taxes..............          26,012                  --   ||           --              1,526
Deferred:                                                                              ||
  Federal.......................................          17,203              11,524   ||        6,490            (63,212)
  State.........................................           1,954               2,478   ||          843             (9,215)
  Valuation allowance (federal and state).......              --                  --   ||       (7,333)            70,442
                                                   ---------------    ---------------- ||---------------   ----------------
Deferred provision (benefit) for income taxes...          19,157              14,002   ||           --             (1,985)
                                                   ---------------    ---------------- ||---------------   ----------------
                                                    $     45,169       $      14,002   || $         --      $        (459)
                                                   ===============    ================ ||===============   ================
</TABLE>

                                      F-22

<PAGE>
                            KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


13.   INCOME TAXES (CONTINUED)

    The differences  between the income tax expense (benefit)  calculated at the
federal  statutory  income tax rate and the  Company's  consolidated  income tax
expense (benefit) are as follows:

<TABLE>
<CAPTION>
                                                                 Forty-Eight   ||   Four Weeks
                                                YEAR ENDED       Weeks Ended   ||     Ended           Year Ended
                                                JANUARY 3,       December 28,  ||   January 26,      December 30,
                                                   1998              1996      ||      1996              1995
                                              --------------    -------------- || --------------    --------------
                                                                         (IN THOUSANDS)
<S>                                           <C>               <C>            || <C>               <C>
U.S. federal statutory rate................    $     37,643      $     11,140  ||  $         --      $    (64,843)
State income taxes (net of federal benefit)           3,766             1,608  ||            --            (8,208)
Deferred tax asset valuation adjustment....              --                --  ||            --            70,442
Intangible amortization....................           1,836             1,268  ||            --               828
Non-taxable items..........................           1,076               (14) ||            --               883
All others.................................             848                --  ||            --               439
                                              --------------    -------------- || --------------    --------------
                                               $     45,169      $     14,002  ||  $         --      $       (459)
                                              ==============    ============== || ==============    ==============
</TABLE>

    The  deferred  tax assets and  deferred  tax  (liabilities)  recorded on the
consolidated balance sheets consist of the following:

<TABLE>
<CAPTION>

                                                                            JANUARY 3, 1998        December 28, 1996
                                                                         --------------------    --------------------
                                                                                        (IN THOUSANDS)
<S>                                                                      <C>                     <C>
Depreciation.......................................................        $        (82,204)       $        (91,860)
Prepaid pension....................................................                 (16,164)                (17,050)
Inventory valuation................................................                  (5,257)                 (7,073)
Other..............................................................                     (88)                   (144)
                                                                         --------------------    --------------------
                                                                                   (103,713)               (116,127)
                                                                         --------------------    --------------------
Net operating loss carryforwards...................................                  80,195                  94,659
Postretirement/postemployment benefits.............................                  25,123                  24,997
Workers' compensation..............................................                  15,119                  16,703
Plant and facility closing costs and severance.....................                  10,996                  14,232
Incentives and deferred compensation...............................                  11,493                  11,658
Charitable contributions...........................................                   8,425                  10,067
Employee benefits..................................................                   9,583                   8,251
Other current assets...............................................                      --                   3,121
Other..............................................................                     442                   8,650
                                                                         --------------------    --------------------
                                                                                    161,376                 192,338
Valuation allowance................................................                 (84,350)                (84,350)
                                                                         --------------------    --------------------
                                                                           $        (26,687)       $         (8,139)
                                                                         ====================    ====================
</TABLE>

    Net operating loss carryforwards total approximately  $203.2 million through
1997 and  expire in 2008  through  2011.  Pursuant  to the terms of the  Keebler
acquisition, the predecessor company retained the right to use the net operating
losses for potential carrybacks.  Any unused operating losses are then available
to Keebler,  but are significantly  restricted under current tax law. Therefore,
all net  operating  loss  carryforwards  have  been  fully  reserved  due to the
uncertainty of their realization.

    Income taxes paid, net of refunds,  were  approximately  $9.9 million,  $1.6
million,  and $2.3 million for the year ended January 3, 1998,  the  forty-eight
weeks  ended   December  28,  1996,  and  the  year  ended  December  30,  1995,
respectively.  There were no taxes paid or refunded  during the four weeks ended
January 26, 1996.

                                      F-23
<PAGE>
                            KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


14.   SHAREHOLDERS' EQUITY

    There were no cash  dividends  declared for the year ended  January 3, 1998,
the forty-eight  weeks ended December 28, 1996, the four weeks ended January 26,
1996, and the year ended  December 30, 1995.  The Company's  ability to pay cash
dividends is limited by the Credit Agreement and the Senior  Subordinated Notes.
The most restrictive  dividend  restriction exists under the terms of the Credit
Agreement which limits dividends to $25.0 million.

    On July 29, 1997, the Board of Directors of the Company  approved a 1-for-10
reverse stock split of the Company's  common stock. In addition,  on January 22,
1998, the Board of Directors  approved a 57.325-for-1  stock split of the common
stock. All per share and related amounts contained in these financial statements
and notes have been  adjusted  to reflect  the stock  splits as if they had been
effective January 26, 1996.

    As a result of the  Sunshine  acquisition  in 1996,  the Company  issued GFI
5,675,633  shares  of the  Company's  common  stock and a  warrant  to  purchase
6,135,781  shares of the Company's  common  stock.  The shares of $.01 par value
stock were valued at $3.23 per share.  The warrant is  exercisable  at $3.23 per
share over a seven year  period,  beginning  June 4, 1996 and  expiring  June 4,
2003.  The total value of the stock and warrant held by GFI was $23.6 million at
December 28, 1996.  Subsequent to the Merger,  the stock and warrant held by GFI
were  transferred  to Bermore and reissued for the same value in the name of the
Company. At January 3, 1998, the warrant had not been exercised.

    During the forty-eight  weeks ended December 28, 1996,  management  invested
$3.7 million in exchange for 1,963,361 shares of the Company's common stock. The
Company  repurchased  1,657,036  shares  of  the  common  stock  to be  sold  to
management  from  Flowers and Artal for $2.9  million.  The  additional  306,325
shares of common stock were issued and sold to management for $0.8 million.


15.   STOCK OPTION PLAN

    The Company has elected to follow  Accounting  Principles  Board Opinion No.
25,   "Accounting   for  Stock  Issued  to  Employees"   (APB  25)  and  related
Interpretations  in accounting for employee  stock options.  Under the Company's
1996 Stock Option Plan 9,673,594  shares of the Company's  stock were authorized
for future grant.  There were 7,031,198  options granted in 1996. In 1997, there
were an  additional  49,873  options  granted  to  management  personnel  and no
forfeitures of the Company's  stock options.  All options  granted have ten year
terms and vest at the end of nine  years.  Vesting can be  accelerated  on a pro
rata basis over the first five years after grant if certain Company  performance
measures are achieved.

    The following table summarizes stock option activity:

<TABLE>
<CAPTION>
                                                                                          Forty-Eight Weeks Ended
                                                    YEAR ENDED JANUARY 3, 1998               December 28, 1996
                                                 ---------------------------------   ----------------------------------
                                                                      WEIGHTED                           Weighted
                                                                      AVERAGE                            Average
                                                    OPTIONS        EXERCISE PRICE       Options       Exercise Price
                                                 --------------   ----------------   -------------   ----------------
<S>                                              <C>              <C>                <C>             <C>
Outstanding at the beginning of the period...        6,802,471            $ 1.98               --            $   --
Granted......................................           49,873              5.23        7,031,198              1.98
Exercised....................................               --                --               --                --
Forfeited....................................               --                --          228,727              1.74
Expired......................................               --                --               --                --
                                                 --------------                      -------------
Outstanding at the end of the period.........        6,852,344            $ 2.01        6,802,471            $ 1.98
                                                 ==============                      =============
Exercisable at the period end................        1,587,243                --               --                --
                                                 ==============                      =============
</TABLE>

                                      F-24
<PAGE>
                            KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


15.   STOCK OPTION PLAN (CONTINUED)

    Exercise prices as of January 3, 1998 for options  outstanding  arising from
the July 1997  grant  (49,873  options),  the  December  1996  grant  (1,114,398
options),  and the May 1996 grant  (5,688,073  options) were $5.23,  $3.23,  and
$1.74, respectively. The weighted average fair value for options granted in 1997
was $5.23.  The weighted  average  remaining  contractual life of the options is
approximately eight years.

    Pro forma information  regarding net income is required by the SFAS No. 123,
"Accounting  for  Stock-Based  Compensation",  and has been determined as if the
Company had accounted for its employee stock options under the fair value method
of that  Statement.  The fair value for the options was estimated at the date of
grant  using a  present  value  approach  with  the  following  weighted-average
assumptions:  risk-free  interest  rate of 6.0%;  no  expected  dividend  yield;
volatility of zero; and a  weighted-average  expected life of the option of five
years.

    For  purposes  of pro forma  disclosures,  the  estimated  fair value of the
options is amortized to expense over the options' vesting period.  The Company's
pro forma net income and basic earnings per share would have been  approximately
$55.0  million and $0.71 per share for the year ended  January 3, 1998 and $14.0
million and $0.19 per share for the  forty-eight  weeks ended December 28, 1996,
respectively.


16.   RESTRUCTURING CHARGE

     In 1993, the predecessor company had recorded an operating charge of $122.7
million to restructure  operations.  During the first four weeks of 1996,  there
was no spending against the restructuring  reserves.  The restructuring  reserve
balance was $38.2  million at January 26,  1996,  and was not a cost  assumed as
part of the Keebler acquisition. There were no restructuring reserves at January
3, 1998 and December 28, 1996.


17.    DISCONTINUED OPERATIONS

    During July 1995, the  predecessor  company adopted plans to discontinue the
operations of the Frozen Food  businesses.  On January 9, 1996,  UB  Investments
(Netherlands)  B.V. sold the Frozen Food  businesses to the Windsor Food Company
Ltd. for $70.0 million.  A gain on sale of $18.9 million was recorded during the
four weeks ended January 26, 1996.  Income tax expense was not recognized on the
gain on the sale of the Frozen Food  businesses as the  predecessor  company did
not provide for any income taxes during the four weeks ended January 26, 1996.

    Net sales  from  these  operations  were  $70.9  million  for the year ended
December 30, 1995.  Expenses  charged against  discontinued  operations  include
expenses  associated  with the  costs of  production,  marketing,  and  specific
administrative  expenses.  Expenses  do not  include  an  allocation  of  shared
selling,   distribution,   and  general   administrative   costs.   Income  from
discontinued  operations relating to the Frozen Food businesses was $7.3 million
for the year ended December 30, 1995.  Income tax expense was not recognized for
discontinued  operations  in 1995  due to the  Company  having  a net  loss on a
consolidated  basis.  There were no  operating  activities  for the Frozen  Food
businesses  during  the  four  weeks  ended  January  26,  1996 as the  sale was
effective as of December 31, 1995. The net assets of the Frozen Food  businesses
as of  December  30,  1995 were $47.7  million.  Included in the net assets were
primarily inventory,  other current assets, property,  plant, and equipment, and
certain current liabilities and accruals.

                                      F-25
<PAGE>
                            KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18.   AFFILIATE TRANSACTIONS

    On December 29, 1995, the predecessor company transferred certain assets and
the stock of the Frozen Food businesses to U.B.  Investments  (Netherlands) B.V.
for promissory  notes that  aggregated  $70.0 million.  On January 9, 1996, U.B.
Investments  (Netherlands) B.V. sold both these assets and stock to Windsor Food
Company Ltd. for $70.0  million,  effective  December  31, 1995.  The  aggregate
carrying value of these businesses and assets reflected in the December 30, 1995
consolidated balance sheet is $47.7 million, consisting primarily of goodwill of
$22.0 million, property, plant, and equipment of $21.2 million, and inventory of
$7.6 million,  which resulted in a pre-tax  realized gain, net of a $3.4 million
charge for severance arising from the sale, of $18.9 million for UBIUS.

     On  December  29,  1995,  the  predecessor  company  sold the stock of both
U.B.F.C.,  Inc. and U.B.H.C.,  Inc. to U.B. Investments plc. for $100 each which
resulted in no significant gain or loss.

    Near the end of 1995, and in  consideration  of completing  various  pending
stock and asset  purchase  agreements,  as described in Note 4, the  predecessor
company  entered into several  transactions  with  affiliated  companies  within
United  Biscuits  (Holdings)  plc.  The  accompanying   consolidated   financial
statements  have not been  adjusted  to  reflect  these  transactions  which are
summarized  below,  as it is  the  Company's  policy  to  only  give  effect  to
dispositions  resulting in a gain on the completion of the transaction  with the
ultimate third party acquirer.

    On November 30,  1995,  Keebler  Company  sold to UB Group Ltd.,  ultimately
United Biscuits  (Holdings) plc., for a $5.0 million affiliate  receivable,  the
entire rights,  titles and interests in certain logos, trade names,  trademarks,
and service  marks  registered  or pending  registration  by Keebler  Company in
Australia,  New Zealand, Asia, and Europe. The proceeds of this transaction were
offset by certain legal fees and  registration  and licensing costs  aggregating
$0.5 million.  The net gain on the sale of these trademarks is included in other
costs and expenses for the year ended December 30, 1995.

    In 1995, the predecessor  company conducted business with various affiliated
companies that ultimately  were under the control of United Biscuits  (Holdings)
plc.  Transactions  with related parties included working capital  financing and
the  purchase of product for resale in the United  States.  Purchases of product
from affiliated companies for resale in the United States were $11.3 million for
the year ended December 30, 1995.


19.    NET INCOME PER SHARE

    Earnings per share is calculated using the weighted average number of common
and  common  equivalent  shares  outstanding  during  each  period.  The  common
equivalent shares relate to the 1996 Stock Option Plan and the warrant issued in
connection with the Sunshine  acquisition and are calculated  using the treasury
stock method.


                                      F-26

<PAGE>
                            KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19.    NET INCOME PER SHARE (CONTINUED)

    The following table sets for the computation of basic and diluted net income
per share:

<TABLE>
<CAPTION>

                                                                                                  Forty-Eight
                                                                              YEAR ENDED          Weeks Ended
                                                                            JANUARY 3, 1998    December 28, 1996
                                                                           -----------------   -----------------
                                                                                      (IN THOUSANDS)
<S>                                                                        <C>                 <C>
NUMERATOR:
   Income from operations before extraordinary item.....................      $     62,381        $     17,677
   Extraordinary item, net of tax.......................................             5,396               1,925
                                                                           -----------------   -----------------
   Net income...........................................................      $     56,985        $     15,752
                                                                           =================   =================
DENOMINATOR:
   Denominator for Basic Earnings Per Share
        Weighted average shares.........................................            77,604              75,244
   Effect of Dilutive Securities:
        Stock options...................................................             2,168                 832
        Warrants........................................................               790                  --
                                                                           -----------------   -----------------
        Diluted potential common shares.................................             2,958                 832
                                                                           -----------------   -----------------
   Denominator for Diluted Earnings Per Share...........................            80,562              76,076
                                                                           =================   =================
</TABLE>

     Options to purchase  56,216  shares of common stock at $3.23 per share were
outstanding  at December 28, 1996,  but were  excluded from the  computation  of
diluted net income per share as the exercise  price of the options  exceeded the
average market price of common shares; and therefore, the effect would have been
antidilutive.


20.   FAIR VALUE OF FINANCIAL INSTRUMENTS

    The fair market value of financial  instruments,  which  includes  short and
long-term borrowings, was estimated using discounted cash flow analyses based on
current   interest   rates  which  would  be  obtained  for  similar   financial
instruments.  The carrying  amounts of these financial  instruments  approximate
fair value.

    The Company often enters into exchange traded commodity  futures and options
contracts to protect the Company against a portion of adverse raw material price
movements.  Gains or losses  realized from the  liquidation or expiration of the
contracts are recognized as part of the cost of raw  materials.  Gains or losses
are deferred in inventory until realized.  Cost of sales was increased by losses
on futures  and options  transactions  of $3.8  million in 1997,  and reduced by
gains on futures and options  transactions  of $0.8 million for the  forty-eight
weeks ended December 28, 1996, and $3.4 million in 1995. Operations for the four
weeks ended January 26, 1996,  was  unaffected by gains or losses on futures and
options as the $0.5 million loss was  recorded as an  adjustment  to the opening
balance  sheet.  As of January 3, 1998,  $4.9 million in unrealized  futures and
options contract losses have been deferred in inventory.  The notional amount of
open futures and options contracts at January 3, 1998 was $58.1 million and $0.7
million,  respectively.  The open  contracts  will expire between March 1998 and
November 1998.


                                      F-27
<PAGE>
                            KEEBLER FOODS COMPANY

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

21.    UNAUDITED QUARTERLY FINANCIAL DATA

    Results of  operations  for each of the four  quarters  of the fiscal  years
ended  January 3, 1998 and December 28, 1996 follow.  Each quarter  represents a
period of twelve weeks except the first quarter which includes sixteen weeks. In
1996, earnings per share amounts have been restated to comply with SFAS No. 128,
"Earnings per Share" (See Note 19).

<TABLE>
<CAPTION>
                                               Quarter 1           Quarter 2           Quarter 3           Quarter 4
                                           ------------------- ------------------- ------------------- -------------------
                                              1997     1996*      1997      1996     1997      1996      1997**     1996
                                           --------- --------- --------- --------- --------- --------- --------- ---------
                                                               (IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S>                                        <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Net sales.............................       $597.0    $335.3    $459.8    $383.8    $485.3    $452.3    $523.1    $474.1
Gross profit..........................        337.0     177.8     259.7     197.9     277.0     235.0     303.5     260.6
Income before extraordinary item......          7.6       1.3      13.0       0.5      18.5       0.8      23.3      15.1
Extraordinary item....................          2.7        --        --       1.9        --        --       2.7        --
Net income (loss).....................          4.9       1.3      13.0      (1.4)     18.5       0.8      20.6      15.1

Basic net income (loss) per share:
   Income before extraordinary item...        $0.10     $0.02     $0.16    $ 0.01     $0.24     $0.01     $0.30     $0.20
   Extraordinary item.................         0.04        --        --      0.03        --        --      0.03        --
                                           --------- --------- --------- --------- --------- --------- --------- ---------
   Net income (loss)..................        $0.06     $0.02     $0.16    $(0.02)    $0.24     $0.01     $0.27     $0.20
                                           ========= ========= ========= ========= ========= ========= ========= =========
Weighted average shares...............         77.6      71.7      77.6      74.4      77.6      77.5      77.6      77.5
                                           ========= ========= ========= ========= ========= ========= ========= =========
Diluted net income (loss) per share:
   Income before extraordinary item...        $0.10     $0.02     $0.16    $ 0.01     $0.23     $0.01     $0.28     $0.19
   Extraordinary item.................         0.04        --        --      0.02        --        --      0.03        --
                                           --------- --------- --------- --------- --------- --------- --------- ---------
   Net income (loss)..................        $0.06     $0.02     $0.16    $(0.01)    $0.23     $0.01     $0.25     $0.19
                                           ========= ========= ========= ========= ========= ========= ========= =========
Weighted average shares...............         79.2      71.7      79.2      75.2      81.3      79.1      81.7      79.1
                                           ========= ========= ========= ========= ========= ========= ========= =========
----------
<FN>

*  Quarter 1, 1996 excludes the financial data of the predecessor company for the four weeks ended January 26, 1996.
** Quarter 4, 1997 includes thirteen weeks as fiscal 1997 is a fifty-three week year.
</FN>
</TABLE>


22.    SUBSEQUENT EVENTS

    The consolidated financial statements reflect the Company's declaration of a
57.325-for-1  stock split of common stock ("Stock Split")  effective January 22,
1998. The Stock Split was effected in the form of a stock dividend. Accordingly,
all  references in the  consolidated  financial  statements to number of shares,
options,  warrants, and the related prices, as well as per share amounts and the
average  number of shares  outstanding,  have been  restated  to  reflect  these
changes.

    On January 29, 1998, the Company made a public offering of 13,386,661 shares
of  common  stock  (the  "Offering").  Concurrent  with  the  Offering,  Bermore
exercised a warrant to purchase  6,135,781  shares of common stock. The exercise
of the warrant resulted in the Company receiving $19.8 million of cash proceeds.
All of the  shares  in the  Offering  were sold by Artal  and  Bermore,  with no
proceeds  from the Offering  going to the Company.  As part of the  transaction,
Flowers  acquired  additional  shares of common  stock from Artal and Bermore so
that its ownership of outstanding  common stock increased from approximately 45%
to 55%.  Sales of shares and the  exercise  of the  warrant  resulted in Artal's
ownership  decreasing  from  approximately  45% to 21%, and Bermore's  ownership
decreasing from approximately 7% to 6% of outstanding common stock. Management's
ownership  remained at  approximately  2%,  with the balance of the  outstanding
common stock being sold to non-affiliates.

                                      F-28
<PAGE>
                                      
                        REPORT OF INDEPENDENT ACCOUNTANTS


THE BOARD OF DIRECTORS AND SHAREHOLDERS OF KEEBLER FOODS COMPANY

Our report on the consolidated financial statements of Keebler Foods Company and
Subsidiaries and UB Investments US Inc. and Subsidiaries is included on page F-2
of the Form 10-K. In connection with our audits of such financial statements, we
have also audited the related financial  statement  schedule listed in the index
on page F-1 of the Form 10-K.

In our  opinion,  the  financial  statement  schedule  referred  to above,  when
considered  in  relation  to the basic  financial  statements  taken as a whole,
present  fairly,  in all  material  respects,  the  information  required  to be
included therein.



                                             COOPERS & LYBRAND L.L.P.



Chicago, Illinois
February 18, 1998



                                      S-1
<PAGE>

<TABLE>

ITEM 14 (D).    FINANCIAL STATEMENT SCHEDULE                                                                  SCHEDULE II

                                                 KEEBLER FOODS COMPANY
                               SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS (NOTE 1)
                  FOR THE YEAR ENDED JANUARY 3, 1998, THE FORTY-EIGHT WEEKS ENDED DECEMBER 28, 1996,
                      THE FOUR WEEKS ENDED JANUARY 26, 1996, AND THE YEAR ENDED DECEMBER 30, 1995

                                                    (IN THOUSANDS)
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                    COL. A                        COL. B                 COL. C                COL. D          COL. E
------------------------------------------------------------------------------------------------------------------------


                                                                       ADDITIONS
                                                                -------------------------
                                                 BALANCE AT     CHARGED TO     CHARGED TO                     BALANCE AT
                                                 BEGINNING        COSTS/         OTHER                           END
                 DESCRIPTION                     OF PERIOD       EXPENSES       ACCOUNTS        DEDUCTIONS     OF PERIOD
-----------------------------------------------  ----------     ----------     ----------     --------------  ----------
<S>                                              <C>            <C>            <C>            <C>             <C>

Those valuation and qualifying accounts
      which are deducted in the balance sheet
      from the assets to which they apply:

YEAR ENDED JANUARY 3, 1998
      For discounts and doubtful accounts        $   5,390      $  18,970      $       -      $ (19,395)(1)   $   4,965
                                                 ==========     ==========     ==========     ==========      ==========
      For deferred taxes                         $  84,350      $       -      $       -      $       -       $  84,350
                                                 ==========     ==========     ==========     ==========      ==========
      For inventory reserves                     $   5,508      $   9,716      $       -      $  (8,442)(2)   $   6,782
                                                 ==========     ==========     ==========     ==========      ==========

FORTY-EIGHT WEEKS ENDED DECEMBER 28, 1996
      For discounts and doubtful accounts        $   4,181      $  14,399      $     907 (3)  $ (14,097)(1)   $   5,390
                                                 ==========     ==========     ==========     ==========      ==========
      For deferred taxes                         $ 109,484      $       -      $       -      $ (25,134)(4)   $  84,350
                                                 ==========     ==========     ==========     ==========      ==========
      For inventory reserves                     $   9,578 (5)  $   3,370      $       -      $  (7,440)(6)   $   5,508
                                                 ==========     ==========     ==========     ==========      ==========

========================================================================================================================

FOUR WEEKS ENDED JANUARY 26, 1996
      For discounts and doubtful accounts        $   3,558      $   1,577      $       -      $    (954)(1)   $   4,181
                                                 ==========     ==========     ==========     ==========      ==========
      For deferred taxes                         $ 116,817      $  (7,333)     $       -      $       -       $ 109,484
                                                 ==========     ==========     ==========     ==========      ==========
      For inventory reserves                     $     637      $     378      $       -      $       -       $   1,015
                                                 ==========     ==========     ==========     ==========      ==========

YEAR ENDED DECEMBER 30, 1995
      For discounts and doubtful accounts        $   1,747      $  13,801      $       -      $ (11,990)(1)   $   3,558
                                                 ==========     ==========     ==========     ==========      ==========
      For deferred taxes                         $  46,375      $  70,442      $       -      $       -       $ 116,817
                                                 ==========     ==========     ==========     ==========      ==========
      For inventory reserves                     $   1,136      $       -      $       -      $    (499)(2)   $     637
                                                 ==========     ==========     ==========     ==========      ==========

<FN>

Note 1: Schedule II - Valuation and Qualifying Accounts includes certain financial data of Keebler Foods Company ("the Company") for
        the year ended January 3, 1998 and for the forty-eight  weeks ended December 28, 1996, as well as certain  financial data of
        UB Investments US, Inc.  ("UBIUS"),  the predecessor  company,  for the four weeks ended January 26, 1996, the date on which
        UBIUS was acquired by INFLO Holdings  Corporation  ("INFLO"),  and the year ended December 30, 1995. The distinction between
        the Company's and the predecessor company's financial data has been made by inserting a double line.


 (1)  Primarily charges against reserves, net of recoveries.
 (2)  Inventory write-offs.
 (3)  Amount acquired in the acquisition of Sunshine Biscuits, Inc.
 (4)  Adjustment to reduce the valuation allowance as a result of the acquisition of the Company.
 (5)  Includes inventory reserves established in the acquisition of the Company.
 (6)  Adjustment to reduce reserve.
</FN>

                                                                S-2
</TABLE>
<PAGE>


                                  EXHIBIT INDEX

 EXHIBIT
 NUMBER                             DESCRIPTION
 -------      ------------------------------------------------------------------
   2.1        Plan and  Agreement  of Merger  dated  November  20, 1997  between
              Keebler Foods Company  ("Keebler") and INFLO Holdings  Corporation
              ("INFLO")  (incorporated  herein by  reference  to Exhibit  2.1 of
              Keebler's Registration Statement on Form S-1 previously filed with
              the Securities and Exchange  Commission (the  "Commission")  (File
              No. 333-42075) (the "1998 Registration Statement"))

   3.1        Amended  and  Restated  Certificate  of  Incorporation  of Keebler
              (incorporated  herein  by  reference  to  Exhibit 3.1 of the  1998
              Registration Statement)

   3.2        Amended  and  Restated  By-Laws  of  Keebler (incorporated  herein
              by  reference  to  Exhibit 3.2 of the 1998 Registration Statement)

   4.1        Indenture dated as of June 15, 1996 among Keebler,  the guarantors
              named therein,  and The U.S. Trust Company of New York ("Trustee")
              (incorporated  herein by  reference  to Exhibit  4.1 of  Keebler's
              Registration  Statement  on Form  S-4  previously  filed  with the
              Commission (File No. 333-8379)(the "1996 Registration Statement"))

   4.2        The 10 3/4% Senior Subordinated Note due 2006 (included in Exhibit
              4.1) (incorporated  herein by reference to Exhibit 4.2 of the 1996
              Registration Statement)

   10.1       Stockholders'  Agreement dated as of January 26, 1996 among INFLO,
              Artal  Luxembourg S.A.  ("Artal"),  and Flowers  Industries,  Inc.
              ("Flowers")  (incorporated  herein by reference to Exhibit 10.1 of
              the 1996 Registration Statement)

   10.2       Stock Purchase  Agreement dated November 5, 1995 between INFLO and
              UB Investments (Netherlands) B.V. ("UB Investments") (incorporated
              herein  by  reference  to  Exhibit  10.2 of the 1996  Registration
              Statement)

   10.3       Amendment Agreement dated as of January 26, 1996 between INFLO and
              UB Investments  (incorporated  herein by reference to Exhibit 10.3
              of the 1996 Registration Statement)

   10.4       Distribution Agreement dated as of January 26, 1996 between United
              Biscuits  (UK) Limited ("UBL")  and  Shaffer,  Clarke & Co.,  Inc.
              ("Shaffer")  (incorporated  herein by reference to Exhibit 10.5 of
              the 1996 Registration Statement)

   10.5       Trademark  License  Agreement dated as of January 26, 1996 between
              UBL and Shaffer  (incorporated herein by reference to Exhibit 10.6
              of the 1996 Registration Statement)

   10.6       Borrower  Pledge  Agreement  dated as of January  26, 1996 made by
              Keebler  in  favor  of  The  Bank  of  Nova  Scotia  (the  "Bank")
              (incorporated  herein by reference to Exhibit  10.7(e) of the 1996
              Registration Statement)

   10.7       Acknowledgment  and Supplement to Borrower Pledge  Agreement dated
              June 4, 1996 made by  Keebler  in favor of the Bank  (incorporated
              herein by  reference to Exhibit  10.7(f) of the 1996  Registration
              Statement)

   10.8       Subsidiary  Pledge  Agreement dated as of January 26, 1996 made by
              each of the Keebler's  subsidiaries  listed as parties  thereto in
              favor of the Bank  (incorporated  herein by  reference  to Exhibit
              10.7(g) of the 1996 Registration Statement)

   10.8(a)    First  Amendment  and  Supplement  to Subsidiary  Pledge Agreement
              by certain  subsidiaries  of Keebler  dated  November  25, 1997 in
              favor of the Bank  (incorporated  herein by  reference  to Exhibit
              10.8(a) of the 1998 Registration Statement)


                                       i
<PAGE>

 EXHIBIT
 NUMBER                             DESCRIPTION
 -------      ------------------------------------------------------------------
  10.9        Management Stockholder's Agreement between INFLO and Key Employees
              of INFLO (incorporated  herein by reference to Exhibit 10.8 of the
              1996 Registration Statement)

  10.10       Non-Qualified   Stock  Option  Agreement  between  INFLO  and  Key
              Employees  of INFLO  (incorporated  herein by reference to Exhibit
              10.9 of the 1996 Registration Statement)

  10.11       1996 Stock  Purchase  and Option Plan for Key  Employees  of INFLO
              (incorporated  herein by  reference  to Exhibit  10.10 of the 1996
              Registration Statement)

  10.12       Sale  Participation   Agreement  among  Artal,  Flowers,  and  Key
              Employees  of INFLO  (incorporated  herein by reference to Exhibit
              10.11 of the 1996 Registration Statement)

  10.13       Stock Purchase Agreement dated June 4, 1996 among INFLO,  Keebler,
              and G.F. Industries, Inc. ("GFI")(incorporated herein by reference
              to Exhibit 10.12 of the 1996 Registration Statement)

  10.14       GFI  Stockholder's  Agreement dated June 4, 1996 among INFLO, GFI,
              Artal,  and Flowers  (incorporated  herein by reference to Exhibit
              10.13 of the 1996 Registration Statement)

  10.15       Warrant to Purchase Shares of Common Stock of INFLO  (incorporated
              herein  by  reference  to  Exhibit  10.14 of the 1996 Registration
              Statement)

  10.16       Second Amended and Restated  Credit  Agreement dated April 8, 1997
              among  Keebler,  the Bank,  and the  other  parties  thereto  (the
              "Credit Agreement")  (incorporated  herein by reference to Exhibit
              10.15 of Keebler's  Quarterly Report on Form 10-Q previously filed
              with the Commission on November 10, 1997 (the "Quarterly Report"))

  10.17       First  Amendment  to the Credit  Agreement  dated  October 3, 1997
              among   Keebler,   the  Bank,  and  the  other   parties   thereto
              (incorporated  herein by  reference  to  Exhibit  10.15(a)  of the
              Quarterly Report)

  10.18       Second  Amendment to the Credit  Agreement dated November 17, 1997
              between Keebler, the Bank, and other parties thereto (incorporated
              by reference to Exhibit 10.19 of the 1998 Registration Statement)

  10.19       Third  Amendment  and Waiver to the Second  Amended  and  Restated
              Credit Agreement dated January 5, 1998 between Keebler,  the Bank,
              and the other parties thereto (incorporated herein by reference to
              Exhibit 10.20 of the 1998 Registration Statement)

  10.20       Stock Appreciation  Rights Plan of Keebler for Certain  Management
              Employees dated March 4, 1997 (incorporated herein by reference to
              Exhibit 10.16 of the Quarterly Report)

  10.21       Artal Stock Purchase Agreement among Artal,  Flowers,  and Keebler
              (incorporated   by  reference  to   Exhibit  10.22  of  the   1998
              Registration Statement)

  10.22       Bermore Stock Purchase  Agreement among Artal,  Flowers,  Bermore,
              and Keebler  (incorporated  by reference  to Exhibit  10.23 of the
              1998 Registration Statement)

  10.23       Employment and Severance Agreement between Keebler and Sam K. Reed
              (incorporated   by   reference   to Exhibit  10.24  of  the   1998
              Registration Statement)

  10.24       Employment  and Severance  Agreement  between  Keebler and certain
              executive officers  (incorporated by reference to Exhibit 10.25 of
              the 1998 Registration Statement)

                                       ii
<PAGE>

 EXHIBIT
 NUMBER                             DESCRIPTION
 -------      ------------------------------------------------------------------
  10.25       1998 Omnibus  Stock Incentive  Plan of  Keebler  (incorporated  by
              reference  to  Exhibit  10.26 of the 1998  Registration Statement)

  10.26       Non-Employee  Director  Stock  Plan of  Keebler  (incorporated  by
              reference  to  Exhibit  10.27 of the 1998  Registration Statement)

  10.27       Amendments   to   the   1996   Non-Qualified   Option   Agreements
              (incorporated   by  reference   to  Exhibit   10.28  of  the  1998
              Registration Statement)

  10.28       Supplement  to  Subsidiary  Guaranty  (Hollow  Tree) (incorporated
              by reference to Exhibit 10.29 of the 1998  Registration Statement)

  10.29       Supplement  to  Subsidiary Guaranty  (Elfin  Equity) (incorporated
              by reference to Exhibit 10.30 of the 1998  Registration Statement)

  10.30       Amendment  No.  1  to  Management  Stockholder's  Agreement  (Non-
              Executives) (incorporated  by reference to Exhibit 10.31.1  of the
              1998 Registration Statement)

  10.31       Amendment No. 1 to Management  Stockholder's Agreement (Executives
              other than O'Neill,  Walsh, and Spear)  (incorporated by reference
              to Exhibit 10.31.2 of the 1998 Registration Statement)

  10.32       Amendment No. 1 to Management  Stockholder's  Agreement  (O'Neill,
              Walsh, and Spear) (incorporated by reference to Exhibit 10.31.3 of
              the 1998 Registration Statement)

  21          Subsidiaries  of  Keebler  (incorporated  herein by  reference  to
              Exhibit 21 of the 1998 Registration Statement)

  27          Financial Data Schedule

                                      iii
<PAGE>