SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Transition Period Ended March 26, 1996
Commission file number 1-7554
THE EARTHGRAINS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-3201045
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
314-259-7000
(Registrant's telephone number, including area code)
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 [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
$1 Par Value Common Stock - 10,092,133 shares as of May 7, 1996
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THE EARTHGRAINS COMPANY
Index
Page No.
Part I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheet as of March 26, 1996
and January 2, 1996 2
Condensed Combined Statements of Earnings for the twelve
week periods ended March 26, 1996 and March 28, 1995 3
Condensed Combined Statements of Cash Flows for the twelve
week periods ended March 26, 1996 and March 28, 1995 4
Notes to Condensed Combined Financial Statements 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Unaudited Pro Forma Financial Information 9
Part II. OTHER INFORMATION
Other Information 11
Exhibits and Reports on Form 8-K 12
* Note: The registrant 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); however,
the registrant became a reporting company on February 29, 1996,
and so has not been subject to such filing requirements for the
past 90 days.
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<TABLE>
<CAPTION>
THE EARTHGRAINS COMPANY
Condensed Consolidated Balance Sheet
(In millions)
(Unaudited)
March 26, January 2,
1996 1996
<C> <C>
<S>
Assets
Current assets:
Cash and cash equivalents $ 38.9 $ 33.4
Accounts receivable, net of allowance for
doubtful accounts of $6.8 and $6.4,
respectively 138.9 136.0
Inventories 68.0 70.6
Deferred income taxes and other 24.0 15.5
Total current assets 269.8 255.5
Other assets 38.6 96.5
Goodwill, net 130.3 131.6
Plant and equipment, net 727.0 713.6
Total assets $1,165.7 $1,197.2
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 98.1 $ 94.2
Accrued salaries, wages and benefits 48.6 43.3
Accrued taxes, other than income taxes 11.4 10.4
Accrual for restructuring and consolidation 15.4 17.9
Other current liabilities 36.3 26.6
Total current liabilities 209.8 192.4
Postretirement benefits 123.1 123.2
Long-term debt 92.6 1.5
Deferred income taxes 87.2 115.8
Other noncurrent liabilities 72.2 63.0
Commitments and contingencies -- --
Shareholders' equity 580.8 701.3
Total liabilities and equity $1,165.7 $1,197.2
<FN>
See accompanying Notes to Condensed Combined Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
THE EARTHGRAINS COMPANY
Condensed Combined Statements of Earnings
(In millions except per share data)
(Unaudited)
For the twelve week period ended
March 26, March 28,
1996 1995
<C> <C>
<S>
Net sales $ 367.7 $ 371.8
Cost of products sold 228.8 226.1
Gross profit 138.9 145.7
Marketing, distribution and administrative
expenses 146.0 140.9
Provision for restructuring and consolidation,
net -- 6.1
Operating (loss) income (7.1) (1.3)
Other income and expenses:
Interest expense (0.1) (0.4)
Other (expense)/income, net (0.1) 0.8
(Loss) income before income taxes (7.3) (0.9)
Provision (benefit) for income taxes (2.2) (0.6)
Net (loss) income $ (5.1) $ (0.3)
(Loss) earnings per share $ (.50) $ (0.03)
Weighted average shares outstanding 10.2 10.4
<FN>
See accompanying Notes to Condensed Combined Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
THE EARTHGRAINS COMPANY
Condensed Combined Statements of Cashflows
(In millions)
(Unaudited)
For the twelve week period ended
March 26, March 28,
1996 1995
<C> <C>
<S>
Cash flow from operating activities:
Net (loss) income $ (5.1) $ (0.3)
Adjustments to reconcile earnings to
net cash flow provided by operations:
Depreciation and amortization 17.4 15.8
Deferred income taxes (6.2) (2.0)
Provision for restructuring and
consolidation -- 6.1
Gain on disposal of fixed assets (0.4) --
Changes in noncash working capital 15.2 14.2
Other, net (2.1) 12.1
Net cash flow from operations 18.8 45.9
Cash flows from investing activities:
Capital expenditures (22.5) (15.5)
Other, net (4.7) 0.3
Net cash used by investing activities (27.2) (15.2)
Cash flows from financing activities:
Proceeds from (payments on) borrowings,
net 89.5 (0.2)
Net transactions with Anheuser-Busch (75.6) (6.2)
Net cash provided by (used by)
financing activities 13.9 (6.4)
Net increase in cash and cash equivalents 5.5 24.3
Cash and cash equivalents, beginning o
period 33.4 14.4
Cash and cash equivalents, end of year $ 38.9 $ 38.7
<FN>
See accompanying Notes to Condensed Combined Financial Statements.
</TABLE>
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Notes to Condensed Combined Financial Statements
For the Transition Period from January 3, 1996 to March 26, 1996
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Note 1 - Effective March 26, 1996, one share of The Earthgrains
Company (the Company or Earthgrains) $.01 par value common stock
was distributed to holders of Anheuser-Busch Companies, Inc.
(Anheuser-Busch) common stock for every 25 shares of Anheuser-
Busch common stock owned at the established record date (the
Distribution). At the time of the Distribution, the Company
began operations as a separate, publicly owned company.
Note 2 - The Company has changed its fiscal year end from the
Tuesday closest to December 31 to the last Tuesday in March.
This transition report reflects the twelve week period between
the prior fiscal year ended January 2, 1996 and the new fiscal
year commencing March 27, 1996.
In the opinion of the Company, the accompanying unaudited
condensed combined financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary for a
fair presentation of the financial statements pursuant to the
applicable SEC rules and guidelines pertaining to interim
financial information. These condensed combined financial
statements should be read in conjunction with the combined
financial statements and notes thereto included in the Company's
registration filing on Form 10.
Note 3 - Inventories are carried at the lower of cost or market.
Cost is determined under the first-in, first-out method.
Total inventories consisted of the following:
March 26, January 2,
1996 1996
Raw Materials $ 53.6 $ 55.5
Finished Goods 14.4 15.1
$ 68.0 $ 70.6
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Note 4 - Earnings per share were computed for both periods
presented using the weighted average shares of Anheuser-Busch
common stock outstanding during the respective periods, adjusted
for a 1 to 25 stock distribution ratio.
Note 5 - Concurrent with the Distribution, the Company used
borrowings under a $215 million unsecured revolving credit
facility (the "Credit Facility") with several financial
institutions to pay $80 million to Anheuser-Busch as a settlement
on its intercompany payable and to fund working capital needs and
general corporate purposes. The credit agreement has a maturity
date of March 20, 2001 and interest on the borrowings is based on
the rate for Eurodollar deposits. The credit facility also
contains customary covenants, including maintenance of an
interest rate coverage ratio and certain other restrictions.
Note 6 - During this transition period ended March 26, 1996, the
Company entered into a multiyear baked goods supply agreement
with a major customer. Under this agreement, Earthgrains will
supply Jitney-Jungle Stores of America, Inc., based in Jackson,
Mississippi, with brand-name and private-label bread, buns and
snack cakes over a five year period. Jitney-Jungle operates more
than 100 grocery stores in Mississippi and five other southern
states.
On April 11, 1996, Earthgrains also announced that it had entered
into a brand licensing agreement and asset exchange with
Interstate Bakeries Corporation. Under the brand licensing and
asset exchange agreement, the Company will assume Interstate
Bakeries' production and marketing in Texas through its own
existing facility. In return, Interstate will take ownership of
Earthgrains' Roanoke bakery and will produce and distribute the
Company's brands in the Virginia market. Both agreements will be
effective during the first quarter of fiscal 1997.
Note 7 - A reclassification has been made between accounts
payable and other current liabilities in the condensed
consolidated balance sheet as of January 2, 1996 to conform to
the current period presentation.
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Management's Discussion and Analysis of Financial Condition and
Results of Operations
INTRODUCTION
Effective at the close of business on March 26, 1996 (the
Distribution Date), shares of the Company were distributed to
shareholders of Anheuser-Busch Common Stock, based upon a ratio
of 1 to 25. Following the distribution, the Company began
operations as an independent, publicly held company. This
discussion summarizes the significant factors affecting the
combined operating results, financial condition and liquidity of
The Earthgrains Company for the twelve week period ended March
26, 1996 compared to the twelve week period ended March 28, 1995.
Results for the periods presented may not necessarily be
indicative of the results of operations that would have been
obtained if the Company had operated independently during the
periods shown or of the Company's future performance as an
independent company. This discussion should be read in
conjunction with the combined financial statements and notes
thereto for the fiscal year ended January 2, 1996 included in the
Company's registration statement on Form 10.
RESULTS OF OPERATIONS
For the twelve week period ended March 26, 1996, sales declined
$4.1 million or 1.1% from the comparable prior year period. The
decrease can be attributed to the planned consolidation and
restructuring that resulted in the closing or sale of
underperforming and non-core businesses. This decrease in sales
was partially offset by increased volume in refrigerated dough
products, a $4.9 million increase in international sales and a
$5.6 million favorable effect of exchange rate fluctuations.
After adjusting sales for the closed or sold facilities in both
periods presented, sales increased by $19.8 million.
Gross margins for the current period of 37.8% compared
unfavorably to last years' 39.2%. As expected, margins were and
may continue to be adversely affected by the dramatic increases
in commodity prices for ingredients, specifically flour costs
which have recently increased to record levels.
The increase in marketing, distribution and administrative
expenses to $146.0 million from $140.9 million in the prior year
period is the result of one-time charges of $7.6 million,
including $6.3 million related to a tentative settlement
agreement for alleged price-fixing and antitrust violations in
the state of Texas.
In the prior year period, $6.1 million of the fiscal 1995
provision for restructuring and consolidation was recorded to
cover estimated expenses arising from the consolidation of
certain domestic bakery operations identified at that date. The
domestic restructuring and consolidation program has been
completed and no such charges have been recorded in the current
period.
The variance in the effective income tax rate reflects the
relative impact of the nondeductible fixed goodwill amortization
on the respective earnings levels.
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As a result of the current period charge for the tentative legal
settlement and other factors discussed above, the Company
incurred a loss of $5.1 million, or $.50 per share, computed on
the basis of pro forma average shares outstanding, compared to a
loss of $0.3 million,or $.03 per share in the prior year's
comparable period.
The historical statement of earnings does not fully reflect
interest expense related to long-term debt assumed by the Company
upon the distribution at March 26, 1996 and certain
administrative expenses associated with operating as an
independent, stand-alone company. For a presentation of the
potential effect these items and events may have had on the
Company's results for the current period see the Unaudited Pro
Forma Financial Information elsewhere in this document.
LIQUIDITY AND CAPITAL RESOURCES
Concurrent with the Distribution, the Company used borrowings
under a $215 million unsecured revolving credit facility with
several financial institutions to pay $80 million to Anheuser-
Busch as a partial payment of its intercompany payable and to
fund working capital needs and general corporate purposes. Upon
the effective date of the distribution, the remaining
intercompany payables and receivables between the Company and
Anheuser-Busch was contributed to the capital of the Company.
The Company's primary source of liquidity is cash flow from
operations, which decreased to $18.8 million for the twelve weeks
ended March 26, 1996 compared to $45.9 million for the same
period in the prior year, primarily due to lower current period
operating results and one-time transactions to effect the spin-
off. Net working capital, excluding cash and cash equivalents,
was $21.1 million at March 26, 1996 compared to $29.7 million at
January 2, 1996.
The Company's current primary cash requirements will consist of
funding capital expenditures and interest payments pursuant to
the credit facility. The Company has invested $22.5 in capital
expenditures during the transition period.
While ingredient costs are expected, at least in the foreseeable
future, to remain at levels significantly above historical
averages, cash provided by operations and borrowings available
under the credit agreement should continue to provide the funding
for ongoing cash requirements.
ENVIRONMENTAL MATTERS
The Company is subject to Federal, state and local environmental
protection laws and regulations and is operating within such laws
or is taking action aimed at assuring compliance with such laws
and regulations. Earthgrains has been identified as a
potentially responsible party ("PRP") at certain locations by the
EPA and may be required to share in the cost of cleanup with
respect to two sites. While it is difficult to quantify with
certainty the financial impact of actions related to
environmental matters, based on the information currently
available it is management's opinion that the ultimate liability
arising from such matters, taking into consideration established
reserves, should not have a material effect on the Company's
results of operations or financial position.
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THE EARTHGRAINS COMPANY
PRO FORMA FINANCIAL INFORMATION
The condensed combined financial statements of the Company
presented reflect periods during which the Company operated as a
subsidiary of Anheuser-Busch. These historical financial
statements of the Company may not necessarily reflect the
consolidated results of operations or financial position of the
Company or what the results of operations would have been if the
Company had been an independent, public company during such
periods.
The unaudited pro forma condensed combined statement of
earnings for the twelve week period ended March 26, 1996 presents
the combined results of Earthgrains' operations assuming that the
Distribution had occurred as of January 3, 1996. Such statement
of earnings has been prepared by adjusting the historical
statement of earnings for the effect of costs and expenses and
the recapitalization to reflect the Distribution as if it had
been effected on January 3, 1996.
A March 26, 1996 pro forma consolidated balance sheet has
not been presented, as the historical consolidated balance sheet
of the Company as of March 26, 1996 reflects the effects of the
Distribution.
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<CAPTION>
The Earthgrains Company
Unaudited Pro Forma Condensed Combined Statement of Earnings
For the Twelve Week Period Ended March 26, 1996
(In millions, except per share data)
Pro Forma Pro
Historical Adjustments Forma
<C> <C> <C>
<S>
Net sales $ 367.7 $ - $ 367.7
Cost of products sold 228.8 .8 (a) 229.6
Gross profit 138.9 (.8) 138.1
Marketing, distribution and
administrative expenses 146.0 3.7 (a) 149.7
Operating (loss) income (7.1) (4.5) (11.6)
Other income and expenses:
Interest expense (0.1) (1.2) (b) (1.3)
Other (expense)/income,
net (0.1) - (0.1)
(Loss) income before
income taxes (7.3) (5.7) (13.0)
Provision (benefit) for
income taxes (2.2) (2.0) (c) (4.2)
Net (loss) income $ (5.1) $ (3.7) $ (8.8)
(Loss) earnings per
share (d) $ (.86)
Weighted average shares
outstanding (d) $ 10.2(d)
<FN>
</TABLE>
_______________________
(a) To reflect the estimated incremental costs associated with being an
independent, public company.
(b) To reflect interest expense on incremental debt and working capital
requirements.
(c) To reflect tax effect of the proforma adjustments.
(d) The number of shares used to compute earnings (loss) per share is based
on the weighted average number of shares of Anheuser-Busch common stock
outstanding during the period adjusted for the 1 for 25 stock distribution
ratio.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On October 25, 1995 and December 12, 1993, civil suits in
the U.S. District Court for the Eastern District of Texas were
filed against the Company, the former general manager of the
Company's Dallas baking operations and certain of the Company's
competitors alleging price fixing in conjunction with the sale of
bread and bread products. These suits seek class action
certification, treble damages and attorneys' fees. A civil suit
in the district Court of Johnson County, Texas, 18th Judicial
District has also been filed against the Company, the former
general manager of the Company's Dallas baking operations and
certain of the Company's competitors arising out of these same
activities. This suit was instituted on October 4, 1995 and
seeks class action certification, treble damages, punitive
damages and attorneys' fees. During the current transition
period, a tentative settlement agreement was reached to cover all
state and federal civil antitrust litigation pending against the
Company in the state of Texas. A reserve of $6.3 million was
recorded during this period in conjunction with the settlement
agreement.
In addition to the above, the Company and certain of its
subsidiaries are involved in certain claims and legal proceedings
which are in varying stages and arise in the normal course of
business.
Although it is impossible to predict the outcome of any
legal proceeding and the Company cannot estimate the ultimate
liability, if any, relating to these various proceedings, the
Company believes that it has meritorious defenses to the claims
pending against it in such proceedings and that the outcome of
such proceedings should not, individually or in the aggregate,
have a material adverse effect on the results of operations or
financial condition of the Company. Also see discussion of
environmental matters elsewhere in this document.
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Items 3 - 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) 10.1 - License Agreement with Anheuser-Busch Companies,
Inc.
10.2 - Corporate Services Agreement with Anheuser-Busch
Companies, Inc.
10.3 - The Earthgrains Company 1996 Stock Incentive
Plan (As Amended April 11, 1996)
27 - Financial Data Schedule
(b) On April 4, 1996, the Company filed with the Securities
and Exchange Commission a Current Report on Form 8-K reporting a
change in the Company's fiscal year end from the Tuesday nearest
December 31 of each year to the Tuesday immediately preceding
March 31 (or March 31, if it is a Tuesday) of each year.
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SIGNATURES
Pursuant to the requirements 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.
THE EARTHGRAINS COMPANY
(Registrant)
Date: May 9, 1996 By: /s/ Mark H. Krieger
_______________________
Mark H. Krieger
Vice President and Chief
Financial Officer
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<TABLE>
<CAPTION>
PRO FORMA FINANCIAL DATA:
For the twelve week period ended
March 26, March 28,
1996 1995
<S> <C> <C>
Net Sales $ 367.7 $ 371.8
Interest Expense 1.3 1.6
(Loss) before Income Taxes (13.0) (7.8)
Net (Loss) (8.8) (4.6)
(Loss) per Common Share (.86) (.44)
Pro Forma Weighted Average Shares
Outstanding 10.2 10.4
<FN>
</TABLE>
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ELECTRONIC INDEX TO EXHIBITS
(All Exhibits are filed electronically.)
Exhibit No. Exhibit
----------- -------
10.1 License Agreement with Anheuser-Busch Companies,
Inc.
10.2 Corporate Services Agreement with Anheuser-Busch
Companies, Inc.
10.3 The Earthgrains Company 1996 Stock Incentive Plan
(As Amended April 11, 1996)
27 Financial Data Schedule
LICENSE AGREEMENT
Agreement dated March 1, 1996 by and between ANHEUSER-BUSCH,
INCORPORATED, a Missouri corporation, having its principal office
at One Busch Place, St. Louis, Missouri 63118-1852 ("Licensor") and
THE EARTHGRAINS COMPANY, a Delaware corporation having its
principal office at 8400 Maryland Avenue, St. Louis, Missouri
63105 ("Licensee") with reference to the following recitals:
A. Licensor desires to license certain trademarks to
Licensee. Said marks are set forth on the attached Exhibit A
("Trademarks");
B. Licensee wishes to use the Trademarks upon and in
connection with the manufacture, sale, marketing and distribution
of the article(s) described in the attached Exhibit B. The
article or articles described in the attached Exhibit B and on
which or in connection with which Licensee uses one or more
Trademarks shall hereinafter be referred to as "Articles". This
Exhibit B may be amended from time to time as Licensee may desire
to expand its product line;
C. Licensor desires to protect the integrity of its
Trademarks and to preserve its right in products bearing the
Trademarks so as to avoid consumer confusion and to distinguish
its products from those of its competitors;
D. This License Agreement replaces and supersedes the October
8, 1987 Agreement between these same two parties.
NOW, THEREFORE, in consideration of the mutual promises of
this Agreement, the parties agree as follows:
1. GRANT OF LICENSE
(a) Licensor grants to Licensee, subject to the terms and
conditions of this Agreement, the exclusive right to use the
Trademarks upon the Articles and in connection with the Articles'
manufacture, sale, marketing and distribution. Licensor reserves
any rights, benefits and opportunities not expressly granted to
Licensee under this Agreement. Licensee agrees that it shall not
use the Trademarks in any manner not expressly authorized by this
Agreement.
(b) The License Agreement between the parties dated
October 8, 1987 is hereby terminated by the mutual consent of the
parties and neither party shall have any
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2
further liability or obligation to the other party in respect of
such agreement.
(c) Licensor represents and warrants that it will not take
any action to nullify or limit the grant of this License and that
it has the right and authority to enter into this Agreement.
2. TERRITORY
The license granted under this Agreement extends only to
the United States, its territories and possessions, Canada and
Mexico (the "Territory"). This Agreement grants no right to
manufacture, sell, market or distribute Articles outside the
Territory, and this Agreement grants no right to authorize any
person or entity to manufacture, sell, market or distribute
Articles outside the Territory. Licensee agrees not to sell
Articles to any person or entity who Licensee knows or has reason
to know intends or is likely to resell Articles outside the
Territory.
3. TERM
The term of this Agreement shall be perpetual unless
terminated in accordance with other provisions herein.
4. MARKETING AND DISTRIBUTION
Licensee shall market and distribute Articles bearing the
Trademarks so as to ensure that the Trademarks are not subject to
abandonment.
5. QUALITY AND APPROVAL
(a) Purpose of Quality Control.
Licensee agrees that the Articles shall be of a uniformly
high quality. In order to maintain the quality of the Articles and
reputation of the Trademarks, Licensor must approve, from time to
time upon reasonable notice to Licensee, the use of the Articles
and promotional and packaging material bearing the Trademarks.
(b) The parties hereto understand that several third
parties supply different ingredients, Articles, point of sale
materials and packaging materials bearing the Trademarks to
Licensee. Licensee acknowledges that the high quality standards in
paragraph 5(a) apply to the materials, Articles and ingredients
purchased from third party suppliers.
(c) Submittal Approval.
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3
(1) Prior to the review provided for in paragraph 5(a),
or at least annually, Licensee shall deliver at its expense a
complete set of art work, sketches and/or production samples of the
Articles, packaging and advertising therefor. Licensor shall have
ten (10) business days to approve these submittals. If Licensor
does not disapprove of the submittals within such ten (10) day
period, then the submittals will be deemed approved. Licensor's
approval of a particular material shall extend to substantially
similar uses of the Trademarks on other materials. Licensor shall
have ten (10) business days to disapprove of said materials. If
Licensor does not disapprove of these materials within ten (10)
business days, the materials will be deemed approved.
(d) Quality Maintenance.
Licensee shall maintain the same quality in the Articles
and promotional and packaging material relating to the Articles
produced as in the samples approved by Licensor. Licensee agrees
to provide upon demand a reasonable number, from time to time, of
samples of the Articles and of promotional and packaging material
relating to the Articles at no cost to Licensor for Licensor's
periodic quality control inspection.
(e) Licensee's Production Facilities.
Licensor shall have the right upon reasonable notice to
Licensee, during regular business hours, at its own expense, to
inspect any production facilities where any Articles are being
manufactured for the purpose of enabling Licensor to determine
whether Licensee is adhering to the requirements of this Agreement
relating to the nature and quality of the Articles and the use of
the Trademarks.
(f) Damaged, Defective or Non-Approved Items.
Licensee shall not sell, market, distribute or use for any
purpose or permit any third party to sell, market, distribute or
use for any purpose any Articles or promotional and packaging
material relating to the Articles which are damaged, defective,
seconds or otherwise fail to meet Licensor's specifications or
quality standards or the trademark and copyright usage and notice
requirements of this Agreement. The parties acknowledge that sales
of Articles are and will be made in thrift stores. Licensee
warrants that these thrift stores will be operated in substantially
the same manner during the term hereof regarding quality of the
Articles as they are now operated.
6. RIGHTS IN THE TRADEMARKS AND COPYRIGHT WORKS
(a) Licensee shall not make any unlicensed use or file
any application for registration of any of the Trademarks or any
marks or works similar thereto.
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4
(b) Licensee acknowledges the validity of and Licensor's
rights in the Trademarks and shall not do or suffer to be done any
act or thing which will impair the rights of Licensor in and to
the Trademarks. Licensee shall not acquire and shall not claim
any title to the Trademarks by virtue of the license granted to
Licensee or through Licensee's use of the Trademarks, the parties
intending and agreeing that all use of the Trademarks by Licensee
shall inure to the benefit of Licensor.
(c) Licensee shall use reasonable commercial efforts to
ensure that the Trademarks are not diluted or subject to disrepute
in the course of Licensee's use thereof and that Licensor's
reputation is not subject to disrepute and that Licensor's
ownership of the Trademarks are preserved.
7. INFRINGEMENT OF TRADEMARKS OR COPYRIGHT WORKS
If Licensee learns of any infringement of the Trademarks
or of the existence, use or promotion of any mark or design similar
to the Trademarks, Licensee shall promptly notify Licensor.
Licensor has the right to decide at its sole discretion what legal
proceedings or other action, if any, shall be taken, by whom, how
such proceedings or other action shall be conducted and in whose
name such proceedings or other action shall be performed. Any
legal proceedings instituted pursuant to this Section shall be at
Licensor's sole cost and expense, for the sole benefit of Licensor,
and all sums recovered in such proceedings, whether by judgment,
settlement or otherwise shall be retained solely and exclusively by
Licensor.
8. COOPERATION WITH LICENSOR
Licensee agrees to cooperate with Licensor in the
prosecution of any trademark or copyright application that Licensor
may desire to file or in the conduct of any litigation relating to
the Trademarks. Licensee shall supply to Licensor such samples,
containers, labels, sales information and similar material and,
upon Licensor's request, shall procure evidence, give testimony and
cooperate with Licensor as may reasonably be required in connection
with any such application or litigation. Licensor agrees to
reimburse Licensee for its genuine, reasonable and documented out
of pocket costs actually incurred in connection with proceedings
under this paragraph.
9. COMPLIANCE WITH GOVERNMENT STANDARDS
Licensee represents and warrants that the Articles, their
packaging, marketing, sales and distribution shall meet or exceed
all Federal, State and local laws, ordinances, standards,
regulations and guidelines pertaining to such products or
activities, including, but not limited to, those pertaining to
product safety, quality, and labeling. Licensee agrees that it
will not package, market, sell or distribute any Articles or cause
or permit any Articles to be packaged, marketed, sold or
distributed in violation of any such Federal, State or local law,
ordinance, standard, regulation or guideline.
<PAGE>
5
10. TRADEMARK AND COPYRIGHT OWNERSHIP AND NOTICES
(a) Licensee's use of any of the Trademarks shall,
depending upon the directions provided by Licensor, in every
instance be combined with one of the following notices: (i) Reg.
U.S. Pat. & TM. Off.; (ii) (R); (iii) TM; or (iv) such other
similar language as shall have Licensor's prior approval.
(b) Licensor and Licensee agree that artwork and
designs directly involving the Trademarks shall be and remain the
property of Licensor and Licensor shall have the right to file
applications to register them in the United States Patent and
Trademark Office. Licensee shall have the right to ask Licensor to
add those marks to the Trademarks listed on Schedule A. Licensee
shall own the other designs and artwork hereinafter which do not
involve the Trademarks. Each party agrees to execute promptly all
reasonable requests from the other party to give effect to this
clause.
11. TERMINATION
(a) Without prejudice to any other rights which Licensor
may have, Licensor may at any time give notice of termination
effective immediately:
(1) If Licensee shall fail for sixty (60) consecutive
days to continue the bona fide distribution and sale of the
Articles in commercially reasonable quantities in the Territory
unless such distribution is prevented by a force majeure event;
(2) If Licensee does any act to bring the Trademarks
into disrepute;
(3) If Licensee shall be unable to pay its obligations
when due, shall make any assignment for the benefit of creditors,
shall file a voluntary petition in bankruptcy, shall be adjudicated
bankrupt or insolvent, shall have bankruptcy, reorganization,
insolvency, or liquidation proceedings instituted against it that
are not dismissed within sixty (60) days from the date of the
institution thereof, shall have any receiver or trustee in
bankruptcy or insolvency appointed for its business or property,
or shall make an assignment for the benefit of creditors;
(4) If the quality of any Articles is lower than in that
which was approved by Licensor for such Article;
(5) If Licensee manufactures, sells, markets,
distributes or uses any Articles or promotional or packaging
material relating to the Articles without Licensor's approval as
provided for by this Agreement or continues to manufacture, sell,
market, distribute or use any Articles or promotional or packaging
material relating to the Articles after receipt of notice from
Licensor disapproving such items;
(6) If Licensee becomes subject to any voluntary or
involuntary order of any governmental agency involving the recall
of any Articles or promotional or packaging material relating to
the Articles because of safety, health or
<PAGE>
6
other hazards or risks to the public and Licensee fails to comply
with such order;
(7) If Licensee breaches any provision of this
Agreement relating to the unauthorized assertion of rights in the
Trademarks;
(8) If Licensee fails to obtain or maintain insurance
coverage as required by the provisions of this Agreement;
(b) If Licensee commits any other material breach of its
obligations under this Agreement or any other agreement between
Licensor and Licensee and fails to rectify that breach within
thirty (30) days after notice of such breach by Licensor, then
Licensor shall have the right to terminate this License Agreement.
(c) If reasonable grounds for insecurity arise with
respect to Licensee's performance of this Agreement, Licensor may
in writing demand adequate assurance of due performance. Until
Licensor receives such assurance in writing, it may suspend its
performance of this Agreement. If Licensor does not receive such
written assurance within ten (10) business days after the date of
its request therefor. The failure by Licensee to furnish such
assurance will constitute a material breach which entitles Licensor
to immediately terminate this Agreement.
12. POST-TERMINATION AND EXPIRATION RIGHTS AND
OBLIGATIONS
(a) If this Agreement is terminated for any cause under
the previous Section 11, Licensee and Licensee's receivers,
representatives, trustees, agents, administrators, successors or
permitted assigns shall have no right after the effective date of
termination to manufacture, sell, ship, market or distribute
Articles or to use any promotional and packaging material relating
to the Articles.
(b) After the expiration or termination of this
Agreement, all rights granted to Licensee under this Agreement
shall forthwith revert to Licensor, and Licensee shall refrain from
further use of the Trademarks or any further reference to the
Trademarks, either directly or indirectly, or from use of any marks
or designs similar to the Trademarks in connection with the
manufacture, sale, marketing or distribution of Licensee's
products.
13. INDEMNITY AND INSURANCE
(a) Licensee acknowledges that it will have no claims
against Licensor for any damage to property or injury to persons
arising out of the operation of Licensee's business. Licensee
agrees to indemnify, hold harmless and defend Licensor with legal
counsel reasonably acceptable to Licensor from and against all
demands, claims, injuries, losses, damages, actions, suits, causes
of action, proceedings, judgments, liabilities and expenses,
including attorneys' fees, court costs and other legal expenses,
arising out of or connected with the Articles, the promotional or
<PAGE>
7
packaging material relating to the Articles, Licensee's methods of
manufacturing, marketing, selling or distributing the Articles,
Licensee's use of the Trademarks or any breach by Licensee of any
provision of this Agreement or of any warranty made by Licensee in
this Agreement.
(b) Licensee shall obtain and maintain during the term
of this Agreement and the disposal period, if any, comprehensive
general liability insurance coverage, including product liability
insurance, naming Licensor as additional insured. Such insurance
shall be underwritten by insurers satisfactory to Licensor and
shall be written for limits of not less than $2,000,000 each
occurrence combined, for bodily injury, including death and
property damage. On January 1, 1999 and on the first day of each
calendar year thereafter (each such day shall be an Adjustment
Date), the insurance coverage required hereunder shall be adjusted
by the same percentage as the percentage change in the Consumer
Price Index (or such successor index that may replace the Consumer
Price Index in recognition and stature) from the date on which the
insurance coverage required hereunder was last established.
Licensee shall furnish Licensor promptly upon the execution of
this Agreement with a certificate of insurance stating thereon the
limits of liability, the period of coverage, the parties insured
(including Licensee and Licensor), and the insurer's agreement not
to terminate or materially modify such insurance without
endeavoring to notify Licensor in writing at least ten (10) days
before such termination or modification. Coverage provided for
Licensor shall be primary, and any insurance maintained by Licensor
shall be in excess and not contributing with any insurance provided
by Licensee. Coverage shall be on an occurrence rather than a
claims made basis. In no event shall Licensee make any use of the
Trademarks before Licensor's receipt of such insurance certificate.
(c) The existence of the insurance coverage shall not
mitigate, alter or waive the indemnity provisions of subparagraph
(a). Licensor shall not be responsible for the payment of the
premiums, charge taxes, assessments or other costs for the
insurance.
(d) Licensor indemnifies and agrees to hold Licensee
harmless and defend Licensee against all demands, claims, injuries,
losses, damages, actions, suits, causes of action, proceedings,
judgments, liabilities and expenses including attorney fees, court
costs or other legal expenses arising out of a material breach of
any of its covenants, representations and warranties hereunder.
The existence of insurance coverage shall not mitigate, alter or
waive these indemnity provisions.
14. NOTICES
Notices provided for herein shall be considered
effectively given when sent by fax, hand delivery or Certified
Mail, in the case of Licensor, to:
ANHEUSER-BUSCH, INCORPORATED
One Busch Place
St. Louis, Missouri 63118-1852
<PAGE>
8
Attention: Legal Department
FAX: 314/577-3835
and, in the case of Licensee to:
The Earthgrains Company
8400 Maryland Avenue
St. Louis, Missouri 63105
Attn: Office of the General Counsel
FAX: 314/259-7029
or, in each case, to such other address as may be substituted by
such notice as provided for herein.
15. ASSIGNMENT AND SUBLICENSE
(a) The license granted hereunder is unique to Licensee,
and Licensee shall not assign, transfer, encumber or sublicense any
of its rights under this Agreement or delegate any of its
obligations under this Agreement (whether voluntarily, by operation
of law, change in control or otherwise) without Licensor's prior
written approval. Any attempted assignment, transfer, sublicense,
encumbrance or delegation by Licensee without such approval shall
be void and a material breach of this Agreement, resulting in
immediate termination of this License Agreement. The parties
acknowledge that certain Articles, ingredients and materials
bearing the Trademarks are manufactured or will be manufactured by
third parties. So long as these items are in compliance with the
quality provisions of paragraph 5 hereof, this will not violate the
terms of this Agreement.
(b) Licensor is entering into this Agreement with
Licensee based, in substantial part, on the unique attributes which
Licensee and its business offer, in view of Licensee's management,
products and methods of operation. Subject to the foregoing, this
Agreement will be binding upon, and inure to the benefit of, the
parties and their respective successors and assigns.
Licensee shall provide Licensor with written notice
of any Change of Control Event (as hereinafter defined), such
notice to be delivered to Licensor within five (5) days of the
occurrence of such Change of Control Event. At the option of
Licensor, this Agreement and Licensee's rights hereunder shall be
terminated on the third anniversary of a Change of Control Event.
In order to exercise such option, Licensor shall deliver written
notice to Licensee no later than sixty (60) days after the date it
receives notice from Licensee of the occurrence of the Change of
Control Event in accordance with the terms of this section.
A Change of Control Event shall occur at such time
as (a) any entity, which for this purpose shall include any group
as defined by Sections 13(d) and 14(d)(2) of the Securities and
Exchange Act of 1934 (an Acquiring Person), becomes the Beneficial
Owner, directly or indirectly, of shares of capital stock of the
Licensee,
<PAGE>
9
entitling the Acquiring Person to exercise 20% or more of the total
voting power of all classes of stock of the Licensee entitled to
vote in elections of directors; (b) Continuing Directors cease to
constitute at least a majority of the directors of the Licensee; or
(c) Licensee merges into or consolidates with any other entity; or
(d) any other entity merges into Licensee and immediately after
such merger as a result of such merger the holders of the
outstanding capital stock of Licensee are not Beneficial Owners of
shares of capital stock of the Licensee entitling them to exercise
50% or more of the total voting power of all classes of stock of
the licensee entitled to vote in election of directors.
The term Beneficial Owner shall be determined in
accordance with Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities and Exchange Act of 1934.
Continuing Directors shall be any directors of the
Licensee who either (a) were directors of the Licensee on the date
of the distribution (the Effective Date) by Anheuser-Busch
Companies, Inc. (A-BC) of the shares of common stock of Licensee to
the holders of the common stock of A-BC or (b) became directors of
the Licensee after the Effective Date and whose election or
nomination for election by the shareholders of the Licensee was
duly approved by the Continuing Directors who were at the time of
election or nomination directors of the Licensee, either by a
specific vote or by approval of the proxy statement issued by the
Licensee in which such individual was named as a nominee for
director of the Licensee.
16. COSTS AND EXPENSES
Each party shall bear and pay all costs and expenses
arising in connection with its performance of this Agreement.
17. INDEPENDENT CONTRACTOR
Licensee is an independent contractor and not an agent,
partner, joint venturer, affiliate or employee of Licensor. No
fiduciary relationship exists between the parties. Neither party
shall be liable for any debts, accounts, obligations or other
liabilities of the other party, its agents or employees. Licensee
shall have no authority to obligate or bind Licensor in any manner.
Licensor has no proprietary interest in Licensee and has no
interest in the business of Licensee, except to the extent
expressly set forth in this Agreement.
18. SEVERABILITY
If any provision of this Agreement shall be determined to
be illegal and unenforceable by any court of law or any competent
governmental or other authority, the remaining provisions shall be
severable and enforceable in accordance with their terms so long as
this Agreement without such terms or provisions does not fail of
its essential purpose or purposes. The parties will negotiate in
good faith to
<PAGE>
10
replace any such illegal or unenforceable provision or provisions
with suitable substitute provisions which will maintain the
economic purposes and intentions of this Agreement.
19. EXHIBITS
All references to "Exhibit" or "Exhibits" herein shall
mean those Exhibits A and B attached to this Agreement, which
Exhibits, wherever referred to herein, are hereby incorporated into
this Agreement as though fully set forth herein.
20. SURVIVAL
The obligations and agreements under Sections 6, 7, 8,
12, 13 and 21 shall survive the termination or expiration of this
Agreement.
<PAGE>
11
21. MISCELLANEOUS
(a) Captions.
The captions for each Section have been inserted for the
sake of convenience and shall not be deemed to be binding upon the
parties for the purpose of interpretation of this Agreement.
(b) Scope and Amendment of Agreement.
This Agreement constitutes the entire agreement between
the parties with respect to the subject matter of this Agreement,
supersedes any and all prior and contemporaneous negotiations,
understandings or agreements in regard to such subject matter and
is intended as a final expression of their Agreement. This
Agreement may be amended only by written instrument expressly
referring to this Agreement, setting forth such amendment and
signed by Licensor and Licensee.
(c) Governing Law.
This Agreement will be deemed to have been executed in
the State of Missouri and will be construed and interpreted
according to the laws of that State without regard to its conflicts
of law principles or rules. The parties agree that any legal
action or proceeding with respect to this Agreement shall be
brought in the United States District Court for the Eastern
District of Missouri or, if such court does not have jurisdiction,
in any court of general jurisdiction in the City or County of St.
Louis, Missouri. Licensee consents to the personal jurisdiction of
such courts, agrees to accept service of process by mail and hereby
waives any jurisdictional or venue defenses otherwise available to
it.
(d) Interpretation.
The parties agree that each party and its counsel has
reviewed this Agreement and the normal rule of construction that
any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
(e) Waiver.
The failure of Licensor to insist in any one or more
instances upon the performance of any term, obligation or condition
of this Agreement by Licensee or to exercise any right or privilege
herein conferred upon Licensor shall not be construed as thereafter
waiving such term, obligation, or condition, or relinquishing such
right or privilege, and the acknowledged waiver or relinquishment
by Licensor of any default or right shall not constitute waiver of
any other default or right. No waiver shall be deemed to have been
made unless expressed in writing and signed by an authorized
officer of Licensor.
<PAGE>
12
(f) Time of the Essence.
Time is of the essence with respect to the obligations to
be performed under this Agreement.
(g) Rights Cumulative.
Except as expressly provided in this Agreement, and to
the extent permitted by law, any remedies described in this
Agreement are cumulative and not alternative to any other remedies
available at law or in equity.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their authorized representatives on the dates
indicated below.
ANHEUSER-BUSCH, INCORPORATED THE EARTHGRAINS COMPANY
BY: //s// Gerald C. Thayer BY: //s// Mark H. Krieger
TITLE: Controller TITLE: Chief Financial Officer
DATE: February 27, 1996 DATE: March 1, 1996
<PAGE>
<PAGE>
13
EXHIBIT A
TRADEMARK RECORD
ARTICLES TRADEMARK LICENSED
KEY:
A1. A & Eagle Design
A2. A & Eagle Full Color Design
A3. ANHEUSER-BUSCH
A8. BUD RACING
A9. BUDWEISER RACING and Checkerboard Design
A10. IT'S A BUD THING
A11. PROUD TO BE YOUR BUD
A12. IT'S ALWAYS BEEN TRUE THIS BUD'S FOR YOU
A13. BUDWEISER BOWTIE (Canted-Regular)
A14. BUDWEISER BOWTIE (Canted-Slanted)
A19. BUD ICE
A20. BUD ICE and Design
A21. BUD ICE LIGHT
A22. BUD ICE LIGHT and Design
A23. ANHEUSER LIGHT
A24. ANHEUSER LIGHT & Label Design
B1. BUDWEISER and Design
B2. BUDWEISER and Bow Tie Design
B3. BUDWEISER and Label Design
B4. BUDWEISER
B5. BUD and Design
B7. KING OF BEERS and Design
B8. THIS BUD'S FOR YOU
B9. BUDWEISER RACING and Label Design
B10. BUDWEISER RACING and Dot Design
B11. BUDWEISER RACING
B12. BUDWEISER Scroll Design
B13. BUDWEISER Crest
B14. BUD
B15. BUD & Italicized Design
B16. KING OF BEERS
B17. BUDWEISER & Italicized Design
<PAGE>
B18. KING OF BEERS & Italicized Design
B19. BUD DRY
B20. BUD DRY & Label Design
B21. BUD DRY & Design
B23. NOTHING BEATS A BUD
B25. BUD DRY & Solid Design
B26. BUD DRY & Racetrack Design
B27. BUD DRY & Solid Racetrack Design
B28. WHY ASK WHY?
B29. JUMP ON A BUD
B30. YOUR PAD OR MINE?
C1. BUD LIGHT & Design
C2. BUD LIGHT and Label Design
C3. BUD LIGHT & Racetrack Design
C4. EVERYTHING ELSE IS JUST A LIGHT
C5. BUD LIGHT & Solid Racetrack Design
C6. BUD LIGHT & Solid Design
C7. BUD LIGHT
C8. BUD LIGHT Scroll & Crest Design
C9. MAKE IT A BUD LIGHT
C10. YES I AM
C11. YES I AM and Design
C12. I LOVE YOU MAN!
D1. BUSCH & Design
D2. BUSCH and Label Design
D3. BUSCH & High Mountain Design
D4. BUSCH and A & Eagle Label Design
D5. HEAD FOR THE MOUNTAINS
D6. BUSCH NON-ALCOHOLIC BREW
D11. BUSCH
D12. BUSCH LIGHT
D13. BUSCH LIGHT & Label Design
D14. BUSCH LIGHT & Design
D15. BUSCH and Beer Design
D18. BUSCH MOUNTAIN MAN
D20. BUSCH CLASH Design
D21. BUSCH POLE AWARD Design
E1. CARLSBERG and Label Design
E2. CARLSBERG and Crown Design
E3. CARLSBERG and Design
E4. CARLSBERG LIGHT and Design
E5. CARLSBERG LIGHT and Crown Design
E6. CARLSBERG
E7. CARLSBERG LIGHT
F1. CLYDESDALES Hitch & Wagon and BUDWEISER Ribbon Design
F2. CLYDESDALES Hitch & Wagon and World Famous Ribbon Design
F3. THE CLYDESDALE COLLECTION
F4. Clydesdale Single Horse
<PAGE>
F5. Clydesdales Hitch & Wagon Design
F6. CLYDESDALE
F7. CLYDESDALES
G1. GRANT'S FARM Design
G2. GRANT'S FARM
G10. ELK MOUNTAIN AMBER ALE
G11. ELK MOUNTAIN AMBER ALE and Design
H1. ELEPHANT Design
H2. ELEPHANT and Label Design
H3. ELEPHANT
H4. ELEPHANT RED
H5. ELEPHANT RED and Label Design
H6. EAGLE SNACKS and Design
H7. EAGLE SNACKS
H8. EAGLE and Design
H9. EVERYBODY LOVES THEM & Design
H10. CAPE COD
H11. CAPE COD and Lighthouse Design
H13. THE CRUNCH YOU CRAVE
H14. THE CRUNCH YOU CRAVE and Design
H15. CROSS ROADS
H16. CROSS ROADS and Label Design
H17. CROSS ROADS & Design
I5. ZIEGENBOCK AMBER
I6. ZIEGENBOCK AMBER and Label Design
J1. MICHELOB & Design
J2. MICHELOB CLASSIC DARK & Design
J3. MICHELOB LIGHT and Design
J4. Vertical Red Stripe Design
J5. MICHELOB & Side Vertical Red Stripe Design
J6. MICHELOB & Top Vertical Red Stripe Design
J7. MICHELOB LIGHT and Side Vertical Red Stripe Design
J8. MICHELOB LIGHT and Top Vertical Red Stripe Design
J9. MICHELOB CLASSIC DARK & Side Vertical Red Stripe Design
J10. MICHELOB CLASSIC DARK & Top Vertical Red Stripe Design
J11. MICHELOB CLASSIC DARK & Block Top Vertical Red Stripe Design
J12. MICHELOB CLASSIC DARK & Block Side Vertical Red Stripe Design
J14. MICHELOB DRY and Red Stripe Design
J15. MICHELOB DRY and A & Eagle Design
J16. MICHELOB
J17. MICHELOB LIGHT
J18. MICHELOB CLASSIC DARK
J19. MICHELOB DRY
J20. MICHELOB and Label Design
J21. MICHELOB LIGHT and Label Design
J22. MICHELOB DRY and Label Design
J23. MICHELOB CLASSIC DARK and Label Design
J24. MICHELOB GOLDEN DRAFT and Scroll Design
<PAGE>
J25. MICHELOB GOLDEN DRAFT and A & Eagle Scroll Design
J26. MICHELOB GOLDEN DRAFT and A & Eagle Design
J27. MICHELOB DRAFT and Design
J28. MICHELOB GOLDEN DRAFT and Design
J29. MICHELOB GOLDEN DRAFT LIGHT and Scroll Design
J30. MICHELOB GOLDEN DRAFT LIGHT and A & Eagle Scroll Design
J31. MICHELOB GOLDEN DRAFT LIGHT and A & Eagle Design
J32. MICHELOB DRAFT LIGHT and Design
J33. MICHELOB GOLDEN DRAFT LIGHT and Design
J35. SMOOTH OVER EVERYTHING
J36. SMOOTH OVER EVERYTHING and Design
J37. MICH GOLDEN
J38. MICH GOLDEN and Design
K1. NATURAL LIGHT and Design
K2. NATURAL LIGHT and Label Design
K3. NATURAL LIGHT and Hops Design
K6. NATURAL LIGHT
K7. NATURAL PILSNER and Label Design
K8. NATURAL PILSNER and Design
K9. NATURAL PILSNER and A & Eagle Ribbon Design
L2. O'DOUL'S & Design
L3. O'DOUL'S & Label Design
L4. O'DOUL'S
N9. RED WOLF & Design
N10. RED WOLF & Label Design
N11. FOLLOW YOUR INSTINCTS
Q1. KING COBRA & Design
Q2. KING COBRA and Label Design
Q3. KING COBRA and Eagle Design
Q4. KING COBRA
Q5. KING COBRA and A & Eagle Design
S1. KNOW WHEN TO SAY WHEN
S2. KNOW WHEN TO SAY WHEN & Circle Design
S3. FRIENDS KNOW WHEN TO SAY WHEN
S10. BUD MAN
<PAGE>
<PAGE>
EXHIBIT B
COPYRIGHT WORKS RECORD
ARTICLES KEY
As approved in writing by
Licensor.
KEY
A: Archives Collection
D: Clydesdales
E: Approved Licensee Artwork
<PAGE>
<PAGE>
EXHIBIT C
OFFICIAL PRODUCT LOGO
VERIFICATION MARK
PAGE
<PAGE>
EXHIBIT D
MANUFACTURER'S AGREEMENT
This Manufacturer's Agreement is made pursuant to the license
agreement between Anheuser-Busch, Incorporated ("Anheuser-Busch")
and the undersigned LICENSEE ("Licensee"), a copy of which is
attached hereto and made a part hereof ("License Agreement").
________________________________________________________ (full
name) at _________________________ ("Manufacturer") desires to
manufacture and sell to Licensee the following Articles bearing
Anheuser-Busch Trademarks and/or Copyright Works:
__________________________. Such Articles shall be manufactured
only at (full address): ___________________________. In
consideration of Anheuser-Busch's approval of the manufacture by
Manufacturer of any Article listed in Exhibit A of the License
Agreement bearing any Trademarks or Copyright Works listed in
Exhibits A or B respectively of the License Agreement, the
parties agree as follows:
Manufacturer acknowledges the validity of and Anheuser-Busch's
sole title to the Trademarks and Copyright Works. Manufacturer
agrees that its right to manufacture Articles with the Trademarks
or Copyright Works thereon is in all respects subject to the
terms and conditions in the License Agreement, including, but not
limited to, the termination provisions and restrictions on the
use of the Trademarks and Copyright Works. Manufacturer agrees
that the provisions of the License Agreement shall take
precedence over and supersede any agreements between Licensee and
Manufacturer. Manufacturer shall sell Articles with the
Trademarks or Copyright Works thereon only to Licensee.
Manufacturer agrees that its manufacture of Articles shall give
Manufacturer no right to use the Trademarks or Copyright Works or
to sell Articles bearing the Trademarks or Copyright Works
beyond the expiration or termination of the License Agreement.
If Licensee's right to use the Trademarks and Copyright Works
expires or terminates, Manufacturer agrees to make no claim
against Anheuser-Busch for any reason.
ANHEUSER-BUSCH, INCORPORATED MANUFACTURER
By: _______________________ By: ______________________
Cheryl A. Pfneisel
Manager, Licensing
Promotional Products Group Title_________________
Date: _____________________ Date: __________________
____________________________
LICENSEE
By: _______________________
Title: ____________________
Date: ____________________
CAPHJD/1995
<PAGE>
<PAGE>
EXHIBIT E
<PAGE>
<PAGE>
EXHIBIT F
IRREVOCABLE LETTER OF CREDIT
Date of Issue: _______________ , 1995
Credit Number: ____________________
Applicant: ________________________
Beneficiary: Anheuser-Busch, Incorporated
One Busch Place
St. Louis, MO 63118-1852
Attn: Licensing Department
Advising Bank: Sun Bank NA
200 So. Orange Ave.
Ninth Flr., East Tower
Orlando, FL 32801
Amount: $________________________
Expiry Date: 15 Months from date of issue
At Our Counters
We hereby establish our Irrevocable Letter of Credit No.
______________ in your favor for the account of
__________________________ which is available against
presentation of your draft(s) drawn on us at sight up to an
aggregate amount of _____________ U.S. Dollars ($_____________),
which draft shall be in the form of Attachment-1 attached hereto.
All banking charges are for the account of Applicant. Partial
drawings are permitted, and the sum of all drawings shall not
exceed $____________.
This Letter of Credit will be automatically extended without
amendment for one year from the current expiry date or any future
expiry date unless we have notified you in writing not less than
thirty (30) days prior to the current expiry date that we have
elected not to extend the Letter of Credit for any such
additional period.
We engage with you that all drafts drawn under and in compliance
with the terms of this Letter of Credit will be duly honored if
presented at this office on or before the current expiry date and
any draft drawn by you under this Letter of Credit must bear the
clause "Drawn under Irrevocable Letter of Credit No.
________________ dated
____________________________ ."
The original Letter of Credit must accompany any drawing.
Except so far as otherwise stated, this documentary credit is
subject to the "Uniform Customs and Practice for Documentary
Credits" (1993 Revision) International Chamber of Commerce
(Publication 500).
______________________________
(Authorized Signature)
<PAGE>
<PAGE>
ATTACHMENT 1
"I hereby certify that I am an authorized official of Anheuser-
Busch, Incorporated for the purposes of drawing under this Letter
of Credit. I further certify that the amount drawn is due from
(Applicant) and that (Applicant) has defaulted or failed to pay
under the terms of the Anheuser-Busch License Agreement between
(Applicant) and Anheuser-Busch, Incorporated dated
__________________________ ."
Drawn under irrevocable Letter of Credit No. __________________
dated ______, 1995.
Anheuser-Busch, Incorporated, as beneficiary of such Letter of
Credit, hereby requests payment in the amount of
____________________ Dollars ($____________).
ANHEUSER-BUSCH, INCORPORATED
By: _____________________________
Title: __________________________
Date: ___________________________
CORPORATE SERVICES AGREEMENT
This Corporate Services Agreement (the "Agreement") is made as of
this 26th day of March, 1996, by and between Anheuser-Busch
Companies, Inc., a Delaware Corporation ("ABC"), and The
Earthgrains Company, a Delaware Corporation ("EGR").
RECITALS
ABC owns 100% of the issued and outstanding shares of EGR,
which is a holding company whose operating subsidiaries are
principally involved in the production and distribution of baked
goods, and refrigerated and frozen dough products for sale to
retail and food service companies (together, the "EGR Businesses").
A. On February 28, 1996, the Board of Directors of ABC
declared a dividend of all outstanding shares of EGR to the holders
of the outstanding common stock of ABC (the "Distribution"), such
dividend to be made on March 26, 1996 (the "Effective Date").
B. ABC desires to provide to EGR, and EGR desires to receive
from ABC, certain services, as more fully described on Schedules 1-
14 attached hereto, (collectively, the "Services") on an interim
basis following the Effective Date.
C. ABC and EGR desire to enter into this Agreement to
confirm the terms and conditions pursuant to which ABC will provide
such Services to EGR.
AGREEMENT
In consideration of the mutual covenants contained herein, and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Services. Subject to the terms of this Agreement and any
consents required from third party software licensors, and except
as otherwise provided in the Schedules, from and after the
Effective Date through March 31, 1997, ABC shall provide the
Services to EGR as specifically set forth in the Schedules 1
through 14 in a consistent manner as such Services were provided to
EGR prior to the Effective Date. The Services will be provided
with the same degree of care and diligence as ABC uses in providing
similar services to itself and its wholly-owned subsidiaries. Duly
authorized agents of ABC shall have the right to enter EGR's
premises to the extent reasonably necessary to
<PAGE>
provide the Services. While this Agreement remains in effect, EGR
agrees to provide such office space, furniture, equipment and
supplies, free of charge, for use on a full-time basis, as ABC may
reasonably require in order to provide the Services.
2. Transition to Service Bureau. If EGR desires ABC's
assistance with respect to the transfer of Services to EGR or an
outside service bureau ("Bureau") effective April 1, 1997, EGR
shall notify ABC no later than September 30, 1996. ABC shall
cooperate with EGR in transferring Services to EGR or the Bureau
designated by EGR, and shall make available to the Bureau all
information ABC has regarding the records and data of EGR. ABC
shall be entitled to engage outside service providers to assist in
such conversion and creation of conversion files.
3. Compensation. In consideration for the Services, EGR
shall pay the monthly fees set forth in Schedule 16. Unless
otherwise specifically provided for in the Schedules, in addition
to the monthly fee, EGR shall pay the following:
(a) To the extent EGR requests ABC's assistance in the
transition or conversion of files pursuant to Section 2 hereof, ABC
shall charge for these Services at the rates provided for in
Schedule 15 hereof plus any expenses incurred by ABC in retaining
outside service providers to assist in the conversion.
(b) To the extent EGR requests ABC to provide consulting
services, including, without limitation, development services to
make improvements or changes to applications described in the
Schedules, ABC shall charge for these services at the rates
provided for in Schedule 15.
(c) ABC shall charge EGR for support services,
including, without limitation, answering questions and
troubleshooting, provided in connection with the Services at the
rates set forth in Schedule 15. ABC shall determine which services
constitute support services subject to an additional charge in a
manner consistent with past practice.
(d) EGR shall pay the additional charges, if any,
incurred pursuant to Section 1.(g) of Schedule 1.
The parties agree that in the event that any tax or assessment is
required to be paid as a result of the provision of services
hereunder, EGR shall be solely responsible for the payment of such
tax or assessment.
<PAGE>
1. Billing and Payment. EGR shall pay the monthly fee
provided for in Section 3 on or before the 10th day of each month.
In addition, to the extent Services are provided by ABC which
result in an additional charge pursuant to Section 3, ABC shall
bill EGR for these services on a monthly basis and such bills shall
be due 30 days after receipt. Any amounts not paid when due shall
be subject to an additional handling charge equal to 1% per month
commencing on the date due through the payment date.
2. Liability; Indemnification. Except for AB's gross
negligence or willful misconduct, as otherwise provided for herein,
neither ABC or its affiliates, directors, officers, employees or
agents shall be liable to EGR or any third party with respect to
any and all actions, claims, suits, judgments, costs, expenses and
liabilities of any kind or nature arising, directly or indirectly,
from or relating to ABC's performance hereunder. In providing the
Services, except as otherwise specifically provided herein or in
the Schedules, ABC shall not be obligated to (i) hire any
additional employees; (ii) maintain the employment of any specific
employee; (iii) purchase, lease or license any additional
equipment or software; or (iv) pay any costs related to the
transfer or conversion of EGR's data to EGR or any alternate
supplier of administrative services. EGR's sole remedy with
respect to any claim arising out of the Services is a refund of the
amount paid by EGR of the defective Services. ABC shall not be
liable to any third party in any way for any obligation or
commitment pursuant to this Agreement or for any act or omission
and EGR shall be solely liable and responsible and shall indemnify
ABC and its affiliates and their respective directors,
shareholders, officers, employees, agents, consultants,
representatives, successors, transferees and assigns for any and
all claims, liabilities, obligations, losses, costs, expenses,
litigation, proceedings, taxes, levies, imposts, duties,
deficiencies, assessments, charges, allegations, demands, damages
or judgments of any kind or nature whatsoever ("Liabilities")
related to, arising from, asserted against or associated with ABC
furnishing or failing to furnish to EGR any of the Services
described herein. In no event shall (i) ABC's liabilities
hereunder exceed the amounts paid for such services and (ii) ABC be
liable for any incidental or consequential damage hereunder.
3. Confidentiality. Any and all information which is not
generally known to the public which is exchanged between the
parties in connection with this Agreement, whether of a technical
or business nature, shall be considered to be confidential. The
parties agree that confidential information shall not be disclosed
to any third party or parties without the written consent of the
other party other than the direct or indirect subsidiaries of each
party and their employees and authorized agents. Each party shall
take reasonable measures to protect against nondisclosure of
confidential information by its officers, directors and employees
and those of its direct or indirect subsidiaries. Confidential
information shall not include any information (i) which is or
becomes part of the public domain, (ii) which is obtained from
third parties
<PAGE>
who are not bound by confidentiality obligations or (iii) which is
required to be disclosed by law, regulation, legal process or the
rules of any state or federal regulatory agency or the New York
Stock Exchange. In the event that a party becomes legally
compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or otherwise) to disclose any
of the confidential information, such party shall provide the other
with prompt prior written notice of such requirement so that the
other party may seek a protective order or other appropriate
remedy. In the event that such protective order or other remedy is
not obtained, or that the other party waives compliance with the
terms hereof, the disclosing party agrees to furnish only that
portion of the confidential information disclosure of which is
legally required and to exercise reasonable efforts to obtain
assurance that confidential treatment will be accorded to such
information. Notwithstanding anything herein to the contrary, a
party may disclose such confidential information to legal counsel
and other professional advisors of such party. The provisions of
this section shall survive the termination of this Agreement. The
parties shall be responsible for any breaches of this Section by
their representatives.
4. Assignment. Except as otherwise specifically provided
herein, this Agreement shall not be assignable by either party, or
any other person, firm or entity without the prior written consent
of the other party; provided, however that this Agreement in its
entirety, or any portion of the rights and obligations established
hereunder, may be assigned by either party hereto to one of its
directly or indirectly wholly-owned subsidiaries without the
written consent of the other party. Except as expressly provided
herein, nothing herein shall create or be deemed to create any
third party beneficiary rights in any person or entity not a party
to this Agreement.
5. Waiver, Amendment or Modification. The failure of either
party at any time or times to enforce or require performance of any
provision hereof shall in no way operate as a waiver or affect the
right of such party at a later time to enforce the same. No
waiver, amendment or modification of this Agreement shall be valid
unless in writing and duly executed by the party to be charged
therewith.
6. Entire Agreement. This Agreement and the Schedules hereto
constitute the entire agreement of the parties concerning the
subject matter hereof and supersede all previous agreements between
the parties, whether, written or oral, with respect to such subject
matter.
7. Governing Law. Except as required by the Employee
Retirement Income Security Act of 1979 ("ERISA"), this Agreement
and the rights and obligations of the parties hereunder are to be
governed by and construed and interpreted in accordance with the
laws of the State of Missouri applicable to contracts made and to
be performed wholly within Missouri, without regard to choice or
conflict of laws rules.
<PAGE>
8. Notices. All notices, request, demands, waivers and other
communications (hereafter "notices") required or permitted to be
given pursuant to this Agreement shall be in writing and shall be
deemed to have been duly given (i) at the time of delivery, if
delivered by hand, (ii) on the date of transmission, if sent by
facsimile, telegram or other standard form of telecommunications or
(iii) three business days after mailing, if mailed registered or
certified first-class mail, postage prepaid, return receipt
requested. Notices shall be delivered or sent, as the case may be,
to the following addresses or to such other addresses as the
parties may hereafter designate by like notice similarly provided:
If to EGR: The Earthgrains Company
8400 Maryland Avenue
St. Louis, MO 63105
Attention: General Counsel
Facsimile: (314) 259-7029
If to ABC: Anheuser-Busch Companies, Inc.
One Busch Place, 202-6
St. Louis, Missouri 63118
Attention: General Counsel
Facsimile: (314) 577-0776
1. Force Majeure. Anything else in this Agreement
notwithstanding, ABC shall be excused from providing Services
hereunder while, and to the extent that, its performance is
prevented by fire, drought, explosion, flood, invasion, rebellion,
earthquake, civil commotion, strike or labor disturbance,
governmental or military authority, act of God, mechanical failure,
sabotage or any other event or casualty beyond the control of ABC,
whether similar or dissimilar to those enumerated in this paragraph
(hereafter "Force Majeure"). In the event of Force Majeure, EGR
shall be responsible for making its own alternative arrangements
with respect to the interrupted Services.
2. Independent Contractor. The relationship of ABC and EGR
which is created hereunder is that of an independent contractor.
This Agreement is not intended to create and shall not be construed
as creating between EGR and ABC the relationship of affiliate,
principal and agent, joint venture, partnership, or any other
similar relationship, the existence of which is hereby expressly
denied.
3. Term. The obligation of ABC to provide Services hereunder
shall terminate at 11:59 p.m. on March 31, 1997, unless otherwise
specifically provided in the Schedules.
<PAGE>
4. Termination. Upon the occurrence of a default by EGR
hereunder, including EGR's failure to keep, observe or perform any
covenant, agreement, term or provision of this Agreement, and if
such failure continues for a period of ten days after written
notice thereof by ABC, ABC may terminate this Agreement and shall
have no further obligation to EGR, and EGR shall be obligated to
pay and perform all of its obligations which have accrued as of the
date of such termination. EGR may terminate this Agreement or any
Services hereunder effective 30 days after advance written notice
is received by ABC from EGR, and any and all fees due and owing ABC
with respect to the terminated Services under Schedule 16 hereof
shall cease as of such termination date; provided that any such
Services shall be pro-rated accordingly if such termination falls
within a partial month. In addition, upon such termination by EGR,
EGR shall be liable for all charges incurred pursuant to Sections
3(a) - (d) up to and including the termination date.
5. Severability. If any provision of this Agreement shall
hereafter be held to be invalid or unenforceable for any reason,
that provision shall be reformed to the maximum extent permitted to
preserve the parties' original intent, failing which it shall be
served from this Agreement with the balance of the Agreement
continuing in full force and effect, unless the ineffectiveness of
such provision would result in such a material change as to cause
completion of the transactions contemplated hereby to be
unreasonable. Such severance shall not have the effect of
rendering the provision in question invalid in any other
jurisdiction or in any other case or circumstances or of rendering
invalid any other provisions contained herein to the extent that
such other provisions are not themselves actually in conflict with
any applicable law.
6. Schedules. All of the Schedules attached to this
Agreement are deemed incorporated herein by reference. If and to
the extent that the provisions of any Schedule are inconsistent
with the provisions hereof, the provisions of such Schedule shall
control with respect to the matters addressed herein. The
Schedules may be amended or supplemented from time to time upon the
mutual agreement of the parties.
7. Relationship between Corporate Services Agreement and
Documents. In the event that any provision of this Agreement
conflicts with any provision of any other agreement by and between
ABC and EGR, with respect to such matter the provision of this
Agreement shall govern.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed on the day and the year first above written.
ANHEUSER-BUSCH COMPANIES, INC. THE EARTHGRAINS COMPANY
By: //s// Robert Mason By: //s// mark H. Krieger
Title: VP & Chief Information Title: VP & Chief
Officer Chief Financial Officer
<PAGE>
<PAGE>
SCHEDULE 1
1. Description of Services - Breadcost System
ABC Services:
a) On-line access by EGR to the application in order to enter
updates, changes, etc.
b) Daily batch processing of Distribution Management System
(DMS) transaction file feed into the Breadcost application.
c) Processing of the standard reports and transmission of
reports per current production processing procedures.
d) Daily and weekly updating of the database with submitted
EGR transactions.
e) Scheduling of period close jobs. This task is performed
once per year and has been set (completed) for 1996.
f) Process period close jobs per current procedure and
schedule.
g) Support special or re-processing of period close jobs.
There will be an additional charge for computer processing and
support for special period close re-processing and these charges
will be billed at the rates identified in Schedule 15.
h) Special quarterly processing.12, 12, 12 and 16 week
quarters.
i) Support to resolve application and technical problems.
j) Process existing on-request reports.
k) Backup data files and rotate to an off-site location per
current production file rotation schedule.
l) Work involving the creation of conversion files will be
performed based upon the Management Systems Group published rates
as identified in Schedule 15.
2. Provider of Services:
A-BC - Management Systems Group Breadcost application support
team and computer center operations.
3. EGR Responsibilities:
a) Submission of activity using on-line Customer
Information Control System (CICS) transactions or video entry
according to the schedule.
b) Transmission of Distribution Management System files
per current production procedures.
c) Printing and distribution of transmitted output
reports.
d) Review of reports generated by the system.
e) Identify problems requiring resolution by A-BC
Management Systems Group Breadcost application support team.
f) Define the contents of any conversion files required
at the end of the service agreement.
g) Handle the subsequent year's budget set-up.
<PAGE>
<PAGE>
SCHEDULE 2
1. Description of Services - Fixed Assets System
ABC Services:
a) Enter properly coded new assets and updates on a monthly
basis with the following closing dates for each month: 1/25, 2/23,
3/25, 4/24, 5/24, 6/24, 7/25, 8/26, 9/24, 10/25, 11/21, 12/16, and
the schedule for the first quarter of 1997 to be issued on or
before 12/31/96.
b) Maintenance of the asset depreciation schedule.
c) Process transactions and provide monthly reporting of asset
depreciation and retirements.
d) Provide printed output reports at the end of each month.
e) Backup data files and rotate to an off-site location per
current production tape file rotation schedule.
f) Work involving the creation of conversion files will be
performed based upon A-BC's Management Systems Group published
rates as identified in Schedule 15.
2. Provider of Services:
A-BC Management Systems Group application support team and
computer center operations, A-BC Fixed Assets Accounting.
3. EGR Responsibilities:
a) Supply properly coded input documents to A-BC according to
the 1996 schedule (1/25, 2/23, 3/25, 4/24, 5/24, 6/24, 7/25, 8/26,
9/24, 10/25, 11/21, and 12/16).
b) Review processing reports for correctness and supply
follow-up corrections.
c) Define the contents of any conversion files required at the
end of the service agreement.
d) Prepare SAP General Ledger entries.
<PAGE>
<PAGE>
SCHEDULE 3
1. Description of Services - Payroll System
ABC Services:
a) Continue with existing companies in the Dun & Bradstreet
(D&B) payroll system with two payroll levels (Wage - Field & Salary
- - Corporate).
b) Creation of new earnings and deduction numbers as required,
limited to standard functionality.
c) Development and testing of system changes required to route
output to
d) EGR.
e) Produce a weekly payroll for bakeries with check file and
credit union file per currently established schedule and
procedures.
f) Produce a semi-monthly corporate payroll with check file
per currently established schedule and procedures. Checks are
normally produced prior to the 15th and last day of month except
when payday lands on a weekend or holiday.
g) Accept and process input using existing methods.
h) Provide calculations for special payments.
i) Transmit standard D&B supplied payroll reports file to wage
field locations.
j) Standard D&B semi-monthly payroll reports to be produced
and held for EGR pickup.
k) Transmit standard D&B reports file to Corporate Tax, per
current procedures.
l) Maintenance of the tax rates in the payroll system.
m) Maintenance of the base functionality of the payroll
system.
n) Provide processing for EGR of all currently predefined
special reports.
o) Access to the current on-line Customer Information Control
System (CICS System), specifically transactions PROI, Bulk Data and
MSAS.
p) Provide contribution of savings withholding information
(for salaried) to the A-BC Credit Union per current procedures..
q) Deductions for Automated Clearing House (ACH) and
generation of a Payroll file to be sent to EGR.
r) Payroll services for 1997 are limited to the first quarter
of 1997 and finalizing 1996 earnings and to produce 941's, W-2's
and year-end regulatory tapes/reports for 1996.
s) Produce and transmit D&B data file for loading into SAP,
per currently in place procedures for weekly bakery payrolls only.
t) Backup data files and rotate to an off-site location per
current file rotation schedule.
u) Work involving the creation of conversion files will be
performed based upon A-BC's Management Systems Group published
rates as identified in Schedule 15.
v) Generate and transmit employee stock purchase information
to EGR.
w) Dependent care program can be done if handled like another
deduction.
<PAGE>
2. Provider of Services:
A-BC Payroll, Benefits, Payroll Tax departments, and A-BC
Management Systems Group application support team and computer
center operations.
3. EGR Responsibilities:
EGR will need to provide limited payroll functionality,
conversion and operation support which includes.
a) Provide payroll check printing, check stock and general
ledger account number per employee.
b) Payroll conversion issues support research into corporate
setup for transitional services.
c) Print capability for all output (checks and reports).
d) Payroll support equal to that which is currently provided.
e) System support for the routing and printing of output,
development and production. File transmission to third party
providers. ACH transmission functionality.
f) Payment and reporting of all tax and regulatory items (to
be defined within the overall tax agreement covering services to be
provided by A-BC Corporate Tax).
g) Generate tax reporting on both paper and magnetic tape.
h) Payment of voluntary withholdings.
i) Processing of garnishments and levies.
j) Posting of transactions to SAP system.
k) Define the contents of any conversion files required at the
end of the service agreement. Obtaining assistance in transition
to new payroll provider. Obtaining assistance to support
consulting on Payroll issues.
l) Obtaining assistance to implement changes to the company
set-up to allow one legal entity.
m) Obtaining assistance to support, responding to audit
inquiries and responding directly to employee of new company
concerning personnel payroll issues.
<PAGE>
<PAGE>
SCHEDULE 4
1. Description of Services - Human Resources System
ABC Services
a) Provide on-line access to EGR's staff to allow set up of
new personnel and update changes in status for existing personnel.
b) Generate a file containing Employee Data Documents (EDD's).
c) Generate monthly Charge Back report and various other
personnel reports on the first A-BC work day of each month.
d) Provide special on-line administrative handling of SSN
based issues when transferring employees between A-BC and EGR,
and/or EGR to A-BC.
e) Provide EGR employee insurance eligibility and dependent
data files to HBA, Mutual, Not Delta Dental, Cigna or Unum...to
provide will require an effort in the range of $10,000 and will not
be completed before 3/29.
f) Generate EGR Employee Pension file - an Easytrieve program
performs this function on request from EGR once a year.
g) Backup data files and rotate to an off-site location per
rotation schedule.
h) Work involving the creation of conversion files will be
performed based upon A-BC's Management Systems Group published
rates in Schedule 15.
2. Provider of Services:
A-BC Payroll, Benefits, and A-BC Management Systems Group
application support team and computer center operations.
3. EGR Responsibilities:
a) Submission of update transactions for new personnel and
status changes for existing personnel.
b) Updates for insurance and stock plan.
c) Entry of transactions by EGR personnel.
d) Obtain new Employee Data Form
e) Printing of Employee Data Forms.
f) Define the contents of any conversion files required by EGR
for development of replacement system to be used at the end of the
service agreement.
<PAGE>
<PAGE>
SCHEDULE 5
1. Description of Services - Stock Plan and Dependent Care Plan
ABC Services:
a) If EGR continues to maintain a Dependent Care Assistance
Plan substantially in the same form and for the same employees
participating in the Anheuser-Busch Dependent Care Assistance Plan
as of the Effective Date, ABC will provide administrative services
with respect to EGR's Dependent Care Assistance Plan for a period
commencing on the Effective Date and ending on December 31, 1996 or
such earlier date as ABC discontinues provision of administrative
services with respect to EGR's payroll system, and only so long as
EGR's Dependent Care Assistance Plan remains in substantially the
same form as the Anheuser-Busch Dependent Care Assistance Program,
all in accordance with ABC's practices and procedures applied to
the Anheuser-Busch Dependent Care Assistance Plan, as determined
within its sole discretion from time to time.
b) The administrative services provided will not include
participant statements, Annual Return/Reports (Form 5500 series),
Form W2-P preparation discrimination testing under section 125 or
129 of the Internal Revenue Code, design or redesign of
administrative forms or systems in connection with changes in plan
design, or special programming or systems consulting.
c) ABC shall provide the following administrative services
with respect to EGR's tax-qualified and non-qualified 401(k) plans
for employees for the period commencing on the Effective Date and
ending on no later than September 30, 1996 or such earlier date as
ABC's provision of administrative services respecting EGR's payroll
systems, so long as the administrative services required can be
provided by ABC without undue changes from its methods of providing
such services for its own 401(k) plan, as determined within the
sole discretion of ABC.
d) The administrative services provided will include trust
reconciliation, determination of Investment Fund gains and losses
and allocation thereof to participant accounts, determination and
authorization of payment of distributions in cash and in kind,
hardship withdrawal processing and authorization of payment, loan
processing and authorization of payment, administration and
authorization of Investment Fund transfer elections, and processing
of employee contributions, all in accordance with ABC's practices
and procedures applied to its own 401(k) plans, all as determined
within its sole discretion from time to time.
e) The administrative services provided will not include
participant statements, Annual Return/Reports (Form 5500 series)
(except with respect to the plan year ending on or about March 31,
1996), 1099R or W2-P preparation, discrimination testing under
section 401(k) or 401(m) of the Internal Revenue Code (except for
the plan year that began on April 1, 1995), testing for compliance
with section 415(c) or (e) of the Internal
<PAGE>
Revenue Code (except for the plan year that began on April 1,
1995), testing for compliance with the limitation imposed by
section 402(g)(1) of the Internal Revenue Code (except for the
calendar year beginning January 1, 1995), design or redesign of
administrative forms or systems in connection with changes in plan
design, or special programming, systems consulting, or
administration of acquisition of EGR common stock on behalf of any
plan or participant accounts in relation to compliance with
requirement of Sections 409 and 4975 (e) with respect to leveraged
employee stock ownership plans.
f) Generation of an output file for the Record Keeper through
3/31/97.
g) Generate a separate EGR output file for the Trustee through
3/31/97.
h) Continue to use existing Voice Response Unit at A-BC until
9/30/96.
i) Accept EGR Employee changes from EGR Voice Response Unit
into payroll 7/01/96 through 3/31/97.
j) Backup data files and rotate to an off-site location per
rotation schedule.
k) Work involving the creation of conversion files will be
performed based upon an estimate and A-BC's published rates as
identified in Schedule 15.
l) ABC shall not be deemed a "fiduciary" or a "named
fiduciary" or "plan administrator" as those terms are defined under
the Employment Retirement Income Security Act of 1974 ("ERISA") or
any similar or successor law with respect to any plan to which it
provides administrative services hereunder, nor is ABC responsible
for administering any such plan or the assets of any such plan.
m) Except as specifically provided for in this Schedule, ABC
shall not be responsible for filing any federal, state or local
information or tax return or form on behalf of EGR or any plan or
for the delivery of any form or notice to employees of EGR which is
due after the Effective Date, but shall provide any information
maintained by ABC necessary for the preparation and filing or
delivery of such returns, forms or notices as may be requested by
EGR.
n) ABC will not advise EGR with respect to any tax or other
law that may affect any employee benefit plan maintained by EGR
after the Effective Date.
o) In no event shall ABC be liable to EGR, any plan, trustee,
participant or other party for any economic loss or special,
consequential, incidental or punitive damages whatsoever.
p) EGR shall have the right of access to all records prepared
or maintained by ABC pursuant to this Schedule. ABC shall make
such records available during normal business hours or shall have
copies of such records made and delivered at EGR's expense to EGR
or any party or parties designated by EGR.
q) Upon termination of the services provided for in this
Schedule, or such earlier time as EGR may reasonably request on
notice satisfactory to ABC, ABC shall provide EGR or a party or
parties designated by EGR with copies of the records it has with
respect to the plans of EGR as of the date of termination of such
request, whichever is applicable at the expense of EGR.
<PAGE>
2. Provider of Services:
A-BC Payroll and Benefits departments and A-BC Management
Systems Group application support team and computer operations.
3. EGR Responsibilities:
a) Establish a plan with the A-BC stock plan administrator.
b) Enter deductions and investment options for participants.
c) Printing of employee statements after 9/30/96.
d) Establish a new Voice Response Unit, with equipment, after
9/30.
e) Establish a new plan with an outside administrator by 10/1.
f) Define the contents of any conversion files required at the
end of the service agreement.
<PAGE>
<PAGE>
SCHEDULE 6
1. Description of Services - Disaster Recovery
ABC Services Provided:
a) Transport backup tapes from off-site storage location
necessary to recover the applications.
b) Provide disaster recovery services for first the
Payroll/Human Resource applications and then the remaining
applications as time permits and resources become available.
c) Restore data files and software so operations can be
resumed.
d) Process the information.
e) Retain backup data files for seven years in order to meet
legal and audit requirements.
2. Provider of Services:
A-BC Management Systems Group computer center operations.
3. EGR Responsibilities:
a) Participate in the recovery and restart of the application
in the event of a disaster by sending personnel to the recovery
site.
b) Establish manual procedures to handle the processes until
computer operations are resumed.
c) Creation of disaster recovery plans for the other
applications.
d) Reapply transactions to bring file information up to date.
<PAGE>
<PAGE>
SCHEDULE 7
1. Description of Services - EasyTrieve Report Writer - Online and
batch report generation system that can retrieve file information
and generate reports for
Breadcost, Fixed Assets, Human Resources and Payroll.
ABC Services Provided:
a) Provide access to report generation software for the
creation of reports.
b) Technical problem resolution.
2. Provider of Services:
A-BC Management Systems Group computer center operations.
3. EGR Responsibilities:
a) Identify personnel who should be given access to this
service
b) Obtain and maintain skills in the report writer product.
c) Development of reports.
d) Submit report requests.
<PAGE>
<PAGE>
SCHEDULE 8
1. Description of Services - Safety and Risk Management Tracking
(Smart)
System According to License Agreement of even date herewith.
ABC Services Provided: TO BE PROVIDED THROUGH 12/31/96.
a) Help line support for EGR users.
b) Monthly update of Risk Science Group data into the A-BC
developed Smart database for each installed EGR bakery facility.
c) Training.
d) Any patches or fixes to the computer application rolled out
to all A-BC Smart facilities prior to 12/31/96 will be provided to
EGR.
2. Provider of Services:
A-BC Safety department and A-BC Management Systems Group
applications support team.
3. EGR Responsibilities:
a) Obtain training in the use of the product.
b) Use of the system to obtain workman's comp information.
c) Define the contents of any conversion files required at the
end of the service agreement.
d) Backup data files and rotate to an off-site location per
rotation schedule.
<PAGE>
<PAGE>
SCHEDULE 9
1. Description of Services - Risk Sciences Group (RSG) -
Accident/Injury information with report generation capabilities.
ABC Services Provided: TO BE PROVIDED THROUGH 12/31/96.
a) Assistance with system use and functionality.
b) Ad-hoc programming requests.
c) Assistance with RSG support issues.
2. Provider of Services:
A-BC Corporate Risk Management Department.
3. EGR Responsibilities:
a) Use of the system.
<PAGE>
<PAGE>
SCHEDULE 10
1. Description of Services - VM Nomad (PERS)
ABC Services Provided:
a) Access to A-BC computers.
b) Backup and recovery of information.
c) Service availability based upon published A-BC Computer
Center production schedules.
d) Provide access to A-BC's IBM mainframe running the Virtual
Machine (VM) operating system and the PERS (Personnel) VM
application in order to extract information or transmit to EGR as
is currently available.
2. Provider of Services:
A-BC Management Systems Group computer center operations.
3. EGR Responsibilities:
a) Develop programs to access the information.
b) Program problem resolution.
<PAGE>
<PAGE>
SCHEDULE 11
1. Description of Services - Consulting Services
ABC Services Provided:
a) Consulting services based upon the availability of
resources for development of new systems or improvements to
existing systems.
b) Provide conversion programs for service agreement systems
in order to migrate applications from A-BC.
c) The consulting services are not provided as part of the
monthly fee as listed on Schedule 16, but will be provided for an
extra charge according to the published rates as identified on
Schedule 15.
2. Provider of Services:
A-BC Management Systems Group Applications Development
Consulting and computer center operations.
3. EGR Responsibilities:
a) Participate in the development of a request for services.
b) Define business requirements.
c) Assist with the design, development, testing and
implementation of the system or conversion programs.
<PAGE>
<PAGE>
SCHEDULE 12
1. Description of Services - Administrative
ABC Services:
a) Process System access forms (MSG-386) for approved
individuals requiring access to (Fixed Assets, Easytrieve, Human
Resources, Payroll, VM-Nomad applications).
b) Provide access to backup data files after the service
agreement expires in 1997 by creating a copy of the data onto a
3480 tape cartridge. For requests involving immediate delivery
there will be a $50 charge to obtain the files from Data Safe
Storage. There is no charge for requests that can be satisfied
within 1 business day.
2. Provider of Services:
A-BC Management Systems Group Computer Security and computer
center operations.
3. EGR Responsibilities:
a) Properly completed and approved system access forms. Send
the forms to Management Systems Group - Computer Security.
b) Provide 1 day notification when backup files are requested
and also describe what medium (tape cartridge, magnetic tape) the
information is to be provided on. Forward requests in writing to
the Manager of Computer Services.
<PAGE>
<PAGE>
SCHEDULE 13
1. Description of Services - Taxes
ABC Services:
1. Prepare the 1996 personal property tax returns of EGR and all
of its U.S. subsidiaries (the "EGR Group").
2. Prepare the EGR Group's monthly consolidated sales tax returns
for the States of Georgia and Texas for the months of March, 1996,
through December, 1996.
3. Assist in any audit of a federal, state, or local income tax
return of the EGR Group or of any of its members through December
31, 1996.
2. Provider of Services:
A-BC Tax Department.
<PAGE>
<PAGE>
SCHEDULE 14
1. Description of Services - EGR Support of A-BC Precision
Printing Facility
EGR Company Provider Services:
a) EGR will provide consulting services to support A-BC
Precision Printing staff's use of the local A/P and G/L
applications upon the same terms and conditions as contained in the
Corporate Services Agreement.
b) Assistance will be provided on a Time and Material basis at
the same rates as A-BC's MSG equivalent resources.
2. Provider of Services:
a) EGR MIS department.
3. A-BC Precision Printing Obligations:
a) Contact EGR to obtain assistance in resolving A/P and G/L
system problems.
b) A-BC MSG will pass through the cost of any requested
services to Precision Printing.
Note: EGR recommends licensing the Viking software and maintenance
until Precision Printing converts to their new system in April.
Precision Printing will need to provide EDI transactions for the
EGR Inventory System.
<PAGE>
<PAGE>
SCHEDULE 15
Management Systems 1996 Bill out Rates
Technical Specialists $49/HR
Programmers, Business and Technical Analysts $62/HR
Consultants and Project Managers $95/HR
Group Managers $120/HR
Other Skilled Resources Negotiated Rate
Direct Expenses At Cost
Note: Rates subject to change if cost structure changes
1996 Computer Processing billing rates for MVS
Resource Cents per number
Cards read $.50/1000
Lines printed $.50/1000
Disk excps $.21/1000
Tape excps $.41/1000
Data base calls $.15/1000
CPU time - cpu1 $.19/second
CPU time - cpu2 $.15/second
Memory usage $.03/K-core-hour
<PAGE>
In addition, a batch job run on the night shift 7PM-7AM) is billed
at 68% of the calculated charge instead of the 100% day rate.
1996 Computer Processing billing rates for VM
Resource Cents per number
Cards read $.50/1000
Lines printed $.50/1000
Disk excps $.21/1000
Tape excps $.41/1000
Data base calls $.15/1000
CPU time $.19/second
Memory usage $.03/K-core-hour
<PAGE>
Earthgrains Services Charges - Schedule 15
For 10 Months of Service
Through 01/31/97
Computer Center Processing Costs for: Total - $340,200; April 96 -
$34,020;
May 96 - $34,020; June 96 - $34,020; August 96 - $34,020; September
96 - $34,020; October 96 - $34,020; November 96 - $34,020; December
96 - $34,020;
January 97 - $34,020.
a) Bread Cost - $12,000
b) Fixed Assets - $7,700
c) Human Resources - $149,900
d) Payroll - $116,000
e) Stock Plan - $5,000
f) Easytrieve - $5,000
g) Contingency - $44,600
Timesharing Processing Costs for: Total - $3,300; April 96 - $330;
May 96 - $330;
June 96 - $330; August 96 - $330; September 96 - $330; October 96 -
$330;
November 96 - $330; December 96 - $330; January 97 - $330
a) VM Nomad - $3,300
Corporate Acctg. Admin Costs for: Total - $31,600; April 96 -
$3,160; May 96 - $3,160; June 96 - $3,160; August 96 - $3,160;
September 96 - $3,160; October 96 - $3,160; November 96 - $3,160;
December 96 - $3,160; January 97 - $3,160
a) Fixed Assets - $11,600
b) Payroll - $20,000
Corp. HR Admin Costs (3 Months) for: Total - $4,998; April 96 -
$1,666;
May 96 - $1,666; June 96 - $1,666;
a) Stock Plan - $4,998
Corp. Tax Admin Costs for: Total - $32,520; April 96 - $3,252; May
96 - $3,252;
June 96 - $3,252; August 96 - $3,252; September 96 - $3,252;
October 96 - $3,252; November 96 - $3,252; December 96 - $3,252;
January 97 - $3,252
a) Tax preparation - $35,520
Additional 1997 Charges - $319,238; Total: $319,238; January 97 -
$79,238;
February 97 - $120,000; March 97 - $120,000
TOTAL CHARGES: Total: $731,856; April 96 - $42,428; May 96 -
$42,428
June 96 - $42,428; August 96 - $40,762; September 96 - $40,762;
October 96 - $40,762; November 96 - $40,762; December 96 - $40,762;
January 97 - $120,000;
February 97 - $120,000; March 97 - $120,000
<PAGE>
THE EARTHGRAINS COMPANY
1996 STOCK INCENTIVE PLAN
(As Amended April 11, 1996)
Section 1. Purpose.
The purpose of the Plan is to attract, retain, motivate and
reward employees of the Company and its Subsidiaries and Affiliates
with stock-related compensation arrangements.
Section 2. Maximum Number of Shares.
(a) The maximum number of shares of Stock which may be
issued pursuant to Awards under the Plan, and the maximum number of
shares for which ISOs may be granted under the Plan, shall be
1,130,000 shares, subject to adjustment as provided in Section 11.
For this purpose:
(i) The number of shares underlying an Award shall be
counted against the Plan maximum ("used") at the time of grant;
shares underlying alternative Awards shall be counted only once.
(ii) When an Award is payable in cash and the amount of
such cash is based on the value of a number of shares of Stock
which is determinable at the time of grant, that determinable
number of shares shall be deemed to underlie that Award for
purposes of the Plan. If the amount of such cash, including any
cash provided pursuant to Section 15 below, in effect is calculated
by applying a percentage to the Fair Market Value of a certain
number of shares of Stock, if such percentage is determinable at
the date of grant, and if such determinable percentage in effect
exceeds 100%, the Committee shall determine at the time of grant
the number of shares which is deemed to underlie such Award.
(iii) If the number of shares underlying an Award is not
determinable at the time of grant, the Committee shall determine at
the time of grant a number of shares which is deemed to underlie
such Award; that number may be adjusted after grant as the
Committee deems appropriate.
(iv) Shares which underlie Awards that (in whole or
part) expire, terminate, are forfeited, or otherwise become non-
payable, or which are recaptured by the Company in connection with
a forfeiture event, may be re-used in new grants to the extent of
such expiration, termination, forfeiture, non-payability, or
recapture.
(b) Notwithstanding any other provisions of the Plan, the
maximum number of shares underlying Awards that may be granted to
any Eligible Employee during any calendar year shall be 650,000,
subject to adjustment as provided in Section 11.
(c) No more than 166,551 shares of Restricted Stock shall be
granted under the Plan (not counting, for this purpose, Restricted
Stock issuable upon exercise of Options or SARs), subject to
adjustment as provided in Section 11.
(d) In its discretion, the Company may issue treasury shares
or authorized but previously unissued shares.
<PAGE>
2
Section 3. Eligibility.
Officers and management employees of the Company, Subsidiaries
or Affiliates shall be eligible to receive Awards under the Plan.
A Director of the Company or a Subsidiary or an Affiliate shall be
eligible only if he or she also is an officer or employee of the
Company, a Subsidiary or an Affiliate. Notwithstanding the
foregoing, persons employed only by Affiliates shall not be
eligible to receive ISOs.
Section 4. General Provisions Relating to Awards.
(a) Subject to the limitations in the Plan, the Committee
may cause the Company to grant Awards to such Eligible Employees,
at such times, of such types, in such amounts, for such periods,
becoming exercisable at such times, with such features, with such
option prices, purchase prices or base prices, and subject to such
other terms, conditions, and restrictions as the Committee deems
appropriate. Each Award shall be evidenced by a written Award
Agreement between the Company and the Recipient. In granting an
Award, the Committee may take into account any factor it deems
appropriate and consistent with the purpose of the Plan.
(b) Except as otherwise provided in the Plan, one or more
Awards may be granted separately or as alternatives to each other.
If Awards are alternatives to each other:
(i) the exercise of all or part of one automatically
shall cause an immediate equal and corresponding termination of the
other; and
(ii) unless the Award Agreement or the Committee
expressly permit otherwise, alternative Awards which are
transferable may be transferred only as a unit, and alternative
Awards which are exercisable must be exercisable by the same person
or persons.
(c) All or any portion of any payment to a Recipient,
whether in cash or shares of Stock, may be deferred to a later date
if and as provided in the Award Agreement. Deferrals may be for
such periods and upon such terms and conditions (including the
provision of interest, dividend equivalents, or other return on
such amounts) as the Committee may determine. The Committee may
structure Award Agreements so that the imposition of income and
other taxes on Recipients is deferred in whole or part.
(d) Award Agreements may contain any provision approved by
the Committee relating to the period for exercise or vesting after
termination of employment. Except to the extent otherwise
expressly provided in the Award Agreement, termination of
employment includes separation from the group of companies
comprised of the Company and its Subsidiaries and Affiliates for
any reason, including death, Disability, retirement, resignation,
dismissal, disposition of a Subsidiary or operation (whether by
stock or asset sale or otherwise), disposition of an interest in an
Affiliate, spin-off, shutdown, or any other event.
(e) Award Agreements may, in the discretion of the
Committee, contain a provision permitting a Recipient to designate
the person who may exercise or receive an Award upon the
Recipient's death, either by will or by appropriate notice to the
Company.
(f) A Recipient shall have none of the rights of a
shareholder with respect to shares of Stock covered by his or her
Award until shares are issued in his or her name.
<PAGE>
3
(g) The Committee may provide in Award Agreements that
Awards, except for ISOs and SARs which are alternatives to ISOs,
are transferable. Transferability may be subject to such
conditions and limitations as the Committee deems appropriate.
Except to the extent otherwise expressly set forth in the Award
Agreement, Awards shall not be transferable other than by will or
the laws of descent and distribution, and (if exercise is required)
shall be exercisable during the Recipient's lifetime only by the
Recipient or his or her guardian or legal representative. This
paragraph shall not apply to Restricted Stock after it vests.
Section 5. Options and SARs.
(a) Except as provided in Section 11(b), the option price
per share of Options or the base price of SARs shall not be less
than Fair Market Value per share of Stock on the Options' or the
SARs' grant date, nor less than the par value of a share of Stock,
except that SARs which are alternatives to Options but which are
granted at a later time may have a base price equal to the option
price even though the base price is less than Fair Market Value on
the date the SARs are granted.
(b) The grant of Options and their related Option Agreement
must clearly identify the Options as either ISOs or as NQSOs.
(c) If Options, SARs, and/or Limited Rights are granted as
alternatives to each other: (i) the option prices and the base
prices (as applicable) shall be equal, (ii) SARs and/or Limited
Rights which are alternatives to ISOs may be granted only at the
same time the ISOs are granted, and (iii) SARs which are
alternatives to Options, and Limited Rights which are alternatives
to Options or SARs, shall expire or terminate at the same time as
the Options or SARs to which they are alternatives.
(d) In the case of SARs, the Award Agreement may specify the
form of payment or may provide that the form is to be determined at
a later date, and may require the satisfaction of any rules or
conditions in connection with receiving payment in any particular
form. If the Recipient is a Reporting Person at the time of grant
or during the SARs' term and is given an election to receive cash
in full or partial settlement of SARs, the Committee shall have
sole discretion to approve or disapprove such election at any time
after it is made.
(e) Notwithstanding any other provision of the Plan, no
Options or SARs shall contain a so-called "reload" feature under
which Options or SARs are automatically granted to Recipients upon
exercise of Options or SARs.
Section 6. Limited Rights.
(a) The Committee shall have authority to grant limited
stock appreciation rights ("Limited Rights") to any Recipient of
any Options or SARs granted under the Plan (the "Related Award")
with respect to all or some of the shares of Stock which underlie
such Related Award. Limited Rights shall not be granted
separately, but shall be granted only as alternatives to their
Related Award. Limited Rights may be granted either at the time of
grant of the Related Award or (except in the case of ISOs) at any
time thereafter during its term. Limited Rights shall be
exercisable or payable at such times, payable in such amounts, and
subject to such other terms, conditions, and restrictions as the
Committee deems appropriate.
(b) The Committee shall place on any Limited Rights granted
to a Reporting Person such restrictions as may be required by
Rule 16b-3 at the time of grant, and shall amend the Plan
<PAGE>
4
accordingly to the extent required by Rule 16b-3. The Committee
shall place on any Limited Rights for which the Related Award is
ISOs such restrictions as may be required by the Code at the time
of grant, and shall amend the Plan accordingly to the extent
required by the Code.
Section 7. Restricted Stock.
(a) "Restricted Stock" means Stock issued to a Recipient
which is subject to transfer restrictions prior to vesting and is
subject to forfeiture upon the happening of such events or such
conditions or upon the failure to satisfy such rules, requirements
and conditions as the Committee specifies in the Award Agreement.
Stock issued in connection with an Award Agreement is not
Restricted Stock unless so designated in the Award Agreement or in
a rule or resolution of the Committee. When Restricted Stock
vests, it ceases to be Restricted Stock for purposes of the Plan.
(b) The certificate representing the shares of Restricted
Stock issued in the name of the Recipient may be held by the
Company and/or may have a legend placed upon it to the effect that
the shares represented by it are subject to, and may not be
transferred except in accordance with the Plan and the Award
Agreement relating to such shares. Dividends relating to shares of
Restricted Stock may be paid to the Recipient or held by the
Company for the Recipient's benefit, as the Committee may provide
in the Award Agreement; if held by the Company, the Committee may
require that the Company pay interest or other return to the
Recipient on any cash dividends at such rate(s) and time(s) as the
Committee provides in the Award Agreement.
(c) If the Recipient of Restricted Stock is a Reporting
Person on the grant date, at least one of the following
requirements shall be satisfied:
(i) the Award is a stock bonus granted for no
consideration (other than services rendered or to be rendered);
(ii) the Award is a stock bonus granted for the minimum
amount of consideration (other then services) required by
applicable corporate law, which amount in no event exceeds 10% of
the Fair Market Value of a share of Stock on the payment date, and
which amount is paid to the Company within 60 days after the grant
date:
(iii) the Award consists of Options which are payable in
Restricted Stock; or
(iv) the Award is an Other Stock Interest which is
payable in Restricted Stock and which either is granted in
conformity with (i) or (ii) above, or constitutes an option or
similar right (including a stock appreciation right) or any other
type of derivative security for the purposes of Rule 16b-3.
This paragraph (c) shall apply to a grant only when required by
Rule 16b-3 at the time and under the circumstances of the grant.
Section 8. Other Stock Interests.
"Other Stock Interest" means any compensatory arrangement not
inconsistent with the Plan which is established by the Committee
and which might (a) involve the issuance of Stock to an Eligible
Employee or (b) involve or be treated as involving the acquisition
or disposition of an equity security of the Company for purposes of
Section 16 of the Act. Other Stock Interests are not limited to
any specific form or structure. Without limiting the above, Other
Stock Interests may include stock bonuses, deferred stock, variable
priced stock options, performance shares,
<PAGE>
5
phantom stock, and convertible securities, and may be granted in
connection with or apart from other compensation programs or plans
or other types of Awards under the Plan. In connection with the
grant of Other Stock Interests, the Committee may provide for
payment to the Recipient of amounts equal to dividends which would
have been paid had Stock actually been issued to the Recipient. In
addition, Other Stock Interests may provide for payment of cash or
other property in lieu of Stock or other securities of the Company.
The Committee shall place on any Other Stock Interest granted to a
Reporting Person such restrictions as may be required by Rule 16b-3
at the time of grant, and shall amend the Plan accordingly to the
extent required by Rule 16b-3.
Section 9. Stock Issuance, Payment, and Withholding.
(a) If an Award contemplates the payment of a purchase price
(including the option price of Options), the Recipient may pay the
purchase price in cash, Stock (including shares of previously-owned
Stock, or Stock issuable in connection with the Award), or other
property, to the extent permitted or required by the Award
Agreement or the Committee from time to time. The Committee may
permit deemed or constructive transfers of shares in lieu of actual
transfer and physical delivery of certificates. Except to the
extent prohibited by applicable law, the Committee or its delegate
may take any necessary or appropriate steps in order to facilitate
the payment of any such purchase price. Without limiting the
foregoing, the Committee may allow the Recipient to defer payment
of such purchase price, or may cause the Company to loan the
purchase price to the Recipient or to guaranty that any shares to
be issued will be delivered to a broker or lender in order to allow
the Recipient to borrow the purchase price. The Committee may
require satisfaction of any rules or conditions in connection with
paying the purchase price at any particular time, in any particular
form, or with the Company's assistance.
(b) If shares used to pay any such purchase price are
subject to any prior restrictions imposed in connection with any
plan of the Company (including the Plan), an equal number of the
shares of Stock purchased shall be made subject to such prior
restrictions in addition to any further restrictions imposed on
such purchased shares by the terms of the Award Agreement or Plan.
(c) When the obligation arises to collect and pay Required
Withholding Taxes, the Recipient shall promptly reimburse the
Company or Employer (as required by the Committee or Company) for
the amount of such Required Withholding Taxes in cash, unless the
Award Agreement or the Committee permits or requires payment in
another form. In the discretion of the Committee or its delegate
and at the Recipient's request, the Committee or its delegate may
cause the Company or Employer to pay to the appropriate taxing
authority Withholding Taxes in excess of Required Withholding Taxes
on behalf of a Recipient, which shall be reimbursed by the
Recipient. In the Award Agreement or otherwise, the Committee may
allow a Recipient to reimburse the Company or Employer for payment
of Withholding Taxes with shares of Stock or other property. The
Committee may require the satisfaction of any rules or conditions
in connection with any non-cash payment of Withholding Taxes. If
a Recipient is a Reporting Person at the time of grant or during
the Award's term and is given an election to pay any Withholding
Taxes with Stock, the Committee shall have sole discretion to
approve or disapprove such election at any time after the election
is made.
(d) If provided in the Award Agreement relating to an ISO,
the Committee may prohibit the transfer by a Recipient of shares of
Stock issued to him or her upon exercise of an ISO into
<PAGE>
6
the name of a nominee, and the Committee may require the placement
of a legend on certificates for such shares reflecting such
prohibition.
Section 10. Forfeitures.
(a) The Committee may include in any Award Agreement any
provisions relating to forfeitures of Awards that it deems
appropriate. Such forfeiture provisions may include, among others,
prohibitions on competing with the Company and its Subsidiaries and
Affiliates and other detrimental conduct. Forfeiture provisions
for one Award type may differ from those for another type, and also
may differ among Awards of the same type. As used in the Plan, a
forfeiture of an Award includes the recapture of economic benefits
derived from an Award, as well as the forfeiture of an Award
itself; however, the Committee may define the term more narrowly in
specific Award Agreements or contexts.
(b) Award Agreements may provide for any forfeiture
provision to terminate or be waived upon an Acceleration Date. In
its discretion, the Committee may provide in any Award Agreement
for the termination of any forfeiture provision upon the happening
of any specified event, and may terminate or waive any forfeiture
provision by action taken after grant.
Section 11. Adjustments and Acquisitions.
(a) In the event of (i) any change in the outstanding shares
of Stock by reason of any stock split, combination of shares, stock
dividend, reorganization, merger, consolidation, or other corporate
change having a similar effect, (ii) any separation of the Company
including a spin-off or other distribution of stock or property by
the Company, or (iii) any distribution to shareholders generally
other than a normal dividend, the Committee shall make such
equitable adjustments to the Plan and to outstanding Awards as it
shall deem appropriate in order to prevent the dilution or
enlargement of (A) the Awards which may be granted, the shares of
Stock which may be issued, or the shares for which ISOs may be
granted under the Plan, (B) the economic value of outstanding
Awards or (C) the limitations imposed by Section 2(b) of the Plan,
provided, however, that the Committee shall not make any adjustment
which would constitute or result in an increase in the aggregate
number of Shares available under the Plan, or the annual limit on
the number of Awards which may be granted to an Eligible Employee
under Section 2(b) of the Plan, requiring shareholder approval
under Section 422 or Section 162(m) of the Code. Any such
determination by the Committee shall be conclusive and binding on
all concerned.
(b) In the event the Company or a Subsidiary enters into a
transaction described in Section 424(a) of the Code with any other
corporation, the Committee may grant Options, SARs or Limited
Rights to employees or former employees of such corporation in
substitution of stock awards, stock appreciation rights or limited
stock appreciation rights (respectively) previously granted to them
by such corporation upon such terms and conditions as shall be
necessary to qualify such grant as a substitution described in
Section 424(a) of the Code.
Section 12. Acceleration.
(a) An "Acceleration Date" occurs when any of the following
events occur:
(i) any Person (as defined herein) becomes the
beneficial owner directly or indirectly (within the meaning of Rule
13d-3 under the Act) of more than 30% of the Company's then
outstanding voting securities (measured on the basis of voting
power),
<PAGE>
7
provided, however, that shares issued or distributed by the Company
in connection with the acquisition of another company or business
from such Person shall be counted as being outstanding, but
otherwise shall be ignored in determining the percentage
beneficially owned by such Person;
(ii) the shareholders of the Company approve a
definitive agreement of merger or consolidation with any other
corporation or business entity, other than (x) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, at least
50% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation, or (y) a merger or consolidation effected
to implement a recapitalization of the Company (or similar
transaction) in which no Person acquires more than 50% of the
combined voting power of the Company's then outstanding securities;
(iii) a change occurs in the composition of the Board of
Directors during any period of twenty-four consecutive months such
that individuals who at the beginning of such period were members
of the Board of Directors cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination
for election by the Company's shareholders, of each new director
was approved by a vote of at least two-thirds of the directors
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously
so approved; or
(iv) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company or an agreement
for the sale or disposition by the Company of all or substantially
all the Company's assets.
For purposes of this paragraph, "Person" shall have the meaning
given in Section 3(a)(9) of the Exchange Act, as modified and used
in Sections 13(d) and 14(d) thereof; however, a Person shall not
include (aa) the Company or any of its subsidiaries, (bb) a trustee
or other fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries, (cc) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (dd) a corporation owned, directly or indirectly, by
the shareholders of the Company in substantially the same
proportions as their ownership of Stock.
(b) If an Acceleration Date occurs while Awards remain
outstanding under the Plan, then all Awards shall "vest", which
means:
(i) all Options and SARs shall become fully
exercisable; and
(ii) all shares of Restricted Stock shall become
nonforfeitable and freely transferable (except for such
restrictions as may be imposed by the Securities Act of 1933, as
amended, or applicable state securities laws), and all conditions
to unrestricted ownership provided in their Award Agreements which
have not previously been satisfied shall lapse.
In the case of Other Stock Interests, the term "vest" shall have
that meaning given it by the Committee at the time of grant.
<PAGE>
8
(c) Except to the extent prohibited by Rule 16b-3 in the
case of Reporting Persons, the Committee may accelerate the date on
which any Award or Stock or property issued pursuant to an Award
shall vest and may remove any restrictions on such Award at any
time after grant and for any reason the Committee deems
appropriate.
(d) All Awards, and all shares of Stock or property issued
pursuant to an Award, shall automatically vest upon a termination
of employment caused by the death, Disability, or (except for
Restricted Stock and Other Stock Interests) retirement of the
Recipient. The Committee may determine the circumstances under
which a Recipient is deemed to have retired.
Section 13. Administration.
(a) The Plan shall be administered by the Compensation and
Human Resources Committee of the Board, or another committee
appointed by the Board from time to time, consisting of three or
more persons, each of whom at all times shall be a member of the
Board, a "disinterested person" as defined in Rule 16b-3, and an
"outside director" within the meaning of Section 162(m)(4)(C)(i) of
the Code. Committee members shall not be eligible for selection to
receive Awards under the Plan.
(b) A majority of the members of the Committee shall
constitute a quorum. The acts of a majority of the members present
at any meeting at which a quorum is present, or acts approved in
writing by a majority of the members of the Committee, shall be the
acts of the Committee. The Committee may meet in person, by
telephone or television conference, or in any other manner
permitted by applicable law. From time to time the Committee may
adopt, amend, and rescind such rules and regulations for carrying
out the Plan and implementing Award Agreements, and the Committee
may take such action in the administration of the Plan, as it deems
proper. The interpretation of any provisions of the Plan by the
Committee shall be final and conclusive unless otherwise determined
by the Board.
Section 14. Amendment, Termination, Shareholder Approval.
(a) The Board may amend or terminate the Plan at any time,
except that without the approval of the Company's shareholders, no
amendment shall (i) increase the maximum number of shares issuable,
or the maximum number of shares for which ISOs may be granted,
under the Plan, (ii) change the class of persons eligible to be
Recipients, (iii) change the annual limit on Awards which may be
granted to an Eligible Employee provided in Section 2(b), (iv)
withdraw the authority of the Committee to administer the Plan, or
(v) change the provisions of this Section 14(a).
(b) The Committee may amend the Plan from time to time to
the extent necessary to (i) comply with Rule 16b-3 and, to the
extent it deems appropriate, (ii) prevent benefits under the Plan
from constituting "applicable employee remuneration" within the
meaning of Section 162(m) of the Code.
(c) No Awards may be granted under the Plan after February
21, 2006.
(d) The approval by shareholders described in this Section
shall consist of the approving vote of the holders of a majority of
the outstanding shares of Stock present (in person or by proxy) at
a meeting of the shareholders at which a quorum is present, unless
a greater vote is required by the Company's charter or by-laws, by
the Board, by the Company's principal stock exchange, or by
applicable law (including Rule 16b-3 or Section 162(m) of the
Code).
<PAGE>
9
Section 15. Additional Payments.
The Committee may grant a Recipient the right to receive
additional compensation in cash or other property (in addition to
any cash or other property payable under the terms of the Award
itself) upon the exercise of Options, SARs, or exercisable Other
Stock Interests, or the vesting of Restricted Stock or non-
exercisable Other Stock Interests, provided that (i) in the case of
ISOs such compensation is includible in income under Sections 61
and 83 of the Code at the time of such exercise or vesting and (ii)
no such right may be granted in connection with any SARs or Limited
Rights which are alternatives to ISOs.
Section 16. Definitions.
(a) "Acceleration Date" has the meaning given in Section
12(a).
(b) "Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(c) "Affiliate" means any entity in which the Company has a
substantial direct or indirect equity interest (other than a
Subsidiary), as determined by the Committee.
(d) "Award" means a grant of ISOs, NQSOs, SARs, Limited
Rights, Restricted Stock or Other Stock Interests.
(e) "Award Agreement" means the written agreement referred
to in Section 4(a) between the Company and the Recipient evidencing
an Award.
(f) "Board" means the Board of Directors of the Company.
(g) Options "cease to qualify as ISOs" when they fail or
cease to qualify for the exclusion from income provided in Section
421 (or any successor provision) of the Code.
(h) "Code" means the U.S. Internal Revenue Code as in effect
from time to time.
(i) "Committee" means the Compensation and Human Resources
Committee described in Section 13 hereof.
(j) "Company" means The Earthgrains Company and its
successors.
(k) "Disability" means the condition of being "disabled"
within the meaning of Section 422(c)(6) of the Code or any
successor provision.
(l) "Eligible Employee" means a person who is eligible to
receive an Award under Section 3 of the Plan.
(m) "Employer" means the Company, the Subsidiary, or the
Affiliate which employs the Recipient.
(n) "Fair Market Value" of Stock on a given date means (i)
the average of the highest and lowest selling prices per share of
Stock reported on the New York Stock Exchange Composite Tape or
similar quotation service for such date, (ii) if Stock is not
listed on the New York Stock Exchange, the average of the highest
and lowest selling prices per share of Stock as reported for such
date on the principal stock exchange or quotation system in the
U.S. on which Stock is listed or quoted (as determined by the
Committee), or (iii) if neither of the preceding clauses is
applicable, the value per share determined by the Committee in a
manner consistent with the Treasury Regulations under Section 2031
of the Internal Revenue Code. If no sale of Stock occurs on such
date, but there were sales reported within a reasonable period both
before and
<PAGE>
10
after such date, the weighted average of the means between the
highest and lowest selling prices on the nearest date before and
the nearest date after such date shall be used, with the average to
be weighted inversely by the respective numbers of trading days
between the selling dates and such date. "Fair Market Value" of
Restricted Stock is the same as the Fair Market Value of any other
Stock.
(o) "Forfeiture" has the meaning given in Section 10(a).
(p) "ISO" or "Incentive Stock Option" means an option to
purchase one share of Stock for a specified option price which is
designated by the Committee as an "Incentive Stock Option" and
which qualifies as an "incentive stock option" under Section 422
(or any successor provision) of the Code.
(q) "Limited Right" has the meaning given in Section 6.
(r) "NQSO" or "Non-Qualified Stock Option" means an option
to purchase one share of Stock for a specified option price which
is designated by the Committee as a "Non-Qualified Stock Option,"
or which is designated by the Committee as an ISO but which ceases
to qualify as an ISO.
(s) "Option" means an ISO or an NQSO.
(t) "Option Agreement" means an Award Agreement which
evidences a grant of Options.
(u) "Optionee" means a person to whom Options are granted
pursuant to the Plan.
(v) "Other Stock Interest" has the meaning given in Section
8.
(w) "Plan" means The Earthgrains Company 1996 Stock
Incentive Plan, as amended from time to time.
(x) "Recipient" means an Eligible Employee to whom an Award
is granted pursuant to the Plan.
(y) "Reporting Person," as of a given date, means a
Recipient who would be required to report a purchase or sale of
Stock occurring on such date to the Securities and Exchange
Commission pursuant to Section 16(a) of the Act and the rules and
regulations thereunder.
(z) "Restricted Stock" has the meaning given in Section 7.
(aa) "Rule 16b-3" means Rule 16b-3 (as amended from time to
time) promulgated by the Securities and Exchange Commission under
the Act, and any successor thereto.
(bb) "SAR" means a stock appreciation right, which is a right
to receive cash, Stock, or other property having a value on the
date the SAR is exercised equal to (i) the excess of the Fair
Market Value of one share of Stock on the exercise date over (ii)
the base price of the SAR. The term "SAR" does not include a
Limited Right.
(cc) "Stock" means shares of the common stock of the Company,
par value $0.01 per share, or such other class or kind of shares or
other securities as may be applicable under Section 11. The term
"Stock" shall include shares of Restricted Stock unless expressly
provided otherwise in the Plan or an Award Agreement.
(dd) "Subsidiary" means a "subsidiary corporation" of the
Company as defined in Section 424(f) (or any successor provision)
of the Code.
<PAGE>
11
(ee) "Vest" has the meaning given in Section 12(b).
(ff) "Withholding Taxes" means, in connection with an Award,
(i) the total amount of Federal and state income taxes, social
security taxes, and other taxes which the Employer of the Recipient
is required to withhold ("Required Withholding Taxes") plus (ii)
any other such taxes which the Employer, in its sole discretion,
withholds at the request of the Recipient.
Section 17. Miscellaneous.
(a) Each provision of the Plan and Option Agreement relating
to ISOs shall be construed so that all ISOs shall be "incentive
stock options" as defined in Section 422 of the Code or any
statutory provision that may replace Section 422, and any
provisions thereof which cannot be so construed shall be
disregarded. Except as provided in Section 10, no discretion
granted or allowed to the Committee under the Plan shall apply to
ISOs after their grant except to the extent the related Option
Agreement shall so provide. Notwithstanding the foregoing, nothing
shall prohibit an amendment to or action regarding outstanding ISOs
which would cause them to cease to qualify as ISOs, so long as the
Company and the Optionee shall consent to such amendment or action.
(b) Without amending the Plan, Awards may be granted to
Eligible Employees who are foreign nationals or who are employed
outside the United States or both, on such terms and conditions
different from those specified in the Plan as may, in the judgment
of the Committee, be necessary or desirable to further the purposes
of the Plan. Such different terms and conditions may be reflected
in Addenda to the Plan. However, in the case of ISOs, no such
different terms or conditions shall be employed if such term or
condition constitutes, or in effect results in, an increase in the
aggregate number of shares which may be issued under the Plan or a
change in the definition of Eligible Employee.
(c) Notwithstanding any other provision in the Plan, the
Committee shall not act with respect to any Reporting Person in a
manner which would contravene any requirement of Rule 16b-3 as in
effect at the time of such action, without the knowing consent of
such Reporting Person.
(d) Nothing in the Plan or any Award Agreement shall confer
on any person or expectation to continue in the employ of his or
her Employer, or shall interfere in any manner with the absolute
right of the Employer to change or terminate such person's
employment at any time for any reason or for no reason.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Appendix A to Item 601(c) of Regulation S-K
The schedule contains summary financial information extracted from the Company's
consolidated financial statements for the twelve weeks ended March 26, 1996
included in the transition report on Form 10-Q and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1996
<PERIOD-START> JAN-03-1996
<PERIOD-END> MAR-26-1996
<CASH> 38,900
<SECURITIES> 0
<RECEIVABLES> 145,700
<ALLOWANCES> 6,800
<INVENTORY> 68,000
<CURRENT-ASSETS> 269,800
<PP&E> 1,255,700
<DEPRECIATION> 528,700
<TOTAL-ASSETS> 1,165,700
<CURRENT-LIABILITIES> 209,800
<BONDS> 1,300
0
0
<COMMON> 0
<OTHER-SE> 580,800
<TOTAL-LIABILITY-AND-EQUITY> 1,165,700
<SALES> 367,700
<TOTAL-REVENUES> 367,700
<CGS> 228,800
<TOTAL-COSTS> 228,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 700
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> (7,300)
<INCOME-TAX> (2,200)
<INCOME-CONTINUING> (5,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,100)
<EPS-PRIMARY> (0.5)
<EPS-DILUTED> 0
</TABLE>
