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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended March 25, 1997
or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from -------------- to --------------
Commission File Number: 1-7554
THE EARTHGRAINS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-3201045
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
8400 Maryland Avenue, St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (314) 259-7000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
Common Stock -- $.01 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
-----------------------------------------------------------
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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant.
$603,187,618 AS OF JUNE 2, 1997
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
$.01 PAR VALUE COMMON STOCK: 10,782,866 SHARES AS OF JUNE 2, 1997
<TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
<S> <C>
Portions of Annual Report to Shareholders for the
Fiscal Year Ended March 25, 1997 PART I, PART II, and PART IV
Portions of Definitive Proxy Statement for the Annual
Meeting of Shareholders on July 25, 1997 PART III
</TABLE>
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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Matters discussed in this Report (particularly Item 7) contain forward-
looking information, as defined in the Private Securities Litigation Reform
Act of 1995. All forward-looking statements discussed in this report involve
risks and uncertainties, including, but not limited to, variations in income
levels of consumers, fluctuations in currency exchange rates for the Spanish
peseta and French franc versus the U.S. dollar, the costs of raw materials,
the ability of the Company to realize projected savings from productivity and
product quality improvements, legal proceedings to which the company may
become a party, and other risks indicated in filings by the Company with the
Securities and Exchange Commission.
PART I
ITEM 1. BUSINESS.
Overview
- --------
The Earthgrains Company (the "Company") commenced operations in 1925
with one bakery. The Company grew to become Campbell Taggart, Inc., an
independent publicly traded company. The Company was acquired by Anheuser-
Busch Companies, Inc. ("AB") in 1982. From 1982 until March 1996, the
Company was a wholly-owned subsidiary of AB. In March 1996, AB divested part
of the food products segment of its business through a tax-free 100 percent
spin-off of the Company to its shareholders. In connection with the spin-off,
the Company was re-incorporated in Delaware under its current name, and
each AB shareholder received one share of the Company's common stock for
every 25 shares of AB's common stock. The Company's common stock began
trading on the New York Stock Exchange on March 27, 1996 under its present
name and the symbol "EGR." In conjunction with the spin-off, the Company
changed its fiscal year end to the Tuesday immediately preceding March 31 or
March 31 if it is a Tuesday.
The Company is a leading producer and distributor of packaged bakery
products for sale to retail grocers and food service companies in the United
States and Europe. Its product lines include fresh, refrigerated, and frozen
baked goods; refrigerated and frozen dough products; and shelf-stable toaster
pastries. These products share common ingredients (flour or grain-based
components) and similarities in manufacturing processes. They compete
against similar products offered by other packaged bakery product
manufacturers and distributors, as well as in-store and retail bakeries.
Based on net sales for the 52-week period ended March 25, 1997
("fiscal year 1997"), the Company believes that it is the third largest
producer of packaged bakery products in the United States. Based on
independent publicly available market data, the Company believes that its
Spanish subsidiary is the largest commercial baker in Spain. The Company
operates 38 manufacturing facilities in the United States, 8 manufacturing
facilities in Spain, and one manufacturing facility in France. The
Company's fresh-baked goods are sold through a variety of distribution
systems. In the U.S., these systems comprise approximately 2,800 delivery
routes covering more than 130,000 food outlets in 27 states throughout the
Southeast, South, Southwest, and Midwest United States and Northern
California. Its refrigerated, frozen, and shelf-stable bakery products are
distributed nationally.
Domestic Operations
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The Company's domestic operations manufacture fresh-baked goods and
refrigerated and frozen dough products through 38 manufacturing facilities in
15 states across the country. The principal fresh-baked goods are baked
breads, rolls, cookies, snack cakes, and other sweet goods. The majority of
the Company's fresh-baked goods are sold under the Colonial(TM), Rainbo(R),
Iron Kids(R), Heiner's(TM), Grant's Farm(TM), and Earth Grains(R) brand
names. The snack cakes and other sweet goods are sold principally under the
Break Cake(R) brand name. The Company's fresh-baked goods business also
involves the manufacture of similar fresh-baked goods for sale under the
brand names of its customers. In addition, the Company supplies specialty
rolls, sandwich buns, and other products to major fast food and family
restaurant chains such as Burger King(R), Pizza Hut(R), and Waffle House(R).
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The fresh-baked goods are sold primarily on a wholesale basis through a
variety of distribution systems to grocers, restaurants, and institutions in
areas generally within a 300 mile radius of the producing bakery. In
accordance with the fresh-baked goods industry practice, the Company allows
retailers to return fresh-baked goods that have not been sold by a prescribed
freshness date. The Company operates over 240 retail thrift stores that sell
certain returned products.
In addition to its fresh-baked goods, the Company manufactures over 80
different refrigerated and frozen dough products, including: biscuits, dinner
rolls, sweet rolls, danishes, cookies, crescent rolls, and breadsticks. The
Company believes that it is the only significant manufacturer of retailers'
store brands (private-label) refrigerated dough in the United States. The
Company also manufactures baked English muffins and toaster pastries. The
refrigerated dough products are sold under more than 200 different store
brands throughout the United States. The refrigerated dough products and
refrigerated English muffins are also sold under the Merico(R) brand name as
well as under the Roman Meal(R) and Sun Maid(R) licensed brands.
The refrigerated dough and toaster pastry products are distributed
throughout the United States principally by direct sales to large wholesale
purchasers or through independent brokers. The Company also manufactures and
sells refrigerated dough products through contract packing arrangements.
European Operations
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The principal products of the European operations are baked breads,
buns, snack cakes, sweet goods, and refrigerated dough products. The
Company's Spanish subsidiary, Bimbo, S.A. ("Bimbo"), operates eight bakeries
in Spain and distributes fresh-baked goods in Spain and Portugal through
almost 1,100 delivery routes primarily under the Bimbo(R) and Silueta(R)
brand names. Based on independent publicly available market data, the
Company believes that Bimbo is the largest commercial baker in Spain. In
addition, the Company's French subsidiary, Europate, operates one
refrigerated dough plant in France and sells refrigerated dough products
throughout Europe. In Europe, refrigerated dough products are sold
principally through contract packing arrangements and under the Company's own
brands, CroustiPate(R) and HappyRoll(TM), and under store brands. The
Company's largest customer for such contract packing arrangements in Europe
is The Pillsbury Company.
Additional risks associated with conducting business overseas, which
are not present with respect to domestic operations, frequently arise. The
Company does not believe that there is currently any substantial likelihood
of a material adverse effect on the Company as a result of such risks.
Competition
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The packaged bakery products business is highly competitive. There is
intense price, product, and service competition with respect to all of the
Company's products. Competition is based on product quality, price, brand
loyalty, effective promotional activities, and the ability to identify and
satisfy emerging consumer preferences. Customer service, including frequency
of deliveries and maintenance of fully stocked shelves, also is an important
competitive factor and is central to the competition for retail shelf space
among fresh-baked goods manufacturers.
The Company competes with other national and regional wholesale
bakeries, large grocery chains that have vertically integrated or in-store
bakeries, small retail bakeries, and many producers of alternative foods.
The identity and number of competitors vary from market to market. The
Company's leading competitors in the fresh-baked goods business include
Interstate Bakeries Corporation, Flowers Industries Inc., CPC International
Inc. and Specialty Foods Corporation. In the refrigerated and frozen dough
product business, the Company competes primarily with Pillsbury, which
produces branded products with which the Company's store brand products
compete. In addition, the Company's other major competitors in the
refrigerated and frozen dough and toaster pastry business include Kellogg
Company and Nabisco, Inc. The fresh-baked, refrigerated, and frozen dough
product lines also compete with other alternative foods. The Company's
leading competitor in Spain is Pan Rico, but it experiences competition from
small regional bakeries in Spain as well.
The Company's ability to sell its products depends on its ability to
attain store shelf space in relation to competing brands and other food
products. Future growth for the Company will depend on the Company's ability
to continue streamlining and reducing operating costs, maintaining effective
cost control programs, improving branded product mix, taking advantage of
industry consolidation opportunities, developing successful new products,
maintaining effective pricing and promotion of its products, and providing
superior customer service. Effective investment in capital and technology
will play an important role in achieving these goals.
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Raw Materials
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The products manufactured by the Company require a large volume of
various agricultural products, including wheat for flours, soybean oil for
shortening, and corn for high fructose corn syrup. Agricultural commodities
represented 25-30% of the Company's cost of products sold for the 1997 fiscal
year. The Company fulfills its commodities requirements through purchases
from various sources, including futures contracts, options, contractual
arrangements, and spot purchases on the open market. The commodity markets
have experienced, and will continue to experience, significant price
volatility. The price and supply of raw materials will be determined by,
among other factors, the level of crop production, weather conditions, export
demand, government regulations, and legislation affecting agriculture. The
Company believes that adequate supplies of agricultural products are
available at the present time, but cannot predict future availability or
prices of such products and materials.
Brand Names and Trademarks
- --------------------------
The Company's major brand names are Colonial, Rainbo, Iron Kids,
Heiner's, Grant's Farm, and Earth Grains for bread products; Break Cake for
snack cakes and other sweet goods; Merico brand for refrigerated dough
products; Roman Meal and Sun Maid franchise names for both bread products and
refrigerated dough products; Bimbo and Silueta in Spain and Portugal; and
CroustiPate and HappyRoll in France. The Company also owns several federally
registered trademarks, including Rainbo, Iron Kids, and Earth Grains. In
addition, pursuant to the License Agreement, AB has granted the Company the
right to use the federally registered trademark Grant's Farm. The Company
regards consumer recognition of and loyalty to its brand names and trademarks
as being extremely important to its long-term success. The Company believes
that its registered and common law trademarks are instrumental to its ability
to create demand for and to market its products. There are currently no
pending challenges to the use or registration of any of the Company's
significant trademarks.
Seasonality
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The Company does experience minimal seasonal fluctuation in demand,
typically in the third quarter of its fiscal year when sales of refrigerated
dough products are seasonally strong.
Backlog
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The Company's relationship with its customers and its manufacturing and
inventory practices do not provide for the traditional backlog associated
with some manufacturing entities and no backlog data is regularly prepared or
used by management.
Research and Development
- ------------------------
The Company actively works to develop new products and to improve
existing products. The dollar amounts expended by the Company during each of
the past three fiscal years on such development activities are not considered
to be material relative to the Company's overall business and operations.
Environmental Matters
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The operations of the Company are subject to various Federal, state,
and local laws and regulations with respect to environmental matters.
Additional information regarding such matters is provided in Item 3 of this
report.
Employees
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As of March 25, 1997, the Company employed approximately 14,000
persons, of which approximately 11,000 were based in the U.S. Approximately
75% of the Company's domestic employees are subject to over 200 union
contracts. The Company believes its labor relations to be satisfactory.
ITEM 2. PROPERTIES.
Domestically, the Company operates 38 manufacturing facilities in 15
states. The Company's European subsidiaries own and operate 8 bakeries in
Spain and one refrigerated dough manufacturing plant in France. The
Company's domestic bakeries operate at approximately 75% of capacity. The
Company owns all of its manufacturing facilities, except for the facilities
in Ft. Payne and Montgomery, Alabama, which are subject to leases. The Ft.
Payne facility is subject to two leases which expire in 2010 and 2016; both
leases give the Company an option to purchase the property. The Montgomery
lease expires in 2004, with an option to extend to 2024; the
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Company also has a purchase option. The Company also operates over 240 retail
thrift stores and maintains approximately 350 distribution centers, the
majority of which are leased. In addition, the Company owns its corporate
headquarters and a research and development facility in St. Louis, Missouri,
and it leases its Spanish corporate headquarters in Barcelona, Spain. The
Company maintains approximately 6,000 motor vehicles used principally in the
sales and distribution of its products.
The Company's major U.S. facilities and the products produced at each
are as follows:
<TABLE>
<CAPTION>
Plants Products
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<S> <C>
Albuquerque, New Mexico Bread & Buns
Atlanta, Georgia Bread & Buns
Carrollton, Texas Refrigerated Dough
Chattanooga, Tennessee Bread & Buns
Dallas, Texas Bread & Buns
Denver, Colorado Bread & Buns
Des Moines, Iowa Bread & Buns
Dothan, Alabama Bread & Buns
El Paso, Texas Bread & Buns
Fresno, California Bread & Buns
Forest Park, Georgia Refrigerated Dough & Toaster Pastries
Ft. Payne, Alabama Bread, Buns & Sweet Goods
Harlingen, Texas Bread & Buns
Houston, Texas Bread & Buns
Huntington, West Virginia Bread & Buns
Huntsville, Alabama Bread & Buns
Hutchinson, Kansas Bread & Buns
Johnson City, Tennessee Bread & Buns
Louisville, Kentucky Bread & Buns
Lubbock, Texas Bread & Buns
Macon, Georgia Bread & Buns
Memphis, Tennessee Bread & Buns
Meridian, Mississippi Bread & Buns
Montgomery, Alabama Bread & Buns
Nashville, Tennessee Bread & Buns
Oakland, California Bread, Buns & English Muffins
Oklahoma City, Oklahoma Bread & Buns
Owensboro, Kentucky Bread & Buns
Paris, Texas Bread, Buns, Sweet Goods & Frozen Dough
Phoenix, Arizona Bread & Buns
Pueblo, Colorado Bread & Buns
Rome, Georgia Cookies
Sacramento, California Bread & Buns
San Antonio, Texas Bread & Buns
Springfield, Missouri Bread & Buns
Stockton, California Bread, Buns & Sweet Goods
Tucson, Arizona Bread & Buns
Wichita, Kansas Bread & Buns
</TABLE>
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The Company's European facilities and the products produced at each are
as follows:
<TABLE>
<CAPTION>
Plants Products
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<S> <C>
Almansa, Spain Bread & Buns
Antequera, Spain Bread & Buns
Canary Islands, Spain Bread & Buns
Granollers, Spain Bread, Buns & Sweet Goods
Las Mercedes, Spain Bread, Buns & Sweet Goods
Lievin, France Refrigerated & Frozen Dough
Madrid, Spain Bread
Palma, Spain Bread & Buns
Solares, Spain Bread & Buns
</TABLE>
The Company believes that its facilities are well maintained, suitable,
and adequate for its immediate needs. Additional space is available if needed
to accommodate expansion.
ITEM 3. LEGAL PROCEEDINGS.
As a manufacturer and marketer of food items, the Company's operations
are subject to regulation by various government agencies, including the
United States Food and Drug Administration. Under various statutes and
regulations, such agencies prescribe requirements and establish standards for
quality, purity, and labeling. Under the Nutrition and Labeling Act of 1990,
as amended, food manufacturers are required to disclose nutritional
information on their labels in a uniform manner. The finding of a failure to
comply with one or more regulatory requirements can result in a variety of
sanctions, including monetary fines or compulsory withdrawal of products from
store shelves. The Company may also be required to comply with state and
local laws regulating food handling and storage.
The operations of Earthgrains, like those of similar businesses, are
subject to various Federal, state, and local laws and regulations with
respect to environmental matters, including air and water quality,
underground fuel storage tanks, and other regulations intended to protect
public health and the environment. Earthgrains has received notices from the
U.S. Environmental Protection Agency that it has been identified as a
potentially responsible party ("PRP") with respect to certain locations under
the Comprehensive Environmental Response, Compensation and Liability Act 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 account established liability accruals, should
not have a material effect on Earthgrains' financial results or financial
position.
The Company is involved in certain legal proceedings arising in the
normal course of business. Although it is impossible to predict the outcome
of any legal proceeding and the Company cannot estimate the range of the
ultimate liability, if any, relating to these 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the security holders,
through the solicitation of proxies or otherwise, during the 1997 fiscal
year.
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EXECUTIVE OFFICERS OF THE REGISTRANT
BARRY H. BERACHA (age 55) presently is Chief Executive Officer and
Chairman of the Board of Directors of the Company, positions he has held
since September 1993. From 1976 to March 1996 he held the position of Vice
President and Group Executive of AB. During that time he also held various
positions in various subsidiaries of AB. In addition, he currently serves as
a member of the board of directors for Metal Container Corporation (a
subsidiary of AB), a position he has held since April 17, 1996.
JOHN W. ISELIN, JR. (age 44) presently is Executive Vice President
(Domestic Baking) of the Company, a position he has held since May 1994.
From January 1994 through April 1994, he served as President and Chief
Operating Officer of the Company's refrigerated dough operations. Mr. Iselin
served as Executive Vice President and Chief Financial Officer for Eagle
Snacks, Inc. (a subsidiary of AB) from January 1992 through December 1993.
XAVIER ARGENTE (age 37) presently is the Company's Executive Vice
President (Bimbo), a position he has held since December 1995. From June
1995 through December 1995, he was Vice General Manager of Operations. From
1990 through June 1995, he was the Commercial Director of Marketing, Sales
and Distribution of Bimbo Operations.
WILLIAM H. OPDYKE (age 53) presently is the Company's Executive Vice
President (Refrigerated Dough Products), a position he has held since June
1995. He previously served as Executive Vice President--Operations of the
Company from May 1994 to June 1995. From November 1993 until May 1994, Mr.
Opdyke served as Executive Vice President--Corporate Quality for Eagle
Snacks, Inc., and between November 1990 and November 1993 he was Executive
Vice President--Sales and Marketing for Eagle Snacks, Inc.
LARRY G. BERGNER (age 45) presently is the Vice President--Technology
of the Company, a position he has held since December 1995. He served as
Vice President of Engineering and Management Information Systems of the
Company from September 1995 until December 1995. He served as Vice President
of Engineering of the Company from February 1994 until September 1995. Prior
to that appointment, he served as Manager of Project Management and
Construction for AB from 1984 through February 1994.
TODD A. BROWN (age 49) presently is the Company's Vice President--
Operations (Refrigerated Dough Products), a position he has held since
September 1995. From January 1995 through September 1995, Mr. Brown was the
Company's Vice President of Quality & Technology. From April 1993 through
December 1993 he was the Company's Vice President of Quality. He was Vice
President of Quality of Metal Container Corporation (a subsidiary of AB).
BARRY M. HORNER (age 48) presently is the Company's Vice President
(Bakery Operations), a position he has held since June 1996. Mr. Horner
served as Executive Vice President of Sales and Distribution of the Company's
domestic baking operations from May 1994 until June 1996. From December 1993
until May 1994 he served as Executive Vice President of the Western Region,
and from May 1989 to December 1993 he served as Vice President and General
Manager of the Company's Earth Grains division.
MARK H. KRIEGER (age 43) presently is the Company's Vice President and
Chief Financial Officer, positions he has held since January 1994. He was
Vice President of Corporate Planning from 1986 to December 1993.
TIMOTHY J. MITCHELL (age 37) presently is the Company's Vice President--
Sales (Refrigerated Dough Products), a position he has held since March
1996. From December 1994 until March 1996 he served as Regional Vice
President of Eagle Snacks, Inc., a subsidiary of AB. From January 1994 until
December 1994 he served as President of Screaming Eagle, Inc., a
Chicago-based distributor of Eagle Snacks. He served as Director, Sales
Administration of Eagle Snacks, Inc. from September 1982 until January 1994.
JOSEPH M. NOELKER (age 48) presently is the Vice President, General
Counsel, and Corporate Secretary of the Company, positions he has held since
March 1996. Mr. Noelker served as Associate General Counsel of AB from
January 1987 until March 1996.
LARRY PEARSON (age 51) presently is the Company's Vice President--
Diversified Products, a position he has held since July 1994. He served as
Vice President--Sales of Earthgrains Baking Companies, Inc. from 1986 until
July 1996.
BRYAN A. TORCIVIA (age 37) presently is the Company's Vice President--
Planning, Purchasing, and Europate, a position he has held since December
1995. He was the Company's Vice President of Corporate Planning
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from January 1994 until December 1995. From January 1992 to December 1993, he
served as Executive Assistant to the Chief Executive Officer of the Company.
Prior to that he served in the Planning and Finance Department of Metal
Container Corporation (a subsidiary of AB) from 1989 to January 1992.
RICHARD W. WITHERSPOON (age 54) presently is the Company's Vice
President--Business Development (Refrigerated Dough Products), a position he
has held since March 1996. He served as Senior Vice President of the
Company's refrigerated dough operations from January 1994 to March 1996. He
previously served as President of Eagle Crest Foods, Inc. from November 1992
to April 1995 and as Vice President of the Company's refrigerated dough
operations from 1984 to December 1992.
EDWARD J. WIZEMAN (age 55) presently is the Company's Vice President--
Human Resources, a position he has held since March 1996. He served as Group
Vice President of Human Resources for the Company from January 1994 until
March 1996. Mr. Wizeman also served as Director of Human Resources
(Operations) of AB from May 1991 to December 1993 and as Director of Human
Resources of Metal Container Corporation (a subsidiary of AB) from 1986 to
May 1991.
OTHER SIGNIFICANT OFFICERS
VIRGIL REHKEMPER (age 38) presently is Vice President and Controller of
the Company, a position he has held since April 1997. Prior to that he
served as Controller of the Company from April 1995 until 1997 and from 1990
to May 1995 he was Manager, Financial and Operational Audit of AB.
MICHAEL SALAMONE (age 38) presently is Vice President and Treasurer of
the Company, a position he has held since September 1996. From 1991 until
1993 he served as Assistant Treasurer of Pet Incorporated and as Vice
President and Treasurer from 1993 until 1995. Prior to that, he held several
positions in Corporate Finance at AB from 1983 until 1991.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is hereby incorporated by
reference to page 36 of the Company's Annual Report to Shareholders for
fiscal year 1997.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is hereby incorporated by
reference to page 39 of the Company's Annual Report to Shareholders for
fiscal year 1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS
The information required by this Item is hereby incorporated by
reference to pages 18 to 21 of the Company's Annual Report to Shareholders
for fiscal year 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is hereby incorporated by
reference to pages 22 to 37 of the Company's Annual Report to Shareholders
for fiscal year 1997.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with Price Waterhouse LLP, the
Company's independent accountants, on accounting principles or practices or
financial statement disclosures. The Company has not changed its independent
accountants during the two most recent fiscal years, nor since the end of the
most recent fiscal year.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item with respect to Directors is
hereby incorporated by reference to pages 4, 5, and 21 of the Company's Proxy
Statement for the Annual Meeting of Shareholders on July 25, 1997. The
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information required by this Item with respect to Executive Officers is
presented in this Form 10-K immediately following the response to Item 4.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is hereby incorporated by
reference from page 6 and pages 13 through 20 of the Company's Proxy
Statement for the Annual Meeting of Shareholders on July 25, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is hereby incorporated by
reference from pages 3 and 7 of the Company's Proxy Statement for the Annual
Meeting of Shareholders on July 25, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is hereby incorporated by
reference from pages 20 and 21 of the Company's Proxy Statement for the
Annual Meeting of Shareholders on July 25, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
<TABLE>
<CAPTION>
1. FINANCIAL STATEMENTS:<F*> Page
----
<S> <C>
Pro Forma Financial Information (unaudited) 17
Consolidated Balance Sheets as of March 25, 1997 and March 26, 1996 22
Consolidated Statements of Earnings for the year ended March 25, 1997;
the twelve weeks ended March 26, 1996; the year ended January 2,
1996; and the year ended January 3, 1995 23
Consolidated Statements of Cash Flows for the year ended March 25, 1997;
the twelve weeks ended March 26, 1996; the year ended January 2,
1996; and the year ended January 3, 1995 24
Consolidated Statements of Shareholders' Equity for the year ended
March 25, 1997; the twelve weeks ended March 26, 1996;
the year ended January 2, 1996; and the year ended January 3, 1995 25
Notes to Consolidated Financial Statements 26-38
Report of Independent Accountants 38
<FN>
<F*> Incorporated herein by reference from the indicated pages of the Annual Report to
Shareholders for fiscal 1997.
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules are omitted because they are not
applicable or the required information is shown in the Consolidated
Financial Statements or Notes thereto.
<TABLE>
<CAPTION>
3. EXHIBITS
<S> <C>
3.1 -- Amended and Restated Certificate of Incorporation of The Earthgrains Company
(dated February 26, 1996).
3.2 -- By-Laws of The Earthgrains Company (amended and restated as of February 22,
1996).
4.1 -- Form of Rights Agreement dated as of February 22, 1996 between the Company and
Boatmen's Trust Company, as Rights Agent.
10.1 -- The Earthgrains Company 1996 Stock Incentive Plan (As Amended April 11, 1996
and March 21, 1997).<F*>
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10.2 -- The Earthgrains Company Amended and Restated Non-Employee Director Stock Plan
(As amended and restated effective March 21, 1997).<F*>
10.3 -- The Earthgrains Company Employee Stock Ownership/401(k) Plan (As amended and restated
June 28, 1996).
10.4 -- The Earthgrains Company Employee Stock Ownership/401(k) Plan Trust Agreement
(Dated July 1, 1996).
10.5 -- The Earthgrains Company Exceptional Performance Plan (Effective as of March 26,
1997).<F*>
10.6 -- The Earthgrains Company Excess Benefit Plan (Effective October 1, 1993)
(incorporated by reference to Exhibit 10.6 to Form 10).<F*>
10.7 -- The Earthgrains Company Supplemental Executive Retirement Plan (Effective April
1, 1996) (incorporated by reference to Exhibit 10.7 to Form 10).<F*>
10.8 -- The Earthgrains Company 401(k) Restoration Plan (Effective April 1, 1996)
(incorporated by reference to Exhibit 10.8 to Form 10).<F*>
10.9 -- The Earthgrains Company Executive Deferred Compensation Plan (Effective March
27, 1996) (incorporated by reference to Exhibit 10.9 to Form 10).<F*>
10.10 -- Form of Tax Sharing Agreement with Anheuser-Busch Companies, Inc. (dated as of
February 27, 1996).
10.11 -- Form of License Agreement with Anheuser-Busch Companies, Inc. (incorporated by
reference to Exhibit 10.1 to Form 10-Q for the period ended March 26, 1996).
10.12 -- Form of Corporate Services Agreement with Anheuser-Busch Companies, Inc.
(incorporated by reference to Exhibit 10.2 to Form 10-Q for the period ended
March 26, 1996).
10.13 -- Form of Amended and Restated Credit Agreement dated as of April 30, 1997.
10.14 -- Employment Agreement between the Company and Barry H. Beracha.<F*>
10.15 -- Form of Employment Agreement between the Company and Messrs. Opdyke, Iselin and
Horner.<F*>
10.16 -- Senior Executive Agreement between Registrant and Mr. Argente (Dated October
23, 1996).<F*>
13. -- Pages 16 through 39 of the Company's Annual Report to Shareholders, a copy of
which is furnished for the information of the Commission. Portions of the
Annual Report not incorporated herein by reference are not deemed "filed" with
the Commission.
21. -- Subsidiaries of the Company.
23. -- Consent of independent accountants.
27. -- Financial Data Schedules.
<FN>
- ---------------------
<F*> Management contract or compensatory plan or arrangement required to be
filed pursuant to Item 14(a)(3) of Form 10-K.
</TABLE>
(B) REPORTS ON FORM 8-K
The following report on Form 8-K was filed during the fourth quarter of
fiscal year 1997:
On February 13, 1997, the Company filed with the Securities and Exchange
Commission a Form 8-K providing, under Item 2 of that Form, the financial
statements and independent accountant's report thereon required by Item 7(a)
in conjunction with the Company's acquisition of Heiner's Bakery, Inc.
9
<PAGE> 11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE EARTHGRAINS COMPANY
(Registrant)
By: /s/ BARRY H. BERACHA
---------------------------------
Barry H. Beracha
Chairman of the Board and
Chief Executive Officer
Date: June 23, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ BARRY H. BERACHA Chairman of the Board, June 23, 1997
- ----------------------------------- Chief Executive Officer,
(Barry H. Beracha) and Director
(Principal Executive Officer)
/s/ MARK H. KRIEGER Vice President and Chief June 23, 1997
- ----------------------------------- Financial Officer
(Mark H. Krieger) (Principal Financial Officer)
/s/ VIRGIL REHKEMPER Vice President and Controller June 23, 1997
- ----------------------------------- (Principal Accounting Officer)
(Virgil Rehkemper)
/s/ J. JOE ADORJAN Director June 23, 1997
- -----------------------------------
(J. Joe Adorjan)
/s/ PETER F. BENOIST Director June 23, 1997
- -----------------------------------
(Peter F. Benoist)
/s/ MAXINE K. CLARK Director June 23, 1997
- -----------------------------------
(Maxine K. Clark)
/s/ JAIME IGLESIAS Director June 23, 1997
- -----------------------------------
(Jaime Iglesias)
/s/ JERRY E. RITTER Director June 23, 1997
- -----------------------------------
(Jerry E. Ritter)
/s/ WILLIAM E. STEVENS Director June 23, 1997
- -----------------------------------
(William E. Stevens)
</TABLE>
10
<PAGE> 1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
THE EARTHGRAINS COMPANY
(Pursuant to Sections 242 and 245
of the Delaware General Corporation Law)
The Earthgrains Company, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), and does hereby
certify as follows:
1. The Corporation's present name is The Earthgrains Company,
and the name under which the Corporation was originally incorporated was
CAMPBELL TAGGART, INC.
2. The original Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of the State of
Delaware on August 13, 1982.
3. The text of the Certificate of Incorporation, as heretofore
amended and supplemented, is hereby amended and restated to read in full as
set forth below in this paragraph 3:
FIRST. The name of the Corporation is The Earthgrains Company.
SECOND. The address of the Corporation's registered office in
the State of Delaware is 1209 Orange Street, City of Wilmington, County of
New Castle. The name of the Corporation's registered agent at such address
is The Corporation Trust Company.
THIRD. The purpose for which the Corporation is formed is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware (the "GCL").
FOURTH. The aggregate number of shares which the Corporation
shall have authority to issue is 60,000,000, 50,000,000 of which shares shall
be Common Stock having a par value of $.01 per share and 10,000,000 of which
shares shall be Preferred Stock having a par value of $.01 per share. A
description of each
<PAGE> 2
of such classes of stock and the designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions thereof, of each
class of stock of the Corporation which are fixed by the Certificate of
Incorporation of the Corporation, and the express grant of authority to the
Board of Directors of the Corporation (the "Board") to fix by resolution or
resolutions the designations and the powers, preferences and rights of each
other class, and the qualifications, limitations or restrictions thereof, are as
follows:
1. The Board shall have authority, by resolution or resolutions,
at any time and from time to time to divide and establish any or all of the
unissued shares of Preferred Stock not then allocated to any series of
Preferred Stock into one or more series, and, without limiting the generality
of the foregoing, to fix and determine the designation of each such series,
the number of shares which shall constitute such series and the following
relative rights and preferences of the shares of each series so established:
(a) the annual dividend rate payable on shares of such
series, the time of payment thereof, whether such dividends shall be
cumulative or non-cumulative, and the date or dates from which any cumulative
dividends shall commence to accrue;
(b) the price or prices at which and the terms and conditions,
if any, on which shares of such series may be redeemed;
(c) the amounts payable upon shares of such series in the
event of the voluntary or involuntary dissolution, liquidation or winding-up
of the affairs of the Corporation;
(d) the sinking fund provisions, if any, for the redemption
or purchase of shares of such series;
(e) the extent of the voting powers, if any, of the shares
of such series;
(f) the terms and conditions, if any, on which shares of
such series may be converted into shares of stock of the Corporation of any
other class or classes or into shares of any other series of the same or any
other class or classes;
(g) whether, and if so the extent to which, shares of such
series may participate with the Common Stock in any dividends in excess of the
2
<PAGE> 3
preferential dividend fixed for shares of such series or in any distribution
of the assets of the Corporation, upon a liquidation, dissolution or winding-up
thereof, in excess of the preferential amount fixed for shares of such series;
and
(h) any other designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of shares of such series not fixed and
determined by law or in the Certificate of Incorporation of the Corporation.
2. Each series of Preferred Stock shall be so designated as to
distinguish the shares thereof from the shares of all other series.
Different series of Preferred Stock shall not be considered to constitute
different classes of shares for the purpose of voting by classes except as
otherwise fixed by the Board with respect to any series at the time of the
creation thereof.
3. So long as any shares of Preferred Stock are outstanding, the
Corporation shall not declare and pay or set apart for payment any dividends
(other than dividends payable in Common Stock or other stock of the
Corporation ranking junior to the Preferred Stock as to dividends) or make
any other distribution on such junior stock, if at the time of making such
declaration, payment or distribution the Corporation shall be in default with
respect to any dividend payable on, or any obligation to retire, shares of
Preferred Stock.
4. Subject to such limitations, if any, as may be contained in
the resolution or resolutions providing for the issue of Preferred Stock of
any series adopted by the Board, shares of Preferred Stock purchased, redeemed
or otherwise acquired by the Corporation (excepting shares of such stock
acquired on the conversion or exchange thereof into or for other shares
of the Corporation) (a) shall, upon the filing by the Corporation of a
certificate pursuant to Delaware law reducing its capital in respect to such
shares, have the status of authorized and unissued shares of Preferred Stock
and may be reissued by the Corporation at any time as shares of any series of
Preferred Stock and (b) shall, unless and until a certificate with respect
thereto is filed as aforesaid, constitute treasury stock; and shares of
Preferred Stock acquired on the conversion or exchange thereof into or for
other shares of the Corporation shall, after such conversion or exchange,
have the status of authorized and unissued shares of Preferred Stock and may
be reissued by the Corporation at any time as shares of any series of
Preferred Stock.
5. Subject to the provisions of any applicable law or the
By-Laws of the Corporation as from time to time amended with respect to the
closing of the
3
<PAGE> 4
transfer books or the fixing of a record date for the determination of
stockholders entitled to vote, and except as otherwise provided by law or in
resolutions of the Board establishing any series of Preferred Stock pursuant to
this Article FOURTH, the holders of outstanding shares of Common Stock of the
Corporation shall exclusively possess the voting power for the election of
directors and for all other purposes, each holder of record of shares of Common
Stock of the Corporation being entitled to one vote for each share of such stock
standing in such holder's name on the books of the Corporation.
FIFTH. A. The business and affairs of the Corporation shall be
managed by or under the direction of the Board consisting of not less than
three nor more than twelve directors, the exact number of directors to be
determined from time to time by resolution adopted by the affirmative vote of
a majority of the entire Board. The directors shall be divided into three
groups, designated Group I, Group II and Group III. Each Group of directors
shall consist, as nearly as may be possible, of one-third of the total number
of directors constituting the entire Board (determined for purposes of the
Certificate of Incorporation without regard to whether any vacancies exist on
the Board). The term of the initial Group I directors shall terminate on the
date of the 1997 annual meeting of stockholders; the term of the initial
Group II directors shall terminate on the date of the 1998 annual meeting of
stockholders; and the term of the initial Class III directors shall terminate
on the date of the 1999 annual meeting of stockholders. At each annual
meeting of stockholders beginning with the 1997 annual meeting, successors to
the Group of directors whose term expires at that annual meeting shall be
elected for a three-year term.
B. If the number of directors is changed, any increase or decrease
shall be apportioned among the Groups so as to maintain the number of directors
in each Group as nearly equal as possible, and any additional director of any
Group elected to fill a vacancy resulting from an increase in such Group shall
hold office for a term that shall coincide with the remaining term of that
Group, but in no case will a decrease in the number of directors shorten the
term of any incumbent director.
C. A director shall hold office until the annual meeting for the
year in which his or her term expires and until his or her successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the
Board, however resulting, may be filled by a majority of the Board then in
office, even if less than a quorum is
4
<PAGE> 5
present or by a sole remaining director. Any director elected to fill a vacancy
shall have the same remaining term as that of his or her predecessor.
D. Notwithstanding the foregoing, whenever the holders of any
one or more classes or series of preferred or preference stock issued by the
Corporation shall have the right, voting separately by class or series, to
elect directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of the Certificate of
Incorporation of the Corporation applicable thereto.
SIXTH. Elections of directors at an annual or special meeting of
stockholders shall be by written ballot, unless the By-Laws of the
Corporation provide otherwise.
SEVENTH. Subject to the rights, if any, of the holders of shares
of Preferred Stock then outstanding, any or all of the directors of the
Corporation may be removed from office at any time, but only for cause and
only by the affirmative vote of the holders of a majority of the outstanding
shares of the Corporation then entitled to vote generally in the election of
directors, considered for purposes of this Article SEVENTH as one class.
EIGHTH. In furtherance and not in limitation of the powers
conferred by statute, a majority of the entire Board is expressly authorized,
without the assent or vote of the stockholders, to adopt By-Laws for the
Corporation, and to amend, alter or repeal the same. In addition, the
By-Laws of the Corporation may be adopted, amended, altered or repealed by
the affirmative vote of sixty-six and two-thirds percent (66-2/3%) of the
outstanding stock of the Corporation entitled to vote thereon.
NINTH. In addition to any affirmative vote required by law,
any other provision of the Certificate of Incorporation of the Corporation,
the By-Laws of the Corporation or otherwise, and except as otherwise
expressly provided in Sections B or C of this Article NINTH, a Business
Transaction with or a Stock Repurchase from, or proposed by or on behalf of,
an Interested Stockholder or an Affiliate or Associate of an Interested
Stockholder shall require the approval by not less than a majority vote of
the holders of all of the Corporation's outstanding Voting Stock, voting
together as a single class, which is beneficially owned by persons other than
such Interested Stockholder and its Affiliates and Associates. Such
affirmative vote shall be required notwithstanding the fact that no vote may
otherwise be required, or that a lesser percentage or separate class vote may
be re-
5
<PAGE> 6
quired, by law, any other provision of the Certificate of Incorporation
of the Corporation, the By-Laws of the Corporation or otherwise.
B. The provisions of Section A of this Article NINTH shall not
be applicable to any Business Transaction involving an Interested Stockholder
or an Affiliate or Associate of an Interested Stockholder, and such Business
Transaction shall require only such affirmative vote, if any, as is required
by law, any other provision of the Certificate of Incorporation of the
Corporation, the By-Laws of the Corporation or otherwise, if all of the
conditions specified in either of the following Paragraph 1 or 2 are met:
1. The Business Transaction shall have been approved (or shall
have been effected in accordance with a written agreement approved) by a
majority of the Disinterested Directors, whether such approval is given
prior or subsequent to the acquisition of beneficial owner ship of the
Voting Stock that caused such Interested Stockholder to become an
Interested Stockholder. A Business Transaction with an Interested
Stockholder or an Affiliate or an Associate of an Interested Stockholder
shall be deemed to have been approved by a majority of the Disinterested
Directors if such Business Transaction either (i) was expressly approved
(or the agreement pursuant to which it was effected was expressly
approved) by a majority of Disinterested Directors, or (ii) is within a
category of Business Transactions with such Interested Stockholder or
its Affiliates or Associates authorized to be entered into by a
resolution or resolutions adopted by, and not subsequently rescinded by,
a majority of Disinterested Directors.
2. The Business Transaction is a Business Combination and all of
the following conditions shall have been met:
(a) The aggregate amount of cash and the Fair Market
Value as of the date of the consummation of the Business Transaction
of consideration other than cash to be received per share by holders
of the Corporation's Common Stock in such Business Transaction shall
be at least equal to the highest amount determined under clauses (i)
and (ii) below:
(i) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid
by or on behalf of such Interested Stockholder or any Affiliate
or Associate of such Interested Stockholder for any shares of
Common Stock in connection with the acquisition by
6
<PAGE> 7
such Interested Stockholder or any such Affiliate or Associate
of beneficial ownership of shares of Common Stock (x) within the
two-year period immediately prior to the first public
announcement of the proposed Business Transaction (the
"Announcement Date"), or (y) in the transaction in which such
Interested Stockholder became an Interested Stockholder,
whichever is higher; and
(ii) the Fair Market Value per share of Common Stock
on the Announcement Date or on the date on which such
Interested Stockholder became an Interested Stockholder
(the "Determination Date"), whichever is higher.
(b) The aggregate amount of cash and the Fair Market Value
as of the date of the consummation of the Business Transaction of
consideration other than cash to be received per share by holders of
shares of any class or series of outstanding Capital Stock other
than Common Stock shall be at least equal to the highest amount
determined under clauses (i), (ii) and (iii) below:
(i) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid
by or on behalf of such Interested Stockholder or any Affiliate
or Associate of such Interested Stockholder for any shares of
such class or series of Capital Stock in connection with the
acquisition by such Interested Stockholder or any such Affiliate
or Associate of beneficial ownership of shares of such class or
series of Capital Stock (x) within the two-year period
immediately prior to the Announcement Date, or (y) in the
transaction in which such Interested Stockholder became an
Interested Stockholder, whichever is higher;
(ii) the Fair Market Value per share of such class
or series of Capital Stock on the Announcement Date or on
the Determination Date, whichever is higher; and
(iii) the highest preferential amount per share, if
any, to which the holders of shares of such class or series
of Capital Stock would be entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding
up of the
7
<PAGE> 8
affairs of the Corporation, regardless of whether the Business
Transaction to be consummated constitutes such an event.
The provisions of this Paragraph 2(b) shall be required to be
met with respect to every class or series of outstanding Capital
Stock, whether or not such Interested Stockholder or any Affiliate or
Associate of such Interested Stockholder has previously acquired
beneficial ownership of any shares of the particular class or series
of Capital Stock.
(c) The consideration to be received by holders of a particular
class or series of outstanding Capital Stock shall be in cash or in the
same form as previously has been paid by or on behalf of such Interested
Stockholder and its Affiliates and Associates in connection with their
direct or indirect acquisition of beneficial ownership of shares of such
class or series of Capital Stock. If the consideration so paid for
shares of any class or series of Capital Stock varied as to form, the
form of consideration for such class or series of Capital Stock shall be
either cash or the form used to acquire beneficial ownership of the
largest number of shares of such class or series of Capital Stock
previously acquired by such Interested Stockholder and its Affiliates and
Associates. The prices determined in accordance with Paragraphs 2(a) and
2(b) of this Section B shall be subject to an appropriate adjustment in
the event of any stock dividend, stock split, combination of shares or
similar event.
(d) After the Determination Date and prior to the
consummation of such Business Transaction: (i) except as approved
by a majority of the Disinterested Directors, there shall have been
no failure to declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) payable in accordance
with the terms of any outstanding Capital Stock; (ii) there shall have
been no reduction in the annual rate of dividends paid on the Common
Stock (except as necessary to reflect any stock split, stock dividend or
subdivision of the Common Stock), except as approved by a majority of the
Disinterested Directors; (iii) there shall have been an increase in the
annual rate of dividends paid on the Common Stock as necessary to reflect
any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction that has the
effect of reducing the number of outstanding shares of
8
<PAGE> 9
Common Stock, unless the failure so to increase such annual rate is
approved by a majority of the Disinterested Directors; and (iv) neither
such Interested Stockholder nor any Affiliate or Associate of such
Interested Stockholder shall have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction that
results in such Interested Stockholder becoming an Interested Stockholder
and except in a transaction that, after giving effect thereto, would not
result in any increase in such Interested Stockholder's or any such
Affiliate's or Associate's percentage beneficial ownership of any class
or series of Capital Stock.
(e) A proxy or information statement describing the proposed
Business Transaction and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Act") (or any subsequent provisions replacing such
Act, rules or regulations) shall be mailed to all stockholders of the
Corporation at least thirty days prior to the consummation of such
Business Transaction (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions). The proxy or information statement shall contain on the
first page thereof, in a prominent place, any statement as to the
advisability (or inadvisability) of the Business Transaction that the
Disinterested Directors, or any of them, may choose to make and, if
deemed advisable by a majority of the Disinterested Directors, the
opinion of an investment banking firm selected by a majority of the
Disinterested Directors as to the fairness (or not) of the terms of
the Business Transaction from a financial point of view to the
holders of the outstanding shares of Capital Stock other than such
Interested Stockholder and its Affiliates or Associates, such
investment banking firm to be paid a reasonable fee for its services
by the Corporation.
C. The provisions of Section A of this Article NINTH shall not be
applicable to a Stock Repurchase with, or proposed by or on behalf of, an
Interested Stockholder or an Affiliate or Associate of an Interested
Stockholder, and such Stock Repurchase shall require only such affirmative
vote, if any, as is required by law, any other provision of the Certificate
of Incorporation of the Corporation, the By-Laws of the Corporation or
otherwise, if the conditions specified in either of the following Paragraph 1
or 2 are met:
9
<PAGE> 10
1. The Stock Repurchase is made pursuant to a tender offer or
exchange offer for a class of Capital Stock made available on the
same basis to all holders of such class of Capital Stock.
2. The Stock Repurchase is made pursuant to an open market
purchase program approved by a majority of the Disinterested
Directors, provided that such repurchase is effected on the open
market and is not the result of a privately negotiated transaction.
D. For the purposes of this Article NINTH:
1. The term "Business Transaction" shall mean:
(a) any merger or consolidation of the Corporation with, or
any sale or transfer of all or substantially all of the
Corporation's assets to, (i) any Interested Stockholder or (ii)
any other corporation (whether or not itself an Interested
Stockholder) which is or after such merger, consolidation, sale
or transfer would be an Affiliate or Associate of an Interested
Stockholder, or any liquidation or dissolution of the
Corporation (any such merger, consolidation, sale, transfer,
liquidation or dissolution being referred to herein as a
"Business Combination"); or
(b) any other transaction (other than a Stock Repurchase)
between the Corporation or any Subsidiary, on the one hand, and
any Interested Stockholder or any Affiliate or Associate of an
Interested Stockholder, on the other hand, and any amendment to
the By-Laws of the Corporation proposed by or on behalf of any
Interested Stockholder or any Affiliate or Associate of an
Interested Stockholder; or
(c) any reclassification of securities (including any
reverse stock split) or recapitalization of the Corporation, or
any merger or consolidation of the Corporation with any
Subsidiary, or any other transaction (whether or not with or
otherwise involving an Interested Stockholder) that has the
effect, directly or indirectly, of increasing the percentage
beneficial ownership of any class or series of Capital Stock
held by, or the voting power with respect to the Corporation
of, any Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder; or
10
<PAGE> 11
(d) any agreement, contract or other arrangement providing
for any one or more of the actions specified in the foregoing
clauses (a) to (c).
2. The term "Stock Repurchase" shall mean any repurchase by the
Corporation or any Subsidiary of any shares of Capital Stock at a
price greater than the then Fair Market Value of such shares from an
Interested Stockholder or an Affiliate or Associate of an Interested
Stockholder if beneficial ownership of one-quarter or more of all
shares of Capital Stock beneficially owned by such Interested Stock
holder and its Affiliates and Associates were acquired (disregarding
shares acquired as part of a pro-rata stock dividend or stock split)
within a period of less than two years prior to the date of such
repurchase (or the date of an agreement in respect thereof).
3. The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article
FOURTH of this Amended and Restated Certificate of Incorporation, and
the term "Voting Stock" shall mean all Capital Stock which by its
terms may be voted on all matters submitted to stockholders of the
Corporation generally.
4. The term "person" shall mean any individual, firm,
corporation or other entity and shall include any group comprised of
any person and any other person with whom such person or any
Affiliate or Associate of such person has any agreement, arrangement
or understanding, directly or indirectly, for the purpose of
acquiring, holding, voting or disposing of Capital Stock.
5. The term "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary, or any pension,
profit-sharing, employee stock ownership or other employee benefit
plan of the Corporation or any Subsidiary, or any trustee of or
fiduciary with respect to any such plan when acting in such capacity)
who (a) is the beneficial owner of Voting Stock representing ten
percent (10%) or more of the votes entitled to be cast by the holders
of all then outstanding shares of Voting Stock; or (b) is an
Affiliate or Associate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner of Voting Stock representing ten percent (10%) or
more of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock.
11
<PAGE> 12
6. A person shall be a "beneficial owner" of any Capital Stock
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; (b) which such person or
any of its Affiliates or Associates has, directly or indirectly, (i)
the right to acquire (whether such right is exercisable immediately
or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding; or (c) which are beneficially owned, directly or
indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any
shares of Capital Stock. For the purposes of determining whether a
person is an Interested Stockholder pursuant to Paragraph 5 of this
Section D, the number of shares of Capital Stock deemed to be
outstanding shall include shares deemed beneficially owned by such
person through application of Paragraph 6 of this Section D, but
shall not include any other shares of Capital Stock that may be
issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
7. A person shall be deemed to be an "Affiliate" of a specified
person, if such person directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such specified person. A person shall be deemed to be
an "Associate" of a specified person, if such person is (a) a
corporation or organization (other than the Corporation or any
Subsidiary) of which such specified person is an officer or partner or
of which such specified person is, directly or indirectly, the
beneficial owner of ten percent (10%) or more of any class of equity
securities, (b) a trust or other estate (other than any pension,
profit-sharing, employee stock ownership or other employee benefit
plan of the Corporation or any Subsidiary) in which such specified
person has a substantial beneficial interest or as to which such
specified person serves as trustee or in a similar fiduciary
capacity, or (c) a relative or spouse of such specified person, or a
relative of such spouse, who has the same home as such specified
person.
8. The term "Subsidiary" means any corporation of which a
majority of any class of equity security is beneficially owned by the
Corporation, as well as any Affiliate of the Corporation which is
controlled by the Corporation; provided, however, that for the purposes
of the definition of Interested Stockholder set forth in Paragraph 5
of this Section D, the term "Subsidiary"
12
<PAGE> 13
shall mean only a company of which a majority of each class of equity
security is beneficially owned by the Corporation.
9. With respect to any Business Transaction with, or proposed by
or on behalf of, an Interested Stockholder or an Affiliate or
Associate of an Interested Stockholder, and with respect to any
proposal of the kind referred to in Section H of this Article NINTH,
which is proposed by or on behalf of an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder, the term
"Disinterested Director" means any member of the Board who is not an
Affiliate or Associate or representative of such Interested Stock
holder and was a member of the Board prior to the time that such
Interested Stockholder became an Interested Stockholder, and any
successor of a Disinterested Director, while such successor is a
member of the Board, who is not an Affiliate or Associate or
representative of such Interested Stockholder and is recommended or
elected to succeed the Disinterested Director by a majority of
Disinterested Directors.
10. The term "Fair Market Value" means (a) in the case of cash,
the amount of such cash; (b) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite Tape for
New York Stock Exchange Listed Stocks, or, if such stock is not
quoted on the Composite Tape, on the New York Stock Exchange, or, if
such stock is not listed on such Exchange, on the principal United
States securities exchange registered under the Act on which such
stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share
of such stock during the 30-day period preceding the date in question
on the National Association of Securities Dealers, Inc. Automated
Quotations System or any similar system then in use, or if no such
quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of the
Disinterested Directors in good faith, and (c) in the case of
property other than cash or stock, the fair market value of such
property on the date in question as determined in good faith by a
majority of the Disinterested Directors.
11. In the event of any Business Transaction in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in Paragraphs 2(a) and 2(b) of Section B of this
Article NINTH shall include the shares of Common Stock and/or the
shares of any other class or series of Capital Stock retained by the
holders of such shares.
13
<PAGE> 14
E. A majority of the Disinterested Directors shall have the power
and duty to determine for the purposes of this Article NINTH, on the basis of
information known to them after reasonable inquiry, all questions arising
under this Article NINTH, including, without limitation, (a) whether a person
is an Interested Stockholder, (b) the number of shares of Capital Stock or
other securities beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, and (d) whether the consideration to be
received in any Stock Repurchase by the Corporation or any Subsidiary exceeds
the then Fair Market Value of the shares of Capital Stock being repurchased.
Any such determination made in good faith shall be binding and conclusive on
all parties.
F. Nothing contained in this Article NINTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by
law.
G. The fact that any Business Transaction complies with the
provisions of Section B of this Article NINTH shall not be construed to
impose any fiduciary duty, obligation or responsibility on the Board, or any
member thereof, to approve such Business Transaction or recommend its
adoption or approval to the stockholders of the Corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the Board, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Transaction.
H. Notwithstanding any other provisions of the Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage or separate class vote may be specified by law, the
Certificate of Incorporation or the By-Laws of the Corporation) and in
addition to the voting requirements set forth in Article THIRTEENTH hereof,
any proposal to amend or repeal, or adopt any provision of the Certificate of
Incorporation inconsistent with, this Article NINTH which is proposed by or
on behalf of an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder shall require approval by a vote of a majority of the
holders of all then outstanding shares of Voting Stock which are beneficially
owned by persons other than such Interested Stockholder and its Affiliates
and Associates, voting together as a single class; provided, however, that
this Section H shall not apply to, and such majority vote shall not be
required for, any amendment, repeal or adoption which does not affect the
provisions of this Article NINTH relating to Stock Repurchases and which is
recommended by a majority of the Disinterested Directors, if a majority of
the directors then in office are Disinterested Directors.
14
<PAGE> 15
TENTH. Any action required or permitted to be taken at any
annual or special meeting of stockholders may be taken only upon the vote of
the stockholders at an annual or special meeting duly noticed and called, as
provided in the By-Laws of the Corporation, and may not be taken by a written
consent of the stockholders pursuant to the GCL.
ELEVENTH. Special meetings of stockholders of the Corporation
for any purpose or purposes may be called at any time by the Chairman of the
Board, the President or a majority of the entire Board. Special meetings of
the stockholders of the Corporation may not be called by any other person or
persons.
TWELFTH. No director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages for any
breach of fiduciary duty by such a director as a director to the full extent
authorized or permitted by law (as now or hereafter in effect). Notwithstanding
the foregoing sentence, a director shall be liable to the extent provided
by applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the GCL or (iv) for any transaction from
which the director derived an improper personal benefit. No amendment to or
repeal of this Article TWELFTH shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
THIRTEENTH: The officers and directors of the Corporation, and
such other persons as authorized by a majority of the entire Board consistent
with the provisions of the GCL shall be indemnified by the Corporation to the
fullest extent authorized or permitted by law (as now or hereafter in
effect).
FOURTEENTH. The Corporation reserves the right to adopt, amend,
alter or repeal any provisions contained in the Certificate of Incorporation
in the manner now or hereafter prescribed by the statutes of the State of
Delaware and the Certificate of Incorporation, and all rights herein conferred
on stockholders are expressly subject to this reservation. Notwithstanding
anything contained in the Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the outstanding stock of the Corporation entitled to vote thereon
shall be required to adopt, amend, alter or repeal any provision inconsistent
with Articles FIFTH, SEVENTH, EIGHTH,
15
<PAGE> 16
NINTH, TENTH, ELEVENTH, TWELFTH, THIRTEENTH and FOURTEENTH of the Certificate of
Incorporation.
4. This Amended and Restated Certificate of Incorporation was
duly adopted in accordance with Sections 242 and 245 of the Delaware General
Corporation Law.
IN WITNESS WHEREOF, The Earthgrains Company has caused its
corporate seal to be affixed and this Amended and Restated Certificate of
Incorporation to be signed by Mark H. Krieger, its Vice President -- Chief
Financial Officer, this 26th day of February, 1996.
THE EARTHGRAINS COMPANY
By: /s/ Mark H. Krieger
---------------------------------------------
Name:
Title:
16
<PAGE> 1
==============================================================================
AMENDED AND RESTATED
AS OF FEBRUARY 22, 1996
BY-LAWS
OF
THE EARTHGRAINS COMPANY
INCORPORATED UNDER THE LAWS OF DELAWARE
==============================================================================
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
BY-LAWS
OF
THE EARTHGRAINS COMPANY
<S> <C>
ARTICLE I:
LOCATION AND OFFICES
SECTION 1:1. Principal Office. 1
SECTION 1:2. Other Offices 1
ARTICLE II:
STOCKHOLDERS
SECTION 2:1. Annual Meeting 1
SECTION 2:2. Business to be Conducted at Annual Meeting 1
SECTION 2:3. Special Meetings 3
SECTION 2:4. Place of Meetings 3
SECTION 2:5. Notice of Meetings 3
SECTION 2:6. Quorum and Voting 4
SECTION 2:7. Voting; Proxy 4
SECTION 2:8. Voting by Fiduciaries, Pledgees and Pledgors 5
SECTION 2:9. Nomination of Directors 5
SECTION 2:10. List of Stockholders 7
SECTION 2:11. Appointment of Inspectors of Election and Resolution
of Questions Concerning Right to Vote 7
ARTICLE III:
DIRECTORS
SECTION 3:1. General Powers. 8
SECTION 3:2. Number and Qualifications 8
SECTION 3:3. Election 8
SECTION 3:4. Meetings 8
SECTION 3:5. Quorum 9
SECTION 3:6. Committees 9
<PAGE> 3
SECTION 3:7. Waiver of Notice 10
SECTION 3:8. Consent 10
SECTION 3:9. Notice to Members of the Board of Directors 10
SECTION 3:10. Presiding Officer 11
SECTION 3:11. Compensation. 11
SECTION 3:12. Interested Directors. 11
ARTICLE IV:
OFFICERS
SECTION 4:1. Appointment 12
SECTION 4:2. Tenure 12
SECTION 4:3. Salaries 12
SECTION 4:4. Chairman of the Board 12
SECTION 4:5. President. 13
SECTION 4:6. Vice Presidents. 13
SECTION 4:7. Secretary. 14
SECTION 4:8. Treasurer. 14
SECTION 4:9. Other Officers. 15
ARTICLE V:
CAPITAL STOCK AND DIVIDENDS
SECTION 5:1. Certificates for Shares 15
SECTION 5:2. Transfers 15
SECTION 5:3. Regulations Governing Issuance and Transfers
of Shares 16
SECTION 5:4. Transfer Agents and Registrars. 16
SECTION 5:5. Lost or Destroyed Certificates 16
SECTION 5:6. Fractions of Shares 16
SECTION 5:7. Determination of Stockholders 17
SECTION 5:8. Record Date 17
ARTICLE VI:
INDEMNIFICATION
SECTION 6:1. General Indemnification 17
ii
<PAGE> 4
SECTION 6:2. Insurance, Indemnification Agreements and
Other Matters 18
SECTION 6:3. Nonexclusivity 18
ARTICLE VII:
MISCELLANEOUS
SECTION 7:1. Voting Shares in Other Corporations 18
SECTION 7:2. Execution of Other Papers and Documents 19
SECTION 7:3. Corporate Seal. 19
SECTION 7:4. Books and Records 19
SECTION 7:5. Fiscal Year. 19
SECTION 7:6. Amendments 19
</TABLE>
iii
<PAGE> 5
AMENDED AND RESTATED
BY-LAWS
OF
THE EARTHGRAINS COMPANY
ARTICLE I: LOCATION AND OFFICES
PRINCIPAL OFFICE.
SECTION 1:1. The principal office of the corporation shall be at such
place as the Board of Directors may from time to time determine, but until a
change is effected such principal office shall be at 8400 Maryland Avenue in
the City of St. Louis, Missouri.
OTHER OFFICES.
SECTION 1:2. The corporation may also have other offices, in such
places (within or without the State of Delaware) as the Board of Directors
may from time to time determine.
ARTICLE II: STOCKHOLDERS
ANNUAL MEETING.
SECTION 2:1. An annual meeting of the stockholders of the corporation
shall be held at 10:00 o'clock a.m. on the fourth Wednesday in July of each
year, beginning in 1997, if not a legal holiday, and if a legal holiday then
on the next succeeding day not a legal holiday or on such other date as shall
be designated from time to time by the Board of Directors. The purpose of
the meeting shall be to elect directors and to transact such other business
as properly may be brought before the meeting. If the corporation shall fail
to hold said meeting for the election of directors on the date aforesaid, the
Board of Directors shall cause the election to be held by the stockholders as
soon thereafter as convenient.
BUSINESS TO BE CONDUCTED AT ANNUAL MEETING.
SECTION 2:2.1. At an annual meeting of stockholders, only such business
shall be conducted as shall have been brought before the meeting (i) pursuant
to the
<PAGE> 6
corporation's notice of the meeting, (ii) by or at the direction of the Board
of Directors (or any duly organized committee thereof), or (iii) by any
stockholder of the corporation who is a stockholder of record on the date of
giving of the notice provided for in this Section 2:2 and on the record date
for the determination of stockholders entitled to vote at such meeting and who
has complied with the notice procedures set forth in this Section 2:2.
SECTION 2:2.2. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder,
such stockholder must have given timely notice in proper written form to the
Secretary which notice is not withdrawn by such stockholder at or prior to
such annual meeting.
SECTION 2:2.3. To be timely, a stockholder's notice to the Secretary
must be delivered or mailed to and received by the Secretary at the principal
executive offices of the corporation, not less than sixty days nor more than
ninety days prior to the first anniversary date of the preceding year's
annual meeting of stockholders; provided, however, that in the event that
-------- -------
the annual meeting is called for a date that is not within thirty days before
or after such anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close of business on the tenth
day following the day on which such notice of the date of the annual meeting
was mailed or such public disclosure of the date of the annual meeting was
made, whichever occurs first.
SECTION 2:2.4. To be in proper written form, such stockholder's notice
must set forth as to each matter the stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at
such meeting; (ii) the name and address, as they appear on the corporation's
books, of the stockholder proposing such business, and the name and address
of the beneficial owner, if any, on whose behalf the proposal is made; (iii)
the class or series and the number of shares of the corporation's stock which
are beneficially owned by such stockholder, and the beneficial owner, if any,
on whose behalf the proposal is made; (iv) a description of all arrangements
or understandings between such stockholder or beneficial owner and any other
person or persons (including their names) in connection with the proposal of
such business by such stockholder or beneficial owner and any material
interest of the stockholder, and of the beneficial owner, if any, on whose
behalf the proposal is made, in such business; and (v) a representation that
such stockholder or beneficial owner intends to appear in person or by proxy
at the annual meeting to bring such business before the meeting.
2
<PAGE> 7
SECTION 2:2.5. Notwithstanding anything in these By-Laws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 2:2. The chairman
of the meeting may, if the facts warrant, determine that the business was not
properly brought before the meeting in accordance with the provisions of this
Section 2:2; and if the chairman should so determine, the chairman shall so
declare to the meeting, and any such business not properly brought before the
meeting shall not be transacted.
SPECIAL MEETINGS.
SECTION 2:3. Special meetings of stockholders of the corporation for
any purpose or purposes may be called at any time by the Chairman of the
Board, the President or a majority of the entire Board. Special meetings of
the stockholders of the corporation may not be called by any other person or
persons. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is
called shall be given to each stockholder entitled to vote at such meeting as
provided in Section 2:5, and only such business as is stated in such notice
shall be acted upon thereat.
PLACE OF MEETINGS.
SECTION 2:4. All meetings of the stockholders shall be held at the
principal office of the corporation, or at such other place, within or
without the State of Delaware, as may be determined by the Board of Directors
and stated in the notice of the meeting.
NOTICE OF MEETINGS.
SECTION 2:5. Written notice of each meeting of the stockholders stating
the place, date, and hour of the meeting, and, in case of a special meeting
or where otherwise required by statute, the purpose or purposes for which the
meeting is called, shall be delivered by mail not less than ten nor more than
sixty days before the date of the meeting, by or at the direction of the
person calling the meeting, to each stockholder entitled to vote at such
meeting. The notice of a stockholders' meeting shall be deemed to be
delivered when deposited in the United States mail with postage prepaid,
addressed to each stockholder at such stockholder's address as it appears on
the records of the corporation.
3
<PAGE> 8
QUORUM AND VOTING.
SECTION 2:6.1. The holders of a majority of the outstanding shares
(exclusive of treasury stock) entitled to vote at any meeting of the
stockholders, when present in person or by proxy, shall constitute a quorum
for the transaction of business, except as otherwise provided by statute, the
Certificate of Incorporation of the Corporation or these By-Laws; but in the
absence of such a quorum the holders of a majority of the shares represented
at the meeting shall have the right successively to adjourn the meeting to a
specified date. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 2:6.2. The absence from any meeting of the number of shares
required by statute, the Certificate of Incorporation of the Corporation or
these By-Laws for action upon one matter shall not prevent action at such
meeting upon any other matter or matters which may properly come before the
meeting, if the number of shares required in respect of such other matters
shall be present.
SECTION 2:6.3. When a quorum is present at any meeting of the
stockholders, the vote of the holders (present in person or represented by
proxy) of a majority of the shares of stock which are actually voted (and
have the power to vote) on any proposition or question properly brought to a
vote at such meeting shall decide any such proposition or question, unless
the proposition or question is one upon which by express provision of statute
or of the Certificate of Incorporation, or of these By-Laws, a different vote
is required, in which case such express provision shall govern and establish
the number of votes required to determine such proposition or question.
VOTING; PROXY.
SECTION 2:7.1. Whenever the law requires or the chairman of the meeting
orders that a vote be taken by ballot, each stockholder entitled to vote on a
particular question at a meeting of stockholders, pursuant to law or the
Certificate of Incorporation, shall be entitled to one vote for each share of
voting stock held by such
4
<PAGE> 9
stockholder. The date for determining the stockholders entitled to vote at a
meeting of the stockholders shall be determined pursuant to Section 5:8.
SECTION 2:7.2. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for such
stockholder by proxy; but no such proxy shall be voted or acted upon after
three years from its date, unless the proxy provides for a longer period. A
duly executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient in law
to support an irrevocable power. A proxy may be made irrevocable regardless
of whether the interest with which it is coupled is an interest in the stock
itself or an interest in the corporation generally.
VOTING BY FIDUCIARIES, PLEDGEES AND PLEDGORS.
SECTION 2:8. Persons holding stock in a fiduciary capacity shall be
entitled to vote the shares so held. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
corporation the pledgor has expressly empowered the pledgee to vote thereon,
in which case only the pledgee or the pledgee's proxy may represent such
stock and vote thereon.
NOMINATION OF DIRECTORS.
SECTION 2:9.1. Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors of the
corporation, except as may be otherwise expressly provided in the Certificate
of Incorporation of the corporation with respect to the right of holders of
preferred stock of the corporation to nominate and elect a specified number
of directors in certain circumstances. Nominations of persons for election
to the Board of Directors may be made at any annual meeting of stockholders,
(i) by or at the direction of the Board of Directors (or any duly authorized
committee thereof) or (ii) by any stockholder of the corporation who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 2:9 and on the record date for the determination of stockholders
entitled to vote at such meeting and who complies with the notice procedures
set forth in this Section 2:9.
SECTION 2:9.2. In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given
timely notice thereof in proper written form to the Secretary of the
corporation.
5
<PAGE> 10
SECTION 2:9.3. To be timely, a stockholder's notice to the Secretary
must be delivered or mailed to and received by the Secretary at the principal
executive offices of the corporation not less than sixty days nor more than
ninety days prior to the first anniversary date of the preceding year's
annual meeting of stockholders, provided, however, that in the event that
-------- -------
the annual meeting is called for a date that is not within thirty days before
or after such anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close of business on the tenth
day following the day on which such notice of the date of the annual meeting
was mailed or such public disclosure of the date of the annual meeting was
made, whichever occurs first.
SECTION 2:9.4. To be in proper written form, a stockholder's notice to
the Secretary must set forth (i) as to each person whom the stockholder
proposes to nominate for election as a director (A) the name, age, business
address and residence address of the person, (B) the principal occupation or
employment of the person, (C) the class or series and the number of shares of
capital stock of the corporation which are owned beneficially or of record by
the person and (D) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated thereunder;
and (ii) as to the stockholder giving the notice or the beneficial owner on
whose behalf the nomination is made, (A) the name and address of such
stockholder as they appear on the corporation's books, (B) the class or
series and the number of shares of the corporation's stock which are
beneficially owned by such stockholder or beneficial owner, (C) a description
of all arrangements or understandings between such stockholder or beneficial
owner and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such stock
holder or beneficial owner, (D) a representation that such stockholder or
beneficial owner intends to appear in person or by proxy at the meeting to
nominate the persons named in its notice, and (E) any other information relat-
ing to such stockholder or beneficial owner that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant
to Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a director if
elected.
SECTION 2:9.5. No person shall be eligible for election as a director
of the corporation unless nominated in accordance with the procedures set
forth in this
6
<PAGE> 11
Section 2:9. If the chairman of the meeting determines that a
nomination was not made in accordance with the foregoing procedures, the
chairman shall declare to the meeting that the nomination was defective and
such defective nomination shall be disregarded.
LIST OF STOCKHOLDERS.
SECTION 2:10. The Secretary shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. The stock ledger shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by this Section 2:10 or the books of the corporation,
or to vote in person or by proxy at any meeting of stockholders.
APPOINTMENT OF INSPECTORS OF ELECTION AND RESOLUTION OF QUESTIONS
CONCERNING RIGHT TO VOTE.
SECTION 2:11. The Board of Directors, in advance of the meeting of
stockholders or, if it does not act, the chairman of the meeting, shall
appoint not less than two persons who are not directors to serve as in-
spectors of election. It shall be their duty to receive and canvass the
votes for election of directors and on any proposal voted on by ballot and to
certify the results to the chairman. In all cases where the right to vote
upon any share of the corporation shall be questioned, it shall be the duty
of the inspectors to examine the stock ledger of the corporation as evidence
of the shares held, and all shares that appear standing thereon in the name
of any person or persons may be voted upon by such person or persons. Each
inspector of election before entering upon the duties of such office shall
take and subscribe the following oath before an officer authorized by law to
administer oaths: "I do solemnly swear that I will execute the duties of an
inspector of the election now to be held with strict impartiality and
according to the best of my ability."
7
<PAGE> 12
ARTICLE III: DIRECTORS
GENERAL POWERS.
SECTION 3:1. The Board of Directors shall control and manage the
business and property of the corporation. The Board may exercise all such
powers of the corporation and do all lawful acts and things as are not by
law, the Certificate of Incorporation or these By-Laws directed or required
to be exercised or done by the stockholders or some particular officer of the
corporation.
NUMBER AND QUALIFICATIONS.
SECTION 3:2. The number of directors shall be determined from time to
time by resolution of the Board of Directors in accordance with the terms of
Article FIFTH of the Certificate of Incorporation.
ELECTION.
SECTION 3:3. Except as provided in the Certificate of Incorporation
with respect to the filling of vacancies, directors shall be elected by a
plurality of the votes cast at annual meetings of stockholders, and shall hold
office until the annual meeting for the year in which his term expires and
until his successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from
office. Any director may resign at any time upon notice to the corporation.
Directors need not be stockholders. The directors who are to be elected at
the annual meeting of the stockholders shall be elected by ballot by the
holders of shares entitled to vote.
MEETINGS.
SECTION 3:4.1. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time be determined
by the Board of Directors. Special meetings of the Board of Directors may be
called by the Chairman, if there be one, the President or any director.
Notice thereof stating the place, date and hour of the meeting shall be given
to each director either by mail not less than forty-eight (48) hours before
the date of the meeting, by telephone or facsimile transmission on
twenty-four (24) hours' notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
8
<PAGE> 13
SECTION 3:4.2. Members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participating in the meeting in this
manner shall constitute presence in person at such meeting.
QUORUM.
SECTION 3:5. Except as may be otherwise specifically provided by law,
the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be
the act of the Board of Directors. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
COMMITTEES.
SECTION 3:6. The Board of Directors may, by resolution passed by a
majority of the entire Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The Board of Directors may designate one or more directors as alternate mem-
bers of any committee, who may replace any absent or disqualified member at
any meeting of any such committee. In the absence or disqualification of a
member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified
member, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. Any committee, to
the extent allowed by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation. Each committee shall keep regular minutes and report to the
Board of Directors when required.
9
<PAGE> 14
WAIVER OF NOTICE.
SECTION 3:7. Any notice which is required by law or by the Certificate
of Incorporation or by these By-Laws to be given to any director may be
waived in writing, signed by such director, whether before or after the time
stated therein. Attendance of a director at any meeting shall constitute
waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
CONSENT.
SECTION 3:8. Any action required or permitted to be taken at any
meeting of the Board of Directors (or of any committee thereof) may be taken
without a meeting if all members of the Board (or committee) consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board (or committee).
NOTICE TO MEMBERS OF THE BOARD OF DIRECTORS.
SECTION 3:9. Each member of the Board of Directors shall file with the
Secretary of the corporation an address to which mail, by hand deliveries or
overnight commercial courier deliveries may be transmitted and, if
appropriate, a telephone number to which facsimile notices may be
transmitted. A notice mailed, delivered by hand or by overnight commercial
courier (receipt requested) or transmitted by facsimile (with confirmation
receipt) in accordance with the instructions provided by the director shall
be deemed sufficient notice. Such address or telephone number may be changed
at any time and from time to time by a director by giving written notice of
such change to the Secretary. Failure on the part of any director to keep an
address and, if applicable, telephone number on file with the Secretary shall
automatically constitute a waiver of notice of any regular or special meeting
of the Board which might be held during the period of time that such address
and telephone number, if applicable, are not on file with the Secretary. A
notice shall be deemed to be mailed when deposited in the United States mail,
postage prepaid. A notice shall be deemed to be delivered by hand or by
overnight commercial courier or by facsimile transmission when sent to the
address or telephone number, as the case may be, which the director has
placed on file with the Secretary, and in the case of facsimile transmission,
when a confirmation receipt is received.
10
<PAGE> 15
PRESIDING OFFICER.
SECTION 3:10. The Chairman of the Board shall preside at all meetings
of the Board of Directors at which the Chairman is present. In the absence
of the Chairman, the Board shall select a chairman of the meeting from among
the directors present.
COMPENSATION.
SECTION 3:11. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation
for attending committee meetings.
INTERESTED DIRECTORS.
SECTION 3:12. No contract or transaction between the corporation and
one or more of its directors or officers, or between the corporation and any
other corporation, partnership, association, or other organization in which
one or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose if (i) the material facts as to his or their relationship or
interest and as to the contract or transaction are disclosed or are known to
the Board of Directors or the committee, and the Board of Directors or
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts
as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good
faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the corporation as of the time it is authorized, approved or
ratified, by the Board of Directors, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
11
<PAGE> 16
ARTICLE IV: OFFICERS
APPOINTMENT.
SECTION 4:1. The Board of Directors shall appoint from its membership a
Chairman of the Board and a President. The Board shall appoint such Vice
Presidents, a Secretary, a Treasurer, Assistant Secretaries, Assistant
Treasurers and such other officers, as the Board may from time to time deem
necessary or appropriate.
TENURE.
SECTION 4:2. Officers appointed by the Board of Directors shall hold
their respective offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. Any
officer appointed by the Board may be removed by the Board with or without a
hearing and with or without cause whenever in its judgment the best interests
of the corporation will be served thereby.
SALARIES.
SECTION 4:3. The salaries of all officers of the corporation shall be
fixed by the Board of Directors (or any committee thereof established for
such purpose).
CHAIRMAN OF THE BOARD.
SECTION 4:4. The Chairman of the Board, if there be one, shall preside
at all meetings of the stockholders and of the Board of Directors. He shall
be the Chief Executive Officer of the corporation, and except where by law
the signature of the President is required, the Chairman of the Board shall
possess the same power as the President to sign, with the Secretary (or
Assistant Secretary) or Treasurer (or Assistant Treasurer), certificates for
the stock of the corporation, and all bonds, mortgages, contracts, and other
instruments of the corporation which may be authorized by the Board of
Directors or by such Chairman of the Board or by the President. During the
absence or disability of the President, the Chairman of the Board shall
exercise all the powers and discharge all the duties of the President.
12
<PAGE> 17
PRESIDENT.
SECTION 4:5. The President shall have general supervision of the
business of the corporation and shall see that all orders and resolutions of
the Board of Directors or the Chairman of the Board are carried into effect.
The President may sign, with the Secretary (or Assistant Secretary) or
Treasurer (or Assistant Treasurer), certificates for stock of the corporation
and execute all deeds, bonds, mortgages, contracts and other instruments of
the corporation authorized by the Board of Directors, by the Chairman of the
Board or by such President, except where required or permitted by law to be
otherwise signed and executed and except that the other officers of the
corporation may sign and execute documents when so authorized by these
By-Laws, the Board of Directors, the Chairman of the Board or the President.
In the absence or disability of the Chairman of the Board, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of Directors. If there be no Chairman of the Board, the President shall
be the Chief Executive Officer of the corporation.
VICE PRESIDENTS.
SECTION 4:6. Each Vice President shall have such powers, duties and
designations as the Board of Directors (or any committee thereof established
for such purpose) assigns to such Vice President. In the absence or disability
of the President and the Chairman of the Board, the Vice Presidents, in the
order designated by the Board of Directors, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. Any Vice President may also sign,
with the Secretary (or Assistant Secretary) or Treasurer (or Assistant
Treasurer), certificates for stock of the corporation, and, when so
authorized by the Chairman of the Board or President, may also sign and
execute in the name of the corporation deeds, mortgages, bonds, contracts or
other instruments authorized by the Board of Directors, and shall perform
such other duties as from time to time may be assigned to any Vice President
by the Board of Directors.
SECRETARY.
SECTION 4:7. The Secretary shall attend all meetings of the Board of
Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall
also perform like duties for the standing committees when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of
13
<PAGE> 18
the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or the President, under whose supervision
such Secretary shall be. If the Secretary shall be unable or shall refuse to
cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no Assistant Secretary,
then either the Board of Directors or the President may choose another officer
to cause such notice to be given. The Secretary shall have custody of the seal
of the corporation and the Secretary or any Assistant Secretary, if there be
one, shall have authority to affix the same to any instrument requiring it and
when so affixed, it may be attested by the signature of the Secretary or by
the signature of any Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the corporation
and to attest the affixing by such officer's signature. The Secretary shall
see that all books, reports, statements, certificates and other documents and
records required by law to be kept or filed are properly kept or filed, as the
case may be. In the absence of the Secretary from any meeting, the minutes
shall be recorded by the person appointed for that purpose by the presiding
officer.
TREASURER.
SECTION 4:8. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the corporation as may
be ordered by the Board, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all
transactions as Treasurer and of the financial condition of the corporation.
If required by the Board of Directors, the Treasurer shall give the corporation
a bond in such sum and with such surety or sureties as shall be satisfactory
to the Board of Director for the faithful performance of the duties of the
office and for the restoration to the corporation, in case of the Treasurer's
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
OTHER OFFICERS.
SECTION 4:9. In accordance with Section 4:1, such other officers as
the Board of Directors may choose shall perform such duties and have such
powers as
14
<PAGE> 19
from time to time may be assigned to them by the Board of Directors. The
Board of Directors may delegate to any other officer of the corporation the
power to choose such other officers and to prescribe their respective duties
and powers.
ARTICLE V: CAPITAL STOCK AND DIVIDENDS
CERTIFICATES FOR SHARES.
SECTION 5:1. Every holder of stock in the corporation shall be entitled
to have a certificate signed, in the name of the corporation (i) by the
Chairman of the Board of Directors, the President or a Vice President and
(ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assis-
tant Secretary of the corporation, certifying the number of shares owned by
him in the corporation. Any or all of the signatures on a certificate may be
a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
issue.
TRANSFERS.
SECTION 5:2. Certificates representing shares of stock of the corporation
shall be transferable only on the books of the corporation by the person or
persons named in the certificate or by the attorney lawfully constituted in
writing representing such person or persons and upon surrender of the
certificate or certificates being transferred which certificate shall be
properly endorsed for transfer or accompanied by a duly executed stock power.
Whenever a certificate is endorsed by or accompanied by a stock power
executed by someone other than the person or persons named in the certifi-
cate, evidence of authority to transfer shall also be submitted with the
certificate. All certificates surrendered to the corporation for transfer
shall be cancelled.
REGULATIONS GOVERNING ISSUANCE AND TRANSFERS OF SHARES.
SECTION 5:3. The Board of Directors shall have the power and authority
to make all such rules and regulations as it shall deem expedient concerning
the issue, transfer and registration of certificates for shares of stock of
the corporation.
15
<PAGE> 20
TRANSFER AGENTS AND REGISTRARS.
SECTION 5:4. Transfer agents and registrars for the corporation's stock
shall be banks, trust companies or other financial institutions located
within or without the State of Delaware as shall be appointed by the Board of
Directors. The Board shall also define the authority of such transfer agents
and registrars.
LOST OR DESTROYED CERTIFICATES.
SECTION 5:5. Where a certificate for shares of the corporation has been
lost or destroyed, the Board of Directors may authorize the issuance of a new
certificate in lieu thereof upon satisfactory proof of such loss or
destruction, and upon the giving of an open penalty bond with surety satis-
factory to the corporation's Treasurer and General Counsel, if there be one,
to protect the corporation or any person injured by the issuance of the new
certificate from any liability or expense which it or they may incur by
reason of the original certificate's remaining outstanding, and upon payment
of the corporation's reasonable costs incident thereto.
FRACTIONS OF SHARES.
SECTION 5:6. The corporation shall not issue fractions of a share. It
shall, however, (1) arrange for the disposition of fractional interests by
those entitled thereto, and (2) pay in cash the fair value of fractions of a
share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered or bearer form which
shall entitle the holder to receive a certificate for a full share upon the
surrender of such scrip or warrants aggregating a full share. Scrip or
warrants shall not, unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, or to participate in
any of the assets of the corporation in the event of liquidation. The Board
of Directors may cause scrip or warrants to be issued subject to the
conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the
holders of scrip or warrants, or subject to any other conditions which the
Board may impose.
DETERMINATION OF STOCKHOLDERS.
SECTION 5:7. The corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof, and
shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the
16
<PAGE> 21
part of any other person, whether or not it shall have express or other notice
thereof, save as expressly provided by the laws of the State of Delaware.
RECORD DATE.
SECTION 5:8. In order that the corporation may determine the stock-
holders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment or any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in ad-
vance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. If no record date is fixed:
(1) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business
on the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held.
(2) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for
-------- -------
the adjourned meeting.
ARTICLE VI: INDEMNIFICATION
GENERAL INDEMNIFICATION.
SECTION 6:1. The corporation shall indemnify to the fullest extent
authorized or permitted by law (as now or hereafter in effect) any person
made, or threatened to be made, a party to or otherwise involved in any
action or proceeding (whether civil or criminal or otherwise) by reason of
the fact that he, his testator or intestate, is or was a director or officer
of the corporation or by reason of the fact that such director or officer, at
the request of the corporation, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
in any capacity. Nothing contained herein shall affect any rights to
indemnification to which employees other than directors and officers may be
entitled
17
<PAGE> 22
by law. No amendment or repeal of this Section 6:1 shall apply to or have any
effect on any right to indemnification provided hereunder with respect to any
acts or omissions occurring prior to such amendment or repeal.
INSURANCE, INDEMNIFICATION AGREEMENTS AND OTHER MATTERS.
SECTION 6:2. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have
the power to indemnify him against such liability under the provisions of the
law. The corporation may create a trust fund, grant a security interest
and/or use other means (including, without limitation, letters of credit,
surety bonds and/or other similar arrangements), as well as enter into
contracts providing for indemnification to the fullest extent authorized or
permitted by law and including as part thereof any or all of the foregoing,
to ensure the payment of such sums as may become necessary to effect full
indemnification.
NONEXCLUSIVITY.
SECTION 6:3. The rights to indemnification conferred in this Article VI
shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, the Certificate of Incorporation of the
corporation, these By-Laws or any agreement, vote of stockholders or
directors or otherwise.
ARTICLE VII: MISCELLANEOUS
VOTING SHARES IN OTHER CORPORATIONS.
SECTION 7:1. The corporation may vote any and all shares of stock and
other securities having voting rights which may at any time and from time to
time be held by it in any other corporation or corporations and such vote may
be cast either in person or by proxy by such officer of the corporation as
the Board of Directors may appoint or, in default of such appointment, the
Chairman, the President or a Vice President.
18
<PAGE> 23
EXECUTION OF OTHER PAPERS AND DOCUMENTS.
SECTION 7:2. All checks, bills, notes, drafts, vouchers, warehouse
receipts, bonds, mortgages, contracts, registration certificates and all
other papers and documents of the corporation shall be signed or endorsed for
the corporation by such of its officers, other employees and agents as the
Board of Directors may from time to time determine, or in the absence of such
determination, by the Chairman of the Board, the President or a Vice President,
provided that instruments requiring execution with the formality of deeds
- --------
shall be signed by the Chairman of the Board, the President or a Vice
President and impressed with the Seal of the corporation, duly attested by
the Secretary or an Assistant Secretary.
CORPORATE SEAL.
SECTION 7:3. The Board of Directors shall provide a suitable seal,
containing the name of the corporation, the year of its organization and the
words "Corporate Seal, Delaware," which seal shall be in the custody of the
Secretary of the corporation, and may provide for one or more duplicates
thereof to be kept in the custody of such other officer of the corporation as
the Board may prescribe.
BOOKS AND RECORDS.
SECTION 7:4. Except as the Board of Directors may from time to time
direct or as may be required by law, the corporation shall keep its books and
records at its principal office.
FISCAL YEAR.
SECTION 7:5. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
AMENDMENTS.
SECTION 7:6. These By-Laws may be amended, altered or repealed, or new
By-Laws may be adopted (a) by the affirmative vote of sixty-six and
two-thirds percent of the outstanding stock of the corporation entitled to
vote thereon, or (b) by the affirmative vote of the majority of the Board of
Directors at any regular or special meeting; provided that the notice of
--------
such meeting of stockholders or directors, whether regular or special, shall
specify as one of the purposes thereof the making of such amendment,
alteration or repeal.
19
<PAGE> 1
- ------------------------------------------------------------------------------
THE EARTHGRAINS COMPANY
and
BOATMEN'S TRUST COMPANY
Rights Agent
------------------
Rights Agreement
Dated as of February 22, 1996
- ------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
Table of Contents
-----------------
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Certain Definitions 1
2. Appointment of Rights Agent 5
3. Issue of Rights Certificates 5
4. Form of Rights Certificates 7
5. Countersignature and Registration 8
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates 8
7. Exercise of Rights; Purchase Price; Expiration Date of Rights 9
8. Cancellation and Destruction of Rights Certificates 12
9. Reservation and Availability of Capital Stock 12
10. Preferred Stock Record Date 14
11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights 15
12. Certificate of Adjusted Purchase Price or Number of Shares 25
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power 25
14. Fractional Rights and Fractional Shares 28
15. Rights of Action 30
16. Agreement of Rights Holders 30
17. Rights Certificate Holder Not Deemed a Stockholder 31
i
<PAGE> 3
18. Concerning the Rights Agent 31
<CAPTION>
Section Page
- ------- ----
<S> <C>
19. Merger or Consolidation or Change of Name of Rights Agent 32
20. Duties of Rights Agent 33
21. Change of Rights Agent 35
22. Issuance of New Rights Certificates 36
23. Redemption and Termination. 37
24. Notice of Certain Events 38
25. Notices 39
26. Supplements and Amendments 39
27. Successors 40
28. Determinations and Actions by the Board of Directors, etc. 40
29. Benefits of this Agreement 41
30. Severability 41
31. Governing Law 42
32. Counterparts 42
33. Descriptive Headings 42
Exhibit A -- Form of Certificate of Designation,
Preferences and Rights A-1
Exhibit B -- Form of Rights Certificate B-1
</TABLE>
ii
<PAGE> 4
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of February 22, 1996 (the
"Agreement"), between The Earthgrains Company, a Delaware corporation (the
"Company"), and Boatmen's Trust Company, a trust company organized under the
laws of the State of Missouri (the "Rights Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, at Board meetings held on July 26, 1995, and November
22, 1995, Anheuser-Busch Companies, Inc., a Delaware corporation and the
Company's sole stockholder ("Anheuser-Busch"), determined to make a dividend
distribution of all outstanding shares of the Company's Common Stock (as
hereinafter defined) to the common stockholders of Anheuser-Busch (the
"Spinoff Distribution");
WHEREAS, as a part of the Spinoff Distribution, Anheuser-Busch
determined that it desired to distribute Rights (as hereinafter defined)
associated with the Common Stock to be distributed, that certificates
representing such Common Stock would also evidence such Rights and that the
registered holders of Common Stock would also be the registered holders of
the associated Rights;
WHEREAS, in order to effectuate the foregoing Anheuser-Busch is
authorizing and directing the Company to create a stockholder rights plan, to
authorize and issue to Anheuser-Busch Rights to be attached to the shares of
Common Stock and evidenced by certificates representing Common Stock and to
enter into a rights agreement substantially in the form of this Agreement;
WHEREAS, it is anticipated that the Board of Directors of
Anheuser-Busch will declare the dividend constituting the Spinoff
Distribution at its regularly scheduled meeting on February 28, 1996, which
will have a record date of March 19, 1996, and a distribution date of March
26, 1996;
WHEREAS, the dividend to be declared to effect the Spinoff
Distribution will consist of one share of Common Stock and one Right to be
distributed in respect of each 25 shares of Anheuser-Busch common stock held
on the record date for the Spinoff Distribution and will be distributed on or
about
<PAGE> 5
March 26, 1996 (the "Effective Date"), to holders of record of common
stock of Anheuser-Busch on March 19, 1996;
WHEREAS, the Board of Directors of the Company has authorized and
declared, and will distribute on or before February 29, 1996, a dividend
distribution of one Right for each share of Common Stock of the Company
outstanding at the close of business on February 27, 1996 (the "Record
Date"), and authorized the issuance of one Right (as such number may
hereafter be adjusted pursuant to the provisions of Section 11(p) hereof) for
each share of Common Stock of the Company issued between the Record Date
(whether originally issued or delivered from the Company's treasury) and the
Distribution Date (as hereinafter defined), each Right initially representing
the right to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock of the Company having the rights, powers and
preferences set forth in the form of Certificate of Designation, Preferences
and Rights attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
-------------------
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such Person, shall
after the Effective Date be the Beneficial Owner of 15% or more of the sum of
the shares of Common Stock then outstanding, but shall not include the
Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms
of any such plan, or any Person who becomes an Acquiring Person solely as a
result of a reduction in the number of shares of Common Stock outstanding due
to the repurchase of shares of Common Stock by the Company, unless and until
such Person shall purchase or otherwise become the Beneficial Owner of
additional shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock. Notwithstanding the foregoing, if the
Board of Directors of the Company determines in good faith that a Person who
would otherwise be an Acquiring Person has become such inadvertently, and
such Person divests as promptly as practicable a sufficient number of shares
of Common Stock so that such Person would no longer be an Acquiring Person,
then such Person shall not be deemed to be an Acquiring Person for any
purposes of this Agreement.
2
<PAGE> 6
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and in
effect on the date of this Agreement (the "Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement
or understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person shall not
--------
be deemed the "Beneficial Owner" of, or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange, or
(B) securities issuable upon exercise of Rights at any time prior
to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of
a Triggering Event which Rights were acquired by such Person or
any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) or Section 22 hereof
(the "Original Rights") or pursuant to Section 11(i) hereof in
connection with an adjustment made with respect to any Original
Rights;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to
vote or dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a
--------
Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this subparagraph (ii) as a
result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A)
arises solely from a revocable proxy given in response to a public
proxy or consent solicitation made pursuant to, and in accordance
with, the
3
<PAGE> 7
applicable provisions of the General Rules and Regulations under
the Exchange Act, and (B) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person (or any of such Person's
Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy
as described in the proviso to subparagraph (ii) of this paragraph
(c)) or disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (c) shall cause
--------
a Person engaged in the business as an underwriter of securities
to be deemed the "Beneficial Owner" of, or to "beneficially own,"
any securities acquired through such Person's participation in
good faith in a firm commitment underwriting until the expiration
of forty days (40) after the date of such acquisition.
(d) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of
Missouri are authorized or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00
P.M., St. Louis, Missouri, time, on such date; provided, however, that if
--------
such date is not a Business Day it shall mean 5:00 P.M., St. Louis, Missouri
time, on the next succeeding Business Day.
(f) "Common Stock" shall mean the common stock, par value
$.01 per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock
of such Person with the greatest voting power, or the equity securities or
other equity interest having power to control or direct the management, of
such Person.
(g) "Continuing Director" shall mean (i) any member of
the Board of Directors of the Company, while such Person is a member of the
Board, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person or of any such
Affiliate or Associate, and was a member of the Board on the Effective Date,
or (ii) any Person who subsequently becomes a member of the Board, while such
Person is a member of the
4
<PAGE> 8
Board, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person or of any such
Affiliate or Associate, if such Person's nomination for election or election
to the Board is recommended or approved by a majority of the Continuing
Directors.
(h) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(i) "Preferred Stock" shall mean shares of Series A
Junior Participating Preferred Stock, par value $.01 per share, of the
Company and, to the extent that there are not a sufficient number of shares
of Series A Junior Participating Preferred Stock authorized to permit the
full exercise of the Rights, any other series of preferred stock, par value
$.01 per share, of the Company designated for such purpose containing terms
substantially similar to the terms of the Series A Junior Participating
Preferred Stock.
(j) "Section 11(a)(ii) Event" shall mean the event
described in Section 11(a)(ii) hereof.
(k) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.
(l) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person
has become such.
(m) "Subsidiary" shall mean, with reference to any
Person, any corporation of which an amount of voting securities sufficient to
elect at least a majority of the directors of such corporation is
beneficially owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.
(n) "Triggering Event" shall mean the Section 11(a)(ii)
Event or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby
---------------------------
appoints the Rights Agent to act as agent for the Company and the holders of
the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The
5
<PAGE> 9
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Rights Certificates.
----------------------------
(a) Until the earlier of (i) the close of business on the
tenth Business Day after the Stock Acquisition Date or (ii) the close of
business on the tenth Business Day (or such later date as the Board of
Directors shall determine) after the date that a tender or exchange offer by
any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company, or
any Person or entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan) is first published or sent or
given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 15% or more of the shares of Common Stock
then outstanding (the earlier of (i) and (ii) being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for the
Common Stock registered in the names of the holders of the Common Stock
(which certificates for Common Stock shall be deemed also to be certificates
for Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable
after the Distribution Date, the Rights Agent will send by first-class,
insured, postage prepaid mail, to each record holder of the Common Stock as
of the close of business on the Distribution Date, at the address of such
holder shown on the records of the Company, one or more right certificates,
in substantially the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number
of Rights per share of Common Stock has been made pursuant to Section 11(p)
hereof, at the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a) hereof) so that Rights Certificates representing only
whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) Rights shall be issued in respect of all shares of
Common Stock which are issued after the Record Date but prior to the earlier
of the Distribution Date or the Expiration Date. Certificates representing
such shares of
6
<PAGE> 10
Common Stock shall also be deemed to be certificates for Rights, and shall
bear the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement between
The Earthgrains Company and Boatmen's Trust Company, dated as of
February 22, 1996 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on
file at the principal offices of The Earthgrains Company. Under
certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. The Earthgrains Company
will mail to the holder of this certificate a copy of the Rights
Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under
certain circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an
Acquiring Person or any Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement), whether currently held
by or on behalf of such Person or by any subsequent holder, may
become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the
transfer of any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each
be substantially in the form set forth in Exhibit B hereto and may have such
marks of identification or designation and such legends, summaries or endorse-
ments printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11 and Section
7
<PAGE> 11
22 hereof, the Rights Certificates, whenever distributed, shall be dated as of
the Record Date and on their face shall entitle the holders thereof to
purchase such number of one one-hundredths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one one-hundredth of a share, the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section
3(a) or Section 22 hereof that represents Rights beneficially owned by: (i)
an Acquiring Person or any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such,
or (iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person
to holders of equity interests in such Acquiring Person or to any Person with
whom such Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the
Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant
to Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence,
shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms
are defined in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and
void in the circumstances specified in Section 7(e) of such
Agreement.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf
of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by
the Secretary or an
8
<PAGE> 12
Assistant Secretary of the Company, either manually or by facsimile signature.
The Rights Certificates shall be countersigned by the Rights Agent, either
manually or by facsimile signature, and shall not be valid for any purpose
unless so countersigned. In case any officer of the Company who shall have
signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery
by the Company, such Rights Certificates, nevertheless, may be countersigned
by the Rights Agent and issued and delivered by the Company with the same
force and effect as though the person who signed such Rights Certificates had
not ceased to be such officer of the Company; and any Rights Certificates may
be signed on behalf of the Company by any person who, at the actual date of
the execution of such Rights Certificate, shall be a proper officer of the
Company to sign such Rights Certificate, although at the date of the execution
of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent
will keep or cause to be kept, at its principal office or offices designated
as the appropriate place for surrender of Rights Certificates upon exercise
or transfer, books for registration and transfer of the Rights Certificates
issued hereunder. Such books shall show the names and addresses of the
respective holders of the Rights Certificates, the number of Rights evidenced
on its face by each of the Rights Certificates and the date of each of the
Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
-----------------------------------------------
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- -----------------------------------------------------------------------------
Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof,
at any time after the close of business on the Distribution Date, and at or
prior to the close of business on the Expiration Date, any Rights Certificate
or Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Certificates, entitling the registered holder to
purchase a like number of one one-hundredths of a share of Preferred Stock
(or, following a Triggering Event, Common Stock, other securities, cash or
other assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated
for such purpose. Neither the Rights Agent nor the Company shall be obligated
to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained
9
<PAGE> 13
in the form of assignment on the reverse side of such Rights Certificate and
shall have provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request. Thereupon the Rights Agent
shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation
of the Rights Certificate if mutilated, the Company will execute and deliver
a new Rights Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
---------------------------------------------------
of Rights. (a) Subject to Section 7(e) hereof, the registered holder of
- ---------
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section
23(a) hereof) in whole or in part at any time after the Distribution Date
upon surrender of the Rights Certificate, with the form of election to
purchase and the certificate on the reverse side thereof duly executed, to
the Rights Agent at the principal office or offices of the Rights Agent
designated for such purpose, together with payment of the aggregate Purchase
Price with respect to the total number of one one-hundredths of a share of
Preferred Stock (or other securities, cash or other assets, as the case may
be) as to which such surrendered Rights are then exercisable, at or prior to
the earlier of (i) the close of business on March 1, 2006 (the "Final Expira-
tion Date"), or (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof (the earlier of (i) and (ii) being herein referred to as
the "Expiration Date").
(b) The Purchase Price for each one one-hundredth of a
share of Preferred Stock pursuant to the exercise of a Right shall initially
be $100, and shall be subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in accordance with
paragraph (c) below.
10
<PAGE> 14
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so
exercised, of the Purchase Price per one one-hundredth of a share of Preferred
Stock (or other securities, cash or other assets, as the case may be)
to be purchased as set forth below and an amount equal to any applicable
transfer tax, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) (A) requisition from any transfer agent of the shares
of Preferred Stock (or make available, if the Rights Agent is the transfer
agent for such shares) certificates for the total number of one
one-hundredths of a share of Preferred Stock to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a share
of Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the
Company the amount of cash, if any, to be paid in lieu of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to, or
upon the order of, the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder, and
(iv) after receipt thereof, deliver such cash, if any, to, or upon the order
of, the registered holder of such Rights Certificate. The payment of the
Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) may be made (x) in cash or by certified bank check or bank draft
payable to the order of the Company, or (y) by delivery of a certificate or
certificates (with appropriate stock powers executed in blank attached
thereto) evidencing a number of shares of Common Stock equal to the then
Purchase Price divided by the closing price (as determined pursuant to
Section 11(d) hereof) per share of Common Stock on the Trading Day
immediately preceding the date of such exercise. In the event that the
Company is obligated to issue other securities (including Common Stock) of
the Company, pay cash and/or distribute other property pursuant to Section
11(a) hereof, the Company will make all arrangements necessary so that such
other securities, cash and/or other property are available for distribution
by the Rights Agent, if and when appropriate. The Company reserves the right
to require prior to the occurrence of a Triggering Event that, upon any
exercise of Rights, a number of Rights be exercised so that only whole shares
of Preferred Stock would be issued.
11
<PAGE> 15
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of,
the registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the occurrence of the Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or
to any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Company has determined is part
of a plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of this Section 7(e), shall become null and void without
any further action, and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable efforts to
insure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Rights
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence
of any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the certificate
contained in the form of election to purchase set forth on the reverse side
of the Rights Certificate surrendered for such exercise, and (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
12
<PAGE> 16
Section 8. Cancellation and Destruction of Rights Certificates.
---------------------------------------------------
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or any
of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The
Rights Agent shall deliver all cancelled Rights Certificates to the
Company, or shall, at the written request of the Company, destroy such
cancelled Rights Certificates, and in such case shall deliver a certificate
of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
---------------------------------------------
(a) The Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its
authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full
of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following
the occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on any
national securities exchange, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
(c) The Company shall use its best efforts (i) to file,
as soon as practicable following the earliest date after the occurrence of
the Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act of 1933 (the "Act"), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) to cause
such registration statement to become effective as soon as
13
<PAGE> 17
practicable after such filing, and (iii) to cause such registration statement
to remain effective (with a prospectus at all times meeting the requirements
of the Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities, and (B) the date of the expiration of
the Rights. The Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights. The
Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of
this Section 9(c), the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification
in such jurisdiction shall not have been obtained, the exercise thereof shall
not be permitted under applicable law or a registration statement shall not
have been declared effective.
(d) The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all one one-hundredths of
a share of Preferred Stock (and, following the occurrence of a Triggering
Event, Common Stock and/or other securities) delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such shares
(subject to payment of the Purchase Price), be duly and validly authorized
and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will
pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the
Rights Certificates and of any certificates for a number of one
one-hundredths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax which may be payable
in respect of any transfer or delivery of Rights Certificates to a Person
other than, or the issuance or delivery of a number of one one-hundredths of a
share of Preferred Stock (or Common Stock and/or other securities, as the
case may be) in respect of a name other than that of, the registered holder
of the Rights Certificates evidencing Rights surrendered for exercise or to
issue or deliver any certificates for a number of one one-hundredths of a
share of Preferred Stock (or Common Stock and/or other securities, as the
case may be) in a name other than that of the registered holder upon the
exercise of any Rights until such tax shall have been paid (any such tax
being payable by the holder of such
14
<PAGE> 18
Rights Certificate at the time of surrender) or until it has been established
to the Company's satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose
---------------------------
name any certificate for a number of one one-hundredths of a share of
Preferred Stock (or Common Stock and/or other securities, as the case may be)
is issued upon the exercise of Rights shall for all purposes be deemed to
have become the holder of record of such fractional shares of Preferred Stock
(or Common Stock and/or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon which the
Rights Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and all applicable transfer taxes) was made; provided,
--------
however, that if the date of such surrender and payment is a date upon which
the Preferred Stock (or Common Stock and/or other securities, as the case may
be) transfer books of the Company are closed, such Person shall be deemed to
have become the record holder of such shares (fractional or otherwise) on,
and such certificate shall be dated, the next succeeding Business Day on
which the Preferred Stock (or Common Stock and/or other securities, as the
case may be) transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Rights Certificate shall not
be entitled to any rights of a stockholder of the Company with respect to
shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or
to exercise any preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
------------------------------------------------
Shares or Number of Rights. The Purchase Price, the number and kind of
- --------------------------
shares covered by each Right and the number of Rights outstanding are subject
to adjustment from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the
Preferred Stock payable in shares of Preferred Stock, (B) subdivide
the outstanding Preferred Stock, (C) combine the outstanding
Preferred Stock into a smaller number of shares, or (D) issue any
shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section
11(a) and Section 7(e) hereof, the Purchase Price in effect at the
time of the
15
<PAGE> 19
record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number
and kind of shares of Preferred Stock or capital stock, as the case
may be, issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be
entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Preferred Stock
or capital stock, as the case may be, which, if such Right had been
exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, he would
have owned upon such exercise and been entitled to receive by virtue
of such dividend, subdivision, combination or reclassification. If
an event occurs which would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section
11(a)(ii) hereof.
(ii) In the event:
any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms
of any such plan), alone or together with its Affiliates and Associates,
shall, at any time after the Effective Date, become the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding, unless the
event causing the 15% threshold to be crossed is a transaction set forth
in Section 13(a) hereof, or is an acquisition of shares of Common Stock
pursuant to a tender offer or an exchange offer for all outstanding
shares of Common Stock at a price and on terms determined by at least a
majority of the Continuing Directors to be in the best interests of the
Company and its stockholders (hereinafter, a "Qualifying Offer"),
then, promptly following the occurrence of such event, proper provision shall
be made so that each holder of a Right (except as provided below and in
Section 7(e) hereof) shall thereafter have the right to receive, upon
exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, in lieu of a number of one one-hundredths of a share
of Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x)
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<PAGE> 20
multiplying the then current Purchase Price by the then number of one
one-hundredths of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of the Section 11(a)(ii) Event, and
(y) dividing that product (which, following such occurrence, shall thereafter
be referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the current market price (determined pursuant to
Section 11(d) hereof) per share of Common Stock on the date of such occurrence
(such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of
Common Stock which are authorized by the Certificate of Incorporation
but not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit the exercise in full
of the Rights in accordance with the foregoing subparagraph (ii) of this
Section 11(a), the Company shall: (A) determine the excess of (1) the
value of the Adjustment Shares issuable upon the exercise of a Right (the
"Current Value") over (2) the Purchase Price (such excess, the "Spread"),
and (B) with respect to each Right (subject to Section 7(e) hereof), make
adequate provision to substitute for the Adjustment Shares, upon exercise
of the Right and payment of the applicable Purchase Price, (1) cash,
(2) a reduction in the Purchase Price, (3) Common Stock or other
equity securities of the Company (including, without limitation,
shares, or units of shares, of preferred stock which the Board of
Directors of the Company has deemed to have the same value as shares
of Common Stock (such shares of preferred stock, "common stock
equivalents")), (4) debt securities of the Company, (5) other as
sets, or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value, where such aggregate value has
been determined by the Board of Directors of the Company based upon
the advice of a nationally recognized investment banking firm
selected by the Board of Directors of the Company; provided,
--------
however, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days
following the later of (x) the occurrence of the Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption
pursuant to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(ii) Trigger Date"), then
the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase
Price, shares of Common Stock (to
17
<PAGE> 21
the extent available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. If the Board of
Directors of the Company shall determine in good faith that it is likely
that sufficient additional shares of Common Stock could be authorized
for issuance upon exercise in full of the Rights, the thirty (30) day
period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the Company may seek stockholder approval for the
authorization of such additional shares (such period, as it may be
extended, the "Substitution Period"). To the extent that the Company
that some action need be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional
shares and/or to decide the appropriate form of distribution to be
made pursuant to such first sentence and to determine the value
thereof. In the event of any such suspension, the Company shall
issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
For purposes of this Section 11(a)(iii), the value of each
Adjustment Share shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of the Common Stock on
the Section 11(a)(ii) Trigger Date and the per share or per unit
value of any "common stock equivalent" shall be deemed to be equal
to the current market price (as determined pursuant to Section 11(d)
hereof) of the Common Stock on such date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or
shares having the same rights, privileges and preferences as the shares of
Preferred Stock ("equivalent preferred stock")) or securities convertible
into Preferred Stock or equivalent preferred stock at a price per share of
Preferred Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
equivalent preferred stock) less than the current market price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock on such
18
<PAGE> 22
record date, the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number of
shares of Preferred Stock outstanding on such record date, plus the number of
shares of Preferred Stock which the aggregate offering price of the total
number of shares of Preferred Stock and/or equivalent preferred stock so to
be offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price, and
the denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of additional shares of
Preferred Stock and/or equivalent preferred stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be
paid by delivery of consideration part or all of which may be in a form other
than cash, the value of such consideration shall be as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and the holders of the Rights. Shares of Preferred Stock
owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is fixed, and in the event
that such rights or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness, cash
(other than a regular quarterly cash dividend out of the earnings or retained
earnings of the Company), assets (other than a dividend payable in Preferred
Stock, but including any dividend payable in stock other than Preferred
Stock) or subscription rights or warrants (excluding those referred to in
Section 11(b) hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the current market price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the cash, assets or evidences of indebtedness so to
be distributed or of such subscription rights or warrants applicable to a
share of Preferred Stock and the denominator of which shall be such current
market price (as determined pursuant to Section 11(d) hereof)
19
<PAGE> 23
per share of Preferred Stock. Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution
is not so made, the Purchase Price shall be adjusted to be the Purchase Price
which would have been in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the
"current market price" per share of Common Stock on any date shall
be deemed to be the average of the daily closing prices per share
of such Common Stock for the thirty (30) consecutive Trading Days
(as such term is hereinafter defined) immediately prior to such
date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "current market price" per share of Common
Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided,
--------
however, that in the event that the current market price per share
of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend
or distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination
or reclassification of such Common Stock, and the ex-dividend date
for such dividend or distribution, or the record date for such
subdivision, combination or reclassification shall not have
occurred prior to the commencement of the requisite thirty (30)
Trading Day or ten (10) Trading Day period, as set forth above,
then, and in each such case, the "current market price" shall be
properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New
York Stock Exchange or, if the shares of Common Stock are not
listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national
securities exchange on which the shares of Common Stock are listed
or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange,
the last
20
<PAGE> 24
quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other system then in
use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a
market in the Common Stock selected by the Board of Directors of
the Company. If on any such date no market maker is making a
market in the Common Stock, the fair value of such shares on such
date as determined in good faith by the Board of Directors of the
Company shall be used. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading is open
for the transaction of business or, if the shares of Common Stock
are not listed or admitted to trading on any national securities
exchange, a Business Day. If the Common Stock is not publicly held
or not so listed or traded, "current market price" per share shall
mean the fair value per share as determined in good faith by the
Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder,
the "current market price" per share of Preferred Stock shall be
determined in the same manner as set forth above for the Common
Stock in clause (i) of this Section 11(d) (other than the last
sentence thereof). If the current market price per share of
Preferred Stock cannot be determined in the manner provided above or
if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the "current
market price" per share of Preferred Stock shall be conclusively
deemed to be an amount equal to 100 (as such number may be
appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the
current market price per share of the Common Stock. If neither the
Common Stock nor the Preferred Stock is publicly held or so listed
or traded, "current market price" per share of the Preferred Stock
shall mean the fair value per share as determined in good faith by
the Board of Directors
21
<PAGE> 25
of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
For all purposes of this Agreement, the "current market price" of one
one-hundredth of a share of Preferred Stock shall be equal to the
"current market price" of one share of Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Purchase Price; provided, however, that any adjustments which by reason of
--------
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest ten-thousandth
of a share of Common Stock or other share or one-millionth of a share of
Preferred Stock, as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section 11 shall be made
no later than the earlier of (i) three (3) years from the date of the
transaction which mandates such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock other
than Preferred Stock, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred
Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and
(m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect
to the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subse-
quent to any adjustment made to the Purchase Price hereunder shall evidence
the right to purchase, at the adjusted Purchase Price, the number of one
one-hundredths of a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its election
as provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price,
that number of one one-hundredths
22
<PAGE> 26
of a share of Preferred Stock (calculated to the nearest one-millionth)
obtained by (i) multiplying (x) the number of one one-hundredths of a share
covered by a Right immediately prior to this adjustment, by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price,
and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of
any adjustment in the number of one one-hundredths of a share of Preferred
Stock purchasable upon the exercise of a Right. Each of the Rights
outstanding after the adjustment in the number of Rights shall be exercisable
for the number of one one-hundredths of a share of Preferred Stock for which
a Right was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest one-ten-thousandth) obtained
by dividing the Purchase Price in effect immediately prior to adjustment of
the Purchase Price by the Purchase Price in effect immediately after
adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11(i),
the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 hereof, the additional Rights
to which such holders shall be entitled as a result of such adjustment, or, at
the option of the Company, shall cause to be distributed to such holders of
record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights
Certificates so to be distributed shall be issued, executed and countersigned
in the manner provided for herein (and may bear, at the option of the
Company, the adjusted Purchase Price) and shall be registered in the names of
the holders of record of Rights Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-hundredths of a share of Preferred
Stock
23
<PAGE> 27
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price per one
one-hundredths of a share and the number of one one-hundredths of a share
which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the
number of one one-hundredths of a share of Preferred Stock issuable upon
exercise of the Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable such number of one
one-hundredths of a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of a record
date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised
after such record date the number of one one-hundredths of a share of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the number of one one-hundredths
of a share of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; provided, however, that the
--------
Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board
of Directors of the Company shall determine to be advisable in order that any
(i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly
for cash of any shares of Preferred Stock at less than the current market
price, (iii) issuance wholly for cash of shares of Preferred Stock or
securities which by their terms are convertible into or exchangeable for
shares of Preferred Stock, (iv) stock dividends, or (v) issuance of rights,
options or warrants referred to in this Section 11, hereafter made by the
Company to holders of its Preferred Stock shall not be taxable to such
stockholders.
(n) The Company covenants and agrees that it shall not,
at any time after the Distribution Date, (i) consolidate with any other
Person (other
24
<PAGE> 28
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements
in effect which would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) prior to, simultaneously
with or immediately after such consolidation, merger or sale, the stockholders
of the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section
26 hereof, take (or permit any Subsidiary to take) any action if at the time
such action is taken it is reasonably foreseeable that such action will
diminish substantially or otherwise eliminate the benefits intended to be
afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Effective Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the
number of Rights associated with each share of Common Stock then outstanding,
or issued or delivered thereafter but prior to the Distribution Date, shall
be proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such event shall
equal the result obtained by multiplying the number of Rights associated with
each share of Common Stock immediately prior to such event by a fraction the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
25
<PAGE> 29
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Section 11 and Section
- ------
13 hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate,
and (c) mail or cause the Rights Agent to mail a brief summary thereof to each
holder of a Rights Certificate (or, if prior to the Distribution Date, to
each holder of a certificate representing shares of Common Stock) in
accordance with Section 25 hereof. The Rights Agent shall be fully protected
in relying on any such certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets
---------------------------------------------------
or Earning Power.
- ----------------
(a) In the event that, following the Stock Acquisition
Date, directly or indirectly, (x) the Company shall consolidate with, or
merge with and into, any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o) hereof), and the Company
shall not be the continuing or surviving corporation of such consolidation or
merger, (y) any Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof) shall consolidate with,
or merge with or into, the Company, and the Company shall be the continuing
or surviving corporation of such consolidation or merger and, in connection
with such consolidation or merger, all or part of the outstanding shares of
Common Stock shall be changed into or exchanged for stock or other securities
of any other Person or cash or any other property, or (z) the Company shall
sell or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to any Person or
Persons (other than the Company or any Subsidiary of the Company in one or
more transactions each of which complies with Section 11(o) hereof), then,
and in each such case (except as may be contemplated by Section 13(d)
hereof), proper provision shall be made so that: (i) each holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable and freely tradeable shares
of Common Stock of the Principal Party (as such term is hereinafter defined),
not subject to any liens, encumbrances, rights of first refusal or other
adverse claims, as shall be equal to the result obtained by (1) multiplying
26
<PAGE> 30
the then current Purchase Price by the number of one one-hundredths of a
share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such one one-hundredths of a share for which a
Right was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event by the Purchase Price in effect immediately prior to such
first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase
Price" for each Right and for all purposes of this Agreement) by (2) 50% of
the current market price (determined pursuant to Section 11(d)(i) hereof) per
share of the Common Stock of such Principal Party on the date of consummation
of such Section 13 Event; (ii) such Principal Party shall thereafter be
liable for, and shall assume, by virtue of such Section 13 Event, all the
obligations and duties of the Company pursuant to this Agreement; (iii) the
term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction as
may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its shares of
Common Stock thereafter deliverable upon the exercise of the Rights; and (v)
the provisions of Section 11(a)(ii) hereof shall be of no effect following
the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which shares of Common
Stock of the Company are converted in such merger or consolidation,
and if no securities are so issued, the Person that is the other
party to such merger or consolidation; and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that
is the party receiving the greatest portion of the assets or earning
power transferred pursuant to such transaction or transactions;
27
<PAGE> 31
provided, however, that in any such case, (1) if the Common Stock of such
- --------
Person is not at such time and has not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, "Principal Party" shall refer
to such other Person; and (2) in case such Person is a Subsidiary, directly
or indirectly, of more than one Person, the Common Stocks of two or more of
which are and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Stock having the
greatest aggregate market value.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have
a sufficient number of authorized shares of its Common Stock which have not
been issued or reserved for issuance to permit the exercise in full of the
Rights in accordance with this Section 13 and unless prior thereto the
Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
paragraphs (a) and (b) of this Section 13 and further providing that, as soon
as practicable after the date of any consolidation, merger or sale of assets
mentioned in paragraph (a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, and will use its
best efforts to cause such registration statement to (A) become
effective as soon as practicable after such filing and (B) remain
effective (with a prospectus at all times meeting the requirements
of the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights
historical financial statements for the Principal Party and each of
its Affiliates which comply in all respects with the requirements
for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers
or consolidations or sales or other transfers. In the event that a Section
13 Event shall occur at any time after the occurrence of a Section 11(a)(ii)
Event, the Rights which have not theretofore been exercised shall thereafter
become exercisable in the manner described in Section 13(a).
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(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a Qualified Offer (or a wholly owned subsidiary of such Person or
Persons), (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to all
holders of shares of Common Stock whose shares were purchased pursuant to
such tender offer or exchange offer, and (iii) the form of consideration
being offered to the remaining holders of shares of Common Stock pursuant to
such transaction is the same as the form of consideration paid pursuant to
such tender offer or exchange offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all rights hereunder shall
expire.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions
of Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional
Rights. In lieu of such fractional Rights, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For purposes of
this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date
on which such fractional Rights would have been otherwise issuable. The
closing price of the Rights for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the Rights are listed or admitted to trading, or if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no
such market maker is making a market in the
29
<PAGE> 33
Rights the fair value of the Rights on such date as determined in good faith
by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions
of shares of Preferred Stock (other than fractions which are integral
multiples of one one-hundredth of a share of Preferred Stock), which may, at
the option of the Company, be evidenced by depositary receipts upon exercise
of the Rights or to distribute certificates which evidence fractional shares
of Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock). In lieu of fractional shares
of Preferred Stock that are not integral multiples of one one-hundredth of a
share of Preferred Stock, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of
one one-hundredth of a share of Preferred Stock. For purposes of this
Section 14(b), the current market value of one one-hundredth of a share of
Preferred Stock shall be one one-hundredth of the closing price of a share of
Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of Common Stock
upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of Common
Stock, the Company may pay to the registered holders of Rights Certificates
at the time such Rights are exercised as herein provided an amount in cash
equal to the same fraction of the current market value of one (1) share of
Common Stock. For purposes of this Section 14(c), the current market value
of one (1) share of Common Stock shall be the closing price of one (1) share
of Common Stock (as determined pursuant to Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect
----------------
of this Agreement are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Stock); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the
30
<PAGE> 34
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Stock), may, in his own behalf and for his own benefit, enforce,
and may institute and maintain any suit, action or proceeding against the
Company to enforce, or otherwise act in respect of, his right to exercise the
Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or
any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at
law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual
or threatened violations of the obligations hereunder of any Person subject to
this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
---------------------------
Right by accepting the same consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights Agent if
surrendered at the principal office or offices of the Rights Agent designated
for such purposes, duly endorsed or accompanied by a proper instrument of
transfer and with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent, subject to the last
sentence of Section 7(e) hereof, shall be required to be affected by any
notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability
to any holder of a Right or other Person as a result of its inability to
perform any of its obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction
31
<PAGE> 35
or by a governmental, regulatory or administrative agency or commission, or
any statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of
such obligation; provided, however, the Company must use its best efforts to
--------
have any such order, decree or ruling lifted or otherwise overturned as soon
as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
--------------------------------------------------
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the number of
one one-hundredths of a share of Preferred Stock or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate,
as such, any of the rights of a stockholder of the Company or any right to
vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24 hereof), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from
time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and disbursements and other disbursements incurred in the
administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of liability
in the premises.
(b) The Rights Agent shall be protected and shall incur
no liability for or in respect of any action taken, suffered or omitted by it
in connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice,
32
<PAGE> 36
direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent.
- -----
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a party, or any
corporation succeeding to the corporate trust or stock transfer business of
the Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto; provided,
--------
however, that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature
of a predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, any successor Rights Agent may countersign such
Rights Certificates either in the name of the predecessor or in the name of
the successor Rights Agent; and in all such cases such Rights Certificates
shall have the full force provided in the Rights Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Rights Certificates shall have
been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes
----------------------
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
33
<PAGE> 37
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such counsel shall
be full and complete authorization and protection to the Rights Agent as to
any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter (including, without limitation, the identity of any Acquiring
Person and the determination of "current market price") be proved or
established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the
President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for
its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this Agreement or
in the Rights Certificates or be required to verify the same (except as to
its countersignature on such Rights Certificates), but all such statements
and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Rights Certificate (except its counter
signature thereof); nor shall it be responsible for any breach by the Company
of any covenant or condition contained in this Agreement or in any Rights
Certificate; nor shall it be responsible for any adjustment required under
the provisions of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after
actual notice of any such adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any
34
<PAGE> 38
Rights Certificate or as to whether any shares of Common Stock or Preferred
Stock will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from the Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer
of the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken
or suffered to be taken by it in good faith in accordance with instructions
of any such officer.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall
not be answerable or accountable for any act, default, neglect or misconduct
of any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct; provided, however, reasonable
--------
care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of its rights if there shall be reasonable grounds for believing
that repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
35
<PAGE> 39
(k) If, with respect to any Right Certificate surrendered
to the Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may be, has
either not been completed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise of transfer without first consulting with
the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
----------------------
successor Rights Agent may resign and be discharged from its duties under
this Agreement upon thirty (30) days' notice in writing mailed to the
Company, and to each transfer agent of the Common Stock and Preferred Stock,
by registered or certified mail, and to the holders of the Rights Certificates
by first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and Preferred Stock, by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. If
the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights
Agent. If the Company shall fail to make such appointment within a period of
thirty (30) days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who
shall, with such notice, submit his Rights Certificate for inspection by the
Company), then any registered holder of any Rights Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be a corporation organized and doing business under the laws of
the United States or of the State of Missouri (or of any other state of the
United States so long as such corporation is authorized to do business as a
banking institution in the State of Missouri), in good standing, having a
principal office in the State of Missouri, which is authorized under such laws
to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which either has
or is an affiliate of a corporation which has at the time of its appointment
as Rights Agent a combined capital and surplus of at least $100,000,000.
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company shall file notice thereof
in
36
<PAGE> 40
writing with the predecessor Rights Agent and each transfer agent of the
Common Stock and the Preferred Stock, and mail a notice thereof in writing to
the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
-----------------------------------
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors
to reflect any adjustment or change in the Purchase Price and the number or
kind or class of shares or other securities or property purchasable under the
Rights Certificates made in accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale of shares of Common
Stock following the Distribution Date and prior to the redemption or
expiration of the Rights, the Company (a) shall, with respect to shares of
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue
Rights Certificates representing the appropriate number of Rights in
connection with such issuance or sale; provided, however, that (i) no such
--------
Rights Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant
risk of material adverse tax consequences to the Company or the Person to
whom such Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
--------------------------
(a) The Board of Directors of the Company may, at its
option, at any time prior to the earlier of (i) the close of business on the
tenth Business Day following the Stock Acquisition Date or (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights
at a redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). Notwithstanding anything contained
in this Agreement to the contrary, the Rights shall not be exercisable after
the occurrence of the Section 11(a)(ii) Event until such
37
<PAGE> 41
time as the Company's right of redemption hereunder has expired. The Company
may, at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the "current market price," as defined in Section 11(d)(i) hereof,
of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors
of the Company ordering the redemption of the Rights, evidence of which shall
have been filed with the Rights Agent and without any further action and
without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the
Board of Directors ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the
then outstanding Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made.
Section 24. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after
the Distribution Date, (i) to pay any dividend payable in stock of any class
to the holders of Preferred Stock or to make any other distribution to the
holders of Preferred Stock (other than a regular quarterly cash dividend out
of earnings or retained earnings of the Company), or (ii) to offer to the
holders of Preferred Stock rights or warrants to subscribe for or to purchase
any additional shares of Preferred Stock or shares of stock of any class or
any other securities, rights or options, or (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of outstanding shares of Preferred Stock), or
(iv) to effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in one
transaction or a series of related transactions, of more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company and/or any of
its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation,
38
<PAGE> 42
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and
in accordance with Section 25 hereof, a notice of such proposed action, which
shall specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is
to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least twenty (20) days prior to the
record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or
the date of participation therein by the holders of the shares of Preferred
Stock whichever shall be the earlier.
(b) In case the Section 11(a)(ii) Event shall occur, (i)
the Company shall as soon as practicable thereafter give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 25
hereof, a notice of the occurrence of such event, which shall specify the
event and the consequences of the event to holders of Rights under Section
11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or,
if appropriate, other securities.
Section 25. Notices. Notices or demands authorized by this
-------
Agreement to be given or made by the Rights Agent or by the holder of any
Rights Certificate to or on the Company shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Rights Agent) as follows:
The Earthgrains Company
8400 Maryland Avenue
St. Louis, Missouri 63105
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
39
<PAGE> 43
Boatmen's Trust Company
510 Locust Street
St. Louis, Missouri 63101
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 26. Supplements and Amendments. Prior to the Distribution
--------------------------
Date and subject to the penultimate sentence of this Section 26, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend
any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company and the Rights Agent shall, if the Company so directs, supplement
or amend this Agreement without the approval of any holders of Rights
Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen
any time period hereunder, or (iv) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Rights
Certificates (other than an Acquiring Person or an Affiliate or Associate of
an Acquiring Person); provided, this Agreement may not be supplemented or
--------
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless such lengthening
is for the purpose of protecting, enhancing or clarifying the rights of,
and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this
Section 26, the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of one one-hundredths
of a share of Preferred Stock for which a Right is exercisable; provided,
--------
however, that at any time prior to (i) the Stock Acquisition Date or (ii) the
date that a tender or exchange offer by any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or
any Subsidiary of the Company, or any Person or entity
40
<PAGE> 44
organized, appointed or established by the Company for or pursuant to the
terms of any such plan) is first published or sent or given within the meaning
of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act,
if upon consummation thereof, such Person would be the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding and if at the time
of any amendment or supplement such tender or exchange offer has not expired
or been terminated, the Board of Directors of the Company may amend this
Agreement to increase the Purchase Price or extend the Final Expiration Date.
Prior to the Distribution Date, the interests of the holders of Rights shall
be deemed coincident with the interests of the holders of Common Stock.
Section 27. Successors. All the covenants and provisions of
----------
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 28. Determinations and Actions by the Board of
------------------------------------------
Directors, etc. For all purposes of this Agreement, any calculation of the
- --------------
number of shares of Common Stock outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding shares of Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.
The Board of Directors of the Company (with, where specifically provided for
herein, the concurrence of the Continuing Directors) shall have the exclusive
power and authority to administer this Agreement and to exercise all rights
and powers specifically granted to the Board (with, where specifically
provided for herein, the concurrence of the Continuing Directors) or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement, and (ii) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not redeem the Rights or to amend the
Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions
with respect to the foregoing) which are done or made by the Board (with,
where specifically provided for herein, the concurrence of the Continuing
Directors) in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties,
and (y) not subject the Board or the Continuing Directors to any liability to
the holders of the Rights.
41
<PAGE> 45
Section 29. Benefits of this Agreement. Nothing in this
--------------------------
Agreement shall be construed to give to any Person other than the Company,
the Rights Agent and the registered holders of the Rights Certificates (and,
prior to the Distribution Date, registered holders of the Common Stock) any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates (and,
prior to the Distribution Date, registered holders of the Common Stock).
Section 30. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated; provided, however, that notwithstanding anything in this
--------
Agreement to the contrary, if any such term, provision, covenant or restriction
is held by such court or authority to be invalid, void or unenforceable
and the Board of Directors of the Company determines in its good faith
judgment that severing the invalid language from this Agreement would
adversely affect the purpose or effect of this Agreement, the right of
redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the close of business on the tenth Business Day following the date
of such determination by the Board of Directors. Without limiting the
foregoing, if any provision requiring a majority of the Board of Directors of
the Company to be Continuing Directors to act is held by any court of
competent jurisdiction or other authority to be invalid, void or
unenforceable, such determination shall then be made by the Board of
Directors of the Company in accordance with applicable law and the Company's
Certificate of Incorporation and By-Laws.
Section 31. Governing Law. This Agreement, each Right and each
-------------
Rights Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
42
<PAGE> 46
Section 33. Descriptive Headings. Descriptive headings of the
--------------------
several Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
Attest: THE EARTHGRAINS COMPANY
By------------------------------- By--------------------------------
Name: Name:
Title: Title:
Attest: BOATMEN'S TRUST COMPANY
By------------------------------- By--------------------------------
Name: Name:
Title: Title:
43
<PAGE> 47
Exhibit A
---------
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A
JUNIOR PARTICIPATING PREFERRED STOCK
OF
THE EARTHGRAINS COMPANY
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The Earthgrains Company, a corporation (the "Corporation")
organized and existing under the General Corporation Law of the State of
Delaware (the "DGCL"), in accordance with the provisions of Section 103
thereof, HEREBY CERTIFIES:
That pursuant to the authority conferred upon the Board of
Directors by the Amended and Restated Certificate of Incorporation of the
Corporation, the Board of Directors on ----------, 1996, adopted the following
resolution creating a series of ---------------(----------) shares of
Preferred Stock designated as Series A Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of its Amended
and Restated Certificate of Incorporation and Section 151 of the DGCL, a
series of Preferred Stock of the Corporation be and it hereby is created, and
that the designation and amount thereof and the voting powers, preferences
and relative, participating, optional and other special rights of the shares
of such series, and the qualifications, limitations or restrictions thereof
are as follows:
1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series A Junior Participating Preferred Stock," par value $.01
per share (the "Series A Junior Preferred Stock"), and the number of shares
constituting such series shall be 102,000.
1
<PAGE> 48
2. Dividends and Distributions. (a) Subject to the prior and
---------------------------
superior rights of the holders of any shares of any series of Preferred Stock
ranking prior and superior to the shares of Series A Junior Preferred Stock
with respect to dividends, the holders of shares of Series A Junior Preferred
Stock in preference to the holders of Common Stock and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available therefor, dividends payable
quarterly on the first day of January, April, July and October (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $1.00 or (b) subject to the provision for adjustment herein
after set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Junior Preferred Stock. In the
event the Corporation shall at any time after the record date for the initial
distribution of the Corporation's Preferred Stock Purchase Rights pursuant to
the Rights Agreement, dated as of February 22, 1996, between the Corporation
and Boatmen's Trust Company, as Rights Agent (the "Rights Declaration Date"),
(i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
amount to which holders of shares of Series A Junior Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on
the Series A Junior Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share on the Series A Junior Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
A-2
<PAGE> 49
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of
Series A Junior Preferred Stock, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Junior Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Junior Preferred
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of holders of
shares of Series A Junior Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 60 days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior
-------------
Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders
of the Corporation. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Junior Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in the Amended and
Restated Certificate of Incorporation (the "Certificate of Incorporation") or
under applicable law, the holders of shares of Series A Junior Preferred
Stock and the holders of shares of Common Stock shall vote together as one
class on all matters submitted to a vote of stockholders of the Corporation.
A-3
<PAGE> 50
(c)(i) If at any time dividends on any Series A Junior Preferred
Stock shall be in arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of a
period (a "default period") that shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend periods and
for the current quarterly dividend period on all shares of Series A Junior
Preferred Stock then outstanding shall have been declared and paid or set
apart for payment. During each default period, all holders of shares of
Series A Junior Preferred Stock together with any other series of Preferred
Stock then entitled to such a vote under the terms of the Certificate of
Incorporation, voting as a separate class, shall be entitled to elect two
members of the Board of Directors of the Corporation.
(ii) During any default period, such voting right of the holders
of Preferred Stock may be exercised initially at a special meeting called
pursuant to subparagraph (iii) of this Subsection 3(c) or at any annual
meeting of stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting rights nor the rights of holders of
Preferred Stock as hereinafter provided to increase in certain cases the
authorized number of Directors shall be exercised unless the holders of 25%
in number of shares of Preferred Stock outstanding shall be present in person
or by proxy. The absence of a quorum of the holders of Common Stock shall
not affect the exercise by the holders of Preferred Stock of such voting
right. At any meeting at which the holders of Preferred Stock shall exercise
such voting right initially during an existing default period, they shall
have the right, voting as a separate class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors, or, if such right is exercised at an annual meeting, to elect two
(2) Directors. If the number that may be so elected at any special meeting
does not amount to the required number, the holders of the Preferred Stock
shall have the right to make such increase in the number of Directors as
shall be necessary to permit the election by them of the required number.
After the holders of the Preferred Stock shall have exercised their right to
elect Directors in any default period and during the continuance of such
period, the number of Directors shall not be increased or decreased except by
vote of the holders of Preferred Stock as herein provided or pursuant to the
rights of any equity securities ranking senior to or pari passu with the
Series A Junior Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding, irrespective of
series, may request the Chairman or the President call a special meeting of
the holders of Preferred Stock, which meeting shall thereupon be called by
such person. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled
A-4
<PAGE> 51
to vote pursuant to this Section 3(c)(iii) shall be given to each holder of
record of Preferred Stock by mailing a copy of such notice to him at his last
address as the same appears on the books of the Corporation. Such meeting
shall be called for a time not earlier than 10 days and not later than 60 days
after such order or request. In the event such meeting is not called within 60
days after such order or request, such meeting may be called on a similar
notice by any stockholder or stockholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this Section 3(c)(iii), no
such special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a separate class, after the exercise of which right (x) the
Directors so elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the Board
of Directors may (except as provided in Section 3(c)(ii)) be filled by vote
of a majority of the remaining Directors theretofore elected by the class
which elected the Director whose office shall have become vacant. References
in this Section 3(c)(iv) to Directors elected by a particular class shall
include Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(d) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock, as a separate class, to elect
Directors shall cease, (y) the term of any Directors elected by the holders
of Preferred Stock, as a separate class, shall terminate, and (z) the number
of Directors shall be such number as may be provided for in, or pursuant to,
the Certificate of Incorporation or By-Laws irrespective of any increase made
pursuant to the provisions of Section 3(c)(ii) (such number being subject,
however, to change thereafter in any manner provided by law or in the
Certificate of Incorporation or By-Laws). Any vacancies in the Board of
Directors effected by the provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining Directors, even though
less than a quorum.
(e) Except as set forth herein or as otherwise provided in the
Certificate of Incorporation, holders of Series A Junior Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock
as set forth herein) for taking any corporate action.
A-5
<PAGE> 52
4. Certain Restrictions. (a) Whenever quarterly dividends or
--------------------
other dividends or distributions payable on the Series A Junior Preferred
Stock as provided in Section 2 are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series A Junior Preferred Stock outstanding shall have been paid in
full, the Corporation shall not:
(i) declare or pay or set apart for payment any
dividends or make any other distributions on, or redeem or purchase
or otherwise acquire, directly or indirectly, for consideration any
shares of any class of stock of the Corporation ranking junior
(either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Junior Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Junior Preferred Stock, except dividends paid ratably
on the Series A Junior Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Junior Preferred Stock, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of any such
parity stock in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Junior Preferred Stock;
or
(iv) purchase or otherwise acquire for consideration
any shares of Series A Junior Preferred Stock, or any shares of
stock ranking on a parity with the Series A Junior Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
A-6
<PAGE> 53
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A Junior Preferred
-----------------
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
6. Liquidation, Dissolution or Winding Up. (a) Upon any
--------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Preferred Stock unless, prior thereto, the
holders of shares of Series A Junior Preferred Stock shall have received an
amount equal to 100 times the par value per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation Preference").
Following the payment of the full amount of the Series A Liquidation
Preference, no additional distributions shall be made to the holders of
shares of Series A Junior Preferred Stock unless, prior thereto, the holders
of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the
Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set
forth in paragraph (c) below to reflect such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock) (such
number in clause (ii) being hereinafter referred to as the "Adjustment
Number"). Following the payment of the full amount of the Series A
Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior Preferred Stock and Common Stock,
respectively, holders of Series A Junior Preferred Stock and holders of
shares of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number
to 1 with respect to such Series A Junior Preferred Stock and Common Stock,
on a per share basis, respectively.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference
and the liquidation preferences of all other series of Preferred Stock, if
any, which rank on a parity with the Series A Junior Preferred Stock, then
such remaining assets shall be distributed ratably
A-7
<PAGE> 54
to the holders of all such shares in proportion to their respective
liquidation preferences. In the event, however, that there are not sufficient
assets available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(c) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment Number by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
7. Consolidation, Merger, Share Exchange, etc. In case the
------------------------------------------
Corporation shall enter into any consolidation, merger, share exchange,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such case the shares of Series A Junior Preferred
Stock shall at the same time be similarly exchanged or changed in an amount
per share (subject to the provision for adjustment hereinafter set forth)
equal to 100 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the amount set forth
in the preceding sentence with respect to the exchange or change of shares of
Series A Junior Preferred Stock shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
8. No Redemption. The shares of Series A Junior Preferred
-------------
Stock shall not be redeemable.
9. Ranking. The Series A Junior Preferred Stock shall rank
-------
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
A-8
<PAGE> 55
10. Amendment. The Certificate of Incorporation shall not be
---------
amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Junior Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of
two-thirds or more of the outstanding shares of Series A Junior Preferred
Stock, voting together as a single voting group.
11. Fractional Shares. Series A Junior Preferred Stock may be
-----------------
issued in fractions of a share which shall entitle the holder, in proportion
to such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Preferred Stock.
IN WITNESS WHEREOF, The Earthgrains Company has caused this
Certificate to signed by Mark H. Krieger, its Senior Vice President -- Chief
Financial Officer, this 23rd day of February, 1996.
THE EARTHGRAINS COMPANY
By:------------------------------------
A-9
<PAGE> 56
Exhibit B
---------
[Form of Rights Certificate]
Certificate No. R- --------- Rights
NOT EXERCISABLE AFTER March 1, 2006 OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED
BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS
AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL
AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL
AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]<F1>
Rights Certificate
THE EARTHGRAINS COMPANY
This certifies that , or registered
assigns, is the registered owner of the number of Rights set forth above,
each of which entitles the
[FN]
- --------------------------------
<F1> The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
B-1
<PAGE> 57
owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of February 22, 1996 (the "Rights Agreement"), between The
Earthgrains Company, a Delaware corporation (the "Company"), and Boatmen's
Trust Company, a trust company organized under the State of Missouri (the
"Rights Agent"), to purchase from the Company at any time prior to 5:00 P.M.
(St. Louis, Missouri, time) on March 1, 2006 at the office or offices of the
Rights Agent designated for such purpose, or its successors as Rights Agent,
one one-hundredth of a fully paid, nonassessable share of Series A Junior
Participating Preferred Stock (the "Preferred Stock") of the Company, at a
purchase price of $100 per one one-hundredth of a share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase and related Certificate duly executed. The
Purchase Price shall be paid, at the election of the holder, in cash or shares
of Common Stock of the Company having an equivalent value. The number of
Rights evidenced by this Rights Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, are the number and Purchase Price as of
February 22, 1996, based on the Preferred Stock as constituted at such date.
Upon the occurrence of the Section 11(a)(ii) Event (as such term
is defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate
or Associate of any such Acquiring Person (as such terms are defined in the
Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate
or Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of the Section
11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Preferred Stock or other securities, which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions
and conditions are hereby incorporated herein by reference and made a part
hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, which limitations of rights include
the temporary suspension of the exercisability of such Rights under the
specific circumstances set forth in the Rights Agreement. Copies of the
Rights Agreement are
B-2
<PAGE> 58
on file at the above-mentioned office of the Rights Agent and are also
available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices of the Rights
Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of one one-
hundredths of a share of Preferred Stock as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at
a redemption price of $.01 per Right at any time prior to the earlier of the
close of business on (i) the tenth Business Day following the Stock Acquisition
Date (as such time period may be extended pursuant to the Rights Agreement), and
(ii) the Final Expiration Date.
The Company is not required to issue fractional shares of Preferred
Stock upon the exercise of any Right or Rights evidenced hereby (other than
fractions which are integral multiples of one one-hundredth of a share of
Preferred Stock, which may, at the election of the Company, be evidenced
by depositary receipts), but in lieu thereof a cash payment may be made, as
provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any
time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action,
or, to receive notice of meetings or other actions affecting stockholders
(except as provided in the Rights Agreement), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by
this Rights Certificate shall have been exercised as provided in the Rights
Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
B-3
<PAGE> 59
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of February 22, 1996
ATTEST: THE EARTHGRAINS COMPANY
- ------------------------------- By----------------------------
Secretary Title:
Countersigned:
BOATMEN'S TRUST COMPANY
By-----------------------------
Authorized Signature
B-4
<PAGE> 60
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ----------------------------------------------------------
hereby sells, assigns and transfers unto-------------------------------------
- -----------------------------------------------------------------------------
(Please print name and address of transferee)
- -----------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ---------------- Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Date:-------------------------------, ----
---------------------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person
(as such terms are defined pursuant to the Rights Agreement); and
B-5
<PAGE> 61
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: -----------, ----
---------------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-6
<PAGE> 62
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: THE EARTHGRAINS COMPANY:
The undersigned hereby irrevocably elects to exercise ----------
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security
or other identifying number
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Dated: ---------------, ----
---------------------------------------
Signature
B-7
<PAGE> 63
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person
(as such terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person.
Dated: -----------, ----
---------------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this
Rights Certificate in every particular, without alteration or enlargement or
any change whatsoever.
B-8
<PAGE> 1
THE EARTHGRAINS COMPANY
1996 STOCK INCENTIVE PLAN
(AS AMENDED APRIL 11, 1996 AND MARCH 21, 1997)
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.
- 2 -
<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
- 3 -
<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,
- 4 -
<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
- 5 -
<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
- 6 -
<PAGE> 7
Company's then outstanding voting securities (measured on
the basis of voting power), 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.
- 7 -
<PAGE> 8
In the case of Other Stock Interests, the term "vest" shall have
that meaning given it by the Committee at the time of grant.
(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 and none of whom shall be an officer or employee of the
Company or any of its subsidiaries at the time of service.
Committee members shall not be eligible for selection to receive
Awards under the Plan.
(b) During any time when one or more Committee members may
not be qualified to serve under Rule 16b-3 or Section 162(m) of the
Code, the Committee may form a sub-Committee from among its
qualifying members to act, in lieu of the full Committee, with
respect to all or any specified category of Awards granted to all
or any specified group of Recipients, and may take other actions
deemed appropriate and convenient to prevent, control, minimize, or
eliminate any adverse effects of such potential disqualification.
At the Committee's request or on its own motion, the Board may
ratify or approve grants, or any terms of any grants, made by the
Committee or a sub-Committee during any time that any member of the
Committee may not be qualified to approve such grants or terms
under Rule 16b-3.
(c) 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
- 8 -
<PAGE> 9
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).
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.
- 9 -
<PAGE> 10
(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 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.
- 10 -
<PAGE> 11
(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.
(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
- 11 -
<PAGE> 12
absolute right of the Employer to change or terminate such person's
employment at any time for any reason or for no reason.
- 12 -
<PAGE> 1
THE EARTHGRAINS COMPANY
AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR STOCK PLAN
--------------------------------
1. Definitions
-----------
(a) "Annual Meeting" - the Company's annual meeting of
Stockholders in any year.
(b) "Board" - the Board of Directors of the Company.
(c) "Change of Control Date" - the earliest date on
which any of the following occurs:
(i) Any person (as defined herein) becomes the
beneficial owner directly or indirectly (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934 as
amended ("Act")) of more than 50% of the Company's then
outstanding voting securities (measured on the basis of
voting power);
(ii) The stockholders of the Company approve a
definitive agreement to merge or consolidate the Company with
any other entity, other than an agreement providing for (A)
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
<PAGE> 2
- 2 -
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
(B) 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 of the Company 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 stockholders, of each new director
was approved by a vote of at least two-thirds of the
directors then 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 stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or
substantially all the Company's assets.
<PAGE> 3
- 3 -
For purposes of this Section, "Person" shall
have the meaning given in Section 3(a)(9) of the Act, as
modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (A) the Company or any of
its Subsidiaries, (B) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any of its Subsidiaries, (C) an underwriter temporarily
holding securities pursuant to an offering of such
securities, or (D) a corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
Company stock.
(d) "Company" - The Earthgrains Company
(e) "Fees" - any annual fee, fees for attending
meetings of the Board or committees thereof, fees for
meetings at which less than a quorum is present, committee
chairmanship fees and any other fees as in effect from time
to time which become payable to a Non-Employee Director.
(f) "Issue Date" - each of (i) the first business day
which is more than six months after the date of the Annual
Meeting and (ii) the date of the Annual Meeting.
(g) "Non-Employee Director" - any duly elected or
appointed member of the Board who is not an employee of the
Company or of any Subsidiary.
<PAGE> 4
- 4 -
(h) "Plan" - the Earthgrains Company Non-Employee
Director Stock Plan.
(i) "Secretary" - the duly elected Secretary of the
Company.
(j) "Share" - a share of the Company's Common Stock which is
authorized and unissued or was reacquired by the Company and is
held in treasury.
(k) "Subsidiary" - an entity of which the Company (directly
or through one or more Subsidiaries) is the beneficial owner of
more than 50% of the entity's outstanding voting securities
(measured on the basis of voting power).
2. Administration
--------------
The Plan shall be administered by the Secretary who shall
have the authority to construe and interpret the Plan, and to
establish or adopt rules, regulations and forms relating to the
administration of the Plan. The Secretary shall have no authority
to add to, delete from or modify the terms of the Plan, as the
Plan shall be nondiscretionary as to the eligibility of
participants and the timing and amounts of the grants. Neither
the Secretary nor any member of the Board shall be liable for any
act or determination made in good faith.
<PAGE> 5
- 5 -
3. Purpose
-------
The Plan is intended to assist in attracting, retaining and
motivating Non-Employee Directors of outstanding ability and to
promote identification of their interests with those of the
stockholders of the Company.
4. Eligibility
-----------
All Non-Employee Directors shall be eligible to participate
in the Plan. Subject to the terms and conditions of the Plan,
Non-Employee Directors shall be entitled to receive Shares
pursuant to each of Sections 6, 7, and 8 of the Plan.
5. Shares Subject to the Plan
--------------------------
The maximum number of Shares that may be issued under the
Plan is 50,000.
<PAGE> 6
- 6 -
6. Payment of Fees in Shares
-------------------------
(a) Each Non-Employee Director shall receive at least 25% of
his or her Fees in Shares in lieu of cash. A Non-Employee
Director may elect to receive up to 100% of his or her Fees in
Shares. Any election, or amendment to a prior election, shall be
in writing on a form prescribed by the Company, shall take effect
commencing with Fees which become payable after the first Issue
Date which occurs after the date of such election or amendment,
shall specify the percentage of Fees to be paid in Shares which
shall be no less than 25%, and shall remain in effect until
further amendment in accordance with this section. The Secretary
shall have the authority to further regulate the timing and amount
of the elections and amendments thereto.
(b) As Fees are earned by the Non-Employee Director, the
percentage of Fees to be paid in Shares shall not be paid in cash,
but in lieu thereof shall be accrued by the Company for his or her
account without interest pending transfer of such Shares to such
Non-Employee Director. On each Issue Date, each Non-Employee
Director for whose account Fees have been accrued pursuant to the
terms of this section since the prior Issue Date shall
automatically and without necessity of any action by the Company,
be entitled to receive Shares for the amount of such accrued Fees
pursuant to the terms and conditions of the Plan. For purposes of
the Plan, the number of Shares shall be determined by dividing (A)
the amount of accrued Fees by (B) the mean of the high and low
sale prices per share of the Company's Common Stock on the New
York Stock Exchange on the Issue Date (provided that, if the Issue
Date is
<PAGE> 7
- 7 -
not a trading day on the New York Stock Exchange, then on the
preceding such trading day), rounding to the nearest whole
number. If on any Issue Date the number of Shares otherwise
issuable to the Non-Employee Directors shall exceed the number of
Shares then remaining available under the Plan, the available
Shares shall be allocated among the Non-Employee Directors in
proportion to the number of Shares they would otherwise be
entitled to receive, and the remainder of the accrued Fees shall
be payable in cash.
7. One Time Grant
--------------
Upon the effective date of the Plan, each person who is a
Non-Employee Director on the effective date shall, automatically
and without necessity of any action by the Company, be entitled to
receive 500 Shares pursuant to the terms and conditions of the
Plan. Each Non-Employee Director elected or appointed after the
effective date of the Plan shall, automatically and without
necessity of any action by the Company, be entitled to receive 500
Shares pursuant to the terms and conditions of the Plan upon the
date of such election or appointment, subject to availability of
Shares under Section 5.
8. Annual Grant
------------
On the date of the Annual Meeting in each year and subject to
availability of Shares under Section 5, each person who is a Non-
Employee Director upon the completion of the Annual Meeting shall,
automatically and without necessity of any action by the Company,
be entitled to receive 100 Shares pursuant to the terms and
conditions of the Plan. If on any such date, the number of Shares
otherwise issuable to the Non-Employee Directors shall exceed the
<PAGE> 8
- 8 -
number of Shares then remaining available under the Plan, the
available Shares shall be allocated among the Non-Employee
Directors in proportion to the number of Shares they would
otherwise be entitled to receive.
9. Capital Adjustments
-------------------
The maximum number of Shares subject to the Plan pursuant to
Section 5 and the number of Shares to be received under Sections
7 and 8 shall be proportionately adjusted to reflect any dividend
or other distribution on the Company's outstanding Common Stock
payable in shares of the Company's Common Stock or any split or
consolidation of the outstanding shares of the Company's Common
Stock. If the Company's outstanding Common Stock shall, in whole
or in part, be changed into or exchangeable for a different class
or classes of securities of the Company or securities of another
corporation, whether through recapitalization, merger,
consolidation, reorganization or otherwise, then (subject to the
powers of the Board to amend the Plan in whole or in part as
provided in Section 14(a)) the Shares which each Non-Employee
Director is entitled to receive shall thereafter be paid in the
class, or proportionately in the classes, of securities into which
the outstanding shares of the Company's Common Stock shall have
been converted or for which they are exchangeable, and the maximum
number of securities issuable under the Plan under Section 5 and
the number of securities to be received under Sections 7 and 8
shall be the number of securities into or for which such
respective number of Shares would be changed or exchangeable.
<PAGE> 9
- 9 -
10. Rights as a Stockholder; Termination of Non-Employee Director
-------------------------------------------------------------
Status
------
Prior to the Issue Date, the Non-Employee Director shall have
no rights as a stockholder with respect to Shares to be issued
under Section 6 for accrued Fees. If any participant in the Plan
ceases to be a Non-Employee Director prior to an Issue Date, then
any Fees accrued for his or her account shall be payable in cash
to such Non-Employee Director as soon as practicable, and he or
she shall not be entitled to any additional Shares. Subject to
the forfeiture provisions of Section 11 and the custody provisions
of Section 12, the Non-Employee Director shall have the rights as
a stockholder with respect to Shares issued under Sections 7 or 8
prior to vesting under Section 11.
11. Vesting
-------
Shares received under Section 6 shall be fully vested on
the Issue Date. Shares granted under Sections 7 or 8 shall
vest on the earlier of the tenth anniversary of the date of
grant and the Non-Employee Director's cessation as a director
of the Company for any reason other than removal by the vote
of the stockholders of the Company, in which case such Shares
shall be forfeited. Notwithstanding the foregoing, Shares
granted to a Non-Employee Director under Sections 7 or 8
shall vest and shall not be forfeited upon his or her removal
as a director by the vote of the stockholders of the Company
if such vote occurs after a Change of Control Date.
<PAGE> 10
- 10 -
In addition to any restrictions on transfer imposed by
applicable law or regulation, including without limitation,
federal or state securities laws, or stock exchange rules, the
Shares received by a Non-Employee Director shall not be in any
manner transferable or subject to encumbrance until vesting.
12. Issuance of Certificates, Payment of Cash Fees and
--------------------------------------------------
Withholding
-----------
(a) As promptly as practicable following each Issue Date,
the Company shall issue stock certificates registered in the name
of each Non-Employee Director representing the number of Shares
determined pursuant to Section 6, and shall deliver such
certificates to the Non-Employee Director or his or her
beneficiary.
(b) As promptly as practicable following the date of grant
under Section 7 or 8, the Company shall issue stock certificates
registered in the name of each Non-Employee Director receiving a
grant representing the number of Shares so granted. The Company
shall maintain custody of such certificates (together with the
certificates representing any securities distributed in respect of
such Shares) until the date of vesting under Section 11. The
certificates shall be delivered to the Non-Employee Director or
his or her beneficiary or successor within 30 days following the
vesting.
<PAGE> 11
- 11 -
In the event of forfeiture of Shares, the stock certificates
representing the forfeited Shares shall be transferred to the
Company. Each recipient of Shares by accepting such Shares
irrevocably grants the Secretary or the designee of the Secretary
power of attorney to effect such transfer.
(c) The portion of the Fees not paid in Shares shall be
payable in cash pursuant to the policies of the Company as in
effect from time to time.
(d) The Company may make such provisions as it may deem
appropriate for the withholding of any federal, state or
local taxes which the Company determines it is required to
withhold attributable to the grant or lapse of restrictions
with respect to the Shares issued under the Plan.
13. Compliance with the Securities Act of 1933
------------------------------------------
The Company may, but has no obligation to, register the
Shares under the Securities Act of 1933. Each recipient of Shares
by accepting such Shares acknowledges that he or she is acquiring
the Shares for investment and not with a view to distribution and,
in addition to any other restriction on transfer provided
hereunder, the Shares may not be transferred except
<PAGE> 12
- 12 -
pursuant to the requirements of Rule 144 including the holding
period thereunder to the extent applicable, another available
exemption from registration, or an effective registration
statement.
14. Miscellaneous
-------------
(a) The Board may amend this Plan at any time provided,
however, that (i) any amendment shall not affect the rights
of participants or beneficiaries to Shares or accrued Fees
held for the account of Non-Employee Directors, (ii) the Plan
may not be amended to the extent that such amendment would
have the effect of disqualifying the participants from
administering any other stock plan of the Company for
purposes of complying with the terms of Rule 16b-3 under the
Securities Exchange Act of 1934 or any successor rule ("Rule
16b-3"), or Section 162(m) of the Internal Revenue Code or
regulations thereunder, and (iii) on or following the Change
of Control Date, the Plan may not be amended to affect the
rights of any participants.
(b) No right or benefit under this Plan shall be
subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same
shall be void. The rights or interests under the Plan are
not subject to the claims of creditors provided, however,
that the Company may apply any Shares held in custody or Fees
<PAGE> 13
- 13 -
held on account to satisfy, in whole or in part, any
indebtedness of a participant to the Company.
(c) Each participant shall designate any person or
persons (who may be designated contingently or successively
and who may be an entity other than a natural person) as his
or her beneficiary or beneficiaries to whom his or her Shares
are paid if the Non-Employee Director dies before receipt
thereof. Each beneficiary designation filed with the
Secretary shall cancel all beneficiary designations
previously filed. The revocation of beneficiary designation,
no matter how effected, shall not require the consent of any
designated beneficiary.
If any participant fails to designate a beneficiary
in the manner provided above, or if the beneficiary
designated by a deceased participant dies before the
participant or before complete distribution of the Shares,
the Secretary shall direct the Company to deliver
certificates representing such Shares (or the balance
thereof) to the participant's estate.
In the event that all, or any portion, of the
Shares payable to a beneficiary hereunder shall remain
undistributed solely by reason of the inability of the
Secretary, after sending a registered letter, return receipt
requested, to the last known address, and after further
diligent effort, to ascertain the whereabouts of such
<PAGE> 14
- 14 -
beneficiary, the amount so distributable shall be treated as
a forfeiture pursuant to the Plan.
(d) Construction of the Plan shall be governed by the
laws of Delaware.
(e) The terms of the Plan shall be binding upon the
heirs, executors, administrators, personal representatives,
successors and assigns of all parties in interest.
(f) The headings have been inserted for convenience
only and shall not affect the meaning or interpretation of
the Plan.
(g) Each participant shall submit to the Secretary, his
or her current mailing address. It shall be the duty of each
participant to notify the Secretary of any change of address.
In the absence of such notice, the Secretary shall be
entitled for all purposes to rely on the last address of the
participant in the Company's records.
(h) Any Shares to be delivered to or for the benefit of
a minor, an incompetent person or other person incapable of
receipting therefor shall be deemed delivered when delivered
to such person's guardian or to the party providing or
reasonably appearing to provide for the care of such person,
and such delivery shall fully discharge the Company and the
Board with respect thereto.
<PAGE> 15
- 15 -
(i) Nothing in this Plan or any amendment thereto shall
give a participant, or any beneficiary of a participant, a
right not specifically provided therein. Nothing in this
Plan or any amendment thereto shall be construed as giving a
participant the right to be retained as a member of the Board
or otherwise in service to the Company.
(j) This Plan is intended to comply with all applicable
conditions of Rule 16b-3, all transactions under this Plan are
subject to such conditions regardless of whether the conditions
are expressly set forth herein, and any provision of this Plan
that is contrary to a condition of Rule 16b-3 shall be deemed
inoperative to the extent it conflicts with the condition of Rule
16b-3.
(k) The Plan shall become effective commencing March
26, 1996, and amended and restated effective March 21, 1997.
<PAGE> 1
THE EARTHGRAINS COMPANY
-----------------------
EMPLOYEE STOCK OWNERSHIP/401(k) PLAN
------------------------------------
<PAGE> 2
<TABLE>
Table of Contents
-----------------
<CAPTION>
Article Page
- ------- ----
<S> <C>
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Plan; Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Qualified Profit Sharing Plan; ESOP . . . . . . . . . . . . . . . . 1
1.3. Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4. Trust; Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5. Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6. Adopting Employers. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7. Appendices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2 Definitions and Construction. . . . . . . . . . . . . . . . . . . . . . . 3
2.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2. Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3 Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . 9
3.1. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2. Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3. Duration of Participation . . . . . . . . . . . . . . . . . . . . . 9
4 After-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1. After-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . 10
4.2. Minimum and Maximum Percentage Contributions. . . . . . . . . . . . 10
4.3. Special Limit on Highly Compensated Employees . . . . . . . . . . . 10
4.4. Transfer to Trustee . . . . . . . . . . . . . . . . . . . . . . . . 11
5 Before-Tax Contributions. . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1. Before-Tax Contributions. . . . . . . . . . . . . . . . . . . . . . 12
5.3. Maximum Dollar Contribution . . . . . . . . . . . . . . . . . . . . 12
5.4. Special Limit on Highly Compensated Employees . . . . . . . . . . . 13
5.5. Transfer to Trustee . . . . . . . . . . . . . . . . . . . . . . . . 13
6 Employer Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1. Employer Matching Contributions . . . . . . . . . . . . . . . . . . 14
6.2. Statutory Limit on Contributions. . . . . . . . . . . . . . . . . . 14
6.3. Special Limit on Highly Compensated Employees . . . . . . . . . . . 14
6.4. Top-Heavy Minimum Benefit . . . . . . . . . . . . . . . . . . . . . 15
6.5. Allocation Among Employers. . . . . . . . . . . . . . . . . . . . . 15
6.6. Transfer to Trust . . . . . . . . . . . . . . . . . . . . . . . . . 15
7 Compensation Reduction Agreements . . . . . . . . . . . . . . . . . . . . 16
7.1. Compensation Reduction Agreements . . . . . . . . . . . . . . . . . 16
7.2. Modification of Contributions . . . . . . . . . . . . . . . . . . . 16
7.3. Committee Adjustment Authority. . . . . . . . . . . . . . . . . . . 16
i
<PAGE> 3
8 Plan Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.1. Participant Plan Accounts . . . . . . . . . . . . . . . . . . . . . 17
8.2. Participant Cash Accounts . . . . . . . . . . . . . . . . . . . . . 17
8.3. Participant Stock Accounts. . . . . . . . . . . . . . . . . . . . . 17
8.4. Balance of Accounts . . . . . . . . . . . . . . . . . . . . . . . . 18
8.5. Adjustments to Reflect Distributions. . . . . . . . . . . . . . . . 18
8.6. Adjustment to Reflect Participant Contributions;
Diversification Proceeds. . . . . . . . . . . . . . . . . . . . . 18
8.7. Adjustment to Reflect Employer Matching
Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.8. Adjustments to Reflect Investment Return. . . . . . . . . . . . . . 19
8.9. Adjustments to Reflect Dividends. . . . . . . . . . . . . . . . . . 19
8.10. Maximum Allocations . . . . . . . . . . . . . . . . . . . . . . . . 19
9 Investment Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1. Investment Funds. . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2. Stock Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.3. Participant Loan Funds. . . . . . . . . . . . . . . . . . . . . . . 22
9.4. Change of Investment Elections. . . . . . . . . . . . . . . . . . . 23
9.5. Investment of Employer Matching Contributions . . . . . . . . . . . 23
9.6. Investment of Cash Dividends. . . . . . . . . . . . . . . . . . . . 23
9.7. Reporting Persons . . . . . . . . . . . . . . . . . . . . . . . . . 24
10 Trust Suspense Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1. Suspense Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2. Release from Suspense Fund . . . . . . . . . . . . . . . . . . . . 26
10.3. Allocation of Released Shares. . . . . . . . . . . . . . . . . . . 26
10.4. Fair Market Value. . . . . . . . . . . . . . . . . . . . . . . . . 27
11 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.1. Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.2. Years of Service . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.3. Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12 Investment Diversification. . . . . . . . . . . . . . . . . . . . . . . . 30
12.1. Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.2. Diversification. . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.3. Election Procedures. . . . . . . . . . . . . . . . . . . . . . . . 30
12.4. Liquidation and Credit of Proceeds . . . . . . . . . . . . . . . . 30
13 Payment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.1. Benefit Payments - In General. . . . . . . . . . . . . . . . . . . 32
13.2. Payment to Participants. . . . . . . . . . . . . . . . . . . . . . 32
13.3. Payment to Beneficiaries . . . . . . . . . . . . . . . . . . . . . 32
13.4. Payment of Small Amounts . . . . . . . . . . . . . . . . . . . . . 33
13.5. Form of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.6. Special Rule for Company Shares. . . . . . . . . . . . . . . . . . 33
13.7. Required Payments. . . . . . . . . . . . . . . . . . . . . . . . . 34
13.8. Earnings on Plan Accounts. . . . . . . . . . . . . . . . . . . . . 34
13.9. Life Expectancies. . . . . . . . . . . . . . . . . . . . . . . . . 34
13.10. Eligible Rollover Distributions. . . . . . . . . . . . . . . . . . 35
ii
<PAGE> 4
14 Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
14.1. Designated Beneficiaries . . . . . . . . . . . . . . . . . . . . . 36
14.2. Spousal Consent Requirements . . . . . . . . . . . . . . . . . . . 36
14.3. Absence of Designated Beneficiary. . . . . . . . . . . . . . . . . 36
15 Participant Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.1. Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
16 Participant Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
16.1. Loan Program; Eligibility. . . . . . . . . . . . . . . . . . . . . 38
17 Relating to Employer Shares . . . . . . . . . . . . . . . . . . . . . . . 39
17.1. Investment in Employer Shares; ESOP. . . . . . . . . . . . . . . . 39
17.2. Conversion to Cash . . . . . . . . . . . . . . . . . . . . . . . . 39
17.3. Voting of Employer Shares. . . . . . . . . . . . . . . . . . . . . 39
17.4. Tender of Employer Shares. . . . . . . . . . . . . . . . . . . . . 40
17.5. Non-Publicly Traded Shares . . . . . . . . . . . . . . . . . . . . 40
18 Former Employees/Participants . . . . . . . . . . . . . . . . . . . . . . 42
18.1. Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
18.2. Cessation of Distributions . . . . . . . . . . . . . . . . . . . . 42
19 Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . 43
19.1. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
19.2. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
19.3. Withdrawal; Discontinuance of Employer Status. . . . . . . . . . . 43
19.4. Termination Distributions. . . . . . . . . . . . . . . . . . . . . 44
20 Mergers, Transfers, and Rollovers . . . . . . . . . . . . . . . . . . . . 45
20.1. Plan Merger, Consolidation or Benefit Transfer . . . . . . . . . . 45
20.2. Rollover Contributions . . . . . . . . . . . . . . . . . . . . . . 45
21 Plan Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
21.1. Human Resources Committee. . . . . . . . . . . . . . . . . . . . . 46
21.2. Committee Powers . . . . . . . . . . . . . . . . . . . . . . . . . 46
21.3. Benefit Payments . . . . . . . . . . . . . . . . . . . . . . . . . 47
21.4. Committee Officers . . . . . . . . . . . . . . . . . . . . . . . . 47
21.5. Committee Actions. . . . . . . . . . . . . . . . . . . . . . . . . 47
21.6. Committee Member Who is Participant. . . . . . . . . . . . . . . . 47
21.7. Resignation or Removal . . . . . . . . . . . . . . . . . . . . . . 47
21.8. Information Required from Employer . . . . . . . . . . . . . . . . 48
21.9. Information Required from Employees. . . . . . . . . . . . . . . . 48
21.10. Uniform Rules and Administration . . . . . . . . . . . . . . . . . 48
22 Claims Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
22.1. Written Claim for Benefits . . . . . . . . . . . . . . . . . . . . 49
22.2. Initial Review of Claim. . . . . . . . . . . . . . . . . . . . . . 49
22.3. Claim Review Procedure . . . . . . . . . . . . . . . . . . . . . . 49
22.4. Review Decisions Final . . . . . . . . . . . . . . . . . . . . . . 50
iii
<PAGE> 5
23 Change-in-Control Provisions. . . . . . . . . . . . . . . . . . . . . . . 51
23.1. Restriction in Case of Change-in-Control . . . . . . . . . . . . . 51
23.2. Change-in-Control. . . . . . . . . . . . . . . . . . . . . . . . . 51
24 Adopting Employers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
24.1. Participation in Plan. . . . . . . . . . . . . . . . . . . . . . . 52
24.2. Withdrawal of Participation in Plan. . . . . . . . . . . . . . . . 52
25 General Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
25.1. Prohibited Inurement . . . . . . . . . . . . . . . . . . . . . . . 53
25.2. No Employment Rights . . . . . . . . . . . . . . . . . . . . . . . 53
25.3. Interests Not Transferable . . . . . . . . . . . . . . . . . . . . 53
25.4. Absence of Guarantee . . . . . . . . . . . . . . . . . . . . . . . 53
25.5. Actions by Employer. . . . . . . . . . . . . . . . . . . . . . . . 53
25.6. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
25.7. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
25.8. Facility of Payment. . . . . . . . . . . . . . . . . . . . . . . . 54
25.9. Missing Participants . . . . . . . . . . . . . . . . . . . . . . . 54
25.10. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Appendix A Identifying Highly Compensation Employees . . . . . . . . . . . . A-1
A.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
A.2. Highly Compensated Employee . . . . . . . . . . . . . . . . . . . . A-1
A.3. Employee Percentages. . . . . . . . . . . . . . . . . . . . . . . . A-1
A.4. Special Rules for Officers. . . . . . . . . . . . . . . . . . . . . A-2
A.5. Tie-Breaking Elections. . . . . . . . . . . . . . . . . . . . . . . A-2
Appendix B Service Crediting Rules . . . . . . . . . . . . . . . . . . . . . B-1
B.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
B.2. Hours of Service. . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Appendix C Excess After-Tax Contributions. . . . . . . . . . . . . . . . . . C-1
C.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
C.2. After-Tax Contribution Percentage . . . . . . . . . . . . . . . . . C-1
C.3. Excess After-Tax Contributions. . . . . . . . . . . . . . . . . . . C-1
C.4. Distribution of Excess. . . . . . . . . . . . . . . . . . . . . . . C-2
C.5. Gain (Loss) on Distributions. . . . . . . . . . . . . . . . . . . . C-2
C.6. Multiple Use Test . . . . . . . . . . . . . . . . . . . . . . . . . C-2
Appendix D Excess Deferrals. . . . . . . . . . . . . . . . . . . . . . . . . D-1
D.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
D.2. Request and Distribution. . . . . . . . . . . . . . . . . . . . . . D-1
D.3. Income on Distributions . . . . . . . . . . . . . . . . . . . . . . D-1
D.4. No Distribution Within the Year . . . . . . . . . . . . . . . . . . D-2
Appendix E Excess Before-Tax Contributions . . . . . . . . . . . . . . . . . E-1
E.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
E.2. Before-Tax Contribution Percentage. . . . . . . . . . . . . . . . . E-1
E.3. Before-Tax Elective Contributions . . . . . . . . . . . . . . . . . E-1
E.4. Distribution of Excess. . . . . . . . . . . . . . . . . . . . . . . E-2
iv
<PAGE> 6
E.5. Gain (Loss) on Distributions. . . . . . . . . . . . . . . . . . . . E-2
E.6. Multiple Use Test . . . . . . . . . . . . . . . . . . . . . . . . . E-2
Appendix F Excess Matching Contributions . . . . . . . . . . . . . . . . . . F-1
F.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
F.2. Matching Contribution Percentage. . . . . . . . . . . . . . . . . . F-1
F.3. Excess Matching Contributions . . . . . . . . . . . . . . . . . . . F-1
F.4. Distribution of Excess. . . . . . . . . . . . . . . . . . . . . . . F-2
F.5. Gain (Loss) on Distributions. . . . . . . . . . . . . . . . . . . . F-2
Appendix G Top-Heavy Provisions. . . . . . . . . . . . . . . . . . . . . . . G-1
G.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
G.2. Top-Heavy Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
G.3. Key-Employees; Non-Key Employees. . . . . . . . . . . . . . . . . . G-1
G.4. Determination Date. . . . . . . . . . . . . . . . . . . . . . . . . G-1
G.5. Adjusted Accrued Benefit. . . . . . . . . . . . . . . . . . . . . . G-2
G.6. Aggregation Group . . . . . . . . . . . . . . . . . . . . . . . . . G-2
G.7. Adjustment to Benefit Limitations . . . . . . . . . . . . . . . . . G-2
</TABLE>
v
<PAGE> 7
AMENDMENT NO. 1
TO
THE EARTHGRAINS COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
Article 1
---------
Introduction
------------
1.1. Plan; Purpose.
- -------------------
The Earthgrains Company Employee Stock Ownership/401(k) Plan
("Plan") is an amendment and restatement of The Earthgrains
Company Employee Stock Ownership Plan which was adopted by The
Earthgrains Company (formerly Campbell Taggart, Inc.)
effective as of July 1, 1994 for the exclusive benefit of its
eligible employees and the eligible employees of each other
corporation that adopts the Plan. The purpose of the Plan is
to provide a method for the accumulation of a fund to assist
eligible employees to attain financial security in case of
retirement and to assist beneficiaries in case of an eligible
employee's death.
1.2. Qualified Profit Sharing Plan; ESOP.
- -----------------------------------------
The Plan is a profit sharing plan that is intended to satisfy
all requirements of section 401(a) of the Internal Revenue
Code of 1986, as amended ("Code"), and the Employee Retirement
Income Security Act of 1974, as amended. The Plan contains
an arrangement that allows an eligible employee to elect to
have contributions made on his behalf under the Plan. This
arrangement is intended to satisfy all requirements of Code
Section 401(k) and therefore constitute a qualified cash or
deferred arrangement.
A portion of the Plan is designed to invest primarily in the
common stock of the Company. This portion is intended to
satisfy all requirements of Code Section 4975(e)(7) and
therefore constitute an employee stock ownership plan, as
defined therein.
1.3. Effective Date.
- --------------------
As amended and restated, the Plan shall be effective as of
July 1, 1996. The rights and obligations of any person whose
employment with the Employer terminated before the Effective
Date shall be governed by the terms of the Plan in effect on
the date his employment terminated, except as provided
otherwise in the Plan.
1.4. Trust; Trustees.
- ---------------------
All assets of the Plan shall be held in trust by one or more
trustees who have been appointed under a trust agreement
between the Trustee and the Investment Committee.
1.5. Administration.
- --------------------
The Plan shall be administered by the Human Resources
Committee of the Company described in Article 21.
<PAGE> 8
1.6. Adopting Employers.
- ------------------------
In accordance with Article 24, any Employer may adopt the Plan
for the benefit of its eligible employees. The eligible
employees of each such Adopting Employer shall participate
under the same terms and conditions as the eligible employees
of each other such Employer, except to the extent provided in
the Plan.
1.7. Appendices.
- ----------------
The Plan may be amplified or modified from time to time by
appendices. Each Appendix forms a part of the Plan and its
provisions shall supersede Plan provisions as necessary to
eliminate any inconsistencies.
2
<PAGE> 9
Article 2
---------
Definitions and Construction
----------------------------
2.1. Definitions.
- -----------------
For purposes of this Plan, the following words and phrases,
whether or not capitalized, have the meanings specified below,
unless the context plainly requires a different meaning:
(a) "Active Participant" means an Employee who has become
------------------
an Active Participant under Section 3.2, but is not
a Former Participant.
(b) "Adopting Employer" means a corporation that has
-----------------
adopted the Plan for the benefit of its eligible
employees pursuant to Article 24.
(c) "After-Tax Contributions" means a Participant's
-----------------------
contributions to the Plan which are not subject to
deduction or exclusion from gross income for federal
income tax purposes. After-Tax Contributions are of
two types:
(i) "After-Tax Matched Contributions" are
-------------------------------
contributions for which an Employer Matching
Contribution will be made; and
(ii) "After-Tax Unmatched Contributions" are
---------------------------------
contributions for which no Employer Matching
Contribution will be made.
(d) "Anheuser-Busch Shares" means shares of common stock
---------------------
of Anheuser-Busch Companies, Inc.
(e) "Before-Tax Contributions" means a Participant's
------------------------
contributions to the Plan which are properly excluded
from gross income pursuant to Code Section 402(g).
Before-Tax Contributions are of two types:
(i) "Before-Tax Matched Contributions" are
--------------------------------
contributions for which an Employer Matching
Contribution will be made; and
(ii) "Before-Tax Unmatched Contributions" are
----------------------------------
contributions for which no Employer Matching
Contribution will be made.
(f) "Beneficiary" means a person to whom all or a portion
-----------
of the Participant's Distributable Benefit is to be
paid if he dies before the complete payment of such
benefit.
(g) "Benefit Payment Date" means the date specified in
--------------------
Article 13 or properly elected by the Participant (or
his Beneficiary) on which his Distributable Benefit
is to be paid, determined without regard to any delay
in payment caused for administrative reasons.
(h) "Break in Service" means a Period of Severance of
----------------
twelve (12) consecutive months.
(i) "Cash Account" means a cash account maintained on
------------
behalf of the Participant under Section 8.2,
including all subaccounts thereunder.
3
<PAGE> 10
(j) "Code" means the Internal Revenue Code of 1986, as
----
amended, and all valid regulations thereunder.
(k) "Committee" means the Human Resources Committee of
---------
the Company.
(l) "Company" means The Earthgrains Company, a
-------
corporation organized and existing under the laws of
the State of Delaware, and any successor corporation
which assumes the Plan and agrees to be bound by the
terms and provisions hereof.
(m) "Company Share" means a share of the common stock of
-------------
the Company, par value $.01 per share.
(n) "Compensation" means wages, salaries, fees for
------------
professional services and other amounts received
(whether or not in cash) for personal services
actually rendered in the course of employment with
the Employer to the extent that the amounts are
includable in gross income (including, but not
limited to, commissions paid salesmen, compensation
for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, or other
expense allowances under a nonaccountable plan (as
described in Treasury Regulation Section 1.62-2(c))
and excluding the following:
(i) Bonuses;
(ii) Amounts paid on account of the Participant's
termination of employment (e.g., vacation pay,
severance pay, etc.);
(iii) Contributions made to a qualified or non-
qualified plan of deferred compensation or
under a simplified employee pension plan which
are not includable in gross income for the
taxable year, or any distributions from a plan
of deferred compensation;
(iv) Amounts realized from the exercise of a non-
qualified stock option, or when restricted
stock (or property) either becomes freely
transferable or is no longer subject to a
substantial risk of forfeiture;
(v) Amounts realized from the sale, exchange or
other disposition of stock acquired under a
qualified stock option;
(vi) Other amounts which receive special tax
benefits, or contributions made (whether or
not under a salary reduction agreement)
towards the purchase of an annuity contract
described in Code Section 403(b) (whether or
not the contributions are actually excludable
from gross income); and
(vii) Amounts (even if includable in gross income)
which are reimbursements or other expense
allowances, fringe benefits (cash or noncash),
moving expenses, deferred compensation, or
welfare benefits.
The annual Compensation of each Employee taken into
account under the Plan shall not exceed $150,000, as
adjusted by the Commissioner for increases in the cost of
living in accordance with Code Section 401(a)(17)(B). The
cost-of-living adjustment in effect for a calendar year
applies to any period, not exceeding twelve (12) months,
over which Compensation is determined (determination
period) beginning in such calendar year. If a
determination period consists of
4
<PAGE> 11
fewer than twelve (12) months, the annual compensation
limit will be multiplied by a fraction, the numerator
of which is the number of months in the determination
period, and the denominator of which is twelve (12).
For purposes of calculating the Compensation of an
Employee, the rules contained in Code Section 414(q)(6)
shall apply, except that in applying such rules, the
term "family" shall include only the spouse of the
Employee and any lineal descendants of such Employee
who have not attained age nineteen (19) before the
close of the Plan Year.
(o) "Disability" means a physical or mental condition
----------
that permanently prevents a person from performing
his usual duties for the Employer or the duties in
any other position that the Employer makes available
to him and for which he is qualified by reason of his
training, education or experience. Disability shall
be deemed to exist when certified by a physician
selected by the Committee or its insurers and
acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability
not be withheld unreasonably). The Employee shall
submit to such medical or psychiatric examinations
and tests as such physician deems necessary to make
any such disability determination.
(p) "Distributable Benefit" means the balance of the
---------------------
Participant's Plan Account as of his Benefit Payment
Date, as adjusted to reflect any gain or loss
allocable to his Plan Account for periods after his
Benefit Payment Date and before complete distribution
from the Plan.
(q) "Effective Date" means July 1, 1996, the effective
--------------
date of the Plan, as amended and restated.
(r) "Employee" means any common-law employee or Leased
--------
Employee of the Employer.
(s) "Employer" means, collectively, the Company and any
--------
corporation that is a member of a controlled group of
corporations (as defined in Code Section 414(b))
which includes the Company; any trade or business
(whether or not incorporated) which is under common
control (as defined in Code Section 414(c)) with the
Company; and any organization (whether or not
incorporated) which is a member of an affiliated
service group (as defined in Code Section 414(m))
which includes the Company; and any other entity
required to be aggregated with the Company under Code
Section 414(o).
(t) "Employer Matching Contribution" means a contribution
------------------------------
to the Trust Fund made by the Employer under Section
6.1.
(u) "ERISA" means the Employee Retirement Income Security
-----
Act of 1974, as amended, and all valid regulations
thereunder.
(v) "Former Participant" means a Participant who has
------------------
become a Former Participant under Section 3.3, but
who has not received full payment of his
Distributable Benefit or again becomes an Active
Participant.
(w) "Highly Compensated Employee" means any Employee
---------------------------
identified as such under Appendix A.
(x) "Hour of Service" means each hour specified as such
---------------
under Appendix B.
(y) "Investment Committee" means the committee, as
--------------------
constituted by the Company from time to time, which
has the authority to direct the Trustee with respect
to the investment of the Trust Fund, except to the
extent that Participants and their Beneficiaries
direct the Trustee.
5
<PAGE> 12
(z) "Investment Fund" means a fund or funds established
---------------
by the Trustee at the direction of the Investment
Committee under Section 9.1 in which assets of the
Trust Fund attributable to After-Tax Contributions,
Before-Tax Contributions, Rollover Contributions and
the proceeds of any diversification election under
Section 12.2 shall be invested.
(aa) "Leased Employee" means a leased employee as defined
---------------
in Code Section 414(n).
(bb) "Loan Fund" means a fund established by the Trustee
---------
under Section 9.3 in which amounts borrowed by a
Participant from the Trust Fund under Article 16
shall be deemed to be invested.
(cc) "Participant" means an Active Participant or a Former
-----------
Participant. Except for purposes of Articles 3
through 7, the term "Participant" also includes any
person for whom a Plan Account is maintained to
reflect a Rollover Contribution.
(dd) "Participant Stock Fund" means a portion of the Stock
----------------------
Fund which reflects Company Shares allocated to
Participants' Stock Accounts.
(ee) "Period of Service" means the following:
-----------------
(i) In General. "Period of Service" means the
----------
period beginning on the first day for which
the Employee is credited with an Hour of
Service and ending with the day immediately
preceding the first day of a Period of
Severance, and any Period of Severance of less
than twelve (12) consecutive months. All
periods specified above shall be aggregated
for purposes of determining an Employee's
Period of Service, except as otherwise
provided in the Plan.
(ii) Maternity or Paternity Absences. If an
-------------------------------
Employee is absent from service for maternity
or paternity reasons, and if the absence
extends beyond the first anniversary of the
date on which the Employee is first absent
from service, then (A) a Period of Severance
shall not begin until the second anniversary
of the date on which the Employee is first
absent from service for purposes of
determining whether a Break in Service has
occurred, and (B) the period after the first
anniversary of the date on which the Employee
is first absent from service and before he
returns to service shall not be treated as
part of his Period of Service. For this
purpose, an absence from work for maternity or
paternity reasons means an absence by reason
of the pregnancy of the Employee, by reason of
a birth of a child of the Employee, by reason
of the placement of a child with the Employee
in connection with the adoption of such child
by such Employee, or for purposes of caring
for such child for a period beginning
immediately following such birth or placement.
(ff) "Period of Severance" means a continuous period of
-------------------
time during which the Employee is not employed with
the Employer. Except as provided in Section
2.1(ee)(ii), a Period of Severance begins on the
earlier of (i) the date on which the Employee dies,
retires, quits, or is discharged, or (ii) the twelve
(12) month anniversary of the date on which the
Employee is otherwise first absent from service, and
ends on the first date on which the Employee again is
credited with an Hour of Service.
(gg) "Plan" means The Earthgrains Company Employee Stock
----
Ownership/401(k) Plan, as amended from time to time.
6
<PAGE> 13
(hh) "Plan Account" means the account maintained by the
------------
Committee on behalf of a Participant under Section
8.1 and includes Cash Accounts and Stock Accounts
thereunder.
(ii) "Plan Year" means:
---------
(i) Prior to July 1, 1996, the consecutive twelve-
month period beginning on April 1 and ending
on the following March 31 of each year;
(ii) After March 31, 1996, the period beginning
April 1, 1996 and ending June 30, 1996; and
(iii) After June 30, 1996, the consecutive twelve-
month period beginning on July 1 and ending on
the following June 30 of each year.
(jj) "Required Beginning Date" means the April 1 of the
-----------------------
calendar year following the calendar year in which
the Participant attains age 70-1/2.
(kk) "Rollover Contribution" means a contribution to the
---------------------
Trust made by a Participant under Section 20.2.
(ll) "Settlement Date" means the Valuation Date that
---------------
coincides with or next follows the date on which the
Participant's employment with the Employer terminates
for any reason.
(mm) "Share Purchase Loan" means a loan or other extension
-------------------
of credit, the proceeds of which are used to acquire
Company Shares.
(nn) "Stock Account" means a stock account maintained on
-------------
behalf of the Participant under Section 8.3,
including all subaccounts thereunder.
(oo) "Stock Fund" means the fund established by the
----------
Trustee under Section 9.2 to hold Company Shares.
(pp) "Suspense Fund" means the portion of the Stock Fund
-------------
which reflects Company Shares not allocated to
Participants' Stock Accounts.
(qq) "Trust Agreement" means the trust established between
---------------
the Investment Committee and the Trustee to hold
assets of the Plan.
(rr) "Trust Fund" means the fund established in
----------
consequence of and for the purpose of the Plan, to be
held in trust by the Trustee, from which Trust Fund
benefits under the Plan are to be paid.
(ss) "Trustee" means Wachovia Bank of North Carolina,
-------
N.A., the trustee appointed by the Investment
Committee to act as Trustee under the Trust
Agreement, and any successor trustee appointed under
the terms of the Trust.
(tt) "Valuation Date" means the last business day of each
--------------
calendar month.
(uu) "Year of Service" means each twelve (12) month period
---------------
within the employee's Period of Service.
7
<PAGE> 14
A definition introduced later in the Plan also applies for all
Plan purposes unless the context plainly requires a different
meaning.
2.2. Gender and Number.
- -----------------------
Pronouns in the Plan stated in the masculine gender include
the feminine gender, words in the singular include the plural,
and words in the plural include the singular.
2.3. Headings.
- --------------
All headings in the Plan are included solely for ease of
reference and do not bear on the interpretation of the text.
As used in the Plan, the terms "Article," "Section," and
"Appendix" mean the text that accompanies the specified
Article, Section, or Appendix of the Plan.
8
<PAGE> 15
Article 3
---------
Eligibility and Participation
-----------------------------
3.1. Eligibility.
- -----------------
An Employee shall be eligible to participate in the Plan if
the following conditions are satisfied:
(a) The Employee is employed with an Adopting Employer;
(b) The Employee has been credited with one (1) Year of
Service;
(c) The Employee is a resident of the United States;
(d) The Employee is not a Leased Employee with respect to
the Employer; and
(e) The Employee is not covered by a collective
bargaining agreement entered into with the Employer
which excludes the Employee from participation in the
Plan.
The Committee shall notify each Employee of the date he
becomes eligible to participate in the Plan and the necessary
actions that may be required on his part to obtain or
participate in all benefits of the Plan.
3.2. Participation.
- -------------------
An Employee who was a Participant in the Plan on June 30, 1996
shall remain a Participant in the Plan on the Effective date
if on such Effective Date such Employee satisfies the
eligibility conditions of Section 3.1. Each other Employee
shall become an Active Participant on the first day of the
calendar month next following the date on which he first
satisfies the eligibility conditions of Section 3.1.
3.3. Duration of Participation.
- -------------------------------
An Active Participant shall become a Former Participant on the
first to occur of the following:
(a) The date on which his employment with the Employer
terminates or he otherwise fails to satisfy the
eligibility conditions of Section 3.1; or
(b) The date on which the Plan terminates.
A Former Participant shall remain such until he receives full
payment of his Distributable Benefit or again becomes an
Active Participant under Article 18.
9
<PAGE> 16
Article 4
---------
After-Tax Contributions
-----------------------
4.1. After-Tax Contributions.
- -----------------------------
An Active Participant may elect to make After-Tax
contributions to the Plan. An election to have amounts
withheld from Compensation as After-Tax Contributions must be
made in accordance with Article 7, and the amount of After-Tax
Contributions is subject to the limitations specified in
Section 4.2.
4.2. Minimum and Maximum Percentage Contributions.
- --------------------------------------------------
After-Tax Contributions must be stated as a whole number
percentage of Compensation and are subject to the following
limitations:
(a) After-Tax Matched Contributions. After-Tax Matched
-------------------------------
Contributions shall not be less than one percent (1%)
and not more than three percent (3%) of the
Participant's Compensation for the Plan Year, or such
other limitations as the Committee shall determine.
(b) After-Tax Unmatched Contributions. After-Tax
---------------------------------
Unmatched Contributions shall not be less than one
percent (1%) and not more than sixteen percent (16%)
of the Participant's Compensation for the Plan Year,
or such other limitations as the Committee shall
determine.
(c) After-Tax Matched Contributions and Before-Tax
----------------------------------------------
Matched Contributions. The sum of a Participant's
---------------------
After-Tax Matched Contributions and Before-Tax
Matched Contributions shall not be less than one
percent (1%) and not more than three percent (3%) of
the Participant's Compensation for the Plan Year, or
such other limitations as the Committee shall
determine.
(d) After-Tax Unmatched Contributions and Before-Tax
------------------------------------------------
Unmatched Contributions. The sum of a Participant's
-----------------------
After-Tax Unmatched Contributions and Before-Tax
Unmatched Contributions shall not be more than
sixteen percent (16%) of the Participant's
Compensation for the Plan Year, or such other
limitations as the Committee shall determine.
4.3. Special Limit on Highly Compensated Employees.
- ---------------------------------------------------
The After-Tax Contributions made for each Plan Year by the
Highly Compensated Employees are subject to the
nondiscrimination requirements imposed under Code Section
401(m). Accordingly, to comply with such requirements, the
After-Tax Contribution Percentage (as determined under
Appendix C) for the group of Highly Compensated Employees must
satisfy one of the following tests for each Plan Year:
(a) The After-Tax Contribution Percentage for the group
of Highly Compensated Employees for the Plan Year
must not exceed the After-Tax Contribution Percentage
for the group of all other Participants for the same
Plan Year multiplied by 1.25; or
(b) The excess of the After-Tax Contribution Percentage
for the group of Highly Compensated Employees for the
Plan Year over the After-Tax Contribution Percentage
for the group of all other Participants for the same
Plan Year must not exceed two (2) percentage points,
and the After-Tax Contribution Percentage for the
group of Highly Compensated Employees must not
10
<PAGE> 17
be more than the After-Tax Contribution Percentage for
the group of all other Participants multiplied by two
(2).
The Committee shall monitor the After-Tax Contributions and
may restrict the After-Tax Contributions of Highly Compensated
Employees at such times during a Plan Year and to such extent
as it deems appropriate to satisfy this Section. Any
restriction shall be applied first to the Highly Compensated
Employee(s) who is contributing the highest percentage of his
Compensation as an After-Tax Contribution.
If this Section is not satisfied for a Plan Year, Appendix C
shall apply to determine the proper correction method.
4.4. Transfer to Trustee.
- -------------------------
After-Tax Contributions shall be paid by the Adopting Employer
in cash to the Trustee as soon as such amounts reasonably can
be segregated from its general assets, but not more than
ninety (90) days, after such amounts are withheld from the
Participant's Compensation.
11
<PAGE> 18
Article 5
---------
Before-Tax Contributions
------------------------
5.1. Before-Tax Contributions.
- ------------------------------
An Active Participant may elect to have Before-Tax
Contributions made to the Plan on his behalf by the Adopting
Employer. The contribution made by the Adopting Employer
under this Section shall equal the amount that the Participant
elects to have withheld from his Compensation, and shall be
identified as a "Before-Tax Contribution" for purposes of this
Plan.
An election to have amounts withheld from Compensation as
Before-Tax Contributions must be made in accordance with
Article 7, and the amount of Before-Tax Contributions is
subject to the limitations specified in Section 5.2.
5.2. Minimum and Maximum Percentage Contributions.
- --------------------------------------------------
Before-Tax Contributions must be stated as a whole number
percentage of Compensation and are subject to the following
limitations:
(a) Before-Tax Matched Contributions. Before-Tax Matched
--------------------------------
Contributions shall not be less than one percent (1%)
and not more than three percent (3%) of the
Participant's Compensation for the Plan Year, or such
other limitations as the Committee shall determine.
(b) Before-Tax Unmatched Contributions. Before-Tax
----------------------------------
Unmatched Contributions shall not be less than one
percent (1%) and not more than sixteen percent (16%)
of the Participant's Compensation for the Plan Year,
or such other limitations as the Committee shall
determine.
(c) Before-Tax Matched Contributions and After-Tax
----------------------------------------------
Matched Contributions. The sum of a Participant's
---------------------
Before-Tax Matched Contributions and After-Tax
Matched Contributions shall not be less than one
percent (1%) and not more than three percent (3%) of
the Participant's Compensation for the Plan Year, or
such other limitations as the Committee shall
determine.
(d) Before-Tax Unmatched Contributions and After-Tax
------------------------------------------------
Unmatched Contributions. The sum of a Participant's
-----------------------
Before-Tax Unmatched Contributions and After-Tax
Unmatched Contributions shall not be more than
sixteen percent (16%) of the Participant's
Compensation for the Plan Year, or such other
limitations as the Committee shall determine.
5.3. Maximum Dollar Contribution.
- ---------------------------------
The Before-Tax Contributions and any elective deferrals made
by a Participant under all qualified plans maintained by the
Employer shall not exceed $9,500 (or such greater amount in
effect under Code Section 402(g)) for the calendar year.
If a Participant withdraws any amount from his Before-Tax
Contribution Cash Account under Article 15, the maximum
specified above for that Participant for the calendar year
immediately following the calendar year during which the
Participant makes such withdrawal shall be reduced by the
amount of the Before-Tax Contributions made by or on his
behalf for the calendar year in which he made the withdrawal.
12
<PAGE> 19
If the Before-Tax Contributions made on behalf of a
Participant for a calendar year and other elective deferrals
(as defined in Code Section 402(g)(3)) exceed $9,500 (or such
greater amount in effect under Code Section 402(g)(1)), such
Participant may request a corrective distribution of the
excess deferrals under Appendix D.
5.4. Special Limit on Highly Compensated Employees.
- ---------------------------------------------------
The Before-Tax Contributions made for each Plan Year on behalf
of the Highly Compensated Employees are subject to the
nondiscrimination requirements imposed under Code Section
401(k). Accordingly, to comply with such requirements, the
Before-Tax Contribution Percentage (as determined under
Appendix E) for the group of Highly Compensated Employees must
satisfy one of the following tests for each Plan Year:
(a) The Before-Tax Contribution Percentage for the group
of Highly Compensated Employees for the Plan Year
must not exceed the Before-Tax Contribution
Percentage for the group of all other Participants
for the same Plan Year multiplied by 1.25; or
(b) The excess of the Before-Tax Contribution Percentage
for the group of Highly Compensated Employees over
the Before-Tax Contribution Percentage for the group
of all other Participants for the same Plan Year must
not exceed two (2) percentage points, and the Before-
Tax Contribution Percentage for the group of Highly
Compensated Employees for the Plan Year must not be
more than the Before-Tax Contribution Percentage for
the group of all other Participants multiplied by two
(2).
The Committee shall monitor the Before-Tax Contributions and
may restrict the Before-Tax Contributions of Highly
Compensated Employees at such times during a Plan Year and to
such extent as it deems appropriate to satisfy this Section;
provided that, in lieu of reducing a Participant's aggregate
After-Tax Contributions and Before-Tax Contribution
percentage, the Committee may allow the Participant to elect
to have all or a portion of the Before-Tax Contributions that
otherwise would be made by a Participant but for this
restriction imposed by the Committee instead contributed as
an After-Tax Contribution. Any restriction under this Section
shall be applied first to the Highly Compensated Employee(s)
who is contributing the highest percentage of his Compensation
as a Before-Tax Contribution.
If this Section is not satisfied for a Plan Year, Appendix E
shall apply to determine the proper correction method.
5.5. Transfer to Trustee.
- -------------------------
Before-Tax Contributions shall be paid by the Adopting
Employer in cash to the Trustee as soon as such amounts
reasonably can be segregated from its general assets, but not
more than ninety (90) days, after such amounts are withheld
from the Participant's Compensation.
13
<PAGE> 20
Article 6
---------
Employer Contributions
----------------------
6.1. Employer Matching Contributions.
- -------------------------------------
An Adopting Employer may make a contribution for each Plan
Year on behalf of each Active Participant who received a
Before-Tax Contribution for any payroll period within the Plan
Year, in an amount determined by the Company in its sole
discretion for such Plan Year; provided, however, that the
Company in its sole discretion may determine that no
contributions shall be made for a Plan Year pursuant to this
Section.
The amount of the Employer Matching Contribution made on
behalf of each such Participant shall equal a percentage of
the Participant's Before-Tax Matched Contributions and After-
Tax Matched Contributions, which percentage shall be announced
by the Company prior to the beginning of each Plan Year;
provided, however, that the Employer Matching Contribution,
if any, made on behalf of Participants who are covered by a
collective bargaining agreement entered into with the Adopting
Employer may be different from the Employer Matching
Contributions for all other Participants.
The contribution made by an Adopting Employer under this
Section shall be identified as an "Employer Matching
Contribution" for purposes of this Plan.
6.2. Statutory Limit on Contributions.
- --------------------------------------
Any contrary provision of the Plan notwithstanding, an
Adopting Employer shall not make a contribution to the Plan
on behalf of any Participant to the extent that:
(a) The contribution would exceed the amount that can be
allocated to the Participant under Section 8.10; or
(b) The contribution would not be deductible by the
Adopting Employer for federal income tax purposes.
Each contribution to the Plan expressly is conditioned on the
ability of the Adopting Employer to deduct the contribution.
6.3. Special Limit on Highly Compensated Employees.
- ---------------------------------------------------
The Employer Matching Contributions made for each Plan Year
on behalf of the Highly Compensated Employees is subject to
the nondiscrimination requirements imposed under Code Section
401(m). Accordingly, to comply with such requirements, the
Matching Contribution Percentage (as determined under Appendix
F) for the group of Highly Compensated Employees must satisfy
one of the following tests for each Plan Year:
(a) The Matching Contribution Percentage for the group of
Highly Compensated Employees for the Plan Year must
not exceed the Matching Contribution Percentage for
the group of all other Participants for the same Plan
Year multiplied by 1.25; or
(b) The excess of the Matching Contribution Percentage
for the group of Highly Compensated Employees for the
Plan Year over the Matching Contribution Percentage
for the group of all
14
<PAGE> 21
other Participants for the same Plan Year must not
exceed two (2) percentage points, and the Matching
Contribution Percentage for the group of Highly
Compensated Employees must not exceed the Matching
Contribution Percentage for the group of all other
Participants multiplied by two (2).
The Committee may restrict the Employer Matching Contribution
to be made on behalf of Highly Compensated Employees at such
times during a Plan Year and to such extent as it deems
appropriate to satisfy this Section. Any restriction shall
be applied first to the Highly Compensated Employee(s) who is
contributing the highest percentage of his Compensation as a
Before-Tax Contribution or After-Tax Contribution.
If this Section is not satisfied for a Plan Year, Appendix F
shall apply to determine the proper correction method.
6.4. Top-Heavy Minimum Benefit.
- -------------------------------
If the Plan is Top-Heavy for a Plan Year (as determined under
Appendix G), a top-heavy minimum contribution shall be made
on behalf of each Participant who is a non-key employee for
the Plan Year and who is an Employee on the last day of the
Plan Year, provided that the Participant does not receive a
top-heavy minimum benefit under any other qualified retirement
plan maintained by the Employer.
The top-heavy minimum contribution shall equal the lesser of
the following:
(a) Four percent (4%) of the Participant's Compensation
for the Plan Year (or three percent (3%) of the
Participant's Compensation for the Plan Year under
the circumstances described in Appendix G); or
(b) A percentage of the Participant's Compensation for
the Plan Year equal to the percentage of Compensation
received as an Employer Matching Contribution by the
key-employee who received the greatest such
percentage.
6.5. Allocation Among Employers.
- --------------------------------
An Adopting Employer shall contribute that portion of the
Employer Matching Contribution for the Plan Year that is
attributable to Compensation received by each Participant for
services performed while in the employ of the Adopting
Employer; provided that, any Adopting Employer may make all
or any part of the contribution for any other Adopting
Employer, if each is a member of the same group which files
a consolidated federal income tax return for the year.
6.6. Transfer to Trustee.
- -------------------------
The amount of Employer Matching Contributions determined under
Section 6.1 but reduced by the amount of forfeitures, if any,
available for application, shall be paid by the Adopting
Employer in cash and/or in Company Shares and shall be
contributed not later than the time prescribed by law
(including extensions) for filing the Employer's federal
income tax return for its taxable year.
15
<PAGE> 22
Article 7
---------
Compensation Reduction Agreements
---------------------------------
7.1. Compensation Reduction Agreements.
- ---------------------------------------
To make or receive After-Tax Contributions and/or Before-Tax
Contributions under the Plan, a Participant must file a
compensation reduction agreement with the Committee on such
form and in accordance with such rules as shall be prescribed
by the Committee for this purpose. A Participant must specify
on the agreement the percentage by which he elects to reduce
his Compensation and the portion of the reduction that he
intends as an After-Tax Matched Contribution and an After-Tax
Unmatched Contribution and the portion that he intends as a
Before-Tax Matched Contribution and a Before-Tax Unmatched
Contribution. Once effective, a compensation reduction
agreement shall remain in effect until it is modified or
revoked, or the Participant ceases to be an Active
Participant.
7.2. Modification of Contributions.
- -----------------------------------
A Participant who has a compensation reduction agreement in
effect shall be permitted the following elections:
(a) Change in Contribution Rate: A Participant may elect
---------------------------
to change the rate of his After-Tax Contributions
and/or Before-Tax Contributions (within the limits
specified in Sections 4.2 and 5.2) at such time and
in accordance with such rules as prescribed by the
Committee.
(b) Suspension of Contributions: A Participant may elect
---------------------------
to suspend his After-Tax Contributions and/or Before-
Tax Contributions at such time and in accordance with
such rules as prescribed by the Committee.
7.3. Committee Adjustment Authority.
- ------------------------------------
Notwithstanding any other provisions of this Plan, the
Committee may at any time or times during a Plan Year reduce
or suspend the After-Tax Contributions and/or Before-Tax
Contributions being made on behalf of a Participant who is a
Highly Compensated Employee to the extent the Committee
determines is appropriate in order to satisfy the limitations
on contributions applicable to Highly Compensated Employees.
If the Committee elects to suspend the contributions of a
Participant pursuant to this section, contributions shall not
resume on behalf of such Participant until the Committee
determines the suspension is no longer necessary.
16
<PAGE> 23
Article 8
---------
Plan Accounting
---------------
8.1. Participant Plan Accounts.
- -------------------------------
The Committee shall maintain a Plan Account for each
Participant and such number of accounts and subaccounts within
the Plan Account as the Committee deems appropriate to
adequately disclose the interest of the Participant in the
Trust Fund. At a minimum, each Plan Account shall consist of
the Cash Accounts specified in Section 8.2, and the Stock
Accounts specified in Section 8.3.
8.2. Participant Cash Accounts.
- -------------------------------
A Participant's Plan Account shall consist of the following
Cash Accounts in addition to such other Cash Accounts as the
Investment Committee may deem appropriate:
(a) "After-Tax Contribution Cash Account" to reflect cash
-----------------------------------
amounts attributable to After-Tax Contributions,
which account shall be segregated to separately
reflect After-Tax Contributions made before January
1, 1987, and the earnings thereon, and After-Tax
Contributions made on or after January 1, 1987, and
the earnings thereon;
(b) "Before-Tax Contribution Cash Account" to reflect
------------------------------------
cash amounts attributable to Before-Tax
Contributions;
(c) "Rollover Contribution Cash Account" to reflect cash
----------------------------------
amounts attributable to Rollover Contributions;
(d) "ESOP Diversification Cash Account" to reflect cash
---------------------------------
amounts attributable to the proceeds of Company
Shares liquidated pursuant to a diversification
election made under Article 12;
(e) "Anheuser-Busch Stock Account" to reflect Anheuser-
----------------------------
Busch Shares and Company Shares paid on March 26,
1996, as a dividend on Anheuser-Busch Shares credited
to the Participant's Plan Account.
A separate subaccount under each Cash Account specified in
(a), (b), (c) and (d) shall be maintained to reflect the
Participant's interest in his Loan Fund and each Investment
Fund.
8.3. Participant Stock Accounts.
- --------------------------------
A Participant's Plan Account shall consist of the following
Stock Accounts in addition to such other Stock Accounts as the
Investment Committee may deem appropriate:
(a) "Matching Contribution Stock Account" to reflect
-----------------------------------
whole and fractional interests in Company Shares
acquired with Employer Matching Contributions and
amounts attributable thereto;
(b) "After-Tax Contribution Stock Account" to reflect
------------------------------------
whole and fractional interests in Company Shares
attributable to After-Tax Contributions, which
account shall be segregated to separately reflect
After-Tax Contributions made before January 1, 1987,
and the earnings thereon, and After-Tax Contributions
made on or after January 1, 1987, and the earnings
thereon;
17
<PAGE> 24
(c) "Before-Tax Contribution Stock Account" to reflect
-------------------------------------
whole and fractional interests in Company Shares
attributable to Before-Tax Contributions;
(d) "Rollover Contribution Stock Account" to reflect
-----------------------------------
whole and fractional interests in Company Shares
attributable to Rollover Contributions;
(e) "ESOP Diversification Stock Account" to reflect whole
----------------------------------
and fractional interests in Company Shares as a
result of the Participant's election to invest in
Company Shares following a diversification election
made under Article 12.
A separate subaccount under each Stock Account specified in
(a), (b), (c), (d) and (e) shall be maintained to reflect the
Participant's interest in each Participant Stock Fund
specified in Section 9.2(a) and (b).
8.4. Balance of Accounts.
- -------------------------
The balance of a Cash Account or Stock Account as of any date
is the balance of the account after the immediately preceding
Valuation Date, less amounts thereafter properly debited, and
plus amounts thereafter properly credited, to the account
under this Article. The balance of each Cash Account shall
be expressed in United States dollars, except that the
Anheuser-Busch Stock Account shall be expressed in numbers
(whole or fractional) of Anheuser-Busch Shares and Company
Shares. The balance of each Stock Account shall be expressed
in number (whole or fractional) of Company Shares.
The balance of a Participant's Plan Account as of any date is
the aggregate balance of all Cash and Stock Accounts within
the Plan Account (expressed in United States dollars and
number (whole and fractional) of Company Shares, as
appropriate) as of such date.
8.5. Adjustments to Reflect Distributions.
- ------------------------------------------
As of each Valuation Date, the balance of each Cash and Stock
Account shall be debited to reflect all distributions from the
Trust which were drawn from such account and not previously
debited.
8.6. Adjustment to Reflect Participant Contributions; Diversification
- ----------------------------------------------------------------------
Proceeds.
--------
As of the last day of each calendar month, the balance of each
Participant's After-Tax Contribution, Before-Tax Contribution,
Rollover Contribution and ESOP Diversification Cash Accounts
shall be credited to reflect the After-Tax Contributions,
Before-Tax Contributions, Rollover Contributions and proceeds
of any diversification election under Section 12.2,
respectively, made by or on behalf of the Participant for such
calendar month.
The credit under this Section shall be reflected in the
appropriate subaccount under the specified Cash Account in
accordance with the Participant's investment direction.
8.7. Adjustment to Reflect Employer Matching Contributions.
- -----------------------------------------------------------
As of last day of each calendar month, the balance of each
Participant's Employer Matching Contribution Stock Account
shall be credited to reflect the Employer Matching
Contributions made on behalf of the Participant for such
month.
18
<PAGE> 25
8.8. Adjustments to Reflect Investment Return.
- ----------------------------------------------
As of each Valuation Date, the balance of the Anheuser-Busch
Stock Account shall be credited (or debited) to reflect the
net realized or unrealized gain (or loss) since the last
Valuation Date and the balance of each subaccount under each
Cash Account shall be credited (or debited) to reflect the net
realized or unrealized gain (or loss) since the last Valuation
Date of the Investment Fund with respect to which the
subaccount is maintained. The amount credited (or debited)
to each such subaccount shall equal an amount that bears the
same ratio to the net gain (or loss) of the Investment Fund
as the adjusted balance (as defined below) of the subaccount
bears to the aggregate adjusted balances of all subaccounts
maintained with respect to the Investment Fund.
For purposes of this Section, the "adjusted balance" of a
subaccount is the balance of such subaccount immediately after
the preceding Valuation Date, adjusted as follows:
(a) The balance is reduced by the portion of the
subaccount drawn from the Investment Fund and
distributed from the Trust since the preceding
Valuation Date; and
(b) The balance is reduced by the portion of the
subaccount drawn from the Investment Fund and
credited to the Participant's Loan Fund since the
preceding Valuation Date.
To determine net gain (or loss), all assets in each Investment
Fund shall be valued at their fair market value as of the
Valuation Date or, if the Valuation Date is not a business
day, the last business day that precedes the Valuation Date.
As of each Valuation Date, the Committee shall debit each
subaccount maintained with respect to a Loan Fund to reflect
the interest paid to such fund since the preceding Valuation
Date as specified in Article 16.
8.9. Adjustments to Reflect Dividends.
- --------------------------------------
All cash dividends on Company Shares (other than Company
Shares credited to the Anheuser-Busch Stock Account) shall be
credited to the Participant's corresponding Stock Accounts as
of the Valuation Date immediately following the payment of
such dividends and applied in accordance with the provisions
of Section 9.6. All cash dividends on Anheuser-Busch Shares
and Company Shares held in the Anheuser-Busch Stock Account
shall be credited to the Anheuser-Busch Stock Account.
8.10. Maximum Allocations.
- -------------------------
Any contrary provision of the Plan notwithstanding, the annual
additions (as defined in Code Section 415(c)(2)) made to a
Participant's Plan Account for any Limitation Year shall not
exceed the limitations imposed under Code Section 415. For
purposes of applying the limitations of this Section,
"Limitation Year" means the Plan Year and the term
"compensation" means compensation as defined in Code Section
415 and the regulations thereunder. The provisions of Code
Section 415, including but not limited to the provisions of
Code Section 415(c)(6), and the regulations thereunder are
hereby incorporated herein by this reference.
If, as the result of a reasonable error in estimating a
Participant's compensation, a reasonable error in determining
the amount of Before-Tax Contributions that may be made by a
Participant under the limits of Code Section 415, or under
other limited facts and circumstances that the Commissioner
of the Internal Revenue Service finds justify the availability
of this provision, the annual additions (as defined
19
<PAGE> 26
in Code Section 415) for a Participant would cause the
limitations of Code Section 415 applicable to that Participant
for the Limitation Year to be exceeded, the excess amounts shall
not be deemed annual additions in that Limitation Year if they
are treated in accordance with one of the following:
(a) The excess amount in the Participant's Plan Account
(excluding those amounts in the Participant's Account
attributable to Before-Tax Contributions and After-
Tax Contributions) shall be allocated and reallocated
(subject to the limits of this Section) among the
Employer Matching Contribution Accounts of
Participants, until such excess amount has been
allocated in its entirety. If the allocation or
reallocation of the excess amounts as provided herein
causes the limitations of Code Section 415 to be
exceeded with respect to each Plan Participant for
the Limitation Year, the excess amounts that cannot
be so allocated shall be held unallocated in a
suspense account. If a suspense account is in
existence at any time during a particular Limitation
Year, other than the Limitation Year described in the
preceding sentence, all amounts in the suspense
account must be allocated and reallocated to
Participant's Plan Accounts (subject to the
limitations of this Section) before any employer
contributions and employee contributions which would
constitute annual additions may be made to the Plan
for that Limitation Year.
(b) The excess amount in the Participant's Plan Account
(excluding those amounts in the Participant's Plan
Account attributable to Before-Tax Contributions and
After-Tax Contributions) shall be used to reduce
Employer Matching Contributions for the next
Limitation Year (and succeeding Limitation Years, as
necessary) for that Participant, if that Participant
is an Active Participant as of the end of the
Limitation Year. However, if the Participant is not
an Active Participant as of the end of the Limitation
Year, then the excess amount must be unallocated in
a suspense account for the Limitation Year and shall
be allocated and reallocated in the next Limitation
Year in the manner specified in subsection (a) above.
Furthermore, the excess amount shall be used to
reduce Employer Matching Contributions for the next
Limitation Year (and succeeding Limitation Years, as
necessary) for all the remaining Participants in the
Plan. For purposes of this subsection (b), excess
amounts may not be distributed to Participants.
(c) The excess amount in the Participant's Plan Account
(excluding those amounts in the Participant's Plan
Account attributable to Before-Tax Contributions and
After-Tax Contributions) shall be held unallocated in
a suspense account for the Limitation Year and
allocated and reallocated in the next Limitation Year
to all Participants in the Plan in accordance with
the rules specified in subsection (a) above. The
excess amounts shall be used to reduce Employer
Matching Contributions for the next Limitation Year
(and succeeding Limitation Years, as necessary) for
Participants in the Plan. For purposes of this
subsection (c), excess amounts may not be distributed
to Participants.
(d) Any Before-Tax Contributions (and earnings thereon)
which would constitute annual additions (as defined
in Code Section 415) for such Limitation Year, to the
extent they would reduce the excess amount, shall be
distributed to the Participant.
(e) Any After-Tax Contributions (and earnings thereon)
which would constitute annual additions (as defined
in Code Section 415) for such Limitation Year, to the
extent they would reduce the excess amount, shall be
distributed to the Participant.
A suspense account established pursuant to this Section shall
not share in the allocation of Trust Fund earnings, and the
balance of such account shall first be used to pay
administrative expenses of the Plan and the remainder, if any,
shall be returned to the Employer in the event this Plan is
terminated prior
20
<PAGE> 27
to the date such account has been allocated in its entirety as a
forfeiture. In no event shall excess annual additions be
distributed to Participants except as described in paragraphs
(d) and (e).
If a Participant is participating or has participated in a
defined benefit plan maintained by the Employer, and the
combined Plan limitation under Code Section 415 is exceeded
in any Limitation Year, the Participant's benefit under such
defined benefit plan shall be limited as necessary to satisfy
the combined plan limit under Code Section 415.
21
<PAGE> 28
Article 9
---------
Investment Funds
----------------
9.1. Investment Funds.
- ----------------------
The Investment Committee shall maintain within the Trust Fund
a diversified group of Investment Funds in which Plan assets
attributable to After-Tax Contributions, Before-Tax
Contributions, Rollover Contributions and the proceeds of any
diversification election under Section 12.2 shall be invested.
The Investment Committee shall have the sole discretion to
determine the number of Investment Funds to be maintained
hereunder and the nature of such funds. In addition, the
Investment Committee may change or eliminate the Investment
Funds provided hereunder from time to time. Such funds shall
be held and administered in accordance with uniform and
nondiscriminatory rules of procedure established by the
Investment Committee.
The Committee shall maintain, with respect to each Investment
Fund, a separate subaccount under each Cash Account specified
in Section 8.2(a), (b), (c) and (d) of each Participant to
reflect the Participant's interest in the Investment Fund
attributable to the Cash Account.
9.2. Stock Funds.
- -----------------
The Trustee shall maintain within the Trust Fund a Stock Fund.
The Stock Fund shall be apportioned into the Suspense Fund
described in Article 10 and two (2) Participant Stock Funds,
including the following:
(a) "Loan Purchase Fund" which shall reflect Company
------------------
Shares acquired with the proceeds of a Share Purchase
Loan and allocated to Participants' Stock Accounts.
(b) "Cash Purchase Fund" which shall reflect Company
------------------
Shares otherwise acquired and allocated to
Participants' Stock Accounts.
The Committee shall maintain, with respect to each Participant
Stock Fund specified in (a) and (b), above, a separate
subaccount under each Stock Account specified in Section 8.3
to reflect the Participant's interest in the Participant Stock
Fund attributable to the Stock Account.
Anything contained herein to the contrary notwithstanding, at
least fifty percent (50%) of the Participant's Before-Tax
Matched Contributions and After-Tax Matched Contributions for
each Plan Year shall be invested in Company Shares for at
least one (1) full Plan Year beginning after the date such
Before-Tax Match Contributions and/or After-Tax Matched
Contributions are made to the Plan.
9.3. Participant Loan Funds.
- ----------------------------
The Trustee shall maintain within the Trust a Loan Fund on
behalf of each Participant in which amounts drawn from an
Investment Fund, Anheuser-Busch Stock Account or Stock Fund
to make a loan to the Participant under Article 16 shall be
deemed to be invested. The Committee shall maintain, with
respect to each Loan Fund, a separate subaccount under each
Cash Account specified in Section 8.2 to reflect the
Participant's interest in the Loan Fund.
22
<PAGE> 29
9.4. Change of Investment Elections.
- ------------------------------------
Except as provided in Section 9.7 with respect to Reporting
Persons (as defined therein), After-Tax Contributions, Before-
Tax Contributions, Rollover Contributions and the proceeds of
any diversification election under Section 12.2 made by or on
behalf of a Participant shall be invested by the Trustee in
the Investment Funds in accordance with the Participant's
investment elections. A Participant must file investment
elections with the Committee upon becoming a Participant.
The following elections shall be available to each Participant
with respect to investment changes:
(a) Change in Future Contributions: A Participant may
------------------------------
elect to change his investment options for future
After-Tax Contributions, Before-Tax Contributions,
Rollover Contributions and the proceeds of any
diversification election under Section 12.2 made by
or on his behalf. The timing and frequency of such
election to change investment options shall be in
accordance with such rules as shall be prescribed by
the Committee.
(b) Change in Current Investments: A Participant may
-----------------------------
elect to change his investment options with respect
to that the portion of his Plan Account attributable
to After-Tax Contributions, Before-Tax Contributions,
Rollover Contributions and the proceeds of any
diversification election under Section 12.2 made by
or on his behalf. The timing and frequency of such
election to change investment options shall be in
accordance with such rules as shall be prescribed by
the Committee.
If a Participant elects to change his current investments
under (b), above, his interest in each Investment Fund shall
be converted to cash as of the Valuation Date after the
election is made and the proceeds thereof shall be invested
in accordance with his election effective as of such Valuation
Date.
Anything contained herein to the contrary notwithstanding, a
Participant may elect to invest all or any portion of his
Anheuser-Busch Stock Account in one or more Investment Funds;
provided however, that a Participant may not elect to transfer
any amount in his Plan Account invested in one or more
Investment Funds into the Anheuser-Busch Stock Account.
All investment elections must be filed with the Committee at
such time and in such form and manner and in accordance with
such rules as shall be prescribed by the Committee for this
purpose.
9.5. Investment of Employer Matching Contributions.
- ---------------------------------------------------
Employer Matching Contributions shall be applied annually to
pay principal and interest on any Share Purchase Loan or, if
a Share Purchase Loan is not outstanding, shall be applied to
acquire Company Shares.
9.6. Investment of Cash Dividends.
- ----------------------------------
(a) Cash dividends paid to the Trustee on Company Shares
shall be applied as follows:
(i) Loan Purchase Fund Shares: Cash dividends on
-------------------------
Company Shares held within the Loan Purchase Fund
shall be applied to pay principal and interest on
the Share Purchase Loan with which such Company
Shares were purchased or, if a Share Purchase
Loan is not outstanding, shall be applied to
acquire Company Shares.
23
<PAGE> 30
(ii) Cash Purchase Fund Shares: Cash dividends on
-------------------------
Company Shares held within the Cash Purchase Fund
may be distributed to the Participant not later
than ninety (90) days after the close of the Plan
Year in which such dividends are paid.
(iii) Suspense Fund Shares: Cash dividends on Company
--------------------
Shares held within the Suspense Fund shall be
applied to pay principal and interest on any
Share Purchase Loan.
All cash dividends applied under this paragraph (a) to
pay principal and interest on a Share Purchase Loan shall
be so applied quarterly together with the Employer
Matching Contributions for the Plan Year. All cash
dividends applied under this Section to acquire Company
Shares shall be so applied at such time as the Trustee
may determine.
When such dividends are applied to pay principal and
interest on a Share Purchase Loan or to purchase Company
Shares, the appropriate Cash Account shall be debited and
the corresponding Stock Account shall be credited to
reflect the number (whole or fractional) of Company
Shares released or purchased.
(b) Cash dividends paid to the Trustee on Anheuser-Busch
Shares and Company Shares held in the Anheuser-Busch
Stock Account shall be applied to purchase Anheuser-Busch
Shares.
9.7. Reporting Persons.
- -----------------------
(a) Notwithstanding any provision of this Plan to the
contrary, including (without limitation) provisions as
to the investment of contributions under this Article 9
and provisions as to the powers of the Committee to
administer the Plan under Article 21, a "Reporting
Person" (as defined herein) may transfer investments
between the Stock Fund and an Investment Fund if and only
if either (i) the transfer is an acquisition of Company
Shares by investment in the Stock Fund pursuant to an
election made at least six (6) months after the date of
any previous election by such Reporting Person effecting
a disposition of Company Shares from the Stock Fund, or
(ii) the transfer is a disposition of Shares from the
Stock Fund pursuant to an election made at least six (6)
months after the date of any previous election by such
Reporting Person effecting an acquisition of Shares by
investment in the Stock Fund; provided however, that the
limitation herein shall not apply to any transfer made
in connection with the Reporting Person's death,
Disability, retirement or termination of employment or
any transfer that is required to be made available to
Participants pursuant to the Code. As used herein, the
term "Reporting Person" means any Participant who, by
virtue of the Participant's position as an officer,
director or greater than ten percent (10%) shareholder
of the Company, is subject to the reporting requirements
of Section 16(a) of the Securities Act of 1934.
(b) Notwithstanding any provision of this Plan to the
contrary, any election by a Reporting Person to withdraw
amounts distributable pursuant to Article 15 shall be
effective only if (i) an election to receive a
distribution in cash attributable in whole or in part to
the liquidation of an investment in the Stock Fund is
made at least six (6) months following the date of any
previous election by such Reporting Person effecting an
acquisition of Company Shares by investment in the Stock
Fund, or (ii) an election to receive a distribution in
Company Shares attributable to the liquidation of
investments in any Investment Fund other than the Stock
Fund is made at least six (6) months following the date
of any previous election by such Reporting Person
effecting a disposition of Company Shares from the Stock
Fund; provided however, that the limitation herein shall
not apply to any distribution made in connection with the
Reporting Person's death,
24
<PAGE> 31
Disability, retirement or termination of employment or any
distribution that is required to be made available to
Participants pursuant to the Code.
25
<PAGE> 32
Article 10
----------
Trust Suspense Fund
-------------------
10.1. Suspense Fund.
- --------------------
The portion of the Stock Fund reflecting Company Shares which
were acquired with the proceeds of a Share Purchase Loan and
which have not been allocated to Participants' Stock Accounts
shall be deemed to be a "Suspense Fund" which holds such
Company Shares pending their release and allocation to the
Participants' Stock Accounts under the terms and conditions
of this Article.
10.2. Release from Suspense Fund.
- ---------------------------------
Company Shares shall be released from the Suspense Fund as of
the date of payment and upon release shall be allocated among
the Participants' Stock Accounts under Section 10.3.
The number of Company Shares released from the Suspense Fund
shall equal the number of Company Shares held in the Suspense
Fund immediately before the release multiplied by a fraction,
the numerator of which is the amount of principal and interest
paid on the Share Purchase Loan for the Plan Year, and the
denominator of which is the sum of (i) the numerator, and (ii)
the amount of principal and interest that will be paid on the
Share Purchase Loan in all future Plan Years (determined
without regard to any possible renewal or extension of the
Share Purchase Loan). For this purpose, if a variable
interest rate applies under a Share Purchase Loan, the
interest that will be paid on the Share Purchase Loan in
future Plan Years shall be computed by using the interest rate
in effect at the end of the then current Plan Year.
10.3. Allocation of Released Shares.
- ------------------------------------
Company Shares released from the Suspense Fund under Section
10.2 shall be allocated among the Participants' Stock Accounts
as follows:
(a) Allocation Based on Loan Purchase Fund Dividends: First,
------------------------------------------------
a number of Company Shares released as a result of
applying the cash dividends paid during the calendar
quarter on Company Shares held within the Loan Purchase
Fund, plus earnings (if any) that have resulted from the
short-term investment of such dividends, to pay principal
and interest on the Share Purchase Loan, shall be
allocated among the Participants whose Employer Matching
Contribution Stock Accounts were credited with such
dividends under Section 8.9.
The number of Company Shares allocated to each such
Participant shall equal the number determined by
multiplying the total number of Company Shares to be
allocated under this subsection by a fraction, the
numerator of which is the dollar amount of the cash
dividends paid during the calendar quarter on Company
Shares held within the Loan Purchase Fund, plus earnings
(if any), credited to the Participant's Employer Matching
Contribution Stock Account under Section 8.9, and the
denominator of which is the dollar amount of the cash
dividends paid during the calendar quarter on Company
Shares held within the Loan Purchase Fund, plus earnings
(if any).
(b) Supplemental Allocation Based on Suspense Fund Dividends:
--------------------------------------------------------
Second, if the fair market value of the Company Shares
released as a result of applying the cash dividends paid
during the Plan Year on Company Shares held within the
Loan Purchase Fund (disregarding the earnings (if any)
26
<PAGE> 33
from the short-term investment of such dividends) to pay
principal and interest on the Share Purchase Loan is less
than the dollar amount of such dividends, then a number
of Company Shares released as a result of applying the
cash dividends paid during the Plan Year on Company
Shares held within the Suspense Fund, plus earnings (if
any) from the short-term investment of such dividends,
with a fair market value equal to the shortfall shall be
allocated among the Participant's who received an
allocation under (a), above.
The number of Company Shares allocated to each such
Participant shall equal the number determined in the same
manner as Company Shares allocated under (a).
If the number of Company Shares released as a result of
applying the cash dividends on Company Shares held within
the Suspense Fund, plus earnings (if any) from the
short-term investment of such dividends, is less than the
number required to make the allocation provided in this
subsection, the Company shall contribute an additional
number of Company Shares to the Trust Fund to allow a
full allocation hereunder.
(c) Allocation Based on Matching Contribution: Third, the
-----------------------------------------
number of Company Shares released as a result of applying
the Employer Matching Contributions made on behalf of all
Participants for the Plan Year, plus earnings (if any)
from the short-term investment of such contributions, to
pay principal and interest on the Share Purchase Loan
(but disregarding that portion of the Employer Matching
Contributions and earnings distributed to satisfy Section
6.3), shall be allocated among those Participants on
whose behalf an Employer Matching Contribution was made
for the Plan Year under Section 6.1.
The number of Company Shares allocated to each such
Participant shall equal the number determined by
multiplying the total number of Company Shares to be
allocated under this subsection by a fraction, the
numerator of which is the dollar amount of the Employer
Matching Contribution made on behalf of the Participant,
plus earnings (if any) from the short-term investment of
such contribution credited to the Participant (but
disregarding that portion of the Employer Matching
Contribution and earnings distributed to satisfy Section
6.3), and the denominator of which is the dollar amount
of the Employer Matching Contribution made on behalf of
all Participants for the Plan Year, plus earnings (if
any) thereon (disregarding that portion distributed to
satisfy Section 6.3).
10.4. Fair Market Value.
- ------------------------
For purposes of this Plan, "fair market value" means the value
on any day determined by the Trustee which shall be (i) if
Company Shares are traded on a national or regional stock
exchange, the closing composite quotation price on that day,
or if Company Shares were not traded on such day, the closing
price on the next preceding trading day on which Company
Shares were traded, (ii) if Company Shares are traded on
NASDAQ, the closing NASDAQ price on that day, and (iii) if
Company Shares are not traded as described above, the value
as determined in accordance with generally accepted valuation
principles on a consistent basis acceptable to the Investment
Committee.
27
<PAGE> 34
Article 11
----------
Vesting and Forfeitures
-----------------------
11.1. Vesting.
- --------------
A Participant shall have a non-forfeitable interest in his
Anheuser-Busch Stock Account and in his Plan Account
attributable to his After-Tax Contributions, Before-Tax
Contributions and Rollover Contributions.
A Participant shall obtain a non-forfeitable interest in his
Plan Account attributable to Employer Matching Contributions
upon the occurrence of (a) his death or Disability, while an
Employee, (b) layoff for a period exceeding twelve (12)
consecutive months, (c) entry into active duty with any branch
of the military services of the United States, or (d)
termination of employment following attainment of age sixty
(60). As of any date prior to the occurrence of an event
described in paragraphs (a) through (d) above, a Participant
shall obtain a nonforfeitable interest in his Plan Account
attributable to Employer Matching Contributions in accordance
with the vesting schedule set forth below based upon the
number of Years of Service credited to such Participant as of
such date:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
1 0%
2 or more 100%
</TABLE>
11.2. Years of Service.
- -----------------------
(a) In General. All Years of Service shall count for
----------
purposes of determining a Participant's vested interest
in his Plan Account attributable to his Employer
Matching Contributions except as provided in (b) below.
(b) Disregard of Pre-Break Service for Post-Break Account.
-----------------------------------------------------
In the case of a Participant who does not have any
vested interest in his Plan Account attributable to
Employer Matching Contributions, all Years of Service
before a period of consecutive Breaks in Service shall
be disregarded for purposes of determining his vested
interest in the balance of such account accrued after
such Breaks in Service if the number of consecutive
Breaks in Service in such period equals or exceeds the
greater of (i) 5, or (ii) the aggregate number of Years
of Service credited before such period (provided that,
such aggregate number of Years of Service shall not
include any Years of Service disregarded under this
paragraph by reason of prior Breaks in Service).
11.3. Forfeitures.
- ------------------
If a Participant's employment with all Employers terminates
at a time when he has no vested interest in his Plan Account
attributable to Employer Matching Contributions, then that
portion of such account in which he does not have a vested
interest shall be forfeited as of the date on which his
employment terminates.
The portion of the Participant's Plan Account in which he does
not have a vested interest shall be applied, for the Plan Year
in which the Participant's employment with all Employers
terminates, to reduce administrative expenses of the Plan and
the remainder, if any, thereafter shall be applied to reduce
the Employer Matching Contribution. If the Participant is
reemployed by an Adopting Employer
28
<PAGE> 35
before he incurs five (5) consecutive Breaks in Service, then he
shall have restored to his Employee Matching Contribution Stock
Account as of the last day of the calendar month in which he is
reemployed an amount equal to the amount of such forfeiture.
Any amount restored shall first come from forfeitures that have
arisen in the year of reemployment, and if such forfeitures are
not sufficient, the Company shall restore such amount.
For purposes of this Section, if a Participant's Distributable
Benefit is $0.00, he shall be deemed to have received payment
thereof as of the date on which his employment with all
Employers terminates.
29
<PAGE> 36
Article 12
----------
Investment Diversification
--------------------------
12.1. Eligibility.
- ------------------
Except as provided in Section 9.7 with respect to Reporting
Persons (as defined therein), a Participant shall be eligible
for the diversification election available under of this
Article if he has attained age fifty-five (55) and completed
ten (10) years of participation in the Plan.
12.2. Diversification.
- ----------------------
A Participant who is eligible under Section 12.1, shall be
permitted, for each Plan Year within his diversification
election period (as defined below), to diversify his Stock
Accounts by directing the Trustee to liquidate the following
portion of such accounts in order to make the proceeds thereof
available for investment in the Investment Funds:
(a) For the first five (5) Plan Years within his
diversification election period, any whole number of
Company Shares up to twenty-five percent (25%) of the
number of Company Shares credited to his Stock Accounts
as of the last day of the Plan Year, less the number of
Company Shares previously diversified under this
Section.
(b) For the final Plan Year within his diversification
election period, any whole number of Company Shares up
to fifty percent (50%) of the number of Company Shares
credited to his Stock Accounts as of the last day of
the Plan Year, less the number of Company Shares
previously diversified under this Section.
For purposes of this Section, the "diversification election
period" is the six (6) Plan Year period that begins with the
Plan Year in which the Participant satisfies the eligibility
requirements of Section 12.1.
12.3. Election Procedures.
- --------------------------
To diversify his Stock Accounts, a Participant must file a
diversification election with the Committee not later than
ninety (90) days after the end of the Plan Year on a form
provided by the Committee for this purpose. If a Participant
fails to file a timely election, the Participant shall be
deemed to have elected not to diversify any portion of his
Stock Accounts for such year.
12.4. Liquidation and Credit of Proceeds.
- -----------------------------------------
If a Participant files a timely diversification election, the
Committee shall direct the Trustee to convert the number of
Company Shares properly specified by the Participant to cash.
Such conversion shall be made as soon as practicable, but not
later than ninety (90) days, after the close of the election
period specified in Section 12.3 in accordance with Section
17.2. Proceeds of such conversion, together with the
Participant's share of earnings (if any) that have resulted
from the short term investment of such proceeds, shall be
credited to the Participant's ESOP Diversification Cash
Account in accordance with Section 8.6 and thereafter, as
directed by the Participant, shall be subject to the
Participant's investment direction in accordance with Article 9.
Company Shares converted to cash pursuant to a Participant's
diversification election shall be drawn first from the
Participant's Employer Matching Contribution Stock Account,
to the extent of the balance of
30
<PAGE> 37
such account, and thereafter from After-Tax Matched Contribution
Stock Account, Before-Tax Matched Contribution Stock Account,
After-Tax Unmatched Contribution Stock Account and the
Before-Tax Unmatched Contributions Stock Account.
31
<PAGE> 38
Article 13
----------
Payment of Accounts
-------------------
13.1. Benefit Payments - In General.
- ------------------------------------
A Participant (or in case of his death, his Beneficiary) shall
be entitled to receive his Distributable Benefit under the
terms and conditions of this Article after his employment with
the Employer has terminated.
13.2. Payment to Participants.
- ------------------------------
If the Participant survives to his Benefit Payment Date, his
Distributable Benefit shall be paid to him in a single-sum
payment.
The single-sum payment shall be made on, or as soon as
practicable after, the Participant's Settlement Date; provided
that, payment or commencement of payment shall not be delayed
beyond sixty (60) days after the end of the Plan Year in which
falls the later of the Participant's Settlement Date or the
date he attains age sixty-five (65); provided further that
payment or commencement of payment shall occur not later than
the Participant's Required Beginning Date irrespective of
whether the Participant's Settlement Date has occurred. A
Participant whose employment with the Employer terminates may
elect that his Distributable Benefit be paid as of any date
selected by the participant that follows his Settlement Date
and precedes his Required Beginning Date.
An election under this Section must be made on such form and
in accordance with such rules as shall be prescribed by the
Committee for this purpose.
If a Participant continues in the employ of the Employer after
his Required Beginning Date, any additional amounts credited
to his Plan Account under Article 8 shall be distributed as
soon as practicable after the credit is determined.
13.3. Payment to Beneficiaries.
- -------------------------------
If a Participant dies before he receives full payment of his
Distributable Benefit, his Beneficiary shall be paid the
remaining portion under the following rules:
(a) Death Before Benefit Payment Date: If the Participant
---------------------------------
dies before his Benefit Payment Date, his Distributable
Benefit shall be paid to his designated Beneficiary in
a single-sum payment.
The single-sum payment shall be made on, or as soon as
practicable after, the Participant's death; provided
that, payment or commencement shall not be delayed
beyond December 31 of the calendar year after the
calendar year of the Participant's death, or, if the
Participant's spouse is the Beneficiary and such date
is later, the December 31 of the calendar year in which
the Participant would have attained age 70-1/2.
(b) Death After Benefit Payment Date: If a Participant dies
--------------------------------
on or after his Benefit Payment Date, the remaining
portion of his Distributable Benefit (if any) shall be
paid to his designated Beneficiary in a single-sum
payment. The single-sum payment shall be made as soon
as practicable after the Participant's death.
32
<PAGE> 39
If no designated Beneficiary survives the Participant, the
remaining portion of his Distributable Benefit shall be paid
to his estate as Beneficiary.
13.4. Payment of Small Amounts.
- -------------------------------
Any contrary provision of this Article notwithstanding, if a
Participant's Distributable Benefit does not exceed $3,500
(and the balance of his Plan Account has not exceeded $3,500
immediately prior to any distribution), a single-sum payment
of the full amount of his Distributable Benefit shall be made
to the Participant (or in case of his death, his Beneficiary)
on or as soon as is practicable after his Settlement Date.
A payment under this Section 13.4 shall be made in cash only.
13.5. Form of Payment.
- ----------------------
All payments under this Article shall be in the form of cash
and, to the extent that the Participant's Plan Account
consists of Company Shares, whole shares; provided that, (i)
a Participant or Beneficiary who would otherwise receive
Company Shares may instead elect to have such Company Shares
converted to cash and the proceeds thereof distributed, and
(ii) a Participant or Beneficiary who would otherwise receive
cash may instead elect to have such cash converted to shares
of Company Shares (whole shares only) and distributed. Any
fractional interest in Company Shares shall be converted to
cash and distributed. A conversion of Company Shares to cash
under this Section shall be made in accordance with Section 17.2.
13.6. Special Rule for Company Shares.
- --------------------------------------
Any contrary provision of this Article notwithstanding, unless
a Participant elects that the special distribution provisions
of this Section not apply, his Distributable Benefit shall be
distributed as follows:
(a) Such portion shall be paid in substantially equal
periodic payments (not less frequently than annually)
over a period not longer than five (5) years, or, if
the value of his Distributable Benefit attributable to
Company Shares credited to his Stock Account exceeds
$500,000 (or such greater amount as may be in effect
under Code Section 409(o)(1)(C)), five (5) years plus
one (1) additional year (but not more than five (5)
additional years) for each $100,000 (or such greater
amount as may be in effect under Code Section
409(o)(1)(C)) or fraction thereof by which the value of
his Distributable Benefit attributable to Company
Shares credited to his Stock Account exceeds $500,000
(or such greater amount as may be in effect under Code
Section 409(o)(1)(C)).
(b) Except as provided below, payments under (a) shall
commence not later than one (1) year after the end of
the following:
(i) In the case of a Participant whose employment
with the Employer terminates after he attains age
sixty-five (65), or at any age by reason of death
or Disability, the Plan Year in which his
employment terminates.
(ii) In the case of a Participant whose employment
with the Employer terminates under circumstances
not described in (i), the fifth (5th) Plan Year
following the year in which his employment
terminates, provided that, this subsection shall
not apply if the Participant is reemployed with
the Employer before the end of such fifth (5th)
Plan Year.
33
<PAGE> 40
Commencement prior to the date on which a Participant
attains age sixty-five (65) shall be subject to the
Participant's consent, and, if a Participant does not
consent, commencement shall occur soon as practicable
after the Participant attains age sixty-five (65).
13.7. Required Payments.
- ------------------------
Any contrary provision of this Article notwithstanding,
payments shall be made with respect to each Participant under
the following rules:
(a) A minimum payment shall be made to a Participant for
the calendar year in which he attains age 70-1/2 and
each subsequent calendar year. The minimum payment for
the calendar year in which he attains age 70-1/2 shall
be made by the Participant's Required Beginning Date,
and the minimum payment for each subsequent calendar
year shall be made by the December 31 of such year.
(b) If a Participant dies before his Required Beginning
Date, a minimum payment will be made to each designated
Beneficiary for each calendar year beginning with the
following:
(1) If the Participant's spouse is the Beneficiary,
the later of (i) the calendar year that follows
the year of the Participant's death, or (ii) the
calendar year in which the Participant would have
attained age 70-1/2.
(2) If the Participant's spouse is not the
Beneficiary, the calendar year that follows the
year of the Participant's death.
The minimum payment for each calendar year will be made
by the December 31 of such year.
(c) If a Participant dies before his Required Beginning
Date, full payment of all amounts due to a Beneficiary
who is not a designated Beneficiary shall be made not
later than the December 31 of the calendar year in
which occurs the fifth (5th) anniversary of the
Participant's death.
(d) If a Participant dies on or after his Required
Beginning Date, all payments to a Beneficiary after the
Participant's death shall be made at least as rapidly
as the payments made to the Participant before his
death.
All payments required under this Section shall be determined
under Code Section 401(a)(9), including the minimum
distribution incidental benefit requirements thereunder.
13.8. Earnings on Plan Accounts.
- --------------------------------
If a Participant's employment with the Employer terminates and
he does not elect to receive immediate payment of his
Distributable Benefit, the Participant's Plan Account shall
continue to be credited to reflect investment return and
dividends in accordance with Sections 8.8 and 8.9.
13.9. Life Expectancies.
- ------------------------
When necessary under this Article, the life expectancy of a
Participant or his Beneficiary shall be determined by the use
of the expected return multiples in Tables V and VI of
Treasury Regulation Section 1.72-9. Life expectancies shall
not be recalculated annually for any purpose under this
Article.
34
<PAGE> 41
13.10. Eligible Rollover Distributions.
- --------------------------------------
Notwithstanding any provision of the plan to the contrary that
would otherwise limit a distributee's election under this
Section, a distributee may elect, at the time and in the
manner prescribed by the Committee, to have any portion of an
eligible rollover distribution (excluding the portion, if any,
representing a loan to the Participant) paid directly to one
(1) eligible retirement plan specified by the distributee in
a direct rollover.
(a) Eligible Rollover Distribution. An eligible rollover
------------------------------
distribution is any distribution of all or any portion
of the balance to the credit of the distributee, except
that an eligible rollover distribution does not
include: any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or
joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution
to the extent such distribution is required under Code
Section 401(a)(9); and the portion of any distribution
that is not includable in gross income (determined
without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(b) Eligible Retirement Plan. An eligible retirement plan
------------------------
is an individual retirement account described in Code
Section 408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan
described in Code Section 403(a), or a qualified trust
described in Code Section 401(a), that accepts the
distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(c) Distributee. A distributee includes an Employee or
-----------
former Employee. In addition, the employee's or former
Employee's surviving spouse or former spouse who is the
alternate payee under a qualified domestic relations
order, as defined in Code Section 414(p), are
distributees with regard to the interest of the spouse
or former spouse.
(d) Direct Rollover. A direct rollover is a payment by the
---------------
Plan to the eligible retirement plan specified by the
distributee.
35
<PAGE> 42
Article 14
----------
Beneficiaries
-------------
14.1. Designated Beneficiaries.
- -------------------------------
A Participant may designate one or more persons (concurrently,
contingently, or successively) to whom his Distributable
Benefit shall be paid if he dies before he receives complete
payment of such benefit; provided that, the sole designated
Beneficiary of a Participant who is lawfully married shall be
his spouse unless his spouse properly consents to the
designation of another person or persons as Beneficiary.
A Beneficiary designation must be made on a form provided by
the Committee for this purpose. It shall be effective on the
date the designation form actually is received by the
Committee, shall revoke all prior designations made by the
Participant, and itself may be revoked by the Participant at
any time.
A Beneficiary designation form received by the Committee after
a Participant's death shall be null and void, and during a
Participant's life, a Beneficiary designation form may be
filed only by the Participant.
14.2. Spousal Consent Requirements.
- -----------------------------------
The spouse of a Participant who designates a person or persons
other than such spouse as a Beneficiary must consent in
writing to the person or persons designated. The written
consent must acknowledge the effect of the designation, and
must be witnessed by a member of the Committee or a notary
public. The designation of a Beneficiary cannot be changed
without spousal consent to the new designation unless the
prior consent of the spouse expressly permits future
designations by the Participant without further spousal
consent.
14.3. Absence of Designated Beneficiary.
- ----------------------------------------
If no designated Beneficiary survives the Participant, then
his estate shall be his Beneficiary for purposes of this Plan.
36
<PAGE> 43
Article 15
----------
Participant Withdrawals
-----------------------
15.1. Eligibility.
- ------------------
A Participant may withdraw an amount from his Plan Account in
accordance with such rules and procedures as prescribed by the
Committee for the administration of a withdrawal program under
the Plan. The withdrawal program shall be administered by the
Committee on a uniform and nondiscriminatory basis.
37
<PAGE> 44
Article 16
----------
Participant Loans
-----------------
16.1. Loan Program; Eligibility.
- --------------------------------
A Participant or Beneficiary who is a Party in Interest as
defined in Section 3(14) of ERISA and who is employed with the
Employer may borrow from the Trust in accordance with such
rules and procedures as prescribed by the Committee for the
administration of a loan program under the Plan. The loan
program shall be administered by the Committee on a uniform
and nondiscriminatory basis and in a manner designed to insure
that loans are available to all such Participants on a
reasonably equivalent basis.
38
<PAGE> 45
Article 17
----------
Relating to Employer Shares
---------------------------
17.1. Investment in Employer Shares; ESOP.
- ------------------------------------------
The Employer Matching Contributions shall be invested by the
Investment Committee to provide Participants with whole and
fractional interests in Company Shares, subject to minimum
fractional interests established by the Investment Committee
from time to time. For any period in which such contributions
are not invested in Company Shares they shall, at the
direction of the Investment Committee, be held within the
Trust Fund in cash or invested in short-term investments.
Subject to applicable law, the Trustee may acquire Company
Shares on the open market, through private purchases,
purchases from the Company (including purchases of treasury
shares or authorized but unissued shares), or otherwise.
The portion of the Trust Fund which is invested in Company
Shares and is attributable to Employer Matching Contributions
is intended to satisfy all requirements of Code Section
4975(e)(7) and therefore constitute an employee stock
ownership plan, as defined therein.
17.2. Conversion to Cash.
- -------------------------
If it is necessary to convert Company Shares held within the
Stock Fund to cash for any reason required under the Plan, the
following shall apply:
(a) The Trustee shall purchase such shares with the cash
amounts (if any) then reflected in the Participants'
Stock Account.
(b) To the extent that Company Shares cannot be purchased
under paragraph (a) above, the Trustee shall sell such
shares on the open market, or to any other employee
benefit plan or program maintained by the Employer, or
to the Company; provided that, any sales to any such
employee benefit plan or program or to the Company must
satisfy the prohibited transaction exemption
requirements set forth in ERISA section 408(e).
The purchase of Company Shares shall be made under paragraph
(a) to the extent of the sufficiency of funds, to provide for
first, loans under Article 16, second, withdrawals under
Article 15, third, distributions under Article 13, and
finally, investment diversification under Article 12.
17.3. Voting of Employer Shares.
- --------------------------------
The Company shall use its reasonable best efforts to cause to
be delivered to each Participant (or in case of death, his
Beneficiary) such notices and informational statements as are
furnished to the Company's stockholders with respect to the
exercise of voting rights on Company Shares, together with
forms by which the Participant (or Beneficiary) may
confidentially instruct the Trustee with respect to the voting
of Company Shares allocated to his Account. The Trustee shall
vote Company Shares held within the Trust as follows:
(a) The Trustee shall vote Company Shares credited to a
Participant's Stock Account and Anheuser-Busch Stock
Account with respect to which the Trustee has received
timely direction, as directed by the Participant (or
Beneficiary) (or abstain if so directed).
39
<PAGE> 46
(b) The Trustee shall vote (i) all Company Shares not
credited to any Participant's Stock Account and
Anheuser-Busch Stock Account, and (ii) all Company
Shares credited to a Participant's Stock Account and
Anheuser-Busch Stock Account with respect to which the
Trustee has not received timely direction, in the same
proportion as the Company Shares specified in (a)
(disregarding any shares specified in (a) with respect
to which the Trustee has received a direction to
abstain).
All voting directions received by the Trustee shall be held
in confidence by the Trustee and shall not be divulged or
released to any person, including an Employee or any officer
or director of any corporation that makes up the Employer.
17.4. Tender of Employer Shares.
- --------------------------------
Any contrary provision of the Plan notwithstanding, if there
is a tender or exchange offer for, or a request or invitation
for the tender or exchange of, Company Shares, the Trustee
promptly shall furnish to each Participant (or in case of
death, his Beneficiary) a notice of such offer, request, or
invitation, and shall request direction from the Participant
(or Beneficiary) as to the tender or exchange of Company
Shares allocated to the Participant's Stock Accounts. The
Trustee shall tender or exchange, or retain, Company Shares
held within the Trust as follows:
(a) The Trustee shall tender or exchange, or retain,
Company Shares credited to a Participant's Stock
Accounts and Anheuser-Busch Stock Account with respect
to which the Trustee has received timely direction, as
directed by the Participant (or Beneficiary).
(b) The Trustee shall retain Company Shares credited to a
Participant's Stock Accounts and Anheuser-Busch Stock
Account with respect to which the Trustee has not
received timely direction.
(c) The Trustee shall tender or exchange, or retain,
Company Shares not credited to any Participant's Stock
Accounts and Anheuser-Busch Stock Account, in the same
proportion as the Employer Shares specified in (a) and
(b) are tendered or exchanged, or retained.
All tender or exchange directions received by the Trustee
shall be held in confidence by the Trustee and shall not be
divulged or released to any person, including an Employee or
any officer or director of any corporation that makes up the
Employer.
17.5. Non-Publicly Traded Shares.
- ---------------------------------
For any period during which Company Shares are not readily
tradable on an established securities market, the following
provisions shall apply:
(a) Put Option: When Company Shares are distributed to a
----------
Participant (or in case of death, his Beneficiary), the
Company shall grant the recipient an option to put the
shares to the Company; provided that, the Company may
allow the Trustee to assume the Company's rights and
obligations at the time the put is exercised. A put
option shall provide that, for a period of sixty (60)
days after such shares are distributed, the recipient
shall have the right to require the Company to purchase
such shares at their fair market value. If the put is
not exercised within such sixty (60) day period, the
put shall be available for an additional period of
sixty (60) days in the following Plan Year. A put
option can be exercised by notifying the Company in
writing.
40
<PAGE> 47
The terms of payment for the purchase of Company Shares
subject to a put shall be as set forth in the put,
subject to the following:
(1) In the case of Company Shares distributed as part
of a total distribution (as defined below),
payment shall be made in substantially equal
periodic payments (not less frequently than
annually) over a period that begins not later
than thirty (30) days after the put is exercised,
and that does not exceed five (5) years. If
payment is made in installments, adequate
security and a reasonable rate of interest shall
be provided to the recipient.
(2) In the case of Company Shares that are not
distributed as part of a total distribution,
payment shall be made within thirty (30) days
after the put is exercised.
For purposes of this subsection, a "total distribution"
means a distribution within one (1) calendar year of
the balance to the credit of the Participant's Plan
Account.
Except as otherwise provided in this subsection, or as
otherwise required by applicable law, no Company Shares
held within or distributed from the Trust shall be
subject to a put, call, or other option, or buy-sell or
similar arrangement.
(b) Distribution Requirements: Except with respect to
-------------------------
distributions required pursuant to Article 13, if
Company Shares become subject to a put option under
(a), any Employer Shares acquired with the proceeds of
a Share Purchase Loan which are held within the Trust
and credited to a Participant's Stock Accounts shall
not be distributed until such Share Purchase Loan is
fully repaid.
For purposes of this Section, whether Company Shares are
"readily tradable on an established securities market" shall
be determined in accordance with regulations or
interpretations adopted by the Internal Revenue Service under
Code Section 409(h).
41
<PAGE> 48
Article 18
----------
Former Employees/Participants
-----------------------------
18.1. Participation.
- --------------------
A person whose employment with the Employer terminates for any
reason shall become (or again become) an Active Participant
after his reemployment with the Employer in accordance with
the following provisions:
(a) If he satisfied the eligibility conditions of Section
3.1 on the day before his employment terminated, he
shall become (or again become) an Active Participant on
the date he again satisfies such eligibility
conditions.
(b) If he did not satisfy the eligibility conditions of
Section 3.1 on the day before his employment
terminated, he shall become (or again become) an Active
Participant on the entry date specified in Section 3.2
that coincides with or next follows the date he
satisfies (or again satisfies) such eligibility
conditions.
An Active Participant who becomes a Former Participant because
he fails to satisfy the eligibility conditions of Section 3.1,
but whose employment with the Employer has not terminated,
shall again become an Active Participant on the date he again
satisfies such eligibility conditions.
18.2. Cessation of Distributions.
- ---------------------------------
Subject to Section 13.2 and 13.6, all distributions from the
Trust then being made to a Former Participant shall cease as
of the date he again becomes an Active Participant.
42
<PAGE> 49
Article 19
----------
Amendment and Termination
-------------------------
19.1. Amendment.
- ----------------
Subject to Article 23, the Company reserves the right to amend
the Plan from time to time subject to the following
limitations:
(a) No amendment shall substantively change the duties and
liabilities of the Human Resources Committee or the
Investment Committee unless such Committee consents to
the amendment;
(b) No amendment shall result in the return to the Employer
of any part of the Trust or the income therefrom, or
result in the distribution of the Trust to or for the
benefit of anyone other than a Participant or
Beneficiary;
(c) No amendment shall reduce the amount or the
nonforfeitable portion of a Participant's Plan Account
balance as determined as of the later of the effective
date or the adoption date of the amendment; and
(d) No amendment shall eliminate an optional form of
distribution with respect to a Participant's existing
Plan Account balance as determined as of the later of
the effective date or the adoption date of the
amendment except as permitted under Code Section
411(d)(6).
The Company may delegate to the Investment Committee or the
Committee or its officers the power to amend the Plan as the
Company deems appropriate. Any amendment to the Plan shall
be effective with respect to all Adopting Employers without
any formal action on the part of any Adopting Employer other
than the Company.
19.2. Termination.
- ------------------
Although each Adopting Employer intends to maintain the Plan
indefinitely, the Plan is entirely voluntary on the part of
each Adopting Employer and the continuation of the Plan and
the contributions hereunder should not be construed as a
contractual obligation of any Adopting Employer. The Company
reserves the right to terminate the Plan in its entirety and
to suspend or discontinue (in whole or in part) all
contributions to the Trust under the Plan, and each Adopting
Employer reserves the right to withdraw from participation.
The Plan shall terminate in its entirety on any date specified
by the Company if advance written notice is given to the
Investment Committee, the Committee, the Trustee, and each
Adopting Employer.
19.3. Withdrawal; Discontinuance of Employer Status.
- ----------------------------------------------------
If a corporation ceases to be a part of the Employer because
of a sale of its stock, then, as of such date and unless the
Investment Committee provides otherwise, the following
provisions shall apply:
(a) Such corporation no longer shall be an Adopting
Employer or part of the Employer, except that it shall
be obligated to make the Before-Tax Contributions
specified in Article 5 that correspond to amounts
withheld from its Employees' Compensation, and transfer
the After-Tax Contributions
43
<PAGE> 50
specified in Article 4 withheld from its Employees'
Compensation, for the month that includes such date.
(b) Employees of such corporation shall be deemed to have
terminated employment with the Employer as of such
date, and their Settlement Date shall be determined
accordingly.
An Adopting Employer prospectively may revoke its election to
participate in the Plan by filing with the Investment
Committee and the Trustee a certified copy of a resolution of
its Board of Directors providing for such revocation and a
certified copy of a resolution of the Board of Directors of
the Company approving such action.
19.4. Termination Distributions.
- --------------------------------
If the Plan terminates, the Investment Committee shall direct
a final accounting and distribution of all amounts then held
in the Trust to the Participants or Beneficiaries. A
distribution shall be made to each Participant or Beneficiary
of the Plan Account balance payable to each such person in a
single-sum payment. Such distribution shall be made as soon
as practicable after the Company receives a favorable
determination from the Internal Revenue Service as to the
qualified status of the Plan under Code Section 401(a) upon
its termination, but not later than one (1) year after the
Plan terminates.
44
<PAGE> 51
Article 20
----------
Mergers, Transfers, and Rollovers
---------------------------------
20.1. Plan Merger, Consolidation or Benefit Transfer.
- -----------------------------------------------------
This Plan shall not merge or consolidate with any other
qualified plan, nor shall assets or liabilities be transferred
to any other qualified plan, unless each Participant would (if
the Plan had then terminated) receive a benefit immediately
after the merger, consolidation, or transfer that is equal to
or greater than the benefit that he would have received
immediately before the merger, consolidation, or transfer (if
the Plan had then terminated).
This Plan shall not merge or consolidate with any defined
benefit pension plan.
20.2. Rollover Contributions.
- -----------------------------
An Active Participant who has a Plan Account maintained on his
behalf which is credited with Before-Tax Contributions and/or
After-Tax Contributions may contribute to the Trust Fund cash
amounts distributed from any other qualified plan or conduit
individual retirement account (as described in Code Section
408(d)(3)(A)(ii)) within sixty (60) days after such
distribution, if the distribution is eligible for rollover
treatment under the applicable provisions of Code Section
402(a) or 408(d). Contributions made under this Section shall
be identified as "Rollover Contributions" for purposes of this
Plan.
Rollover Contributions shall be reflected in a Rollover
Contribution Cash Account established on behalf of the
Employee under Section 8.1. An Employee (or in case of death,
his Beneficiary) shall have a nonforfeitable interest in his
Rollover Contribution Cash Account at all times.
45
<PAGE> 52
Article 21
----------
Plan Administration
-------------------
21.1. Human Resources Committee.
- --------------------------------
The Plan shall be administered by the HUMAN RESOURCES
COMMITTEE. Each member of such committee is a "named
fiduciary" within the meaning of Section 402(e) of ERISA with
respect to the administration of the Plan.
21.2. Committee Powers.
- -----------------------
The Committee shall have such discretionary powers as are not
specifically reserved to the Company, the Investment Committee
or the Trustee which are appropriate to administer the Plan,
including, but not limited to, the following:
(a) To determine all questions arising under the Plan,
including the power to determine the rights and
eligibility of Employees or Participants and their
Beneficiaries, and the amount of any benefits due such
persons under the Plan;
(b) To construe the terms of the Plan and to remedy
ambiguities, inconsistencies or omissions;
(c) To adopt such rules of procedure as it considers
appropriate for the proper administration of the Plan
and are consistent with the Plan;
(d) To enforce the Plan provisions and the rules of
procedure which it adopts;
(e) To direct payments or distributions from the Trust
under the provisions of the Plan;
(f) To furnish the Employer with such information relating
to the Plan as may be required by it for tax or other
purposes;
(g) To employ agents, attorneys, accountants, actuaries or
other persons, and to allocate or delegate to them such
powers, rights and duties as it considers appropriate
for the proper administration of the Plan;
(h) To initiate such amendments to the Plan as may be in
substance authorized by the Board of Directors of the
Company;
(i) To make equitable adjustments for any mistakes or
errors made in the administration of the Plan;
(j) To request an audit of the Trust to be made at
reasonable times (but at least annually) by a certified
public accountant, subject to the approval of the
Company.
The Committee shall have such further powers and duties as may
be elsewhere specified in the Plan or trust agreement between
the Company and the Trustee.
46
<PAGE> 53
21.3. Benefit Payments.
- -----------------------
The Committee shall direct the Trustee, either in writing or
orally with written confirmation, to make payments from the
Trust to Participants and Beneficiaries in accordance with the
Plan. Written directions to the Trustee shall contain such
information as may reasonably be required by the Trustee for
this purpose.
21.4. Committee Officers.
- -------------------------
The Board of Directors of the Company shall appoint a Chairman
from among the members of the Committee, and the Committee
shall select a Secretary who may, but need not be, a member
of the Committee.
21.5. Committee Actions.
- ------------------------
The Committee shall act by a majority of its members, subject
to the following:
(a) The Committee may delegate authority to a specific
member(s) of the Committee to carry out such duties as
the Committee may assign;
(b) A member of the Committee may by writing delegate any
or all his rights, powers, duties and discretions to
any other member of the Committee, with the consent of
the latter;
(b) The Committee may retain counsel, employ agents, and
provide for such clerical and accounting services as it
may require to administer the Plan; and
(c) When there is an even division of opinion among the
members of the Committee as to a matter, the Board of
Directors of the Company shall decide the matter.
The actions of the Committee must be taken at a meeting or in
writing without a meeting. Three (3) members of the Committee
shall constitute a quorum, but the concurrence of at least
three (3) members shall be necessary for any action.
21.6. Committee Member Who is Participant.
- ------------------------------------------
If a member of the Committee is a Participant, he may not
decide any matter relating to his participation or Plan
Account or how his Plan Account or any portion thereof is to
be paid to him that he would not have the right to decide were
he not a member of the Committee, and he shall not receive any
compensation for his services in the administration of the
Plan.
21.7. Resignation or Removal.
- -----------------------------
A member of the Committee may resign at any time by giving
thirty (30) days advance written notice to the Board of
Directors of the Company and to each other Committee member.
The Company may remove a member of the Committee with or
without cause by giving advance written notice to such member
and each other member of the Committee.
A member of the Committee who is an Employee shall cease to
be a member of the Committee as of the date his employment
with the Employer terminates for any reason unless the Board
of Directors of the Company acts to continue him as a member.
47
<PAGE> 54
21.8. Information Required from Employer.
- -----------------------------------------
The Employer shall furnish the Committee with such data and
information as the Committee deems appropriate to administer
the Plan. The records of the Employer as to an Employee's
period(s) of employment and Compensation, shall be conclusive
on all persons unless determined by the Committee to be
clearly incorrect.
21.9. Information Required from Employees.
- ------------------------------------------
Each person entitled to benefits under the Plan must furnish
the Committee from time to time in writing such person's post
office address, each change of post office address, and such
other data and information as the Committee deems appropriate
to administer the Plan. Any communication, statement or
notice addressed to any person at the last post office address
filed with the Committee shall be binding upon such person for
all purposes of the Plan.
21.10. Uniform Rules and Administration.
- ---------------------------------------
The Committee shall administer the Plan on a reasonable and
nondiscriminatory basis and shall apply uniform rules to all
persons similarly situated.
48
<PAGE> 55
Article 22
----------
Claims Procedure
----------------
22.1. Written Claim for Benefits.
- ---------------------------------
A Participant, Beneficiary or any other person who believes
that he is entitled to, but has been improperly denied, a
distribution or benefit under the Plan may file a claim for
such distribution or benefit with the Committee. Such claim
must be filed on such form and with such documentation as the
Committee shall prescribe.
22.2. Initial Review of Claim.
- ------------------------------
The Committee shall consider all properly filed claims for
distribution or benefit and shall notify the claimant in
writing within sixty (60) days of receipt of the claim as to
whether the claim is allowed or denied.
If the Committee denies a claim, the written notice informing
the claimant of the denial shall include the following:
(a) The specific reason(s) for the denial of the claim;
(b) The pertinent Plan provision(s) on which the denial is
based;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary; and
(d) An explanation of the claim review procedure available
to the claimant.
The Committee may deny a claim in whole or in part and shall
notify the claimant of the extent of the denial.
22.3. Claim Review Procedure.
- -----------------------------
A claimant who receives notice that his claim for distribution
or benefit is denied in whole or in part may, within sixty
(60) days after the receipt of the notice, apply to the
Committee for a review of the decision. Such application must
be made on a form provided by the Committee for this purpose.
A claimant who files a claim for review with the Committee
shall have the following rights:
(a) Upon reasonable notice to the Committee, the claimant
may examine documents in the possession of the
Committee that are pertinent to the decision under
review; and
(b) The claimant may submit written comments and issues to
the Committee relating to the decision under review.
The Committee shall notify the claimant in writing within
sixty (60) days of the later of the receipt of the application
for review or the receipt of written comments and issues from
the claimant as to whether the claim is allowed or denied.
If the application is denied, the written notice informing the
claimant of the denial shall include the information specified
in Section 22.2.
49
<PAGE> 56
22.4. Review Decisions Final.
- -----------------------------
A decision by the Committee on an application for review shall
be final and binding on all parties.
50
<PAGE> 57
Article 23
----------
Change-in-Control Provisions
----------------------------
23.1. Restriction in Case of Change-in-Control.
- -----------------------------------------------
Any contrary provision of the Plan notwithstanding, in the
event of a Change-in-Control of the Company, the unvested
portion of a Participant's Account shall immediately become
100% non-forfeitable.
23.2. Change-in-Control.
- ------------------------
For purposes of this Article, a "Change-in-Control" means the
merger or consolidation of the Company with or into another
corporation as the result of which the Company is not the
continuing or surviving corporation; the sale or other
disposition of all or substantially all of the assets of the
Company (including the exchange of such assets for the
securities of another corporation); the acquisition by another
person of 50% or more of the Company's then outstanding shares
of voting stock; the recapitalization, reclassification,
liquidation or dissolution of the Company; or other
transaction involving the Company pursuant to which the common
stock of the Company would be converted into cash, securities
or other property.
51
<PAGE> 58
Article 24
----------
Adopting Employers
------------------
24.1. Participation in Plan.
- ----------------------------
Any Employer may, with the consent of the Board of Directors
of the Company, become a party to this Plan by adopting the
Plan as its defined contribution plan for its employees. Upon
the filing with the Trustee of a certified copy of the
resolutions or other document evidencing adoption of the Plan
and a written instrument showing the consent of the Board of
Directors of participation of such Employer, it shall
thereupon be included in the Plan as an Adopting Employer.
The Board of Directors shall, subject to applicable law,
designate the extent, if any, to which the Employees of the
Employer may be recognized for service credit with the
predecessor companies prior to the date of such adoption for
purposes of the Plan. Any contributions by any Employer shall
be held by the Trustee subject to the terms and provisions of
the Plan and of the Trust Agreement.
24.2. Withdrawal of Participation in Plan.
- ------------------------------------------
Upon any voluntary withdrawal by an Adopting Employer (after
giving written notice of intention to withdraw to the
Investment Committee), the Investment Committee shall
determine that portion of the Trust Fund allocable to the
Participants and their Beneficiaries thereby affected,
consistent with the provisions of ERISA and the regulations
thereunder. Subject to the provisions of ERISA and
regulations thereunder, the Investment Committee shall then
instruct the Trustee to set aside from the trust assets then
held by it, such security and other property as it shall, with
the approval of the Investment Committee, deem to be equal in
value to the portion of the Trust Fund so allocable to the
withdrawing Employer. The Investment Committee shall direct
the Trustee, subject to the provisions of ERISA and
regulations thereunder, either (1) to hold such assets so set
aside and to apply same for the exclusive benefit of the
Participants and Beneficiaries so affected on the same basis
as if the Trust Fund had been terminated pursuant to Section
19.2 upon the date of such withdrawal, or (2) to deliver such
assets to trustees to be selected by such withdrawing
Employer.
52
<PAGE> 59
Article 25
----------
General Provisions
------------------
25.1. Prohibited Inurement.
- --------------------------
The principal or income of the Trust shall not be paid or
revert to the Employer or be used for any purpose other than
the exclusive benefit of the Participants and Beneficiaries
and the payment of the reasonable and necessary expenses of
the Trust.
This Section shall not prohibit the return, upon demand of the
Employer, of a contribution made by the Employer to the Trust
if:
(a) The contribution is made as a result of a mistake of
fact and the return is within one year of the payment
of the contribution; or
(b) The deduction for the contribution is disallowed under
Code Section 404 and the return (to the extent that a
deduction is disallowed) is within one year of the
disallowance.
Any contribution returned to the Employer under this Section
shall be reduced by any portion of such contribution that
previously was distributed and by any losses of the Trust
allocable to such contribution.
In no event shall the return of any contribution cause any
Participant's Plan Account balance to be less than the amount
of such balance had the contribution not been made.
25.2. No Employment Rights.
- ---------------------------
The Plan is not a contract of employment, and participation
in the Plan shall not confer upon any Employee the right to
be retained in the employ of the Employer.
25.3. Interests Not Transferable.
- ---------------------------------
Subject to Code Section 401(a)(13)(B), and except as may be
required by application of the withholding provisions of the
Code or of any state's tax laws, no benefit or interest under
the Plan shall be subject to assignment or alienation, either
voluntary or involuntary. Payment of benefits to an alternate
payee under a qualified domestic relations order meeting the
requirements of Code Section 414(p) shall be made on the
earliest date allowed under the domestic relations order,
which date may be prior to the time the Participant would be
eligible to receive a distribution under the terms of the
Plan.
25.4. Absence of Guarantee.
- ---------------------------
Benefits under the Plan shall be paid only out of the Trust
and the Employer has no legal obligation or liability to make
any direct payment of benefits due under the Plan. Neither
the Investment Committee nor the Employer in any way
guarantees the Trust from loss or depreciation, nor in any way
guarantees any payment to any person except as may be required
under law.
53
<PAGE> 60
25.5. Actions by Employer.
- --------------------------
Any action taken by any corporation that makes up the Employer
with respect to the Plan shall be by resolution of its Board
of Directors or by a person or persons authorized by
resolution of its Board of Directors.
25.6. Insurance.
- ----------------
To the extent provided in resolutions of the Board of the
Directors of the Company that are in effect on the Effective
Date, the Employer shall indemnify, or purchase insurance for,
any officer, director, Employee, member of the Investment
Committee, or the Committee to protect such person against
liabilities arising from actions for omissions under this
Plan. The Company shall notify the Investment Committee and
the Committee promptly upon the modification or termination
of such resolutions as they may apply to the Investment
Committee, the Committee and its members.
25.7. Expenses.
- ---------------
To the extent not paid by the Employer, all costs of Plan
administration shall be paid by the Trustee out of Trust
assets and shall be allocated among all Plan Accounts in an
equitable manner determined by the Investment Committee.
25.8. Facility of Payment.
- --------------------------
If any person entitled to receive any benefit payment under
the Plan is, in the sole judgment of the Committee, under a
legal disability or is incapacitated in such a way as to be
unable to handle his financial affairs, the Committee may
cause all payments due to such person to be made for the
benefit of such person to any other person designated by the
Committee. Any such payment shall operate as a complete
discharge to the Employer, the Investment Committee, the
Committee, and the Trustee.
25.9. Missing Participants.
- ---------------------------
The Committee need not search for or locate any Participant
or Beneficiary. If the Committee notifies a Participant or
Beneficiary that he is entitled to a benefit, and such person
fails to file a claim for benefit or otherwise make his
whereabouts known to the Committee within a reasonable period
of time after the notification, the payment to which he is
entitled shall be disposed of in an equitable manner as
permitted by law. Notification by the Committee mailed to the
last post office address filed with the Committee shall be
sufficient notice of benefit entitlement for this purpose.
25.10. Applicable Law.
- ---------------------
The Plan shall be governed by the internal laws of the state
of Missouri to the extent that federal law does not preempt
such laws.
54
<PAGE> 61
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1
to be executed this ----- day of --------------------, 1996.
ATTEST: THE EARTHGRAINS COMPANY
By:
- ------------------------- -------------------------
Title:
----------------------
55
<PAGE> 62
Appendix A
----------
Identifying Highly Compensation Employees
-----------------------------------------
A.1. Introduction.
- ------------------
This Appendix applies to determine the identity of Highly
Compensated Employees for a Plan Year.
To the extent that this Appendix does not contain all rules
in Code Section 414(q) (and the regulations thereunder) that
apply for this purpose, such rules are incorporated herein by
reference and shall supplement this Appendix.
A.2. Highly Compensated Employee.
- ---------------------------------
An Employee is a "Highly Compensated Employee" for a Plan Year
if he performs services for the Employer during the Plan Year
and any of the following conditions is satisfied:
(a) The Employee is a five percent (5%) owner of any
corporation that makes up the Employer at any time
during the prior Plan Year or current Plan Year;
(b) The Employee received Compensation of more than $50,000
(or such greater amount in effect under Code Section
414(q)(1)(C)) for the prior Plan Year and was a member
of the group consisting of the top twenty percent (20%)
of the Employees when ranked by Compensation:
(c) The Employee received Compensation of more than $75,000
(or such greater amount in effect under Code Section
414(q)(1)(B)) for the prior Plan Year;
(d) The Employee received Compensation of more than $45,000
(or such greater amount as equals fifty percent (50%) of
the amount in effect under Code Section 415(b)(1)(A))
for the prior Plan Year and was an officer of the
Employer at any time during such year.
An Employee also is a Highly Compensated Employee for the
current Plan Year if he is one of the top 100 Employees when
ranked by Compensation received for the current Plan Year and
is described in (b), (c) or (d) when such paragraphs are
applied based on the current Plan Year (determined based on
the applicable dollar limitations identified above that are
in effect for the current Plan Year).
In determining whether an Employee is a Highly Compensated
Employee, the rules contained in Code Section 414(q)(6) shall
apply.
A.3. Employee Percentages.
- --------------------------
To determine the number of Employees for purposes of A.2(b),
all Employees who perform services for the Employer during a
Plan Year shall be counted as Employees except the following:
(a) An Employee who has not completed six (6) months of
service by the end of the Plan Year (including service
completed in the immediately preceding Plan Year);
(b) An Employee who normally works less than seventeen and
one-half (17-1/2) hours per week;
(c) An Employee who normally works less than six (6) months
during any Plan Year;
A-1
<PAGE> 63
(d) An Employee who has not attained age twenty-one (21) by
the end of the Plan Year.
The Employer can modify the exclusions under (a), (b), (c) or
(d) above by substituting any shorter period of service or
lower age than that specified; provided that such modification
must be made on a uniform and consistent basis for all
employee benefit plans maintained by the Employer.
A.4. Special Rules for Officers.
- --------------------------------
To determine whether an Employee is a Highly Compensated
Employee by reason of his position as an officer of a
corporation that makes up the Employer, the following rules
apply:
(a) No more than fifty (50) Employees shall be treated as
officers; and
(b) If for any year no officer is described in A.2(d) above,
then the highest paid officer shall be treated as a
Highly Compensated Employee.
If the number of Employees who are treated as officers is
limited under (a) above, then the officers with the greatest
Compensation for the year shall be treated as Highly
Compensated Employees.
A.5. Tie-Breaking Elections.
- ----------------------------
To determine the identity of Highly Compensated Employees, the
Employer shall adopt rounding and tie-breaking rules that are
reasonable, nondiscriminatory, and uniformly and consistently
applied.
A-2
<PAGE> 64
Appendix B
----------
Service Crediting Rules
-----------------------
B.1. Introduction.
- ------------------
This Appendix applies to determine the Hours of Service of an
Employee for purposes of the Plan.
To the extent that this Appendix does not contain all rules
in section 2530.200b-2 of the Code of Federal Regulations that
apply for this purpose, such rules are incorporated herein by
reference and shall supplement this Appendix.
B.2. Hours of Service.
- ----------------------
An Employee shall be credited with an Hour of Service for each
of the following:
(a) Each hour for which he is paid, or entitled to a
payment, by the Employer for a period during which he
performs services for the Employer;
(b) Each hour for which he is paid, or entitled to a
payment, by the Employer for a period during which he
does not perform services for the Employer (irrespective
of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity, layoff,
jury duty, military duty, or leave of absence;
(c) Each hour for which he is awarded back pay or for which
the Employer agrees to back pay (irrespective of the
mitigation of damages) unless an hour has been credited
for the same period under (a) or (b) above; and
(d) In the case of an Employee (or former Employee) who is
on an authorized leave of absence or on active duty with
any branch of the military service of the United States
and who is not directly or indirectly paid or entitled
to payment by the Employer during such period, an Hour
of Service is every regular working hour of every
regular working day for which such person would have
been credited with an Hour of Service (based on his
normal work schedule in effect at the time of the
beginning of such leave or military service) had he been
actively at work during the period of such leave or
military service, but only if such person returns to
work at the end of such leave or (in the case of
military service) during the period in which his
reemployment rights are protected by Federal law.
Hours credited under (c) shall be credited for the period to
which the award or agreement pertains rather than the period
in which the award, agreement or payment is made.
B-1
<PAGE> 65
Appendix C
----------
Excess After-Tax Contributions
------------------------------
C.1. Introduction.
- ------------------
This Appendix applies for the following purposes:
(a) To determine the After-Tax Contribution Percentage for
each group of Participants specified in Section 4.3; and
(b) To determine the proper correction method if Section 4.3
is not satisfied for the Plan Year.
To the extent that this Appendix does not contain all rules
in Code Section 401(m) (and the regulations thereunder) that
apply for this purpose, such rules are incorporated herein by
reference and shall supplement this Appendix.
C.2. After-Tax Contribution Percentage.
- ---------------------------------------
The following definitions apply for purposes of Section 4.3
and this Appendix:
(a) The "After-Tax Contribution Percentage" ("ACP") for a
group of Participants is the average of the After-Tax
Contribution Ratios of each Participant in the group.
(b) The "After-Tax Contribution Ratio" ("ACR") of a
Participant is the ratio determined by dividing his
After-Tax Contributions for the Plan Year by his
Compensation.
For purposes of this Section, a Participant's Compensation is
the Compensation he received for that portion of the Plan Year
during which he was a Participant. Thereafter, a
Participant's Compensation is the Compensation he received for
the full Plan Year, including periods during the Plan Year
during which he was not a Participant.
C.3. Excess After-Tax Contributions.
- ------------------------------------
If Section 4.3 is not satisfied for a Plan Year, then some or
all Highly Compensated Employees shall have made an excess
After-Tax Contribution for the Plan Year.
The amount of the excess After-Tax Contribution of a Highly
Compensated Employee shall be determined as follows:
(a) The ACR of the Highly Compensated Employee with the
highest ACR is reduced as necessary to satisfy Section
4.3, or cause the ACR of such Highly Compensated
Employee to equal the ACR of the Highly Compensated
Employee with the next highest ACR.
(b) The process in (a) is repeated as necessary to satisfy
Section 4.3.
The excess After-Tax Contribution of a Participant is equal
to the dollar amount represented by the reduction in his ACR
caused by the application of the above rules.
C-1
<PAGE> 66
C.4. Distribution of Excess.
- ----------------------------
The Committee shall cause to distribute the excess After-Tax
Contribution of each Highly Compensated Employee (plus the
gain or minus the loss allocable thereto) to satisfy Section
4.3. The distribution shall be made by the last day of the
Plan Year following the Plan Year in which the excess After-
Tax Contribution was made.
Amounts distributed under this Appendix shall be debited to
the Participant's After-Tax Contribution Cash Account, and
shall be drawn from each Investment Fund in which such account
is invested in proportion to the amount invested in each such
fund immediately after the Valuation Date that precedes the
date of the distribution.
Amounts distributed under this Appendix shall not include any
part of any Employer Matching Contribution attributable to
excess After-Tax Contributions. Employer Matching
Contributions attributable to excess After-Tax Contributions
shall be forfeited and shall be applied in accordance with the
provisions of Section 11.3.
C.5. Gain (Loss) on Distributions.
- ----------------------------------
The gain (or loss) allocable to an excess After-Tax
Contribution distributed under this Appendix is equal to the
net gain (or loss) for the Plan Year credited (or debited) to
the Participant's After-Tax Contribution Cash Account
multiplied by a fraction, the numerator of which is the dollar
amount of the excess After-Tax Contribution and the
denominator of which is the balance in such account at the end
of the Plan Year reduced by the net gain (or increased by the
net loss) credited (or debited) to such account for the Plan
Year.
C.6. Multiple Use Test.
- -----------------------
After the excess After-Tax Contribution (determined under this
Appendix), and the excess Before-Tax Contribution (determined
under Appendix E), has been determined for each Highly
Compensated Employee, the "multiple use test" specified in
regulations adopted under Code Section 401(m) shall be applied
by comparing the ACP for each group of Participant's specified
in Section 4.3 with the Before-Tax Contribution Percentage (as
determined under Appendix E) for each group of Participants
specified in Section 5.4. If the multiple use test is not
satisfied for a Plan Year, then some or all Highly Compensated
Employees shall be considered to have made an additional
excess After-Tax Contribution for the Plan Year. The amount
of the additional excess After-Tax Contribution shall be
determined in accordance with the process specified in C.4,
which shall be applied as necessary to satisfy the multiple
use test. The Committee shall cause to distribute the
additional excess After-Tax Contribution of each Highly
Compensated Employee (plus the gain or minus the loss
allocable thereto) as specified above in this Appendix.
For purposes of applying the multiple use test specified
herein, the ACP for the group of Highly Compensated Employees
shall be determined by disregarding the excess After-Tax
Contribution of each such Highly Compensated Employee as
determined under this Appendix without regard to this C.7, and
the Before-Tax Contribution Percentage for the group of Highly
Compensated Employees shall be determined by disregarding the
excess Before-Tax Contribution of each such Highly Compensated
Employee as determined under Appendix E (including the excess
Before-Tax Contribution which results from applying the
multiple use test specified in Appendix E).
C-2
<PAGE> 67
Appendix D
----------
Excess Deferrals
----------------
D.1. Introduction.
- ------------------
This Appendix applies if the elective deferrals (as defined
in Code Section 402(g)(3)) of a Participant exceed $9,500 (or
such greater amount in effect under Code Section 402(g)(1))
and the Participant requests that a corrective distribution
of the excess be made from under this Plan.
To the extent that this Appendix does not contain all rules
in Code Section 402(g) (and the regulations thereunder) that
apply for this purpose, such rules are incorporated herein by
reference and shall supplement this Appendix.
D.2. Request and Distribution.
- ------------------------------
A Participant may request that a corrective distribution of
excess deferrals be made from the Trust Fund by filing a
request with the Committee on a form provided by the Committee
for this purpose, subject to the following:
(a) The request must be filed no later than March 1
following the calendar year in which the Participant
made the excess deferrals;
(b) The request must specify the amount of the excess
deferral that the Participant attributes to the Plan;
and
(c) The Participant must certify that the amount requested
is an excess deferral or provide such evidence as is
required by the Committee to establish that the amount
request is in fact an excess deferral.
The Committee shall promptly review each request and, if it
approves the request, shall instruct the Trustee to distribute
the requested amount (plus the gain or minus the loss
allocable thereto) to the Participant not later than the
April 15 after the request is filed. In the event the
elective deferrals of a Participant exceed the amount
specified in D.1. and the Participant does not request a
corrective distribution of such excess deferrals, such
Participant shall be deemed to have made such request for
distribution of such excess deferrals so that such amounts can
be distributed to such Participant.
Amounts distributed under this Appendix shall be debited to
the Participant's Before-Tax Contribution Cash Account, and
shall be drawn from each Investment Fund in which such account
is invested in proportion to the amount invested in each such
fund immediately after the Valuation Date that precedes the
date of the distribution.
D.3. Income on Distributions.
- -----------------------------
The gain (or loss) allocable to an excess deferral distributed
under this Appendix is equal to the net gain (or loss) for the
Plan Year credited (or debited) to the Participant's Before-
Tax Contribution Cash Account multiplied by a fraction, the
numerator of which is the dollar amount of the excess deferral
and the denominator of which is the balance in such account
at the end of the Plan Year reduced by the net gain (or
increased by the net loss) credited (or debited) to such
account for the Plan Year.
D-1
<PAGE> 68
D.4. No Distribution Within the Year.
- -------------------------------------
No corrective distributions of excess deferrals shall be made
before the end of the Plan Year in which the deferrals were
made.
D-2
<PAGE> 69
Appendix E
----------
Excess Before-Tax Contributions
-------------------------------
E.1. Introduction.
- ------------------
This Appendix applies for the following purposes:
(a) To determine the Before-Tax Contribution Percentage for
each group of Participants specified in Section 5.4; and
(b) To determine the proper correction method if Section 5.4
is not satisfied for the Plan Year. To the extent that
this Appendix does not contain all rules in Code Section
401(k) (and the regulations thereunder) that apply for
this purpose, such rules are incorporated herein by
reference and shall supplement this Appendix.
E.2. Before-Tax Contribution Percentage.
- ----------------------------------------
The following definitions apply for purposes of Section 5.4
and this Appendix:
(a) The "Before-Tax Contribution Percentage" ("BCP") for a
group of Participants is the average of the Before-Tax
Contribution Ratios of each Participant in the group.
(b) The "Before-Tax Contribution Ratio" ("BCR") of a
Participant is the ratio determined by dividing his
Before-Tax Contributions for the Plan Year (disregarding
any Elective Contributions distributed or that will be
distributed under Appendix D) by his Compensation.
For purposes of this Section, a Participant's Compensation is
the Compensation he received for that portion of the Plan Year
during which he was a Participant. Thereafter, a
Participant's Compensation is the Compensation he received for
the full Plan Year, including periods during the Plan Year
during which he was not a Participant.
E.3. Before-Tax Elective Contributions.
- ---------------------------------------
If Section 5.4 is not satisfied for a Plan Year, then some or
all Highly Compensated Employees shall have made an excess
Before-Tax Contribution for the Plan Year.
The amount of the excess Before-Tax Contribution of a Highly
Compensated Employee is determined as follows:
(a) The BCR of the Highly Compensated Employee with the
highest BCR is reduced as necessary to satisfy Section
5.4, or cause the BCR of such Highly Compensated
Employee to equal the BCR of the Highly Compensated
Employee with the next highest BCR.
(b) The process in (a) is repeated as necessary to satisfy
Section 5.4.
The excess Before-Tax Contribution of a Participant is equal
to the dollar amount represented by the reduction in his BCR
caused by the application of the above rules.
E-1
<PAGE> 70
E.4. Distribution of Excess.
- ----------------------------
The Committee shall cause to distribute the excess Before-Tax
Contribution of each Highly Compensated Employee (plus the
gain or minus the loss allocable thereto) to satisfy Section
5.4. The distribution shall be made by the last day of the
Plan Year following the Plan Year in which the excess Before-
Tax Contribution was made.
Amounts distributed under this Appendix shall be debited to
the Participant's Before-Tax Contribution Cash Account, and
shall be drawn from each Investment Fund in which such account
is invested in proportion to the amount invested in each such
fund immediately after the Valuation Date that precedes the
date of the distribution.
Amounts distributed under this Appendix shall not include any
part of any Employer Matching Contribution attributable to
excess Before-Tax Contributions. Employer Matching
Contributions attributable to excess Before-Tax Contributions
shall be forfeited and shall be applied in accordance with the
provisions of Section 11.3.
E.5. Gain (Loss) on Distributions.
- ----------------------------------
The gain (or loss) allocable to an excess Before-Tax
Contribution distributed under this Appendix is equal to the
net gain (or loss) for the Plan Year credited (or debited) to
the Participant's Before-Tax Contribution Cash Account
multiplied by a fraction, the numerator of which is the dollar
amount of the excess Before-Tax Contribution and the
denominator of which is the balance in such account at the end
of the Plan Year reduced by the net gain (or increased by the
net loss) credited (or debited) to such account for the Plan
Year.
E.6. Multiple Use Test.
- -----------------------
After the excess Before-Tax Contribution (determined under
this Appendix), and the excess Matching Contribution
(determined under Appendix F), has been determined for each
Highly Compensated Employee, the "multiple use test" specified
in regulations adopted under Code Section 401(m) shall be
applied by comparing the BCP for each group of Participant's
specified in Section 5.4 with the Matching Contribution
Percentage (as determined under Appendix F) for each group of
Participants specified in Section 6.4. If the multiple use
test is not satisfied for a Plan Year, then some or all Highly
Compensated Employees shall be considered to have made an
additional excess Before-Tax Contribution for the Plan Year.
The amount of the additional excess Before-Tax Contribution
shall be determined in accordance with the process specified
in E.3, which shall be applied as necessary to satisfy the
multiple use test. The Committee shall cause to distribute
the additional excess Before-Tax Contribution of each Highly
Compensated Employee (plus the gain or minus the loss
allocable thereto) as specified above in this Appendix.
For purposes of applying the multiple use test specified
herein, the BCP for the group of Highly Compensated Employees
shall be determined by disregarding the excess Before-Tax
Contribution of each such Highly Compensated Employee as
determined under this Appendix without regard to this E.6.
E-2
<PAGE> 71
Appendix F
----------
Excess Matching Contributions
-----------------------------
F.1. Introduction.
- ------------------
This Appendix applies for the following purposes:
(a) To determine the Matching Contribution Percentage for
each group of Participants specified in Section 6.3; and
(b) To determine the proper correction method if Section 6.3
is not satisfied for the Plan Year.
To the extent that this Appendix does not contain all rules
in Code Section 401(m) (and the regulations thereunder) that
apply for this purpose, such rules are incorporated herein by
reference and shall supplement this Appendix.
F.2. Matching Contribution Percentage.
- --------------------------------------
The following definitions apply for purposes of Section 6.3
and this Appendix:
(a) The "Matching Contribution Percentage" ("MCP") for a
group of Participants is the average of the Matching
Contribution Ratios of each Participant in the group.
(b) The "Matching Contribution Ratio" ("MCR") of a
Participant is the ratio determined by dividing his
Matching Contributions for the Plan Year by his
Compensation.
For purposes of this Section, a Participant's Compensation is
the Compensation he received for that portion of the Plan Year
during which he was a Participant. Thereafter, a
Participant's Compensation is the Compensation he received for
the full Plan Year, including periods during the Plan Year
during which he was not a Participant.
F.3. Excess Matching Contributions.
- -----------------------------------
If Section 6.3 is not satisfied for a Plan Year, then some or
all Highly Compensated Employees shall have received an excess
Matching Contribution for the Plan Year.
The amount of the excess Matching Contribution received by a
Highly Compensated Employee is determined as follows:
(a) The MCR of the Highly Compensated Employee with the
highest MCR is reduced as necessary to satisfy Section
6.3, or cause the MCR of such Highly Compensated
Employee to equal the MCR of the Highly Compensated
Employee with the next highest MCR.
(b) The process in (a) is repeated as necessary to satisfy
Section 6.3.
The excess Matching Contribution received by a Participant is
equal to the dollar amount represented by the reduction in his
MCR caused by the application of the above rules.
F-1
<PAGE> 72
F.4. Distribution of Excess.
- ----------------------------
The Committee shall cause to distribute the excess Matching
Contribution received by each Highly Compensated Employee
(plus the gain or minus the loss allocable thereto) to satisfy
Section 6.3. The distribution shall be made by the last day
of the Plan Year following the Plan Year for which the excess
Matching Contribution was received.
Amounts distributed under this Appendix shall be debited first
to the Participant's ESOP Diversification Cash Account (from
the segregated portion thereof that reflects the proceeds from
the liquidation of Company Shares credited to the
Participant's Matching Contribution Stock Account), to the
extent of the balance of such account, and thereafter to the
Participant's Matching Contribution Cash Account. Amounts
debited to the Participant's ESOP Diversification Cash Account
shall be drawn from each Investment Fund in which such account
is invested in proportion to the amount invested in each such
fund immediately after the Valuation Date that precedes the
date of the distribution. If a Participant's Matching
Contribution Cash Account is not sufficient to provide any
required payment under this Section, first Company Shares
reflected in the Cash Purchase Fund and thereafter Company
Shares reflected in the Loan Purchase Fund shall be converted
to cash to provide for the required payment.
F.5. Gain (Loss) on Distributions.
- ----------------------------------
The gain (or loss) allocable to an excess Matching
Contribution distributed under this Appendix is equal to the
net gain (or loss) for the Plan Year credited (or debited) to
the Participant's Matching Cash Account multiplied by a
fraction, the numerator of which is the dollar amount of the
excess Matching Contribution and the denominator of which is
the balance in such account at the end of the Plan Year
reduced by the net gain (or increased by the net loss)
credited (or debited) to such account for the Plan Year.
F-2
<PAGE> 73
Appendix G
----------
Top-Heavy Provisions
--------------------
G.1. Introduction.
- ------------------
This Appendix applies to determine whether the Plan is a Top-
Heavy Plan for a Plan Year.
To the extent that this Appendix does not contain all rules
in Code Section 416 (and the regulations thereunder) that
apply for this purpose, such rules are incorporated herein by
reference and shall supplement this Appendix.
G.2. Top-Heavy Plan.
- --------------------
For purposes of Section 6.4 and this Appendix, the Plan is
Top-Heavy for a Plan Year if, as of the determination date,
the adjusted accrued benefit of key-employees under all
qualified plans within the aggregation group is more than
sixty percent (60%) of the adjusted accrued benefit of all
non-key employees under all qualified plans within the
aggregation group.
G.3. Key-Employees; Non-Key Employees.
- --------------------------------------
A "key-employee" is any Employee who at any time during the
Plan Year or any of the four (4) preceding Plan Years was:
(a) An officer of any corporation that makes up the Employer
with Compensation of more than fifty percent (50%) of
the amount in effect under Code Section 415(b)(1)(A) for
such Plan Year, provided that no more than fifty (50)
Employees shall be treated as officers;
(b) One of the ten (10) Employees with Compensation of more
than the amount in effect under Code Section
415(c)(1)(A) for the Plan Year who owns the largest
interest in the Employer, provided that an Employee who
owns not more than a one-half percent (1/2%) interest in
value shall not be counted, and if two (2) Employees
have the same interest, the Employee with the greater
Compensation for the Plan Year shall be treated as
owning a larger interest;
(c) A five percent (5%) owner of any corporation that makes
up the Employer; and
(d) A one percent (1%) owner of any corporation that makes
up the Employer with Compensation for the Plan Year of
more than $150,000.
A "non-key employee" is any Employee who is not a key-
employee.
G.4. Determination Date.
- ------------------------
The "determination date" is the last day of the immediately
preceding Plan Year.
G-1
<PAGE> 74
G.5. Adjusted Accrued Benefit.
- ------------------------------
The "adjusted accrued benefit" of an Employee is the sum of
the Employee's adjusted account balance under this Plan plus
his adjusted accrued benefit under any other qualified plan
within the aggregation group in which the Employee
participates or has participated.
An Employee's "adjusted account balance" under this Plan is
his Account balance as of the determination date, adjusted as
follows:
(a) The Employee's Plan Account is increased by the total
amount of all distributions made from the Account during
the five (5) year period ending on the determination
date;
(b) The Employee's Plan Account is disregarded if he has not
performed services for the Employer at any time during
the five (5) year period ending on the determination
date;
(c) The Employee's Plan Account is disregarded if he was a
key-employee for a prior Plan Year but is not a key-
employee for the current Plan Year;
(d) The Employee's Plan Account does not include the amount
of any contribution actually paid to the Trust Fund
after the determination date (except with respect to the
first Plan Year); and
(e) The Employee's Plan Account is increased or decreased by
the amount of any rollover or transfer in which the Plan
is the recipient or distributor as provided in Code
Section 416(g)(4)(A).
An Employee's adjusted accrued benefit under each other
qualified plan within the aggregation group shall be
determined under such plan and Code Section 416.
G.6. Aggregation Group.
- -----------------------
The "aggregation group" includes the following qualified
plans:
(a) Each qualified plan of the Employer in which a key-
employee participated in the Plan Year containing the
determination date or any of the four (4) preceding Plan
Years;
(b) Each qualified plan of the Employer which enabled a plan
described in (a) to satisfy the requirements of Code
Section 401(a)(4) or 410; and
(c) At the election of the Employer, any qualified plan of
the Employer that is not described in (a) or (b) but
that satisfies the requirements of Code Sections
401(a)(4) or 410 when considered together with such
plans.
The plans described in (a) and (b) together constitute the
"required aggregation group." The plans described in (a), (b)
and (c) together constitute the "permissive aggregation
group."
G.7. Adjustment to Benefit Limitations.
- ---------------------------------------
If the Plan is Top-Heavy for a Plan Year and, as of the
determination date, the adjusted accrued benefit of key-
employees under all qualified plans within the aggregation
group is more than ninety percent (90%) of the adjusted
accrued benefit of all non-key-employees under all qualified
plans within the aggregation group then the following rules
shall apply:
G-2
<PAGE> 75
(a) A factor of 1.0 shall be used in the denominator of the
defined benefit fraction and defined Contribution
fraction used to determine the combined plan limit under
Section 8.10 instead of a factor of 1.25; and
(b) A factor of three percent (3%) shall be used in
calculating the top-heavy minimum contribution under
Section 6.4 instead of a factor of four percent (4%).
This Section shall apply only for Plan Years in which the
above specified conditions exist.
G-3
<PAGE> 1
THE EARTHGRAINS COMPANY
-----------------------
EMPLOYEE STOCK OWNERSHIP /401(k) PLAN
-------------------------------------
TRUST AGREEMENT
---------------
<PAGE> 2
<TABLE>
Table of Contents
-----------------
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
I TRUST; TRUST FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Name of Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Investment Committee . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Qualification under Internal Revenue Code. . . . . . . . . . . . . 2
1.5 Entire Understanding . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Administration of Plan . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Named Fiduciary. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
II CONTRIBUTIONS TO TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . 3
III PAYMENTS FROM TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Instructions From Human Resources Committee. . . . . . . . . . . . 3
3.2 Trustee Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Trustee Compensation . . . . . . . . . . . . . . . . . . . . . . . 3
IV INVESTMENT OF TRUST FUND. . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Investment Powers - In General . . . . . . . . . . . . . . . . . . 4
4.2 Investment of ESOP Contributions . . . . . . . . . . . . . . . . . 4
4.3 Investment of non-ESOP Contributions - Powers of Trustee . . . . . 4
4.4 Investment of non-ESOP Contributions - Powers of Investment
Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.5 Voting of Company Stock. . . . . . . . . . . . . . . . . . . . . . 6
4.6 Tender of Company Stock. . . . . . . . . . . . . . . . . . . . . . 7
V INVESTMENT MANAGERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Appointment by Investment Committee. . . . . . . . . . . . . . . . 7
5.2 Relationship to Trustee. . . . . . . . . . . . . . . . . . . . . . 8
5.3 Fiduciary Responsibility . . . . . . . . . . . . . . . . . . . . . 9
5.4 Investment Authority . . . . . . . . . . . . . . . . . . . . . . . 9
VI RECORDKEEPING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Recordkeeping. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
- 1 -
<PAGE> 3
6.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
VII AMENDMENT AND TERMINATION. . . . . . . . . . . . . . . . . . . . . . . .10
7.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
7.2 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
VIII SUCCESSION OF TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . .10
8.1 Removal by Investment Committee. . . . . . . . . . . . . . . . . .10
8.2 Resignation of Trustee . . . . . . . . . . . . . . . . . . . . . .10
8.3 Appointment of Successor Trustee . . . . . . . . . . . . . . . . .11
8.4 Transfer of Assets to Successor Trustee. . . . . . . . . . . . . .11
8.5 Reorganization of Trustee. . . . . . . . . . . . . . . . . . . . .11
IX GENERAL ADMINISTRATIVE POWERS . . . . . . . . . . . . . . . . . . . . . .11
9.1 Plan Administration. . . . . . . . . . . . . . . . . . . . . . . .11
9.2 Reliance Upon Human Resources Committee. . . . . . . . . . . . . .11
9.3 Reliance upon Company. . . . . . . . . . . . . . . . . . . . . . .12
9.4 Reliance upon Counsel. . . . . . . . . . . . . . . . . . . . . . .12
9.5 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
9.6 No Implied Powers or Obligations . . . . . . . . . . . . . . . . .12
9.7 Parties to Court Proceedings . . . . . . . . . . . . . . . . . . .12
9.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
X MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
10.1 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . .13
10.2 Reorganization of Company . . . . . . . . . . . . . . . . . . . .13
10.3 Prohibition Against Assignment. . . . . . . . . . . . . . . . . .14
10.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .14
10.5 Severability of Provisions. . . . . . . . . . . . . . . . . . . .14
10.6 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
10.7 Exclusive Benefit Rule. . . . . . . . . . . . . . . . . . . . . .14
</TABLE>
- 2 -
<PAGE> 4
THE EARTHGRAINS COMPANY
-----------------------
EMPLOYEE STOCK OWNERSHIP/401(K) PLAN TRUST AGREEMENT
----------------------------------------------------
This agreement ("Agreement") is entered into this 1st day of July, 1996,
effective as of July 1, 1996, by and between the Investment Committee of The
Earthgrains Company (the "Company"), and Wachovia Bank of Company (the
"Company"), and Wachovia Bank of North Carolina, N.A., a national banking
association organized under the laws of the United States of America (the
"Trustee"), in its capacity as Trustee under the Plan.
RECITALS
1. The Company has established and maintains The Earthgrains
Company Employee Stock Ownership/401(k) Plan for the exclusive
benefit of its eligible employees and the eligible employees
of its affiliated corporations (together, the "Employer"),
which plan was amended and restated effective July 1, 1996,
(the "Plan").
2. The Plan is intended to satisfy all requirements of section
401(a) of the Internal Revenue Code of 1986, as amended
("Code"), and the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
3. A portion of the Plan is designed to invest primarily in
common stock of the Company ("Company Stock"), which portion
is intended to satisfy all requirements of Code section
4975(e)(7) and therefore constitutes an employee stock
ownership plan ("ESOP").
4. The Plan provides for a trustee to receive and hold
contributions made under the Plan in trust, which trust is
intended to be tax-exempt under Code sections 401(a) and
501(a).
5. By execution of this Agreement, the Investment Committee and
Trustee hereby establish the following Trust Agreement.
ARTICLE I
TRUST; TRUST FUND
-----------------
1.1 Name of Trust. The Investment Committee hereby establishes
-------------
with the Trustee a trust to carry out the purposes of the Plan,
which trust shall be known as the "The Earthgrains Company Employee
Stock Ownership/401(k) Plan Trust" (the "Trust").
1.2 Trust Fund. The "Trust Fund" as of any date means all
----------
property then held in trust under this Agreement.
1.3 Investment Committee. The Investment Committee means the
--------------------
committee, as constituted
<PAGE> 5
by the Company from time to time, which has the following
responsibilities:
(a) The selection, retention and termination of investment
managers, trustees, custodians and other organizations
performing similar investment services, including negotiation
and approval of fee schedules and other compensation and
expenses to be paid to such organizations;
(b) The selection of pooled, collective, commingled or group
investment accounts, funds, trusts, Company Stock, or other
entities, into which Plan assets may be invested from time to
time and negotiation and approval of fee schedules and
expenses to be paid in connection therewith;
(c) Management of the investment mix of Plan assets within
risk/return guidelines established from time to time by the
Audit and Finance Committee of the Company's Board of
Directors;
(d) Entering into financial contracts or similar arrangements to
manage risk (including but not limited to foreign currency
hedges and so-called "swap" contracts);
(e) Selection, retention, and termination of all other investment
service providers and negotiation and approval of all fee
schedules, expenses and compensation to be paid to such
service providers; and
(f) Execution of all other administrative duties with respect to
investment matters of the Plan.
(g) Directing the Trustee to enter into a loan or loans exempt
under Code Section 4575 (ESOP Loan) and to purchase Company
Stock with the proceeds of such ESOP Loan.
1.4 Qualification under Internal Revenue Code. Unless otherwise
-----------------------------------------
advised to the contrary, the Trustee shall assume that the Trust is
entitled to tax exemption under Code section 501(a) as part of an
employee benefit plan which is qualified under Code section 401(a).
1.5 Entire Understanding. The rights, powers, titles, duties,
--------------------
discretions, and immunities of the Trustee shall be governed solely
by this Agreement, the Plan, and applicable law.
1.6 Administration of Plan. The Plan shall be administered by the
----------------------
Human Resources Committee appointed by the Company (the "Human
Resources Committee"), which shall have such authority and
responsibility as is provided in the Plan and this Agreement.
1.7 Named Fiduciary. The Investment Committee shall be a "named
---------------
fiduciary" within the meaning of Section 402(a)(2) of ERISA with
respect to the investment of the Trust Fund, except
- 2 -
<PAGE> 6
to the extent that the Investment Committee has appointed an
investment manager pursuant to Article V, and except to the extent
that a Participant (or Beneficiary) directs the Trustee with respect
to the voting or tendering of Company Stock pursuant to Sections 4.5
or 4.6.
1.8 Definitions. All capitalized words and phrases used in this
-----------
Agreement shall have the meanings ascribed to them in the Plan,
unless the context plainly requires a different meaning.
ARTICLE II
CONTRIBUTIONS TO TRUST FUND
---------------------------
The Trustee shall receive and hold contributions made under the
Plan by the Employer and Participants, together with the income and
increments thereon, in trust for the exclusive benefit of
Participants and their Beneficiaries, and without distinction
between principal and income. The Trustee shall not be required
nor have any duty to take any action to collect or enforce payment
of any contribution under the Plan required to be made by the
Employer or a Participant.
ARTICLE III
PAYMENTS FROM TRUST FUND
------------------------
3.1 Instructions From Human Resources Committee. The Trustee
-------------------------------------------
shall make such distributions and payments from the Trust Fund to
such persons, in such manner, at such times, and in such amounts,
as the Human Resources Committee from time to time shall direct.
The Trustee shall not be responsible for ascertaining whether any
distribution or payment directed by the Human Resources Committee
complies with the terms of the Plan, or see to its application,
and, accordingly, shall be fully protected in making payments in
accordance with such directions.
3.2 Trustee Expenses. The expenses incurred by the Trustee in the
----------------
performance of its duties under this Agreement, including (but not
limited to) reasonable fees for legal, accounting, administrative,
or other services rendered to the Trustee, and expenses incident
thereto, shall be paid by the Trustee out of the Trust Fund unless
paid by the Employer. All proper charges upon or in respect of the
Trust Fund, including (but not limited to) real and personal
property taxes, income taxes, transfer taxes, and other taxes of
any kind, levied or assessed under current or future law shall be
paid by the Trustee out of the Trust Fund.
3.3 Trustee Compensation. The Trustee shall be entitled to such
--------------------
compensation as may be agreed upon in writing from time to time
between the Investment Committee and the Trustee and such
compensation shall be paid from the Trust Fund unless paid by the
Employer.
- 3 -
<PAGE> 7
ARTICLE IV
INVESTMENT OF TRUST FUND
------------------------
4.1 Investment Powers - In General. Except as otherwise provided
------------------------------
in this Agreement, the Trustee shall have exclusive authority and
discretion to hold, manage, care for, and protect the Trust Fund.
4.2 Investment of ESOP Contributions. The purpose of that portion
--------------------------------
of the Plan that is an ESOP is to invest primarily in and hold
Company Stock, and, accordingly, the Trustee shall, as directed by
the Investment Committee, invest and reinvest contributions made
under the ESOP portion of the Plan in Company Stock, subject to
minimum fractional interests established by the Trustee from time
to time, and (subject to the Code and ERISA) is authorized to
borrow from any lender (including a "party-in-interest" as defined
in ERISA section 3(14)) to finance the acquisition of Company
Stock. For any period in which contributions under the ESOP
portion of the Plan are not invested in Company Stock, they shall,
at the direction of the Investment Committee, be held within the
Trust Fund in cash or invested in short-term investments pursuant
to Section 4.3. Subject to applicable law, the Trustee may acquire
Company stock on the open market, through private purchases,
purchases from the Company (including purchases of treasury shares
or authorized by unissued shares), or otherwise.
4.3 Investment of non-ESOP Contributions - Powers of Trustee.
--------------------------------------------------------
Except for any portion of the Trust Fund which has been invested at
the direction of the Investment Committee (or a Participant or
Beneficiary) pursuant to Section 4.4, or at the direction of an
investment manager pursuant to Article V, the Trustee shall have
the following rights, powers, and duties with respect to the
investment of contributions made under the non-ESOP portion of the
Plan, in addition to those provided elsewhere in this Agreement,
the Plan, or by law:
(a) To retain, without liability for depreciation or loss, any and
all stocks, bonds, notes, or other securities, including those
issued by the Employer, and those issued by a foreign
corporation, or any variety of real or personal property,
including that which it may receive as a contribution from the
Employer.
(b) To sell, lease, pledge, mortgage, transfer, exchange, convert,
or otherwise dispose of, or grant options with respect to, any
and all property at any time that forms part of the Trust
Fund, in such manner, at such time or times, for such
purposes, for such prices, and upon such terms and conditions
as it may decide. Any sale may be made by private contract or
by public auction and no person who deals with the Trustee
shall be bound to see to the application of the purchase money
or to inquire into the validity, expediency, or propriety of
any such sale or other disposition.
(c) Upon direction of the Investment Committee, to borrow money
for any purpose
- 4 -
<PAGE> 8
(including entering into an ESOP Loan) connected with the
protection, preservation, or improvement of any assets of the
Trust Fund, whenever, in its judgment, it appears advisable and,
as security, to mortgage or pledge any real estate or personal
property of the Trust Fund, upon such terms and conditions as it
may deem advisable.
(d) Subject to Section 4.5, to vote, in person or by general or
limited proxy, any shares of stock or other securities held by
it; to consent, directly or through an agent, to the
reorganization, consolidation, merger, dissolution, or
liquidation of any corporation in which the Trustee may have
any interest, or to the sale, pledge, lease, or mortgage of
any property by or to any such corporation; and to make any
payments and to take any steps which it may deem necessary or
proper to enable it to obtain the benefit of any such
transaction.
(e) To acquire, dispose of, or exercise all options, rights, and
privileges to convert stocks, bonds, notes, mortgages, or
other property into other stocks, bonds, mortgages, or other
property; to subscribe for additional or other stocks, bonds,
notes, mortgages, or other property; to make such conversions
and subscriptions and to make payments therefor; and to hold
such stocks, bonds, notes, mortgages, or other property so
acquired as investments of the Trust Fund.
(f) To keep any of the securities or other property belonging to
the Trust Fund registered or recorded in the name of the Trust
Fund or in the name of the Trustee as nominee, without
disclosing said Trust Fund.
(g) To pay, compromise, compound, adjust, submit to arbitration,
settle, or release any claims or demands of the Trust as it
may deem advisable, including the acceptance of deeds of real
property in satisfaction of bonds and mortgages, and to make
any payments in connection therewith which it may deem
advisable.
(h) To reduce the interest rate at any time, and from time to
time, on any note or mortgage constituting a portion of the
Trust Fund and to extend or renew notes and mortgages upon or
after maturity, with or without reference to the value of the
mortgage security at the time of such extension or renewal.
(i) To employ agents, attorneys, and other persons whose services
may reasonably be required in connection with the
administration of the Trust Fund from time to time, and to pay
reasonable compensation therefor.
(j) To deposit in its banking department any or all cash held in
the Trust Fund; provided that, if this power is exercised, its
banking department shall not be obligated to pay to the Trust
Fund or to any beneficiary thereof, any interest, earnings, or
profit whatsoever accruing to or deriving to it from such
money on deposit with it, except for such rate of
- 5 -
<PAGE> 9
interest as under its current practices it may be obligated to
pay upon demand deposit of individuals.
(k) To execute and deliver any and all instruments in writing
which it may deem advisable to carry out any of the foregoing
powers. No party to any such instrument in writing, signed by
the Trustee, shall be obliged to inquire into its validity or
be bound to see to the application of any money or other
property paid or delivered to the Trustee pursuant to the
terms of such instrument.
Any provision of this Agreement to the contrary notwithstanding,
the Trustee shall not acquire or dispose of any asset or engage in
any transaction if such acquisition, disposition, or transaction
would cause a tax to be imposed upon any person under Code section
4975.
4.4 Investment of non-ESOP Contributions - Powers of Investment
-----------------------------------------------------------
Committee. The Investment Committee shall direct the Trustee as to
- ---------
the investment of any or all assets of the Trust Fund, or shall
direct the Trustee to maintain or make available within the Trust
Fund a diversified group of at least three (3) investment funds in
which the assets of the Trust Fund may be invested at the direction
of Participants or Beneficiaries. An "investment fund" may be any
common or collective trust fund or pooled investment fund
maintained by the Trustee or an affiliate of the Trustee, the terms
and conditions of which are incorporated herein. All directions of
the Investment Committee (or its agent), or a Participant or
Beneficiary, to the Trustee in this regard shall be in writing, and
the Trustee shall be under no duty to question any such direction
or to review any securities or other property in connection with
such direction. The Trustee shall not be liable or responsible in
any way for any losses or unfavorable results that arise from its
compliance with such directions.
4.5 Voting of Company Stock. The Company shall use its reasonable
-----------------------
best efforts to cause to be delivered to each Participant (or in
case of death, his Beneficiary) such notices and informational
statements as are furnished to the Company's stockholders with
respect to the exercise of voting rights on Company Stock, together
with a form by which the Participant (or Beneficiary) may
confidentially instruct the Trustee with respect to the voting of
Company Stock allocated to his account under the Plan. The Trustee
shall vote Company Stock held within the Trust Fund as follows:
The Trustee shall vote Company Stock credited to a Participant's
account under the Plan with respect to which the Trustee has
received timely direction, as directed by the Participant (or
Beneficiary) (or abstain if so directed).
The Trustee shall vote (i) all Company Stock not credited to any
Participant's account under the Plan, and (ii) all Company Stock
credited to a Participant's account under the Plan with respect
to which the Trustee has not received timely direction, in the
same proportion as the Company Stock specifically directed by
Participants and Beneficiaries in (a) (disregarding
- 6 -
<PAGE> 10
any shares specified in (a) with respect to which the Trustee has
received a direction to abstain).
For purposes of voting Company Stock, the Participant (or
Beneficiary) shall be a Named Fiduciary with respect to Company
Stock credited to his account.
4.6 Tender of Company Stock. If there is a tender or exchange
-----------------------
offer for, or a request or invitation for the tender or exchange
of, Company Stock, the Trustee promptly shall furnish to each
Participant (or in case of death, his Beneficiary) a notice of such
offer, request, or invitation, and shall request direction from the
Participant (or Beneficiary) as to the tender or exchange of
Company Stock allocated to the Participant's account under the
Plan. The Trustee shall tender or exchange, or retain, Company
Stock held within the Trust as follows:
(a) The Trustee shall tender or exchange, or retain, Company Stock
credited to a Participant's account under the Plan with
respect to which the Trustee has received timely direction, as
directed by the Participant (or Beneficiary).
(b) The Trustee shall retain Company Stock credited to a
Participant's account under the Plan which respect to which
the Trustee has not received timely direction.
(c) The Trustee shall tender or exchange, or retain, Company Stock
not credited to any Participant's account under the Plan, in
the same proportion as the Company Stock specified in (a) and
(b) are tendered or exchanged, or retained.
(d) For purposes of tendering Company Stock, the Participant (or
Beneficiary) shall be a Named Fiduciary with respect to the
Company Stock credited to his account.
All tender or exchange directions received by the Trustee shall be
held in confidence by the Trustee and shall not be divulged or
released to any person, including an employee or any officer or
director of the Company.
ARTICLE V
INVESTMENT MANAGERS
-------------------
5.1 Appointment by Investment Committee. The Investment Committee
-----------------------------------
may transfer to one or more "investment managers" (as defined
below) the authority and responsibility to direct the investment
and management, and/or to have custody and control, of all or part
of the Trust Fund by advance written notice to the Trustee. Any
such notice shall include the name and a specimen signature of each
such investment manager. Any such transfer of the Trustee's
authority to an investment manager may be revoked in whole or in
part by the Investment Committee by delivery to the investment
manager and the Trustee of reasonable advance written
- 7 -
<PAGE> 11
notice to that effect, whereupon such authority shall be restored to
the Trustee unless a successor investment manager is appointed by the
Investment Committee. For purposes of this Agreement, an "investment
manager" is a fiduciary that has fully complied with the provisions of
section 3(38) of ERISA and has provided the Trustee with a written
acknowledgment that it has done so and that it is a fiduciary with
respect to the Trust Fund or the Investment Committee to the extent it
has assumed investment management.
5.2 Relationship to Trustee. During such period of time as an
-----------------------
investment manager is authorized to direct the investment and
management of all or part of the Trust Fund which remains in the
custody of the Trustee, the following shall apply:
(a) No Liability for Losses. The Trustee shall not be liable or
-----------------------
in any way responsible for any losses or other unfavorable
results arising from the Trustee's compliance with investment
or management directions received by the Trustee from the
investment manager. The Trustee shall not be liable for the
acts or omissions of any investment manager unless the Trustee
knowingly participates in, or knowingly undertakes to conceal,
an act or omission of such investment manager knowing such act
or omission constitutes a breach of fiduciary responsibility
by the investment manager. If the Trustee has knowledge of a
breach committed by the investment manager, it shall notify
the Company in writing thereof, and the Company shall
thereafter assume full responsibility to all persons
interested in the Plan to remedy such breach.
(b) Communications to Trustee. All directions concerning
-------------------------
investments made by an investment manager shall be signed by
such person or persons, acting on behalf of the investment
manager, as may be duly authorized in writing; provided that,
the transmission to the Trustee of such directions by
photostatic teletransmission with duplicate or facsimile
signature or signatures shall be considered a delivery in
writing of the aforesaid directions until the Trustee is
notified in writing that the use of such devices with
duplicate or facsimile signatures is no longer authorized.
(c) Compliance with Instructions. The Trustee shall comply with
----------------------------
any written directions given by an investment manager as
promptly as possible, and shall be entitled to presume that
any directions so given are fully authorized.
(d) Absence of Instructions. The Trustee shall not be liable for
-----------------------
its failure to invest any or all of the Trust Fund in the
absence of written directions from the investment manager.
(e) Rights with Respect to Securities. The Trustee shall have no
---------------------------------
obligation to determine the existence of any conversion,
redemption, exchange, subscription, or other right relating to
any securities purchases, of which notice was given prior to
the purchase of such securities, unless the Trustee is
informed of the existence of the right and is instructed to
exercise such right, in writing, by the investment manager,
within a reasonable time
- 8 -
<PAGE> 12
prior to the expiration of such right.
5.3 Fiduciary Responsibility. The Investment Committee intends by
------------------------
this Article to allocate to an investment manager all fiduciary
responsibility with respect to the assets of the Trust Fund that
are invested, managed, and controlled by, and under the custody of
the investment manager. Unless the Trustee, by action or failure
to act, participates in or undertakes to conceal an act or omission
of an investment manager, the Trustee shall incur no liability for
any loss of any kind which may result solely (i) by reason of any
action taken by it in accordance with any direction of such
investment manager, or (ii) by reason of any act or omission of an
investment manager, and, except where the Trustee has failed fully
to perform and discharge all of its duties and obligations under
this Agreement, the Company shall indemnify and hold harmless the
Trustee for any legal liability judicially imposed by a court of
competent jurisdiction on the Trustee solely as a result of
complying with the instructions of an investment manager appointed
by the Investment Committee or solely as a result of any act or
omission of the investment manager. The Trustee shall not be
deemed to be a party to or to have any obligations under any
agreement with any investment manager, except as otherwise provided
for herein. On receipt of directions from an investment manager,
the trustee promptly shall make, execute, acknowledge, and deliver
any and all documents of transfer and conveyance and any and all
other instruments that may be necessary or appropriate to carry out
such directions. The Trustee shall not be deemed to have
participated in any act or omission of the investment manager
solely by reason of acting or failing to act in accordance with the
direction of the investment manager.
5.4 Investment Authority. An investment manager shall have the
--------------------
investment powers and duties otherwise granted to or imposed upon
the Trustee, except as otherwise limited by agreement or by
investment objectives provided by the Investment Committee.
ARTICLE VI
RECORDKEEPING
-------------
6.1 Recordkeeping. The Trustee shall keep accurate and detailed
-------------
accounts of all its investments, receipts, disbursements, and other
transactions involving the Trust Fund, and all accounts, books, and
records relating thereto shall be open to inspection and audit by
any person designated by the Investment Committee at all reasonable
times during business hours.
6.2 Fiscal Year. The fiscal year of the Trust shall be the twelve
-----------
(12) month period ending on June 30 of each year.
6.3 Reports. Within seventy-five (75) days following the close of
-------
each fiscal year of the Trust, and as soon as practicable, but not
later than sixty (60) days, after the removal or resignation of the
Trustee, the Trustee shall file with the Investment Committee a
written report that sets forth all investments, receipts,
disbursements, and other transactions effected by it
- 9 -
<PAGE> 13
during such fiscal year, or portion thereof. Such report shall
contain a description of all investments purchased and sold with the
cost or net proceeds of such purchases or sales (accrued interest paid
or received being shown separately), and showing the investments held
at the end of the period for which the report is submitted.
Neither the Investment Committee, the Company, nor any Participant
or Beneficiary in the Plan, nor any other person shall have the
right to demand or be entitled to any further or different
accounting by the Trustee. The foregoing provisions, however,
shall not preclude the Trustee from having its accounts judicially
settled if it so desires.
ARTICLE VII
AMENDMENT AND TERMINATION
-------------------------
7.1 Amendment. The Investment Committee shall have the right at
---------
any time, and from time to time, to amend this Agreement, in whole
or in part, on a prospective or retroactive basis; provided that,
no amendment shall be effective if it causes any part of the Trust
Fund to be used for, or diverted to, purposes other the exclusive
benefit of Participants and their Beneficiaries, and no amendment
shall be effective without the Trustee's consent if it materially
changes the rights, duties, and responsibilities of the Trustee.
An amendment shall become effective upon the date therein so
stated.
7.2 Termination. If the Plan is terminated, this Agreement
-----------
nevertheless shall continue in effect until all assets have been
distributed from the Trust Fund, at which time the Trust and this
Agreement shall terminate. The Investment Committee shall notify
the Trustee of the termination of the Plan, and the Trustee shall
dispose of Trust Fund assets in accordance with the directions of
the Investment Committee, subject to the receipt of such
determination from the Internal Revenue Service as to the qualified
status of the Plan and Trust under Code sections 401 (a) and 501
(a) as may reasonably be required by the Trustee.
ARTICLE VIII
SUCCESSION OF TRUSTEES
----------------------
8.1 Removal by Investment Committee. The Investment Committee may
-------------------------------
remove the Trustee at any time upon written notice to the Trustee.
Such removal shall be effective immediately upon the Trustee's
receipt of such notice or at such later date as the parties may
agree.
8.2 Resignation of Trustee. The Trustee may resign as Trustee at
----------------------
any time upon sixty (60) days' written notice to the Investment
Committee, or such other date as the parties may agree. Such
resignation shall be effective as of the date the Investment
Committee appoints a successor trustee; provided that, if no
successor trustee is appointed within sixty (60) days after the
Investment Committee's receipt of the Trustee's notice of
resignation, the Trustee may apply to
- 10 -
<PAGE> 14
a court of competent jurisdiction for appointment of a successor
trustee and such resignation shall be effective as of the date the
court appoints a successor trustee.
8.3 Appointment of Successor Trustee. To appoint a successor
--------------------------------
trustee, the Investment Committee shall deliver to the Trustee and
to the successor trustee an instrument, executed by the Investment
Committee, appointing such successor trustee, and deliver to the
Trustee a written acceptance executed by the successor trustee so
appointed. Unless and until superseded by a subsequent trust
agreement, all of the provisions of this Agreement shall apply to
any successor trustee with the same force and effect as if such
successor trustee originally had been named herein as the Trustee.
8.4 Transfer of Assets to Successor Trustee. Upon the appointment
---------------------------------------
of a successor trustee, the Trustee shall, without requiring any
release or agreement from any party other than the Investment
Committee, render a final accounting in writing to the Investment
Committee and transfer and deliver the assets of the Trust Fund to
such successor trustee after reserving such reasonable amount as it
shall deem necessary to provide for any fees, expenses, or taxes
then chargeable against the Trust Fund. The receipt of assets by
a successor trustee and the approval by the Investment Committee of
the final accounting of the Trustee shall be a full and complete
acquittal and discharge of the Trustee except as otherwise provided
under ERISA. A successor trustee shall have no liability
whatsoever for the acts or omissions of the Trustee. If the
Investment Committee fails to object to such accounting by delivery
to the Trustee within one hundred and twenty (120) days from the
date of receipt by the Investment Committee of such final
accounting, such accounting shall be deemed to be approved by the
Investment Committee.
8.5 Reorganization of Trustee. If, at any time, the Trustee
-------------------------
merges or consolidates with another entity, or sells or transfers
substantially all of its assets and business to another entity, the
entity resulting from such merger or consolidation, or the entity
into which it is converted, or to which such sale or transfer is
made, shall thereupon become and be the Trustee under this
Agreement, with the same effect as though originally so named.
ARTICLE IX
GENERAL ADMINISTRATIVE POWERS
-----------------------------
9.1 Plan Administration. The Plan shall be administered by the
-------------------
Human Resources Committee, the individual members of which have
been duly appointed. The Human Resources Committee shall have all
administrative authority and responsibility with respect to the
Plan as is provided in the Plan, and the Trustee shall have no
obligations with respect to the administration of the Plan.
9.2 Reliance Upon Human Resources Committee. The Trustee shall be
---------------------------------------
fully protected in relying upon any instruction, direction, or
approval of the Human Resources Committee (or its
- 11 -
<PAGE> 15
agent) furnished to the Trustee if such instruction, direction, or
approval is (i) signed by a majority of the members of the Human
Resources Committee, or (ii) signed by one or more of its members as
may be authorized by the Human Resources Committee in accordance with
the Plan or administrative procedures of the Human Resources Committee
to execute such instructions, directions, or approvals. The Trustee
may rely upon a certification by any Company officer as to the
identity of the members of the Human Resources Committee until
advised to the contrary. The Company agrees to indemnify and hold
the Trustee harmless against any liabilities it may incur in acting
in accordance with any such written instruction, direction, or
approval delivered by the Human Resources Committee.
9.3 Reliance upon Company. The Trustee shall be fully protected
---------------------
in acting upon any instrument, certificate, or paper signed on
behalf of the Company, provided that the Trustee reasonably
believes that such instrument, certificate, or paper is genuine and
signed by the proper person. The Trustee shall be under no duty to
make any investigation or inquiry as to any statement of fact
contained in such writing, but may accept the same as conclusive
evidence of the truth and accuracy thereof, including any statement
that any amendment or modification of this Agreement under the
provisions of Article VII complies with the requirements and
restrictions set forth therein. The Company agrees to indemnify
and hold the Trustee harmless against any liabilities it may incur
in acting in accordance with any such written instructions
delivered by the Company, the Investment Committee and/or Human
Resources Committee.
9.4 Reliance upon Counsel. The Trustee may consult with counsel,
---------------------
who may or may not be counsel for the Company, in respect of any of
its duties or obligations hereunder and shall be fully protected in
acting or refraining from acting in accordance with the written
advice of such counsel.
9.5 Indemnity. The indemnity provided the Trustee under this
---------
Agreement shall survive the termination of this Agreement.
9.6 No Implied Powers or Obligations. Nothing shall be deemed to
--------------------------------
impose any powers, duties, or responsibilities on the Trustee other
than those expressly set forth in the Plan, this Agreement, or
under ERISA.
9.7 Parties to Court Proceedings. Except as otherwise required by
----------------------------
ERISA, only the Company, the Investment Committee, and the Trustee
shall be necessary parties to any court proceeding involving the
Trustee or the Trust, and no employee, former employee, or
beneficiary shall be entitled to any notice or process. Any final
judgment entered in any such proceeding shall be conclusive upon
the Company, the Investment Committee, the Trustee, employees,
former employees, and beneficiaries of employees or former
employees.
9.8 Notices. All notices, orders, authorizations, directions, or
-------
other communications hereunder shall be in writing and shall be
deemed to have been given if delivered personally or
- 12 -
<PAGE> 16
mailed to the following address, marked for attention as indicated, or
such other address or marked for such other attention as may from time
to time be furnished in writing to the other party to this Agreement
by any such addressee:
If to the Company, the Investment Committee or the Human
Resources Committee:
The Earthgrains Company
8400 Maryland Avenue
St. Louis, Missouri 63105-3668
Attention: Vice President and General Counsel
Vice President and Treasurer
Director of Human Resources Administration
If to the Trustee:
Wachovia Bank of North Carolina, N.A.
301 North Main Street
Winston-Salem, North Carolina 27150
Attention: S. Jane Price, CRPS
Vice President
ARTICLE X
MISCELLANEOUS
-------------
10.1 Third Parties. No person dealing with the Trustee shall be
-------------
obligated to see to the application of any money paid or property
delivered to the Trustee; nor shall any such person be required to
take cognizance of the provisions of this Agreement or the Plan, or
to question the authority of the Trustee to do any act as respects
the Trust or the authority of the Trustee to receive any money
becoming due and payable, nor be obligated to inquire as to whether
the Trustee has secured the direction, consent, or approval of the
Company, the Investment Committee, the Human Resources Committee or
of any Participant or Beneficiary to any proposed action. In
general, each person dealing with the Trustee may act upon any
advice, request, or representation in writing by the Trustee or the
Trustee's duly authorized agent and shall not be liable to any
person in so doing.
10.2 Reorganization of Company. If the Company consolidates or
-------------------------
merges with or into any other corporation, or sells substantially
all of its property, the successor corporation formed and resulting
from any such consolidation, merger, or purchase of assets
automatically shall become a party to this Agreement unless in
connection with such consolidation, merger, or purchase of
- 13 -
<PAGE> 17
assets, another entity becomes a party in lieu of the successor
corporation.
10.3 Prohibition Against Assignment. Except as may be required or
------------------------------
permitted under ERISA and the Code, no interest in any payments
under the Trust Fund shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt so to anticipate, alienate,
sell, transfer, assign, pledge, encumber, or charge shall be void.
Neither shall the Trust nor the Trustee be in any manner liable for
or subject to any debts, contracts, liabilities, engagements, or
torts of any person entitled to any payment or distribution from
the Trust Fund.
10.4 Governing Law. This Agreement shall be governed by the
-------------
internal laws of the state of Missouri to the extent that federal
law does not preempt such laws.
10.5 Severability of Provisions. If any provision of this
--------------------------
Agreement is held illegal or invalid for any reason, such
illegality or invalidity shall not affect the remaining provisions
of this Agreement, but shall be fully severable, and this Agreement
shall be construed and enforced as if the illegal or invalid
provision had never been included herein.
10.6 Headings. All headings in this Agreement are included solely
--------
for ease of reference and do not bear on the interpretation of the
text.
10.7 Exclusive Benefit Rule. The assets of the Trust Fund shall
----------------------
never inure to the benefit of the Company and shall be held for the
exclusive purpose of providing benefits under the Plan and
defraying reasonable expenses of administration. The Company shall
not be entitled to receive or recover any part of its contributions
to the Trust or the earnings thereon except as follows:
(a) Contributions Conditioned on Deductibility. All Company
------------------------------------------
contributions to the Trust Fund are conditioned upon
deductibility under Code section 404, unless otherwise
expressly stated by the Company. Accordingly, if and to the
extent that such a deduction is disallowed within the meaning
of section 403(c)(2) of ERISA, the contribution in question
shall be repaid to the Company upon demand (but subject to
paragraph (c) below and only to the extent disallowed) within
one (1) year after such disallowance. If the Company
contribution for any taxable year exceeds the amount
deductible for the taxable year under the Code, but is not
repaid pursuant to the foregoing sentence, the portion not so
deductible shall in like amount reduce the contribution
required in respect of the subsequent taxable year during
which the disallowance or other determination of
nondeductibility is made and, to the extent not thereby
consumed, any subsequent taxable year or years.
(b) Contributions Made by Mistake. If and to the extent that a
-----------------------------
contribution to the Trust Fund is made as a result of a good
faith mistake of facts or circumstances, the same shall
- 14 -
<PAGE> 18
be repaid to the Company upon demand of the Investment Committee
(but subject to paragraph (c) below and only to the extent of
such mistake) within one (1) year after the contribution was
made.
(c) Repayments. Any repayment of a contribution under paragraphs
----------
(a) or (b), above, shall be subject to the condition that (i)
such repayment shall not include any earnings attributable to
that portion of the contribution that qualifies for repayment
under paragraph (a) or (b) above, unless the repayment is
being made to avoid a detrimental tax effect under Code
section 401(k), 401(m), or 402(g), (ii) there shall be
deducted from the amount of such repayment any losses
attributable to that portion of the contribution which
qualifies for repayment under paragraph (a) or (b) above, and
(iii) in no event shall such repayment result in any
Participant's account being reduced to a balance which is less
than the balance which would have been in his account had the
amount contributed not been contributed, and the amount of the
repayment shall be adjusted accordingly.
IN WITNESS WHEREOF, the Investment Committee of The Earthgrains
Company and the Trustee have caused this Agreement to be duly
executed as of the day and year first above written.
WACHOVIA BANK OF INVESTMENT COMMITTEE OF
NORTH CAROLINA, N.A. THE EARTHGRAINS COMPANY
as Trustee
By--------------------------------- By----------------------------
Its-------------------------------- Its---------------------------
- 15 -
<PAGE> 1
THE EARTHGRAINS COMPANY
EXCEPTIONAL PERFORMANCE PLAN
EFFECTIVE MARCH 26, 1997
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<S> <C>
SECTION 1. ESTABLISHMENT OF PLAN. . . . . . . . . . . . . . . 1
SECTION 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . 1
2.1. Affiliate. . . . . . . . . . . . . . . . 1
2.2. Board. . . . . . . . . . . . . . . . . . 1
2.3. Bonus. . . . . . . . . . . . . . . . . . 1
2.4. Change in Control. . . . . . . . . . . . 1
2.5. Code . . . . . . . . . . . . . . . . . . 1
2.6. Committee. . . . . . . . . . . . . . . . 1
2.7. Company. . . . . . . . . . . . . . . . . 1
2.8. Covered Employee . . . . . . . . . . . . 1
2.9. Eligible Employee. . . . . . . . . . . . 1
2.10. Exchange Act . . . . . . . . . . . . . . 1
2.11. Participant. . . . . . . . . . . . . . . 1
2.12. Performance Goal . . . . . . . . . . . . 1
2.13. Performance Period . . . . . . . . . . . 2
2.14. Plan . . . . . . . . . . . . . . . . . . 2
2.15. Program. . . . . . . . . . . . . . . . . 2
SECTION 3. BONUS PROGRAMS . . . . . . . . . . . . . . . . . . 2
SECTION 4. PERFORMANCE PERIODS. . . . . . . . . . . . . . . . 2
SECTION 5. ELIGIBILITY, PARTICIPATION AND COVERED
EMPLOYEES . . . . . . . . . . . . . . . . . . . 2
SECTION 6. PERFORMANCE CRITERIA AND GOALS . . . . . . . . . . 2
SECTION 7. AMOUNTS OF BONUSES . . . . . . . . . . . . . . . . 3
SECTION 8. PAYMENT OF BONUSES . . . . . . . . . . . . . . . . 3
SECTION 9. ADMINISTRATION BY COMMITTEE. . . . . . . . . . . . 3
SECTION 10. CHANGE IN CONTROL . . . . . . . . . . . . . . . . 4
10.1. Change in Control Defined. . . . . . . . 4
10.2. Adjustments Upon Change in Control . . . 5
SECTION 11. AMENDMENT AND TERMINATION . . . . . . . . . . . . 5
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . 5
12.1. Effective Date . . . . . . . . . . . . . 5
12.2. No Guarantee of Employment or
Compensation . . . . . . . . . . . . . . 5
12.3. Claims . . . . . . . . . . . . . . . . . 5
12.4. No Alienation. . . . . . . . . . . . . . 5
12.5. Other Incentive Plans. . . . . . . . . . 6
12.6. Governing Law. . . . . . . . . . . . . . 6
12.7. Severability . . . . . . . . . . . . . . 6
</TABLE>
<PAGE> 3
THE EARTHGRAINS COMPANY
EXCEPTIONAL PERFORMANCE PLAN
SECTION 1. ESTABLISHMENT OF PLAN.
The Earthgrains Company does hereby adopt The Earthgrains
Company Exceptional Performance Plan set forth herein for the
purpose of attracting, motivating and rewarding certain employees
of the Company with qualified performance-based compensation.
SECTION 2. DEFINITIONS.
2.1. Affiliate: Any entity in which the Company has a
substantial direct or indirect equity interest.
2.2. Board: The Board of Directors of the Company.
2.3. Bonus: The amount payable to any Participant with
respect to a Program.
2.4. Change in Control: Change in Control shall have the
meaning ascribed thereto in Section 10.1.
2.5. Code: The Internal Revenue Code of 1986, as
amended, and the regulations and interpretations promulgated
thereunder.
2.6. Committee: The Committee described in Section 9.
2.7. Company: The Earthgrains Company.
2.8. Covered Employee: Covered Employee shall have the
meaning ascribed thereto in Section 5.
2.9. Eligible Employee: A person who is eligible to
participate in the Plan in accordance with Section 5.
2.10. Exchange Act: The Securities Exchange Act of 1934,
as amended, and the regulations and interpretations promulgated
thereunder.
2.11. Participant: An Eligible Employee who is designated
as a Participant in a Program pursuant to Section 5.
2.12. Performance Goal: Performance Goal shall have the
meaning ascribed thereto in Section 6.
<PAGE> 4
2.13. Performance Period: Any period of time designated
by the Committee in accordance with Section 4 with respect to which
Bonuses may be paid under a Program.
2.14. Plan: The Earthgrains Exceptional Performance Plan,
as amended from time to time.
2.15. Program: A Bonus Program established by the
Committee which designates the Participants, the Covered Employees,
a Performance Period, Performance Goals, and formulas or standards
for determining the amounts of Bonuses payable under the Plan.
SECTION 3. BONUS PROGRAMS.
The Committee shall have the authority to establish one or
more Programs pursuant to which Bonuses may be paid to one or more
Participants.
SECTION 4. PERFORMANCE PERIODS.
For each Program, the Committee shall set forth one or more
Performance Periods over which performance will be measured to
determine whether and in what amounts to pay Bonuses to
Participants. A Performance Period may be a fixed period of time
or a period which terminates upon the occurrence of one or more
pre-established events. Each Program must be established in
writing prior to the expiration of any prescribed time period for
the pre-establishment of Performance Goals under Section 162(m) of
the Code.
SECTION 5. ELIGIBILITY, PARTICIPATION AND COVERED EMPLOYEES.
Management employees of the Company and its Affiliates shall
be Eligible Employees. For each Program, the Committee shall
designate as Participants one or more Eligible Employees. Each
Program shall also set forth those individuals the Committee
believes may be or become covered employees as that term is defined
in Section 162(m) of the Code ("Covered Employees") for any taxable
year in which Bonuses may be payable to Participants under the
Program.
SECTION 6. PERFORMANCE CRITERIA AND GOALS.
All Bonuses shall be based upon one or more of the following
criteria, which may be Company-wide or specific to an Affiliate,
division, product, and/or geographic area: sales, revenues,
earnings (including, without limitation, earnings before interest,
taxes, depreciation and amortization), earnings per share, return
on equity, return on assets, return on capital, cash flow, market
share, stock price, costs and productivity ("Performance
Criteria"). For each
2
<PAGE> 5
Program and for each Participant, the Committee shall establish one
or more objective performance goals based upon one or more
Performance Criteria ("Performance Goals"). No Bonus shall be paid
to any Covered Employee if the applicable Performance Goal(s) are
not satisfied during the applicable Performance Periods.
SECTION 7. AMOUNTS OF BONUSES.
For each Program, the Committee shall designate an objective
formula or standard for determining the dollar amount of each
Participant's Bonus (the "Bonus Formula"). In no event shall the
total amount of Bonuses paid to any Covered Employee in any fiscal
year exceed $1 million. Except with respect to Bonuses payable to
Covered Employees, and notwithstanding failure to satisfy the
applicable Performance Goal(s), the Committee shall have the
discretion to increase or reduce the amount of any Participant's
Bonus above or below the standard or formula amount to reflect
individual performance and/or unanticipated factors; the Committee
may only reduce the amount of any Bonuses payable to Covered
Employees below the Bonus Formula amount to reflect individual
performance and/or unanticipated factors.
SECTION 8. PAYMENT OF BONUSES.
After the close of each Performance Period, the Committee
shall certify in writing the achievement of the applicable
Performance Goal(s) and the amount of any Bonuses payable to
Covered Employees under the Bonus Formula. No Bonuses shall be
paid under this Plan to Covered Employees unless and until the Plan
has received shareholder approval as required by Section 162(m) of
the code. Subject to the foregoing, the timing of payment of all
Bonuses to both Covered Employees and Participants who are not
Covered Employees shall be within the sole discretion of the
Committee. The Company shall withhold from any amount payable
under the Plan all taxes required to be withheld by any federal,
state or local government.
SECTION 9. ADMINISTRATION BY COMMITTEE.
The Plan shall be administered by a committee established by
the Board or a subcommittee established by a committee of the Board
(the "Committee"). The Committee shall be comprised of at least
two outside directors of the Company as that term is defined in
Section 162(m) of the Code and the Regulations thereunder. The
members of the Tax Qualified Subcommittee of the Human Resources
and Executive Compensation Committee shall initially serve as the
members of the Committee. The Committee shall have full power and
authority to administer and interpret the Plan and to adopt such
rules, regulations, agreements, guidelines and instruments for the
administration of the Plan and for the conduct of its business as
the Committee deems necessary or advisable.
3
<PAGE> 6
SECTION 10. CHANGE IN CONTROL.
10.1. Change in Control Defined. For purposes of this
Plan, a "Change in Control" shall occur if:
(a) Any Person (as defined herein) becomes the
beneficial owner directly or indirectly (within the
meaning of Rule 13d-3 of the Exchange Act) of more
than 30% of the Company's then outstanding voting
securities (measured on the basis of voting power);
(b) The shareholders of the Company approve a
definitive agreement to merge or consolidate the
Company with any other corporation, other than an
agreement providing for (i) 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 (ii) 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;
(c) A change occurs in the composition of the
Board during any period of twenty-four consecutive
months such that individuals who at the beginning
of such period were members of the Board 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 then 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
(d) The shareholders of the Company approve a plan
of complete liquidation of the Company or an
agreement for the sale or disposition by the
Company of all or substantially all of 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 (w) the Company or any of its subsidiaries, (x) a trustee
or other fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries, (y) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (z) a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same
proportions as their ownership of Company stock.
4
<PAGE> 7
10.2. Adjustments Upon Change in Control. On the date a
Change in Control occurs to the extent expressly set forth in the
applicable Program, appropriate adjustments shall be made to the
applicable Performance Goal(s), Performance Periods, and Bonus
Formulas to prevent or limit forfeiture of Bonuses under a Program.
A Program which includes such equitable adjustment provisions may
(i) limit the Committee's ability to exercise Committee Discretion
upon a Change in Control; (ii) prohibit any post-Change in Control
amendment to the Program which would adversely affect any
Participant without the written consent of such Participant; and
(iii) provide for a gross-up of benefits payable under the Program
to compensate Participants for any excise or other special tax
imposed by reason of the equitable adjustment provisions.
SECTION 11. AMENDMENT AND TERMINATION.
The Board reserves the right to amend or terminate the Plan in
whole or in part at any time. Unless otherwise prohibited by
applicable law, any amendment required to conform to Section 162(m)
of the Code may be made by the Committee. No amendment may be made
to the class of individuals constituting Eligible Employees, the
Performance Criteria or the maximum Bonus payable to any Covered
Employee in a year set forth in Section 7 without shareholder
approval unless shareholder approval is not required in order for
Bonuses paid to Covered Employees to constitute qualified
performance-based compensation under Section 162(m) of the Code.
The Committee may amend the Plan in any way if the Committee
determines that such amendment may be made without shareholder
approval and without jeopardizing qualification of Bonuses to
Covered Employees as performance-based compensation under Section
162(m) of the Code.
SECTION 12. MISCELLANEOUS.
12.1. Effective Date. The Plan shall be effective as of
March 26, 1997.
12.2. No Guarantee of Employment or Compensation. The
Plan shall not restrict the Company or any Affiliate from
discharging an Eligible Employee from employment, restrict any
Eligible Employee from resigning from such employment, or restrict
the Company or any Affiliate from increasing or decreasing the
compensation of any Eligible Employee.
12.3. Claims. Except in the case of a Change in Control,
no person shall have any claim to any Bonus. There is no
obligation for uniformity of treatment of Eligible Employees.
12.4. No Alienation. Except as required by law, amounts
payable under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind,
either voluntary or involuntary.
5
<PAGE> 8
12.5. Other Incentive Plans. Nothing contained in the
Plan shall prohibit the Company from granting other performance
awards to employees (including Eligible Employees) under such
conditions, and in such form and manner, as it sees fit. The
adoption of the Plan does not preclude the adoption of any other
bonus or incentive plan for employees; nor shall adoption of any
Program preclude the adoption of additional Programs under the
Plan.
12.6. Governing Law. Subject to the provisions of
applicable federal law, the Plan shall be administered, construed
and enforced according to the laws of the State of Missouri.
12.7. Severability. The invalidity of any particular
clause, provision or covenant herein shall not invalidate all or
any part of the remainder of the Plan, but such remainder shall be
and remain valid in all respects as fully as the law will permit.
6
<PAGE> 1
TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement"), dated as of this
27th day of February, 1996, by and between Anheuser-Busch Companies, Inc.
("A-BC"), a Delaware corporation, The Earthgrains Company ("TEC"), a Delaware
corporation formerly known as Campbell Taggart, Inc., and each TEC Affiliate
(as defined below), is entered into in connection with the Distribution (as
defined below).
WHEREAS A-BC has received an advance ruling from the Internal
Revenue Service (the "IRS") regarding the tax-free nature of its distribution
of the shares of TEC; and
WHEREAS A-BC and TEC desire to set forth their agreement on the
proper allocation among A-BC and TEC and their subsidiaries of federal,
state, foreign, and local taxes;
NOW, THEREFORE, in consideration of their mutual promises, the
parties agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be
<PAGE> 2
equally applicable to both the singular and the plural forms of the terms
defined):
"A-BC Affiliate" means any corporation, partnership or other
entity directly or indirectly controlled by A-BC, other than TEC or any TEC
Affiliate.
"A-BC Businesses" means the present and future subsidiaries,
divisions and businesses of any member of the A-BC Group, other than the TEC
Businesses. A-BC Businesses shall include all former subsidiaries, divisions
and businesses other than the TEC Businesses.
"A-BC Group" means the group of corporations that, immediately
after the Distribution Date, are members of the affiliated group of
corporations of which A-BC is the common parent (within the meaning of
Section 1504 of the Code).
"A-BC OFL" means the consolidated overall foreign loss of the
A-BC Group as such term is defined for purposes of section 904(f) of the
Code.
"A-BC Retained Amount" has the meaning prescribed in Section
3.8(b) hereof.
"A-BC Shareholder Tax Indemnity Payment" has the meaning
prescribed in Section 4.2 hereof.
"A-BC Stock Plan" means any stock option plan, restricted stock
plan or other stock-based incentive
2
<PAGE> 3
compensation plan involving A-BC stock in effect on the Distribution Date with
respect to employees of (or other service providers to) the A-BC Group or the
TEC Group.
"Aggregate Net De Minimis Taxes" has the meaning prescribed in
Section 3.8(a) hereof.
"Allocable Refund" has the meaning prescribed in Section 3.8(b)
hereof.
"Allocable Taxes" has the meaning prescribed in Section 3.8(a)
hereof.
"Beracha Options" means the options to purchase common stock of
A-BC held by Barry Beracha ("Beracha") at the time of the Distribution that
can be exercised by Beracha subsequent to the Distribution.
"Beracha A-BC Deductible Options" means any Beracha Options other
than Beracha TEC Deductible Options.
"Beracha TEC Deductible Options" means the Beracha Options that
are listed in Exhibit A attached hereto.
"Budes Business" means the business operations previously conducted
by Budes, S.A. and former, present and future business operations conducted by
Anheuser-Busch Investments, S.L. and its successors.
3
<PAGE> 4
"Code" means the Internal Revenue Code of 1986 (or, if relevant,
the Internal Revenue Code of 1954), as amended, or any successor thereto, as
in effect for the taxable period in question.
"Combined Group" means all the corporations required to be
included in a particular Combined Return.
"Combined Return" means any combined, unitary, or consolidated
return or report used in the determination of a State Income Tax or Other Tax
liability.
"Combined Jurisdiction" means, for any taxable period, any
jurisdiction in which TEC or a TEC Affiliate is included in a consolidated,
combined or unitary return with A-BC or an A-BC Affiliate for State Income
Tax or Other Tax purposes.
"Consolidated Group" means the affiliated group of corporations
(within the meaning of Section 1504 of the Code) of which A-BC is the common
parent prior to the Distribution Date.
"TEC Affiliate" means any corporation, partnership or other
entity directly or indirectly controlled by TEC.
"TEC Businesses" means the present and future subsidiaries,
divisions and businesses of any member of the TEC Group, excluding the
Spanish Theme Park Opera-
4
<PAGE> 5
tions and the Budes Business. TEC Businesses shall include all former
subsidiaries, divisions and businesses except to the extent such former
subsidiaries, divisions and businesses are included in the definition of the
Spanish Theme Park Operations or the Budes Business.
"TEC Group" means the group of corporations that, immediately
after the Distribution Date, will be members of the affiliated group of
corporations of which TEC is the common parent (within the meaning of Section
1504 of the Code). For purposes of this definition, it is assumed that TEC
will elect to file consolidated federal income tax returns with TEC as the
common parent beginning immediately after the Distribution.
"TEC ISO" means an incentive stock option (as defined in Section
422(b) of the Code) that was granted to an employee who, at the time of such
grant, was an employee of TEC or a member of the TEC Group.
"TEC NQSO" means a stock option (other than an incentive stock
option as defined in Section 422(b) of the Code) that (i) was granted to an
individual who, at the time of such grant, was an employee of TEC or a member
of the TEC Group, (ii) is exercised subsequent to the Distribution Date and
(iii) is not a Beracha Option.
5
<PAGE> 6
"TEC Shareholder Tax Indemnity Payment" has the meaning
prescribed in Section 4.3 hereof.
"Current Tax Benefit Transaction" has the meaning prescribed in
Section 3.13 hereof.
"De Minimis Taxes" has the meaning prescribed in Section 3.8(a)
hereof.
"Deferred Tax Benefit Transaction" has the meaning prescribed in
Section 3.13 hereof.
"Disqualifying Disposition" means the disposition of an incentive
stock option (as defined in Section 422(b) of the Code) prior to the
expiration of the holding period requirements contained in Section 422(a) of
the Code which results in a deduction described in Section 421(b) of the
Code.
"Distribution" is the pro-rata distribution by A-BC of all the
issued and outstanding common stock of C-T in a transaction intended to
qualify as a tax-free distribution under Sections 355 and 368(a)(1)(D) of the
Code.
"Distribution Date" means the date determined by the A-BC Board
of Directors as of which the Distribution shall be effected.
"Final Determination" shall mean the final resolution of
liability for any Tax for a taxable period,
6
<PAGE> 7
including any related interest, penalties or other additions to tax, (i) by
Internal Revenue Service Form 870 or 870-AD (or any successor forms thereto),
on the date of acceptance by or on behalf of the IRS, or by a comparable form
under the laws of other jurisdictions; except that a Form 870 or 870-AD or
comparable form that reserves (whether by its terms or by operation of law) the
right of the taxpayer to file a claim for refund and/or the right of the Taxing
Authority to assert a further deficiency shall not constitute a Final
Determination; (ii) by a decision, judgment, decree, or other order by a court
of competent jurisdiction, which has become final and unappealable; (iii) by a
closing agreement or accepted offer in compromise under Section 7121 or Section
7122 of the Code, or comparable agreements under the laws of other
jurisdictions; (iv) by any allowance of a refund or credit in respect of an
overpayment of Tax, but only after the expiration of all periods during which
such refund may be recovered (including by way of offset) by the jurisdiction
imposing such Tax; or (v) by any other final disposition, including by reason
of the expiration of the applicable statute of limitations.
"Income Tax Deduction" means any deduction taken with respect to
the calculation of any Income Taxes.
7
<PAGE> 8
"Income Taxes" means all federal, state, local and foreign income
Taxes or other Taxes based on income including, without limitation, any
franchise Taxes.
"Internal Distribution" means the series of transactions defined
as the "Internal Distribution" in part C.1. of the Ruling Request, as
amended, which collectively result in the distribution of the Budes Business
and the Spanish Theme Park Operations out of the TEC Group thereby allowing
A-BC to continue to own the Budes Business and the Spanish Theme Park
Operations following the Distribution.
"Internal Distribution Affiliate" has the meaning prescribed in
Section 2.2(d) hereof.
"International Baking Operations" means the former, present and
future subsidiaries, businesses, divisions, assets and operations of Bimbo,
S.A. and Europate, S.A.
"MPI Dividend" means the distribution by TEC of all the stock of
Merico Packaging Inc. ("MPI") to A-BC prior to and in connection with the
Distribution.
"Net TEC Deficiency" has the meaning prescribed in Section 3.8(a)
hereof.
"Option Tax Benefit" has the meaning prescribed in Section 3.13
hereof.
8
<PAGE> 9
"Other Taxes" means all taxes other than Income Taxes and
Transfer Taxes.
"PIRMI Property" means a certain parcel of real estate located in
California that Campbell Taggart Baking Companies, Inc. ("CTBCI") will sell
to Busch Agricultural Resources, Inc. ("BARI") prior to and in connection
with the Distribution.
"P-W" means Price Waterhouse L.L.P.
"Representative" means with respect to any person or entity, any
of such person's or entity's directors, officers, employees, agents,
consultants, advisors, accountants, attorneys, and representatives.
"Restructuring Taxes" means Taxes incurred by A-BC or a member of
the A-BC Group by virtue of any gain recognized by A-BC pursuant to the
Distribution. Restructuring Taxes shall not include any Taxes resulting from
the recognition of any previously consummated deferred intercompany
transactions (as defined in Treasury regulation Section 1.1502-13) or the
recognition of an excess loss account under Treasury regulation Section
1.1502-19.
"Ruling Request" means the private letter ruling request filed by
A-BC with the IRS on September
9
<PAGE> 10
21, 1995, as supplemented from time to time with respect to certain tax aspects
of the Distribution.
"Services Agreement" means the Corporate Services Agreement
between A-BC and TEC to be executed prior to and in connection with the
Distribution.
"Spanish Theme Park Operations" means the former, present and
future subsidiaries, businesses, divisions, assets and operations related to
the minority equity interests and creditor interests owned by members of the
TEC Group or members of the A-BC Group in Grand Peninsula, S.A., GP Resort,
S.A., and GP Commercial, S.A.
"State Income Taxes" means all state or local income Taxes or
other state or local Taxes based on income including, without limitation, any
franchise Taxes.
"Stock Plan Transaction" means any transaction under the A-BC
Stock Plan including, without limitation, the exercise of any Beracha TEC
Deductible Option or the sale of any stock of A-BC that was acquired pursuant
to the exercise of an incentive stock option (as defined in Section 422 of
the Code), but excluding an transaction related to stock options held or
exercised by Jaime Iglesias.
"Tax" and "Taxes" mean any form of taxation, whenever created or
imposed, and whenever imposed by a national, municipal, governmental, state,
federal, for-
10
<PAGE> 11
eign, or other body (a "Taxing Authority"), and without limiting the generality
of the foregoing, shall include any net income, alternative or add-on minimum
tax, gross income, sales, use, ad valorem, gross receipts, value added,
franchise, profits, license, transfer, recording, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profit, custom duty, or other tax, government fee or other like assessment or
charge of any kind whatsoever, together with any related interest, penalties,
or other additions to tax, or additional amount imposed by any such Taxing
Authority.
"Taxing Authority" is defined under the term "Taxes."
"Tax Benefit" means a reduction in the Income Tax liability of a
corporation (or of the consolidated or combined group of which it is a
member) for any taxable period that arises, or may arise in the future, as a
result of any adjustment to, or addition or deletion of, a Tax Item in the
computation of the Income Tax liability of the taxpayer (or the consolidated
or combined group of which it is a member).
"Tax Controversy" is defined in Section 4.2(a).
11
<PAGE> 12
"Tax Detriment" means an increase in the Income Tax liability of
a corporation (or of the consolidated or combined group of which it is a
member) for any taxable period that arises, or may arise in the future, as a
result of any adjustment to, or addition or deletion of, a Tax Item in the
computation of the Income Tax liability of the taxpayer (or the consolidated
or combined group of which it is a member).
"Tax Item" means any item of income, gain, loss, deduction,
credit, recapture of credit, or any other item which increases or decreases
Income Taxes paid or payable.
"Tax Practices" has the meaning prescribed in Section 2.1 hereof.
"Tax Return" means any return, filing, questionnaire or other
document required to be filed, including requests for extensions of time,
filings made with estimated Tax payments, claims for refund or amended
returns that may be filed, for any taxable period with any Taxing Authority
in connection with any Tax or Taxes (whether or not a payment is required to
be made with respect to such filing).
12
<PAGE> 13
"Transfer Taxes" means any state, local or foreign transfer Taxes
that do not constitute Income Taxes.
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
-------------------------------------
Section 2.1. Manner of Filing. All Tax Returns (relating to
----------------
pre-Distribution and post-Distribution taxable periods) filed by A-BC and TEC
after the Distribution Date shall be prepared on a basis that is consistent
with the rulings of the IRS that were issued in connection with the
Distribution (and, if applicable, the Internal Distribution) and shall be
filed on a timely basis (including extensions) by the party responsible for
such filing under this Agreement. All Tax Returns relating to taxable
periods ending before or including the Distribution Date and filed after the
date of this Agreement by A-BC or TEC shall be prepared (in the absence of a
controlling change in law or circumstance or consent of A-BC, which consent
shall not be unreasonably withheld) in a manner that is consistent with past
practices, elections, accounting methods, conventions, and principles of
taxation used for the most recent taxable periods for which Tax Returns
involving similar items have been filed prior to the Distribution Date,
except to the
13
<PAGE> 14
extent such practices, elections, methods, conventions and principles are
altered by audits by Taxing Authorities in which event the practices required
by such audits shall be utilized (collectively the "Tax Practices").
Section 2.2. Pre-Distribution Tax Returns.
----------------------------
(a) A-BC shall timely prepare and file, or cause to be timely
prepared and filed, all Tax Returns for the Consolidated Group. The Tax
Returns for the Consolidated Group shall include all Tax Items required to be
reported for any member of the TEC Group for taxable periods ending before or
including the Distribution Date. TEC shall provide A-BC its Tax Returns and
supporting schedules and additional information requested by A-BC for use by
A-BC in preparing Tax Returns for the Consolidated Group for taxable periods
ending prior to January 10, 1996 on or before June 30, 1996. TEC shall
provide A-BC its Tax Returns and supporting schedules and additional
information requested by A-BC for use by A-BC in preparing Tax Returns for
the Consolidated Group for the taxable period that includes the Distribution
Date on or before September 30, 1996. In addition, TEC shall provide A-BC
all information requested by A-BC relevant to the determination of estimated
and final Tax payments for all federal Income Taxes on or before the date
that
14
<PAGE> 15
is 15 days prior to the due date of any such payment. A-BC shall file
the Tax Returns for the Consolidated Group consistently with such Tax
Returns, supporting schedules and additional information provided by TEC to
the extent such Tax Returns, supporting schedules and additional information
are reasonable and were prepared in a manner consistent with the Tax
Practices. A-BC shall deliver to TEC copies of the portions of each such
Consolidated Group Tax Return that relate to the TEC Businesses within 30
days after the day that it is filed. A-BC shall not subsequently amend any
Consolidated Group Tax Return previously filed by A-BC to reflect any change
in an item primarily affecting the TEC Businesses without the prior written
consent of TEC, which consent shall not be unreasonably withheld. If A-BC
subsequently amends any Consolidated Group Tax Return previously filed by
A-BC to reflect any change in an item that affects the TEC Businesses (but
does not primarily affect the TEC Businesses so as to require the written
consent of TEC pursuant to the immediately preceding sentence), then A-BC
shall inform TEC of such amendment and provide TEC with the portions of such
amended return that affect the TEC Businesses.
15
<PAGE> 16
(b) TEC shall prepare and file, or cause to be prepared and
filed, all appropriate Tax Returns relating to all State Income Taxes,
Transfer Taxes and Other Taxes imposed on any member of the TEC Group, except
for returns and filings with respect to Combined Jurisdictions.
(c) For any Combined Jurisdiction, A-BC or an A-BC Affiliate, as
appropriate, shall be responsible for the preparation and filing of all Tax
Returns relating to any State Income Taxes or Other Taxes imposed upon any
member of the TEC Group for the same taxable periods with respect to which
A-BC is responsible for the filing of federal income Tax Returns under
Section 2.2(a) of this Agreement. TEC (or the appropriate TEC Affiliate) shall
provide A-BC (or the appropriate A-BC Affiliate) such Tax Returns, schedules
and additional information requested by A-BC for use by A-BC (or the
appropriate A-BC Affiliate) in preparing any Combined Return for any taxable
periods ending prior to January 10, 1996 on or before June 30, 1996. TEC (or
the appropriate TEC Affiliate) shall provide A-BC (or the appropriate A-BC
Affiliate) such Tax Returns, schedules and additional information requested
by A-BC for use by A-BC (or the appropriate A-BC Affiliate) in preparing any
Combined Return for any taxable periods which ends on or includes the
Distribu-
16
<PAGE> 17
tion Date on or prior to September 30, 1996. In addition, TEC shall provide
A-BC all information requested by A-BC relevant to the determination of
estimated and final Tax payments for all Taxes with respect to Combined
Returns on or before the date that is 15 days prior to the due date of any
such payment. A-BC shall file the Tax Returns for the Combined Jurisdiction
consistently with such Tax Returns, supporting schedules and additional
information provided by TEC to the extent such Tax Returns, supporting
schedules and additional information are reasonable and were prepared in a
manner consistent with the Tax Practices. A-BC shall deliver to TEC copies
of the portion of each such Combined Return that relates to the TEC
Businesses no later than 30 days after the date TEC makes a written request
therefor. A-BC shall not amend any Combined Return to reflect any change in
an item primarily attributable to the TEC Businesses without the prior
written consent of TEC (which consent may not unreasonably be withheld).
(d) A-BC (or the relevant A-BC Affiliate) and TEC (or the
relevant TEC Affiliate) shall each be responsible for the filing of their
respective Tax Returns for jurisdictions outside the United States other than
Combined Jurisdictions that are due with respect to all
17
<PAGE> 18
taxable periods and for the payment of all Taxes due or payable in connection
therewith; provided, however, that, unless otherwise instructed in writing by
-------- ------
A-BC, with respect to any Tax Return of a TEC Affiliate that participated in or
was affected by the Internal Distribution (an "Internal Distribution
Affiliate"), TEC shall cause such Internal Distribution Affiliate to treat the
Internal Distribution as one or more tax-free transactions on its respective
Tax Returns.
Section 2.3. Post-Distribution Tax Returns. TEC shall prepare
-----------------------------
and file, or cause to be prepared and filed, all Tax Returns for the TEC
Group for all taxable periods beginning after the Distribution Date. A-BC
shall prepare and file, or cause to be prepared and filed, all Tax Returns
for the A-BC Group for all taxable periods beginning after the Distribution
Date.
ARTICLE III
PAYMENTS, REFUNDS AND DEFICIENCIES
----------------------------------
Section 3.1. Allocation and Payment. A-BC and TEC agree to
----------------------
allocate and pay their respective shares of Income Taxes and Other Taxes as
provided in this Agreement. Payments to Taxing Authorities and between the
18
<PAGE> 19
Parties, as the case may be, shall be made in accordance with such tax
allocations.
Section 3.2. Federal Income Taxes. For each taxable period
--------------------
ending before or including the Distribution Date for which A-BC filed or will
file a consolidated federal income Tax Return that includes the TEC Group,
the Consolidated Group's federal income tax liability shall be allocated
between the A-BC Group and the TEC Group in a manner consistent with the
allocation of federal income tax liabilities between the A-BC Group and the
TEC Group in prior years, provided, however, that, subject to the provisions
-------- -------
of Section 3.8, A-BC shall be entitled to any Tax refunds received with
respect to the Consolidated Group's federal Income Tax Return even if such
refund would otherwise be allocable to the TEC Group. In the event that the
TEC Group has a taxable loss on a separate company basis (computed in
accordance with the computation of separate taxable income under the principles
of Treasury Regulation Sec. 1.1502-12) for any taxable period ending before or
including the Distribution Date for which A-BC filed or will file a
consolidated federal Income Tax Return that includes the TEC Group, the TEC
Group's share of the Consolidated Group's federal income tax liability shall
be zero and no member of the
19
<PAGE> 20
TEC Group shall be entitled to receive any payment from any member of the A-BC
Group for use of the TEC Group's loss even if such loss reduced the
Consolidated Group's federal income tax liability.
Section 3.3. State Income Taxes. For each taxable period (or
------------------
portion thereof) ending before or including the Distribution Date for which
the liability of the members of the A-BC Group and the TEC Group is
determined on a Combined Return basis that includes members of both the A-BC
Group and the TEC Group, the aggregate State Income Tax liability of the A-BC
Group and the TEC Group in a particular state shall be allocated between the
A-BC Group and the TEC Group in a manner consistent with the allocation of
State Income Tax liabilities in prior years (or, if there was no such
allocation of State Income Tax liabilities in prior years, then in a manner
consistent with the allocation of federal Income Tax liabilities under
Section 3.2), provided, however, that, subject to the provisions of Section
-------- -------
3.8, A-BC shall be entitled to any Tax refunds received with respect to a
Combined Return even if such refund would otherwise be allocable to a member
of the TEC Group. In the event that the TEC Group has a taxable loss on a
separate company basis (computed in accordance with the
20
<PAGE> 21
computation of separate taxable income under the principles of Treasury
Regulation Sec. 1.1502-12) with respect to any Combined Return, the TEC Group's
share of the tax liability related to such Combined Return shall be zero and no
member of the TEC Group shall be entitled to receive any payment from any
member of the A-BC Group for use of the TEC Group's loss even if such loss
reduced the tax liability due with respect to such Combined Return.
For each taxable period (or portion thereof) relating to State
Income Taxes imposed on any member of the TEC Group on a separate return,
combined or consolidated basis, except for returns and filings with respect
to Combined Jurisdictions, TEC or a member of the TEC Group shall be solely
responsible for the payment of such State Income Taxes (including estimated
Taxes) and the members of the TEC Group shall indemnify A-BC for any such
Taxes; provided, however, that TEC shall not be required to reimburse A-BC
-------- -------
for any State Income Taxes described in this sentence that were paid by A-BC
on behalf of TEC on or prior to the Distribution Date and provided further,
-------- -------
that TEC shall be entitled to keep, and shall not be required to indemnify
A-BC for, any refund of State Income Taxes described in this sentence that is
received after the Distribution Date.
21
<PAGE> 22
For each taxable period (or portion thereof) relating to State
Income Taxes imposed on any member of the A-BC Group on a separate return,
combined or consolidated basis, except for returns and filings with respect
to Combined Jurisdictions, A-BC shall be solely responsible for the payment
of such State Income Taxes and the members of the A-BC Group shall indemnify
TEC for any such Taxes.
Section 3.4. Other Taxes. For each taxable period (or portion
-----------
thereof) ending before or including the Distribution Date, the aggregate
liability of the A-BC Group and the TEC Group for the actual amount of any
Other Taxes shall be determined and allocated between the A-BC Group and the
TEC Group in accordance with the principles of Section 3.3 of this Agreement.
Section 3.5. Transfer Taxes. A-BC shall be liable for any
--------------
Transfer Taxes resulting from the Distribution and the Internal Distribution
and shall reimburse and indemnify TEC with respect to such Transfer Taxes.
Section 3.6. Tax Attributes. Tax attributes determined on a
--------------
consolidated basis for years ending before or including the Distribution Date
shall be allocated to members of the A-BC Group and the TEC Group in
accordance with the Code and the Treasury regulations
22
<PAGE> 23
promulgated thereunder (and any applicable state or foreign law or regulation).
Except as otherwise provided in Section 5.4 and subject to the discussion of
the A-BC OFL below, A-BC shall determine the amounts and proper allocation of
such attributes as of the Distribution Date and A-BC and TEC hereby agree to
compute their tax liabilities for taxable years after the Distribution Date
consistent with that determination and allocation. A-BC shall provide TEC
access to A-BC's calculations that were used by A-BC to determine the amounts
and proper allocations of such attributes.
The amount of the A-BC OFL that is allocated to the TEC Group as
of December 31, 1994 is $5,140,933, computed in accordance with the notional
overall foreign loss concept of Treasury regulation Sec. 1.1502-9 and in
compliance with the interest expense allocation and apportionment provisions
of Section 864(e) of the Code applicable to members of a consolidated group.
The amount of the A-BC OFL that is allocated to the TEC Group as of December
31, 1995 and as of the Distribution Date will be made in accordance with the
methodology used by A-BC to allocate the A-BC OFL as of December 31, 1994,
subject to review by P-W, and A-BC will inform TEC in
23
<PAGE> 24
writing as to the amount, if any, of the A-BC OFL that is allocated to TEC as
of the Distribution Date.
If as a result of an audit by the IRS the amount of the A-BC OFL
that is allocated to the TEC Group as of the Distribution Date pursuant to
preceding paragraph is required to be reduced (an "OFL Allocation Reduction")
due to a claim by the IRS that the "split methodology" was improperly applied
to allocate the A-BC OFL between A-BC and TEC, then TEC shall pay to A-BC an
amount equal to thirty five percent (35%) of the OFL Allocation Reduction.
Any payment required to be made by TEC to A-BC due to an OFL Allocation
Reduction shall be made within 7 days after TEC receives a reduction in its
Taxes with respect to such OFL Allocation Reduction, and TEC shall take all
reasonable measures (including filing amended Tax Returns) to obtain such
reduction in Taxes as soon as reasonable practicable.
Tax attributes determined on a Combined Jurisdiction basis for
years ending before or including the Distribution Date shall be allocated to
members of the A-BC Group and the TEC Group in accordance with applicable
state or foreign law or regulation. A-BC shall determine the amounts and
proper allocation of such attributes as of the Distribution Date and A-BC and
TEC hereby agree to
24
<PAGE> 25
compute their tax liabilities for taxable years after the Distribution Date
consistent with that determination and allocation.
Section 3.7. Payment of Taxes With Respect to Taxable Year of
-----------------------------------------------
Separation and Prior Tax Year.
- -----------------------------
(a) Federal Income Taxes. For the federal taxable year that
--------------------
includes the Distribution Date as well as the immediately prior taxable year,
TEC shall pay to A-BC an amount equal to (i) the allocable federal Income Tax
liability of the members of the TEC Group determined under Section 3.2 of
this Agreement, including the TEC Group's share of estimated taxes, less (ii)
any federal Income Taxes paid by A-BC for such periods on or prior to the
Distribution Date on behalf of the TEC Group that would otherwise be
allocable to the C-T Group under Section 3.2. A-BC shall be responsible for
the payment to the IRS of the federal Income Tax liability of the
Consolidated Group for the taxable year that includes the Distribution Date as
well as the immediately prior taxable year.
(b) State Income Taxes. For any taxable period (or portion
------------------
thereof) that includes or ends prior to the Distribution Date and for which a
State Income Tax of A-BC or TEC or any of their subsidiaries is determined
25
<PAGE> 26
on the basis of a Combined Return that includes members of both the A-BC Group
and the TEC Group, A-BC shall be responsible for the timely payment of the
estimated and total tax liabilities of the Combined Group to the appropriate
Taxing Authority. TEC shall pay to A-BC an amount equal to (i) the Taxes
(including estimated Taxes), if any, allocated to TEC or any member of the TEC
Group under Section 3.3 of this Agreement, less (ii) any State Income Taxes
paid by A-BC for such periods on or prior to the Distribution Date on behalf
of any member of the TEC Group that would otherwise be allocable to the TEC
Group under Section 3.3. TEC shall be responsible for the timely payment of
the estimated and total State Income Tax liabilities of any member of the TEC
Group for any taxable period that includes or ends prior to the Distribution
Date and for which a State Income Tax of TEC or any of its subsidiaries is
determined on a separate company basis; provided, however, that TEC shall not
--------
be required to reimburse A-BC for any State Income Taxes described in this
sentence that were paid by A-BC on behalf of TEC on or prior to the
Distribution Date.
(c) Other Taxes. For any taxable period (or portion thereof)
-----------
that includes the Distribution Date, TEC
26
<PAGE> 27
and A-BC shall make payments with respect to Other Taxes in accordance with the
principles of Section 3.4.
Section 3.8. Tax Deficiencies and Refunds as to Consolidated
-----------------------------------------------
Group Tax Returns and Combined Returns.
- --------------------------------------
(a) Subject to the provisions of Section 4.3, if as a result of
any audit, amendment or other change in a Consolidated Group Tax Return or
Combined Return with respect to any taxable period ending before or including
the Distribution Date, there is an additional amount of Taxes due and payable
(including any liability arising under Treas. Reg. Sec. 1.1502-6 or similar
provision under state or local law), any such deficiency shall be paid by
A-BC or the A-BC Affiliate. TEC or a TEC Affiliate shall pay to A-BC an amount
equal to 50 percent (50%) of any federal or State Income Taxes or any Other
Taxes paid by A-BC or an A-BC Affiliate arising as the result of an audit
adjustment, amendment or other change in a Tax Return which are allocable to
TEC pursuant to the principles of Sections 3.2, 3.3 or 3.4 hereof with
respect to any taxable period ending before or including the Distribution Date
(one hundred percent of such amount being referred to as "Allocable Taxes");
provided, however, that if and to the extent the determination resulting in
- --------
such Allocable Tax (i) entitles TEC to realize a Tax
27
<PAGE> 28
Benefit, or (ii) would otherwise require A-BC to pay (without reimbursement
from TEC) Allocable Taxes in excess of (x) five hundred thousand dollars
($500,000) less (y) all Allocable Taxes previously paid by A-BC (without
reimbursement from TEC), TEC or such TEC Affiliate shall pay to A-BC an amount
equal to one hundred percent (100%) of any such Allocable Taxes. Any Allocable
Taxes for which A-BC is not entitled to reimbursement pursuant to this Section
3.8(a) shall be referred to herein as "De Minimis Taxes" and the aggregate
amount of De Minimis Taxes that have not been reduced by A-BC's share of an
Allocable Refund under Section 3.8(b) hereof shall be referred to herein as
"Aggregate Net De Minimis Taxes." Notwithstanding the foregoing, TEC shall not
be responsible for any penalties (such as those imposed on substantial under
statements pursuant to Sections 6661 and 6662 of the Code) that would not
have been imposed but for the failure of A-BC to disclose any matter to the
IRS to the extent adequate information relating to such matter had been
timely provided to A-BC by TEC, and any such penalties shall be excluded from
the definition of Allocable Taxes. The cumulative amount of Allocable Taxes
(other than Allocable Taxes for which TEC received a Tax Benefit) paid by TEC
pursuant to this Section
28
<PAGE> 29
3.8(a) reduced by the cumulative amount of Allocable Refunds (other than
Allocable Refunds for which TEC suffered a Tax Detriment) received by TEC
pursuant to Section 3.8(b) hereof shall be referred to as the "Net TEC
Deficiency."
(b) If as a result of any audit, amendment or other change in
any Consolidated Group Tax Return or Combined Return with respect to any tax
able period ending before or including the Distribution Date, there is a
refund of Taxes previously paid (whether by payment, credit, offset against
other Taxes due or otherwise), such refund shall be payable to A-BC or the
A-BC Affiliate. Notwithstanding anything to the contrary in the preceding
sentence, A-BC shall be required to pay to TEC all or a portion of the amount
of such refund that is allocable to TEC or any member of the TEC Group pursuant
to the principles of Sections 3.2, 3.3, or 3.4 hereof (an "Allocable Refund")
in an amount equal to one hundred percent (100%) of such Allocable Refund to
the extent that the Allocable Refund causes TEC to suffer a Tax Detriment.
To the extent TEC does not suffer a Tax Detriment as a result of an Allocable
Refund, and if the Aggregate Net De Minimis Taxes calculated under Section
3.8(a) hereof equal zero (after reducing the Aggregate
29
<PAGE> 30
Net De Minimis Taxes pursuant to the immediately subsequent paragraph), then
A-BC shall pay to TEC an amount equal to the lesser of (i) two hundred and
fifty thousand dollars ($250,000) less any amount previously paid to TEC
pursuant to this clause (i) of this sentence and (ii) the amount of such
Allocable Refund. The absolute value of the difference, if any, of between (i)
the amount A-BC is required to pay to TEC pursuant to the immediately preceding
sentence and (ii) the actual amount of the Allocable Refund that A-BC would
have been required to pay to TEC if clause (i) of the immediately preceding
sentence was omitted (such difference being the "A-BC Retained Amount"), shall
be retained by A-BC and held as collateral for future obligations of TEC that
may arise under this Agreement. On the fourth anniversary of the Distribution
Date, A-BC shall pay to TEC the balance, if any, of the A-BC Retained Amount
existing on such date. To the extent TEC is otherwise required to make a
payment to A-BC pursuant to Section 3.8(a) hereof, in lieu of making an actual
cash payment to A-BC, TEC can elect to reduce the amount of the A-BC Retained
Amount by the amount of the cash payment that TEC would otherwise be required
to make.
30
<PAGE> 31
Notwithstanding anything to the contrary in this Section 3.8(b),
to the extent TEC does not suffer a Tax Detriment as a result of an Allocable
Refund, and if at the time A-BC receives such Allocable Refund the then
balance of Aggregate Net De Minimis Taxes is greater than zero, then A-BC
shall be required to pay to TEC the sum of (i) one hundred percent (100%) of
the portion of such Allocable Refund to the extent such portion does not
reduce the Net TEC Deficiency below five hundred thousand dollars ($500,000)
and (ii) fifty percent (50%) of any remaining portion of such Allocable
Refund, up to an aggregate amount of five hundred thousand dollars ($500,000).
To the extent any amount of such Allocable Refund is allocated and paid to
TEC pursuant to clause (ii) of the immediately preceding sentence, an equal
amount of such Allocable Refund shall be allocated to A-BC to reduce the
amount of the Aggregate Net De Minimis Taxes. If the amount of the Allocable
Refund is sufficient to reduce the Net TEC Deficiency to zero (and therefore
sufficient to reduce the amount of the Aggregate Net De Minimis Taxes to
zero), and a portion of such Allocable Refund remains unallocated under this
paragraph, such unallocated portion shall be treated as an
31
<PAGE> 32
Allocable Refund to be allocated pursuant to the immediately preceding
paragraph.
The proper application of the provisions contained in Section
3.8(a) and Section 3.8(b) hereof are illustrated in Exhibit D, and these
provisions shall be interpreted consistently with such illustrations.
(c) Notwithstanding the provisions of Section 3.7(a), if TEC or
a TEC Affiliate wishes to make payment of, or enter into a cash bond with
respect to, any Taxes for which it would bear the burden under this Agreement
prior to the date that payment of such Taxes is required by the relevant
Taxing Authority, A-BC shall permit TEC to make such advance payment or enter
into such cash bond and shall take such reasonable actions as may be
necessary to effectuate the same.
Section 3.9. [Section will not be used.]
Section 3.10. Timing of Certain Payments. Any payment required
--------------------------
to be made pursuant to Sections 3.7 or 3.8 with respect to any Tax Return
shall be made by the party obligated to make such payment (i) in the case of
a refund of Tax, within 7 days after receipt (whether by way of payment,
credit, or offset against any payments due or otherwise) of such refund or
(ii) in the case of the payment of Tax with respect to any such Tax Return,
32
<PAGE> 33
the later of (x) 7 days prior to the due date for payment of such Tax and (y)
the delivery of written demand for the payment hereunder to the party
obligated to make such payment hereunder. Any payment described in clause
(i) and any demand for payment described in clause (ii) shall be accompanied
by a calculation setting forth the basis for the amount paid or demanded.
Section 3.11. Liability for Taxes with Respect to Post-
-----------------------------------------
Distribution Taxable Periods. Unless otherwise provided in this Agreement,
- ----------------------------
the A-BC Group shall pay all Taxes and shall be entitled to receive and
retain all refunds of Taxes with respect to taxable periods beginning after
the Distribution Date that are attributable to the A-BC Businesses. Unless
otherwise provided in this Agreement, the C-T Group shall pay all Taxes and
shall be entitled to receive and retain all refunds of Taxes with respect to
taxable periods beginning after the Distribution Date that are attributable
to the TEC Businesses.
3.12. Carrybacks. TEC shall be entitled to any refund for any
----------
Tax obtained by the Consolidated Group (or any member of the Consolidated
Group in a Combined Jurisdiction) as a result of the carryback of losses or
credits of any member of the TEC Group from any taxable period after the
Distribution Date to any taxable period
33
<PAGE> 34
ending before or including the Distribution Date, provided that A-BC, in it
sole and absolute discretion, approves in writing such carryback. Such refund
is limited to the net amount received by A-BC (by refund, offset against other
Taxes or otherwise), net of any net Tax cost incurred by A-BC or an A-BC
Affiliate resulting from such refund, and shall be paid by A-BC within 10
business days after payment is received by A-BC from a Taxing Authority. The
application of any such carrybacks by TEC and/or any TEC Affiliate shall be in
accordance with the Code and the consolidated return Treasury regulations
promulgated thereunder or applicable state or Other Tax laws. C-T shall
indemnify A-BC for any interest, fines and penalties resulting from the
carryback of any item under this paragraph. Upon request by TEC, A-BC shall
advise TEC of an estimate of any Tax detriment A-BC projects will be associated
with any carryback of losses or credits of a member of the C-T Group.
Notwithstanding this Section 3.12, TEC and any member of the TEC Group shall
have the right, in its sole discretion, to make any election, including the
election under Section 172(b)(3) of the Code, which would eliminate or limit
the carryback of any loss or credit to any taxable period ending before or
including the Distribution Date.
34
<PAGE> 35
Section 3.13. Deductions Attributable to A-BC Stock Plan. C-T
------------------------------------------
agrees to pay A-BC an amount equal to the Option Tax Benefit (as determined
below) received by the TEC Group that is attributable to any Stock Plan
Transaction. Payment of the amount of such Option Tax Benefit shall be made
within 30 days after the filing of the relevant Tax Return for any taxable
year in which an Option Tax Benefit is realized.
The amount of the Option Tax Benefit shall be determined as
follows:
To the extent an Income Tax Deduction allowable to the TEC Group
with respect to a Stock Plan Transaction reduces the Taxes payable
by the TEC Group in the taxable year in which the Stock Plan
Transaction occurs (a "Current Tax Benefit Transaction"), the amount
of the Option Tax Benefit related to such Stock Plan Transaction
shall equal the excess of (i) the amount of Taxes that the TEC
35
<PAGE> 36
Group would have paid in the taxable year in which the Stock Plan
Transaction occurred in the absence of such Stock Plan Transaction
over (ii) the amount of Taxes actually payable by the TEC Group in
the taxable year in which the Stock Plan Transaction occurred. In
determining the amount of Taxes that the TEC Group would have paid
in the taxable year in which the Stock Plan Transaction occurred
(both with and without considering the Stock Plan Transaction) any
losses or tax credits carried forward from previous tax years or
carried back from subsequent tax years shall not be considered.
To the extent an Income Tax Deduction allowable to the TEC Group
with respect to a Stock Plan Transaction does not reduce the Taxes
payable by the TEC Group in the taxable year in which the Stock
Plan Transaction occurs or is deemed to occur by virtue of the last
sentence of this paragraph (a "Deferred Tax Benefit Transaction")
because, for example, the TEC Group has a net operating loss in
such taxable year prior to considering any net operating loss
carryovers or carrybacks, the amount of the Option Tax Benefit
related to such Stock Plan Transaction (or the portion of such
Stock Plan Transaction that does not result in a reduction of the
TEC Group's Taxes) shall equal zero in the taxable year in which
the Stock Plan Transaction occurs. In the case of a Stock Plan
Transaction (or a portion thereof) that is a Deferred Tax Benefit
Transaction, the Stock Plan Transaction shall be deemed to have
occurred in
36
<PAGE> 37
the immediately succeeding taxable year and the amount of the Option Tax
Benefit related to such Stock Plan Transaction will be computed as if such
Stock Plan Transaction occurred in the immediately succeeding taxable
year.
To the extent there is any ambiguity relating to the proper
determination of the amount of timing of an Option Tax Benefit with
respect to a Stock Plan Transaction, the examples contained in
Exhibit C shall, to the extent applicable, control the determination
of the amount and timing of such Option Tax Benefit.
If subsequent to C-T's payment of any Option Tax Benefit, there
is (A) a Final Determination under applicable law to the effect that all or
part of the Income Tax Deduction giving rise to such payment was not allow
able or available, or (B) a reduction in the amount of the benefit TEC
realizes as a result of a Final Determination increasing the amount of income
or gain associated with those transactions, A-BC shall repay to TEC within 30
days of any event described in (A) or (B) (a "Subsequent Benefit Decrease
Event") any amount that would have not been payable to A-BC pursuant to this
Section 3.13 had the amount of the Option Tax Benefit
37
<PAGE> 38
been initially determined in light of the Subsequent Benefit Decrease Events,
together with the amount of any interest and penalties payable to any Taxing
Authority with respect to those amounts. If subsequent to TEC's payment of any
amount under this Section 3.13, there is (A) a Final Determination under
applicable law to the effect that an Income Tax Deduction giving rise to a
payment of an Option Benefit Amount exceeded the amount claimed or (B) an
increase in the amount of the Option Tax Benefit TEC realizes as a result of a
Final Determination decreasing the amount of income or gain associated with an
Option Plan Transaction, TEC shall pay to A-BC within 30 days of any event
described in (A) or (B) (a "Subsequent Benefit Increase Event") any additional
amount that would have been payable to A-BC pursuant to this Section 3.13 had
the amount of the Option Tax Benefit been initially determined in light of the
Subsequent Benefit Increase Events.
TEC and A-BC agree to treat any payments arising under this
Section 3.13 as an adjustment to the intercompany payable owed by TEC to A-BC
immediately prior to discharge of such intercompany payable prior to the
Distribution. If and to the extent there is a Final Determination that the
treatment of any payment made
38
<PAGE> 39
pursuant to this Section 3.13 is required to be included in the income of any
member of the A-BC Group, then TEC shall be required to make an additional
payment to A-BC in an amount such that the amount received and retained by A-BC
after the payment of any Taxes related to such payments and additional payments
is equal to the amount A-BC would have retained had such payments not been
required to be included in the income of any member of the A-BC Group.
Any Income Tax Deduction related to the exercise of any Beracha
TEC Deductible Options subsequent to the Distribution Date shall be treated
as an Income Tax Deduction accruing to a member of the TEC Group, and TEC
will file all its Tax Returns consistent with such treatment. If a Taxing
Authority proposes to disallow an Income Tax Deduction to a member of the
A-BC Group with respect to a Beracha A-BC Deductible Option, upon receipt of
written notice from A-BC, TEC shall be required to treat the Income Tax
Deduction related to such Beracha A-BC Deductible Option as an Income Tax
Deduction accruing to a member of the TEC Group, and TEC will file all its
Tax Returns (including any amended Tax Returns that may be required)
consistent with such treatment. Unless there is a Final Determination to the
contrary, each
39
<PAGE> 40
member of the TEC Group agrees that, under current law, the TEC Group will not
be required to recognize any income or gain upon the exercise on any Beracha
TEC Deductible Option (or the exercise of any Beracha A-BC Deductible Option
described in the immediately preceding sentence), and the TEC Group shall file
all its Tax Returns consistent with such treatment.
Any Income Tax Deduction related to a Disqualifying Disposition
of a TEC ISO subsequent to the Distribution Date shall be treated as an
Income Tax Deduction accruing to a member of the TEC Group, and TEC will file
all its Tax Returns consistent with such treatment. Unless there is a Final
Determination to the contrary, each member of the TEC Group agrees that,
under current law, the TEC Group will not be required to recognize any income
or gain upon a Disqualifying Disposition of a TEC ISO subsequent to the
Distribution Date, and the TEC Group shall file all its Tax Returns
consistent with such treatment.
Any Income Tax Deduction related to the exercise of a TEC NQSO
subsequent to the Distribution Date shall be treated as an Income Tax
Deduction accruing to a member of the TEC Group, and TEC will file all its Tax
Returns consistent with such treatment. Unless there is
40
<PAGE> 41
a Final Determination to the contrary, each member of the TEC Group agrees
that, under current law, the TEC Group will not be required to recognize any
income or gain upon the exercise of a TEC NQSO subsequent to the Distribution
Date, and the TEC Group shall file all its Tax Returns consistent with such
treatment.
Section 3.14. Exchange of Information and Disputes Regarding
---------------------------------------------
Certain Tax Liabilities and Tax Benefits. In determining (i) the amount of a
- ----------------------------------------
liability to be allocated pursuant to Section 3.2, 3.3, 3.4 or 3.5 (ii) the
amount of a payment for the use of losses or credits attributable to the TEC
Businesses required to be made pursuant to Section 3.7(a), (iii) the amount
of a payment required to be made pursuant to Section 3.13 attributable to a
deduction arising from a transaction under the A-BC Stock Plan, or (iv) the
proper allocation of Tax attributes pursuant to Section 3.06 (other than the
A-BC OFL), A-BC or TEC, as the case may be, shall be required to furnish the
other party all appropriate information (including relevant Tax Returns or
portions thereof) used to calculate such amount or allocation. In the event
of a dispute regarding (i) the allocation of liability pursuant to Section
3.2, 3.3, 3.4 or 3.5 (ii) a payment for the use of losses or credits
attributable to the TEC
41
<PAGE> 42
Businesses pursuant to Section 3.7(a), (iii) a payment pursuant to Section 3.13
attributable to a deduction arising from a transaction under the A-BC Stock
Plan, or (iv) the proper allocation of Tax attributes pursuant to Section 3.06
(other than the A-BC OFL), the senior management of TEC and A-BC shall first
attempt in good faith to resolve such dispute. In the event senior management
of TEC and A-BC are unable to resolve a dispute described in the preceding
sentence, A-BC and TEC shall employ (and equally share the expense of) a
nationally recognized public accounting firm to determine the proper allocation
of such liability or Tax attribute or the proper amount of such payment. Any
determination of any such liability or payment by such accounting firm shall be
made in accordance with A-BC's allocation of relevant liabilities in prior
years.
ARTICLE IV
RESTRICTIONS ON POST-DISTRIBUTION TRANSACTIONS
----------------------------------------------
AND INDEMNIFICATION OBLIGATIONS
-------------------------------
Section 4.1. Restrictions on TEC's Ability to Undertake Certain
--------------------------------------------------
Post-Distribution Transactions. TEC agrees that during the 36-month period
- ------------------------------
beginning on the Distribution Date it will not (i) merge or consolidate
42
<PAGE> 43
with or into another corporation, (ii) liquidate or partially liquidate (within
the meaning of such terms as defined in Sections 346 and 302(e), respectively,
of the Code), (iii) sell or transfer all or substantially all its assets
(within the meaning of Revenue Procedure 77-37, 1977-2 C.B. 568) in a single
transaction or series of related transactions, (iv) redeem or otherwise
repurchase any of TEC's capital stock, (v) except in connection with capital
stock issued to the officers, directors, or employees of TEC and members of the
TEC Group pursuant to employee benefit or compensation plans of the TEC Group,
issue additional shares of TEC capital stock, or (vi) enter into or engage in
any transaction or arrangement that would result in a failure to comply with
each representation and statement made to the IRS in connection with the Ruling
Request. Notwithstanding the preceding sentence, TEC may enter into or engage
in any transaction or arrangement referred to in clauses (i) through (v) in the
preceding sentence if (x) A-BC consents in writing in advance to such action or
(y) TEC, at its own expense, obtains a supplemental private letter ruling from
a nationally recognized independent tax advisor, which ruling or opinion and
tax advisor are reasonably satisfactory to A-BC, stating that such transaction
or ar-
43
<PAGE> 44
rangement will not have any adverse impact on the qualification of the
Distribution as a tax-free distribution under Sections 355 and 368(a)(1)(D) of
the Code.
TEC agrees that during the 36-month period beginning on the
Distribution Date it will not, and it will cause all TEC Affiliates not to
(i) sell, transfer or otherwise dispose of more than an insubstantial portion
of the assets comprising the International Baking Operations, (ii) sell,
transfer or otherwise dispose of any of the stock of Bimbo, S.A. or the
successor to its assets other than to another TEC Affiliate, (iii) sell,
transfer or otherwise dispose of any of the stock of Campbell Taggart
International Holding, Inc. other than to another TEC Affiliate, or (iv)
enter into or engage in any transaction or arrangement that would create a
material risk that the Internal Distribution would fail to constitute a
series of tax-free transactions for federal income tax purposes.
Notwithstanding the preceding sentence, TEC may enter into or engage in any
transaction or arrangement referred to in clauses (i) through (iii) in the
preceding sentence if (x) A-BC consents in writing in advance to such action
or (y) TEC, at its own expense, obtains a private letter ruling from the IRS
or an unqualified opinion from a nationally recognized indepen-
44
<PAGE> 45
dent tax advisor, which ruling or opinion and tax advisor are reasonably
satisfactory to A-BC, stating that such transaction or arrangement will not
have any adverse impact on the qualification of the Internal Distribution as a
series of tax-free transactions for federal income tax purposes.
Section 4.2. Liability of TEC for Undertaking Certain
----------------------------------------
Transactions. Notwithstanding any other provision of this Agreement to the
- ------------
contrary, if, as a result of any event wholly or partially within the control
of any member of the TEC Group occurring in the 36-month period commencing on
the Distribution Date and involving either the stock or assets (or any
combination thereof) of any member of the TEC Group (including, but not
limited to, any transaction or arrangement referred to in clauses (i) through
(v) of the first paragraph of Section 4.1) any Taxes are imposed on any
member of the A-BC Group with respect to any action taken pursuant to the
Distribution, then TEC shall pay those Taxes and indemnify and hold harmless,
on an after-tax basis, each member of the A-BC Group from and against all
such Taxes, including but not limited to any such Taxes paid at any time by
any member of the A-BC Group. TEC shall make such payment and
indemnification no later than 7 days
45
<PAGE> 46
after written notice from A-BC of a Final Determination with respect to such
Taxes, which notice shall be accompanied by a computation of the amounts due.
Notwithstanding any other provision of this Agreement to the
contrary, if, as a result of any event wholly or partially within the control
of any member of the TEC Group occurring in the 36-month period commencing on
the Distribution Date and involving either the stock or assets (or any
combination thereof) of any member of the TEC Group (including, but not
limited to, any transaction or arrangement referred to in clauses (i) through
(v) of the first paragraph of Section 4.1) the A-BC Group becomes legally
obligated to make a payment (an "A-BC Shareholder Tax Indemnity Payment") to
shareholders of A-BC who participated in the Distribution and such A-BC Share
holder Tax Indemnity Payment is required to be made as a result of the
Distribution constituting a taxable transaction, then TEC shall be required to
reimburse A-BC, on an after-tax basis, for the full amount of any A-BC
Shareholder Tax Indemnity Payment. TEC shall make such payment and
indemnification no later than 7 days after written notice from A-BC of a final
judgment with respect to any A-BC Shareholder Tax Indemnity Payment,
46
<PAGE> 47
which notice shall be accompanied by a computation of the amounts due.
Section 4.3. Indemnification of TEC by A-BC for Liabilities
----------------------------------------------
Related to Distribution. If any Taxes are imposed on any TEC Group member as
- -----------------------
a result of any action taken pursuant to the Distribution, then, to the
extent those Taxes are not the result of any event wholly or partially within
the control of any member of the TEC Group occurring in the 36-month period
commencing on the Distribution Date and involving either the stock or assets
(or any combination thereof) of any member of the TEC Group, A-BC shall pay
those Taxes and shall indemnify and hold harmless, on an after-tax basis,
each member of the C-T Group from and against all such Taxes, including but
not limited to any such Taxes paid at any time by any TEC Group member. A-BC
shall make such payment and indemnification no later than 7 days after
written notice from TEC of a Final Determination with respect to such Taxes,
which notice shall be accompanied by a computation of the amounts due.
If any member of the TEC Group becomes legally obligated to make
a payment (a "TEC Shareholder Tax Indemnity Payment") to shareholders of A-BC
who participated in the Distribution and such TEC Shareholder Tax
47
<PAGE> 48
Indemnity Payment is required to be made as a result of the Distribution
constituting a taxable transaction, then, to the extent the status of the
Distribution as a taxable transaction is not the result of any event wholly or
partially within the control of any member of the TEC Group occurring in the
36-month period commencing on the Distribution Date and involving either the
stock or assets (or any combination thereof) of any member of the TEC Group,
A-BC shall be required to reimburse TEC, on an after-tax basis, for the full
amount of any TEC Shareholder Tax Indemnity Payment. A-BC shall make such
payment and indemnification no later than 7 days after written notice from TEC
of a final judgment with respect to any TEC Shareholder Tax Indemnity Payment,
which notice shall be accompanied by a computation of the amounts due.
Section 4.4. Indemnification of TEC for Certain Internal
-------------------------------------------
Distribution Taxes. If any Taxes are imposed on any TEC Affiliate as a
- ------------------
result of any action taken pursuant to the Internal Distribution, then, to
the extent those Taxes are not the result of any event wholly or partially
within the control of any TEC Affiliate and involving the International Baking
Operations occurring in the 36-month period commencing on the Distribution
48
<PAGE> 49
Date, A-BC shall pay those Taxes and shall indemnify and hold harmless, on an
after-tax basis, each C-T Affiliate from and against all such Taxes,
including but not limited to any such Taxes paid at any time by any TEC
Affiliate. A-BC shall make such payment and indemnification no later than 7
days after written notice from TEC of a Final Determination with respect to
such Taxes, which notice shall be accompanied by a computation of the amounts
due.
Section 4.5. Indemnification of A-BC for Certain Internal
--------------------------------------------
Distribution Taxes. Notwithstanding any other provision of this Agreement
- ------------------
to the contrary, if, as a result of any event wholly or partially within the
control of TEC or any TEC Affiliate occurring in the 36-month period
commencing on the Distribution Date and involving the International Baking
Operations, any Taxes are imposed on A-BC or any A-BC Affiliate with respect
to any action taken pursuant to the Internal Distribution, then TEC shall pay
those Taxes and indemnify and hold harmless, on an after-tax basis, each A-BC
Affiliate from and against all such Taxes, including but not limited to any
such Taxes paid at any time by any A-BC Affiliate. TEC shall make such
payment and indemnification no later than 7 days after written notice from
A-BC of a Final
49
<PAGE> 50
Determination with respect to such Taxes, which notice shall be accompanied by
a computation of the amounts due.
Section 4.6. MPI Dividend Taxes. If any Taxes are imposed on
-------------------
TEC as a result of the MPI Dividend, then A-BC shall indemnify and hold
harmless TEC, on an after-tax basis, for such Taxes. A-BC and TEC agree to
treat any payment made pursuant to this section 4.6 as a contribution to the
capital of TEC by A-BC occurring immediately prior to the Distribution. A-BC
shall make such payment and indemnification no later than 7 days after
written notice from TEC of a Final Determination with respect to such Taxes,
which notice shall be accompanied by a computation of the amounts due.
Section 4.7. PIRMI Taxes. If any Taxes are imposed on CTBCI as
-----------
a result of the sale of the PIRMI Property to BARI, then A-BC shall indemnify
and hold harmless TEC, on an after-tax basis, for such Taxes. A-BC and TEC
agree to treat any payment made pursuant to this section 4.7 as a
contribution to the capital of TEC by A-BC occurring immediately prior to the
Distribution. A-BC shall make such payment and indemnification no later than
7 days after written notice from TEC of a Final Determination with respect to
such Taxes, which notice shall be accompanied by a computation of the amounts
due.
50
<PAGE> 51
ARTICLE V
COOPERATION AND EXCHANGE OF INFORMATION
---------------------------------------
SECTION 5.1. Cooperation.
-----------
(a) A-BC and TEC shall cooperate (and shall cause each member of
their Group to cooperate) fully at such time and to the extent reasonably
requested by the other party in connection with the preparation and filing of
any return or the conduct of any audit, dispute, proceeding, suit or Tax
action concerning any issues or any other matter contemplated hereunder.
Such cooperation shall include, without limitation, (1) the retention and
provision on demand of books, records, documentation or other information
relating to any Tax Return until the later of (x) the expiration of the
applicable statute of limitation (giving effect to any extension, waiver, or
mitigation thereof) and (y) in the event any claim has been made under this
Agreement for which such information is relevant, the occurrence of a Final
Determination with respect to such claim; (2) the provision of additional
information with respect to an explanation of the Tax Practices and material
provided under clause (1) of this section; (3) the execution of any document
that may be necessary or reasonably helpful in connection with the filing of
any Tax Return by any member of the A-BC Group
51
<PAGE> 52
or the TEC Group, or in connection with any audit, proceeding, suit or action
addressed in the preceding sentence; and (4) the use of the parties' reasonable
best efforts to obtain any documentation from a governmental authority or a
third party that may be necessary or helpful in connection with the foregoing.
Each party shall make its employees and facilities available on a mutually
convenient basis to facilitate such cooperation.
(b) A-BC and TEC shall use reasonable efforts to keep each other
advised as to the status of Tax audits and litigation involving any issue
that relates to a Tax of TEC or any TEC Affiliate or could give rise to the
liability of TEC or any TEC Affiliate under this Agreement (a "Liability
Issue"). A-BC and TEC shall promptly furnish each other copies of any
inquiries or requests for information from any Taxing Authority or any other
administrative, judicial, or other governmental authority concerning any
Liability Issue. If applicable under Section 5.2(a), A-BC shall have the
right to consult with TEC regarding any responses to such requests and TEC
shall provide A-BC with copies of any such written responses before such
responses are given to any Taxing Authority. Without limiting the foregoing,
A-BC and TEC, as the case may be, shall each promptly furnish to the
52
<PAGE> 53
other upon receipt of a copy of the revenue agent's report or similar report,
notice of proposed adjustment, or notice of deficiency received by any member
of the A-BC Group or by any member of the TEC Group, as the case may be,
relating to any Liability Issue or any adjustment referred to in Section
5.1(c) hereof.
(c) A-BC shall advise and consult with TEC with respect to any
proposed Tax adjustments relating to the Consolidated Group that are the
subject of an IRS audit or investigation or are the subject of litigation
that may affect any Tax attribute of any member of the C-T Group after the
Distribution Date.
Section 5.2. Contest Provisions.
------------------
(a) Subject to the cooperation provisions in Section 5.1, A-BC
shall have the full responsibility and control over the handling of any Tax
controversy, including, without limitation, any audit, a protest to the
Appeals Division of the IRS, and litigation in Tax Court or any other court
of competent jurisdiction (a "Tax Controversy"), involving a Tax Return of
the Consolidated Group, a Tax Return for a Combined Jurisdiction or a Tax
Return with respect to the Internal Distribution. Upon request by TEC,
however, and subject to A-BC approval (which may be withheld in its sole
discretion) and the
53
<PAGE> 54
cooperation provisions in Section 5.1, TEC shall, at TEC's expense, have full
responsibility and control over the handling of any Tax Controversy with
respect to any item that would give rise to a payment of Tax for which TEC
would be liable without reimbursement from A-BC or an A-BC Affiliate, or a
refund of Tax for which TEC would be entitled to receive payment, under Article
III hereof.
(b) A-BC and TEC shall each promptly notify the other of any
inquiries by any Taxing Authority or any other administrative, judicial or
other governmental authority that relate to any Tax that may be imposed on
the other or any Affiliate of the other or any liability of any member of the
A-BC Group or Consolidated Group that might arise under this Agreement.
(c) In addition to the cooperation and contest provisions in
Section 5.1 and Sections 5.2(a) and (b), in the event that (i) a notice of
deficiency is received by A-BC from any Taxing Authority and such notice
relates in whole or in part to Restructuring Taxes for which TEC may be
liable to A-BC pursuant to Article IV hereof and (ii) TEC acknowledges to
A-BC in writing TEC's liability with respect to all such Restructuring Taxes
(the "C-T Restructuring Issue") then:
54
<PAGE> 55
(1) A-BC, upon receiving written request from TEC, which request
shall be given no later than a date reasonably necessary to permit preparation
and timely filing of a petition in the Tax Court for redetermination of the
deficiency, shall timely file such petition in a manner consistent with this
Section 5.2(c); provided, however, that upon the request of TEC, A-BC shall:
(i) pay the amount of the deficiency (provided that TEC has advanced to A-BC no
later than three (3) business days before A-BC pays such deficiency, without
interest and until a Final Determination of the TEC Restructuring Issue, 100
percent of the amount of the portion of the deficiency relating to the TEC
Restructuring Issue); (ii) file a claim for the refund; and (iii) if the claim
is denied, bring an action in a court of competent jurisdiction seeking the
refund of such Tax.
(2) In the event that a judgment of a court of competent
jurisdiction results in an adverse determination with respect to the TEC
Restructuring Issue, and A-BC notifies TEC that it does not intend to appeal
such TEC Restructuring Issue, then TEC shall have the right to cause A-BC to
appeal from such adverse determination at TEC's expense.
55
<PAGE> 56
(3) TEC and its representatives, at TEC's expense and subject to
receiving A-BC's advance approval, which approval shall be in the sole
discretion of A-BC, shall be entitled to control, and settle the TEC
Restructuring Issue, including the ability to control all conferences,
meetings, or proceedings with any Taxing Authority and all appearances before
any court, the subject matter of which is or includes the TEC Restructuring
Issue.
(4) All action taken under this Section 5.2(c) at TEC's request,
direction, or control shall be at C-T's expense.
(5) The right to control and settle referred to in Section
5.2(c)(3) hereof shall include the submission and content of documentation,
protests, memoranda of fact and law and briefs, the conduct of oral arguments
or presentations, the selection of witnesses, and the negotiation of
stipulations of fact with respect to the TEC Restructuring Issue.
(6) Within fifteen (15) business days of the receipt by A-BC of
a refund of any amounts advanced to it by TEC under paragraph (c)(1) above
(including any interest received by A-BC), A-BC shall pay such refunded
amount to TEC net of any net Tax cost incurred by A-BC or
56
<PAGE> 57
an A-BC Affiliate (as determined in accordance with the parenthetical at the
end of Section 3.8(b)) resulting from such refund.
Section 5.3. Information for Shareholders. A-BC shall provide
----------------------------
each shareholder that receives stock of TEC pursuant to the Distribution with
the information necessary for such shareholder to comply with the
requirements of Section 355 of the Code and the Treasury regulations
thereunder with respect to statements that such shareholders must file with
their federal income tax returns demonstrating the applicability of Section
355 to the Distribution.
Section 5.4. Earnings and Profits. Upon written request by TEC,
--------------------
A-BC shall employ a "big six" nationally recognized accounting firm to advise
A-BC and TEC in writing of the amount of A-BC's earnings and profits that are
properly allocated to the TEC Group at the time of the Distribution under
Treasury regulation Section 1.312-10; provided, however, that (i) A-BC shall
-------- -------
not be required to cause such accounting firm to furnish such information
until at least one hundred eighty (180) days after receipt of written notice
from TEC demanding that A-BC provide such information, (ii) A-BC shall not be
required to cause such accounting firm to furnish such
57
<PAGE> 58
information to TEC prior to December 31, 1996, and (iii) TEC shall not request
such information from A-BC unless and until TEC has determined that the receipt
of such information is reasonably necessary. A-BC and TEC shall cooperate, and
shall cause all members of their respective groups to cooperate, with such
accounting firm in making its determination and shall share all out of pocket
costs incurred in connection with such determination equally. Neither A-BC
nor TEC shall be entitled to challenge the determination of such accounting
firm pursuant to this Section 5.4, and shall report all earnings and profit
amounts consistent with such determination for all Tax purposes.
ARTICLE VI
MISCELLANEOUS
-------------
Section 6.1. Tax Indemnification.
-------------------
(a) TEC and members of the TEC Group shall indemnify and hold
harmless A-BC or any member of the A-BC Group from and against any liability,
cost or expenses, including, without limitation, any fine, penalty, interest,
charge or accountant's fee arising out of fraudulent or negligent
information, workpapers, documents and other items prepared by TEC or any
member of
58
<PAGE> 59
the TEC group, used in the preparation of any Tax Return or claim for refund
filed by A-BC and/or the Consolidated Group for any period during which TEC or
any member of the C-T Group was or has been a member of the Consolidated Group.
(b) A-BC shall indemnify and hold harmless TEC and each member
of the TEC Group from and against any liability, cost or expense, including,
without limitation, any fine, penalty, interest, charge or accountant's fee,
arising out of fraudulent or negligent preparation of any Tax Return or claim
for refund filed by A-BC and/or the Consolidated Group for any period during
which TEC or any member of the TEC Group was or has been a member of the
Consolidated Group.
Section 6.2. Breach. A-BC shall indemnify and hold harmless
------
each member of the TEC Group and TEC and members of the TEC Group shall
indemnify and hold harmless each member of the A-BC Group from and against
any payment required to be made under this Agreement as a result of the
breach by a member of the A-BC Group or the TEC Group, as the case may be, of
any obligation under this Agreement.
Section 6.3. Disclaimers.
-----------
59
<PAGE> 60
(a) A-BC disclaims all knowledge of or responsibility for the
content or accuracy of any separate returns or filings made by or on behalf
of any member of the TEC Group for any taxable period during which the member
was not a member of the Consolidated Group.
(b) TEC disclaims all knowledge of or responsibility for the
content or accuracy of any Tax Returns or filings made by or on behalf of the
Consolidated Group or any member thereof for any period except to the extent
such Tax Returns or filings reflect items of the C-T Businesses.
Section 6.4. Interest on Overdue Payments.
----------------------------
Any payment that is required to be made pursuant to this
Agreement (i) by TEC (or a TEC Affiliate) to A-BC (or an A-BC affiliate) or
(ii) by A-BC (or an A-BC affiliate) to TEC (or a TEC Affiliate), that is not
made on or prior to the date that such payment is required to be made
pursuant by this Agreement shall thereafter bear interest at the rate
established for underpayments pursuant to Section 6621(a)(2) of the Code.
Section 6.5. Payments by Wire Transfer.
-------------------------
Any payment that is required to be made pursuant to this
Agreement (i) by TEC (or a TEC Affiliate) to A-BC (or an A-BC affiliate) or
(ii) by A-BC (or an A-BC
60
<PAGE> 61
affiliate) to TEC (or a TEC Affiliate), shall be made by wire transfer of
immediately available funds, provided, however, that if the amount of any
-------- -------
payment is less than $10,000, such payment may be made in a form other than a
wire transfer.
Section 6.6. Notices. Any notice, demand, claim or other
-------
communication under this Agreement shall be in writing and shall be deemed
given upon delivery if delivered personally, upon mailing if sent by
certified mail, return receipt requested, postage prepaid, or upon completion
of transmission if sent by telecopy or facsimile, to the parties at the
following address:
A-BC at:
Anheuser-Busch Companies, Inc.
One Busch Place
St. Louis, Missouri 63118-1952
Attention: General Counsel
and
Anheuser-Busch Companies, Inc.
One Busch Place
St. Louis, Missouri 63118-1952
Attention: Tax Controller
TEC at: The Earthgrains Company
8,400 Maryland Avenue
Clayton, Missouri 63105
Attention: General Counsel
61
<PAGE> 62
Section 6.7. Complete Agreement. This Agreement constitutes the
------------------
entire agreement of the Parties concerning the subject matter hereof, and
supersedes all other agreements, whether or not written, in respect of any
Tax between or among any member or members of the A-BC Group, on the one
hand, and any member or members of the TEC Group, on the other hand. This
Agreement may not be amended except by an agreement in writing, signed by the
parties hereto.
Section 6.8. Governing Law. This Agreement shall be governed by
-------------
and construed in accordance with, the laws of the State of Delaware.
Section 6.9. Successors and Assigns. A party's rights and
----------------------
obligations under this Agreement may not be assigned without the prior
written consent of the other party. All of the provisions of this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns.
Section 6.10. Joint and Several Liability. TEC and each TEC
---------------------------
Affiliate shall have joint and several liability for any obligation of TEC or
a TEC Affiliate arising pursuant to this Agreement.
62
<PAGE> 63
Section 6.11. No Third-Party Beneficiaries. This Agreement is
----------------------------
solely for the benefit of the parties to this Agreement and their respective
subsidiaries and should not be deemed to confer upon third parties any
remedy, claim, liability, reimbursement, claim of action or other right in
excess of those existing without this Agreement.
Section 6.12. Legal Enforceability. Any provision of this
--------------------
Agreement that is prohibited or unenforceable in any jurisdiction shall, as
to that jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions. Any
prohibition or unenforceability of any provision of this Agreement in any
jurisdiction shall not invalidate or render unenforceable the provision in
any other jurisdiction.
Section 6.13. Expenses. Unless otherwise expressly provided in
--------
this Agreement or in the Transfer Agreement, each party shall bear any and
all expenses that arise from their respective obligations under this
Agreement.
Section 6.14. Tax Return Preparation and Services. TEC (and the
-----------------------------------
TEC Affiliates) and A-BC (and the A-BC Affiliates) agree to allocate
responsibility for
63
<PAGE> 64
performing Tax related functions (including, but not limited to, preparing and
filing Tax Returns) according to the "tax function action plan" contained in
Exhibit B to this Agreement. The party responsible for performing a Tax
related function shall be obligated to pay all costs and expenses related to
such performance. To the extent A-BC or an A-BC Affiliate performs a Tax
related function for TEC or a TEC Affiliate that is the responsibility of TEC
or a TEC Affiliate, TEC shall be required to reimburse A-BC for such services
in accordance with the terms of the Services Agreement.
Section 6.15. Confidentiality. Each party shall hold and cause
---------------
its consultants and advisors to hold in strict confidence, unless compelled
to disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all information (other than any such
information relating solely to the business or affairs of such party)
concerning the other parties hereto furnished it by such other party or its
representatives pursuant to this Agreement (except to the extent that such
information can be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such
party, or (c) later lawfully acquired from other
64
<PAGE> 65
sources by the party to which it was furnished), and each party shall not
release or disclose such information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors who
shall be advised of the provisions of the Section. Each party shall be deemed
to have satisfied its obligation to hold confidential information concerning or
supplied by the other party if its exercises the same care as it takes to
preserve confidentiality for its own similar information.
This Agreement may be signed in two counterparts, each of which
shall be an original, with the same effect as if the signature thereto and
hereto were upon the same instrument.
65
<PAGE> 66
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
Anheuser-Busch Companies, Inc.
By: -----------------------------
Title: --------------------------
The Earthgrains Company
By: -----------------------------
Title: --------------------------
Bimbo, S.A.
By: -----------------------------
Title: --------------------------
Campbell Taggart Baking Companies, Inc.
By: -----------------------------
Title: --------------------------
Campbell Taggart International Holdings, Inc.
By: -----------------------------
Title: --------------------------
66
<PAGE> 67
Commonwealth Cold Storage, Inc.
By: -----------------------------
Title: --------------------------
Eagle Crest Foods, Inc.
By: -----------------------------
Title: --------------------------
Earth Grains of Lexington, Inc.
By: -----------------------------
Title: --------------------------
Europate, S.A.
By: -----------------------------
Title: --------------------------
Merico, Inc.
By: -----------------------------
Title: --------------------------
67
<PAGE> 68
Exhibit A
---------
<TABLE>
LIST OF BERACHA OPTIONS THAT CONSTITUTE
BERACHA TEC DEDUCTIBLE OPTIONS
------------------------------
<CAPTION>
Date of Grant Number of Options Exercise Price Type
- ------------- ------------------ -------------- ----
<S> <C> <C> <C>
12/16/92 15,263 58.5625 NQSO
12/16/92 779 58.5625 ISO
12/15/93 38,000 48.8750 NQSO
12/15/93 2,000 48.8750 ISO
12/14/94 48,023 50.5625 NQSO
12/14/94 1,977 50.5625 ISO
Total: 106,042
-------
</TABLE>
68
<PAGE> 69
Exhibit B
---------
<TABLE>
CAMPBELL TAGGART
TAX FUNCTION ACTION PLAN
<CAPTION>
Area 1995 1996 Pre-Spin 1996 Post-Spin
<S> <C> <C> <C>
Tax Provision A-B<FA> PW PW
Tax Compliance
- Legal entity trial balances PW<FB> PW PW
- Extension requests A-B PW PW
- Federal consolidated return PW PW PW
- State apportionment
information PW PW PW
- State consolidated/unitary
returns PW PW PW
- State separate company
returns PW PW PW
- Franchise returns PW PW PW
- City returns PW PW PW
- Annual reports A-B/PW PW PW
- Estimated payments A-B A-B PW
Estimated fee range $95,000-145,000 $135,000-185,000 $160,000-215,000
(excluding out of pocket)
Payroll tax function A-B<FC> A-B<FC> A-B<FC>
Property tax function A-B<FC> A-B<FC> A-B<FC>
Sales/use tax function not A-B<FC> A-B<FC> A-B<FC>
currently prepared at plant
locations
<FN>
NOTES
<FA> PW will assist in accumulating 1995 CT tax information from operating
divisions and corporate headquarters.
<FB> We understand several displaced A-B accounting personnel are available
to assist within the A-B organization, as necessary. Utilizing such
individuals to prepare separate company trial balances could assist in
reducing the cost of this function.
<FC> Detailed information would have to be provided by CT to facilitate A-B's
effort.
</TABLE>
69
<PAGE> 70
Exhibit C
---------
The following two examples illustrate the proper method for deter
mining the amount of the Option Tax Benefit with respect to a Stock Plan
Transaction.
Example One
- -----------
In 1997, a Stock Plan Transaction occurs which results in an
Income Tax Deduction to the TEC Group of $5 million. For the 1997 taxable
year, the TEC Group has taxable income of $10 million before deducting any
net operating loss ("NOL") carryovers or carrybacks and before considering
the Income Tax Deduction related to the Stock Plan Transaction. The TEC
Group also has NOL carryovers of $20 million. Accordingly, absent the Stock
Plan Transaction, the TEC Group would not have any taxable income and would
not owe any Income Taxes in 1997. If the TEC Group did not have any NOL
carryovers available in 1997 and the Stock Plan Transaction did not occur in
1997, the TEC Group would owe Income Taxes of $4 million. If the TEC Group
did not have any NOL carryovers available in 1997 and the Stock Plan
Transaction occurred in 1997, the TEC Group would owe Income Taxes of $1.8
million.
Under section 3.13 of the Agreement, the Option Tax Benefit
related to the Stock Plan Transaction that occurred in 1997 is $2.2 million
(the difference between $4.0 million and $1.8 million). The fact that the
TEC Group would not have owed any taxes in 1997 if the Stock Plan Transaction
did not occur (since the NOL carryovers would offset all the TEC Group's
taxable income) is not relevant to the determination of the Option Tax
Benefit in 1997.
Example Two
- -----------
In 1997, a Stock Plan Transaction occurs which results in an
Income Tax Deduction to the TEC Group of $5 million. For the 1997 taxable
year, the TEC Group has a net operating loss of $20 million before
considering any NOL carryovers or carrybacks and before considering the
Income Tax Deduction related to the Stock Plan Transaction. Accordingly, the
total NOL of the TEC Group for 1997 after considering the Income Tax
Deduction related to the Stock Plan Transaction is $25 million. The TEC
Group does not have any NOL carryovers from prior taxable years.
In 1998, the TEC Group has taxable income of $10 million before
considering any net operating loss ("NOL") carryovers from 1997. If the TEC
Group did not have any NOL carryovers available in 1998, the TEC Group would
owe Income Taxes of $4 million. If the TEC Group did not have any NOL
carryovers available in 1997 and the Stock Plan Transaction that actually
occurred in 1997 had instead occurred
70
<PAGE> 71
in 1998 and produced the same $5 million Income Tax Deduction that resulted in
1997, the TEC Group would owe Income Taxes of $1.8 million.
Under section 3.13 of the Agreement, the Option Tax Benefit
related to the Stock Plan Transaction that occurred in 1997 is zero ($0)
since the TEC Group had a net operating loss in 1997 before any NOL carry
overs or carrybacks were considered. Accordingly, the Stock Plan Transaction
constitutes a Deferred Tax Benefit Transaction. Since the Stock Plan
Transaction is a Deferred Tax Benefit Transaction in 1997, it is treated as a
Stock Plan Transaction that occurred in 1998 (the next succeeding taxable
year). In 1998, the Income Tax Deduction related to the Stock Option
Transaction results in an Option Tax Benefit of $2.2 million. Moreover, the
fact that the taxable income of the TEC Group in 1998 would otherwise have been
offset by the $20 million NOL carryover that related to the TEC Group's
operating losses in 1997 is irrelevant.
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<PAGE> 72
Exhibit D
---------
The following examples illustrate the proper method of applying
the provisions contained in Sections 3.8(a) and 3.8(b) of the Agreement.
Example One
- -----------
As a result of an audit of a Tax Return filed by A-BC, on January
1, 1997, A-BC is required to pay additional Taxes in the amount of $5 million,
of which $2 million represent Allocable Taxes. Prior to January 1, 1997,
neither A-BC nor any A-BC Affiliate has been required to pay any Allocable
Taxes or has received any Allocable Refund. Moreover, the Allocable Tax does
not result in a Tax Benefit to TEC or a TEC Affiliate.
Under Section 3.8(a), TEC is required to pay A-BC $1,500,000 (50%
of the first $1 million and 100% thereafter). The balance of De Minimis
Taxes paid for by A-BC and not reimbursed by TEC is $500,000. The balance
of Aggregate Net De Minimis Taxes is also $500,000 because no Allocable
Refunds have been received to date. The Net TEC Deficiency is $1,500,000.
Example Two
- -----------
Same facts as in Example One, except that on March 1, 1997 A-BC
receives a refund in the amount of $2 million, of which $1,200,000 represents
an Allocable Refund. The Allocable Refund does not result in a Tax Detriment
to TEC or a TEC Affiliate.
Under Section 3.8(b), TEC is entitled to receive $1,100,000 of
the Allocable Refund. This is calculated by first paying TEC $1 million,
which reduces the Net TEC Deficiency from $1,500,000 to $500,000. Then, 50%
of the remaining $200,000 is paid to TEC. This reduces each of the Net TEC
Deficiency and the Aggregate Net De Minimis Taxes to $400,000.
Example Three
- -------------
Same facts as in Examples One and Two, except that on April 1,
1997, A-BC receives a refund in the amount of $3 million, of which $1,500,000
represents an Allocable Refund. The Allocable Refund does not result in a
Tax Detriment to TEC or a TEC Affiliate.
72
<PAGE> 73
Under Section 3.8(b), TEC is entitled to receive a current pay
ment from A-BC of $650,000 and the A-BC Retained amount rises from $0 to
$450,000. This is calculated by first paying TEC 50% of the first $800,000
of the Allocable Refund, which reduces both the Net TEC Deficiency and the
Aggregate Net De Minimis Taxes from $400,000 to $0. Then, 100% of the next
$250,000 of the Allocable Refund is paid to TEC. Finally, the remaining
$450,000 of the Allocable Refund is retained by A-BC as future collateral and
increases the A-BC Retained amount by $450,000.
Example Four
- ------------
Same facts as in Examples One through Three, except that on May
1, 1998, A-BC receives a refund in the amount of $1 million, of which
$200,000 represents an Allocable Refund. The Allocable Refund does not
result in a Tax Detriment to TEC or a TEC Affiliate.
Under Section 3.8(b), TEC is not entitled to receive any current
payment from A-BC, and the A-BC Retained amount rises from $450,000 to
$650,000.
Example Five
- ------------
Same facts as in Examples One through Four, except that on May 1,
1999, as a result of an audit of a Tax Return filed by A-BC, A-BC is
required to pay additional Taxes in the amount of $3 million, of which
$1,200,000 represents Allocable Taxes. The Allocable Taxes do not result in
a Tax Benefit to TEC or a TEC Affiliate.
Under Section 3.8(a), TEC would be required to pay A-BC $700,000,
representing 50% of the first $1 million such Allocable Taxes and 100% of the
remaining $200,000. Since there is an A-BC Retained Amount of $650,000 at
such time, TEC can elect to make a cash payment to A-BC of only $50,000 and
reduce the A-BC Retained Amount to $0.
Example Six
- -----------
Same facts as in Examples One through Four (but excluding Example
Five). No further audits or refunds that result in Allocable Taxes or
Allocable Refunds occur prior to the fourth anniversary of the Distribution
Date. Accordingly, on the fourth anniversary of the Distribution Date, A-BC
is required to pay TEC $650,000 as a refund of the A-BC Retained Amount.
73
<PAGE> 1
===============================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF APRIL 30, 1997
AMONG
THE EARTHGRAINS COMPANY,
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS,
THE CHASE MANHATTAN BANK
AND
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
AS CO-AGENTS,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT
AND
LETTER OF CREDIT ISSUING LENDER,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BANCAMERICA SECURITIES, INC.
===============================================================================
<PAGE> 2
<TABLE>
<CAPTION>
SECTION TABLE OF CONTENTS Page
<S> <C>
ARTICLE I
DEFINITIONS. . . . . . . . . . . . 1
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . 1
1.2 Other Interpretive Provisions. . . . . . . . . . . . . . 21
1.3 Accounting Principles. . . . . . . . . . . . . . . . . . 22
ARTICLE II
THE CREDITS . . . . . . . . . . . . 22
2.1 Amounts and Terms of Commitments . . . . . . . . . . . . 22
2.2 Loan Accounts. . . . . . . . . . . . . . . . . . . . . . 23
2.3 Procedure for Committed Borrowing. . . . . . . . . . . . 23
2.4 Conversion and Continuation Elections for Committed
Borrowings. . . . . . . . . . . . . . . . . . . . . . . 24
2.5 Bid Borrowings . . . . . . . . . . . . . . . . . . . . . 26
2.6 Procedure for Bid Borrowings . . . . . . . . . . . . . . 26
2.7 Voluntary Termination or Reduction of Commitments. . . . 30
2.8 Optional Prepayments . . . . . . . . . . . . . . . . . . 30
2.9 Repayment. . . . . . . . . . . . . . . . . . . . . . . . 30
2.10 Interest . . . . . . . . . . . . . . . . . . . . . . . . 31
2.11 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) Arrangement, Agency Fees. . . . . . . . . . . . . . 31
(b) Facility Fees . . . . . . . . . . . . . . . . . . . 32
2.12 Computation of Fees and Interest. . . . . . . . . . . . 32
2.13 Payments by the Company . . . . . . . . . . . . . . . . 32
2.14 Payments by the Lenders to the Administrative Agent . . 33
2.15 Sharing of Payments, Etc. . . . . . . . . . . . . . . . 34
2.16 Extension of Scheduled Termination Date; Substitution
of Lenders . . . . . . . . . . . . . . . . . . . . . . 36
2.17 Optional Increase in Commitments. . . . . . . . . . . . 37
2.18 Maintenance of Existing Offshore Borrowings on a Non-Pro-
Rata Basis; Temporary Non-Pro-Rata Borrowings. . . . . 38
ARTICLE III
THE LETTERS OF CREDIT. . . . . . . . . . 40
3.1 The Letter of Credit Subfacility.. . . . . . . . . . . . 40
3.2 Issuance, Amendment and Renewal of Letters of Credit . . 41
3.3 Risk Participations, Drawings and Reimbursements . . . . 44
3.4 Repayment of Participations. . . . . . . . . . . . . . . 46
3.5 Role of the Issuing Lenders. . . . . . . . . . . . . . . 46
3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . 47
3.7 Cash Collateral Pledge . . . . . . . . . . . . . . . . . 49
3.8 Letter of Credit Fees. . . . . . . . . . . . . . . . . . 49
3.9 Uniform Customs and Practice . . . . . . . . . . . . . . 49
i
<PAGE> 3
<CAPTION>
SECTION TABLE OF CONTENTS Page
<S> <C>
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY. . . . . . 49
4.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . 51
4.3 Increased Costs and Reduction of Return. . . . . . . . . 52
4.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . 53
4.5 Inability to Determine Rates . . . . . . . . . . . . . . 53
4.6 Certificates of Lenders. . . . . . . . . . . . . . . . . 54
4.7 Substitution of Lenders. . . . . . . . . . . . . . . . . 54
4.8 Survival . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE V
CONDITIONS PRECEDENT . . . . . . . . . . 54
5.1 Conditions to Effectiveness. . . . . . . . . . . . . . . 54
(a) Agreement and Notes. . . . . . . . . . . . . . . . . 55
(b) Resolutions; Incumbency. . . . . . . . . . . . . . . 55
(c) Organization Documents . . . . . . . . . . . . . . . 55
(d) Legal Opinions . . . . . . . . . . . . . . . . . . . 55
(e) Payment of Fees. . . . . . . . . . . . . . . . . . . 55
(f) Certificate. . . . . . . . . . . . . . . . . . . . . 56
(g) Guaranty . . . . . . . . . . . . . . . . . . . . . . 56
(h) Other Documents. . . . . . . . . . . . . . . . . . . 56
5.2 Conditions to All Credit Extensions. . . . . . . . . . . 56
(a) Notice, Application. . . . . . . . . . . . . . . . . 56
(b) Continuation of Representations and Warranties . . . 56
(c) No Existing Default. . . . . . . . . . . . . . . . . 57
ARTICLE VI
REPRESENTATIONS AND WARRANTIES. . . . . . . . 57
6.1 Corporate Existence and Power. . . . . . . . . . . . . . 57
6.2 Corporate Authorization; No Contravention. . . . . . . . 57
6.3 Governmental Authorization . . . . . . . . . . . . . . . 58
6.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . 58
6.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . 58
6.6 No Default . . . . . . . . . . . . . . . . . . . . . . . 59
6.7 ERISA Compliance . . . . . . . . . . . . . . . . . . . . 59
6.8 Use of Proceeds; Margin Regulations. . . . . . . . . . . 59
6.9 Title to Properties. . . . . . . . . . . . . . . . . . . 60
6.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.11 Financial Condition. . . . . . . . . . . . . . . . . . . 60
6.12 Environmental Matters. . . . . . . . . . . . . . . . . . 61
6.13 Regulated Entities . . . . . . . . . . . . . . . . . . . 61
6.14 No Burdensome Restrictions . . . . . . . . . . . . . . . 61
6.15 Copyrights, Patents, Trademarks and Licenses, etc. . . . 61
ii
<PAGE> 4
<CAPTION>
SECTION TABLE OF CONTENTS Page
<S> <C>
6.16 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 61
6.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 61
6.18 Swap Obligations . . . . . . . . . . . . . . . . . . . . 62
6.19 Full Disclosure. . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VII
AFFIRMATIVE COVENANTS. . . . . . . . . . 62
7.1 Financial Statements . . . . . . . . . . . . . . . . . . 62
7.2 Certificates; Other Information. . . . . . . . . . . . . 63
7.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 63
7.4 Preservation of Corporate Existence, Etc . . . . . . . . 64
7.5 Maintenance of Property. . . . . . . . . . . . . . . . . 65
7.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 65
7.7 Payment of Obligations . . . . . . . . . . . . . . . . . 65
7.8 Compliance with Laws . . . . . . . . . . . . . . . . . . 65
7.9 Compliance with ERISA. . . . . . . . . . . . . . . . . . 66
7.10 Inspection of Property and Books and Records . . . . . . 66
7.11 Environmental Laws . . . . . . . . . . . . . . . . . . . 66
7.12 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . 66
7.13 Further Assurances . . . . . . . . . . . . . . . . . . . 66
ARTICLE VIII
NEGATIVE COVENANTS. . . . . . . . . . . 67
8.1 Financial Condition Covenants. . . . . . . . . . . . . . 67
(a) Leverage Ratio. . . . . . . . . . . . . . . . . . . 67
(b) Interest Coverage Ratio . . . . . . . . . . . . . . 67
8.2 Limitation on Liens. . . . . . . . . . . . . . . . . . . 67
8.3 Disposition of Assets. . . . . . . . . . . . . . . . . . 69
8.4 Consolidations and Mergers . . . . . . . . . . . . . . . 69
8.5 Loans and Investments. . . . . . . . . . . . . . . . . . 70
8.6 Limitation on Foreign Subsidiary Indebtedness. . . . . . 71
8.7 Transactions with Affiliates . . . . . . . . . . . . . . 71
8.8 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . 71
8.9 Swap Contracts . . . . . . . . . . . . . . . . . . . . . 72
8.10 Guarantors . . . . . . . . . . . . . . . . . . . . . . . 72
8.11 Restricted Payments. . . . . . . . . . . . . . . . . . . 72
8.12 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.13 Change in Business . . . . . . . . . . . . . . . . . . . 73
8.14 Accounting Changes . . . . . . . . . . . . . . . . . . . 73
ARTICLE IX
EVENTS OF DEFAULT. . . . . . . . . . . 73
9.1 Event of Default . . . . . . . . . . . . . . . . . . . . 73
(a) Non-Payment . . . . . . . . . . . . . . . . . . . . 73
iii
<PAGE> 5
<CAPTION>
SECTION TABLE OF CONTENTS Page
<S> <C>
(b) Representation or Warranty. . . . . . . . . . . . . 73
(c) Specific Defaults . . . . . . . . . . . . . . . . . 73
(d) Other Defaults. . . . . . . . . . . . . . . . . . . 74
(e) Cross-Default . . . . . . . . . . . . . . . . . . . 74
(f) Insolvency; Voluntary Proceedings . . . . . . . . . 74
(g) Involuntary Proceedings . . . . . . . . . . . . . . 74
(h) ERISA . . . . . . . . . . . . . . . . . . . . . . . 75
(i) Judgments . . . . . . . . . . . . . . . . . . . . . 75
(j) Change of Control . . . . . . . . . . . . . . . . . 75
(k) Guarantor Defaults. . . . . . . . . . . . . . . . . 75
9.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . 76
9.3 Rights Not Exclusive . . . . . . . . . . . . . . . . . . 76
ARTICLE X
THE ADMINISTRATIVE AGENT . . . . . . . . . 77
10.1 Appointment and Authorization; "Administrative Agent" . 77
10.2 Delegation of Duties. . . . . . . . . . . . . . . . . . 77
10.3 Liability of Administrative Agent . . . . . . . . . . . 78
10.4 Reliance by Administrative Agent. . . . . . . . . . . . 78
10.5 Notice of Default . . . . . . . . . . . . . . . . . . . 79
10.6 Credit Decision . . . . . . . . . . . . . . . . . . . . 79
10.7 Indemnification of Administrative Agent . . . . . . . . 80
10.8 Administrative Agent in Individual Capacity . . . . . . 80
10.9 Successor Administrative Agent. . . . . . . . . . . . . 81
10.10 Withholding Tax . . . . . . . . . . . . . . . . . . . . 81
10.11 Co-Agents . . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE XI
MISCELLANEOUS. . . . . . . . . . . . 83
11.1 Amendments and Waivers. . . . . . . . . . . . . . . . . 83
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . 84
11.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . 85
11.4 Costs and Expenses. . . . . . . . . . . . . . . . . . . 85
11.5 Company Indemnification . . . . . . . . . . . . . . . . 86
11.6 Payments Set Aside. . . . . . . . . . . . . . . . . . . 87
11.7 Successors and Assigns. . . . . . . . . . . . . . . . . 87
11.8 Assignments, Participations, etc. . . . . . . . . . . . 87
11.9 Confidentiality . . . . . . . . . . . . . . . . . . . . 89
11.10 Set-off . . . . . . . . . . . . . . . . . . . . . . . . 90
11.11 Notification of Addresses, Lending Offices, Etc.. . . . 90
11.12 Counterparts. . . . . . . . . . . . . . . . . . . . . . 90
11.13 Severability. . . . . . . . . . . . . . . . . . . . . . 90
11.14 No Third Parties Benefited. . . . . . . . . . . . . . . 90
11.15 Governing Law and Jurisdiction. . . . . . . . . . . . . 91
11.16 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . 91
iv
<PAGE> 6
<CAPTION>
SECTION TABLE OF CONTENTS Page
<S> <C>
11.17 Entire Agreement. . . . . . . . . . . . . . . . . . . . 92
11.18 Amendment and Restatement; Return of Notes. . . . . . . 92
v
<PAGE> 7
<CAPTION>
SCHEDULES
<S> <C>
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 3.3 Existing Letters of Credit
Schedule 6.5 Litigation
Schedule 6.7 ERISA
Schedule 6.11 Material Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.16 Subsidiaries and Minority Interests
Schedule 8.2 Permitted Liens
Schedule 11.2 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Committed Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Competitive Bid Request
Exhibit D Form of Invitation for Competitive Bid
Exhibit E Form of Competitive Bid
Exhibit F Form of Guaranty
Exhibit G Form of Compliance Certificate
Exhibit H Form of Opinion of Counsel to the Company and
the Guarantors
Exhibit I Form of Opinion of Special Counsel to the
Administrative Agent
Exhibit J Form of Assignment and Acceptance
Exhibit K Form of Promissory Note
Exhibit L Form of Request for Extension of Termination
Date
Exhibit M Form of Request for Increase in Commitments
</TABLE>
vi
<PAGE> 8
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT is entered into
as of April 30, 1997, among THE EARTHGRAINS COMPANY, a Delaware
corporation (the "Company"), the several financial
-------
institutions from time to time party to this Agreement
(collectively the "Lenders"; individually each a
-------
"Lender"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
------
ASSOCIATION, as letter of credit issuing lender, and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative
agent for the Lenders.
WHEREAS, the Company, various lenders and Bank of America
National Trust and Savings Association, as administrative agent,
have entered into a Credit Agreement dated as of February 27,
1996 (as amended, the "Existing Credit Agreement"); and
-------------------------
WHEREAS, the parties hereto desire to amend and restate the
Existing Credit Agreement in its entirety pursuant hereto;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties hereto
agree that the Existing Credit Agreement shall be amended and
restated in its entirety to read as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms have
---------------------
the following meanings:
Absolute Rate - see subsection 2.6(c)(ii)(C).
------------- ------------------------
Acquisition means any transaction or series of
-----------
related transactions for the purpose of or resulting,
directly or indirectly, in (a) the acquisition of all or
substantially all of the assets of a Person, or of any
business or division of a Person, (b) the acquisition of in
excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger
or consolidation or any other combination with another
Person (other than a Person that is a Subsidiary) provided
that the Company or the Subsidiary is the surviving entity.
Administrative Agent means BofA in its capacity as
--------------------
agent for the Lenders hereunder, and any successor agent
arising under Section 10.9.
------------
1
<PAGE> 9
Administrative Agent-Related Persons means BofA and
------------------------------------
any successor agent arising under Section 10.9 and any
------------
successor letter of credit issuing bank hereunder, together
with their respective Affiliates (including, in the case of
BofA, the Arranger), and the officers, directors, employees,
agents and attorneys-in-fact of such Persons and Affiliates.
Administrative Agent's Payment Office means the
-------------------------------------
address for payments set forth on Schedule 11.2 or such
-------------
other address as the Administrative Agent may from time to
time specify.
Affiliate means, as to any Person, any other Person
---------
which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person.
A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and
policies of the other Person, whether through the ownership
of voting securities or membership interests, by contract or
otherwise.
Agreement means this Amended and Restated Credit
---------
Agreement.
Anheuser-Busch means Anheuser-Busch Companies,
--------------
Inc., a Delaware corporation.
Applicable Margin means, with respect to any
-----------------
Offshore Rate Committed Loan (and with respect to the L/C
Fee Rate), (a) initially, 0.20% per annum, and (b) beginning
on any date on which the Applicable Margin is to be adjusted
pursuant to the sentence following the table below, the rate
per annum set forth in the table below opposite the
applicable Interest Coverage Ratio:
<TABLE>
<CAPTION>
Interest Applicable
Coverage Ratio Margin
-------------- ----------
<S> <C>
Greater than or equal 0.17%
to 10 to 1
Greater than or equal 0.20%
to 4 to 1 but less
than 10 to 1
Less than 4 to 1 0.30%
</TABLE>
The Applicable Margin for all Offshore Rate Committed Loans
(and for purposes of the L/C Fee Rate) shall be adjusted, to
the extent applicable, 56 days (or, in the case of the last
2
<PAGE> 10
fiscal quarter of any year, 101 days) after the end of each
fiscal quarter, based on the Interest Coverage Ratio for the
Computation Period ending on the last day of such fiscal
quarter; it being understood that if the Company fails
-------------------
to deliver the financial statements required by subsection
----------
7.1(a) or 7.1(b), as applicable, and the related
------ ------
Compliance Certificate required by subsection 7.2(b) by
-----------------
the 56th day (or, if applicable, the 101st day) after any
fiscal quarter, the Applicable Margin shall be 0.30% until
such financial statements and Compliance Certificate are
delivered.
Arranger means BancAmerica Securities, Inc., a
--------
Delaware corporation.
Assignee - see subsection 11.8(a).
-------- ------------------
Assignment and Acceptance - see subsection
------------------------- ----------
11.8(a).
- -------
Attorney Costs means and includes all reasonable
--------------
fees and disbursements of any law firm or other external
counsel and, without duplication, the allocated cost of
internal legal services and all reasonable disbursements of
internal counsel.
Bankruptcy Code means the Federal Bankruptcy Reform
---------------
Act of 1978 (11 U.S.C. Section 101, et seq.).
------
Base Rate means, for any day, the higher of: (a)
---------
0.50% per annum above the latest Federal Funds Rate; and (b)
the rate of interest in effect for such day as publicly
announced from time to time by BofA in San Francisco,
California, as its "reference rate." (The "reference rate"
is a rate set by BofA based upon various factors including
BofA's costs and desired return, general economic conditions
and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above or below
such announced rate.) Any change in the reference rate
announced by BofA shall take effect at the opening of
business on the day specified in the public announcement of
such change.
Base Rate Committed Loan means a Committed Loan, or
------------------------
an L/C Advance, that bears interest based on the Base Rate.
Bid Borrowing means a Borrowing hereunder
-------------
consisting of one or more Bid Loans made to the Company on
the same day by one or more Lenders.
Bid Loan means a Loan by a Lender to the Company
--------
under Section 2.6.
-----------
3
<PAGE> 11
BofA means Bank of America National Trust and
----
Savings Association, a national banking association.
Borrowing means a borrowing hereunder consisting of
---------
Committed Loans of the same Type, or Bid Loans, made to the
Company on the same day by one or more Lenders under
Article II and, other than in the case of Base Rate
----------
Committed Loans, having the same Interest Period. A
Borrowing may be a Bid Borrowing or a Committed Borrowing.
Borrowing Date means any date on which a Borrowing
--------------
occurs under Section 2.3 or 2.6.
----------- ---
Business Day means any day other than a Saturday,
------------
Sunday or other day on which commercial banks in New York
City, Chicago or San Francisco are authorized or required by
law to close and, if the applicable Business Day relates to
any Offshore Rate Committed Loan, means such a day on which
dealings are carried on in the offshore dollar interbank
market.
Capital Adequacy Regulation means any guideline,
---------------------------
request or directive of any central bank or other
Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each
case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
Cash Collateralize means to pledge and deposit with
------------------
or deliver to the Administrative Agent, for the benefit of
the Administrative Agent, the Issuing Lenders and the
Lenders, as collateral for the L/C Obligations, cash or
deposit account balances pursuant to documentation in form
and substance satisfactory to the Administrative Agent and
the Required Lenders. Derivatives of such term shall have
corresponding meanings. Cash collateral shall be maintained
in blocked accounts at BofA or, with BofA's consent, the
applicable Issuing Lender.
Change of Control means any of the following
-----------------
events:
(a) any Person or group (within the meaning of Rule
13d-5 of the SEC under the Securities Exchange Act of 1934
as in effect on the date hereof) shall become the Beneficial
Owner (as defined in Rule 13d-3 of the SEC under the
Securities Exchange Act of 1934 as in effect on the date
hereof) of 25% or more of the capital stock or other equity
interests of the Company the holders of which are entitled
under ordinary circumstances (irrespective of whether at the
time the holders of such stock or other equity interests
shall have or might have voting power by reason of the
4
<PAGE> 12
happening of any contingency) to vote for the election of
the directors of the Company;
(b) a majority of the members of the Board of
Directors of the Company shall cease to be Continuing
Members; or
(c) any event or condition relating to a change of
control of the Company shall occur which requires, or
permits the holder or holders (or any agent or trustee
therefor) of any Indebtedness of the Company or any
Subsidiary to require, the purchase or repurchase prior to
its expressed maturity of any Indebtedness of the Company or
any Subsidiary in an aggregate principal amount (for all
such Indebtedness) of $30,000,000 or more.
Code means the Internal Revenue Code of 1986, and
----
regulations promulgated thereunder.
Commitment - see Section 2.1. As of the
---------- -----------
Effective Date, the amount of the combined Commitments of
all Lenders is $225,000,000.
Committed Borrowing means a Borrowing hereunder
-------------------
consisting of Committed Loans made by the Lenders ratably
according to their respective Pro Rata Shares.
Committed Loan means a Loan by a Lender to the
--------------
Company under Section 2.1, which may be a Base Rate
-----------
Committed Loan or an Offshore Rate Committed Loan (each a
"Type" of Committed Loan).
----
Company - see the Preamble.
------- --------
Competitive Bid means an offer by a Lender to make
---------------
a Bid Loan in accordance with subsection 2.6(c).
----------------
Competitive Bid Request - see subsection
----------------------- ----------
2.6(a).
------
Compliance Certificate means a certificate
----------------------
substantially in the form of Exhibit G.
---------
Computation Period means any period of four
------------------
consecutive fiscal quarters ending on the last day of a
fiscal quarter.
Consolidated Total Assets means the consolidated
-------------------------
total assets of the Company and its Subsidiaries.
Contingent Obligation means, as to any Person, any
---------------------
direct or indirect liability of such Person, whether or not
contingent, with or without recourse, (a) with respect to
5
<PAGE> 13
any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person
(the "primary obligor"), including any obligation of such
Person (i) to purchase, repurchase or otherwise acquire such
primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any
such primary obligation, or to maintain working capital or
equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to
make payment of such primary obligation, or (iv) otherwise
to assure or hold harmless the holder of any such primary
obligation against loss in respect thereof (each a
"Guaranty Obligation"); (b) with respect to any Surety
-------------------
Instrument issued for the account of such Person or as to
which such Person is otherwise liable for reimbursement of
drawings or payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services
of, another Person if the relevant contract or other related
document or obligation requires that payment for such
materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such
materials, supplies or other property is ever made or
tendered, or such services are ever performed or tendered;
or (d) in respect of any Swap Contract. The amount of any
Contingent Obligation shall (a) in the case of Guaranty
Obligations, be deemed equal to the stated or determinable
amount of the primary obligation in respect of which such
Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability
in respect thereof, and (b) in the case of other Contingent
Obligations, be equal to the maximum reasonably anticipated
liability in respect thereof.
Continuing Member means a member of the Board of
-----------------
Directors of the Company who either (a) was a member of the
Company's Board of Directors on the Effective Date and has
been such continuously thereafter or (b) became a member of
such Board of Directors after the Effective Date and whose
election or nomination for election was approved by a vote
of the majority of the Continuing Members then members of
the Company's Board of Directors.
Contractual Obligation means, as to any Person, any
----------------------
provision of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed
of trust or other document to which such Person is a party
or by which it or any of its property is bound.
6
<PAGE> 14
Conversion/Continuation Date means any date on
----------------------------
which, under Section 2.4, the Company (a) converts
-----------
Committed Loans of one Type to the other Type or (b)
continues Offshore Rate Committed Loans for a new Interest
Period.
Credit Extension means and includes (a) the making
----------------
of any Loan hereunder and (b) the Issuance of any Letter of
Credit hereunder.
Declining Lender - see subsection 2.16(b).
---------------- ------------------
Dollars, dollars and $ each mean lawful
------- ------- -
money of the United States.
EBITA means, for any Computation Period, the
-----
Company's consolidated earnings from continuing operations
for such period plus, to the extent deducted in determining
such earnings, Interest Expense, income taxes, any
amortization of the goodwill on the Company's balance sheet
as of January 2, 1996, any non-cash special charge taken in
the fiscal quarter ended March 25, 1997 or thereafter.
Effective Amount means, with respect to any
----------------
outstanding L/C Obligations on any date, the amount of such
L/C Obligations on such date after giving effect to any
Issuances of Letters of Credit occurring on such date, any
other changes in the aggregate amount of the L/C Obligations
as of such date, including as a result of any reimbursements
of outstanding unpaid drawings under any Letter of Credit or
any reduction in the maximum amount available for drawing
under Letters of Credit taking effect on such date.
Effective Date - see Section 5.1.
-------------- -----------
Eligible Assignee means (a) a commercial bank
-----------------
organized under the laws of the United States, or any state
thereof, and having a combined capital and surplus of at
least $100,000,000; (b) a commercial bank organized under
the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the
OECD), or a political subdivision of any such country, and
having a combined capital and surplus of at least
$100,000,000, provided that such bank is acting through a
branch or agency located in the United States; and (c) a
Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Lender,
(ii) a Subsidiary of a Person of which a Lender is a
Subsidiary, or (iii) a Person of which a Lender is a
Subsidiary.
Environmental Claims means all claims, however
--------------------
asserted, by any Governmental Authority or other Person
7
<PAGE> 15
alleging potential liability or responsibility for violation
of any Environmental Law, or for release or injury to the
environment.
Environmental Laws means all federal, state or
------------------
local laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative
orders, directed duties, requests, licenses, authorizations
and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health,
safety and land use matters.
ERISA means the Employee Retirement Income Security
-----
Act of 1974, and the regulations promulgated thereunder.
ERISA Affiliate means any trade or business
---------------
(whether or not incorporated) under common control with the
Company within the meaning of Section 414(b) or (c) of the
Code (and Sections 414(m) and (o) of the Code for purposes
of provisions relating to Section 412 of the Code);
provided that "ERISA Affiliate" shall not include
--------
Anheuser-Busch or any other Person which, as a result of the
distribution of the stock of the Company by Anheuser-Busch
to its shareholders, ceased to be, along with the Company, a
member of a controlled group of corporations or a controlled
group of trades or businesses, as described in section 414
of the Code.
ERISA Event means (a) a Reportable Event with
-----------
respect to a Pension Plan; (b) a withdrawal by the Company
or any ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of
ERISA) or a substantial cessation of operations which is
treated as such a withdrawal; (c) a complete or partial
withdrawal by the Company or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan
is in reorganization; (d) the filing of a notice of intent
to terminate, the treatment of a Pension Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the
commencement of proceedings by the PBGC to terminate a
Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Pension
Plan or Multiemployer Plan; or (f) the imposition of any
liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon the
Company or any ERISA Affiliate.
8
<PAGE> 16
Event of Default means any of the events or
----------------
circumstances specified in Section 9.1.
-----------
Existing Credit Agreement - see the Recitals.
------------------------- --------
Existing Letters of Credit means the letters of
--------------------------
credit listed on Schedule 3.3.
------------
Existing Offshore Borrowing - see subsection
--------------------------- ----------
2.18(a).
- -------
Extension Response Date - see subsection
----------------------- ----------
2.16(a).
-------
Facility Fee Rate means (a) initially, 0.10% per
-----------------
annum, and (b) beginning on any date on which the Facility
Fee Rate is to be adjusted pursuant to the sentence
following the table below, the rate per annum set forth in
the table below opposite the applicable Interest Coverage
Ratio:
<TABLE>
<CAPTION>
Interest Facility
Coverage Ratio Fee Rate
-------------- ---------
<S> <C>
Greater than or equal 0.08%
to 10 to 1
Greater than or equal 0.10%
to 4 to 1 but less
than 10 to 1
Less than 4 to 1 0.15%
</TABLE>
The Facility Fee Rate shall be adjusted, to the extent
applicable, 56 days (or, in the case of the last fiscal
quarter of any year, 101 days) after the end of each fiscal
quarter, based on the Interest Coverage Ratio for the
Computation Period ending on the last day of such fiscal
quarter; it being understood that if the Company fails
-------------------
to deliver the financial statements required by subsection
----------
7.1(a) or 7.1(b), as applicable, and the related
------ ------
Compliance Certificate required by subsection 7.2(b) by
-----------------
the 56th day (or, if applicable, the 101st day) after any
fiscal quarter, the Facility Fee Rate shall be 0.15% until
such financial statements and Compliance Certificate are
delivered.
Federal Funds Rate means, for any day, the rate set
------------------
forth in the weekly statistical release designated as
H.15(519), or any successor publication, published by the
Federal Reserve Bank of New York (including any such
successor, "H.15(519)") on the preceding Business Day
opposite the caption "Federal Funds (Effective)"; or, if for
any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the
9
<PAGE> 17
arithmetic mean as determined by the Administrative Agent of
the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Administrative
Agent.
Foreign Subsidiary means (i) any Subsidiary which
------------------
is organized under the laws of a jurisdiction other than,
and conducts substantially all of its business outside, the
United States and (ii) any Subsidiary organized under the
laws of the United States or a political subdivision thereof
and which engages in no business other than the ownership of
stock of one or more Subsidiaries described in clause
------
(i) above.
---
FRB means the Board of Governors of the Federal
---
Reserve System, and any Governmental Authority succeeding to
any of its principal functions.
Further Taxes means any and all present or future
-------------
taxes, levies, assessments, imposts, duties, deductions,
fees, withholdings or similar charges (including net income
taxes and franchise taxes), and all liabilities with respect
thereto, imposed by any jurisdiction on account of amounts
payable or paid pursuant to Section 4.1.
-----------
GAAP means generally accepted accounting principles
----
set forth from time to time in the opinions and
pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of
the date of determination.
Governmental Authority means any nation or
----------------------
government, any state or other political subdivision
thereof, any central bank (or similar monetary or regulatory
authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any
corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the
foregoing.
Guarantor means (a) as of the Effective Date, each
---------
of Earthgrains Baking Companies, Inc., a Delaware
corporation, and Earthgrains Refrigerated Dough Products,
Inc., a Texas corporation, and (b) thereafter, any Person
which is a Significant Subsidiary (other than any Foreign
Subsidiary)
10
<PAGE> 18
and any other Person which executes and delivers a
counterpart of the Guaranty.
Guaranty means a guaranty substantially in the form
--------
of Exhibit F.
---------
Guaranty Obligation has the meaning specified in
-------------------
the definition of Contingent Obligation.
Honor Date has the meaning specified in
----------
subsection 3.3(c).
-----------------
Indebtedness of any Person means, without
------------
duplication, (a) all indebtedness of such Person for
borrowed money; (b) all obligations issued, undertaken or
assumed by such Person as the deferred purchase price of
property or services (other than trade payables entered into
in the ordinary course of business on ordinary terms); (c)
all reimbursement or payment obligations of such Person with
respect to Surety Instruments; (d) all obligations of such
Person evidenced by notes, bonds, debentures or similar
instruments; (e) all indebtedness of such Person created or
arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with
respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such
agreement in the event of default are limited to
repossession or sale of such property); (f) all obligations
of such Person with respect to capital leases which should
be recorded on a balance sheet of such Person in accordance
with GAAP; (g) all indebtedness of the types referred to in
clauses (a) through (f) above secured by (or for
----------- ---
which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or
in property (including accounts and contracts rights) owned
by such Person, even though such Person has not assumed or
become liable for the payment of such Indebtedness, provided
that the amount of any such Indebtedness shall be deemed to
be the lesser of the face principal amount thereof and the
fair market value of the property subject to such Lien; and
(i) all Guaranty Obligations of such Person in respect of
indebtedness or obligations of others. For all purposes of
this Agreement, the Indebtedness of any Person shall include
all Indebtedness of any partnership or joint venture in
which such Person is a general partner or a joint venturer
(other than any such Indebtedness which is expressly non-
recourse to such Person).
Indemnified Liabilities - see Section 11.5.
----------------------- ------------
Indemnified Person - see Section 11.5.
------------------ ------------
11
<PAGE> 19
Independent Auditor - see subsection 7.1(a).
------------------- -----------------
Insolvency Proceeding means, with respect to any
---------------------
Person, (a) any case, action or proceeding with respect to
such Person before any court or other Governmental Authority
relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief
of debtors or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; in
each case undertaken under any U.S. Federal, state or
foreign law, including the Bankruptcy Code.
Interest Coverage Ratio means, for any Computation
-----------------------
Period, the ratio of (a) EBITA for such Computation Period,
to (b) Interest Expense for such Computation Period.
Interest Expense means for any period the
----------------
consolidated interest expense of the Company and its
Subsidiaries for such period (including all imputed interest
on capital leases).
Interest Payment Date means, as to any Loan other
---------------------
than a Base Rate Committed Loan, the last day of each
Interest Period applicable to such Loan and, as to any Base
Rate Committed Loan, the last Business Day of each calendar
quarter, provided that if any Interest Period for an
--------
Offshore Rate Committed Loan exceeds three months, each
three-month anniversary of the first day of such Interest
Period also shall be an Interest Payment Date.
Interest Period means, (a) as to any Offshore Rate
---------------
Committed Loan, the period commencing on the Borrowing Date
of such Loan or on the Conversion/Continuation Date on which
such Loan is converted into or continued as an Offshore Rate
Committed Loan, and ending on the date one, two, three, six
or, if available to all Lenders, nine or twelve months
thereafter as selected by the Company in its Notice of
Committed Borrowing or Notice of Conversion/Continuation, as
the case may be; and (b) as to any Bid Loan, a period not
less than 7 days and not more than 180 days as selected by
the Company in the applicable Competitive Bid Request;
provided that:
--------
(i) if any Interest Period would otherwise end on
a day that is not a Business Day, such Interest Period
shall be extended to the following Business Day unless,
in the case of an Offshore Rate Committed Loan, the
result of such extension would be to carry such
Interest Period into another calendar month, in which
12
<PAGE> 20
event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period for an Offshore Rate
Committed Loan that begins on the last Business Day of
a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such
Interest Period; and
(iii) no Interest Period for any Loan shall
extend beyond the Termination Date.
Invitation for Competitive Bids means a
-------------------------------
solicitation for Competitive Bids, substantially in the form
of Exhibit D.
---------
IRS means the Internal Revenue Service, and any
---
Governmental Authority succeeding to any of its principal
functions under the Code.
Issuance Date has the meaning specified in
-------------
subsection 3.1(a).
-----------------
Issue means, with respect to any Letter of Credit,
-----
to issue or to extend the expiry of, or to renew or increase
the amount of, such Letter of Credit; and the terms
"Issued," "Issuing" and "Issuance" have
------ ------- --------
corresponding meanings.
Issuing Lender means each of BofA in its capacity
--------------
as issuer of one or more Letters of Credit hereunder,
together with (i) any replacement letter of credit issuer
arising under subsection 10.1(b) or Section 10.9 and
------------------ ------------
(ii) any other Lender or any Affiliate of a Lender which the
Administrative Agent and the Company have approved in
writing as an "Issuing Lender" hereunder.
L/C Advance means each Lender's participation in
-----------
any L/C Borrowing in accordance with its Pro Rata Share.
L/C Amendment Application means an application form
-------------------------
for amendment of an outstanding standby letter of credit as
shall at any time be in use by the applicable Issuing
Lender, as such Issuing Lender shall request.
L/C Application means an application form for
---------------
issuance of a standby letter of credit as shall at any time
be in use by the applicable Issuing Lender, as such Issuing
Lender shall request.
13
<PAGE> 21
L/C Borrowing means an extension of credit
-------------
resulting from a drawing under any Letter of Credit which
shall not have been reimbursed on the date when made nor
converted into a Borrowing of Committed Loans under
subsection 3.3(d).
-----------------
L/C Commitment means the commitment of the Issuing
--------------
Lenders to Issue, and the commitment of the Lenders
severally to participate in, Letters of Credit from time to
time Issued or outstanding under Article III (including
-----------
the Existing Letters of Credit) in an aggregate amount not
to exceed on any date the lesser of $75,000,000 and the
combined Commitments; it being understood that the L/C
Commitment is a part of the combined Commitments rather than
a separate, independent commitment.
L/C Fee Rate means, at any time, the Applicable
------------
Margin; provided that upon notice to the Company from the
Administrative Agent (acting at the request or with the
consent of the Required Lenders) during the existence of any
Event of Default, and for so long as such Event of Default
continues, such rate shall be increased by 2%.
L/C Obligations means at any time the sum of (a)
---------------
the aggregate undrawn amount of all Letters of Credit then
outstanding, plus (b) the amount of all unreimbursed
drawings under all Letters of Credit, including all
outstanding L/C Borrowings.
L/C-Related Documents means the Letters of Credit,
---------------------
the L/C Applications, the L/C Amendment Applications and any
other document relating to any Letter of Credit, including
any of the applicable Issuing Lender's standard form
documents for letter of credit issuances.
Lender - see the Preamble. References to the
------ --------
"Lenders" shall include each Issuing Lender in its capacity
as such; for purposes of clarification only, to the extent
that any Issuing Lender may have any rights or obligations
in addition to those of the other Lenders due to its status
as Issuing Lender, its status as such will be specifically
referenced.
Lending Office means, as to any Lender, the office
--------------
or offices of such Lender specified as its "Lending Office"
or "Domestic Lending Office" or "Offshore Lending Office",
as the case may be, on Schedule 11.2, or such other
-------------
office or offices as such Lender may from time to time
notify the Company and the Administrative Agent.
14
<PAGE> 22
Letter of Credit means any standby letter of credit
----------------
Issued by an Issuing Lender pursuant to Article III
-----------
(including any Existing Letter of Credit).
Lien means any security interest, mortgage, deed of
----
trust, pledge, hypothecation, assignment, charge or deposit
arrangement, encumbrance, lien (statutory or other) or
preferential arrangement of any kind or nature whatsoever in
respect of any property (including those created by, arising
under or evidenced by any conditional sale or other title
retention agreement, the interest of a lessor under a
capital lease, or any financing lease having substantially
the same economic effect as any of the foregoing, but not
including the interest of a lessor under an operating
lease).
Loan means an extension of credit by a Lender to
----
the Company under Article II or Article III in the
---------- -----------
form of a Committed Loan, Bid Loan or L/C Advance.
Loan Documents means this Agreement, any Notes, the
--------------
L/C-Related Documents, the Guaranty and all other documents
delivered to the Administrative Agent or any Lender in
connection herewith.
Margin Stock means "margin stock" as such term is
------------
defined in Regulation G, T, U or X of the FRB.
Material Adverse Effect means a material adverse
-----------------------
change in, or a material adverse effect upon, the
operations, business, properties, assets, condition
(financial or otherwise) or prospects of the Company and its
Subsidiaries taken as a whole.
Multiemployer Plan means a "multiemployer plan",
------------------
within the meaning of Section 4001(a)(3) of ERISA, with
respect to which the Company or any ERISA Affiliate may have
any liability.
Note means a promissory note executed by the
----
Company in favor of a Lender pursuant to subsection
----------
2.2(b), in substantially the form of Exhibit K.
------ ---------
Notice of Committed Borrowing means a notice in
-----------------------------
substantially the form of Exhibit A.
---------
Notice of Conversion/Continuation means a notice in
---------------------------------
substantially the form of Exhibit B.
---------
Obligations means all advances, debts, liabilities,
-----------
obligations, covenants and duties arising under any Loan
15
<PAGE> 23
Document owing by the Company to any Lender, the
Administrative Agent or any other Indemnified Person,
whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due,
or now existing or hereafter arising.
Offshore Rate means, for any Interest Period, with
-------------
respect to Offshore Rate Committed Loans comprising part of
the same Borrowing, the rate of interest per annum (rounded
upward to the next 1/16th of 1%) determined by the
Administrative Agent as follows:
Offshore Rate = IBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any
-----------------------------
day for any Interest Period the maximum reserve
percentage (expressed as a decimal, rounded upward, if
necessary, to an integral multiple of 1/100th of 1%) in
effect on such day (whether or not applicable to any
Lender) under regulations issued from time to time by
the FRB for determining the maximum reserve requirement
(including any emergency, supplemental or other
marginal reserve requirement) with respect to
Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"IBOR" means the rate of interest per annum
----
determined by the Administrative Agent to be the
arithmetic mean (rounded upward, if necessary, to an
integral multiple of 1/16th of 1%) of the rates of
interest per annum notified to the Administrative Agent
by each Reference Lender as the rate of interest at
which dollar deposits in the approximate amount of the
amount of the Loan to be made or continued as, or
converted into, an Offshore Rate Committed Loan by such
Reference Lender and having a maturity comparable to
such Interest Period would be offered to prime banks in
the offshore dollar interbank market at their request
at approximately 11:00 a.m. (Chicago time) two Business
Days prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all
Offshore Rate Committed Loans then outstanding as of the
effective date of any change in the Eurodollar Reserve
Percentage.
Offshore Rate Committed Loan means a Committed Loan
----------------------------
that bears interest based on the Offshore Rate.
16
<PAGE> 24
Organization Documents means (i) for any
----------------------
corporation, the certificate of incorporation, the bylaws,
any certificate of determination or instrument relating to
the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee
thereof) of such corporation, (ii) for any partnership or
joint venture, the partnership or joint venture agreement
and any other organizational document of such entity, (iii)
for any limited liability company, the certificate or
articles of organization, the operating agreement and any
other organizational document of such limited liability
company, (iv) for any trust, the declaration of trust, the
trust agreement and any other organizational document of
such trust and (v) for any other entity, the document or
agreement pursuant to which such entity was formed and any
other organizational document of such entity.
Other Taxes means any present or future stamp,
-----------
court or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery,
performance, enforcement or registration of, or otherwise
with respect to, this Agreement or any other Loan Document.
Participant - see subsection 11.8(d).
----------- ------------------
Payment Sharing Notice means a written notice from
----------------------
the Company or any Lender informing the Administrative Agent
that an Event of Default has occurred and is continuing and
directing the Administrative Agent to allocate payments
received from the Company in accordance with subsection
----------
2.15(b).
-------
PBGC means the Pension Benefit Guaranty
----
Corporation, or any Governmental Authority succeeding to any
of its principal functions under ERISA.
Pension Plan means a pension plan (as defined in
------------
Section 3(2) of ERISA) subject to Title IV of ERISA, other
than a Multiemployer Plan, with respect to which the Company
or any ERISA Affiliate may have any liability.
Permitted Liens - see Section 8.2.
--------------- -----------
Permitted Swap Obligations means all obligations
--------------------------
(contingent or otherwise) of the Company or any Subsidiary
existing or arising under Swap Contracts, provided that such
obligations are (or were) entered into by such Person in the
ordinary course of business for the purpose of directly
mitigating risks associated with (a) raw materials
17
<PAGE> 25
purchases, (b) interest or currency exchange rates, (c)
operating expenses or other anticipated obligations of such
Person, (d) other liabilities, commitments or assets held or
reasonably anticipated by such Person or (e) changes in the
value of securities issued by such Person in conjunction
with a securities repurchase program not otherwise
prohibited hereunder.
Person means an individual, partnership,
------
corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association,
joint venture or Governmental Authority.
Plan means an employee benefit plan (as defined in
----
Section 3(3) of ERISA), other than a Multiemployer Plan,
with respect to which the Company or any ERISA Affiliate may
have any liability, and includes any Pension Plan.
Pro Rata Share means, as to any Lender at any time,
--------------
the percentage equivalent (expressed as a decimal, rounded
to the ninth decimal place) at such time of such Lender's
Commitment divided by the combined Commitments of all
Lenders.
Reference Lenders means BofA, The Chase Manhattan
-----------------
Bank and Morgan Guaranty Trust Company of New York.
Reportable Event means, any of the events set forth
----------------
in Section 4043(b) of ERISA or the regulations thereunder,
other than any such event for which the 30-day notice
requirement under ERISA has been waived in regulations
issued by the PBGC.
Required Lenders means (a) prior to the Termination
----------------
Date, Lenders holding at least 66-2/3% of the Commitments,
and (b) on and after the Termination Date, Lenders holding
at least 66-2/3% of the then aggregate unpaid principal
amount of the Loans.
Requirement of Law means, as to any Person, any law
------------------
(statutory or common), treaty, rule or regulation or
determination of an arbitrator or of a Governmental
Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any
of its property is subject.
Responsible Officer means the chief executive
-------------------
officer, the president or any vice president of the Company,
or any other officer having substantially the same authority
and responsibility; or, with respect to financial matters,
the chief financial officer or the treasurer of the Company,
or
18
<PAGE> 26
any other officer having substantially the same authority
and responsibility.
SEC means the Securities and Exchange Commission,
---
or any Governmental Authority succeeding to any of its
principal functions.
Significant Subsidiary means at any time any
----------------------
Subsidiary which, as of the last day of the most recently
ended fiscal year, either (a) held more than 10% of
Consolidated Total Assets or (b) had more than 10% of the
consolidated revenues of the Company and its Subsidiaries
for the fiscal year ending on such date (or, in the case of
any Subsidiary acquired or created during any fiscal year,
which would have met either of such tests on a pro forma
basis as of the last day of the preceding fiscal year).
Subsidiary of a Person means any corporation,
----------
association, partnership, limited liability company, joint
venture or other business entity of which more than 50% of
the voting stock, membership interests or other equity
interests is owned or controlled directly or indirectly by
such Person, or one or more of the Subsidiaries of such
Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Company.
Successor Lender - see subsection 2.16(b).
---------------- ------------------
Surety Instruments means all letters of credit
------------------
(including standby and commercial), banker's acceptances,
bank guaranties, shipside bonds, surety bonds and similar
instruments.
Swap Contract means any agreement, whether or not
-------------
in writing, relating to any transaction that is a rate swap,
basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap or option,
bond, note or bill option, interest rate option, forward
foreign exchange transaction, cap, collar or floor
transaction, currency swap, cross-currency rate swap,
swaption, currency option or any other, similar transaction
(including any option to enter into any of the foregoing) or
any combination of the foregoing, and, unless the context
otherwise clearly requires, any master agreement relating to
or governing any or all of the foregoing.
Taxes means any and all present or future taxes,
-----
levies, assessments, imposts, duties, deductions, fees,
withholdings or similar charges, and all liabilities with
respect thereto, excluding, in the case of each Lender and
19
<PAGE> 27
the Administrative Agent, taxes imposed on or measured by
its net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Lender or
the Administrative Agent, as the case may be, is organized
or maintains a lending office.
Temporary Non-Pro Rata Borrowing - see subsection
-------------------------------- ----------
2.18(b).
- -------
Termination Date means the earlier to occur of:
----------------
(a) April 30, 2002 (or such later date to which
the Termination Date may be extended pursuant to
Section 2.16); and
------------
(b) the date on which the Commitments terminate
in accordance with the provisions of this Agreement.
Total Indebtedness means, at any time, all
------------------
Indebtedness of the Company and its Subsidiaries determined
on a consolidated basis, excluding contingent obligations
with respect to letters of credit (other than any letter of
credit issued for the account of the Company or any
Subsidiary to support obligations of a Person other than the
Company or any Subsidiary).
Type has the meaning specified in the definition of
----
"Committed Loan."
Unfunded Pension Liability means the excess of a
--------------------------
Pension Plan's benefit liabilities under Section 4001(a)(16)
of ERISA, over the current value of such Plan's assets,
determined in accordance with the assumptions used for
funding such Pension Plan pursuant to Section 412 of the
Code for the applicable plan year.
United States and U.S. each means the United
------------- ----
States of America.
Unmatured Event of Default means any event or
--------------------------
circumstance which, with the giving of notice, the lapse of
time or both, will (if not cured or otherwise remedied
during such time) constitute an Event of Default.
Wholly-Owned Subsidiary means any corporation in
-----------------------
which (other than directors' qualifying shares required by
law) 100% of the capital stock of each class having ordinary
voting power, and 100% of the capital stock of every other
class, in each case, at the time as of which any
determination is being made, is owned, beneficially and of
20
<PAGE> 28
record, by the Company, or by one or more of the other
Wholly-Owned Subsidiaries, or both.
1.2 Other Interpretive Provisions.
-----------------------------
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any
particular provision of this Agreement; and subsection, Section,
Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures,
notices and other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means
"from and including"; the words "to" and "until" each mean "to
but excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other
contractual instruments shall be deemed to include all subsequent
amendments and other modifications thereto, but only to the
extent such amendments and other modifications are not prohibited
by the terms of any Loan Document, and (ii) references to any
statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are
for convenience of reference only and shall not affect the
interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate
the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in
accordance with their terms. Unless otherwise expressly provided
herein, any reference to any action of the Administrative Agent,
the Lenders or the Required Lenders by way of consent, approval
or waiver shall be deemed modified by the phrase "in its/their
sole discretion."
21
<PAGE> 29
(g) This Agreement and the other Loan Documents are
the result of negotiations among and have been reviewed by
counsel to the Administrative Agent, the Company and the other
parties, and are the products of all parties. Accordingly, they
shall not be construed against the Lenders or the Administrative
Agent merely because of the Administrative Agent's or Lenders'
involvement in their preparation.
1.3 Accounting Principles.
---------------------
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement
shall be made, in accordance with GAAP, consistently applied;
provided that if the Company notifies the Administrative
- --------
Agent that the Company wishes to amend any covenant in Article
-------
VIII to eliminate the effect of any change in GAAP on the
- ----
operation of such covenant (or if the Administrative Agent
notifies the Company that the Required Lenders wish to amend
Article VIII for such purpose), then the Company's compliance
- ------------
with such covenant shall be determined on the basis of GAAP in
effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such covenant
is amended in a manner satisfactory to the Company and the
Required Lenders.
(b) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitments. Each Lender
--------------------------------
severally agrees, on the terms and conditions set forth herein,
to make Committed Loans to the Company from time to time on any
Business Day during the period from the Effective Date to the
Termination Date, in an aggregate amount not to exceed at any
time outstanding the amount set forth on Schedule 2.1 (such
------------
amount, as reduced pursuant to Section 2.7, increased
-----------
pursuant to Section 2.17 or changed by one or more
------------
assignments under Section 11.8, such Lender's
------------
"Commitment"); provided, however, that, after giving
---------- -------- -------
effect to any Committed Borrowing, the aggregate principal amount
of all outstanding Loans (whether Committed Loans or Bid Loans)
plus the Effective Amount of all L/C Obligations shall not
- ----
exceed the combined Commitments; and provided,
--- --------
further, that the aggregate principal amount of the Committed
- -------
Loans of any Lender plus the participation of such Lender in
----
the Effective Amount of all L/C Obligations shall not at any time
exceed such Lender's Commitment. Within the limits of each
Lender's Commitment, and subject to the other terms and
conditions hereof, the Company may
22
<PAGE> 30
borrow under this Section 2.1, prepay under Section 2.8
----------- -----------
and reborrow under this Section 2.1.
-----------
2.2 Loan Accounts. (a) The Loans made by each Lender
-------------
and the Letters of Credit Issued by each Issuing Lender shall be
evidenced by one or more accounts or records maintained by such
Lender or Issuing Lender, as the case may be, in the ordinary
course of business. The accounts or records maintained by the
Administrative Agent, each Issuing Lender and each Lender shall
be rebuttable presumptive evidence of the amount of the Loans
made by the Lenders to the Company and the Letters of Credit
Issued for the account of the Company, and the interest and
payments thereon. Any failure so to record or any error in doing
so shall not, however, limit or otherwise affect the obligation
of the Company hereunder to pay any amount owing with respect to
the Loans or any Letter of Credit.
(b) Upon the request of any Lender made through the
Administrative Agent, the Loans made by such Lender may be
evidenced by one or more Notes, instead of or in addition to loan
accounts. Each such Lender shall endorse on the schedules
annexed to its Note(s) the date, amount and maturity of each Loan
evidenced thereby and the amount of each payment of principal
made by the Company with respect thereto. Each such Lender is
irrevocably authorized by the Company to endorse its Note(s) and
each Lender's record shall be rebuttable presumptive evidence of
the amount of the Loans evidenced thereby, and the interest and
payments thereon; provided, however, that the failure of
-------- -------
a Lender to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the
obligations of the Company hereunder or under any such Note to
such Lender.
2.3 Procedure for Committed Borrowing. (a) Each
---------------------------------
Committed Borrowing shall be made upon the Company's irrevocable
written notice delivered to the Administrative Agent in the form
of a Notice of Committed Borrowing, which notice must be received
by the Administrative Agent prior to (i)10:30 a.m. Chicago time
two Business Days prior to the requested Borrowing Date, in the
case of Offshore Rate Committed Loans, and (ii) 10:30 a.m.
Chicago time (or, in the case of any portion of the initial
Borrowing which is to be maintained as Base Rate Committed Loans,
9:00 a.m. Chicago time) on the requested Borrowing Date, in the
case of Base Rate Committed Loans, specifying:
(A) the amount of the Committed Borrowing,
which shall be in an aggregate amount of $5,000,000 or
a higher multiple of $500,000;
(B) the requested Borrowing Date, which
shall be a Business Day;
23
<PAGE> 31
(C) the Type of Loans comprising such
Committed Borrowing; and
(D) in the case of Offshore Rate Committed
Loans, the duration of the initial Interest Period
applicable to such Loans.
(b) The Administrative Agent will promptly notify each
Lender of its receipt of any Notice of Committed Borrowing and of
the amount of such Lender's Pro Rata Share of such Borrowing.
(c) Each Lender will make the amount of its Pro Rata
Share of each Committed Borrowing available to the Administrative
Agent for the account of the Company at the Administrative
Agent's Payment Office by 12:00 noon Chicago time (or, in the
case of the initial Borrowing, 10:30 a.m. Chicago time) on the
Borrowing Date requested by the Company in funds immediately
available to the Administrative Agent. The proceeds of all such
Loans will then be made available to the Company by the
Administrative Agent by wire transfer in accordance with written
instructions provided to the Administrative Agent by the Company
of like funds as received by the Administrative Agent.
(d) After giving effect to any Committed Borrowing,
unless the Administrative Agent otherwise consents, there may not
be more than 12 different Interest Periods in effect for all
Borrowings.
2.4 Conversion and Continuation Elections for Committed
---------------------------------------------------
Borrowings. (a) The Company may, upon irrevocable written
- ----------
notice to the Administrative Agent in accordance with
subsection 2.4(b):
- -----------------
(i) elect, as of any Business Day, in the case of
Base Rate Committed Loans, or as of the last day of the
applicable Interest Period, in the case of Offshore Rate
Committed Loans, to convert such Loans (or any part thereof
in an aggregate amount of $5,000,000 or a higher integral
multiple of $500,000) into Committed Loans of the other
Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Offshore Rate Committed
Loans having Interest Periods expiring on such day (or any
part thereof in an aggregate amount of $5,000,000 or a
higher integral multiple of $500,000) for another Interest
Period;
provided that if at any time the aggregate amount of Offshore
- --------
Rate Committed Loans in respect of any Borrowing is reduced, by
payment, prepayment, or conversion of any part thereof, to be
24
<PAGE> 32
less than $5,000,000, such Offshore Rate Committed Loans shall
automatically convert into Base Rate Committed Loans.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Administrative
Agent not later than 10:30 a.m. Chicago time at least (i) two
Business Days in advance of the Conversion/Continuation Date, if
the Committed Loans are to be converted into or continued as
Offshore Rate Committed Loans; and (ii) on the
Conversion/Continuation Date, if the Committed Loans are to be
converted into Base Rate Committed Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Committed Loans
to be converted or continued;
(C) the Type of Committed Loans resulting
from the proposed conversion or continuation; and
(D) in the case of conversion into or
continuation of Offshore Rate Committed Loans, the
duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period
applicable to Offshore Rate Committed Loans, the Company has
failed to select timely a new Interest Period to be applicable to
such Offshore Rate Committed Loans, the Company shall be deemed
to have elected to convert such Offshore Rate Committed Loans
into Base Rate Committed Loans effective as of the expiration
date of such Interest Period.
(d) The Administrative Agent will promptly notify each
Lender of its receipt of a Notice of Conversion/Continuation, or,
if no timely notice is provided by the Company, the
Administrative Agent will promptly notify each Lender of the
details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective
outstanding principal amounts of the Committed Loans with respect
to which the notice was given held by each Lender.
(e) Unless the Required Lenders otherwise consent, the
Company may not elect to have a Loan converted into or continued
as an Offshore Rate Committed Loan during the existence of an
Event of Default or Unmatured Event of Default.
(f) After giving effect to any conversion or
continuation of Loans, unless the Administrative Agent shall
otherwise consent, there may not be more than 12 different
Interest Periods in effect for all Borrowings.
25
<PAGE> 33
2.5 Bid Borrowings. In addition to Committed
--------------
Borrowings pursuant to Section 2.3, each Lender severally
-----------
agrees that the Company may, as set forth in Section 2.6,
-----------
from time to time request the Lenders prior to the Termination
Date to submit offers to make Bid Loans to the Company;
provided that the Lenders may, but shall have no obligation
- --------
to, submit such offers and the Company may, but shall have no
obligation to, accept any such offers; and provided,
--------
further, that (a) after giving effect to any Bid Borrowing,
- -------
the aggregate principal amount of all Loans (whether Bid Loans or
Committed Loans) plus the Effective Amount of all L/C
----
Obligations shall not at any time exceed the combined Commitments
and (b) after giving effect to any Bid Borrowing, there may not
be more than 12 different Interest Periods in effect for all
Borrowings.
2.6 Procedure for Bid Borrowings.
----------------------------
(a) When the Company wishes to request the Lenders to
submit offers to make Bid Loans hereunder, it shall transmit to
the Administrative Agent by telephone call followed promptly by
facsimile transmission a notice in substantially the form of
Exhibit C (a "Competitive Bid Request") so as to be
- --------- -----------------------
received no later than 10:30 a.m. Chicago time on the Business
Day prior to the date of such proposed Bid Borrowing, specifying:
(i) the date of such Bid Borrowing, which shall
be a Business Day;
(ii) the aggregate amount of such Bid Borrowing,
which shall be $5,000,000 or a higher integral multiple of
$500,000; and
(iii) the duration of the Interest Period
applicable thereto, subject to the provisions of the
definition of "Interest Period" herein.
Subject to subsection 2.6(c), the Company may not request
-----------------
Competitive Bids for more than three Interest Periods in a single
Competitive Bid Request and may not request Competitive Bids more
than twice in any period of five consecutive Business Days.
(b) Upon receipt of a Competitive Bid Request, the
Administrative Agent will promptly send to the Lenders by
facsimile transmission an Invitation for Competitive Bids, which
shall constitute an invitation by the Company to each Lender to
submit Competitive Bids offering to make the Bid Loans to which
such Competitive Bid Request relates in accordance with this
Section 2.6.
- -----------
(c) (i) Each Lender may at its discretion submit a
Competitive Bid containing an offer or offers to make Bid
26
<PAGE> 34
Loans in response to any Invitation for Competitive Bids.
Each Competitive Bid must comply with the requirements of
this subsection 2.6(c) and must be submitted to the
-----------------
Administrative Agent by facsimile transmission at the
Administrative Agent's office for notices not later than
8:30 a.m. Chicago time on the proposed date of Borrowing;
provided that Competitive Bids submitted by the
--------
Administrative Agent (or any Affiliate of the Administrative
Agent) in the capacity of a Lender may be submitted, and may
only be submitted, if the Administrative Agent or such
Affiliate notifies the Company of the terms of the offer or
offers contained therein not later than 8:15 a.m. Chicago
time on the proposed date of Borrowing.
(ii) Each Competitive Bid shall be in
substantially the form of Exhibit E, specifying therein:
---------
(A) the proposed date of Borrowing;
(B) the principal amount of each Bid Loan
for which such Competitive Bid is being made, which
principal amount (x) may be equal to, greater than or
less than the Commitment of the quoting Lender, (y)
must be $5,000,000 or a higher integral multiple of
$500,000 and (z) may not exceed the principal amount of
Bid Loans for which Competitive Bids were requested;
(C) the rate of interest per annum (which
shall be an integral multiple of 1/100th of 1%) (the
"Absolute Rate") offered for each such Bid Loan;
-------------
and
(D) the identity of the quoting Lender.
A Competitive Bid may contain up to three separate offers by
the quoting Lender with respect to each Interest Period
specified in the related Invitation for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded if
it:
(A) is not substantially in conformity with
Exhibit E or does not specify all of the
---------
information required by subsection (c)(ii) of this
------------------
Section;
(B) contains qualifying, conditional or
similar language;
(C) proposes terms other than or in addition
to those set forth in the applicable Invitation for
Competitive Bids; or
27
<PAGE> 35
(D) arrives after the time set forth in
subsection (c)(i) of this Section.
-----------------
(d) Promptly on receipt and not later than 9:00 a.m.
Chicago time on the proposed date of Borrowing, the
Administrative Agent will notify the Company of the terms (i) of
any Competitive Bid submitted by a Lender that is in accordance
with subsection 2.6(c) and (ii) of any Competitive Bid that
-----------------
amends, modifies or is otherwise inconsistent with a previous
Competitive Bid submitted by such Lender with respect to the same
Competitive Bid Request. Any such subsequent Competitive Bid
shall be disregarded by the Administrative Agent unless such
subsequent Competitive Bid is submitted solely to correct a
manifest error in such former Competitive Bid and only if
received within the times set forth in subsection 2.6(c).
-----------------
The Administrative Agent's notice to the Company shall specify
(1) the aggregate principal amount of Bid Loans for which offers
have been received for each Interest Period specified in the
related Competitive Bid request; and (2) the respective principal
amounts and Absolute Rates so offered. Subject only to the
provisions of Sections 4.2 and 4.5 and Article V
------------ --- ---------
hereof and the provisions of this subsection (d), any
--------------
Competitive Bid shall be irrevocable except with the written
consent of the Administrative Agent given on the written
instructions of the Company.
(e) Not later than 9:30 a.m. Chicago time on the
proposed date of a Bid Borrowing, the Company shall notify the
Administrative Agent of its acceptance or non-acceptance of the
offers so notified to it pursuant to subsection 2.6(d). The
-----------------
Company shall be under no obligation to accept any offer and may
choose to reject all offers. In the case of acceptance, such
notice shall specify the aggregate principal amount of offers for
each Interest Period that is accepted. The Company may accept
any Competitive Bid in whole or in part; provided that:
--------
(i) the aggregate principal amount of each Bid
Borrowing may not exceed the applicable amount set forth in
the related Competitive Bid Request;
(ii) the principal amount of each Bid Borrowing
must be $5,000,000 or a higher integral multiple of
$500,000;
(iii) acceptance of offers may only be made on
the basis of ascending Absolute Rates within each Interest
Period; and
(iv) the Company may not accept any offer that is
described in subsection 2.6(c)(iii) or that otherwise
----------------------
fails to comply with the requirements of this Agreement.
28
<PAGE> 36
(f) If offers are made by two or more Lenders with the
same Absolute Rates for a greater aggregate principal amount than
the amount in respect of which such offers are accepted for the
related Interest Period, the principal amount of Bid Loans in
respect of which such offers are accepted shall be allocated by
the Administrative Agent among such Lenders as nearly as possible
(in such multiples, not less than $500,000, as the Administrative
Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. Determination by the
Administrative Agent of the amount of Bid Loans shall be
conclusive in the absence of manifest error.
(g) (i) The Administrative Agent will promptly notify
each Lender having submitted a Competitive Bid if its offer
has been accepted and, if its offer has been accepted, of
the amount of the Bid Loan to be made by it on the date of
the applicable Bid Borrowing.
(ii) Each Lender which has received notice
pursuant to subsection 2.6(g)(i) that its Competitive
--------------------
Bid has been accepted shall make the amounts of such Bid
Loans available to the Administrative Agent for the account
of the Company at the Administrative Agent's Payment Office
by 1:00 p.m. Chicago time on such date of Bid Borrowing, in
immediately available funds.
(iii) Promptly following each Bid Borrowing, the
Administrative Agent shall notify each Lender of the ranges
of bids submitted and the highest and lowest Bids accepted
for each Interest Period requested by the Company and the
aggregate amount borrowed pursuant to such Bid Borrowing.
(iv) From time to time, the Company and the
Lenders shall furnish such information to the Administrative
Agent as the Administrative Agent may request relating to
the making of Bid Loans, including the amounts, interest
rates, dates of borrowings and maturities thereof, for
purposes of the allocation of amounts received from the
Company for payment of all amounts owing hereunder.
(h) If, on the proposed date of Borrowing, the
Commitments have not been terminated and all applicable
conditions to funding referenced in Sections 4.2 and 4.5
------------ ---
and Article V hereof are satisfied, the Lender or Lenders
---------
whose offers the Company has accepted will fund each Bid Loan so
accepted. Nothing in this Section 2.6 shall be construed as
-----------
a right of first offer in favor of the Lenders or to otherwise
limit the ability of the Company to request and accept credit
facilities from any Person (including any of the Lenders),
provided that no Event of Default or Unmatured Event of Default
29
<PAGE> 37
would result from the Company executing, delivering or performing
under such credit facilities.
2.7 Voluntary Termination or Reduction of Commitments.
-------------------------------------------------
The Company may, upon not less than five Business Days' prior
notice to the Administrative Agent, terminate the Commitments, or
permanently reduce the Commitments by a minimum amount of
$5,000,000 or a higher integral multiple of $500,000; unless,
------
after giving effect thereto and to any prepayments of Loans made
on the effective date thereof, the aggregate principal amount of
all Loans (whether Committed Loans or Bid Loans) plus the
----
Effective Amount of all L/C Obligations together would exceed the
amount of the combined Commitments then in effect. Once reduced
in accordance with this Section, the Commitments may not be
increased. Any reduction of the Commitments shall be applied to
reduce the Commitment of each Lender according to its Pro Rata
Share. If the Company terminates the Commitments or reduces the
Commitments to zero, the Company shall pay all accrued and unpaid
interest, fees and other amounts payable hereunder on the date of
such termination.
2.8 Optional Prepayments. (a) Subject to the proviso to
--------------------
subsection 2.4(a) and to Section 4.4, the Company may,
- ----------------- -----------
from time to time, upon irrevocable notice to the Administrative
Agent, which notice must be received by the Administrative Agent
prior to 10:30 a.m. Chicago time (i) two Business Days prior to
the date of prepayment, in the case of Offshore Rate Committed
Loans, and (ii) on the date of prepayment, in the case of Base
Rate Committed Loans, ratably prepay Committed Loans in whole or
in part, in an aggregate amount of $1,000,000 or a higher
integral multiple of $500,000 (or, if any Base Rate Committed
Loans have been made pursuant to subsection 3.3(d), in an
-----------------
aggregate amount equal to the aggregate amount of such Base Rate
Committed Loans). Such notice of prepayment shall specify the
date and amount of such prepayment and the Committed Loans to be
prepaid. The Administrative Agent will promptly notify each
Lender of its receipt of any such notice and of such Lender's Pro
Rata Share of such prepayment. If such notice is given by the
Company, the Company shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the
date specified therein, together with, in the case of Offshore
Rate Committed Loans, accrued interest to such date on the amount
prepaid and any amounts required pursuant to Section 4.4.
-----------
(b) No Bid Loan may be voluntarily prepaid without the
written consent of the applicable Lender.
2.9 Repayment. The Company shall repay each Bid Loan on
---------
the last day of the Interest Period therefor. The Company shall
repay all Loans (including any outstanding Bid Loans) on the
Termination Date.
30
<PAGE> 38
2.10 Interest. (a) Each Committed Loan shall bear
--------
interest on the outstanding principal amount thereof from the
applicable Borrowing Date at a rate per annum equal to (i) the
Offshore Rate plus the Applicable Margin or (ii) the Base Rate,
as the case may be (and subject to the Company's right to convert
to the other Type of Committed Loan under Section 2.4). Each
-----------
Bid Loan shall bear interest on the outstanding principal amount
thereof from the relevant Borrowing Date at the applicable
Absolute Bid Rate.
(b) Interest on each Loan shall be paid in arrears on
each Interest Payment Date. Interest also shall be paid on the
date of any conversion of Offshore Rate Committed Loans under
Section 2.4 and prepayment of Offshore Rate Committed Loans
- -----------
under Section 2.8, in each case for the portion of the Loans
-----------
so converted or prepaid.
(c) Notwithstanding the foregoing provisions of this
Section, upon notice to the Company from the Agent (acting at the
request or with the consent of the Required Lenders) during the
existence of any Event of Default, and for so long as such Event
of Default continues, the Company shall pay interest (after as
well as before entry of judgment thereon to the extent permitted
by law) on the principal amount of all outstanding Loans and, to
the extent permitted by applicable law, on any other amount
payable hereunder or under any other Loan Document, at a rate per
annum which is determined by adding 2% per annum to the rate
otherwise applicable thereto pursuant to the terms hereof or such
other Loan Document (or, if no such rate is specified, the Base
Rate). All such interest shall be payable on demand.
(d) Anything herein to the contrary notwithstanding,
the obligations of the Company to any Lender hereunder shall be
subject to the limitation that payments of interest shall not be
required for any period for which interest is computed hereunder,
to the extent (but only to the extent) that contracting for or
receiving such payment by such Lender would be contrary to the
provisions of any law applicable to such Lender limiting the
highest rate of interest that may be lawfully contracted for,
charged or received by such Lender, and in such event the Company
shall pay such Lender interest at the highest rate permitted by
applicable law.
2.11 Fees. In addition to certain fees described in
----
Section 3.8:
- -----------
(a) Arrangement, Agency Fees. The Company agrees
------------------------
to pay to the Administrative Agent and the Arranger such fees at
such times and in such amounts as are mutually agreed to from
time to time by the Company and the Administrative Agent or the
Arranger, as the case may be.
31
<PAGE> 39
(b) Facility Fees. The Company shall pay to the
-------------
Administrative Agent for the account of each Lender a facility
fee computed at the Facility Fee Rate per annum on the amount of
such Lender's Commitment as in effect from time to time (whether
used or unused) or, if the Commitments have terminated, on the
principal amount of such Lender's Committed Loans outstanding
from time to time. Such facility fee shall accrue from the
Effective Date to the Termination Date, and thereafter until all
Committed Loans are paid in full, and shall be due and payable
quarterly in arrears on the last Business Day of each calendar
quarter, with the final payment to be made on the Termination
Date (or, if later, on the date all Committed Loans are paid in
full).
2.12 Computation of Fees and Interest. (a) All
--------------------------------
computations of interest for Base Rate Committed Loans when the
Base Rate is determined by BofA's "reference rate" shall be made
on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed. All other computations of interest and
fees shall be made on the basis of a 360-day year and actual days
elapsed. Interest and fees shall accrue during each period
during which such interest or such fees are computed from the
first day thereof to the last day thereof.
(b) Each determination of an interest rate by the
Administrative Agent shall be conclusive and binding on the
Company and the Lenders in the absence of manifest error. The
Administrative Agent will, at the request of the Company or any
Lender, deliver to the Company or such Lender, as the case may
be, a statement showing the quotations used by the Administrative
Agent in determining any interest rate and the resulting interest
rate.
(c) If for any reason whatsoever a Reference Lender
ceases to be a Lender hereunder, such Reference Lender shall
thereupon cease to be a Reference Lender, and the Offshore Rate
shall be determined on the basis of the rates as notified by the
remaining Reference Lenders.
(d) Each Reference Lender shall use its best efforts to
furnish quotations of rates to the Administrative Agent as
contemplated hereby. If any of the Reference Lenders fails to
supply such rates to the Administrative Agent upon its request,
the Offshore Rate shall be determined on the basis of the
quotations of the remaining Reference Lender(s).
2.13 Payments by the Company. (a) All payments to be
------------------------
made by the Company shall be made without set-off, recoupment or
counterclaim. Except as otherwise expressly provided herein, all
payments by the Company shall be made to the Administrative Agent
for the account of the Lenders at the Administrative Agent's
32
<PAGE> 40
Payment Office, and shall be made in Dollars and in immediately
available funds, no later than 1:00 p.m. Chicago time on the date
specified herein. The Administrative Agent will promptly
distribute to each Lender its Pro Rata Share (or other applicable
share as expressly provided herein) of such payment in like funds
as received. Any payment received by the Administrative Agent
later than 1:00 p.m. Chicago time shall be deemed to have been
received on the following Business Day and any applicable
interest or fee shall continue to accrue.
(b) Whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following
Business Day (unless, in the case of a payment with respect to an
Offshore Rate Committed Loan, the following Business Day is in
another calendar month, in which case such payment shall be made
on the preceding Business Day), and such extension of time shall
in such case be included in the computation of interest or fees,
as the case may be.
(c) Unless the Administrative Agent receives notice
from the Company prior to the date on which any payment is due to
the Lenders that the Company will not make such payment in full
as and when required, the Administrative Agent may assume that
the Company has made such payment in full to the Administrative
Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in
reliance upon such assumption, distribute to each Lender on such
due date an amount equal to the amount then due such Lender. If
and to the extent the Company has not made such payment in full
to the Administrative Agent, each Lender shall repay to the
Administrative Agent on demand such amount distributed to such
Lender, together with interest thereon at the Federal Funds Rate
for each day from the date such amount is distributed to such
Lender until the date repaid.
2.14 Payments by the Lenders to the Administrative
---------------------------------------------
Agent. (a) Unless the Administrative Agent receives notice
- -----
from a Lender at least one Business Day prior to the date of a
Borrowing of Offshore Rate Committed Loans or by 11:30 a.m.
Chicago time on the day of any Borrowing of Base Rate Committed
Loans, that such Lender will not make available as and when
required hereunder to the Administrative Agent for the account of
the Company the amount of such Lender's Pro Rata Share of such
Committed Borrowing, the Administrative Agent may assume that
such Lender has made such amount available to the Administrative
Agent in immediately available funds on the Borrowing Date and
the Administrative Agent may (but shall not be so required), in
reliance upon such assumption, make available to the Company on
such date a corresponding amount. If and to the extent any
Lender shall not have made its full amount available to the
Administrative Agent in immediately available funds and the
33
<PAGE> 41
Administrative Agent in such circumstances has made available to
the Company such amount, such Lender shall on the Business Day
following such Borrowing Date make such amount available to the
Administrative Agent, together with interest at the Federal Funds
Rate. A notice of the Administrative Agent submitted to any
Lender with respect to amounts owing under this subsection
----------
(a) shall be conclusive, absent manifest error. If such amount
- ---
is so made available, such payment to the Administrative Agent
shall constitute such Lender's Committed Loan on the date of
Borrowing for all purposes of this Agreement. If such amount is
not made available to the Administrative Agent on the Business
Day following the Borrowing Date, the Administrative Agent will
notify the Company of such failure to fund and, upon demand by
the Administrative Agent, the Company shall pay such amount to
the Administrative Agent for the Administrative Agent's account,
together with interest thereon for each day elapsed since the
date of such Borrowing, at a rate per annum equal to the interest
rate applicable at the time to the Committed Loans comprising
such Committed Borrowing.
(b) The failure of any Lender to make any Loan on any
Borrowing Date shall not relieve any other Lender of any
obligation hereunder to make a Loan on such Borrowing Date, but
no Lender shall be responsible for the failure of any other
Lender to make the Loan to be made by such other Lender on any
Borrowing Date.
2.15 Sharing of Payments, Etc. (a) Except as otherwise
------------------------
expressly provided herein, whenever any payment received by the
Administrative Agent to be distributed to the Lenders is
insufficient to pay in full the amounts then due and payable to
the Lenders, and the Administrative Agent has not received a
Payment Sharing Notice, such payment shall be distributed to the
Lenders (and for purposes of this Agreement shall be deemed to
have been applied by the Lenders, notwithstanding the fact that
any Lender may have made a different application in its books and
records) in the following order: first, to the payment of
-----
reimbursement obligations of the Company in respect of any Letter
of Credit; second, to the payment of the principal amount of
------
the Loans which is then due and payable, ratably among the
Lenders in accordance with the aggregate principal amount owed to
each Lender; third, to the payment of interest then due and
-----
payable on the Loans and on the reimbursement obligations in
respect of Letters of Credit, ratably among the Lenders in
accordance with the aggregate amount of interest owed to each
Lender; fourth, to the payment of the facility fees payable
------
under subsection 2.11(b) and letter of credit fees payable
------------------
under Section 3.8, ratably among the Lenders in accordance
-----------
with the amount of such fees owed to each Lender; and fifth,
-----
to the payment of any other amount payable under this Agreement,
ratably among the Lenders in accordance with the aggregate amount
owed to each Lender.
34
<PAGE> 42
(b) After the Administrative Agent has received a
Payment Sharing Notice, and for so long thereafter as any Event
of Default exists, all payments received by the Administrative
Agent to be distributed to the Lenders shall be distributed to
the Lenders (and for purposes of this Agreement shall be deemed
to have been applied by the Lenders, notwithstanding the fact
that any Lender may have made a different application in its
books and records) in the following order: first, to the
-----
payment of amounts payable under Sections 11.4 and 11.5,
------------- ----
ratably among the Lenders in accordance with the aggregate amount
owed to each Lender; second, to the payment of facility fees
------
payable under subsection 2.11(b) and letter of credit fees
------------------
payable under Section 3.8, ratably among the Lenders in
-----------
accordance with the amount of such fees owed to each Lender;
third, to the payment of the interest accrued on and the
- -----
principal amount of all of the Loans and reimbursement
obligations (including contingent reimbursement obligations)
regardless of whether any such amount is then due and payable,
ratably among the Lenders in accordance with the aggregate
accrued interest plus the aggregate principal amount owed to each
Lender; and fourth, to the payment of any other amount
------
payable under this Agreement, ratably among the Lenders in
accordance with the aggregate amount owed to each Lender.
(c) If, other than as expressly provided elsewhere
herein (including in Section 2.16 with respect to any payment
------------
to a Declining Lender, in Section 2.17 with respect to any
------------
prepayment made to give effect to a non-pro-rata subscription for
an increase in the Commitments, or in Section 2.18 with
------------
respect to payments of principal of and interest on Existing
Offshore Borrowings and Temporary Non-Pro-Rata Borrowings), any
Lender shall obtain any payment or other recovery (whether
voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of principal of or interest on
any Loan, or any other amount payable hereunder, in excess of the
share of payments and other recoveries such Lender would have
received if such payment or other recovery had been distributed
pursuant to the provisions of subsection 2.15(a) or (b)
------------------ ---
(whichever is applicable at the time of such payment or other
recovery), such Lender shall immediately (i) notify the
Administrative Agent of such fact and (ii) purchase from the
other Lenders such participations in the Loans made by (or other
Obligations owed to) them as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery
pro rata with each of them in accordance with the order of
payments set forth in subsection 2.15(a) or (b), as the
------------------ ---
case may be; provided that if all or any portion of such
--------
excess payment or other recovery is thereafter recovered from the
purchasing Lender, such purchase shall to that extent be
rescinded and each other Lender shall repay to the purchasing
Lender the purchase price paid therefor, together with an amount
equal to such paying Lender's ratable
35
<PAGE> 43
share (according to the proportion of (i) the amount of such
paying Lender's required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the
total amount so recovered. The Company agrees that any Lender so
purchasing a participation from another Lender may, to the
fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off, but subject to Section
-------
11.10) with respect to such participation as fully as if such
- -----
Lender were the direct creditor of the Company in the amount of
such participation. The Administrative Agent will keep records
(which shall be conclusive and binding in the absence of manifest
error) of participations purchased under this Section and will in
each case notify the Lenders following any such purchases or
repayments.
(d) Any amount that would be applied to a contingent
obligation of the Company in respect of a Letter of Credit under
clause third of subsection 2.15(b) shall be held by the
- ------------ ------------------
Administrative Agent as Cash Collateral hereunder. If such
Letter of Credit is thereafter drawn upon, the Administrative
Agent shall pay the applicable Issuing Lender an amount equal to
the lesser of the amount of such drawing and the amount of the
funds so held as Cash Collateral for such Letter of Credit. If
and to the extent that such Letter of Credit expires or
terminates (or the maximum amount available for drawing
thereunder is reduced), the funds so held as Cash Collateral for
such Letter of Credit (or the portion thereof in excess of the
maximum amount available for drawing thereunder) shall be applied
by the Administrative Agent as set forth in subsection
----------
2.15(a) or 2.15(b), as applicable.
- ------- -------
2.16 Extension of Scheduled Termination Date;
----------------------------------------
Substitution of Lenders.
- -----------------------
(a) At any time after April 30, 1999 (but not more than
once in any calendar year and not more than twice during the term
of this Agreement), the Company may, at its option, request all
Lenders to extend the scheduled Termination Date by one year by
means of a letter, addressed to each Lender and the
Administrative Agent, substantially in the form of Exhibit L.
---------
Each Lender electing (in its sole and complete discretion) so to
extend the scheduled Termination Date shall deliver signed
counterparts of such letter to the Company and the Administrative
Agent no later than 45 days after the date of such request by the
Company (such 45th day, the "Extension Response Date"). Any
-----------------------
Lender which does not deliver such counterparts by the Extension
Response Date shall be deemed to have declined to extend the
scheduled Termination Date. If all Lenders elect to extend the
scheduled Termination Date, the scheduled Termination Date shall
be extended for an additional one-year period on the date on
36
<PAGE> 44
which the Administrative Agent has received signed counterparts
of such letter from all Lenders (and the Administrative Agent
shall promptly notify the Company and the Lenders of such
extension). If all Lenders do not elect to extend the scheduled
Termination Date, the provisions of subsection (b) below
--------------
shall apply.
(b) If the scheduled Termination Date is not extended
pursuant to clause (a) above after a request by the Company,
----------
then the Company may, at any time prior to the 60th day after the
Extension Response Date for such request, arrange for any Lender
that did not elect to extend the Termination Date (a "Declining
---------
Lender") to assign its Loans, its Commitment and all of its
- ------
other rights and obligations hereunder to one or more other
Lenders and/or Eligible Assignees (any such Person, a
"Successor Lender"); provided that no assignment to an
---------------- --------
Eligible Assignee which is not a Lender shall be effective
without the prior written consent of the Administrative Agent and
each Issuing Lender (which consents shall not be unreasonably
withheld or delayed). Any such assignment shall be made pursuant
to an Assignment and Acceptance between the Declining Lender and
each applicable Successor Lender (it being understood that no
Declining Lender shall be required to make any such assignment
unless all of such Declining Lender's Loans, Commitment and other
rights and obligations hereunder are being assigned concurrently
pursuant to one or more assignments). On the date of any such
assignment, (i) the Successor Lender(s) shall pay to the
Declining Lender an amount equal to the principal amount of all
of such Declining Lender's outstanding Loans, (ii) the Company
shall pay to the Declining Lender an amount equal to all accrued
interest, fees and other amounts then owed to such Declining
Lender hereunder or in connection herewith (including any amount
payable pursuant to Section 4.4, assuming for such purpose
-----------
that such Declining Lender's Offshore Rate Committed Loans and
Bid Loans were prepaid on the date of such assignment) and (iii)
the Declining Lender shall cease to be a Lender hereunder. If
BofA shall become a Declining Lender, BofA shall resign as
Administrative Agent and the provisions of Section 10.9 shall
------------
apply.
(c) If all Declining Lenders have been replaced
pursuant to subsection (b) on or before the 60th day after
--------------
the applicable Extension Response Date, then the scheduled
Termination Date shall be extended for an additional one-year
period (and the Administrative Agent shall promptly notify the
Company and the Lenders of such extension).
2.17 Optional Increase in Commitments. The Company may
--------------------------------
at any time, by means of a letter to the Administrative Agent and
each Lender substantially in the form of Exhibit M, request
---------
that the Lenders increase the combined Commitments; provided that
--------
37
<PAGE> 45
(i) such letter shall be accompanied by a certificate of the
Secretary or an Assistant Secretary of the Company as to
resolutions of the board of directors of the Company approving
such increase and (ii) in no event shall the aggregate amount of
the combined Commitments exceed $300,000,000 without the written
consent of all Lenders. Each Lender shall have the option (in
its sole and complete discretion) to subscribe for its
proportionate share of such increase, according to its then-
existing Pro Rata Share. Each Lender shall respond to the
Company's request within 20 Business Days by submitting a
response in the form of Attachment 1 to Exhibit M to the
---------
Administrative Agent (and any Lender not responding within such
period shall be deemed to have declined such request). At the
option of the Company, any part of the proposed increase not so
subscribed may be assumed, within 10 Business Days after all
Lenders have responded to (or are deemed to have declined) such
request, by one or more existing Lenders and/or by one or more
Persons meeting the qualifications of an Eligible Assignee, in
amounts which are acceptable to the Company; it being understood
that any assumption by a Person which is not an existing Lender
shall be subject to consent of the Administrative Agent and each
Issuing Lender (which consents shall not be unreasonably withheld
or delayed). Any increase in the combined Commitments pursuant
to this Section 2.17 shall become effective on the earliest
------------
to occur of (a) the date on which the proposed increase has been
fully subscribed, (b) 10 Business Days after the date on which
all Lenders have responded to (or are deemed to have declined)
the Company's request for an increase and (c) the date, which
shall not be earlier than the date on which all Lenders have
responded to (or are deemed to have declined) the Company's
request for an increase, on which the Company notifies the
Administrative Agent that the Company accepts an increase in the
combined Commitments which is less than the full amount of the
requested increase. The Administrative Agent shall promptly
notify the Company and the Lenders of any increase in the amount
of the combined Commitments pursuant to this Section 2.17 and
------------
of the Commitment and Pro Rata Share of each Lender after giving
effect thereto. The Company acknowledges that, in order to
maintain Committed Loans in accordance with each Lender's Pro
Rata Share, a reallocation of the Commitments as a result of a
non-pro-rata subscription to an increase in the combined
Commitments may require prepayment of all or portions of certain
Committed Loans on the date of such increase (and any such
prepayment shall be subject to the provisions of Section 4.4).
-----------
2.18 Maintenance of Existing Offshore Borrowings on a Non-
-----------------------------------------------------
Pro-Rata Basis; Temporary Non-Pro-Rata Borrowings.
- -------------------------------------------------
(a) Notwithstanding any provision of this Agreement to
the contrary (but subject to subsection (c) below), all
--------------
Borrowings of "Offshore Rate Committed Loans" (under and as
38
<PAGE> 46
defined in the Existing Credit Agreement) which are outstanding
on the Effective Date (each an "Existing Offshore Borrowing")
---------------------------
shall continue to be maintained hereunder by the Lenders in
accordance with their "Pro Rata Shares" (under and as defined in
the Existing Credit Agreement) until the last day of the current
Interest Period therefor (except to the extent prepaid or
converted by the Company prior to such date). On the last day of
the current Interest Period for each Existing Offshore Borrowing,
either such Borrowing shall be prepaid in full or such Borrowing
shall be converted to a Borrowing of Base Rate Committed Loans
(and, in the case of a conversion to a Borrowing of Base Rate
Committed Loans, the Lenders shall, unless the Administrative
Agent has received a Payment Sharing Notice, in which case
clause (c) below shall apply, make such assignments among
- ----------
themselves as are necessary so that each Lender has a Pro Rata
Share of such Borrowing).
(b) To enable the Company to access the full amount of
the combined Commitments prior to the date on which all Existing
Offshore Borrowings have been paid in full or converted to
Borrowings of Base Rate Committed Loans, the Lenders agree that
if (i) Existing Offshore Borrowings are outstanding and the
Company may not make a Borrowing of Committed Loans from all
Lenders as a result of the limitation set forth in the second
proviso clause of the first sentence of Section 2.1 and (ii)
-----------
all other conditions precedent to the applicable Borrowing have
been satisfied (or waived in writing by the Required Lenders),
the Company may, subject to the provisos to the first sentence of
Section 2.1, borrow Base Rate Committed Loans on a non-pro-
- -----------
rata basis (any such Borrowing, a "Temporary Non-Pro-Rata
----------------------
Borrowing") from the Lenders whose Commitments have not been
- ---------
fully utilized (on a ratable basis among such Lenders). Each
Temporary Non-Pro-Rata Borrowing shall be promptly prepaid to the
extent (x) that the Company has availability to make a Borrowing
from the Lenders in accordance with their Pro Rata Shares or (y)
that, after giving effect to any assignments of Base Rate
Committed Loans pursuant to the parenthetical clause in the last
sentence of clause (a), any Lender would have Loans in excess
----------
of its Commitment.
(c) If any Existing Offshore Borrowing or Temporary Non-
Pro-Rata Borrowing is outstanding on the date on which the
Administrative Agent receives a Payment Sharing Notice, the
Lenders shall, in consultation with the Administrative Agent,
make such adjustments among themselves (by making assignments or
purchasing participations) as are necessary so that each Lender
has a Pro Rata Share (either directly or via participation) of
each Borrowing of Committed Loans.
39
<PAGE> 47
ARTICLE III
THE LETTERS OF CREDIT
3.1 The Letter of Credit Subfacility. (a) On the terms
--------------------------------
and conditions set forth herein (i) each Issuing Lender agrees,
(A) from time to time on any Business Day during the period from
the Effective Date to the Termination Date to issue standby
Letters of Credit for the account of the Company, and to amend or
renew standby Letters of Credit previously issued by it, in
accordance with subsections 3.2(c) and 3.2(d), and (B) to
------------------ ------
honor properly drawn drafts under the Letters of Credit issued by
it; and (ii) the Lenders severally agree to participate in
standby Letters of Credit Issued for the account of the Company;
provided that no Issuing Lender shall be obligated to Issue, and
no Lender shall be obligated to participate in, any Letter of
Credit if as of the date of Issuance of such Letter of Credit
(the "Issuance Date") (1) the aggregate principal amount of
-------------
all Loans (whether Committed Loans or Bid Loans) plus the
----
Effective Amount of all L/C Obligations exceeds the combined
Commitments, (2) the Effective Amount of all L/C Obligations
exceeds the L/C Commitment or (3) the participation of any Lender
in the Effective Amount of all L/C Obligations plus the
outstanding principal amount of the Committed Loans of such
Lender exceeds such Lender's Commitment. Within the foregoing
limits, and subject to the other terms and conditions hereof, the
Company's ability to obtain Letters of Credit shall be fully
revolving, and, accordingly, the Company may, during the
foregoing period, obtain Letters of Credit to replace Letters of
Credit which have expired or which have been drawn upon and
reimbursed.
(b) No Issuing Lender shall be under any obligation to
Issue any Letter of Credit if:
(i) any order, judgment or decree of any
Governmental Authority or arbitrator shall by its terms
purport to enjoin or restrain such Issuing Lender from
Issuing such Letter of Credit, or any Requirement of Law
applicable to such Issuing Lender or any request or directive
(whether or not having the force of law) from any
Governmental Authority with jurisdiction over such Issuing
Lender shall prohibit, or request that such Issuing Lender
refrain from, the Issuance of letters of credit generally or
such Letter of Credit in particular or shall impose upon such
Issuing Lender with respect to such Letter of Credit any
restriction, reserve or capital requirement (for which such
Issuing Lender is not otherwise compensated hereunder) not in
effect on the Effective Date, or shall impose upon such
Issuing Lender any unreimbursed loss, cost or expense which
was not applicable on the Effective Date and which such
Issuing Lender in good faith deems material to it (it being
40
<PAGE> 48
understood that the applicable Issuing Lender shall promptly
notify the Company and the Administrative Agent of any of the
foregoing events or circumstances);
(ii) such Issuing Lender has received written
notice from any Lender, the Administrative Agent or the
Company, on or prior to the Business Day prior to the
requested date of Issuance of such Letter of Credit, that one
or more of the applicable conditions contained in Article
-------
V is not then satisfied;
-
(iii) the expiry date of such requested Letter of
Credit is after the Termination Date, unless all of the
Lenders have approved such expiry date in writing; or
(iv) such Letter of Credit does not provide for
drafts, or is not otherwise in form and substance acceptable
to such Issuing Lender, or the Issuance of a Letter of Credit
shall violate any applicable policies of such Issuing Lender;
(v) such Letter of Credit is denominated in a
currency other than Dollars.
3.2 Issuance, Amendment and Renewal of Letters of
---------------------------------------------
Credit. (a) Each Letter of Credit shall be issued upon the
- ------
irrevocable written request of the Company received by the
applicable Issuing Lender (with a copy sent by the Company to the
Administrative Agent) at least one Business Day (or such shorter
time as the applicable Issuing Lender and the Administrative
Agent may agree in a particular instance in their sole
discretion) prior to the proposed date of issuance. Each such
request for issuance of a Letter of Credit shall be by facsimile,
confirmed immediately (by messenger or overnight courier) in an
original writing, in the form of an L/C Application, and shall
specify in form and detail satisfactory to the applicable Issuing
Lender: (i) the face amount of the Letter of Credit; (ii) the
expiry date of the Letter of Credit; (iii) the name and address
of the beneficiary thereof; (iv) the documents to be presented by
the beneficiary of the Letter of Credit in case of any drawing
thereunder; (v) the full text of any certificate to be presented
by the beneficiary in case of any drawing thereunder; and (vi)
such other matters as such Issuing Lender may require.
(b) Promptly upon receipt of any L/C Application or L/C
Amendment Application, the applicable Issuing Lender will confirm
with the Administrative Agent (by telephone or in writing) that
the Administrative Agent has received a copy of such L/C
Application or L/C Amendment Application from the Company and, if
not, such Issuing Lender will provide the Administrative Agent
with a copy thereof. Unless the applicable Issuing Lender has
41
<PAGE> 49
received on or before the Business Day immediately preceding the
date such Issuing Lender is to issue a requested Letter of
Credit, (A) notice from the Administrative Agent directing such
Issuing Lender not to issue such Letter of Credit because such
issuance is not then permitted under subsection 3.1(a) as a
-----------------
result of the limitations set forth in clauses (1) through
-----------
(3) thereof or (B) a notice described in subsection
- --- ----------
3.1(b)(ii), then, subject to the terms and conditions hereof,
- ----------
such Issuing Lender shall, on the requested date, issue a Letter
of Credit for the account of the Company in accordance with such
Issuing Lender's usual and customary business practices.
(c) From time to time while a Letter of Credit is
outstanding and prior to the Termination Date, the applicable
Issuing Lender will, upon the written request of the Company
received by such Issuing Lender (with a copy sent by the Company
to the Administrative Agent) at least one Business Day (or such
shorter time as the applicable Issuing Lender and the
Administrative Agent may agree in a particular instance in their
sole discretion) prior to the proposed date of amendment, amend
any Letter of Credit issued by it. Each such request for
amendment of a Letter of Credit shall be made by facsimile,
confirmed immediately (by messenger or overnight courier) in an
original writing, made in the form of an L/C Amendment
Application and shall specify in form and detail satisfactory to
such Issuing Lender: (i) the Letter of Credit to be amended;
(ii) the proposed date of amendment of such Letter of Credit
(which shall be a Business Day); (iii) the nature of the proposed
amendment; and (iv) such other matters as such Issuing Lender may
require. No Issuing Lender shall have any obligation to amend
any Letter of Credit if: (A) such Issuing Lender would have no
obligation at such time to issue such Letter of Credit in its
amended form under the terms of this Agreement; or (B) the
beneficiary of such Letter of Credit does not accept the proposed
amendment to such Letter of Credit. The Administrative Agent
will promptly notify the Lenders of any Issuance of a Letter of
Credit.
(d) The Issuing Lenders and the Lenders agree that,
while a Letter of Credit is outstanding and prior to the
Termination Date, at the option of the Company and upon the
written request of the Company received by the applicable Issuing
Lender (with a copy sent by the Company to the Administrative
Agent) at least one Business Day (or such shorter time as the
applicable Issuing Lender and the Administrative Agent may agree
in a particular instance in their sole discretion) prior to the
proposed date of notification of renewal, the applicable Issuing
Lender shall be entitled to authorize the automatic renewal of
any Letter of Credit issued by it. Each such request for renewal
of a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, in the form of an L/C
42
<PAGE> 50
Amendment Application, and shall specify in form and detail
satisfactory to the applicable Issuing Lender: (i) the Letter of
Credit to be renewed; (ii) the proposed date of notification of
renewal of such Letter of Credit (which shall be a Business Day);
(iii) the revised expiry date of such Letter of Credit (which,
unless all Lenders otherwise consent in writing, shall be prior
to the Termination Date); and (iv) such other matters as such
Issuing Lender may require. No Issuing Lender shall be under any
obligation to renew any Letter of Credit if: (A) such Issuing
Lender would have no obligation at such time to issue or amend
such Letter of Credit in its renewed form under the terms of this
Agreement; or (B) the beneficiary of such Letter of Credit does
not accept the proposed renewal of such Letter of Credit. If any
outstanding Letter of Credit shall provide that it shall be
automatically renewed unless the beneficiary thereof receives
notice from the applicable Issuing Lender that such Letter of
Credit shall not be renewed, and if at the time of renewal such
Issuing Lender would be entitled to authorize the automatic
renewal of such Letter of Credit in accordance with this
subsection 3.2(d) upon the request of the Company but such
- -----------------
Issuing Lender shall not have received any L/C Amendment
Application from the Company with respect to such renewal or
other written direction by the Company with respect thereto, such
Issuing Lender shall nonetheless be permitted to allow such
Letter of Credit to renew, and the Company and the Lenders hereby
authorize such renewal, and, accordingly, such Issuing Lender
shall be deemed to have received an L/C Amendment Application
from the Company requesting such renewal.
(e) Each Issuing Lender may, at its election (or as
required by the Administrative Agent at the direction of the
Required Lenders), deliver any notice of termination or other
communication to any Letter of Credit beneficiary or transferee,
and take any other action as necessary or appropriate, at any
time and from time to time, in order to cause the expiry date of
such Letter of Credit to be a date not later than the Termination
Date.
(f) This Agreement shall control in the event of any
conflict with any L/C-Related Document (other than any Letter of
Credit).
(g) Each Issuing Lender will deliver to the
Administrative Agent, concurrently or promptly following its
delivery of a Letter of Credit, or amendment to or renewal of a
Letter of Credit, to an advising bank or a beneficiary, a true
and complete copy of such Letter of Credit or of such amendment
or renewal.
43
<PAGE> 51
3.3 Risk Participations, Drawings and Reimbursements.
------------------------------------------------
(a) On and after the Effective Date, the Existing
Letters of Credit shall be deemed for all purposes (including for
purposes of the fees to be collected pursuant to Section 3.8
-----------
and reimbursement of costs and expenses to the extent provided
herein) to be Letters of Credit outstanding under this Agreement.
Each Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the applicable Issuing
Lender on the Effective Date a participation in each Existing
Letter of Credit and each drawing thereunder in an amount equal
to the product of (i) such Lender's Pro Rata Share times (ii) the
maximum amount available to be drawn under such Letter of Credit
and the amount of such drawing, respectively. For purposes of
Section 2.1, each Existing Letter of Credit shall be deemed
- -----------
to utilize the Commitment of each Lender by an amount equal to
the amount of such participation.
(b) Immediately upon the Issuance of each Letter of
Credit on or after the Effective Date, each Lender shall be
deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the applicable Issuing Lender a participation in
such Letter of Credit and each drawing thereunder in an amount
equal to the product of (i) such Lender's Pro Rata Share times
(ii) the maximum amount available to be drawn under such Letter
of Credit and the amount of such drawing, respectively. For
purposes of Section 2.1, each Issuance of a Letter of Credit
-----------
shall be deemed to utilize the Commitment of each Lender by an
amount equal to the amount of such participation.
(c) In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, the
applicable Issuing Lender will promptly notify the Company and
the Administrative Agent. The Company shall (subject, if
applicable, to its right to obtain Base Rate Committed Loans as
provided below) reimburse the applicable Issuing Lender prior to
10:30 a.m. Chicago time on each date that any amount is paid by
such Issuing Lender under any Letter of Credit (each such date,
an "Honor Date") in an amount equal to the amount so paid by
----------
such Issuing Lender; provided that, to the extent that any
Issuing Lender accepts a drawing under a Letter of Credit after
10:30 a.m. Chicago time, the Company will not be obligated to
reimburse such Issuing Lender until the next Business Day and the
"Honor Date" for such Letter of Credit shall be such next
Business Day. If the Company fails to reimburse an Issuing
Lender for the full amount of any drawing under any Letter of
Credit by 10:30 a.m. Chicago time on the Honor Date, such Issuing
Lender will promptly notify the Administrative Agent and the
Administrative Agent will promptly notify each Lender thereof,
and the Company shall be deemed to have requested that Base Rate
Committed Loans be made by the Lenders to be disbursed on the
Honor Date under such
44
<PAGE> 52
Letter of Credit, subject to the amount of the unutilized portion
of the combined Commitments and subject to the conditions set
forth in Section 5.2 other than Section 5.2(a). Any
----------- --------------
notice given by an Issuing Lender or the Administrative Agent
pursuant to this subsection 3.3(c) may be oral if immediately
-----------------
confirmed in writing (including by facsimile); provided that
--------
the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.
(d) Each Lender shall upon any notice pursuant to
subsection 3.3(c) make available to the Administrative Agent
- -----------------
for the account of the applicable Issuing Lender an amount in
Dollars and in immediately available funds equal to its Pro Rata
Share of the amount of the drawing, whereupon the Lenders shall
(subject to subsection 3.3(e)) each be deemed to have made a
------------------
Committed Loan consisting of a Base Rate Committed Loan to the
Company in such amount. If any Lender so notified fails to make
available to the Administrative Agent for the account of the
applicable Issuing Lender the amount of such Lender's Pro Rata
Share of the amount of such drawing by no later than 1:00 p.m.
Chicago time on the Honor Date, then interest shall accrue on
such Lender's obligation to make such payment, from the Honor
Date to the date such Lender makes such payment, at a rate per
annum equal to the Federal Funds Rate in effect from time to time
during such period. The Administrative Agent will promptly give
notice of the occurrence of the Honor Date, but failure of the
Administrative Agent to give any such notice on the Honor Date or
in sufficient time to enable any Lender to effect such payment on
such date shall not relieve such Lender from its obligations
under this Section 3.3.
-----------
(e) With respect to any unreimbursed drawing that is
not converted into Base Rate Committed Loans in whole or in part,
because of the Company's failure to satisfy the conditions set
forth in Section 5.2 (other than subsection 5.2(a) which
----------- -----------------
need not be satisfied) or for any other reason, the Company shall
be deemed to have incurred from the applicable Issuing Lender an
L/C Borrowing in the amount of such drawing, which L/C Borrowing
shall be due and payable on demand and shall bear interest
(payable on demand) at a rate per annum equal to the Base Rate
plus 2%, and each Lender's payment to such Issuing Lender
pursuant to subsection 3.3(d) shall be deemed payment in
-----------------
respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Lender in satisfaction of its
participation obligation under this Section 3.3.
-----------
(f) Each Lender's obligation in accordance with this
Agreement to make the Committed Loans or L/C Advances, as
contemplated by this Section 3.3, as a result of a drawing
-----------
under a Letter of Credit, shall be absolute and unconditional and
without recourse to any Issuing Lender and shall not be affected
45
<PAGE> 53
by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have
against the applicable Issuing Lender, the Company or any other
Person for any reason whatsoever; (ii) the occurrence or
continuance of an Event of Default, an Unmatured Event of Default
or a Material Adverse Effect; or (iii) any other circumstance,
happening or event whatsoever, whether or not similar to any of
the foregoing; provided that each Lender's obligation to make
--------
Committed Loans under this Section 3.3 is subject to the
-----------
conditions set forth in Section 5.2 (other than subsection
----------- ----------
5.2(a)).
- ------
3.4 Repayment of Participations. (a) Upon (and only
---------------------------
upon) receipt by the Administrative Agent for the account of an
Issuing Lender of immediately available funds from the Company
(i) in reimbursement of any payment made by such Issuing Lender
under a Letter of Credit with respect to which any Lender has
paid the Administrative Agent for the account of such Issuing
Lender for such Lender's participation in such Letter of Credit
pursuant to Section 3.3 or (ii) in payment of interest
-----------
thereon, the Administrative Agent will pay to each Lender, in the
same funds as those received by the Administrative Agent for the
account of such Issuing Lender, the amount of such Lender's Pro
Rata Share of such funds, and such Issuing Lender shall receive
the amount of the Pro Rata Share of such funds of any Lender that
did not so pay the Administrative Agent for the account of such
Issuing Lender.
(b) If the Administrative Agent or an Issuing Lender is
required at any time to return to the Company, or to a trustee,
receiver, liquidator or custodian, or to any official in any
Insolvency Proceeding, any portion of any payment made by the
Company to the Administrative Agent for the account of an Issuing
Lender pursuant to subsection 3.4(a) in reimbursement of a
-----------------
payment made under a Letter of Credit or interest or fee thereon,
each Lender shall, on demand of the Administrative Agent,
forthwith return to the Administrative Agent or the applicable
Issuing Lender the amount of its Pro Rata Share of any amount so
returned by the Administrative Agent or such Issuing Lender plus
interest thereon from the date such demand is made to the date
such amount is returned by such Lender to the Administrative
Agent or such Issuing Lender, at a rate per annum equal to the
Federal Funds Rate in effect from time to time.
3.5 Role of the Issuing Lenders. (a) Each Lender and
---------------------------
the Company agree that, in paying any drawing under a Letter of
Credit, the applicable Issuing Lender shall not have any
responsibility to obtain any document (other than any sight draft
and certificate expressly required by such Letter of Credit) or
to ascertain or inquire as to the validity or accuracy of any
46
<PAGE> 54
such document or the authority of the Person executing or
delivering any such document.
(b) No Issuing Lender or Administrative Agent-Related
Person, nor any of their respective correspondents, participants
or assignees, shall be liable to any Lender for: (i) any action
taken or omitted in connection herewith at the request or with
the approval of the Lenders (including the Required Lenders, as
applicable); (ii) any action taken or omitted in the absence of
gross negligence or willful misconduct; or (iii) the due
execution, effectiveness, validity or enforceability of any L/C-
Related Document.
(c) The Company hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its
use of any Letter of Credit; provided that this assumption is
--------
not intended to, and shall not, preclude the Company's pursuing
such rights and remedies as it may have against the beneficiary
or transferee at law or under any other agreement. No Issuing
Lender or Administrative Agent-Related Person, nor any of their
respective correspondents, participants or assignees, shall be
liable or responsible for any of the matters described in
clauses (i) through (vii) of Section 3.6;
- ----------- ----- -----------
provided that, anything in such clauses to the contrary
- --------
notwithstanding, the Company may have a claim against an Issuing
Lender, and such Issuing Lender may be liable to the Company, to
the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by the Company which
the Company proves were caused by such Issuing Lender's willful
misconduct or gross negligence or such Issuing Lender's willful
failure to pay under any Letter of Credit after the presentation
to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of such Letter
of Credit. In furtherance and not in limitation of the
foregoing: (i) an Issuing Lender may accept documents that appear
on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the
contrary; and (ii) no Issuing Lender shall be responsible for the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective
for any reason.
3.6 Obligations Absolute. The obligations of the
--------------------
Company under this Agreement and any L/C-Related Document to
reimburse the applicable Issuing Lender for a drawing under a
Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Committed Loans, shall be
unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement and each such other
47
<PAGE> 55
L/C-Related Document under all circumstances, including the
following:
(i) any lack of validity or enforceability of this
Agreement or any L/C-Related Document;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
obligations of the Company in respect of any Letter of Credit
or any other amendment or waiver of or any consent to
departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense
or other right that the Company may have at any time against
any beneficiary or any transferee of any Letter of Credit (or
any Person for whom any such beneficiary or any such
transferee may be acting), the applicable Issuing Lender or
any other Person, whether in connection with this Agreement,
the transactions contemplated hereby or by any L/C-Related
Document or any unrelated transaction;
(iv) any draft, demand, certificate or other
document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any
respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a drawing
under any Letter of Credit;
(v) any payment by an Issuing Lender under any
Letter of Credit against presentation of a draft or
certificate that does not strictly comply with the terms of
such Letter of Credit; or any payment made by an Issuing
Lender under any Letter of Credit to any Person purporting to
be a trustee in bankruptcy, debtor-in-possession, assignee
for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in
connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of
any collateral, or any release or amendment or waiver of or
consent to departure from any other guarantee, for all or any
of the obligations of the Company in respect of any Letter of
Credit; or
(vii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing,
including any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the
Company or a guarantor.
48
<PAGE> 56
3.7 Cash Collateral Pledge. If any Letter of Credit
----------------------
remains outstanding and partially or wholly undrawn as of the
Termination Date, then the Company shall immediately Cash
Collateralize the L/C Obligations in an amount equal to the
maximum amount then available to be drawn under all Letters of
Credit.
3.8 Letter of Credit Fees. (a) The Company shall pay to
---------------------
the Administrative Agent for the account of each Lender a letter
of credit fee with respect to each Letter of Credit equal to the
L/C Fee Rate per annum of the average daily maximum amount
available to be drawn on such Letter of Credit, computed on a
quarterly basis in arrears on the last Business Day of each
calendar quarter and on the Termination Date (or such later date
on which such Letter of Credit shall expire or be fully drawn).
(b) The letter of credit fees payable under
subsection 3.8(a) shall be due and payable quarterly in
- -----------------
arrears on the last Business Day of each calendar quarter during
which Letters of Credit are outstanding, commencing on the first
such quarterly date to occur after the Closing Date, through the
Termination Date (or such later date upon which all outstanding
Letters of Credit shall expire or be fully drawn), with the final
payment to be made on the Termination Date (or such later date).
(c) The Company shall pay to each Issuing Lender a
letter of credit fronting fee at such times and in such amounts
as are mutually agreed to from time to time by the Company and
such Issuing Lender.
(d) The Company shall pay to each Issuing Lender from
time to time on demand the normal issuance, presentation,
amendment and other processing fees, and other standard costs and
charges, of such Issuing Lender relating to letters of credit as
from time to time in effect.
3.9 Uniform Customs and Practice. The Uniform Customs
----------------------------
and Practice for Documentary Credits as published by the
International Chamber of Commerce ("UCP") most recently at
---
the time of issuance of any Letter of Credit shall (unless
otherwise expressly provided in such Letter of Credit) apply to
such Letter of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes. (a) Any and all payments by the Company to
-----
each Lender or the Administrative Agent under this Agreement and
any other Loan Document shall be made free and clear of, and
without
49
<PAGE> 57
deduction or withholding for, any Taxes. In addition, the
Company shall pay all Other Taxes and Further Taxes.
(b) If the Company shall be required by law to deduct
or withhold any Taxes, Other Taxes or Further Taxes from or in
respect of any sum payable hereunder to any Lender or the
Administrative Agent, then:
(i) the sum payable shall be increased as
necessary so that, after making all required deductions and
withholdings (including deductions and withholdings
applicable to additional sums payable under this Section),
such Lender or the Administrative Agent, as the case may be,
receives and retains an amount equal to the sum it would have
received and retained had no such deductions or withholdings
been made;
(ii) the Company shall make such deductions and
withholdings; and
(iii) the Company shall pay the full amount
deducted or withheld to the relevant taxing authority or
other authority in accordance with applicable law.
(c) The Company agrees to indemnify and hold harmless
each Lender and the Administrative Agent for the full amount of
Taxes, Other Taxes and Further Taxes in the amount that such
Lender specifies as necessary to preserve the after-tax yield
such Lender would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes,
Other Taxes or Further Taxes were correctly or legally asserted.
Payment under this indemnification shall be made within 30 days
after the date such Lender or the Administrative Agent makes
written demand therefor.
(d) Within 30 days after the date of any payment by the
Company of any Taxes, Other Taxes or Further Taxes, the Company
shall furnish each applicable Lender and the Administrative Agent
the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Lender
and the Administrative Agent.
(e) If the Company is required to pay any amount to any
Lender or the Administrative Agent pursuant to subsection (b)
--------------
or (c) of this Section, then such Lender shall use reasonable
---
efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its Lending Office so as to eliminate
any such additional payment by the Company which may thereafter
50
<PAGE> 58
accrue, if such change in the sole judgment of such Lender is not
otherwise disadvantageous to such Lender.
(f) Notwithstanding the foregoing provisions of this
Section 4.1, if any Lender fails to notify the Company of any
- -----------
event or circumstance which will entitle such Lender to
compensation pursuant to this Section 4.1 within 120 days
-----------
after such Lender obtains knowledge of such event or
circumstance, then such Lender shall not be entitled to
compensation from the Company for any amount arising prior to the
date which is 120 days before the date on which such Lender
notifies the Company of such event or circumstance.
4.2 Illegality. (a) If any Lender determines that the
----------
introduction of any Requirement of Law, or any change in any
Requirement of Law, or in the interpretation or administration of
any Requirement of Law, has made it unlawful, or that any central
bank or other Governmental Authority has asserted that it is
unlawful, for such Lender or its applicable Lending Office to
make Offshore Rate Committed Loans, then, on notice thereof by
such Lender to the Company through the Administrative Agent, any
obligation of such Lender to make Offshore Rate Committed Loans
shall be suspended until such Lender notifies the Administrative
Agent and the Company that the circumstances giving rise to such
determination no longer exist.
(b) If a Lender determines that it is unlawful to
maintain any Offshore Rate Committed Loan, the Company shall,
upon its receipt of notice of such fact and demand from such
Lender (with a copy to the Administrative Agent), prepay in full
such Offshore Rate Committed Loan of such Lender the outstanding,
together with interest accrued thereon and amounts required under
Section 4.4, either on the last day of the Interest Period
- -----------
thereof, if such Lender may lawfully continue to maintain such
Offshore Rate Committed Loan to such day, or immediately, if such
Lender may not lawfully continue to maintain such Offshore Rate
Committed Loan. If the Company is required to so prepay any
Offshore Rate Committed Loan, then concurrently with such
prepayment, the Company shall borrow from the affected Lender, in
the amount of such repayment, a Base Rate Committed Loan.
(c) If the obligation of any Lender to make or maintain
Offshore Rate Committed Loans has been so terminated or
suspended, all Loans which would otherwise be made by such Lender
as Offshore Rate Committed Loans shall be instead Base Rate
Committed Loans.
(d) Before giving any notice to the Administrative
Agent under this Section, the affected Lender shall designate a
different Lending Office with respect to its Offshore Rate
Committed Loans if such designation will avoid the need for
51
<PAGE> 59
giving such notice or making such demand and will not, in the
judgment of such Lender, be illegal or otherwise disadvantageous
to such Lender.
4.3 Increased Costs and Reduction of Return. (a) If any
---------------------------------------
Lender determines that, due to either (i) the introduction of or
any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of
the Offshore Rate) in or in the interpretation of any law or
regulation or (ii) compliance by such Lender with any guideline
or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any
increase in the cost to such Lender of agreeing to make or
making, funding or maintaining any Offshore Rate Committed Loan
or participating in any Letter of Credit, or, in the case of an
Issuing Lender, any increase in the cost to such Issuing Lender
of agreeing to issue, issuing or maintaining any Letter of Credit
or of agreeing to make or making, funding or maintaining any
unpaid drawing under any Letter of Credit, then the Company shall
be liable for, and shall from time to time, upon demand (with a
copy of such demand to be sent to the Administrative Agent), pay
to the Administrative Agent for the account of such Lender,
additional amounts as are sufficient to compensate such Lender
for such increased cost.
(b) If any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change
in any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or
(iv) compliance by such Lender (or its Lending Office) or any
corporation controlling such Lender with any Capital Adequacy
Regulation affects or would affect the amount of capital required
or expected to be maintained by such Lender or any corporation
controlling such Lender and (taking into consideration such
Lender's or such corporation's policies with respect to capital
adequacy and such Lender's desired return on capital) determines
that the amount of such capital is increased as a consequence of
its Commitment, Loans or obligations under this Agreement, then,
upon demand of such Lender to the Company through the
Administrative Agent, the Company shall pay to such Lender, from
time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender for such increase.
(c) Notwithstanding the foregoing provisions of this
Section 4.3, if any Lender fails to notify the Company of any
- -----------
event or circumstance which will entitle such Lender to
compensation pursuant to this Section 4.3 within 60 days
-----------
after such Lender obtains knowledge of such event or
circumstance, then such Lender shall not be entitled to
compensation from the
52
<PAGE> 60
Company for any amount arising prior to the date which is 60 days
before the date on which such Lender notifies the Company of such
event or circumstance.
4.4 Funding Losses. The Company shall reimburse each
--------------
Lender and hold each Lender harmless from any loss or expense
which the Lender may sustain or incur as a consequence of:
(a) the failure of the Company to make on a timely
basis any payment of principal of any Offshore Rate Committed
Loan or Bid Loan;
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have
given) a Notice of Committed Borrowing or a Notice of
Conversion/Continuation or has accepted a Competitive Bid for
such Loan;
(c) the failure of the Company to make any prepayment
in accordance with any notice delivered under Section 2.8;
-----------
(d) the prepayment (including after acceleration
thereof) of an Offshore Rate Committed Loan or a Bid Loan on a
day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under subsection
----------
2.4(a) of any Offshore Rate Committed Loan to a Base Rate
- ------
Committed Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation
or reemployment of funds obtained by it to maintain its Offshore
Rate Loans or Bid Loans or from fees payable to terminate the
deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Lenders under
this Section and under subsection 4.3(a), each Offshore Rate
-----------------
Committed Loan made by a Lender (and each related reserve,
special deposit or similar requirement) shall be conclusively
deemed to have been funded at the IBOR used in determining the
Offshore Rate for such Offshore Rate Committed Loan by a matching
deposit or other borrowing in the interbank eurodollar market for
a comparable amount and for a comparable period, whether or not
such Offshore Rate Committed Loan is in fact so funded.
4.5 Inability to Determine Rates. If (a) the
----------------------------
Administrative Agent determines that for any reason adequate and
reasonable means do not exist for determining the Offshore Rate
for any requested Interest Period with respect to a proposed
Offshore Rate Committed Loan, or (b) the Required Lenders
determine that the Offshore Rate applicable pursuant to
subsection 2.10(a) for any requested Interest Period with
- ------------------
respect to a proposed Offshore Rate Committed Loan does not
adequately and fairly reflect the
53
<PAGE> 61
cost to such Lenders of funding such Loan, the Administrative
Agent will promptly so notify the Company and each Lender.
Thereafter, the obligation of the Lenders to make or maintain
Offshore Rate Committed Loans hereunder shall be suspended until
the Administrative Agent (upon the instruction of the Required
Lenders in the case of clause (b)) revokes such notice in
----------
writing. Upon receipt of such notice, the Company may revoke any
Notice of Committed Borrowing or Notice of Conversion/
Continuation then submitted by it. If the Company does not
revoke such Notice, the Lenders shall make, convert or continue
the Loans, as proposed by the Company, in the amount specified in
the applicable notice submitted by the Company, but such Loans
shall be made, converted or continued as Base Rate Committed
Loans instead of Offshore Rate Committed Loan.
4.6 Certificates of Lenders. Any Lender claiming
-----------------------
reimbursement or compensation under this Article IV shall
----------
deliver to the Company (with a copy to the Administrative Agent)
a certificate setting forth in reasonable detail the amount
payable to such Lender hereunder and the manner in which such
amount has been calculated, and such certificate shall be
conclusive and binding on the Company in the absence of manifest
error.
4.7 Substitution of Lenders. Upon the receipt by the
-----------------------
Company from any Lender of a claim for compensation under
Section 4.1 or 4.3 or a notice of the type described in
- ----------- ---
Section 4.2, the Company may: (i) designate a replacement
- -----------
bank or financial institution satisfactory to the Company (a
"Replacement Lender") to acquire and assume all or a ratable
------------------
part of all of such affected Lender's Loans and Commitment;
and/or (ii) request one or more of the other Lenders to acquire
and assume all or part of such affected Lender's Loans and
Commitment. Any designation of a Replacement Lender under
clause (i) shall be subject to the prior written consent of
- ----------
the Administrative Agent (which consent shall not be unreasonably
withheld).
4.8 Survival. The agreements and obligations of the
--------
Company in this Article IV shall survive the termination of
----------
this Agreement and the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Effectiveness. This Agreement shall
---------------------------
become effective, and all loans outstanding under the Existing
Credit Agreement shall be deemed to have been made hereunder and
all Existing Letters of Credit shall be deemed to have been
Issued hereunder, on the date (the "Effective Date") on which
--------------
the Administrative Agent shall have received (i) evidence that the
54
<PAGE> 62
Company has paid all fees and other amounts (other than principal
and interest on outstanding Loans) accrued under the Existing
Credit Agreement and (ii) all of the following, in form and
substance satisfactory to the Administrative Agent and each
Lender, and (except for the Notes) in sufficient copies for each
Lender:
(a) Agreement and Notes. This Agreement and the
-------------------
Notes executed by each party hereto and thereto.
(b) Resolutions; Incumbency.
-----------------------
(i) Copies of the resolutions of the board of
directors of the Company and each Guarantor authorizing the
execution and delivery of the Loan Documents to which such
Person is a party and the consummation of the transactions
contemplated hereby, certified as of the Effective Date by
the Secretary or an Assistant Secretary of such Person; and
(ii) a certificate of the Secretary or Assistant
Secretary of the Company and each Guarantor certifying the
names and true signatures of the officers of such Person
authorized to execute and deliver the Loan Documents to which
such Person is a party (and, in the case of the Company, to
execute and deliver Notices of Borrowing, Notices of
Conversion/Continuation, Competitive Bid Requests, Compliance
Certificates, L/C Applications, L/C Amendment Applications
and similar documents).
(c) Organization Documents. The articles or
----------------------
certificate of incorporation and the bylaws of the Company and
each Guarantor as in effect on the Effective Date, certified by
the Secretary or Assistant Secretary of such Person as of the
Effective Date.
(d) Legal Opinions.
--------------
(i) An opinion of Bryan Cave LLP, counsel to the
Company and the Guarantors, substantially in the form of
Exhibit H; and
---------
(ii) an opinion of Mayer, Brown & Platt, special
counsel to the Administrative Agent, substantially in the
form of Exhibit I.
---------
(e) Payment of Fees. Evidence of payment by the
---------------
Company of all accrued and unpaid fees, costs and expenses to the
extent then due and payable hereunder on the Effective Date,
together with Attorney Costs of BofA to the extent invoiced prior
to or on the Effective Date, plus such additional amounts of
Attorney Costs as shall constitute BofA's reasonable estimate of
55
<PAGE> 63
Attorney Costs incurred or to be incurred by it through the
closing proceedings (provided that such estimate shall not
thereafter preclude final settling of accounts between the
Company and BofA), including any such costs, fees and expenses
arising under or referenced in Sections 2.11 and 11.4.
------------- ----
(f) Certificate. A certificate signed by a
-----------
Responsible Officer, dated as of the Effective Date, stating
that:
(i) the representations and warranties contained
in Article VI are true and correct on and as of such
----------
date, as though made on and as of such date;
(ii) no Event of Default or Unmatured Event of
Default exists or would result from the effectiveness of this
Agreement; and
(iii) since December 31, 1996, no event or
circumstance has occurred that has resulted or could
reasonably be expected to result in a Material Adverse
Effect.
(g) Guaranty. A Guaranty executed by each of the
--------
Guarantors.
(h) Other Documents. Such other approvals,
---------------
opinions, documents or materials as the Administrative Agent or
any Lender may reasonably request.
5.2 Conditions to All Credit Extensions. The obligation
-----------------------------------
of each Lender to make any Loan to be made by it and the
obligation of any Issuing Lender to Issue any Letter of Credit is
subject to the satisfaction of the following conditions precedent
on the relevant Borrowing Date or Issuance Date:
(a) Notice, Application. The Administrative Agent
-------------------
shall have received a Notice of Committed Borrowing or notice of
the acceptance by the Company of one or more Competitive Bids or,
in the case of the Issuance of any Letter of Credit, the
applicable Issuing Lender and the Administrative Agent shall have
received an L/C Application or L/C Amendment Application, as
required under Section 3.2.
-----------
(b) Continuation of Representations and Warranties.
----------------------------------------------
The representations and warranties in Article VI (excluding
----------
Section 6.5, subsections 6.7(a) and 6.7(c) and
- ----------- ------------------ ------
Section 6.11) shall be true and correct on and of such
----
Borrowing Date or Issuance Date with the same effect as if made
on and as of such Borrowing Date or Issuance Date (except to the
extent such representations and warranties expressly refer to an
earlier
56
<PAGE> 64
date, in which case they shall be true and correct as of such
earlier date).
(c) No Existing Default. No Event of Default or
-------------------
Unmatured Event of Default shall exist or shall result from such
Borrowing or Issuance.
Each Notice of Committed Borrowing, notice of acceptance of a
Competitive Bid, L/C Application and L/C Amendment Application
submitted by the Company hereunder shall constitute a
representation and warranty by the Company that, as of the date
of each such notice and as of the relevant Borrowing Date or
Issuance Date, as applicable, the conditions in this Section
-------
5.2 are satisfied.
- ---
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Administrative
Agent and each Lender that:
6.1 Corporate Existence and Power. The Company and each
-----------------------------
of its Subsidiaries:
(a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals (i) to own its
assets and to carry on its business and (ii) to execute, deliver
and perform its obligations under the Loan Documents to which it
is a party;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the
conduct of its business requires such qualification or license;
and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in subclause (b)(i),
----------------
clause (c) or clause (d), to the extent that the failure
- ---------- ----------
to do so could not reasonably be expected to have a Material
Adverse Effect.
6.2 Corporate Authorization; No Contravention. The
-----------------------------------------
execution, delivery and performance by the Company and each
Guarantor of each Loan Document to which such Person is party
57
<PAGE> 65
have been duly authorized by all necessary corporate action, and
do not and will not:
(a) contravene the terms of any of such Person's
Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document
evidencing any Contractual Obligation to which such Person or any
of its Subsidiaries is a party or any order, injunction, writ or
decree of any Governmental Authority to which such Person or any
of its Subsidiaries or any of its or their property is subject;
or
(c) violate any Requirement of Law.
6.3 Governmental Authorization. No approval, consent,
--------------------------
exemption, authorization or other action by, or notice to, or
filing with, any Governmental Authority is necessary or required
in connection with the execution, delivery or performance by, or
enforcement against, the Company or any Guarantor of the
Agreement or any other Loan Document.
6.4 Binding Effect. This Agreement and each other Loan
--------------
Document to which the Company or any Guarantor is a party
constitute the legal, valid and binding obligations of the
Company and such Guarantor, to the extent such Person is a party
thereto, enforceable against such Person in accordance with their
respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
6.5 Litigation. Except as specifically disclosed on
----------
Schedule 6.5, there are no actions, suits, proceedings,
- ------------
claims or disputes pending or, to the best knowledge of the
Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the
Company or any Subsidiary or any of their respective properties;
(a) which purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated
hereby or thereby; or (b) as to which there exists a reasonable
likelihood of an adverse determination, which determination would
reasonably be expected to have a Material Adverse Effect. No
injunction, writ, temporary restraining order or other order of
any nature has been issued by any court or other Governmental
Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any other Loan
Document, or directing that the transactions provided for herein
or therein not be consummated as herein or therein provided.
58
<PAGE> 66
6.6 No Default. No Event of Default or Unmatured Event
----------
of Default exists or would result from the incurring of any
Obligations by the Company. As of the Effective Date, neither
the Company nor any Subsidiary is in default under or with
respect to any Contractual Obligation in any respect which,
individually or together with all such defaults, could reasonably
be expected to have a Material Adverse Effect.
6.7 ERISA Compliance. Except as specifically disclosed
----------------
in Schedule 6.7:
------------
(a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other
federal or state law. Each Plan which is intended to qualify
under Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the best knowledge of
the Company, nothing has occurred which would cause the loss of
such qualification. The Company and each ERISA Affiliate has
made all required contributions to any Plan subject to Section
412 of the Code, and no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of
the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Company, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has
resulted or could reasonably be expected to result in a Material
Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no contribution failure has occurred with
respect to a Pension Plan sufficient to give rise to a Lien under
Section 302(f) of ERISA; (iii) no Pension Plan has any Unfunded
Pension Liability; (iv) neither the Company nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension
Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (v) neither the Company nor any ERISA Affiliate
has incurred, or reasonably expects to incur, any liability (and
no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (vi) neither the Company nor any ERISA Affiliate has
engaged in a transaction that could be subject to Section 4069 or
4212(c) of ERISA.
6.8 Use of Proceeds; Margin Regulations. The proceeds
-----------------------------------
of the Loans will be used solely for the purposes set forth in and
59
<PAGE> 67
permitted by Section 7.12 and Section 8.8. Neither the
------------ -----------
Company nor any Subsidiary is generally engaged in the
business of purchasing or selling Margin Stock or extending
credit for the purpose of purchasing or carrying Margin Stock.
6.9 Title to Properties. The Company and each
-------------------
Subsidiary have good record and marketable title in fee simple
to, or valid leasehold interests in, all real property necessary
or used in the ordinary conduct of their respective businesses,
except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. As of the
Effective Date, the property of the Company and its Subsidiaries
is subject to no Liens, other than Permitted Liens.
6.10 Taxes. The Company and its Subsidiaries have filed
-----
all Federal and other material tax returns and reports required
to be filed, and have paid all Federal and other material taxes,
assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise
due and payable, except those which are being contested in good
faith by appropriate proceedings and for which adequate reserves
have been provided in accordance with GAAP. There is no proposed
tax assessment against the Company or any Subsidiary that would,
if made, have a Material Adverse Effect.
6.11 Financial Condition. (a) The unaudited
-------------------
consolidated financial statements of the Company and its
Subsidiaries dated December 31, 1996, and the related
consolidated statements of income or operations, shareholders'
equity and cash flows for the fiscal period ended on that date:
(i) were prepared in accordance with GAAP (subject
to the absence of footnotes) consistently applied throughout
the period covered thereby, except as otherwise expressly
noted therein;
(ii) fairly present the financial condition of the
Company and its Subsidiaries as of the date thereof and the
results of operations for the period covered thereby (subject
to ordinary, good faith year-end audit adjustments); and
(iii) except as specifically disclosed in
Schedule 6.11, show all material indebtedness and other
-------------
liabilities, absolute or contingent, of the Company and its
consolidated Subsidiaries as of the date thereof, including
liabilities for taxes and material Contingent Obligations.
(b) Since December 31, 1996, there has been no Material
Adverse Effect.
60
<PAGE> 68
6.12 Environmental Matters. The Company conducts in the
---------------------
ordinary course of business a review of the effect of existing
Environmental Laws and existing Environmental Claims on its
business, operations and properties, and as a result thereof the
Company has reasonably concluded that, except as specifically
disclosed in Schedule 6.12, such Environmental Laws and
-------------
Environmental Claims could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
6.13 Regulated Entities. None of the Company, any
------------------
Person controlling the Company, or any Subsidiary is an
"Investment Company" within the meaning of the Investment Company
Act of 1940. The Company is not subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power
Act, the Interstate Commerce Act, any state public utilities
code, or any other Federal or state statute or regulation
limiting its ability to incur Indebtedness.
6.14 No Burdensome Restrictions. Neither the Company
--------------------------
nor any Subsidiary is a party to or bound by any Contractual
Obligation, or subject to any restriction in any Organization
Document or any Requirement of Law, which could reasonably be
expected to have a Material Adverse Effect.
6.15 Copyrights, Patents, Trademarks and Licenses, etc.
-------------------------------------------------
The Company or its Subsidiaries own or are licensed or otherwise
have the right to use all of the material patents, trademarks,
service marks, trade names, copyrights, contractual franchises,
authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict
with the rights of any other Person. To the best knowledge of
the Company, no slogan or other advertising device, product,
process, method, substance, part or other material now employed,
or now contemplated to be employed, by the Company or any
Subsidiary, and which is material to the business or operations
of the Company and its Subsidiaries, infringes upon any rights
held by any other Person.
6.16 Subsidiaries. As of the Effective Date, the
------------
Company has no Subsidiaries other than those specifically
disclosed in part (a) of Schedule 6.16 (and no
-------- -------------
Significant Subsidiaries other than those identified as such in
part (a) of such Schedule) and has no equity investments in
- --------
any other corporation or entity other than those specifically
disclosed in part (b) of Schedule 6.16.
-------- -------------
6.17 Insurance. The properties of the Company and its
---------
Subsidiaries are insured with financially sound and reputable
insurance companies not Affiliates of the Company, in such
amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses
61
<PAGE> 69
and owning similar properties in localities where the Company or
such Subsidiary operates.
6.18 Swap Obligations. Neither the Company nor any of
----------------
its Subsidiaries has incurred any outstanding obligations under
any Swap Contracts, other than Permitted Swap Obligations. The
Company has undertaken its own independent assessment of its
consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks
associated with such matters and has not relied on any swap
counterparty or any Affiliate of any swap counterparty in
determining whether to enter into any Swap Contract.
6.19 Full Disclosure. The representations and
---------------
warranties made by the Company and its Subsidiaries in the Loan
Documents as of the date such representations and warranties are
made or deemed made, and the statements contained in any exhibit,
report, statement or certificate furnished by or on behalf of the
Company or any Subsidiary in connection with the Loan Documents,
taken as a whole, do not contain any untrue statement of a
material fact or omit any material fact required to be stated
therein or necessary to make the statements made therein, in
light of the circumstances under which they are made, not
misleading as of the time when made or delivered.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
or any Letter of Credit shall remain outstanding, unless the
Required Lenders waive compliance in writing:
7.1 Financial Statements. The Company shall deliver to
--------------------
the Administrative Agent, in form and detail satisfactory to the
Administrative Agent and the Required Lenders, with sufficient
copies for each Lender:
(a) as soon as available, but not later than 100 days
after the end of each fiscal year, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as
at the end of such year and the related consolidated statements
of income or operations, shareholders' equity and cash flows for
such year, setting forth in each case in comparative form the
figures for the previous fiscal year, and accompanied by the
opinion of Price Waterhouse L.L.P. or another
nationally-recognized independent public accounting firm
("Independent Auditor"), which opinion (i) shall state that
-------------------
such consolidated financial statements present fairly the
Company's
62
<PAGE> 70
consolidated financial position for the periods indicated in
conformity with GAAP and (ii) shall not be qualified or limited
because of a restricted or limited examination by the Independent
Auditor of any material portion of the Company's or any
Subsidiary's records; and
(b) as soon as available, but not later than 55 days
after the end of each of the first three fiscal quarters of each
fiscal year, a copy of the unaudited consolidated balance sheet
of the Company and its Subsidiaries as of the end of such quarter
and the related consolidated statements of income, shareholders'
equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by a
Responsible Officer as fairly presenting, in accordance with GAAP
(subject to ordinary, good faith year-end audit adjustments), the
financial position and the results of operations of the Company
and its Subsidiaries as of such date and for such period.
7.2 Certificates; Other Information. The Company shall
-------------------------------
furnish to the Administrative Agent, with sufficient copies for
each Lender:
(a) concurrently with the delivery of the financial
statements referred to in subsections 7.1(a) and (b), a
------------------ ---
Compliance Certificate executed by a Responsible Officer;
(b) promptly, copies of all financial statements and
reports that the Company sends to its shareholders, and copies of
all financial statements and regular, periodic or special reports
(including Forms 10K, 10Q and 8K) that the Company or any
Subsidiary may make to, or file with, the SEC; and
(c) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any
Subsidiary as the Administrative Agent, at the request of any
Lender, may from time to time reasonably request.
7.3 Notices. The Company shall promptly (or, in the
-------
case of any event described in clause (c)(ii) below, not less
--------------
than 10 days prior to the occurrence of such event) notify the
Administrative Agent and each Lender:
(a) of the occurrence of any Event of Default or
Unmatured Event of Default known to the Company;
(b) of any of the following matters that has resulted
or is reasonably expected to result in a Material Adverse Effect:
(i) breach or non-performance of, or any default under, a
Contractual Obligation of the Company or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension
between the Company or any Subsidiary and any Governmental
63
<PAGE> 71
Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting the
Company or any Subsidiary including pursuant to any applicable
Environmental Laws;
(c) of the occurrence of any of the following events
known to the Company which affect the Company or any ERISA
Affiliate, and deliver to the Administrative Agent and each
Lender a copy of any notice with respect to such event that is
filed with a Governmental Authority and any notice delivered by a
Governmental Authority to the Company or any ERISA Affiliate with
respect to such event:
(i) an ERISA Event;
(ii) a contribution failure with respect to a
Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA;
(iii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iv) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code
by the Company or any ERISA Affiliate; or
(v) the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment results
in a material increase in contributions or Unfunded Pension
Liability; and
(d) of any material change in accounting policies or
financial reporting practices by the Company and its consolidated
Subsidiaries.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details
of the occurrence referred to therein, and stating what action
the Company or any affected Subsidiary proposes to take with
respect thereto. Each notice under subsection 7.3(a) shall
-----------------
describe with particularity any and all clauses or provisions of
this Agreement or any other Loan Document that have been breached
or violated.
7.4 Preservation of Corporate Existence, Etc. The
----------------------------------------
Company shall, and shall cause each Significant Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its
jurisdiction of organization;
64
<PAGE> 72
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits,
licenses and franchises necessary or desirable in the normal
conduct of its business (except in connection with transactions
permitted by Section 8.4 and sales of assets permitted by
-----------
Section 8.3);
- ------------
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation
of which could reasonably be expected to have a Material Adverse
Effect.
7.5 Maintenance of Property. The Company shall, and
-----------------------
shall cause each Subsidiary to, maintain and preserve all its
property which is used or useful in its business in good working
order and condition, ordinary wear and tear excepted, except to
the extent that failure to do so would not reasonably be expected
to have a Material Adverse Effect.
7.6 Insurance. The Company shall, and shall cause each
---------
Subsidiary to, maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties
and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar
business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons.
7.7 Payment of Obligations. The Company shall, and
----------------------
shall cause each Subsidiary to, pay and discharge, as the same
shall become due and payable, all their respective material
obligations and liabilities, including:
(a) all material tax liabilities, assessments and
governmental charges or levies upon it or its properties or
assets, unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with
GAAP are being maintained by the Company or such Subsidiary; and
(b) all material claims which, if unpaid, would by law
become a Lien upon its property.
7.8 Compliance with Laws. The Company shall, and shall
--------------------
cause each Subsidiary to, comply in all material respects with
all material Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the
Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may
exist.
65
<PAGE> 73
7.9 Compliance with ERISA. The Company shall, and shall
---------------------
cause each of its ERISA Affiliates to: (a) maintain each Plan in
compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law; (b)
cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code;
provided that, with respect to the "ABA Plan" described in
- --------
Schedule 6.7, the Company shall not be deemed to be in
- ------------
default under this Section 7.9 if such Plan is in material
-----------
compliance with the foregoing provisions not later than March 1,
1997.
7.10 Inspection of Property and Books and Records. The
--------------------------------------------
Company shall, and shall cause each Subsidiary to, maintain
proper books of record and account, in which full, true and
correct entries (sufficient to permit the preparation of
consolidated financial statements in conformity with GAAP) shall
be made of all financial transactions and matters involving the
assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Significant Subsidiary
to permit, the Administrative Agent, any Lender or their
respective representatives, at any reasonable time during normal
business hours and from time to time at the request of the
Administrative Agent or the relevant Lender, to visit and inspect
the properties of the Company or any Significant Subsidiary (and,
if (i) any Unmatured Event of Default exists and has been
continuing for 15 days or (ii) any Event of Default exists to
examine their respective corporate, financial and operating
records, and make copies thereof or abstracts therefrom), and to
discuss the affairs, finances and accounts of the Company or any
Significant Subsidiary with the appropriate officers of the
Company or such Significant Subsidiary.
7.11 Environmental Laws. The Company shall, and shall
------------------
cause each Subsidiary to, conduct its operations and keep and
maintain its property in material compliance with all material
Environmental Laws.
7.12 Use of Proceeds. The Company shall use the
---------------
proceeds of the Loans for working capital and other general
corporate purposes not in contravention of any Requirement of Law
or of any Loan Document; provided that the Company shall not
--------
use the proceeds of any Loan to make any Acquisition if the Board
of Directors of the Person to be acquired has not approved such
Acquisition.
7.13 Further Assurances. Promptly upon the creation or
------------------
acquisition of any Significant Subsidiary (other than a Foreign
Subsidiary), and promptly after any Subsidiary (other than a
Foreign Subsidiary) shall become a Significant Subsidiary, the
Company shall cause such Significant Subsidiary to execute and
66
<PAGE> 74
deliver a counterpart of the Guaranty together with such other
documents (including, without limitation, resolutions, incumbency
certificates and opinions of counsel) as the Agent or the
Required Lenders may reasonably request in connection therewith.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
or any Letter of Credit shall remain outstanding, unless the
Required Lenders waive compliance in writing:
8.1 Financial Condition Covenants.
-----------------------------
(a) Leverage Ratio. The Company shall not at any
--------------
time permit the ratio of (x) Total Indebtedness to (y) the sum of
Total Indebtedness plus the Company's shareholders' equity to be
greater than .50 to 1.
(b) Interest Coverage Ratio. The Company shall not
-----------------------
permit, as of the last day of any fiscal quarter (beginning with
the fiscal quarter ending March 25, 1997), the Interest Coverage
Ratio to be less than 2.5 to 1.
8.2 Limitation on Liens. The Company shall not, and
-------------------
shall not suffer or permit any Subsidiary to, directly or
indirectly, make, create, incur, assume or suffer to exist any
Lien upon or with respect to any part of its property, whether
now owned or hereafter acquired, other than the following
("Permitted Liens"):
---------------
(a) any Lien existing on property of the Company or any
Subsidiary on the Effective Date and set forth in Schedule
--------
8.2 securing Indebtedness outstanding on such date, and any
- ---
extension, renewal or replacement of any such Lien so long as the
principal amount secured thereby is not increased and the scope
of the property subject to such Lien is not extended;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable
without penalty, or to the extent that non-payment thereof is
permitted by Section 7.7, provided that no notice of lien has
-----------
been filed or recorded under the Code or any other Requirement of
Law;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
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<PAGE> 75
ordinary course of business which are not delinquent or remain
payable without penalty or which are being contested in good
faith and by appropriate proceedings, which proceedings have the
effect of preventing the forfeiture or sale of the property
subject thereto;
(e) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the ordinary course
of business in connection with workers' compensation,
unemployment insurance and other social security legislation;
(f) Liens on the property of the Company or any
Subsidiary securing (i) the non-delinquent performance of bids,
trade contracts (other than for borrowed money), leases,
statutory obligations, (ii) surety bonds (excluding appeal bonds
and other bonds posted in connection with court proceedings or
judgments) and (iii) other non-delinquent obligations of a like
nature; in each case incurred in the ordinary course of business,
provided all such Liens in the aggregate would not (even if
enforced) cause a Material Adverse Effect;
(g) Liens consisting of judgment or judicial attachment
liens and liens securing contingent obligations on appeal bonds
and other bonds posted in connection with court proceedings or
judgments, provided that (i) in the case of judgment and judicial
attachment liens, the enforcement of such Liens is effectively
stayed and (ii) all such liens in the aggregate at any time
outstanding for the Company and its Subsidiaries do not exceed
$30,000,000;
(h) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business
which, individually or in the aggregate, do not materially
detract from the value of the property subject thereto or
interfere with the ordinary conduct of the businesses of the
Company and its Subsidiaries;
(i) purchase money security interests on any property
acquired or held by the Company or its Subsidiaries in the
ordinary course of business, securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the cost
of acquiring such property; provided that (i) any such Lien
--------
attaches to such property concurrently with or within 90 days
after the acquisition thereof, (ii) such Lien attaches solely to
the property so acquired in such transaction, (iii) the principal
amount of the debt secured thereby does not exceed 100% of the
cost of such property, and (iv) the principal amount of the
Indebtedness secured by any and all such purchase money security
interests shall not at any time exceed $20,000,000;
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<PAGE> 76
(j) Liens securing obligations in respect of capital
leases on assets subject to such leases, provided that such
capital leases are otherwise permitted hereunder;
(k) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-
off or similar rights and remedies as to deposit accounts or
other funds maintained with a creditor depository institution;
provided that (i) such deposit account is not a dedicated
- --------
cash collateral account and is not subject to restrictions
against access by the Company in excess of those set forth by
regulations promulgated by the FRB, and (ii) such deposit account
is not intended by the Company or any Subsidiary to provide
collateral to the depository institution; and
(l) other Liens securing Indebtedness not at any time
exceeding in the aggregate 5% of Consolidated Total Assets.
8.3 Disposition of Assets. The Company shall not, and
---------------------
shall not permit any Subsidiary to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of (whether
in one or a series of transactions) any property (including
accounts and notes receivable, with or without recourse) or enter
into any agreement to do any of the foregoing, except:
(a) dispositions of inventory, or used, worn-out or
surplus equipment, all in the ordinary course of business;
(b) dispositions of any of the assets identified in
writing to the Administrative Agent prior to the Effective Date,
to the extent that the net cash proceeds of all such dispositions
does not exceed $25,000,000; and
(c) dispositions not otherwise permitted hereunder
which are made for fair market value; provided that (i) at
--------
the time of any disposition, no Event of Default shall exist or
shall result from such disposition and (ii) the aggregate value
of all assets so disposed of by the Company and its Subsidiaries
in any fiscal year shall not exceed 10% of Consolidated Total
Assets as of the last day of the preceding fiscal year.
8.4 Consolidations and Mergers. The Company shall not,
--------------------------
and shall not permit any Significant Subsidiary to, merge,
consolidate with or into, or convey, transfer, lease or otherwise
dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any other Person,
except:
(a) any Significant Subsidiary may merge with the
Company, provided that the Company shall be the continuing or
69
<PAGE> 77
surviving corporation, or with any one or more Subsidiaries,
provided that if any transaction shall be between a Subsidiary
and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall
be the continuing or surviving corporation;
(b) any Significant Subsidiary may sell all or
substantially all of its assets (upon voluntary liquidation or
otherwise), to the Company or another Wholly-Owned Subsidiary;
and
(c) any merger, consolidation or disposition in
connection with a transaction permitted by Section 8.3 or an
-----------
Acquisition permitted by Section 8.5.
-----------
8.5 Loans and Investments. The Company shall not, and
---------------------
shall not permit any Subsidiary to, purchase or acquire, or make
any commitment to purchase or acquire, any capital stock, equity
interest or obligations or other securities of, or any interest
in, any Person, or make or commit to make any Acquisition, or
make or commit to make any advance, loan, extension of credit or
capital contribution to or any other investment in any Person
(including any Affiliate of the Company)(any of the foregoing an
"Investment"), except for:
(a) Investments held by the Company or any Subsidiary
in the form of cash equivalents or short term marketable
securities;
(b) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of
goods or services in the ordinary course of business;
(c) extensions of credit by the Company to any of its
Wholly-Owned Subsidiaries or by any of its Wholly-Owned
Subsidiaries to another of its Wholly-Owned Subsidiaries,
provided that the aggregate amount of all extensions of
- --------
credit by the Company and its Domestic Subsidiaries to Foreign
Subsidiaries, plus all Investments in Foreign Subsidiaries
permitted solely by subsection (e) below, shall not at any
--------------
time exceed 12.5% of Consolidated Total Assets;
(d) Investments incurred in order to consummate
Acquisitions not otherwise prohibited herein, provided that
--------
no Event of Default or Unmatured Event of Default exists or will
result therefrom;
(e) Investments (other than extensions of credit) in
Subsidiaries, provided that the aggregate amount of all such
--------
Investments made by the Company and its Domestic Subsidiaries in
Foreign Subsidiaries after February 27, 1996, plus all
Investments in Foreign Subsidiaries permitted solely by
70
<PAGE> 78
subsection (c) above, shall not exceed 12.5% of Consolidated
- --------------
Total Assets;
(f) Investments constituting Permitted Swap Obligations
or payments or advances under Swap Contracts relating to
Permitted Swap Obligations;
(g) pledges or deposits required in the ordinary course
of business in connection with workmen's compensation,
unemployment insurance and other social security legislation;
(h) advances, loans or extensions of credit to
suppliers in the ordinary course of business by the Company and
its Subsidiaries;
(i) advances, loans or extensions of credit in the
ordinary course of business by the Company and its Subsidiaries
to employees of the Company and its Subsidiaries;
(j) repurchases by the Company of its common stock to
the extent permitted by Section 8.11;
------------
(k) loans to an employee stock ownership plan
established by the Company, the proceeds of which are used solely
to purchase stock of the Company; and
(l) other Investments not at any time exceeding in the
aggregate 5% of Consolidated Total Assets.
8.6 Limitation on Foreign Subsidiary Indebtedness. The
---------------------------------------------
Company shall not permit its Foreign Subsidiaries to create,
incur, assume or suffer to exist, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness
at any time outstanding in an aggregate amount in excess of 10%
of Consolidated Total Assets.
8.7 Transactions with Affiliates. The Company shall
----------------------------
not, and shall not permit any Subsidiary to, enter into any
transaction with any Affiliate of the Company (other than the
Company or a Subsidiary), except upon fair and reasonable terms
no less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person not
an Affiliate of the Company or such Subsidiary.
8.8 Use of Proceeds. (a) The Company shall not, and
---------------
shall not suffer or permit any Subsidiary to, use any portion of
the Loan proceeds or any Letter of Credit, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay
or otherwise refinance indebtedness of the Company or others
incurred to purchase or carry Margin Stock or (iii) to extend
credit for the purpose of purchasing or carrying any Margin
Stock.
71
<PAGE> 79
(b) The Company shall not, directly or indirectly, use
any portion of the Loan proceeds or any Letter of Credit (i)
knowingly to purchase Ineligible Securities from the Arranger
during any period in which the Arranger makes a market in such
Ineligible Securities, (ii) knowingly to purchase during the
underwriting or placement period Ineligible Securities being
underwritten or privately placed by the Arranger, or (iii) to
make payments of principal or interest on Ineligible Securities
underwritten or privately placed by the Arranger and issued by or
for the benefit of the Company or any Affiliate of the Company.
The Arranger is a registered broker-dealer and permitted to
underwrite and deal in certain Ineligible Securities; and
"Ineligible Securities" means securities which may not be
---------------------
underwritten or dealt in by member banks of the Federal Reserve
System under Section 16 of the Banking Act of 1933 (12 U.S.C.
Section 24, Seventh), as amended.
8.9 Swap Contracts. The Company shall not, and shall
--------------
not permit any Subsidiary to, create, incur, assume or suffer to
exist any obligations under Swap Contracts except for Permitted
Swap Obligations.
8.10 Guarantors. The Company shall not permit more than
----------
10% of the consolidated total assets of the Company and its
Subsidiaries (excluding Foreign Subsidiaries) at any time to be
held by, or more than 10% of the consolidated revenues for any
fiscal year of the Company and its Subsidiaries (excluding
Foreign Subsidiaries) to be earned by, Subsidiaries which are not
Guarantors.
8.11 Restricted Payments. The Company shall not (i)
-------------------
declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock or (ii)
purchase, redeem or otherwise acquire for value, or permit any
Subsidiary to purchase or otherwise acquire for value, any shares
of the Company's capital stock or any warrants, rights or options
to acquire such shares, now or hereafter outstanding, except
that:
(a) the Company may declare and make dividend payments
or other distributions payable solely in its common stock;
(b) the Company may purchase, redeem or otherwise
acquire shares of its common stock or warrants or options to
acquire any such shares with the proceeds received from the
substantially concurrent issue of new shares of its common stock;
and
(c) so long as no Event of Default or Unmatured Event
of Default exists or would result therefrom, the Company may
(x) declare and pay cash dividends to its stockholders; and
72
<PAGE> 80
(y) purchase, redeem or otherwise acquire shares of its common
stock or warrants or options to acquire such shares, provided
--------
that the aggregate amount of all such purchases, redemptions and
other acquisitions on or after February 27, 1996 shall not exceed
$85,000,000.
8.12 ERISA. The Company shall not, and shall not permit
-----
any of its ERISA Affiliates to: (a) engage in a prohibited
transaction or violation of the fiduciary responsibility rules
with respect to any Plan which has resulted or could reasonably
be expected to result in liability of the Company in an aggregate
amount in excess of $15,000,000; or (b) engage in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
8.13 Change in Business. The Company shall not, and
------------------
shall not suffer or permit any Subsidiary to, engage in any
material line of business substantially different from those
lines of business carried on by the Company and its Subsidiaries
on the date hereof.
8.14 Accounting Changes. The Company shall not, and
------------------
shall not permit any Subsidiary to, make any significant change
in accounting treatment or reporting practices, except as
required by GAAP.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Event of Default. Any of the following shall
----------------
constitute an "Event of Default":
(a) Non-Payment. The Company fails to pay, (i)
-----------
when and as required to be paid herein, any amount of principal
of any Loan or of any L/C Obligation, or (ii) within three
Business Days after the same becomes due, any interest, fee or
any other amount payable hereunder or under any other Loan
Document.
(b) Representation or Warranty. Any representation
--------------------------
or warranty by the Company or any Subsidiary made or deemed made
herein or in any other Loan Document, or which is contained in
any certificate, document or financial or other statement by the
Company, any Subsidiary or any Responsible Officer furnished at
any time under this Agreement or under any other Loan Document,
is incorrect in any material respect on or as of the date made or
deemed made.
(c) Specific Defaults. The Company fails to
-----------------
perform or observe any term, covenant or agreement contained in
any of subsection 7.3(a), Section 8.2, 8.3, 8.4,
----------------- ----------- --- ---
8.8, 8.11 or 8.13.
- --- ---- ----
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<PAGE> 81
(d) Other Defaults. The Company or any Guarantor
--------------
fails to perform or observe any other term or covenant contained
in this Agreement or any other Loan Document, and such failure
shall continue unremedied for a period of 30 days after the date
upon which written notice thereof is given to the Company by the
Administrative Agent or any Lender.
(e) Cross-Default. (i) The Company or any
-------------
Subsidiary (A) fails to make any payment in respect of any
Indebtedness or Contingent Obligation having an aggregate
principal amount of more than $30,000,000 when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or
otherwise); or (B) fails to perform or observe any other
condition or covenant, or any other event shall occur or
condition shall exist, under any agreement or instrument relating
to any such Indebtedness or Contingent Obligation, if the effect
of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries)
to cause, such Indebtedness to become due and payable prior to
its stated maturity, or such Contingent Obligation to become
payable or cash collateral in respect thereof to be demanded,
provided that the aggregate amount of all such Indebtedness
- --------
and Contingent Obligations so affected and cash collateral so
required shall be in the amount of $30,000,000 or more.
(f) Insolvency; Voluntary Proceedings. The Company
---------------------------------
or any Subsidiary (i) ceases or fails to be solvent, or generally
fails to pay, or admits in writing its inability to pay, its
debts as they become due, subject to applicable grace periods, if
any, whether at stated maturity or otherwise; (ii) voluntarily
ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or
(iv) takes any action to effectuate or authorize any of the
foregoing.
(g) Involuntary Proceedings. (i) Any involuntary
-----------------------
Insolvency Proceeding is commenced or filed against the Company
or any Subsidiary, or any writ, judgment, warrant of attachment,
execution or similar process is issued or levied against a
substantial part of the Company's or any Subsidiary's properties,
and such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded, within 60
days after commencement, filing or levy; (ii) the Company or any
Subsidiary admits the material allegations of a petition against
it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency
Proceeding with respect to the Company or such Subsidiary; or
(iii) the Company or any Subsidiary acquiesces in the appointment
74
<PAGE> 82
of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar
Person for itself or a substantial portion of its property or
business.
(h) ERISA. (i) An ERISA Event shall occur with
-----
respect to a Pension Plan or Multiemployer Plan which has
resulted or could reasonably be expected to result in liability
of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess
of $3,000,000; (ii) a contribution failure shall occur with
respect to a Pension Plan sufficient to give rise to a Lien under
Section 302(f) of ERISA; (iii) the aggregate amount of Unfunded
Pension Liability among all Pension Plans at any time exceeds
$50,000,000; or (iv) the Company or any ERISA Affiliate shall
fail to pay when due, after the expiration of any applicable
grace period (or any period during which (x) the Company is
permitted to contest its obligation to make such payment without
incurring any liability (other than interest) or penalty and (y)
the Company is contesting such obligation in good faith and by
appropriate proceedings), any installment payment with respect to
its withdrawal liability under Section 4201 of ERISA or any
contribution obligation under Section 4243 of ERISA, in each case
under a Multiemployer Plan in an aggregate amount in excess of
$3,000,000.
(i) Judgments. One or more non-interlocutory
---------
judgments, non-interlocutory orders, decrees or arbitration
awards is entered against the Company or any Subsidiary involving
in the aggregate a liability (to the extent not covered by
independent third-party insurance as to which the insurer does
not dispute coverage) as to any single or related series of
transactions, incidents or conditions of $30,000,000 or more, and
the same shall remain unvacated and unstayed pending appeal for a
period of 10 days after the entry thereof.
(j) Change of Control. Any Change of Control
-----------------
occurs.
(k) Guarantor Defaults. The Guaranty is for any
------------------
reason partially (including with respect to future advances) or
wholly revoked or invalidated, or otherwise ceases to be in full
force and effect with respect to any Person (other than as a
result of such Person ceasing to be a Significant Subsidiary or
being merged or consolidated with another Person, in each case
pursuant to a transaction expressly permitted hereunder), or any
Guarantor or any Person on behalf of any Guarantor contests in
any manner the validity or enforceability thereof or denies that
such Guarantor has any further liability or obligation
thereunder.
75
<PAGE> 83
9.2 Remedies. If any Event of Default occurs, the
--------
Administrative Agent shall, at the request of, or may, with the
consent of, the Required Lenders,
(a) declare the commitment of each Lender to make Loans
and any obligation of each Issuing Lender to Issue Letters of
Credit to be terminated, whereupon such commitment and obligation
shall be terminated;
(b) declare an amount equal to the maximum aggregate
amount that is or at any time thereafter may become available for
drawing under all outstanding Letters of Credit (whether or not
any beneficiary shall have presented, or shall be entitled at
such time to present, the drafts or other documents required to
draw under such Letters of Credit) to be immediately due and
payable, and declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and
all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Lenders all
other rights and remedies available to it and the Lenders under
the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event
- -------- -------
specified in subsection (f) or (g) of Section 9.1 (in
-------------- --- -----------
the case of clause (i) of subsection (g), upon the
---------- --------------
expiration of the 60-day period mentioned therein), the
obligation of each Lender to make Loans and any obligation of
each Issuing Lender to Issue Letters of Credit shall
automatically terminate and the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable without further act of
the Administrative Agent, the Issuing Lender or any other Lender.
9.3 Rights Not Exclusive. The rights provided for in
--------------------
this Agreement and the other Loan Documents are cumulative and
are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter
arising.
76
<PAGE> 84
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1 Appointment and Authorization; "Administrative
----------------------------------------------
Agent". (a) Each Lender hereby irrevocably (subject to
- ------
Section 10.9) appoints, designates and authorizes the
- ------------
Administrative Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the
Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor
shall the Administrative Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent. Without
limiting the generality of the foregoing sentence, the use of the
term "agent" in this Agreement with reference to the
Administrative Agent is not intended to connote any fiduciary or
other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely
as a matter of market custom, and is intended to create or
reflect only an administrative relationship between independent
contracting parties.
(b) Each Issuing Lender shall act on behalf of the
Lenders with respect to any Letters of Credit Issued by it and
the documents associated therewith until such time and except for
so long as the Administrative Agent may agree at the request of
the Required Lenders to act for such Issuing Lender with respect
thereto; provided, however, that each Issuing Lender
-------- -------
shall have all of the benefits and immunities (i) provided to the
Administrative Agent in this Article X with respect to any
---------
acts taken or omissions suffered by such Issuing Lender in
connection with Letters of Credit Issued by it or proposed to be
Issued by it and the application and agreements for letters of
credit pertaining to the Letters of Credit as fully as if the
term "Administrative Agent", as used in this Article X,
---------
included such Issuing Lender with respect to such acts or
omissions, and (ii) as additionally provided in this Agreement
with respect to such Issuing Lender.
10.2 Delegation of Duties. The Administrative Agent may
--------------------
execute any of its duties under this Agreement or any other Loan
Document by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters
77
<PAGE> 85
pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
10.3 Liability of Administrative Agent. None of the
---------------------------------
Administrative Agent-Related Persons shall (i) be liable to any
Lender for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan
Document or the transactions contemplated hereby (except for its
own gross negligence or willful misconduct), or (ii) be
responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by the Company or any
Subsidiary or Affiliate of the Company, or any officer thereof,
contained in this Agreement or in any other Loan Document, or in
any certificate, report, statement or other document referred to
or provided for in, or received by the Administrative Agent under
or in connection with, this Agreement or any other Loan Document,
or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for
any failure of the Company or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No
Administrative Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Company or any of the
Company's Subsidiaries or Affiliates.
10.4 Reliance by Administrative Agent. (a) The
--------------------------------
Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile,
telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons, and
upon advice and statements of legal counsel (including counsel to
the Company), independent accountants and other experts selected
by the Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as it
deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of
the Required Lenders and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the
Lenders.
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<PAGE> 86
(b) For purposes of determining compliance with the
conditions specified in Section 5.1, each Lender that has
-----------
executed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or
other matter either sent by the Administrative Agent to such
Lender for consent, approval, acceptance or satisfaction, or
required thereunder to be consented to or approved by or
acceptable or satisfactory to the Lender.
10.5 Notice of Default. The Administrative Agent shall
-----------------
not be deemed to have knowledge or notice of the occurrence of
any Event of Default or Unmatured Event of Default, except with
respect to defaults in the payment of principal, interest and
fees required to be paid to the Administrative Agent for the
account of the Lenders, unless the Administrative Agent shall
have received written notice from a Lender or the Company
referring to this Agreement, describing such Event of Default or
Unmatured Event of Default and stating that such notice is a
"notice of default". If the Administrative Agent receives such a
notice, the Administrative Agent will notify the Lenders of its
receipt of such notice. The Administrative Agent shall take such
action with respect to such Event of Default or Unmatured Event
of Default as may be requested by the Required Lenders in
accordance with this Article X; provided, however,
--------- -------- -------
that unless and until the Administrative Agent has received any
such request, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such
action, with respect to such Event of Default or Unmatured Event
of Default as it shall deem advisable or in the best interest of
the Lenders.
10.6 Credit Decision. Each Lender acknowledges that
---------------
none of the Administrative Agent-Related Persons has made any
representation or warranty to it, and that no act by the
Administrative Agent hereinafter taken, including any review of
the affairs of the Company and its Subsidiaries, shall be deemed
to constitute any representation or warranty by any
Administrative Agent-Related Person to any Lender. Each Lender
represents to the Administrative Agent that it has, independently
and without reliance upon any Administrative Agent-Related Person
and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other
condition and creditworthiness of the Company and its
Subsidiaries, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision
to enter into this Agreement and to extend credit to the Company
hereunder. Each Lender also represents that it will,
independently and without reliance upon any Administrative Agent-
Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking
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<PAGE> 87
action under this Agreement and the other Loan Documents, and to
make such investigations as it deems necessary to inform itself
as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except
for notices, reports and other documents expressly herein
required to be furnished to the Lenders by the Administrative
Agent, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of
the Company which may come into the possession of any
Administrative Agent-Related Person.
10.7 Indemnification of Administrative Agent. Whether
---------------------------------------
or not the transactions contemplated hereby are consummated, the
Lenders shall indemnify upon demand the Administrative
Agent-Related Persons (to the extent not reimbursed by or on
behalf of the Company and without limiting the obligation of the
Company to do so), pro rata, from and against any and all
Indemnified Liabilities; provided, however, that no
-------- -------
Lender shall be liable for the payment to any Administrative
Agent-Related Person of any portion of the Indemnified
Liabilities resulting solely from such Person's gross negligence
or willful misconduct. Without limitation of the foregoing, each
Lender shall reimburse the Administrative Agent upon demand for
its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Administrative Agent
in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or
legal advice in respect of rights or responsibilities under, this
Agreement, any other Loan Document, or any document contemplated
by or referred to herein, to the extent that the Administrative
Agent is not reimbursed for such expenses by or on behalf of the
Company. The undertaking in this Section shall survive the
termination of this Agreement, the payment of all Obligations and
the resignation or replacement of the Administrative Agent.
10.8 Administrative Agent in Individual Capacity. BofA
-------------------------------------------
and its Affiliates may make loans to, issue letters of credit for
the account of, accept deposits from, acquire equity interests in
and generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the
Administrative Agent or an Issuing Lender hereunder and without
notice to or consent of the Lenders. The Lenders acknowledge
that, pursuant to such activities, BofA or its Affiliates may
receive information regarding the Company or its Affiliates
(including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiary) and
acknowledge that the Administrative Agent shall be under no
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<PAGE> 88
obligation to provide such information to them. With respect to
its Loans, BofA shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though
it were not the Administrative Agent or an Issuing Lender.
10.9 Successor Administrative Agent. The Administrative
------------------------------
Agent may, and at the request of the Required Lenders shall,
resign as Administrative Agent upon 30 days' notice to the
Lenders. If the Administrative Agent resigns under this
Agreement, the Required Lenders (with, so long as no Event of
Default exists, the consent of the Company, which shall not be
unreasonably withheld or delayed) shall appoint from among the
Lenders a successor administrative agent for the Lenders. If no
successor administrative agent is appointed prior to the
effective date of the resignation of the Administrative Agent,
the Administrative Agent may appoint, after consulting with the
Lenders and the Company, a successor administrative agent from
among the Lenders. Upon the acceptance of its appointment as
successor administrative agent hereunder, such successor
administrative agent shall succeed to all the rights, powers and
duties of the retiring Administrative Agent and the term
"Administrative Agent" shall mean such successor administrative
agent and the retiring Administrative Agent's appointment, powers
and duties as Administrative Agent shall be terminated. After any
retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article X and
---------
Sections 11.4 and 11.5 shall inure to its benefit as to
- ------------- ----
any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. If no successor
administrative agent has accepted appointment as Administrative
Agent by the date which is 30 days following a retiring
Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon
become effective and the Lenders shall perform all of the duties
of the Administrative Agent hereunder until such time, if any, as
the Required Lenders appoint a successor administrative agent as
provided for above. Notwithstanding the foregoing, however, BofA
may not be removed as the Administrative Agent at the request of
the Required Lenders unless BofA and any applicable Affiliate
thereof shall also simultaneously be replaced as an "Issuing
Lender" hereunder pursuant to documentation in form and substance
reasonably satisfactory to BofA.
10.10 Withholding Tax. (a) If any Lender is a "foreign
---------------
corporation, partnership or trust" within the meaning of the Code
and such Lender claims exemption from, or a reduction of, U.S.
withholding tax under Sections 1441 or 1442 of the Code, such
Lender agrees with and in favor of the Administrative Agent, to
deliver to the Administrative Agent:
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<PAGE> 89
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax
treaty, properly completed IRS Forms 1001 and W-8 before the
payment of any interest in the first calendar year and before
the payment of any interest in each third succeeding calendar
year during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax
because it is effectively connected with a United States
trade or business of such Lender, two properly completed and
executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Lender and
in each succeeding taxable year of such Lender during which
interest may be paid under this Agreement, and IRS Form W-9;
and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a
condition to exemption from, or reduction of, United States
withholding tax.
Each such Lender agrees to promptly notify the Administrative
Agent of any change in circumstances which would modify or render
invalid any claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction
of, withholding tax under a United States tax treaty by providing
IRS Form 1001 and such Lender sells, assigns, grants a
participation in, or otherwise transfers all or part of the
Obligations of the Company to such Lender, such Lender agrees to
notify the Administrative Agent of the percentage amount in which
it is no longer the beneficial owner of Obligations of the
Company to such Lender. To the extent of such percentage amount,
the Administrative Agent will treat such Lender's IRS Form 1001
as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Administrative
Agent sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of the Company to such
Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Code.
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, the Administrative Agent may withhold
from any interest payment to such Lender an amount equivalent to
the applicable withholding tax after taking into account such
reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to the
- --------------
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<PAGE> 90
Administrative Agent, then the Administrative Agent may withhold
from any interest payment to such Lender not providing such forms
or other documentation an amount equivalent to the applicable
withholding tax.
(e) If the IRS or any other Governmental Authority of
the United States or other jurisdiction asserts a claim that the
Administrative Agent did not properly withhold tax from amounts
paid to or for the account of any Lender (because the appropriate
form was not delivered or was not properly executed, or because
such Lender failed to notify the Administrative Agent of a change
in circumstances which rendered the exemption from, or reduction
of, withholding tax ineffective, or for any other reason) such
Lender shall indemnify the Administrative Agent fully for all
amounts paid, directly or indirectly, by the Administrative Agent
as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts
payable to the Administrative Agent under this Section, together
with all costs and expenses (including Attorney Costs). The
obligation of the Lenders under this subsection shall survive the
payment of all Obligations and the resignation or replacement of
the Administrative Agent.
10.11 Co-Agents. None of the Lenders identified on the
---------
facing page or signature pages of this Agreement or any related
document as a "co-agent" shall have any right, power, obligation,
liability, responsibility or duty under this Agreement other than
those applicable to all Lenders as such. Without limiting the
foregoing, none of the Lenders so identified as a "co-agent"
shall have or be deemed to have any fiduciary relationship with
any Lender. Each Lender acknowledges that it has not relied, and
will not rely, on any of the Lenders so identified in deciding to
enter into this Agreement or in taking or not taking action
hereunder.
ARTICLE XI
MISCELLANEOUS
11.1 Amendments and Waivers. No amendment or waiver of
----------------------
any provision of this Agreement or any other Loan Document, and
no consent with respect to any departure by the Company or any
applicable Subsidiary therefrom, shall be effective unless the
same shall be in writing and signed by the Required Lenders (or
by the Administrative Agent at the written request of the
Required Lenders) and the Company and acknowledged by the
Administrative Agent, and then any such waiver or consent shall
be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver,
-------- -------
amendment or consent shall, unless in writing and signed by all
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<PAGE> 91
Lenders and the Company and acknowledged by the Administrative
Agent, do any of the following:
(a) increase or extend the Commitment of any Lender (or
reinstate any Commitment terminated pursuant to Section 9.2);
-----------
(b) postpone or delay any date fixed by this Agreement
or any other Loan Document for any payment of principal,
interest, fees or other amounts due to the Lenders (or any of
them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on, any Loan, or reduce any fees (other than the
fees referred to in subsection 2.11(a) or subsections
------------------ -----------
3.8(c) and (d)) or other amounts payable hereunder or under
- ------ ----
any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required
for the Lenders or any of them to take any action hereunder; or
(e) amend this Section, or Section 2.15, or any
------------
provision herein providing for consent or other action by all
Lenders;
and provided, further, that (i) no amendment, waiver or
-------- -------
consent shall, unless in writing and signed by the applicable
Issuing Lender in addition to the Required Lenders or all
Lenders, as the case may be, affect the rights or duties of such
Issuing Lender under this Agreement or any L/C-Related Document
relating to any Letter of Credit Issued or to be Issued by it and
(ii) no amendment, waiver or consent shall, unless in writing and
signed by the Administrative Agent in addition to the Required
Lenders or all Lenders, as the case may be, affect the rights or
duties of the Administrative Agent under this Agreement or any
other Loan Document.
11.2 Notices. (a) All notices, requests, consents,
-------
approvals, waivers and other communications shall be in writing
(including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by
the Company by facsimile (i) shall be immediately confirmed by a
telephone call to the recipient at the number specified on
Schedule 11.2, and (ii) shall be followed promptly by
- -------------
delivery of a hard copy original thereof) and mailed, faxed or
delivered, to the address or facsimile number specified for
notices on Schedule 11.2; or, as directed to the Company or
-------------
the Administrative Agent, to such other address as shall be
designated by such party in a written notice to the other
parties, and as directed to any other party, at such other
address as shall be designated by such party in a written notice
to the Company and the Administrative Agent.
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<PAGE> 92
(b) All such notices, requests, consents, approvals,
waivers and communications shall, when transmitted by overnight
delivery, or faxed, be effective when delivered for overnight
(next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day
after the date deposited into the U.S. mail, or if delivered,
upon delivery; except that notices pursuant to Article II,
----------
III or X to the Administrative Agent shall not be
- --- -
effective until actually received by the Administrative Agent,
and notices pursuant to Article III to the applicable Issuing
-----------
Lender shall not be effective until actually received by such
Issuing Lender at the address specified for such "Issuing Lender"
on Schedule 11.2.
-------------
(c) Any agreement of the Administrative Agent and the
Lenders herein to receive certain notices by telephone or
facsimile is solely for the convenience and at the request of the
Company. The Administrative Agent and the Lenders shall be
entitled to rely on the authority of any Person purporting to be
a Person authorized by the Company to give such notice and the
Administrative Agent and the Lenders shall not have any liability
to the Company or any other Person on account of any action taken
or not taken by the Administrative Agent or the Lenders in
reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans and L/C Obligations
shall not be affected in any way or to any extent by any failure
by the Administrative Agent and the Lenders to receive written
confirmation of any telephonic or facsimile notice or the receipt
by the Administrative Agent and the Lenders of a confirmation
which is at variance with the terms understood by the
Administrative Agent and the Lenders to be contained in the
telephonic or facsimile notice.
11.3 No Waiver; Cumulative Remedies. No failure to
------------------------------
exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or
privilege.
11.4 Costs and Expenses. The Company shall:
------------------
(a) whether or not the transactions contemplated hereby
are consummated, pay or reimburse BofA (including in its capacity
as Administrative Agent and an Issuing Lender) and the Arranger
within five Business Days after demand (subject to subsection
----------
5.1(e)) for all costs and expenses incurred by BofA (including
- -------
in its capacity as Administrative Agent and an Issuing Lender)
and the Arranger in connection with the negotiation, development,
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<PAGE> 93
preparation, delivery, syndication, documentation, administration
and execution of, and any amendment, supplement, waiver or
modification to (in each case, whether or not consummated), this
Agreement, any other Loan Document and any other document
prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby,
including Attorney Costs incurred by BofA (including in its
capacity as Administrative Agent and an Issuing Lender) and the
Arranger with respect thereto; and
(b) pay or reimburse the Administrative Agent, the
Arranger and each Lender within five Business Days after demand
for all costs and expenses (including Attorney Costs) incurred by
them in connection with the enforcement, attempted enforcement,
or preservation of any rights or remedies under this Agreement or
any other Loan Document (including in connection with any
"workout" or restructuring regarding the Loans, and including in
any Insolvency Proceeding or appellate proceeding).
11.5 Company Indemnification. Whether or not the
-----------------------
transactions contemplated hereby are consummated, the Company
shall indemnify, defend and hold the Administrative Agent-Related
Persons and each Lender and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each
an "Indemnified Person") harmless from and against any and
------------------
all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and
disbursements (including Attorney Costs) of any kind or nature
whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit
and the termination, resignation or replacement of the
Administrative Agent or replacement of any Lender) be imposed on,
incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement or any document
contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of this Agreement or the
Loans or Letters of Credit or the use of the proceeds thereof,
whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the "Indemnified Liabilities");
-----------------------
provided that the Company shall have no obligation hereunder
- --------
to any Indemnified Person with respect to Indemnified Liabilities
resulting solely from the gross negligence or willful misconduct
of such Indemnified Person. The agreements in this Section shall
survive the termination of this Agreement and the payment of all
other Obligations.
86
<PAGE> 94
11.6 Payments Set Aside. To the extent that the Company
------------------
makes a payment to the Administrative Agent or the Lenders, or
the Administrative Agent or any Lender exercises its right of
set-off, and such payment or the proceeds of such set-off or any
part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by the Administrative
Agent or such Lender in its discretion) to be repaid to a
trustee, a receiver or any other party, in connection with any
Insolvency Proceeding or otherwise, then (a) to the extent of
such recovery the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such set-off had
not occurred and (b) each Lender severally agrees to pay to the
Administrative Agent upon demand its pro rata share of any amount
so recovered from or repaid by the Administrative Agent.
11.7 Successors and Assigns. The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns,
except that the Company may not assign or transfer any of its
rights or obligations under this Agreement without the prior
written consent of the Administrative Agent and each Lender.
11.8 Assignments, Participations, etc. (a) Any Lender
--------------------------------
may, with the written consent of the Company (which consent shall
not be required during the existence of an Event of Default), the
Administrative Agent and each Issuing Lender, at any time assign
and delegate to one or more Eligible Assignees (provided that no
written consent of the Company, the Administrative Agent or any
Issuing Lender shall be required in connection with any
assignment and delegation by a Lender to an Eligible Assignee
that is an Affiliate of such Lender) (each an "Assignee")
--------
all, or any ratable part of all, of the Committed Loans, the
Commitments, the L/C Obligations and the other rights and
obligations of such Lender hereunder, in a minimum amount of
$5,000,000 (or, if less, the amount of such Lender's Commitment);
provided, however, that the Company and the
- -------- -------
Administrative Agent may continue to deal solely and directly
with such Lender in connection with the interest so assigned to
an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with
respect to the Assignee, shall have been given to the Company and
the Administrative Agent by such Lender and the Assignee;
(ii) such Lender and its Assignee shall have delivered to the
Company and the Administrative Agent an Assignment and Acceptance
in the form of Exhibit J ("Assignment and Acceptance")
--------- -------------------------
together with any Note or Notes subject to such assignment and
(iii) such Lender or the Assignee has paid to the Administrative
Agent a processing fee in the amount of $2,500.
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<PAGE> 95
(b) From and after the date that the Administrative
Agent notifies the assignor Lender that it has received and
provided its consent (and received the consent of each Issuing
Lender and, if applicable, the Company) with respect to an
executed Assignment and Acceptance and payment of the above-
referenced processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment
and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assignor Lender shall, to
the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released
from its obligations under the Loan Documents.
(c) Within five Business Days after the effectiveness
of any Assignment and Acceptance pursuant to subsection
----------
11.8(a)), the Company shall, upon request, execute and deliver
- -------
to the Administrative Agent a new Note evidencing the applicable
Assignee's assigned Loans and Commitment and, if the assignor
Lender has retained a portion of its Loans and its Commitment, a
replacement Note in the principal amount of the Commitment
retained by the assignor Lender (such Notes to be in exchange
for, but not in payment of, the Notes held by the assignor
Lender). Immediately upon the effectiveness of any Assignment
and Acceptance, this Agreement shall be deemed to be amended to
the extent, but only to the extent, necessary to reflect the
addition of the Assignee and/or the resulting adjustment of the
Commitments arising therefrom.
(d) Any Lender may at any time, with notice to the
Company, sell to one or more commercial banks or other Persons
not Affiliates of the Company (a "Participant") participating
-----------
interests in any Loans, the Commitment of such Lender and the
other interests of such Lender (the "originating Lender")
hereunder and under the other Loan Documents; provided,
--------
however, that (i) the originating Lender's obligations under
- -------
this Agreement shall remain unchanged, (ii) the originating
Lender shall remain solely responsible for the performance of
such obligations, (iii) the Company, each Issuing Lender and the
Administrative Agent shall continue to deal solely and directly
with the originating Lender in connection with the originating
Lender's rights and obligations under this Agreement and the
other Loan Documents, and (iv) no Lender shall transfer or grant
any participating interest under which a Participant has rights
to approve any amendment to, or any consent or waiver with
respect to, this Agreement or any other Loan Document, except to
the extent such amendment, consent or waiver would require
unanimous consent of the Lenders as described in the first
-----
proviso to Section 11.1. In the case of any such
- ------- ------------
participation, the Participant shall be entitled to the benefit
of Sections 4.1,
------------
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<PAGE> 96
4.3, 4.4 and 11.5 as though it were also a Lender hereunder
- --- --- ----
(provided that no Participant shall be entitled to any greater
amount pursuant to such Sections than the originating Lender
would have been entitled to receive if no such participation had
been sold), and if amounts outstanding under this Agreement are
due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender
under this Agreement.
(e) Notwithstanding any other provision in this
Agreement, any Lender may at any time create a security interest
in, or pledge, all or any portion of its rights under and
interest in this Agreement and any Note held by it in favor of
any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and such
Federal Reserve Bank may enforce such pledge or security interest
in any manner permitted under applicable law.
11.9 Confidentiality. Each Lender agrees to take, and
---------------
to cause its Affiliates to take, normal and reasonable
precautions and exercise due care to maintain the confidentiality
of all information identified as "confidential" or "secret" by
the Company and provided to it by the Company or any Subsidiary,
or by the Administrative Agent on the Company's or such
Subsidiary's behalf, under this Agreement or any other Loan
Document, and neither such Lender nor any of its Affiliates shall
use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents or in
connection with other business now or hereafter existing or
contemplated with the Company or any Subsidiary; except to the
extent such information (i) was or becomes generally available to
the public other than as a result of disclosure by such Lender,
or (ii) was or becomes available on a non-confidential basis from
a source other than the Company, provided that such source is not
bound by a confidentiality agreement with the Company or any
Subsidiary known to such Lender; provided, however, that
-------- -------
any Lender may disclose such information (A) at the request or
pursuant to any requirement of any Governmental Authority to
which such Lender is subject or in connection with an examination
of such Lender by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance
with the provisions of any applicable Requirement of Law; (D) to
the extent reasonably required in connection with any litigation
or proceeding to which the Administrative Agent or any Lender or
any of their respective Affiliates may be party; (E) to the
extent reasonably required in connection with the exercise of any
remedy hereunder or under any other Loan Document; (F) to such
Lender's
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<PAGE> 97
independent auditors and other professional advisors;
(G) to any Participant or Assignee, actual or potential, provided
that such Person agrees in writing to keep such information
confidential to the same extent required of the Lenders
hereunder; (H) as to any Lender or any of its Affiliates, as
expressly permitted under the terms of any other document or
agreement regarding confidentiality to which the Company or any
Subsidiary is party or is deemed party with such Lender or such
Affiliate; and (I) to its Affiliates.
11.10 Set-off. In addition to any rights and remedies
-------
of the Lenders provided by law, if an Unmatured Event of Default
under subsection 9.1(a), (f) or (g) or any Event of
----------------- --- ---
Default exists, each Lender is authorized at any time and from
time to time, without prior notice to the Company, any such
notice being expressly waived by the Company to the fullest
extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or
final) at any time held by, and other indebtedness at any time
owing by, such Lender to or for the credit or the account of the
Company against any and all Obligations owing to such Lender, now
or hereafter existing, irrespective of whether or not the
Administrative Agent or such Lender shall have made demand under
this Agreement or any other Loan Document and although such
Obligations may be contingent or unmatured. Each Lender agrees
promptly to notify the Company and the Administrative Agent after
any such set-off and application made by such Lender;
provided, however, that the failure to give such notice
- -------- -------
shall not affect the validity of such set-off and application.
11.11 Notification of Addresses, Lending Offices, Etc.
-----------------------------------------------
Each Lender shall notify the Administrative Agent in writing of
any change in the address to which notices to such Lender should
be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the
Administrative Agent shall reasonably request.
11.12 Counterparts. This Agreement may be executed in
------------
any number of separate counterparts, each of which, when so
executed, shall be deemed an original, and all of which taken
together shall be deemed to constitute but one and the same
instrument.
11.13 Severability. The illegality or unenforceability
------------
of any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the
legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.
11.14 No Third Parties Benefited. This Agreement is
--------------------------
made and entered into for the sole protection and legal benefit
of the
90
<PAGE> 98
Company, the Lenders, the Administrative Agent and the
Administrative Agent-Related Persons, and their permitted
successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect
cause of action or claim in connection with, this Agreement or
any of the other Loan Documents.
11.15 Governing Law and Jurisdiction. (a) THIS
------------------------------
AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS; PROVIDED THAT
THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN
DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE COMPANY, THE ADMINISTRATIVE AGENT AND THE
LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO
THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS. EACH OF THE
COMPANY, THE ADMINISTRATIVE AGENT AND THE LENDERS IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR
ANY DOCUMENT RELATED HERETO. THE COMPANY, THE ADMINISTRATIVE
AGENT AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY ILLINOIS LAW.
11.16 Waiver of Jury Trial. THE COMPANY, THE LENDERS
--------------------
AND THE ADMINISTRATIVE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS
TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY ADMINISTRATIVE
AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
COMPANY, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH AGREE THAT
ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENT,
RENEWAL, SUPPLEMENT OR MODIFICATION TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
91
<PAGE> 99
11.17 Entire Agreement. This Agreement, together with
----------------
the other Loan Documents (and any agreement relating to fees
referred in subsection 2.11(a)), embodies the entire
------------------
agreement and understanding among the Company, the Lenders and
the Administrative Agent, and supersedes all prior or
contemporaneous agreements and understandings of such Persons,
verbal or written, relating to the subject matter hereof and
thereof.
11.18 Amendment and Restatement; Return of Notes. This
------------------------------------------
Agreement amends and restates the Existing Credit Agreement in
its entirety and, after the effectiveness of this Agreement on
the Effective Date, the Existing Credit Agreement shall be of no
further force or effect (except for any provisions thereof which
by their terms survive termination thereof). Each Lender agrees
that it will, as promptly as practicable after the Effective
Date, return to the Company any note issued to such Lender under
the Existing Credit Agreement, marked to show that such Note has
been superseded.
92
<PAGE> 100
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
THE EARTHGRAINS COMPANY
By:
--------------------------------
Vice President and
Treasurer
S-1
<PAGE> 101
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:
----------------------------
Title
----------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as an
Issuing Lender and as a Lender
By:
----------------------------
Title
----------------------------
S-2
<PAGE> 102
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS, as Co-Agent
and as a Lender
By:
----------------------------
Title
----------------------------
S-3
<PAGE> 103
THE CHASE MANHATTAN BANK,
as Co-Agent and as a Lender
By:
----------------------------
Title
----------------------------
S-4
<PAGE> 104
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Co-Agent
and as a Lender
By
----------------------------
Title
----------------------------
S-5
<PAGE> 105
THE BANK OF NEW YORK
By
----------------------------
Title
----------------------------
S-6
<PAGE> 106
THE FIRST NATIONAL BANK OF CHICAGO
By
----------------------------
Title
----------------------------
S-7
<PAGE> 107
WELLS FARGO BANK, N.A.
By
----------------------------
Title
----------------------------
S-8
<PAGE> 108
WACHOVIA BANK OF GEORGIA, N.A.
By
----------------------------
Title
----------------------------
S-9
<PAGE> 109
<TABLE>
SCHEDULE 2.1
COMMITMENTS
AND PRO RATA SHARES
<CAPTION>
Lender Commitment Pro Rata Share
- ------ ---------- --------------
<S> <C> <C>
Bank of America National Trust $35,000,000.00 15.555555556%
and Savings Association
The Boatmen's National Bank $30,000,000.00 13.333333333%
of St. Louis
The Chase Manhattan Bank $30,000,000.00 13.333333333%
Morgan Guaranty Trust Company $30,000,000.00 13.333333333%
of New York
The Bank of New York $25,000,000.00 11.111111111%
The First National Bank of Chicago $25,000,000.00 11.111111111%
Wells Fargo Bank, N.A. $25,000,000.00 11.111111111%
Wachovia Bank of Georgia, N.A. $25,000,000.00 11.111111111%
TOTAL $225,000,000.00 100.000000000%
</TABLE>
<PAGE> 110
SCHEDULE 11.2
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
THE EARTHGRAINS COMPANY
- -----------------------
Mr. Michael A. Salamone
Vice President & Treasurer
8400 Maryland Avenue
St. Louis, MO 63105-3668
Telephone: 314-259-7066
Facsimile: 314-259-7036
Person to whom Bid Loan correspondence should be addressed:
Mr. Michael A. Salamone
Vice President & Treasurer
8400 Maryland Avenue
St. Louis, MO 63105-3668
Telephone: 314-259-7066
Facsimile: 314-259-7036
BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION,
- -----------------------
as Administrative Agent
Bank of America National Trust
and Savings Association
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: David Flores
Telephone: (415) 436-2749
Facsimile: (415) 436-2700
Administrative Agent's Payment Office:
Attn: Agency Management Services #5596
1850 Gateway Boulevard
Concord, California 94520
For Credit To: 12338-15039
Reference: The Earthgrains Company
<PAGE> 111
BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION,
- -----------------------
as an Issuing Lender and as a Lender
Domestic and Offshore Lending Office:
200 W. Jackson Blvd, 9th Floor
Chicago, Illinois 60697
Attention: Patricia Thomas-Horne
Account Administrator
Telephone: (312) 828-3869
Facsimile: (312) 974-9626
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Bank of America National Trust and Savings Association
231 South LaSalle Street, 9th Floor
Chicago, Illinois 60197
Attention: G. Burton Queen
Managing Director
Telephone: (312) 828-3096
Facsimile: (312) 987-1276
THE BOATMEN'S NATIONAL BANK
- ---------------------------
OF ST. LOUIS, as Co-Agent
------------
and as a Lender
Domestic and Offshore Lending Office:
One Boatmen's Plaza
800 Market Street
St. Louis, Missouri 63101
Attention: Pam Weiss
Telephone: (314) 466-6912
Facsimile: (314) 466-7783
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
The Boatmen's National Bank of St. Louis
One Boatmen's Plaza
800 Market Street
St. Louis, Missouri 63101
Attention: Kenneth J. Schult
Vice President
Telephone: (314) 466-7683
Facsimile: (314) 466-7783
2
<PAGE> 112
THE CHASE MANHATTAN BANK,
- ------------------------
as Co-Agent and as a Lender
Domestic and Offshore Lending Office:
140 East 45th Street, 29th Floor
New York, New York 10017-3162
Attention: Martena Johnson
Telephone: (212) 622-8703
Facsimile: (212) 622-0002
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
The Chase Manhattan Bank
270 Park Avenue, 9th Floor
New York, New York 10017-2070
Attention: Maggie Lane
Telephone: 212-270-9803
Facsimile: 212-270-2625
Attention: Lyette Proctor
Telephone: (212) 270-2272
Facsimile: (212) 270-7888
MORGAN GUARANTY TRUST COMPANY
- -----------------------------
OF NEW YORK, as Co-Agent
-----------
and as a Lender
Domestic and Offshore Lending Office;
Notices (other than Borrowing, Conversion/
Continuation and similar operational notices):
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260-0060
Attention: Patricia Merritt
Vice President
Telephone: (212) 648-6744
Facsimile: (212) 648-5336
Notices (Borrowing, Conversion/Continuation and similar operational
notices):
c/o J.P. Morgan Services, Inc.
500 Stanton Christiana Road
P.O. Box 6070
Newark, Delaware 19713-2107
Attention: Beth Cesari
Telephone: (302) 634-1857
Facsimile: (302) 634-1091
3
<PAGE> 113
THE BANK OF NEW YORK,
- --------------------
as a Lender
Domestic and Offshore Lending Office:
One Wall Street, 19th Floor
New York, New York 10286
Attention: Pilar Kinzie
Telephone: (212) 635-7607
Facsimile: (212) 635-7923
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
The Bank of New York
One Wall Street, 19th Floor
New York, New York 10286
Attention: John Lambert
Vice President
Telephone: (212) 635-8204
Facsimile: (212) 635-1208/1209
THE FIRST NATIONAL BANK OF CHICAGO,
- ----------------------------------
as a Lender
Domestic and Offshore Lending Office:
One First National Plaza
Suite 0088, 1-14
Chicago, IL 60670
Attention: April Yebd
Telephone: (312) 732-4823
Facsimile: (312) 732-2715
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
The First National Bank of Chicago
One First National Plaza
Suite 0173, 1-14
Chicago, IL 60670
Attention: William J. Oleferchik
Telephone: (312) 732-2947
Facsimile: (312) 732-1117
4
<PAGE> 114
WELLS FARGO BANK, N.A.,
- ----------------------
as a Lender
Domestic and Offshore Lending Office:
201 Third Street
San Francisco, California 94103
Attention: Tessie Melgar
Loan Operations Manager
Telephone: (415) 477-5421
Facsimile: (415) 979-0675
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Wells Fargo Bank, N.A.
222 West Adams Street
Suite 2180
Chicago, Illinois 60606
Attention: Melissa F. Nachman
Vice President
Telephone: (312) 553-2353
Facsimile: (312) 553-4783
WACHOVIA BANK OF GEORGIA, N.A.,
- ------------------------------
as a Lender
Domestic and Offshore Lending Office:
191 Peachtree Street NE
Atlanta, Georgia 30303
Attention: Karen Reynolds
Telephone: (404) 332-6446
Facsimile: (404) 332-6898
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Wachovia Bank of Georgia, N.A.
191 Peachtree Street NE
Atlanta, Georgia 30303
Attention: Steven Bennett
Telephone: (404) 332-6739
Facsimile: (404) 332-6898
5
<PAGE> 115
GUARANTY
THIS GUARANTY dated as of April 30, 1997, is executed in
favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent (in such capacity, the "Administrative
--------------
Agent") and the Lenders which are now or hereafter become
- -----
parties to the Credit Agreement referred to below.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, The Earthgrains Company (the "Company") has
-------
entered into an Amended and Restated Credit Agreement dated as of
April 30, 1997 (as amended, restated or otherwise modified from
time to time, the "Credit Agreement"; terms defined in the
----------------
Credit Agreement and not defined in this Guaranty are used herein
as defined in the Credit Agreement) with various financial
institutions (together with their respective successors and
assigns, the "Lenders"), Bank of America National Trust and
-------
Savings Association, as an Issuing Lender, and Bank of America
National Trust and Savings Association, as Administrative Agent;
and
WHEREAS, each of the undersigned will benefit from the
making of loans pursuant to the Credit Agreement and is willing
to guaranty the Liabilities (as defined below) as hereinafter set
forth;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each of
the undersigned hereby jointly and severally, unconditionally and
irrevocably, as primary obligor and not merely as surety,
guarantees the full and prompt payment when due, whether by
acceleration or otherwise, and at all times thereafter, of all
obligations (monetary or otherwise) of the Company to each of the
Lenders and the Administrative Agent under or in connection with
the Credit Agreement and the Notes, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent,
now or hereafter existing, or due or to become due, in each case
as the same may be amended, modified, extended or renewed from
time to time (all such obligations being herein collectively
called the "Liabilities"); provided, however, that
----------- -------- -------
the liability of each of the undersigned hereunder shall be
limited to the maximum amount of the Liabilities which such
undersigned may guaranty without violating any fraudulent
conveyance or fraudulent transfer law (plus all costs and
expenses paid or incurred by the Administrative Agent or any
Lender in enforcing this Guaranty against such undersigned).
Each of the undersigned agrees that, in the event of the
dissolution or insolvency of the Company or any undersigned, or
<PAGE> 116
the inability or failure of the Company or any undersigned to pay
debts as they become due, or an assignment by the Company or any
undersigned for the benefit of creditors, or the occurrence of
any other Event of Default under Section 9.1(f) or 9.1(g) of the
Credit Agreement, and if such event shall occur at a time when
any of the Liabilities may not then be due and payable, such
undersigned will pay to the Administrative Agent for the account
of the Lenders forthwith the full amount which would be payable
hereunder by such undersigned if all Liabilities were then due
and payable.
To secure all obligations of each of the undersigned
hereunder, and in addition to any rights and remedies of the
Lenders provided by law, if any Unmatured Event of Default under
subsection 9.1(a), (f) or (g) of the Credit Agreement or any
Event of Default exists, the Administrative Agent and each Lender
are authorized at any time and from time to time, without prior
notice to the undersigned, any such notice being expressly waived
by the undersigned to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, the Administrative Agent or
such Lender to or for the credit or the account of the
undersigned against any and all Liabilities owing to the
Administrative Agent or such Lender, now or hereafter existing,
irrespective of whether or not the Administrative Agent or such
Lender shall have made demand under this Guaranty or any other
Loan Document and although such Liabilities may not be due and
payable. The Administrative Agent and each Lender agree to
promptly notify the undersigned (and the Administrative Agent, if
applicable) after any such set-off and application; provided,
--------
however, that the failure to give such notice shall not
- -------
affect the validity of such set-off and application.
This Guaranty shall in all respects be a continuing,
absolute and unconditional guaranty, and shall remain in full
force and effect (notwithstanding, without limitation, the
dissolution of any of the undersigned or that at any time or from
time to time no Liabilities are outstanding) until all
Commitments have terminated and all Liabilities have been paid in
full.
The undersigned further agree that if at any time all or any
part of any payment theretofore applied by the Administrative
Agent or any Lender to any of the Liabilities is or must be
rescinded or returned by the Administrative Agent or such Lender
for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of the Company or any of
the undersigned), such Liabilities shall, for the purposes of
this Guaranty, to the extent that such payment is or must be
rescinded or returned, be deemed to have continued in existence,
-2-
<PAGE> 117
notwithstanding such application by the Administrative Agent or
such Lender, and this Guaranty shall continue to be effective or
be reinstated, as the case may be, as to such Liabilities, all as
though such application by the Administrative Agent or such
Lender had not been made.
The Administrative Agent or any Lender may, from time to
time, at its sole discretion and without notice to the
undersigned (or any of them), take any or all of the following
actions without affecting the obligations of the undersigned
hereunder: (a) retain or obtain a security interest in any
property to secure any of the Liabilities or any obligation
hereunder, (b) retain or obtain the primary or secondary
obligation of any obligor or obligors, in addition to the
undersigned, with respect to any of the Liabilities, (c) extend
or renew any of the Liabilities for one or more periods (whether
or not longer than the original period), alter or exchange any of
the Liabilities, or release or compromise any obligation of any
of the undersigned hereunder or any obligation of any nature of
any other obligor with respect to any of the Liabilities, (d)
release its security interest in, or surrender, release or permit
any substitution or exchange for, all or any part of any property
securing any of the Liabilities or any obligation hereunder, or
extend or renew for one or more periods (whether or not longer
than the original period) or release, compromise, alter or
exchange any obligations of any nature of any obligor with
respect to any such property, and (e) resort to the undersigned
(or any of them) for payment of any of the Liabilities when due,
whether or not the Administrative Agent or such Lender shall have
resorted to any property securing any of the Liabilities or any
obligation hereunder or shall have proceeded against any other of
the undersigned or any other obligor primarily or secondarily
obligated with respect to any of the Liabilities.
-3-
<PAGE> 118
Each of the undersigned hereby expressly waives: (a) notice
of the acceptance by the Administrative Agent or any Lender of
this Guaranty, (b) notice of the existence or creation or non-
payment of all or any of the Liabilities, (c) presentment,
demand, notice of dishonor, protest, and all other notices
whatsoever and (d) all diligence in collection or protection of
or realization upon any Liabilities or any security for or
guaranty of any Liabilities.
Notwithstanding any payment made by or for the account of
any of the undersigned pursuant to this Guaranty, the undersigned
shall not be subrogated to any right of the Administrative Agent
or any Lender until such time as the Administrative Agent and the
Lenders shall have received final payment in cash of the full
amount of all Liabilities.
Each of the undersigned further agrees to pay all reasonable
expenses (including reasonable attorneys' fees and legal
expenses) paid or incurred by the Administrative Agent or any
Lender in endeavoring to collect the Liabilities of such
undersigned, or any part thereof, and in enforcing this Guaranty
against such undersigned.
The creation or existence from time to time of additional
Liabilities to the Administrative Agent or the Lenders or any of
them is hereby authorized, without notice to the undersigned (or
any of them), and shall in no way affect or impair the rights of
the Administrative Agent or the Lenders or the obligations of the
undersigned under this Guaranty, including each of the
undersigned's guaranty of such additional Liabilities.
The Administrative Agent and any Lender may from time to
time, in accordance with Section 11.8 of the Credit Agreement,
without notice to the undersigned (or any of them), assign or
transfer any or all of the Liabilities or any interest therein;
and, notwithstanding any such assignment or transfer or any
subsequent assignment or transfer thereof, such Liabilities shall
be and remain Liabilities for the purposes of this Guaranty, and
each and every immediate and successive assignee or transferee of
any of the Liabilities or of any interest therein shall, to the
extent of the interest of such assignee or transferee in the
Liabilities, be entitled to the benefits of this Guaranty to the
same extent as if such assignee or transferee were a Lender.
No delay on the part of the Administrative Agent or any
Lender in the exercise of any right or remedy shall operate as a
waiver thereof, and no single or partial exercise by the
Administrative Agent or any Lender of any right or remedy shall
preclude other or further exercise thereof or the exercise of any
other right or remedy; nor shall any modification or waiver of
any provision of this Guaranty be binding upon the Administrative
Agent or the Lenders except as expressly set forth in a writing
duly signed and delivered on behalf of the Administrative Agent.
No action of the Administrative Agent or any Lender permitted
hereunder shall in any way affect or impair the rights of the
Administrative Agent or any Lender or the obligations of the
undersigned under this Guaranty. For purposes of this Guaranty,
Liabilities shall include all obligations of the Company to the
Administrative Agent or any Lender arising under or in connection
with the Credit Agreement or any Note, notwithstanding any right
or power of the Company or anyone else to assert any claim or
defense as to the invalidity or unenforceability of any
obligation, and no such claim or defense shall affect or impair
the obligations of the undersigned hereunder.
Pursuant to the Credit Agreement, (a) this Guaranty has been
delivered to the Administrative Agent and (b) the Administrative
-4-
<PAGE> 119
Agent has been authorized to enforce this Guaranty on behalf of
itself and each of the Lenders. All payments by the undersigned
pursuant to this Guaranty shall be made to the Administrative
Agent for the ratable benefit of the Lenders.
This Guaranty shall be binding upon the undersigned and the
successors and assigns of the undersigned; and to the extent that
the Company or any of the undersigned is either a partnership or
a corporation, all references herein to the Company and to the
undersigned, respectively, shall be deemed to include any
successor or successors, whether immediate or remote, to such
partnership or corporation. The term "undersigned" as used
herein shall mean all parties executing this Guaranty and each of
them, and all such parties shall be jointly and severally
obligated hereunder.
This Guaranty has been delivered at Chicago, Illinois, and
shall be construed in accordance with and governed by the
internal laws of the State of Illinois. Wherever possible each
provision of this Guaranty shall be interpreted in such manner as
to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
Guaranty.
This Guaranty may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, and
each such counterpart shall be deemed to be an original but all
such counterparts shall together constitute one and the same
Guaranty. At any time after the date of this Guaranty, one or
more additional persons or entities may become parties hereto by
executing and delivering to the Administrative Agent a
counterpart of this Guaranty. Immediately upon such execution
and delivery (and without any further action), each such
additional person or entity will become a party to, and will be
bound by all of the terms of, this Guaranty.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, SHALL
BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT
-------- -------
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN
THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. EACH OF THE UNDERSIGNED HEREBY EXPRESSLY
AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH
-5-
<PAGE> 120
LITIGATION AS SET FORTH ABOVE. EACH OF THE UNDERSIGNED FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, TO THE ADDRESS SET FORTH OPPOSITE ITS
SIGNATURE HERETO (OR SUCH OTHER ADDRESS AS IT SHALL HAVE
SPECIFIED IN WRITING TO THE ADMINISTRATIVE AGENT AS ITS ADDRESS
FOR NOTICES HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF ILLINOIS. EACH OF THE UNDERSIGNED HEREBY EXPRESSLY
AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
EACH OF THE UNDERSIGNED, AND (BY ACCEPTING THE BENEFITS
HEREOF) EACH OF THE ADMINISTRATIVE AGENT AND EACH LENDER, HEREBY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY, ANY OTHER
LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
-6-
<PAGE> 121
IN WITNESS WHEREOF, this Guaranty has been duly executed and
delivered as of the day and year first above written.
EARTHGRAINS BAKING COMPANIES, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
EARTHGRAINS REFRIGERATED DOUGH
PRODUCTS, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
The undersigned is executing a counterpart hereof for
purposes of becoming a party hereto:
---------------------------------
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
-7-
<PAGE> 122
NOTE
April 30, 1997
FOR VALUE RECEIVED, the undersigned, The Earthgrains
Company (the "Company"), hereby promises to pay to the order
-------
of Bank of America National Trust and Savings Association (the
"Lender") the aggregate unpaid principal amount of all Loans
------
made by the Lender to the Company pursuant to the Amended and
Restated Credit Agreement, dated as of April 30, 1997 (as amended
or otherwise modified from time to time, the "Credit
------
Agreement"), among the Company, various financial institutions
- ---------
from time to time party thereto, Bank of America National Trust
and Savings Association, as an Issuing Lender, and Bank of
America National Trust and Savings Association, as Administrative
Agent, on the dates and in the amounts provided in the Credit
Agreement. The Company further promises to pay interest on the
unpaid principal amount of the Loans evidenced hereby from time
to time at the rates, on the dates, and otherwise as provided in
the Credit Agreement.
The Lender is authorized to endorse the amount and the
date on which each Loan is made and each payment of principal
with respect thereto on the schedules annexed hereto and made a
part hereof, or on continuations thereof which shall be attached
hereto and made a part hereof; provided that any failure to
endorse such information on such schedule or continuation thereof
shall not in any manner affect any obligation of the Company
under the Credit Agreement and this Promissory Note (this
"Note").
----
This Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement, which Credit
Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain
stated events.
Terms defined in the Credit Agreement are used herein
with their defined meanings therein unless otherwise defined
herein. This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Illinois
applicable to contracts made and to be performed entirely within
such State.
<PAGE> 123
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed and delivered as of the day and year first above
written.
THE EARTHGRAINS COMPANY
By:
-------------------------------
Title:
-------------------------------
-2-
<PAGE> 124
Schedule A to Note
BASE RATE COMMITTED LOANS AND REPAYMENTS OF
-------------------------------------------
BASE RATE COMMITTED LOANS
-------------------------
(2) (3)
Amount of Amount of
Base Rate Base Rate (4)
(1) Committed Committed Notation
Date Loan Loan Repaid Made By
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
---------- ------------- ------------ --------
<PAGE> 125
Schedule B to Note
OFFSHORE RATE COMMITTED LOANS AND REPAYMENTS
--------------------------------------------
OF OFFSHORE RATE COMMITTED LOANS
--------------------------------
(3)
(2) Interest (4)
Amount of Period for Amount of
Offshore Offshore Offshore
Rate Rate Rate (5)
(1) Committed Committed Committed Notation
Date Loan Loan Loan Repaid Made By
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
- ---------- ----------- ------------- ------------- ----------
<PAGE> 126
Schedule C to Note
BID LOANS AND REPAYMENTS OF BID LOANS
-------------------------------------
(3)
(2) Interest (4)
Amount Period Amount
of for of (5)
(1) Bid Bid Bid Notation
Date Loan Loan Loan Repaid Made By
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
- --------- ---------- ---------- -------------- ---------
<PAGE> 127
NOTE
April 30, 1997
FOR VALUE RECEIVED, the undersigned, The Earthgrains
Company (the "Company"), hereby promises to pay to the order of
-------
The Boatmen's National Bank of St. Louis (the "Lender") the
------
aggregate unpaid principal amount of all Loans made by the Lender
to the Company pursuant to the Amended and Restated Credit
Agreement, dated as of April 30, 1997 (as amended or otherwise
modified from time to time, the "Credit Agreement"), among the
----------------
Company, various financial institutions from time to time party
thereto, Bank of America National Trust and Savings Association, as
an Issuing Lender, and Bank of America National Trust and Savings
Association, as Administrative Agent, on the dates and in the
amounts provided in the Credit Agreement. The Company further
promises to pay interest on the unpaid principal amount of the
Loans evidenced hereby from time to time at the rates, on the
dates, and otherwise as provided in the Credit Agreement.
The Lender is authorized to endorse the amount and the
date on which each Loan is made and each payment of principal with
respect thereto on the schedules annexed hereto and made a part
hereof, or on continuations thereof which shall be attached hereto
and made a part hereof; provided that any failure to endorse such
information on such schedule or continuation thereof shall not in
any manner affect any obligation of the Company under the Credit
Agreement and this Promissory Note (this "Note").
----
This Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement, which Credit
Agreement, among other things, contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events.
Terms defined in the Credit Agreement are used herein with
their defined meanings therein unless otherwise defined herein.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois applicable to
contracts made and to be performed entirely within such State.
<PAGE> 128
NOTE
April 30, 1997
FOR VALUE RECEIVED, the undersigned, The Earthgrains
Company (the "Company"), hereby promises to pay to the order of
-------
The Chase Manhattan Bank (the "Lender") the aggregate unpaid
------
principal amount of all Loans made by the Lender to the Company
pursuant to the Amended and Restated Credit Agreement, dated as of
April 30, 1997 (as amended or otherwise modified from time to time,
the "Credit Agreement"), among the Company, various financial
----------------
institutions from time to time party thereto, Bank of America
National Trust and Savings Association, as an Issuing Lender, and
Bank of America National Trust and Savings Association, as
Administrative Agent, on the dates and in the amounts provided in
the Credit Agreement. The Company further promises to pay interest
on the unpaid principal amount of the Loans evidenced hereby from
time to time at the rates, on the dates, and otherwise as provided
in the Credit Agreement.
The Lender is authorized to endorse the amount and the
date on which each Loan is made and each payment of principal with
respect thereto on the schedules annexed hereto and made a part
hereof, or on continuations thereof which shall be attached hereto
and made a part hereof; provided that any failure to endorse such
information on such schedule or continuation thereof shall not in
any manner affect any obligation of the Company under the Credit
Agreement and this Promissory Note (this "Note").
----
This Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement, which Credit
Agreement, among other things, contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events.
Terms defined in the Credit Agreement are used herein with
their defined meanings therein unless otherwise defined herein.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois applicable to
contracts made and to be performed entirely within such State.
<PAGE> 129
NOTE
April 30, 1997
FOR VALUE RECEIVED, the undersigned, The Earthgrains
Company (the "Company"), hereby promises to pay to the order of
-------
Morgan Guaranty Trust Company of New York (the "Lender") the
------
aggregate unpaid principal amount of all Loans made by the Lender
to the Company pursuant to the Amended and Restated Credit
Agreement, dated as of April 30, 1997 (as amended or otherwise
modified from time to time, the "Credit Agreement"), among the
----------------
Company, various financial institutions from time to time party
thereto, Bank of America National Trust and Savings Association, as
an Issuing Lender, and Bank of America National Trust and Savings
Association, as Administrative Agent, on the dates and in the
amounts provided in the Credit Agreement. The Company further
promises to pay interest on the unpaid principal amount of the
Loans evidenced hereby from time to time at the rates, on the
dates, and otherwise as provided in the Credit Agreement.
The Lender is authorized to endorse the amount and the
date on which each Loan is made and each payment of principal with
respect thereto on the schedules annexed hereto and made a part
hereof, or on continuations thereof which shall be attached hereto
and made a part hereof; provided that any failure to endorse such
information on such schedule or continuation thereof shall not in
any manner affect any obligation of the Company under the Credit
Agreement and this Promissory Note (this "Note").
----
This Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement, which Credit
Agreement, among other things, contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events.
Terms defined in the Credit Agreement are used herein with
their defined meanings therein unless otherwise defined herein.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois applicable to
contracts made and to be performed entirely within such State.
<PAGE> 130
NOTE
April 30, 1997
FOR VALUE RECEIVED, the undersigned, The Earthgrains
Company (the "Company"), hereby promises to pay to the order of
-------
The Bank of New York (the "Lender") the aggregate unpaid
------
principal amount of all Loans made by the Lender to the Company
pursuant to the Amended and Restated Credit Agreement, dated as of
April 30, 1997 (as amended or otherwise modified from time to time,
the "Credit Agreement"), among the Company, various financial
----------------
institutions from time to time party thereto, Bank of America
National Trust and Savings Association, as an Issuing Lender, and
Bank of America National Trust and Savings Association, as
Administrative Agent, on the dates and in the amounts provided in
the Credit Agreement. The Company further promises to pay interest
on the unpaid principal amount of the Loans evidenced hereby from
time to time at the rates, on the dates, and otherwise as provided
in the Credit Agreement.
The Lender is authorized to endorse the amount and the
date on which each Loan is made and each payment of principal with
respect thereto on the schedules annexed hereto and made a part
hereof, or on continuations thereof which shall be attached hereto
and made a part hereof; provided that any failure to endorse such
information on such schedule or continuation thereof shall not in
any manner affect any obligation of the Company under the Credit
Agreement and this Promissory Note (this "Note").
----
This Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement, which Credit
Agreement, among other things, contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events.
Terms defined in the Credit Agreement are used herein with
their defined meanings therein unless otherwise defined herein.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois applicable to
contracts made and to be performed entirely within such State.
<PAGE> 131
NOTE
April 30, 1997
FOR VALUE RECEIVED, the undersigned, The Earthgrains
Company (the "Company"), hereby promises to pay to the order of
-------
The First National Bank of Chicago (the "Lender") the aggregate
------
unpaid principal amount of all Loans made by the Lender to the
Company pursuant to the Amended and Restated Credit Agreement,
dated as of April 30, 1997 (as amended or otherwise modified from
time to time, the "Credit Agreement"), among the Company,
----------------
various financial institutions from time to time party thereto,
Bank of America National Trust and Savings Association, as an
Issuing Lender, and Bank of America National Trust and Savings
Association, as Administrative Agent, on the dates and in the
amounts provided in the Credit Agreement. The Company further
promises to pay interest on the unpaid principal amount of the
Loans evidenced hereby from time to time at the rates, on the
dates, and otherwise as provided in the Credit Agreement.
The Lender is authorized to endorse the amount and the
date on which each Loan is made and each payment of principal with
respect thereto on the schedules annexed hereto and made a part
hereof, or on continuations thereof which shall be attached hereto
and made a part hereof; provided that any failure to endorse such
information on such schedule or continuation thereof shall not in
any manner affect any obligation of the Company under the Credit
Agreement and this Promissory Note (this "Note").
----
This Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement, which Credit
Agreement, among other things, contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events.
Terms defined in the Credit Agreement are used herein with
their defined meanings therein unless otherwise defined herein.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois applicable to
contracts made and to be performed entirely within such State.
<PAGE> 132
NOTE
April 30, 1997
FOR VALUE RECEIVED, the undersigned, The Earthgrains
Company (the "Company"), hereby promises to pay to the order of
-------
Wells Fargo Bank, N.A. (the "Lender") the aggregate unpaid
------
principal amount of all Loans made by the Lender to the Company
pursuant to the Amended and Restated Credit Agreement, dated as of
April 30, 1997 (as amended or otherwise modified from time to time,
the "Credit Agreement"), among the Company, various financial
----------------
institutions from time to time party thereto, Bank of America
National Trust and Savings Association, as an Issuing Lender, and
Bank of America National Trust and Savings Association, as
Administrative Agent, on the dates and in the amounts provided in
the Credit Agreement. The Company further promises to pay interest
on the unpaid principal amount of the Loans evidenced hereby from
time to time at the rates, on the dates, and otherwise as provided
in the Credit Agreement.
The Lender is authorized to endorse the amount and the
date on which each Loan is made and each payment of principal with
respect thereto on the schedules annexed hereto and made a part
hereof, or on continuations thereof which shall be attached hereto
and made a part hereof; provided that any failure to endorse such
information on such schedule or continuation thereof shall not in
any manner affect any obligation of the Company under the Credit
Agreement and this Promissory Note (this "Note").
----
This Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement, which Credit
Agreement, among other things, contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events.
Terms defined in the Credit Agreement are used herein with
their defined meanings therein unless otherwise defined herein.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois applicable to
contracts made and to be performed entirely within such State.
<PAGE> 133
NOTE
April 30, 1997
FOR VALUE RECEIVED, the undersigned, The Earthgrains
Company (the "Company"), hereby promises to pay to the order of
-------
Wachovia Bank of Georgia, N.A. (the "Lender") the aggregate
------
unpaid principal amount of all Loans made by the Lender to the
Company pursuant to the Amended and Restated Credit Agreement,
dated as of April 30, 1997 (as amended or otherwise modified from
time to time, the "Credit Agreement"), among the Company,
----------------
various financial institutions from time to time party thereto,
Bank of America National Trust and Savings Association, as an
Issuing Lender, and Bank of America National Trust and Savings
Association, as Administrative Agent, on the dates and in the
amounts provided in the Credit Agreement. The Company further
promises to pay interest on the unpaid principal amount of the
Loans evidenced hereby from time to time at the rates, on the
dates, and otherwise as provided in the Credit Agreement.
The Lender is authorized to endorse the amount and the
date on which each Loan is made and each payment of principal with
respect thereto on the schedules annexed hereto and made a part
hereof, or on continuations thereof which shall be attached hereto
and made a part hereof; provided that any failure to endorse such
information on such schedule or continuation thereof shall not in
any manner affect any obligation of the Company under the Credit
Agreement and this Promissory Note (this "Note").
----
This Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement, which Credit
Agreement, among other things, contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events.
Terms defined in the Credit Agreement are used herein with
their defined meanings therein unless otherwise defined herein.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois applicable to
contracts made and to be performed entirely within such State.
<PAGE> 1
EMPLOYMENT AGREEMENT
--------------------
This Contract made between Barry H. Beracha ("Employee"), whose address
is 12843 Topping Manor Dr., St. Louis, MO 63131 and Campbell Taggart, Inc.,
a Delaware corporation with its principal place of business at 8400 Maryland
Ave., St. Louis, MO 63105, and its subsidiaries and affiliates ("the
Company").
In consideration of the mutual covenants and promises, hereinafter set
forth, the parties hereto agree as follows:
RECITALS
--------
WHEREAS, Employee is presently employed by the Company as its Chief
Executive Officer and also serves as Chairman of its Board of Directors and
has extensive experience as an executive level manager for the Company, and
WHEREAS, the Company is presently undergoing a spin-off from its parent
company, Anheuser-Busch Companies, Inc. ("A-BC"), and a business
reorganization and desires to secure Employee's employment for a definite
period of time in anticipation of such spin-off and reorganization, and to
prevent any other competitive business from securing his services and
utilizing his experience, background and expertise, and
WHEREAS, the terms, conditions and undertakings of this Agreement were
submitted to, reviewed and duly approved by the Executive Salaries
1
<PAGE> 2
Committee of the Board of Directors of A-BC, the current sole shareholder of
the Company.
WHEREAS, Employee desires to be employed by the Company in the
executive capacity described below:
NOW, THEREFORE, in consideration for the mutual covenants and promises
contained herein, the Company and Employee hereby agree as follows:
SECTION ONE
-----------
EMPLOYMENT
----------
The Company hereby employs Employee as its Chief Executive Officer.
Employee shall at all times discharge his duties in consultation with and
under the supervision of the Company's Board of Directors ("Board"). The
Company through its Board may modify or realign Employee's duties and
responsibilities in a manner consistent with the office of Chief Executive
Officer as it deems necessary during the term of this Agreement.
SECTION TWO
-----------
BEST EFFORTS OF EMPLOYEE
------------------------
Employee agrees that he will diligently and conscientiously devote his
full and exclusive time and attention and best efforts in discharging all of
the duties that may be required of or from him pursuant to the express and
implicit terms hereof. Employee acknowledges that he is obligated to
2
<PAGE> 3
manage the business of the Company in a sound and business like manner and in
conformity with all laws and regulations governing the conduct of the
business of the Company including, but not limited to, laws and regulations
relating to anti-trust, employment practices, employee health and safety, and
environmental matters. Employee may, with prior approval of the Company's
Board, serve as a director for other corporations so long as doing so does
not interfere with his ability to effectively manage the business of the
Company.
SECTION THREE
-------------
TERM
----
A. This Employment Agreement is contingent upon the Company's
completion of its spin-off from A-BC and reorganization as an independent and
publicly traded corporation. In the event that such spin-off and
reorganization does not occur, this Agreement shall be deemed to be null and
void, and of no effect.
B. In the event that such spin-off and reorganization is completed,
this Agreement shall continue until March 31, 2001 unless otherwise
terminated in accordance with the provisions of SECTION FIVE hereof. This
Agreement may be extended for additional periods upon the mutual written
agreement of the parties.
3
<PAGE> 4
SECTION FOUR
------------
COMPENSATION
------------
A. Effective April 1, 1996, the Company shall pay Employee a monthly
base salary of $41,667.00, payable on the 15th and last day of each month
less applicable state and federal taxes. The base salary may be changed by
mutual agreement of the parties at any time during the term of this
Agreement; provided, however, that until March 31, 2001, Employee's monthly
base salary shall not be less than the amount set forth above.
B. In addition to his base salary, commencing in 1996 Employee shall
be eligible to receive an annual incentive bonus as determined by the Board,
with an annual target amount of $300,000.00.
C. Upon completion of the Company's spin-off as a publicly traded
corporation, Employee shall be eligible to receive 83,333 shares of
restricted Company stock grants, plus stock options for 208,333 shares of
Company stock. The number of shares of Company stock grants and options is
based on an anticipated spin-off distribution of one share of common stock of
the Company for each 25 shares of common stock of A-BC. In the event that
the actual distribution ratio is higher or lower, the number of Company
shares provided to Employee will be adjusted proportionally. In the event
that Employee's employment with the Company is terminated for reasons other
than those set forth in Section Five B of this Agreement, Employee's interest
in all Company stock options and restricted stock grants shall automatically
vest. All stock grants and options are subject to the terms and
4
<PAGE> 5
conditions of the formal incentive stock plan and agreement to be adopted by
the Company's Board or its authorized committee.
D. In addition to the above base salary, Employee shall be provided
with an executive level benefit program including stock options and/or stock
grants, Company provided automobile, membership in a country club and
luncheon club, and tax and financial planning counseling, and such other
benefits as determined by the Company's Board.
SECTION FIVE
------------
TERMINATION
-----------
A. The Company reserves the right to terminate the employment of
Employee at any time without cause. However, except as provided in SECTION
FIVE B. below, if such termination occurs prior to March 31, 2001, Employee
shall be entitled to his base salary as set forth in SECTION FOUR A. until
March 31, 2001 provided that Employee remains in compliance with the terms
and conditions of this Agreement. During any period of time in which
Employee's base salary is continued pursuant to this SECTION FIVE, Employee
agrees that he shall make himself available to render consulting services, as
requested by the Company, from time to time until such time as he may become
employed on a full-time basis elsewhere.
B. Notwithstanding the other provisions of this Agreement, the
Company shall be entitled to terminate this Agreement immediately and without
notice if, at any time during this Agreement, Employee: refuses without cause
to perform his assigned duties, is openly critical in the media
5
<PAGE> 6
of the Company, engages in any conduct which the Company's Conflicts of
Interest Committee determines to be in material violation of the Conflicts of
Interests policy published by the Company, or is convicted or pleads guilty
or nolo contendere to any felony or any charge involving illegal drugs or any
other crime involving moral turpitude, or materially breaches the provisions
of Section Eight of this Agreement. In such case the Company shall only be
obligated to pay Employee any base salary due (prorated on a daily basis) to
the date of the breach or other occurrence.
C. In the event that Employee's employment is terminated for any
reason, Employee shall not be eligible to participate in any severance pay
plan established by the Company for its employees.
SECTION SIX
-----------
DEATH AND DISABILITY BENEFITS
-----------------------------
A. If during the term of this Agreement, Employee becomes so
disabled or incapacitated that he is unable to perform the duties of Chief
Executive Officer, the Company shall continue to pay Employee his base
monthly salary through March 31, 2001. This amount may be paid in a lump sum
in the discretion of the Board.
B. If Employee dies during the term of this Agreement, the Company
shall pay Employee's base monthly salary, through March 31, 2001, to either a
revocable living trust established by Employee, or if none, then to his
estate. This amount may be paid in a lump sum in the discretion of the
Board.
6
<PAGE> 7
SECTION SEVEN
-------------
BENEFITS
--------
It is agreed that in addition to the benefits set out in Section Four
D, during the term of this Agreement, Employee shall be eligible for coverage
under such pension plan, group health insurance plan, 401(k) stock purchase
plan/ESOP, vacation, holiday and other employee programs or policies in
effect from time to time for salaried employees of the Company, except as
provided in SECTION FIVE C. above. Neither participation in any such plan,
program or policy nor continuation of base compensation to Employee pursuant
to SECTION FIVE A. shall be deemed to extend Employee's employment with the
Company or his participation in any such plan, program or policy.
SECTION EIGHT
-------------
CONFIDENTIALITY
---------------
Employee agrees that, in addition to any other limitations contained in
this Agreement, regardless of the circumstances of Employee's termination of
employment, he will not communicate to any person, firm, corporation or other
entity, any information relating to the Company's customer lists, prices,
secrets, advertising, nor any other confidential knowledge or secrets that
Employee might from time to time acquire with respect to the business of the
Company or any of its affiliates or subsidiaries. Employee also specifically
acknowledges the continued validity and effect of any Agreement as to
Confidentiality and Inventions previously signed by Employee and that the
7
<PAGE> 8
terms of any such agreement are incorporated into this Agreement by this
reference.
SECTION NINE
------------
ARBITRATION
-----------
As additional consideration for this Employment Agreement, Employee
agrees that any differences, claims, or matters in dispute arising between
the Company and Employee out of or in connection with his employment or the
termination of his employment by the Company including, but not limited to
the terms and conditions of this Agreement, allegations of wrongful
termination, or allegations of discriminatory or retaliation discharge under
any federal, state or local discrimination law shall be submitted by them to
arbitration by the American Arbitration Association, or its successor, and
the determination of the American Arbitration Association, or its successor,
shall be final and absolute. The arbitrator shall be governed by the duly
promulgated rules and regulations of the American Arbitration Association, or
its successor, and the pertinent provisions of the laws of the State of
Missouri relating to arbitration. The decision of the arbitrator may be
entered as a judgment in any court of competent jurisdiction in the State of
Missouri or elsewhere.
SECTION TEN
-----------
MISCELLANEOUS PROVISIONS
------------------------
A. This Agreement represents the entire agreement between the
parties and any prior understandings or representations of any kind of
8
<PAGE> 9
preceding the date of this Agreement shall not be binding on either party
except to the extent incorporated into this Agreement. This Agreement shall
not be altered, amended or modified except in writing signed by the
authorized agent for the Company's Board and by Employee.
B. Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by Employee, his beneficiaries, or legal
representatives without the Company's prior written consent; provided,
however, that nothing in this Section shall preclude (i) Employee from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives
of his estate from assigning or transferring any rights hereunder to the
person or persons entitled thereunto.
C. The headings of sections are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
D. This Agreement shall be construed according to the laws of the
State of Missouri.
E. No term or condition of the Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel. No such written waiver shall be deemed
a continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived
9
<PAGE> 10
and shall not constitute a waiver of such term or condition for the future or
of any act other than that specifically waived.
F. If, for any reason, any provision of the Agreement is held
invalid, such invalidity shall not affect any other provision of the
Agreement not held so invalid, and each such other provision shall to the
full extent consistent with law continue in full force and effect.
G. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
SECTION ELEVEN
--------------
NOTICE
------
Any notice given hereunder shall be in writing and delivered or mailed
by registered or certified mail, return receipt requested:
A. To the Company, addressed to its Corporate Secretary, 8400
Maryland Ave. St. Louis, MO. 63103;
B. To Employee, at 12843 Topping Manor Drive, St. Louis, MO. 63131,
or such other address as contained in the Company's current payroll records.
The parties have entered into this Employment Agreement based solely
upon the terms and conditions set forth herein. THIS AGREEMENT
10
<PAGE> 11
CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
_____ day of _______________, 19__.
CAMPBELL TAGGART, INC.
By: __________________________
Its Authorized Agent
THE COMPANY
________________________________
BARRY H. BERACHA
EMPLOYEE
11
<PAGE> 1
EMPLOYMENT AGREEMENT(III)
-------------------------
This Contract made between _________________________________
("Employee"), whose address is _____________________ and
____________________, a ___________ corporation with its principal place of
business at _____________________________________________, and its
subsidiaries and affiliates ("the Company").
In consideration of the mutual covenants and promises, hereinafter set
forth, the parties hereto agree as follows:
RECITALS
--------
WHEREAS, Employee is presently employed by the Company as ____________
and has extensive experience as an executive level manager for the Company,
and
WHEREAS, the Company is presently contemplating a spin-off from its
parent company, Anheuser-Busch Companies, Inc., and a business reorganization
and desires to secure Employee's employment for a definite period of time in
anticipation of such spin-off and reorganization, and
WHEREAS, Employee desires to be employed by the Company in the
executive capacity described below:
NOW, THEREFORE, in consideration for the mutual covenants and promises
contained herein, the Company and Employee hereby agree as follows:
<PAGE> 2
SECTION ONE
-----------
EMPLOYMENT
----------
The Company hereby employs Employee as its ____________________
_______________________________________. Employee's day to day reporting
responsibilities shall be to the Company's _________________. The Company
may modify or realign Employee's duties and responsibilities as it deems
necessary during the term of this Agreement.
SECTION TWO
-----------
BEST EFFORTS OF EMPLOYEE
------------------------
Employee agrees that he will at all times faithfully and to the best of
his ability, experience and talent, perform all of the duties that may be
required of or from him pursuant to the express and implicit terms hereof.
Employee acknowledges that he is obligated to manage the business of the
Company in a sound and business like manner and in conformity with all laws
and regulations governing the conduct of the business of the Company
including, but not limited to, laws and regulations relating to anti-trust,
employment practices, employee health and safety, and environmental matters.
SECTION THREE
-------------
TERM
----
A. This Employment Agreement is contingent upon the Company's
completion of its anticipated spin-off and reorganization as an independent
and publicly traded corporation. In the event that such spin-off and
reorganization does not occur, this Agreement shall be deemed to be null and
void, and of no effect.
2
<PAGE> 3
B. In the event that such spin-off and reorganization is completed,
this Agreement shall continue until December 31, 1998 unless otherwise
terminated in accordance with the provisions of SECTION SIX hereof. This
Agreement may be extended for additional periods upon the mutual written
agreement of the parties.
SECTION FOUR
------------
COMPENSATION
------------
A. Effective _________________, 199_, the Company shall pay Employee
a monthly base salary of $_______, payable on the 15th and last day of each
month. The base salary may be changed by mutual agreement of the parties at
any time during the term of this Agreement; provided, however, that until
December 31, 1998, Employee's monthly base salary shall not be less than the
amount set forth above.
B. In addition to the above base salary, Employee shall be provided
with an executive level benefit program including stock options and/or stock
grants as determined by the Company.
SECTION FIVE
------------
CHANGE OF CONTROL
-----------------
If, prior to the spin-off and reorganization of the Company, the
Company is either merged or consolidated with any other corporation, or the
Company sells all or substantially all of its assets, and as a result
thereof, Employee is either terminated or suffers a substantial reduction in
his present level of responsibilities, the Company agrees to pay Employee a
lump sum payment equivalent to his current annualized base salary. This
provision shall be void and of no effect upon completion of the Company's
spin-off and reorganization.
3
<PAGE> 4
SECTION SIX
-----------
TERMINATION
-----------
A. The Company reserves the right to terminate the employment of
Employee at any time without cause. However, except as provided in SECTION
SIX B. below, if such termination occurs prior to December 31, 1998,
Employee shall be entitled to his base salary as set forth in SECTION FOUR A.
until December 31, 1998 provided that Employee remains in compliance with the
terms and conditions of this Agreement. During any period of time in which
Employee's base salary is continued pursuant to this SECTION SIX, Employee
agrees that he shall make himself available to render consulting services, as
requested by the Company, from time to time until such time as he may become
employed on a full-time basis elsewhere.
B. Notwithstanding the other provisions of this Agreement, the
Company shall be entitled to terminate this Agreement immediately and without
notice if, at any time during this Agreement, Employee: (i) refuses without
cause to perform his assigned duties, be openly critical in the media of
officers or directors of the Company, engage in any conduct which the
Company's Conflicts of Interest Committee determines to be inimical to or
contrary to the best interests of the Company, be convicted or plead guilty
or nolo contendere to any felony or any charge involving illegal drugs or any
other crime involving moral turpitude, or otherwise materially breach this
Agreement, (ii) becomes incapable by reason of physical or mental disability
of performing the essential functions of his position, or (iii) dies. In
such case the Company shall only be obligated to pay Employee any base salary
due (prorated on a daily basis) to the date of the breach or other
occurrence.
4
<PAGE> 5
C. In the event that Employee's employment is terminated for any
reason, Employee shall not be eligible to participate in any severance pay
plan established by the Company for its employees.
SECTION SEVEN
-------------
BENEFITS
--------
It is agreed that, during the term of this Agreement, Employee shall be
eligible for coverage under such pension plan, group health insurance plan,
401(k) stock purchase plan/ESOP, vacation, holiday and other employee
programs or policies in effect from time to time for salaried employees of
the Company, except as provided in SECTION SIX C. above. Neither
participation in any such plan, program or policy nor continuation of base
compensation to Employee pursuant to SECTION SIX A. shall be deemed to extend
Employee's employment with the Company or his participation in any such plan,
program or policy.
SECTION EIGHT
-------------
CONFIDENTIALITY
---------------
Employee agrees that, in addition to any other limitations contained in
this Agreement, regardless of the circumstances of Employee's termination of
employment, he will not communicate to any person, firm, corporation or other
entity, any information relating to the Company's customer lists, prices,
secrets, advertising, nor any other confidential knowledge or secrets that
Employee might from time to time acquire with respect to the business of the
Company or any of its affiliates or subsidiaries. Employee also specifically
acknowledges the continued validity and effect of any Agreement as to
Confidentiality and Inventions previously signed by Employee and that the
terms of any such agreement are incorporated into this Agreement by this
reference.
5
<PAGE> 6
SECTION NINE
------------
ARBITRATION
-----------
As additional consideration for this Employment Agreement, Employee
agrees that any differences, claims, or matters in dispute arising between
the Company and Employee out of or in connection with his employment or the
termination of his employment by the Company including, but not limited to
the terms and conditions of this Agreement, allegations of wrongful
termination, or allegations of discriminatory or retaliation discharge under
any federal, state or local discrimination law shall be submitted by them to
arbitration by the American Arbitration Association, or its successor, and
the determination of the American Arbitration Association, or its successor,
shall be final and absolute. The arbitrator shall be governed by the duly
promulgated rules and regulations of the American Arbitration Association, or
its successor, and the pertinent provisions of the laws of the State of
Missouri relating to arbitration. The decision of the arbitrator may be
entered as a judgment in any court of the State of Missouri or elsewhere.
SECTION TEN
-----------
MISCELLANEOUS PROVISIONS
------------------------
A. This Agreement represents the entire agreement between the
parties and any prior understandings or representations of any kind of
preceding the date of this Agreement shall not be binding on either party
except to the extent incorporated into this Agreement. This Agreement shall
not be altered, amended or modified except in writing signed by the President
of the Company and by Employee.
6
<PAGE> 7
B. This Agreement shall be binding upon and shall inure to the
benefit of the assigns, heirs, legatees or personal representatives of
Employee and the successors or assigns of the Company.
C. Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by Employee, his beneficiaries, or legal
representatives without the Company's prior written consent; provided,
however, that nothing in this Section shall preclude (i) Employee from
designating a beneficiary to receive any benefit payable hereunder upon his
death, or (ii) the executors, administrators, or other legal representatives
of his estate from assigning or transferring any rights hereunder to the
person or persons entitled thereunto.
D. The headings of sections are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
E. This Agreement shall be construed according to the laws of the
State of Missouri.
F. No term or condition of the Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel. No such written waiver shall be deemed
a continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or of any act
other than that specifically waived.
7
<PAGE> 8
G. If, for any reason, any provision of the Agreement is held
invalid, such invalidity shall not affect any other provision of the
Agreement not held so invalid, and each such other provision shall to the
full extent consistent with law continue in full force and effect.
The parties have entered into this Employment Agreement based solely
upon the terms and conditions set forth herein. THIS AGREEMENT CONTAINS A
BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
_____ day of _______________, 19__.
________________________________
By: _______________________________
Its President
THE COMPANY
____________________________________
EMPLOYEE
8
<PAGE> 1
SENIOR EXECUTIVE AGREEMENT
An Agreement made in Barcelona on October twenty-three nineteen
ninety six.
BETWEEN
Of the one part:
MR. BARRY H. BERACHA, a US citizen, of legal age, executive, with
address at 12843 Topping Manor Drive, St. Louis, MO. and provided
with passport no. H 340775.
Of the other part:
MR. JAVIER ARGENTE ARINO, a Spanish national, of legal age,
married, engineer, with address at Mare de Deu de Nuria 24-26,
08017 Barcelona and provided with national identity card no.
46.219.014-P.
THEY ACT
MR. BARRY H. BERACHA, on behalf of BIMBO, S.A., a Spanish
corporation having its registered office at Granollers, Carretera
de Barcelona s/n, organized in public deed executed on 7 March,
1964 before the Notary of Barcelona Mr. Luis Felez, recorded in the
Commercial Registry of Barcelona (hereinafter the "COMPANY"). The
COMPANY is a subsidiary of The Earthgrains Company, with address at
8400 Maryland Avenue, St. Louis MO 63105-3668, USA (the
"EARTHGRAINS COMPANY").
MR. JAVIER ARGENTE ARINO, (hereinafter the "EXECUTIVE"), in his own
name and right. Mr. Argente expressly accepts that the contents of
this document form an integral part of his employment contract with
the COMPANY and undertakes, on the basis of the principle of good
faith, to comply with the terms set forth herein.
WHEREAS
The two parties wish to regulate the terms and conditions governing
the position of "Consejero Delegado" (Chief Executive Officer-CEO-)
to be held by the EXECUTIVE.
NOW, THEREFORE, mutually acknowledging their legal capacity to
contract and undertake obligations, particularly for this contract,
the parties agree to regulate their reciprocal obligations in
accordance with the provisions of Royal Decree 1382/1985 and the
following
1
<PAGE> 2
CLAUSES
ONE. - APPOINTMENT AND TERM OF OFFICE
------------------------------
1.1 The EXECUTIVE renders his services to the COMPANY as
"Consejero Delegado" (Chief Executive Office -CEO-) as from 22
March 1996 under the terms of the Royal Decree 1382/1985.
1.2 This contract will expire on December 31, 1998. However, it
will be subject to successive three year renewal terms, unless the
COMPANY delivers notice of termination in writing at least three
months before the referred date or expiration of any of the three
year extensions.
TWO. - RECOGNITION OF LENGTH OF SERVICE
--------------------------------
The COMPANY recognizes the EXECUTIVE a length of service, for all
effects, including termination of this contract, as from 15 June
1987 on which date he joined the company as executive assistant to
the Chairman.
THREE. - DUTIES AND OBLIGATIONS
----------------------
The EXECUTIVE shall exercise the powers and authority corresponding
to the position of "Consejero Delegado" (Chief Executive Officer -
CEO-) with the diligence expected from a senior executive and in
accordance with the applicable rules and regulations governing said
position.
Throughout the term of this Agreement, and without prejudice to the
obligations and responsibilities inherent in the position held by
the EXECUTIVE, the latter shall:
a) Devote the necessary attention to his duties within the
COMPANY, serving the latter faithfully with his knowledge and
experience, and use his best endeavors to promote the
interests and appropriate development of the COMPANY.
b) Meet and comply with all reasonable demands of the
administrative bodies of the COMPANY, providing such
explanations, information and assistance as may be required of
him in respect of his duties and activities within the
COMPANY.
c) Not to undertake any other activities that may be detrimental
to the adequate performance of his obligations hereunder.
d) Unless expressly authorized by the Board of Directors of the
COMPANY, not to perform any work other than that contemplated
in this contract, nor act as manager or executive of any
company other than the COMPANY or its subsidiaries.
2
<PAGE> 3
e) Inform the Board of Directors of the COMPANY of any
remuneration that he may obtain, directly or indirectly, as a
result of any commitment or opportunity arising by virtue of
his position in the COMPANY.
f) With the effects contemplated in Spanish law, expressly accept
his full, exclusive devotion to the COMPANY during the term of
his employment contract with same. In particular, the
EXECUTIVE may not render his services either directly or
indirectly or through any intermediary, whether an individual
or a company, to any other firm, company or individual in
competition with THE EARTHGRAINS COMPANY or the COMPANY and,
in particular, with the business of production, marketing and
distribution of bread and pastry. This obligation will also
apply after termination of this agreement if this is due to
the EXECUTIVE leaving the COMPANY before December 31, 1998 in
which case this obligation shall expire upon the referred
date.
The obligation contemplated in the proceeding paragraph is
compensated with the remuneration received from the COMPANY,
since it is expressly agreed that said remuneration includes
the corresponding compensation.
g) The holding of any position or office in subsidiaries or
associated companies of the COMPANY are excepted from the
prohibitions established in paragraphs c), d) and f) above.
FOUR. - REMUNERATION AND REIMBURSEMENT FOR EXPENSES
-------------------------------------------
4.1. The EXECUTIVE shall receive a minimum gross annual base sum of
thirty million pesetas (Ptas. 30,000,000) as remuneration for his
services.
This remuneration shall be paid in fifteen (15) installments: one
in each of the twelve calendar months and three additional
installments, payable in May, July and December.
The gross annual base remuneration shall compensate and include all
sums the EXECUTIVE is entitled to by virtue of applicable
provisions of law, regulations or collective agreements, and any
sum corresponding to taxes, social security contributions or
similar shall be deducted therefrom.
4.2. The EXECUTIVE shall also be entitled to:
a) Life insurance, covering, in the event of death, three times
the gross annual fixed remuneration received at the time of
death.
b) Accident insurance covering a total of three times the gross
annual fixed remuneration in the event of permanent disability
to a minimum degree, and one year's salary in the event of
death.
3
<PAGE> 4
c) Stock options and grants on the shares in THE EARTHGRAINS
COMPANY, according to the scheme of the COMPANY.
d) Medical insurance, according to specific scheme for the
COMPANY management.
e) An annual bonus based on the terms and conditions that the
parties may agree from time to time.
f) Retirement indemnity at the age of 65 years, in a sum
equivalent to one year's salary at the gross annual fixed
remuneration, plus the average variable bonus received in the
last three years, provided that he has been in effective
service within the COMPANY for at least fifteen years and is
still employed by the COMPANY or the EARTHGRAINS COMPANY at
the time of retirement.
4.3. Furthermore, the EXECUTIVE shall be reimbursed for any
expenses incurred in acts of representation and travel in
fulfillment of his obligations within the COMPANY, which expenses
shall be duly justified. The EXECUTIVE shall have the use of a
credit card against an account of the COMPANY, which he shall use
exclusively for the payment of expenses attributable to said
COMPANY, complying with the traditional company rules in this
respect.
FIVE. - INDEMNIFICATION AGREEMENT
-------------------------
It is expressly agreed that the AGREEMENT signed on 27 March 1996
between THE EARTHGRAINS COMPANY and the EXECUTIVE, attached as
Annex I hereto, is deemed incorporated in this contract and,
therefore, forms an integral part hereof.
SIX. - CONFIDENTIALITY AND TRADE SECRETS
---------------------------------
During such term as this contract shall remain in effect, the
EXECUTIVE shall not disclose to any other person or company, in
Spain or overseas, any information concerning the affairs,
business, contracts, finance, commercial contracts, clients or any
other matters relating to the COMPANY without express authorization
by the latter, save as may be required in the performance of his
duties or when such disclosure shall benefit the COMPANY, and shall
take such measures as may be necessary to prevent the publication
of any trade secrets, know-how or information.
6.1. Both during the effective term of his contract with the
COMPANY and after termination thereof, he shall keep strictly
secret all confidential information regarding the details and
peculiarities of the operations and business of the COMPANY
and/or its subsidiaries and associated companies, that is, any
information of whatsoever nature that is not general knowledge
outside the COMPANY.
6.2. The obligation to keep trade secrets means that he shall not
make use of any information regarding the transactions or
potential transactions of the COMPANY and shall not
4
<PAGE> 5
disclose to anyone, save as duly authorized by the latter, any
confidential information or trade secret regarding the activities
of the COMPANY or its associates, nor provide any information
whatsoever on any inventions, research, commercial plans or
market surveys made or undertaken by or for the COMPANY and/or
its subsidiaries or associated companies.
6.3. In any case, he undertakes to leave at the disposal of the
COMPANY all documents, samples, materials, drawings or plans
relating to the activities of the latter that he may have in
his possession when his employment therein shall cease.
6.4. Any default of the trade secrecy obligation established in
this clause shall be deemed fair grounds for dismissal and the
COMPANY may, if it deems fit, claim for the relevant
compensation for damages.
SEVEN. - PROFESSIONAL ETHICS
-------------------
The EXECUTIVE shall, in his relations with the personnel and
clients of the COMPANY, act strictly in accordance with the
internationally recognized rules of professional conduct and
ethics.
EIGHT. - AMENDMENTS TO CONTRACT
----------------------
Any modification of amendment of the clauses of this contract shall
be made in writing.
NINE. - BREACH OF CONTRACT
------------------
The EXECUTIVE accepts that any default by him of the diligence
expected from a senior executive or of the terms and conditions of
this Agreement with the COMPANY shall represent a breach of trust
and, consequently, shall be deemed as fair grounds for termination
of this Agreement, without prejudice to any actions that the
COMPANY may bring against him for damages.
TEN. - TERMINATION OF THE CONTRACT
---------------------------
10.1 NON-RENEWAL
-----------
Should the COMPANY decide not to renew the Agreement at the end of
the term provided in clause 1.2, it will pay the EXECUTIVE an
amount equal to 1,5 (one and a half) years' cash salary.
If the COMPANY does not renew the Agreement after December 31, 2001
or any of the subsequent three year terms, then the EXECUTIVE will
be entitled to a compensation of 2 (two) years' cash salary.
5
<PAGE> 6
These amounts will include and cover any and all other payments the
EXECUTIVE may be entitled to by law and will in no way exceed the
total amount of 2 (two) years' cash gross annual base remuneration,
except for accrued and not yet paid pro-rata installment payments
("pagas proporcionales") of such remuneration and for accrued and
not yet paid bonuses (under clause 4.2.e).
10.2 VOLUNTARY TERMINATION
---------------------
Either party may terminate the special labor relationship regulated
herein at any time, serving written notice to the other party at
least three months in advance. In the event of voluntary
termination by the COMPANY, clause 10.6 will apply.
10.3 DISMISSAL
---------
The COMPANY may terminate the employment contract at any moment
with no need for any advance notice in the event of a serious
breach of contract by the EXECUTIVE or default of the diligence
expected from a senior executive. If the COMPANY's decision is
declared fair, the EXECUTIVE shall not be entitled to the severance
payment established in the following paragraph.
10.4 SEVERANCE PAYMENT FOR UNFAIR DISMISSAL
--------------------------------------
a) If the dismissal is declared unfair, or if the COMPANY
voluntarily terminates the Agreement in accordance with clause
10.2, or if the termination is made on the grounds of
redundancy, the EXECUTIVE shall be entitled to severance pay
in a sum equivalent to forty-five days' salary in cash per
year of service with a maximum of 24 months' salary. The
salary for this purpose shall be the gross annual base
remuneration in cash received at the time of termination plus
the average annual payments in cash made in respect of the
variable bonus over the last three years.
b) By way of exception, if before 31 December 1998 the COMPANY
unfairly dismisses the EXECUTIVE, voluntarily terminates the
Agreement in accordance with clause 10.2 or if the termination
is made on the grounds of redundancy, the EXECUTIVE will be
entitled to the highest of: (i) the amount resulting from the
calculation under paragraph a) above or (ii) the gross annual
base remuneration under clause 4.1 to be accrued between the
time the Agreement terminates and 31 December 1998.
10.5 AMOUNTS COVERED BY SEVERANCE PAYMENT
------------------------------------
Any severance payment or other payment made to EXECUTIVE under this
clause should be offset by any other payments upon severance and
thus will include and cover any such payments, including for
termination of a previous labor relationship, whether those
payments are mandated by law, contract or by the EARTHGRAINS
COMPANY or the COMPANY policies.
6
<PAGE> 7
10.6 RIGHT TO OPT
------------
In the event of non renewal or voluntary termination by the COMPANY
under Clause 10.1 or 10.2 above, the EXECUTIVE may opt between: (a)
receiving the compensation established in clause 10.1 for the case
of non renewal of 10.4 for the case of voluntary termination
respectively or (b) returning to the position of "Director General"
held prior to his appointment as "Consejero Delegado" (Chief
Executive Officer -CEO-).
After opting to return to the post of General Manager, the
EXECUTIVE may resign from such position during the following six
months, in which case he would receive compensation as per clause
10.1 or 10.4 above as the case may be, with the same seniority as
agreed in Clause 2.
ELEVEN. - NON-COMPETITION
---------------
In the event this Agreement be terminated on any ground whatsoever,
the parties agree that the COMPANY may request from the EXECUTIVE
that the EXECUTIVE shall not enter into competition with the
COMPANY for a maximum term of two years immediately after the
termination of this Agreement. The decision with regard to such
request and term of duration (up to the said maximum of two years)
shall exclusively correspond to the COMPANY, which at its sole
discretion may request or waive its right of requesting compliance
with such non competition obligation by the EXECUTIVE, as well as
fix the duration period of said non-competition obligation.
In case that the COMPANY decides to request the compliance with the
non-competition obligation, the EXECUTIVE shall be entitled to
receive an amount equal to the EXECUTIVE's average gross annual
base cash remuneration be enforced, payable at the end of each
quarter. However, any amounts paid to the EXECUTIVE upon
termination or non renewal of the Agreement under clause 10 will be
offset from the compensation EXECUTIVE would be entitled to under
this clause with regard to the non-competition obligation,
deduction being made from the first quarterly payments.
In the event of breach of this obligation by the EXECUTIVE, the
COMPANY shall be entitled to demand the repayment of all amounts
paid under the provisions of the foregoing paragraph, plus legal
interest in those amounts. Furthermore, the COMPANY may demand
payment of a compensation amounting to the last annual salary
received by the EXECUTIVE.
TWELVE. - RETURN OF COMPANY PAPERS
------------------------
Upon termination of this contract, the EXECUTIVE shall return to
the COMPANY all correspondence, documents, client lists, reports,
files and any other property belonging to the COMPANY, and all
copies that he may have in his possession or under his control,
which shall at all times be the execlusive property of the COMPANY,
and the EXECUTIVE waives any rights that he may have by virtue of
the temporary possession or control of the aforesaid information or
objects.
7
<PAGE> 8
THIRTEEN. - APPLICABLE LAW AND JURISDICTION
-------------------------------
In all respects not contemplated herein, the parties shall abide by
the applicable provisions of Spanish law or regulations. The
parties expressly agree to submit any issues or actions filed or
arising from or in relation to the interpretation, fulfillment or
default of the terms and conditions set forth herein to the courts
and tribunals of Barcelona, with express waiver of any other
jurisdiction that may correspond to them.
In witness whereof, the parties execute this agreement in three
counterparts, at the date and place first above mentioned.
THE COMPANY THE EXECUTIVE
8
<PAGE> 1
THE EARTHGRAINS COMPANY 1997 ANNUAL REPORT
[EARTHGRAINS LOGO]
<PAGE> 2
A fresh BEGINNING
We are proud to present the first annual report of The Earthgrains Company,
an international manufacturer, distributor, and consumer marketer of fresh
baked goods and refrigerated dough products. | The Earthgrains name reflects
our values -- freshness, health, taste, variety and excellence. Founded in
1925 in America's heartland and formerly known as Campbell Taggart, Inc.,
Earthgrains was spun off as an independent company from Anheuser-Busch
Companies, Inc. in March 1996. | Earthgrains, listed on the New York Stock
Exchange under the EGR symbol, operates four businesses in the United States
and Europe:
[PICTURE]
U.S. BAKERY PRODUCTS markets packaged fresh-baked bread, buns, rolls and
snack cakes under leading brands in the Southeast, South, Southwest, Midwest
and Northern California.
[PICTURE]
U.S. REFRIGERATED DOUGH PRODUCTS supplies customers nationwide with biscuits,
cinnamon rolls, cookie dough, toaster pastries and pie crusts, primarily under
retailers' store brands (private label).
[PICTURE]
EUROPEAN BAKERY PRODUCTS, known as Bimbo, S.A., (pronounced Beem-bo) is Spain's
largest baker of American-style sliced bread, buns and rolls, and Portugal's
second-largest seller of those products.
[PICTURE]
EUROPEAN REFRIGERATED DOUGH PRODUCTS, known as Europate, S.A., is the only
supplier of canned dough products in Europe and also produces rolled dough
products.
===============================================================================
Earthgrains has more than 11,000 employees in the United States and almost
3,000 in Europe who are dedicated to carrying out the Company's mission --
providing superior customer service, offering consumer satisfaction through
quality products, and increasing shareholder value.
===============================================================================
TABLE OF CONTENTS
Financial Highlights 1 Letter to Shareholders 2 Earthgrains at a Glance 4
Recipe for Success & Appetite for Growth 9 Financial Contents 16
Officers of The Earthgrains Company and Its Principal Subsidiaries 40
Board of Directors and Corporate Information 41
<PAGE> 3
<TABLE>
Financial Highlights
<CAPTION>
----------------------------------------
For years ended
- ----------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share amounts) March 25, 1997 March 26, 1996<F1>
==========================================================================================================
Pro Forma
<S> <C> <C>
Net Sales $1,662.6 $1,660.5
Net Income (loss) $ 16.2 $ (29.9)
Earnings (loss) per Share $ 1.60 $ (2.93)
Excluding nonrecurring charges and credits:<F2>
Net Income (loss) $ 18.8 $ (18.3)
Earnings (loss) per Share $ 1.86 $ (1.80)
EBITDA<F3> $ 126.2 $ 67.6
EBITDA Margin 7.6% 4.1 %
Operating Income (loss) $ 40.3 $ (17.4)
Operating Margin 2.4% (1.0)%
==========================================================================================================
</TABLE>
Net Sales [GRAPH]
(In millions)
Sales in 1997 show an increase of 4.4 percent over the year-ago period when
the comparison is adjusted to eliminate facilities sold or closed because of
restructuring. Revenue increased in all four businesses during 1997.
Earnings (loss) per Share [GRAPH]
(In dollars)
Growth in earnings per share reflects Earthgrains' significant turnaround
during its first year as an independent public company.
- -------------------------------------------------------------------------------
EBITDA Margin [GRAPH]
(As percent)
EBITDA margin nearly doubled in fiscal 1997, compared with the margin in the
year-ago period. Improved cash flow continues to be an important target for
future performance.
Debt-to-Capitalization Ratio [GRAPH]
(As percent)
Modest debt provides Earthgrains with a strong capital platform for growth
and significant financial flexibility to take advantage of industry
consolidation opportunities.
===============================================================================
[FN]
<F1> Unaudited pro forma information (see page 17) produces more
meaningful comparisons with actual results for fiscal 1997;
however, the pro forma information is not necessarily indicative
of results that would have occurred if the Company had been an
independent company during the comparable year-ago period for
1996.
<F2> 1997 amounts exclude a $12.7 million provision for restructuring
and $5.3 million in Spanish tax incentives and credits. 1996 amounts
exclude a $3.0 million provision for restructuring, $7.8 million for
the Spanish work force reduction program and $7.6 for a legal
settlement and other nonrecurring costs.
<F3> EBITDA is earnings before interest expense, income texes, depreciation
and amortization.
<F4> 1996 sales have been adjusted to eliminate facilities sold or closed
because of restructuring.
THE EARTHGRAINS COMPANY 1
<PAGE> 4
Letter to Shareholders
I am very pleased to report The Earthgrains Company's accomplishments in its
first year as an independent public company. We have several important
positives to report: stock price appreciation, increased profitability, and
increased revenues. As we celebrate the renewed success of our company in
the United States and Europe, we are also looking to the future. We are
hungry to increase shareholder value further. Our results in fiscal 1997
represent a solid start that is indicative of Earthgrains' significant
potential for additional improvement.
FIRST-YEAR GOALS MET, ADDITIONAL GOALS SET A year ago, we stated a clear
goal: to improve revenues and profitability. We accomplished that. Revenues
from ongoing operations were $1.663 billion, up 4.4 percent from the comparable
year-ago period. More important, our operating margins improved in all four
businesses in the United States and Europe. Net income, excluding nonrecurring
charges, was $18.8 million, up from a pro forma loss of $18.3 million.
[PHOTO]
The result was a total return on your investment of 69 percent -- a
figure that includes our dividends and stock appreciation, which outperformed
the S&P 500. Earnings per share, excluding one-time charges, were $1.86, up
from a pro forma loss of $1.80 per share in the equivalent year-before
period. In other moves, the Earthgrains Board of Directors declared a
2-for-1 stock split effective July 28, 1997, and authorized repurchase of up
to 500,000 shares, or 5 percent of shares outstanding, subject to a favorable
Internal Revenue Service ruling.
As you can see, our turnaround progress has been good -- particularly
in our U.S. and European bakery operations. Given our current trends, we
expect even better performance. We want to be the best in the industry and
drive shareholder value. By fiscal 2000, our goal is to more than double our
operating margin, taking it to 5 percent. Our goal for EBITDA margin --
earnings before interest expense, income taxes, depreciation and amortization
- -- is 10 percent, with a stretch goal of 11 percent. These goals are
supported by our new exceptional performance compensation program.
We will continue to move toward these goals by using our business
strategies that worked so well this first year:
* Offering quality, value and variety of products to consumers
* Enhancing customer satisfaction -- being the preferred supplier to
customers
* Reducing and controlling costs
* Taking advantage of industry consolidation opportunities
TURNAROUND THROUGH FOCUS, FLEXIBILITY AND REWARDS As an independent
company, Earthgrains has developed a culture of focus, flexibility and rewards
to improve shareholder value.
We like the opportunities in our core business areas of packaged
fresh-baked goods and refrigerated dough products -- both in the United
States and in Europe. In bakery, we focus on building branded business to
drive margins. In dough, we focus on operational excellence to provide
customers with the finest quality store-brand products. Our businesses in the
United States and Europe are parallel, and we are able to take advantage of
many lessons learned to benefit both domestic and international operations.
We have made significant turnarounds in our U.S. and European bakery
products businesses, where we boosted profits and sales. We have lowered
costs through re-engineered operations and have improved product mix,
including new products and line extensions. In Spain, Bimbo, S.A., has
increased market share and enjoys one of the most recognizable names in the
branded food business.
2 THE EARTHGRAINS COMPANY
<PAGE> 5
A strong balance sheet has given Earthgrains the flexibility to respond
quickly to industry conditions and market opportunities. We were spun off in
sound financial condition, and we have done a good job of managing our cash.
Earthgrains' debt-to-capitalization ratio of 15 percent gives us flexibility
and a strong platform for growth.
Our strong balance sheet also allows us to invest in disciplined
high-return-on-investment capital projects, such as construction of our first
Portuguese bakery, which will come on line in the summer of 1998 to meet
increasing demand for bakery products in Portugal and northwest Spain. Our
investment in information technology, such as the latest handheld computers,
category management software, electronic partnerships with customers, and
business application software, sets us apart from the competition. The
benefits are numerous, including enhanced customer partnering, reduced
distribution costs, and other efficiencies.
[GRAPH]
One of the most significant changes in our culture has been aligning
the interests of management and employees with shareholders. Earthgrains has
many employee-owners through its 401(k) plan and its Employee Stock Purchase
Plan. Employee 401(k) contributions are matched by the company through
investment in Earthgrains stock. We use business focal points, such as
increasing revenue, increasing manufacturing and selling efficiencies, and
improving safety, to link rewards with performance that drives EBITDA and
Return on Capital Employed (ROCE). Moreover, Earthgrains' new Exceptional
Performance Plan, an aggressive, broad-based compensation plan for more than
160 key executives, links significant one-time cash awards to reaching
financial performance measures of 10 percent and 11 percent EBITDA margin
concurrent with ROCE above the cost of capital. These programs and other
incentives are critical to increasing shareholder value.
TAKING ADVANTAGE OF GROWTH AND CONSOLIDATION We began our independence with
a vision of getting better, then bigger. We are better, and our improvements
in our first year have put us in position to improve profitability even further
and to take advantage of appropriate growth opportunities -- within existing
markets and in new territory.
Public ownership of the leading U.S. baking companies has resulted in
positive fundamental change in the industry and a move away from its
commodity nature. The factors for growth of U.S. Bakery Products are in
place. Bread and baked goods consumption is steady, and customers are willing
to pay more for premium products with unique qualities and tastes. We are
making fundamental changes by being innovative with our customers and
offering superior products, such as our successful shelf-stable bagels, which
consumers enjoy for their taste, value and nutrition.
We will continue to take advantage of consolidation in the U.S. baking
industry for profitable growth. In the past year, we have rationalized our
capacity while improving customer service, revenue and product quality. We
were able to move quickly to reach an agreement to supply Jitney-Jungle
Stores of America with branded and store-brand breads using our existing
bakery capacity. We also entered into production and licensing agreements
with Interstate Bakeries Corp. in north Texas and Virginia.
Our acquisition in December 1996 of Heiner's Bakery, Inc. of
Huntington, W.Va., almost immediately added to earnings. With our strong
balance sheet and cash position, we are seeking further acquisitions to
enhance revenues, profitability and return on capital.
Earthgrains is moving forward according to plan. We have hard-working,
dedicated employees (many of whom are shareholders), solid relationships with
customers, and a strong mix of products and businesses -- all of which we can
build on. I look forward to reporting our progress to you in the future.
Sincerely,
/s/ Barry H. Beracha
Barry H. Beracha
Chairman and Chief Executive Officer
June 13, 1997
THE EARTHGRAINS COMPANY 3
<PAGE> 6
Earthgrains at a Glance
<TABLE>
<CAPTION>
Net Sales
(In millions)
- --------------------------------
<S> <C>
/ / U.S. $1,297.1
/ / European 365.5
- --------------------------------
Total $1,662.6
</TABLE>
[GRAPH]
U.S. operations accounted for 78 percent of total sales in 1997, while
European operations contributed 22 percent. Sales for all four businesses
increased in 1997, and all operate in healthy, growing markets.
<TABLE>
<CAPTION>
Operating Income<F*>
(In millions)
<S> <C>
- --------------------------------
/ / U.S. $15.1
/ / European 25.2
- --------------------------------
Total $40.3
</TABLE>
[GRAPH]
Turnaround in European Bakery Products significantly contributed to operating
income in 1997. A turnaround in U.S. operations is under way and continued
improvement should contribute to an increasing percentage of total operating
income in subsequent years.
[FN]
<F*>See footnote 2 on page 1, Financial Highlights.
- -------------------------------------------------------------------------------
U.S. BAKERY PRODUCTS
- -------------------------------------------------------------------------------
PRODUCTS Earthgrains is the third-largest bread and baked goods
producer in the United States. Fresh-baked products sold to retail grocers
include white, wheat, pan, and hearth-baked breads and rolls, as well as
bagels, snack cakes, cookies and other sweet goods. Earthgrains supplies
specialty buns and rolls, sandwich buns, and other bakery products for food
service and fast-food customers such as Burger King, Pizza Hut and Waffle
House.
MARKETS Earthgrains markets its popular, premium and superpremium
products under leading brand names in 27 states in the Southeast, South,
Southwest, Midwest and Northern California -- representing about a third of
the U.S. population. Earthgrains brands hold the No. 1 or No. 2 market
position in 16 of the Company's 19 sales zones. Earthgrains distributes
baked goods through more than 2,800 direct-store delivery routes and more
than 240 thrift stores.
OVERVIEW Earthgrains continues to roll out new products to supplement
its lineup of popular pan breads, premium variety breads, superpremium
hearth-baked breads, and other baked goods. Earth Grains(R) brand
shelf-stable bagels have captured a significant market share in their first
year.
Earthgrains operates 33 bakeries serving pan bread markets in a
300-mile radius of its plants.
U.S. Bakery Products also has three Diversified Products bakeries,
which make such products as hearth-baked breads, croissants, breadsticks,
snack cakes, and cookies for distribution throughout Earthgrains' markets.
Earthgrains has entered an agreement to acquire its bagel co-packer, H&L
Baking Co. of Albuquerque, N.M., to bring specialized bagel production into
the company's Diversified Products operation.
- -------------------------------------------------------------------------------
U.S. REFRIGERATED DOUGH PRODUCTS
- -------------------------------------------------------------------------------
PRODUCTS Earthgrains is the second-largest producer of refrigerated
dough products in the United States. The Company makes packaged dough
products that are sold through grocery refrigerated sections, including
canned biscuits, crescent rolls, cinnamon rolls, cookie dough, breadsticks,
pizza crust, and refrigerated pie crusts. The Company also makes toaster
pastries.
MARKETS Earthgrains is the only manufacturer of store-brand
refrigerated dough products, which are marketed nationwide under more than
200 store brands. Earthgrains co-packs brand-name cookie dough and is one of
the largest producers of store-brand toaster pastries.
Products are also sold under Earthgrains' Merico(R) brand name as well
as under the Sun Maid(R) brand. Refrigerated dough products are distributed
throughout the United States, primarily by direct sales to large retail
grocery chains and grocery wholesalers.
OVERVIEW Earthgrains manufactures refrigerated dough products at its
Forest Park, Ga., and Carrollton, Texas, plants, with a focus on operational
excellence.
In the last year, U.S. Refrigerated Dough Products has improved its
product mix and streamlined its pricing system to improve customer service
significantly.
Working in conjunction with the Earthgrains R&D Center, Refrigerated
Dough Products quickly develops products for customers to meet consumer
demand and market trends. New products introduced in the last year include
3-inch-diameter Jumbos biscuits and cinnamon rolls, and a line of low-fat
toaster pastries.
- -------------------------------------------------------------------------------
EUROPEAN BAKERY PRODUCTS
- -------------------------------------------------------------------------------
PRODUCTS Earthgrains' Spanish subsidiary, Bimbo, S.A., operates eight
bakeries and is the leading producer of fresh-baked sliced bread, buns, and
rolls in Spain. Bimbo is the second-largest marketer of fresh-baked sliced
bread in Portugal. In addition to baked breads, buns, and rolls, Bimbo makes
snack cakes and other sweet goods.
MARKETS More than 90 percent of European Bakery Products sales come
from branded goods, including Bimbo(R) brand white breads and Silueta(R)
brand wheat breads. More than 200 branded products are marketed through
almost 1,100 direct-store delivery routes.
A store-brand bread business is operated separately under Bimbo's Pimad
subsidiary.
OVERVIEW Bimbo, S.A., founded in 1964, introduced American-style sliced
bread to Spain. Bimbo, which was acquired by Earthgrains in 1971, had some
of the same founders as Grupo Industrial Bimbo in Mexico, but the two
companies have always been independent.
Bimbo, headquartered in Barcelona, Spain, is one of the top food
companies in Spain with high consumer awareness and high customer service
ratings. The growing sliced-bread markets in Spain and Portugal have
prompted the recently completed expansion of Bimbo's Canary Islands bakery
and the construction of a new bakery in northern Portugal, which will become
operational in the summer of 1998.
- -------------------------------------------------------------------------------
EUROPEAN REFRIGERATED DOUGH PRODUCTS
- -------------------------------------------------------------------------------
PRODUCTS Earthgrains' French subsidiary, Europate, S.A., operates one
refrigerated dough plant and is the only manufacturer of canned refrigerated
dough in Europe. Europate also makes rolled dough -- used to prepare foods
such as quiches and tarts.
MARKETS Europate's refrigerated dough products are sold throughout
Europe, primarily through contract packing arrangements with major
international food companies. In France, canned dough and rolled dough
products are also produced and sold under Earthgrains' CroustiPate and
HappyRoll brands.
OVERVIEW Earthgrains started Europate more than 20 years ago.
Europate's growth strategies include increasing sales of its own brands in
France, and increasing exports of canned dough to its customers throughout
Europe.
4 THE EARTHGRAINS COMPANY
<PAGE> 7
- -------------------------------------------------------------------------------
U.S. BRANDS
- -------------------------------------------------------------------------------
[COLONIAL LOGO]
[RAINBO LOGO]
[HEINER'S LOGO]
Popular white bread and bakery products with taste, freshness and value for
the whole family
[IRONKIDS LOGO]
Popular white bread for children with all the fiber and many important
nutrients of whole-wheat bread
[EARTHGRAINS LOGO]
Superpremium specialty breads, bagels and other bakery products
[GRANT'S FARM LOGO]
Premium soft variety breads
[BREAK CAKE LOGO]
Snack cakes and sweet goods
[MERICO LOGO]
Toaster pastries and a full line of refrigerated dough products, including
biscuits, dinner rolls, cinnamon rolls, cookie dough, and pie crusts
- -------------------------------------------------------------------------------
EUROPEAN BRANDS
- -------------------------------------------------------------------------------
[BIMBO LOGO]
Popular white breads, buns and rolls
[SILUETA LOGO]
Premium variety breads
[CROUSTIPATE LOGO]
Superpremium rolled and canned dough products made with pure butter
[BIMBOY LOGO]
Popular enriched white bread for children
[BIMBO CAO LOGO]
Snack cakes
[HAPPY ROLL LOGO]
Premium rolled and canned dough products made with margarine
THE EARTHGRAINS COMPANY 5
<PAGE> 8
- -------------------------------------------------------------------------------
U.S. DISTRIBUTION TERRITORY AND PLANT LOCATIONS
- -------------------------------------------------------------------------------
[MAP]
HEADQUARTERS
------------------
* St. Louis
* REFRIGERATED DOUGH PLANTS (2)
--------------------------------
(National distribution)
Carrollton, Texas
Forest Park, Georgia
* BAKERY PRODUCT PLANTS (36)
- ---------------------------------------
* California Region
CALIFORNIA
Fresno
Oakland
Sacramento
Stockton
* Southwest Region
COLORADO
Denver
Pueblo
ARIZONA
Phoenix
Tucson
NEW MEXICO
Albuquerque
* Texas Region
TEXAS
Dallas
El Paso
Harlingen
Houston
Lubbock
San Antonio
* Central Region
IOWA
Des Moines
KANSAS
Hutchinson
Wichita
OKLAHOMA
Oklahoma City
MISSOURI
Springfield
* Mid-south Region
KENTUCKY
Louisville
Owensboro
TENNESSEE
Memphis
Nashville
MISSISSIPPI
Meridian
* Southeast Region
ALABAMA
Dothan
Huntsville
Montgomery
GEORGIA
Macon
Atlanta
TENESSEE
Chattanooga
Johnson City
* Heiner's
WEST VIRGINIA
Huntington
* Diversified Product Plants
(National distribution)
Paris, Texas
Fort Payne, Alabama
Rome, Georgia
- -------------------------------------------------------------------------------
EUROPEAN PLANT LOCATIONS
- -------------------------------------------------------------------------------
* BAKERY PRODUCT PLANTS (8)
----------------------------
SPAIN
Almansa
Antequera
Canary Islands
Granollers
Las Mercedes
Madrid
Palma
Solares
PORTUGAL
Albergaria-a-Velha
(Summer 1998)
* REFRIGERATED DOUGH PLANT
---------------------------
FRANCE
Lievin
[MAP]
THE EARTHGRAINS COMPANY 6
<PAGE> 9
[PICTURE]
TRANSATLANTIC SYNERGY | The parallels between Earthgrains' bakery and dough
operations in Europe and in the United States increase the Company's
competitiveness in both markets. The two-way exchange of information, strategy
and operating tactics is helping all four businesses improve. | All of the
four businesses are profitable, and in healthy, growing markets. The
businesses use similar production processes, ingredients, distribution
processes, and technology. | For example, the handheld computer technology
initiated by U.S. Bakery Products is now used by Bimbo, S.A., in Spain. And
because the Spanish and Portuguese sliced-bread market is developing 20 to 30
years after the U.S. market, Bimbo is able to apply lessons learned in the
United States. Similarly, U.S. Bakery has adopted techniques used in Spain
to reduce selling expenses caused by seasonal volume fluctuations.
[PHOTO]
CHRIS HOLLOWAY, ROUTE SALES REPRESENTATIVE, ST. LOUIS
THE EARTHGRAINS COMPANY 7
<PAGE> 10
BUILDING BETTER BAGELS AND JUMBO CINNAMON ROLLS
We refer to the operations in our 44,000-squarefoot R&D Center in St. Louis as
"little r and Big D." That's because our focus is on the development of
products that will have a positive impact on the bottom line. Our new Earth
Grains brand shelf-stable bagels is one example. Our R&D specialists were
challenged to "build a better bagel" -- one that would not only taste great but
would also retain its freshness longer without refrigeration. Mission
accomplished. Since being rolled out across the entire Earthgrains market
area, the bagels have captured more than 15 percent of the market, and our
share is still growing. Another big product accomplishment was the fast
development of Jumbos, our 3-inch-diameter canned cinnamon rolls and biscuits,
to meet the needs of our refrigerated dough retail customers.
[PHOTO]
8 THE EARTHGRAINS COMPANY
<PAGE> 11
RECIPE for SUCCESS
APPETITE for GROWTH
[PHOTO]
A fresh beginning has turned into a year of achievement for The Earthgrains
Company and success for its shareholders. Earthgrains heads into the second
year of its independence in a healthy position to further improve and grow as
a leading provider of foods made from grain in the United States and Europe.
Top brands, quality consumer products, superior customer service, operational
efficiencies, and employee satisfaction have been integral to the Company's
turnaround. Continuous improvement in each of these areas is critical for
Earthgrains' future success. In fiscal 1997, Earthgrains improved margins
and revenues in all four of its businesses. The Company's focus on
improving profitability -- both for Earthgrains and for its customers -- and
the flexibility of a strong balance sheet have put Earthgrains in position to
take advantage of opportunities in a consolidating U.S. baking industry and
to continue to build Company value.
THE EARTHGRAINS COMPANY 9
<PAGE> 12
STRATEGY: Offering quality, value and variety of products to consumers
Quality, Value and Variety
Consumers have embraced the superior nutritional qualities of foods
made from grains. Healthy diets call for steady consumption of staples such
as white and variety wheat breads. In addition, consumers want premium breads
and rolls that are rich in texture and taste -- which is consistent with
Earthgrains' efforts to introduce more high-quality, higher-margin products.
Earthgrains' bread brands in America and Europe are some of the
strongest in the baking industry. Domestically, brands such as IronKids(R),
Colonial(TM), Rainbo(R), Heiner's(TM), Earth Grains(R) and Grant's Farm(TM)
give Earthgrains market share leadership in its territory, which includes
roughly a third of the nation's population.
Brand building continues through the introduction of high-quality,
value-added products. These include shelf-stable bagels and Harvest Top(TM)
superpremium breads, both marketed under the Earth Grains brand name; and Old
Family Recipe(TM), a home-style bread made with granulated sugar and milk,
marketed under the Colonial and Rainbo brands.
In Europe, the Company's bakery brands, including Bimbo and Silueta,
hold a commanding market leadership position for bread and buns in Spain --
almost 60 percent, which is more than twice the market share of the nearest
competitor. Bimbo, S.A., created the American-style sliced-bread market in
Spain. Just five years after entering Portugal, Bimbo holds more than a
fifth of that market, second overall in market share. Line extensions and
new products, such as the premium Boutique de Bimbo bread and new Silueta
brand whole-wheat varieties, are driving sales in the growing sliced-bread
market in Spain and Portugal.
In its refrigerated dough businesses, Earthgrains is focused on
operational excellence. Earthgrains is one of only two refrigerated dough
producers in the United States. It is the only producer of canned
refrigerated dough in Europe. The Company serves the U.S. market primarily
through store-brand products and its Merico brand. Through operational
excellence, Earthgrains provides customers with proven products that taste as
good as or better than the branded competitor's products, and it does so
without the added costs associated with marketing and new-product
introductions. In the last year, Earthgrains was able to quickly roll out
3-inch biscuits and cinnamon rolls, called Jumbos, in the United States after
the branded leader introduced this new category of larger products. More
products are nearing rollout.
Earthgrains' European refrigerated dough subsidiary, Europate, S.A.,
distributes its own line of products under the CroustiPate and HappyRoll
brands in France. The Company also produces canned refrigerated dough
products for other multinational food companies throughout Europe.
[PHOTO]
BRAND LEADERSHIP
Earthgrains is No. 1 or No. 2 in 16 of its 19 U.S. Bakery Products sales
zones. Strong brands such as IronKids, Colonial, Rainbo, Heiner's, Earth
Grains and Grant's Farm give Earthgrains the market share leadership in its
total sales territory.
[PHOTO]
THE NAME IN SPAIN IS BIMBO
In Spain, the name Bimbo is almost synonymous with American-style sliced
sandwich bread. Branded products account for more than 90 percent of our
sales in Spain. Increased marketing initiatives, product-line extensions, and
new products will play a significant part in continued profitable growth.
10 THE EARTHGRAINS COMPANY
<PAGE> 13
[PHOTO]
PUMPING UP SALES WITH IRONKIDS IronKids bread, a white bread that appeals
to children's tastes, is a brand builder and a body builder. It has all the
fiber and many of the important nutrients of whole-wheat bread. A longtime
creative marketing campaign -- including the staging of popular triathlons for
children, product support through commercials, sponsorship of the 1996 Summer
Olympics in Atlanta, and the IronKids Internet web site (www.ironkids.com) --
has made IronKids one of the leading brands in the Earthgrains market area
since its introduction in 1989.
[PHOTO]
EMPLOYEES DRIVE OPPORTUNITIES The success of The Earthgrains Company is
dependent on employees and their commitment to the Company's vision and
business mission. Earthgrains uses a Total Quality Commitment (TQC) team
approach to problem-solving. The Company encourages its employees at all
levels to make improvements and increase competitiveness. Earthgrains has also
increased the training offered to employees -- particularly in problem-solving,
communications, and statistical analysis. Plant employees oversee product
quality by using Quality Control Points, a TQC team procedure to improve
product consistency and cost efficiencies.
Veronica Gonzalez of the Carrollton, Texas, refrigerated dough plant checks
the weight of Jumbos biscuits.
THE EARTHGRAINS COMPANY 11
<PAGE> 14
STRATEGY: Enhancing customer satisfaction
Valued Customers, Valued Partners
In America and Europe, Earthgrains is forging innovative partnerships.
The Company is seeking more customer feedback and is conducting more research
to achieve that end. New opportunities are being discovered -- and seized.
To get closer to customers and their needs, U.S. Bakery Products reorganized
its management last year, moving six executives from corporate headquarters
into the field. This management structure is better aligned with the
regional nature of both the baking industry and the retail grocery business.
The result has been sales and baking operations that are better coordinated
to meet customer needs.
Information and data analysis are critical to customer partnerships.
Earthgrains is making a significant investment in technology to serve
customers better, to improve quality, and to lower costs. For example, the
latest handheld computer technology will help Earthgrains put the right
product in the right place at the right time for customers. Business
decisions by retail grocers are increasingly driven by data, and Earthgrains
is a leader in investing in technology to analyze information. Innovative
customer partnerships will set Earthgrains apart from the competition.
Technology is also playing an integral role in category management efforts
with retailers -- another way to grow sales and margins for both the Company
and its customers.
[MAP]
Last year, U.S. Bakery Products reorganized its management into a regional
operating structure. The new system has resulted in better coordination of
sales and baking operations to meet customer needs.
[PHOTO]
A KEY INGREDIENT: TECHNOLOGY Earthgrains is investing in technology and
computer software applications to hone its strategic decision making, to help
customers sell product, to track and analyze sales data, and to improve
business efficiency. In addition to updating handheld computer software for
delivery route drivers, our major initiatives include category management
programs, electronic partnerships with customers, and incorporation of business
application software by SAP (Systems, Applications and Products in Data
Processing). Through category management, Earthgrains is actively working
with several customers to analyze how to stock bread shelves to enhance
consumer satisfaction, and to maximize returns. Our objective is to increase
sales and margins above industry averages for both Earthgrains and retailers.
We use our computer technology and database systems to analyze product mix,
bread rack size and layout, and a store's local demographic data to determine
the best way to sell bakery products. The use of SAP business application
software has significantly reduced Earthgrains' accounts payable processing
costs and improved its working capital management. U.S. Refrigerated Dough
products analyzed SAP-generated information and data to streamline pricing
schedules and focus on operational excellence. SAP will continue to help
Earthgrains increase its return on information.
12 THE EARTHGRAINS COMPANY
<PAGE> 15
TAKING BREAD COSTS OUT OF THE OVEN
Earthgrains' $4.2 million plant modernization in Albuquerque, N.M., is an
example of disciplined capital spending with high return on investment. A
new oven, state-of-the-art makeup equipment, and substantial plant
infrastructure improvements have increased speed, quality, and production
flexibility. With the improvements, the plant can meet growing bread demand
across New Mexico. A second, less-efficient plant in the state has been
closed. Revenues are up, and costs are down. That makes the Albuquerque
project an improvement that pays for itself.
[PHOTO]
Albuquerque, N.M., bakery employee Sylvia Moliner prepares buns for
packaging.
U.S. Refrigerated Dough Products significantly improved customer
service by using a new sales information software system to analyze its
performance. The result will be improved product mix on customers' shelves,
the simplification of promotional pricing schedules, and improved
cost-effectiveness.
STRATEGY: Reducing and controlling costs
Cost Improvements Boost Margins
Earthgrains made significant cost improvements in its first year, and
more are planned for fiscal 1998. Cost reductions have played a major part
in improving margins. Earthgrains will continue to look for opportunities to
rationalize capacity within its system and to make other improvements that
lead to better quality and lower costs.
Several U.S. Bakery Products initiatives resulted in reduced costs.
These included reduction of ingredient waste, reduced workers' compensation
costs through improved safety performance, better production line efficiency,
baking efficiency improvements through reciprocal baking between plants, and
reduction of stale returns.
For better efficiency within its system, Earthgrains closed the
Indianapolis, Ind., dough plant and is expanding operations at its
Carrollton, Texas, dough plant. Bakery production at Earthgrains' Augusta,
Ga., plant was transferred to the more modern Atlanta bakery.
THE EARTHGRAINS COMPANY 13
<PAGE> 16
The Roswell, N.M., bakery was also closed. Its production transferred to the
expanded Albuquerque, N.M., bakery. Customer-service levels and revenues were
maintained or enhanced in each case.
In Europe, Bimbo re-engineered its operations to reduce administrative
costs and increase efficiencies. Europate has efforts under way to reduce
ingredient costs and improve efficiencies for refrigerated dough operations.
Earthgrains began to implement a new financial information software
system in 1996. The benefits include reduced accounts payable processing
costs and improved working capital management.
STRATEGY: Taking advantage of industry consolidation opportunities
Industry Consolidation Continues
Earthgrains is active in industry consolidation, using its strong
balance sheet to take advantage of opportunities to build brands, to improve
margins, to rationalize capacity, to lower costs, and to enhance shareholder
value. Earthgrains made several moves in fiscal 1997 to strengthen its
position in existing territories and to expand into a contiguous market.
In December 1996, Earthgrains bought Heiner's Bakery, Inc. of
Huntington, W.Va., bringing a new market-leading fresh-bread brand into its
group, along with an opportunity to introduce Earthgrains' premium bread
products into a new territory.
[PHOTO]
Through supply and licensing agreements, Earthgrains was able to help
rationalize capacity and improve efficiency in the U.S. baking industry. In
June 1996, Earthgrains assumed the production, distribution and marketing of
the Interstate Bakeries Corp. (IBC) bread brands in Texas under a licensing
agreement. IBC closed its Dallas bakery and took ownership of Earthgrains'
Roanoke, Va., bakery, where it assumed production, distribution and marketing
of Earthgrains' brands in Virginia.
In April 1996, Earthgrains entered into a supply agreement with
Jitney-Jungle Stores of America, Inc., to supply more than 100 of that
retailer's grocery stores in Mississippi and five other Southern states with
our brands and Jitney-Jungle store-brand bread, buns and snack cakes.
Earthgrains absorbed the added production into its Meridian, Miss., bakery, and
Jitney-Jungle was able to close its bakery.
Moving Forward
The Earthgrains Company continues to focus on the factors driving its
success -- product quality, value and variety; superior customer service;
information technology; efficient operations; participation in industry
consolidation; and a dedicated work force aligned with shareholder interests.
The result is a profitable company growing in value.
[PHOTO]
UNIQUE DOUGH
Europate, S.A., is the only European producer of canned dough products. Our
CroustiPate brand's products are uniquely designed to meet French consumer
tastes for flaky and short-crust dough.
ACQUIRING A BIGGER BREAD BASKET
When Heiner's Bakery of Huntington, W.Va., went up for sale in mid-1996,
Earthgrains took note -- and took action. Heiner's had an enviable market
share (42 percent) in a contiguous territory to Earthgrains' markets; it
marketed strictly branded breads; and it would add to the Earthgrains bottom
line almost immediately.
As an independent company, Earthgrains had the flexibility to quickly
assess the opportunity and was nimble enough to bring Heiner's into the
Earthgrains' fold within three months. Heiner's brand breads continue to
lead the market in West Virginia, southeastern Ohio and northeastern
Kentucky. And Earthgrains is introducing complementary products -- IronKids
bread and Earth Grains brand superpremium products -- a move that will make
this market even more profitable.
14 THE EARTHGRAINS COMPANY
<PAGE> 17
[PHOTO]
DEMAND DRIVES PRODUCTION EXPANSION IN SPAIN, PORTUGAL
In Spain, the Bimbo name is synonymous with American-style packaged sliced
bread. Bimbo, S.A., created the market for sliced white bread with its Bimbo
brand. Bimbo also created the market for sliced wheat variety bread with its
Silueta brand. The brands lead their categories, owning 55 percent and 65
percent market shares, respectively. Bimbo has eight bakeries in Spain
running almost at full capacity. Bimbo's plant in Spain's Canary Islands,
built just four years ago, doubled its capacity this year through an
expansion. A new plant under construction in northern Portugal will be
operational in the summer of 1998.
SAFETY IN NUMBERS: EMPLOYEE TEAMS SUCCEED
Safety is a long-term commitment at Earthgrains. Lost-work-time injuries are
down more than 50 percent over the last three years. In 1996, 23 of our 38
U.S. plants had perfect safety records -- no lost-time injuries. Our
Stockton, Calif., bakery employees have gone four years without a lost-time
injury, which has boosted morale and reduced that bakery's workers'
compensation costs by more than 80 percent. The new emphasis on safety
began when Earthgrains introduced the Total Quality Commitment management
approach at all of its plants. Employees are now directly involved in
solving problems. The Stockton safety team employees helped design and
implement new procedures and hazard controls that have led to record safety
achievements. TQC is used to drive other improvements as well, such as
minimizing stale and ingredient waste.
[PHOTO]
Stockton, Calif., bakery safety team members, clockwise from left, Lynn
Wright, George Lichty, Steve Horner, Don Helsel and Oscar Rodriguez.
THE EARTHGRAINS COMPANY 15
<PAGE> 18
<TABLE>
Financial Table of Contents
- -------------------------------------------------------------------------------
<S> <C>
Pro Forma Financial Information 17
- ------------------------------------------------------------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition 18
- ------------------------------------------------------------------
Consolidated Balance Sheets 22
- ------------------------------------------------------------------
Consolidated Statements of Earnings 23
- ------------------------------------------------------------------
Consolidated Statements of Cash Flows 24
- ------------------------------------------------------------------
Consolidated Statements of Shareholders' Equity 25
- ------------------------------------------------------------------
Notes to Consolidated Financial Statements 26
- ------------------------------------------------------------------
Responsibility for Financial Statements and
Report of Independent Accountants 38
- ------------------------------------------------------------------
Five-Year Financial Highlights 39
- ------------------------------------------------------------------
Officers of The Earthgrains Company
and Its Principal Subsidiaries 40
- ------------------------------------------------------------------
Board of Directors and Corporate Information 41
- ------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
Cautionary Statement Regarding Forward-Looking Statements
Matters discussed in this Annual Report (particularly in Management's
Discussion and Analysis and the Letter to Shareholders), contain forward-
looking information, as defined in the Private Securities Litigation Reform Act
of 1995. All such forward-looking information in this report involves
risks and uncertainties, including, but not limited to, variations in income
levels of consumers, fluctuations in currency exchange rates for the Spanish
peseta and French franc versus the U.S. dollar, the costs of raw materials,
the ability of the Company to realize projected savings from productivity and
product quality improvements, legal proceedings to which the Company may
become a party, and other risks indicated in filings by the Company with the
Securities and Exchange Commission.
16 THE EARTHGRAINS COMPANY
<PAGE> 19
Pro Forma Financial Information
- -------------------------------------------------------------------------------
Statements of earnings are presented below for the year ended March 25, 1997,
and a comparable 52-week period ended March 26, 1996. Unaudited pro forma
adjustments have been made to the unaudited historical financial statement to
reflect the effect of the Distribution on a comparable fiscal 1996.
The resulting pro forma income statement produces more meaningful
comparisons with actual results for fiscal 1997; however, the pro forma
information is not necessarily indicative of results that would have occurred
if the Company had been an independent Company during the comparable year-ago
period for 1996.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
For the Years Ended March 25 and March 26
--------------------------------------------------------
Historical Pro Forma Pro Forma
(In millions, except per share data) 1997 1996 Adjustments <Fa> 1996
=====================================================================================================================
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $1,662.6 $1,660.5 $ -- $1,660.5
Cost of products sold 988.8 1,037.4 3.5 1,040.9
- ----------------------------------------------------------------------------------------------------------------------------
Gross profit 673.8 623.1 (3.5) 619.6
Marketing, distribution and administrative expenses 633.5 632.6 19.8 652.4
Provision for restructuring and consolidation, net 12.7 3.0 -- 3.0
- ----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 27.6 (12.5) (23.3) (35.8)
Interest expense (6.3) (1.6) (5.4) (7.0)
Other income, net 1.4 3.8 -- 3.8
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 22.7 (10.3) (28.7) (39.0)
Provision (benefit) for income taxes 6.5 1.2 (10.3) (9.1)
- ----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 16.2 $ (11.5) $(18.4) $ (29.9)
- ----------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding 10.1 10.2
- ----------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share $ 1.60 <Fb> $ (2.93) <Fc><Fd>
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
<Fa> The pro forma adjustments represent: (1) estimates of incremental costs
associated with being an independent public company; (2) the
transfer of the prepaid pension asset to Anheuser-Busch; (3)
interest expense on incremental debt and working capital
requirements; and (4) the tax effect of such adjustments.
<Fb> Excluding the $12.7 million provision for restructuring and $5.3 million
in Spanish tax incentives and credits, earnings for the current
fiscal year were $1.86 per share.
<Fc> Excluding the $3.0 million provision for restructuring, $7.8 million for
the Spanish work force reduction program and $7.6 for a legal
settlement and other non-recurring costs, earnings performance for
the pro forma comparable fiscal 1996 was $1.80 loss per share.
<Fd> Earnings per share for the comparable period presented were computed
using the weighted average shares of Anheuser-Busch common stock
outstanding during the period, adjusted for a 1-to-25 distribution
ratio.
</TABLE>
THE EARTHGRAINS COMPANY 17
<PAGE> 20
Management's Discussion and Analysis of
Results of Operations and Financial Condition
- -------------------------------------------------------------------------------
INTRODUCTION
- ------------
A number of significant factors, which are discussed below, affected the
consolidated results of operations, financial condition and liquidity of
Earthgrains during the current fiscal year ended March 25, 1997, the 12-week
transition period ended March 26, 1996, and the two fiscal years ended
January 2, 1996, and January 3, 1995. This discussion should be read in
conjunction with the Consolidated Financial Statements and notes thereto for
such periods included elsewhere in this report. 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. Accordingly, since the Company was
a wholly-owned subsidiary of Anheuser-Busch during the periods presented
prior to the current fiscal year, these financial statements 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 those periods.
OVERVIEW AND OUTLOOK
- --------------------
Earthgrains operates in the packaged bakery products industry, which is
highly competitive and price-sensitive. Commodity costs represent
approximately 25-30% of the Company's cost of products sold. U.S. commodity
market prices are subject to price volatility and remain relatively high
although they have decreased in the second half of fiscal 1997 from reaching
record levels in the first half of the year and during the 1996 transition
period. Additionally, the packaged bakery products industry continues to be
in a condition of excess capacity and underutilization.
Earthgrains' first fiscal year results as an independent company
demonstrate accomplishments from elements of a fundamental strategy of
improving revenues, enhancing cost-effectiveness, gaining efficiencies and
taking advantage of industry consolidation. This focus, along with emphasis
on providing more new and better-quality products and services to customers,
has enabled Earthgrains to improve revenues and operating margins, more than
offsetting the increased costs associated with being a stand-alone public
entity.
A portion of these benefits are the result of the Company's
restructuring and consolidation program aimed at reducing excess capacity and
withdrawal from unprofitable markets and lower-margin accounts. The plant
consolidations coupled with the reorganization of field management and sales
groups have enabled the necessary focus on operating efficiency and product
quality while strengthening customer partnering in core business operations.
These changes have also concentrated resources in markets with the greatest
growth opportunities and on products that offer higher margins. Benefits of
the restructuring and consolidation program are expected to continue into the
upcoming year. While strong progress has been demonstrated in improving
underlying performance, continuing efforts will be made to maximize
manufacturing, distribution and administrative efficiencies and to strive for
even better operating results.
Taking advantage of acquisition opportunities in its core fresh
baked-goods business line is key to enhancing the Company's ability to
compete successfully in this industry. The acquisition of Heiner's Bakery,
Inc. as of November 30, 1996, which contributed to earnings from the outset,
signifies the Company's intent to play an active role in this process. The
Company will continue to seek opportunities to participate in industry
consolidation that are a good fit with its strategy to enhance revenues,
profitability and return on capital.
RESTRUCTURING AND CONSOLIDATION PROVISIONS
- ------------------------------------------
Beginning in late 1993, the Company established a restructuring and
consolidation program designed to reduce costs and maximize operating
efficiencies. The Company has recorded the following provisions relating to
restructuring and consolidation programs:
* A $12.7 million charge in fiscal 1997 primarily covering expenses in
conjunction with closing one bakery and one refrigerated dough plant
* A $27.5 million charge in fiscal 1995 covering estimated expenses
arising from the consolidation of certain domestic bakery operations
* A $114.6 million charge in fiscal 1993 covering the cost of Anheuser-
Busch's groupwide enhanced retirement, restructuring and relocation
program
The Company believes improvements in the current fiscal year operating
results reflect benefits achieved through the restructuring and consolidation
program described above. Benefits of the recent charge are expected to carry
into the upcoming year enabling further realization of operating efficiencies
and improved financial performance. Although no major future restructurings
18 THE EARTHGRAINS COMPANY
<PAGE> 21
- -------------------------------------------------------------------------------
are anticipated at this time, the Company will continue to review its
operations for opportunities to improve efficiencies. See Note 4 to the
Consolidated Financial Statements for additional information concerning the
details of the Company's restructuring charges, including a reconciliation of
the balance sheet reserve relating thereto.
RESULTS OF OPERATIONS
- ---------------------
Fiscal Year 1997 Compared to Fiscal Year 1995
Net sales for the fiscal year ended March 25, 1997, of $1,662.6 million
were consistent with sales of $1,664.6 for the comparable 52-week period
ended January 2, 1996 (fiscal 1995). The decrease in sales attributed to the
closing or sale of underperforming and noncore businesses as part of the
planned consolidation and restructuring was partially offset by the effect of
price increases taken early in the year and favorable product mix shift.
Sales contributed through the acquisition of Heiner's Bakery, Inc. as of
November 30, 1996, were more than offset by the unfavorable impact of foreign
exchange rates near the end of the year. After adjustment for the closed or
sold facilities in both periods presented, sales for fiscal 1997 increased by
$88.8 million or 5.6%, represented across fresh bakery and refrigerated dough
operations both domestically and internationally.
Gross margins increased to 40.5% in the current year from 37.8% in
fiscal 1995. Profit margin improvements were experienced by domestic fresh
bakery operations and both international bakery and refrigerated dough
operations. Margins for domestic refrigerated dough operations were down
slightly from fiscal 1995. These margin improvements can be attributed to
the achieved price increases, benefits of the restructuring and consolidation
process, and improved operating efficiencies. Additionally, flour costs
which began to increase dramatically in the last half of fiscal 1995 have
decreased, thereby resulting in improved margins from 1995.
Agricultural commodity costs represented 25-30% of cost of products
sold during the 1997 fiscal year, which is consistent with prior years.
Costs of products sold includes agricultural commodities whose prices are
influenced by weather conditions, government regulations and economic
conditions. The Company utilized futures contracts or options to hedge
approximately 45-55% of such agricultural commodity costs or 11-17% of cost
of products sold during the 1997 fiscal year. As of March 25, 1997, the
amount of the Company's aggregate obligation to purchase commodities under
such contracts was $11.4 million.
Marketing, distribution and administrative expenses increased by $6.0
million in 1997 and from 37.7% to 38.1% on a percentage of sales basis. The
elimination of costs through the closing or sale of facilities and the effect
of the charge for the Spanish work force reduction program reflected in 1995
were more than offset by the costs of operating as a stand-alone public
company.
The prior-year charge of $27.5 million for restructuring and
consolidation was netted with an $18.4 million gain on the sale of
businesses, resulting in the net charge of $9.1 million. Excluding the
current-year charge of $12.7 million and the 1995 net charge of $9.1 million
to consolidate certain inefficient facilities, operating income for fiscal
1997 increased $37.9 million compared to the prior year. This significant
increase in operating results reflects benefits from our consolidation and
restructuring program and our continued focus on cost-effectiveness combined
with an improvement in product mix.
The lower effective tax rate for fiscal 1997 is a direct result of $5.3
million in one-time Spanish tax incentives and credits associated principally
with investments made in the Canary Islands. The Company substantially
completed the expansion of its Canary Islands bakery during the current year.
Typically, the Company's effective income tax rate is higher primarily due to
the relative impact of the nondeductible fixed goodwill amortization on the
respective earnings level.
Net earnings for fiscal 1997 were $16.2 million or $1.60 per share,
compared to a loss of $6.6 million, or a $0.65 loss per share, computed on
the basis of pro forma average shares outstanding for fiscal 1995.
The historical statement of earnings for the year-ago period does not
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 might have had on
the Company's results for a comparable year-ago fiscal year ended March 26,
1996, see the unaudited Pro Forma Financial Information on page 17 of this
report.
Twelve-Week Period Ended March 26, 1996
Compared to Twelve-Week Period Ended March 28, 1995
For the 12-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 noncore businesses. This decrease
in sales was partially offset by
THE EARTHGRAINS COMPANY 19
<PAGE> 22
Management's Discussion and Analysis of
Results of Operations and Financial Condition
(CONTINUED)
- -------------------------------------------------------------------------------
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 adjustment for the closed or sold facilities in both
periods presented, sales increased by $19.8 million.
Gross margins for the March 1996 period of 37.8% compared unfavorably
to the prior-year period's 39.2%. As expected, margins were adversely
affected by the dramatic increases in commodity prices for ingredients,
specifically flour costs, which increased to record levels.
The increase in marketing, distribution and administrative expenses to
$146.0 million from $140.9 million in the comparable period is the result of
one-time charges of $7.6 million, including $6.3 million related to a
settlement agreement in a case that involved alleged price-fixing and
antitrust violations in the state of Texas.
In the comparable 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 variance in the effective income-tax rate reflects the relative
impact of the nondeductible fixed goodwill amortization on the respective
earnings levels.
As a result of the March 1996 charge for the legal settlement and other
factors discussed above, the Company incurred a loss of $5.1 million, or
$0.50 per share, computed on the basis of pro forma average shares
outstanding, compared to a loss of $0.3 million, or $0.03 per share in the
prior year's comparable period.
Fiscal Year 1995 Compared to Fiscal Year 1994
Net sales in 1995 decreased $55.9 million or 3.2% compared to the same
period in the prior year. Domestic fresh baked-goods sales decreased by
$89.6 million in part as a result of the planned consolidation and
restructuring, including the withdrawal from underperforming territories.
Lower domestic fresh baked-goods volume was partially offset by higher net
prices, higher international sales of $32.5 million and a $13.7 million
favorable effect of foreign currency exchange rate fluctuations. Excluding
the sales of the closed facilities and divested businesses, foreign currency
exchange-rate fluctuations and the extra week in the 1994 fiscal year, net
sales decreased $6.5 million on a comparable basis.
Gross profit decreased $19.6 million or 3.0% versus fiscal 1994. As a
percentage of sales, gross profit remained constant at 37.8%. Margins for
the 1995 fiscal year would have improved but were adversely affected by the
dramatic increases in commodity prices for ingredients in the last half of
the year.
Marketing, distribution, and administrative expenses in 1995 increased
$3.6 million compared to the prior year. As a percent of sales, these
expenses increased to 37.7% in 1995 versus 36.3% in 1994, as the reduction in
volume-related selling expenses was more than offset by increases in other
costs, including the Spanish work force reduction program and domestic
employee relocation expenses.
Excluding the 1995 charge of $27.5 million to consolidate certain
inefficient domestic bakery facilities, operating income for the 1995 fiscal
year decreased $23.2 million compared to the prior year. This decrease in
operating results was primarily attributable to the impact of commodity
prices for ingredients and the work force reduction in Spain.
The increase in the effective tax rate primarily reflects the relative
effect of the nondeductible fixed goodwill amortization on a reduced earnings
level.
Fiscal Year 1994 Compared to Fiscal Year 1993
Net sales in 1994 decreased $20.1 million or 1.2%, primarily due to the
sale in December 1993 of Eagle Crest Foods, Inc. (Eagle Crest), a frozen
Mexican foods operation. Sales for Eagle Crest in 1993 amounted to $39.6
million, which more than offset the additional week in fiscal 1994. A new
contract packing agreement and full-year effects of prior-year product
introductions contributed to the $28.1 million or 11.8% increase in
refrigerated dough products sales. Adverse changes in foreign currency
exchange rates negatively affected sales in 1994 by $14.0 million. Excluding
the effects of Eagle Crest, foreign currency exchange-rate fluctuations and
the extra week in fiscal 1994, 1994 net sales increased $7.5 million over
1993 on a comparable basis.
Gross profit of $649.5 million in 1994 represented a decrease of 7.4%
from the prior year. As a percentage of net sales, gross profit in 1994 was
37.8% compared with 40.3% in 1993. The decrease was principally attributable
to the domestic bakery operations. In the early stages of the realignment
and consolidation program, these operations experienced manufacturing
inefficiencies and reduced organizational effectiveness due to changes in
field operating management. In addition, domestic bakery operating margins
declined during the year due to a 6% increase in ingredient costs and
increased promotional allowances for fresh baked goods in many market areas.
Marketing, distribution and administrative expenses rose slightly as a
percentage of net sales -- 36.3% in 1994 versus 35.4% in 1993.
As a result of the effects noted above, operating income for 1994 was
$25.6 million, a decrease of
20 THE EARTHGRAINS COMPANY
<PAGE> 23
- -------------------------------------------------------------------------------
$58.7 million versus 1993, excluding the effect of the 1993 restructuring
charge.
The increase in the effective tax rate primarily reflects the relative
effect of the nondeductible fixed goodwill amortization on a reduced earnings
level.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Concurrent with the Distribution on March 26, 1996, 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 net intercompany payable, to fund working capital
needs and for general corporate purposes. Upon the effective date of the
distribution, the remaining intercompany payables and receivables between the
Company and Anheuser-Busch were contributed to the capital of the Company. A
separate unsecured $15 million committed line of credit is also maintained
for servicing funding requirements. Prior to the Distribution, as a
subsidiary, the Company obtained funds for its capital needs, including
working capital, from Anheuser-Busch, primarily through a non-interest
bearing intercompany account.
The Company's primary source of liquidity is cash flow from operations,
which was $101.8 million for the current fiscal year ended March 25, 1997.
Improved operating efficiencies and pricing initiatives have contributed to
the strong cash flows from operations for the current year. Net working
capital, excluding cash and cash equivalents, was $37.5 million at March 25,
1997, up slightly from $35.1 million a year ago.
The funding for the acquisition of Heiner's, which was completed in the
third quarter of fiscal 1997, was sourced through the existing credit
agreement and cash generated from operations. The Company's primary routine
cash requirements will continue to consist of funding capital expenditures
and interest payments pursuant to the credit facility. The Company invested
$71.2 million in capital expenditures during the current fiscal year and
expects to fund capital investments of approximately $90 million in the
upcoming year.
The consolidated capital expenditure plan for fiscal 1998 includes a
proposal recently approved by the Board of Directors to build a bakery in
northern Portugal. This new facility will allow the Spanish operations to
meet increased demand for baked goods and expand their current market in
Portugal and northwest Spain. Funding for the plant will be provided through
cash from the Spanish operations. Other planned capital projects include
expansion of the refrigerated dough operations in Carrollton, Texas, to
facilitate incorporation of the production from the recently closed
Indianapolis plant and a new bagel production line for the Fort Payne, Ala.,
plant. The Company will also continue ongoing investments in systems
technology along with modernization and expansion plans for various domestic
and international bakeries.
Effective April 30, 1997, the Company renegotiated the $215 million
Credit Facility to $225 million with an option to increase the available line
to $300 million. Additionally, the maturity date on the borrowings was
extended to April 2002 and certain covenants were modified slightly to enable
increased debt capacity. On both a short-term and long-term basis,
management believes that its cash flows from operations, together with its
available borrowings under the Credit Facility, will provide it with
sufficient resources to meet its seasonal working capital needs, to finance
its projected capital expenditures, and to meet its foreseeable liquidity
requirements.
ENVIRONMENTAL MATTERS
- ---------------------
The operations of Earthgrains, like those of similar businesses, are subject
to various Federal, state and local laws and regulations with respect to
environmental matters, including air and water quality, underground
fuel-storage tanks, and other regulations intended to protect public health
and the environment. Earthgrains has been identified as a potentially
responsible party ("PRP") at certain locations under the Comprehensive
Environmental Responses, Compensation and Liability Act, 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 Earthgrains' results of operations or financial position.
THE EARTHGRAINS COMPANY 21
<PAGE> 24
<TABLE>
Consolidated Balance Sheets
<CAPTION>
- ------------------------------------------------------------------------------
March 25, March 26,
(In millions, except share data) 1997 1996
==============================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 43.1 $ 38.9
Accounts receivable, net 141.5 135.9
Inventories, net 66.4 68.0
Deferred income taxes 29.9 27.3
Other current assets 15.7 15.4
- ------------------------------------------------------------------------------
Total current assets 296.6 285.5
Other assets 28.8 38.6
Goodwill, net 140.0 130.3
Plant and equipment, net 706.7 723.2
- ------------------------------------------------------------------------------
Total assets $1,172.1 $1,177.6
==============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 121.4 $ 98.1
Accrued salaries, wages and benefits 46.6 48.6
Accrual for restructuring and consolidation 15.4 15.4
Other current liabilities 32.6 49.4
- ------------------------------------------------------------------------------
Total current liabilities 216.0 211.5
Postretirement benefits 118.8 123.1
Long-term debt 103.0 92.6
Deferred income taxes 103.8 99.5
Other noncurrent liabilities 48.1 68.8
Commitments and contingencies -- --
Shareholders' equity:
Anheuser-Busch equity investment -- 582.1
Common stock, $.01 par value, 50,000,000
authorized, 10,778,050 shares issued 0.1 --
Additional paid-in capital 604.4 --
Retained earnings 14.7 --
Unearned ESOP shares (15.1) --
Unearned portion of restricted stock (4.2) --
Cumulative translation adjustment (17.5) --
- ------------------------------------------------------------------------------
Shareholders' equity 582.4 582.1
- ------------------------------------------------------------------------------
Total liabilities and equity $1,172.1 $1,177.6
==============================================================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
22 THE EARTHGRAINS COMPANY
<PAGE> 25
<TABLE>
Consolidated Statements of Earnings
<CAPTION>
- ------------------------------------------------------------------------------------------------
For the For the
year twelve For the years ended
ended weeks ended ---------------------
March 25, March 26, January 2, January 3,
(In millions, except per share data) 1997 1996 1996 1995<F*>
================================================================================================
<S> <C> <C> <C> <C>
Net sales $1,662.6 $ 367.7 $1,664.6 $1,720.5
Cost of products sold 988.8 228.8 1,034.7 1,071.0
- ------------------------------------------------------------------------------------------------
Gross profit 673.8 138.9 629.9 649.5
Marketing, distribution and
administrative expenses 633.5 146.0 627.5 623.9
Provision for restructuring and
consolidation, net 12.7 -- 9.1 --
- ------------------------------------------------------------------------------------------------
Operating income (loss) 27.6 (7.1) (6.7) 25.6
Other income and expenses:
Interest (expense) (6.3) (0.1) (1.9) (1.9)
Other income (expense), net 1.4 (0.1) 4.7 2.6
- ------------------------------------------------------------------------------------------------
Income (loss) before income taxes 22.7 (7.3) (3.9) 26.3
Provision (benefit) for income taxes 6.5 (2.2) 2.7 15.0
- ------------------------------------------------------------------------------------------------
Net income (loss) $ 16.2 $ (5.1) $ (6.6) $ 11.3
================================================================================================
Earnings per share $ 1.60
============================================================
<FN>
<F*>Fiscal year contains 53 weeks.
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
THE EARTHGRAINS COMPANY 23
<PAGE> 26
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
For the For the
year twelve weeks For the years ended
ended ended -----------------------
March 25, March 26, January 2, January 3,
(In millions) 1997 1996 1996 1995<F*>
==================================================================================================================
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 16.2 $ (5.1) $ (6.6) $ 11.3
Adjustments to reconcile earnings to
net cash flow provided by operations:
Depreciation and amortization 84.5 17.4 79.5 81.8
Deferred income taxes 1.7 (6.2) 2.5 20.1
Provision for restructuring and consolidation
($12.7 million, less cash payments of $0.2;
$27.5 million, less cash payments of $3.7 million) 12.5 -- 23.8 --
Gain on disposal of businesses -- -- (18.4) --
(Gain) loss on disposal of fixed assets (0.2) (0.4) 0.5 9.5
(Increase) decrease in noncash working capital (6.9) 17.1 5.6 (91.9)
Other, net (6.0) (5.3) 14.7 --
- ------------------------------------------------------------------------------------------------------------------
Net cash flow from operations 101.8 17.5 101.6 30.8
- ------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (71.2) (22.5) (109.3) (86.4)
Acquisition (38.5) -- -- --
Proceeds from sale of property 4.5 (4.7) 31.9 1.7
- ------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (105.2) (27.2) (77.4) (84.7)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from (payments on) long-term borrowings, net 10.4 91.1 (10.1) (0.2)
Dividends to shareholders (1.5) -- -- --
Payments on short-term borrowings (1.3) (1.6) (0.2) (4.6)
Net transactions with Anheuser-Busch -- (74.3) 5.1 35.1
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used by) financing activities 7.6 15.2 (5.2) 30.3
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 4.2 5.5 19.0 (23.6)
Cash and cash equivalents, beginning of year 38.9 33.4 14.4 38.0
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 43.1 $ 38.9 $ 33.4 $ 14.4
==================================================================================================================
<FN>
<F*>Fiscal year contains 53 weeks.
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
24 THE EARTHGRAINS COMPANY
<PAGE> 27
<TABLE>
Consolidated Statements of Shareholders' Equity
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Addi- Anheuser-
Common Stock tional Unearned Unearned Cumulative Busch
(In millions, except ------------------ Paid-In Retained ESOP Restricted Translation Equity
share data) Shares Amount Capital Earnings Shares Stock Adjustment Investment Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 29,
1993 -- $ -- $ -- $ -- $ -- $ -- $ -- $ 636.3 $ 636.3
Net income 11.3 11.3
Translation
adjustments 1.6 1.6
Net transactions
with A-B 35.1 35.1
- ------------------------------------------------------------------------------------------------------------------------
Balance January 3,
1995 684.3 684.3
Net (loss) (6.6) (6.6)
Translation
adjustments 18.5 18.5
Net transactions
with A-B 5.1 5.1
- ------------------------------------------------------------------------------------------------------------------------
Balance January 2,
1996 701.3 701.3
Net (loss) (5.1) (5.1)
Translation
adjustments 2.0 2.0
Net transactions
with A-B (116.1) (116.1)
- ------------------------------------------------------------------------------------------------------------------------
Balance March 26,
1996 582.1 582.1
Shares issued upon
distribution 10,092,133 0.1 582.0 (582.1) --
Net income 16.2 16.2
Dividends
($.15 per share) (1.5) (1.5)
Shares issued under
stock plan 166,551 5.1 (5.1) --
Amortization of
restricted stock 0.9 0.9
Shares issued to ESOP 513,114 16.8 (16.8) --
Shares allocated
under ESOP 0.3 1.7 2.0
Translation
adjustments (17.5) (17.5)
Other 6,252 0.2 0.2
- ------------------------------------------------------------------------------------------------------------------------
Balance March 25,
1997 10,778,050 $0.1 $604.4 $14.7 $(15.1) $ (4.2) $(17.5) $ -- $ 582.4
========================================================================================================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
THE EARTHGRAINS COMPANY 25
<PAGE> 28
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
- ---------------------------
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, Earthgrains began
operations as a separate publicly owned company.
The financial results presented in the financial statements for periods
prior to the current fiscal year are not necessarily indicative of results
that would have occurred if the Company had been an independent public
company during the periods presented. See unaudited Pro Forma Financial
Information on page 17 of this report for discussion and comparison of the
effect of the Distribution on the Company on a comparable year-ago fiscal
year ended March 26, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES
- ---------------------------------------------------------------
This summary of the Company's significant accounting principles and policies
is presented to assist in evaluating the Company's financial statements
included in this report. These principles and policies conform to generally
accepted accounting principles and are applied on a consistent basis among
years.
Principles of consolidation
These financial statements include the Company and all its
subsidiaries. All significant intercompany transactions are eliminated.
Fiscal year end
The Company has a 52- or 53-week year. Concurrent with the
Distribution, the Company changed its fiscal year end from the Tuesday
closest to December 31 to the last Tuesday in March. The change resulted in
a transition period of twelve weeks beginning January 3, 1996 and ending
March 26, 1996. The following table summarizes the periods covered in each
of the three fiscal years and in the transition period presented in these
financial statements and footnotes thereto unless otherwise stated:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Fiscal Year/Period Period Covered
- ------------------------------------------------------------------
<S> <C>
1997 52-week period ended March 25, 1997
1996 Transition Period 12-week period ended March 26, 1996
1995 52-week period ended January 2, 1996
1994 53-week period ended January 3, 1995
</TABLE>
Foreign currency translation
Adjustments resulting from foreign currency transactions are recognized
in income, whereas adjustments resulting from the translation of financial
statements are reflected within equity.
Goodwill
Goodwill is amortized on a straight-line basis over a period of 40
years. Accumulated amortization as of March 25, 1997, and March 26, 1996,
was $70.6 and $65.5 million, respectively. $124.9 million of the goodwill
balance as of March 25, 1997, relates to the acquisition of the Company by
Anheuser-Busch in 1982.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and temporary
investments purchased with an initial maturity of three months or less.
Inventories and production costs
Inventories are valued at the lower of cost or market. Cost is
determined under the first-in, first-out method. Inventories include the
cost of materials, direct labor and manufacturing overhead. Obsolete or
unsaleable inventories are reflected at their estimated realizable values.
The Company hedges certain of its commodity purchases as considered necessary
to reduce the risk associated with market-price fluctuations. Gains and
losses on hedges of future commodity purchases are recognized as a component
of inventory in the same period as the related purchase transaction.
Plant and equipment
Plant and equipment is carried at cost and includes expenditures for
new facilities and expenditures that substantially increase the useful lives
of existing facilities. Maintenance, repairs and minor renewals are expensed
as incurred. When plant and equipment is retired or otherwise disposed, the
related cost and accumulated depreciation are eliminated and any gain or loss
on disposition is reflected in income or expense.
Depreciation is provided principally on the straight-line method over
the estimated useful lives of the assets, resulting in depreciation rates on
buildings ranging from 2% to 10% and on machinery and equipment ranging from
5% to 25%.
In conjunction with the acquisition of the Company by Anheuser-Busch in
1982, a portion of the purchase price was associated with reflecting the
property, plant and equipment at fair value through purchase accounting.
Additionally, the effect of the adoption of FAS No. 109
26 THE EARTHGRAINS COMPANY
<PAGE> 29
- --------------------------------------------------------------------------------
in fiscal 1992 was applied to these assets. Such amounts are being amortized on
a straight-line basis over 40 years. This purchase price assigned to fixed
assets amounted to $215.6 million, with related deferred taxes of $81.9 million,
at March 25, 1997.
Capitalization of interest
Interest relating to the cost of acquiring certain fixed assets is
capitalized. The capitalized interest is included as part of the cost of the
related asset and is amortized over its estimated useful life.
Income taxes
The provision for income taxes is based on the income and expense
amounts as reported in the Consolidated Statements of Earnings. Deferred
income taxes are recognized for the effect of temporary differences between
financial and tax reporting in accordance with the requirements of Statement
of Financial Accounting Standards No. 109 (FAS109).
Financial instruments with off-balance-sheet risk and concentration of credit
risk
The Company is a party to certain financial instruments with
off-balance-sheet risk incurred in the normal course of business. These
financial instruments include forward and option contracts designated as
hedges. Derivative financial instruments are used solely as hedges to manage
existing risks or exposure. The Company's exposure to credit loss in the
event of nonperformance by the counterparties to these financial instruments
(either individually or in the aggregate) is not material.
Derivative financial instruments, which are used by the Company in the
management of commodity exposures, are accounted for on an accrual basis.
Income and expense are recognized in the same category as that of the related
asset or liability.
The fair value of derivative instruments is monitored based on the
estimated amounts the Company would receive or pay to terminate the
contracts.
The Company does not have a material concentration of accounts
receivable or credit risk.
Fair value of financial instruments
As of March 25, 1997 and March 26, 1996, the fair value of long-term
debt was approximately equal to its recorded value of $103.0 million and
$92.6 million, respectively. The fair value of long-term debt was estimated
based on the quoted market values for the same or similar debt issues, or
rates currently available for debt with similar terms.
Research and development and advertising and promotional costs
Research and development and advertising and promotional costs are
expensed in the year in which these costs are incurred.
Impairment of long-lived assets
The Company reviews long-lived assets and goodwill for impairment
whenever events or changes in business circumstances indicate that the
carrying amount of the assets may not be fully recoverable. The Company
performs nondiscounted cash flow analyses to determine whether an impairment
exists. Impairment losses, if any, would be determined based on the present
value of the cash flows using discount rates that reflect the inherent risk
of the underlying business.
Systems development costs
The Company defers systems development costs when they reach
technological feasibility. Amounts deferred are amortized over a five-year
period.
Earnings per share
Earnings per share for the current fiscal year are based on the
weighted average number of shares of common stock outstanding during the
year. Earnings per share figures have been omitted for prior periods
presented because the Company was a wholly-owned subsidiary of Anheuser-Busch
during this time. In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128 (FAS 128),
"Earnings per Share." The statement, which specifies the computation,
presentation and disclosure requirements for earnings per share, is effective
as of the Company's third quarter of fiscal 1998. The adoption of FAS 128 is
not expected to have a material effect on reported earnings per share for the
Company.
Stock-based compensation
The Company accounts for employee stock options in accordance with
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock
Issued to Employees." Under APB 25, the Company applies the intrinsic value
method of accounting and therefore does not recognize compensation expense
for options granted, because options are only granted at a price equal to
market value on the day of grant.
In October 1995, the Financial Accounting Standards Board issued,
Statement of Financial Accounting Standards No. 123 (FAS 123), "Accounting
for Stock Based Compensation," which became effective for the Company
THE EARTHGRAINS COMPANY 27
<PAGE> 30
Notes to Consolidated Financial Statements
(CONTINUED)
- --------------------------------------------------------------------------------
in the 1996 transition period. FAS 123 prescribes the recognition of
compensation expense based on the fair value of options determined on the grant
date. However, FAS 123 allows companies that currently apply APB 25 to continue
using that method. Earthgrains has therefore elected to continue applying
the intrinsic value method under APB 25. For companies that choose to
continue applying the intrinsic value method, FAS 123 requires certain pro
forma disclosures as if the fair value method had been utilized. See Note 9
for additional discussion and disclosures.
Use of estimates
In conformity with generally accepted accounting principles, the
preparation of our financial statements requires our management to make
estimates and assumptions that affect the amounts reported in our financial
statements and accompanying notes. Although these estimates are based on our
knowledge of current events and the actions that we may undertake in the
future, they may ultimately differ from actual results.
Reclassification
Certain reclassifications have been made to the prior period financial
statements to conform with the current year presentation.
3. ACQUISITION
- -----------------
On November 30, 1996, the assets of Heiner's Bakery, Inc. of Huntington, West
Virginia, were purchased for cash. Heiner's is a privately held wholesale
manufacturer and distributor of branded bread, buns and rolls with marketing
territory throughout West Virginia and in portions of Ohio and Kentucky. The
acquisition has been accounted for using the purchase method and,
accordingly, the results of operations are included in the Consolidated
Statement of Earnings from the date of acquisition. Assets acquired were
recorded at their estimated fair market value, and the excess costs over net
tangible assets are being amortized over forty years. The acquisition
agreement contains a provision for additional payments over the two years
subsequent to the transaction date if certain minimum earnings requirements
are met. Any such amounts earned under these terms of the agreement will be
recorded as increases in the excess of the total acquisition cost over the
fair value of the net assets acquired. Had the purchase taken place on
January 4, 1995, unaudited pro forma consolidated results of operations would
have been as follows (in millions, except for per share data):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Fiscal Transition Fiscal
Year Period Year
1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,691.1 $376.3 $1,700.7
Net income 17.7 (5.0) (5.8)
Earnings per share 1.75
</TABLE>
Pro forma data do not purport to be indicative of the results that
would have been obtained had these events actually occurred at the beginning
of the periods presented and such data are not intended to be a projection of
future results.
4. PROVISIONS FOR RESTRUCTURING AND CONSOLIDATION, NET
- ---------------------------------------------------------
During fiscal 1995, the Company recorded a $27.5 million provision to cover
estimated costs arising from the closing of eight domestic bakery facilities.
Production was transferred to other facilities. The provision covers the
costs associated with writing off certain fixed assets, employee severance
benefits for approximately 950 employees at these facilities and other
related closing costs. The Company's fiscal 1995 provision for restructuring
and consolidation, net of $9.1 million is composed of the $27.5 million
provision for restructuring and consolidation and an $18.4 million gain on
the sale of businesses.
During fiscal 1997, the Company recorded a provision of $12.7 million
primarily in conjunction with closing one bakery and one refrigerated dough
plant to achieve further efficiencies. The provision reflects costs of
writing off certain fixed assets, employee severance benefits and other
related closing costs. Production was transferred to other facilities.
Costs for the respective year provisions are categorized as follows (in
millions):
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Fiscal Fiscal
Year Year
1997 1995
- ------------------------------------------------------------
<S> <C> <C>
Noncash asset write-offs $ 8.8 $19.5
Other, primarily severance 3.9 8.0
- ------------------------------------------------------------
$12.7 $27.5
============================================================
</TABLE>
28 THE EARTHGRAINS COMPANY
<PAGE> 31
- --------------------------------------------------------------------------------
A reconciliation of activity with respect to the Company's fiscal year
1995 and 1997 provisions for restructuring and consolidation of domestic
operations is as follows (in millions):
<TABLE>
- ------------------------------------------------------------
<S> <C>
Provision, 1995 $ 27.5
Noncash asset write-offs (5.9)
Cash payments associated with severance (3.4)
Other miscellaneous items, net (0.3)
- ------------------------------------------------------------
Ending balance, January 2, 1996 17.9
Noncash asset write-offs (0.3)
Cash payments associated with severance (1.9)
Other miscellaneous items, net (0.3)
- ------------------------------------------------------------
Ending balance, March 26, 1996 15.4
Provision, 1997 12.7
Noncash asset write-offs (11.5)
Cash payments associated with severance (1.1)
Other miscellaneous items, net (0.1)
- ------------------------------------------------------------
Ending balance, March 25, 1997 $ 15.4
============================================================
</TABLE>
5. LONG-TERM DEBT
- --------------------
Long-term debt is as follows as of (in millions):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
March 25, March 26,
1997 1996
- ------------------------------------------------------------------
<S> <C> <C>
Revolving Credit Facility due 2001 $100.5 $90.1
Note Payable, 9.375%, due 1998 1.0 1.0
Industrial Development Bonds
9.5%, due 2001 1.5 1.5
- ------------------------------------------------------------------
103.0 92.6
Less current portion -- --
- ------------------------------------------------------------------
$103.0 $92.6
==================================================================
</TABLE>
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 net intercompany payable, to fund working capital needs and
for 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 coverage ratio and certain other
restrictions. As of March 25, 1997, $37.3 million in letters of credit were
also outstanding under this credit facility, principally related to
self-insurance requirements. A separate $15 million unsecured committed line
of credit is also maintained for servicing funding requirements.
6. RELATED PARTY TRANSACTIONS
- --------------------------------
The following describes transactions with Anheuser-Busch prior to the
Distribution on March 26, 1996. Anheuser-Busch utilized a centralized cash
management system to finance its domestic operations. Cash deposits from the
Company were transferred to Anheuser-Busch on a daily basis and
Anheuser-Busch funded the Company's disbursement bank accounts as required.
No interest was charged on transactions with Anheuser-Busch.
Anheuser-Busch provided certain general and administrative services to
the Company, including tax, treasury, risk management and insurance, legal,
research and development, information systems and human resources. These
expenses were allocated to the Company based on actual usage or other methods
which management believed to be reasonable. These allocations were $0.9
million for the 1996 transition period and $10.7 and $9.8 million in fiscal
years 1995 and 1994, respectively. These costs could have been different had
the Company operated on its own during these periods presented.
The Company was included in the combined Federal and certain state
income tax returns of Anheuser-Busch through March 26, 1996. The provision
for income taxes and related tax payments or refunds reflected in the
Company's financial statements prior to the current fiscal year are computed
as if a separate return had been filed for the Company, using those elements
of income and expense as reported in the Consolidated Statements of Earnings.
THE EARTHGRAINS COMPANY 29
<PAGE> 32
Notes to Consolidated Financial Statements
(CONTINUED)
- -------------------------------------------------------------------------------
7. RETIREMENT BENEFITS
- -----------------------
Pension plans
Earthgrains has pension plans covering substantially all of its regular
employees. In conjunction with the Distribution, Anheuser-Busch assumed
responsibility for the vested portion of all benefits as of March 26, 1996.
Accordingly, all pension assets and liabilities as of that date were retained
by Anheuser-Busch.
Net pension expense (benefit) for single-employer defined benefit plans
was comprised of the following for the three fiscal years and the transition
period (in millions):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Fiscal Transition Fiscal Fiscal
Year Period Year Year
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost (benefits
earned during the year) $ 2.8 $ 1.0 $ 3.8 $ 3.9
Interest cost on projected
benefit obligation 0.9 2.0 8.4 8.6
Assumed return on assets (0.2) (4.4) (17.5) (15.6)
Amortization of actuarial
gains (losses) and the excess
of market value of plan
assets over projected benefit
obligation at January 1, 1986 1.1 (0.7) (2.8) (5.0)
- ------------------------------------------------------------------------------------------------
Net pension expense (benefit) $ 4.6 $(2.1) $ (8.1) $ (8.1)
================================================================================================
</TABLE>
The key actuarial assumptions used in determining pension expense
(benefit) for single-employer defined benefit plans were as follows for each
of the three fiscal years and the transition period:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Fiscal Transition Fiscal Fiscal
Year Period Year Year
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 7.5% 7.5% 8.0% 7.5%
Long-term rate
of return on plan assets 10.0% 10.0% 10.0% 10.0%
Weighted-average rate
of compensation increase 4.5% 5.5% 5.5% 5.5%
</TABLE>
There was no gain on pension assets in fiscal year 1997. The actual
gain on pension assets was $4.4 million, $30.1 million and $3.5 million in
the 1996 transition period, and fiscal years 1995 and 1994, respectively.
The following tables set forth the funded status of all Company
single-employer defined benefit plans as of (in millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
March 25, March 26,
1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair market value -
primarily corporate equity securities
and publicly traded bonds $ 6.3 $ 193.9
Accumulated benefit obligation:
Vested benefits (6.0) (104.8)
Nonvested benefits (0.8) (1.2)
- ---------------------------------------------------------------------------------
Accumulated benefit obligation (6.8) (106.0)
Effect of projected compensation increases (7.9) (13.0)
- ---------------------------------------------------------------------------------
Projected benefit obligation (14.7) (119.0)
Plan assets (less than) in excess
of projected benefit obligation $ (8.4) $ 74.9
- ---------------------------------------------------------------------------------
Plan assets (less than) in excess of
projected benefit obligation consist
of the following components:
Unamortized excess of market value
of plan assets over projected benefit
obligation at January 1, 1986
being amortized over 15 years $ 0.4 $ 16.4
Unrecognized net actuarial
gains (losses) 0.1 (9.3)
Prior service costs (7.5) (1.4)
(Pension liability)
prepaid pension (1.4) 69.2
- ---------------------------------------------------------------------------------
Plan assets (less than) in excess of
projected benefit obligation $ (8.4) $ 74.9
=================================================================================
</TABLE>
The assumptions used in determining the funded
status of these plans were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.5% 7.5%
Weighted-average rate of
compensation increase 4.5% 5.5%
</TABLE>
Contributions to multiple and multi-employer plans in which the Company
participates are determined in accordance with the provisions of negotiated
labor contracts. Contributions to these plans were $23.2 million, $5.7
million, $23.8 million and $24.1 million for fiscal 1997, the 1996 transition
period, and fiscal years 1995 and 1994, respectively.
30 THE EARTHGRAINS COMPANY
<PAGE> 33
- -------------------------------------------------------------------------------
Postretirement benefits
The Company provides certain health care and life insurance benefits to
eligible retired employees. Salaried participants generally become eligible
for retiree health care benefits after reaching age 60 with 30 years of
service or after reaching age 65. Bargaining unit employees generally become
eligible for retiree health care benefits after reaching age 55 with 10-15
years of service or after reaching age 65.
The following table sets forth the accumulated postretirement benefit
obligation (APBO) and the total postretirement benefit liability for all
single-employer defined benefit plans in the Company's balance sheets as of
(in millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
March 25, March 26,
1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Retirees $ 50.5 $ 52.2
Fully eligible active plan participants 17.0 15.5
Other active plan participants 26.8 21.2
- ---------------------------------------------------------------------------------
Accumulated postretirement benefit
obligation (APBO) 94.3 88.9
Unrecognized prior service benefits 38.9 45.4
Unrecognized net actuarial (losses) (8.7) (7.4)
- ---------------------------------------------------------------------------------
Total postretirement benefit liability $124.5 $126.9
=================================================================================
</TABLE>
As of March 25, 1997, and March 26, 1996, $118.8 million and $123.1
million of this obligation was classified as a long-term liability and $5.7
million and $3.8 million was classified as a current liability, respectively.
Net periodic postretirement benefits expense for single-employer
defined benefit plans for the following periods was comprised of the
following (in millions):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Fiscal Transition Fiscal Fiscal
Year Period Year Year
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost (benefits
attributed to service
during the year) $ 3.3 $ 0.8 $ 2.7 $ 3.0
Interest cost on
accumulated postretirement
benefit obligation 6.7 1.5 6.4 5.8
Amortization of prior
service benefit (6.4) (1.5) (6.4) (6.4)
Amortization of actuarial gain -- -- -- (.9)
- ------------------------------------------------------------------------------------------------
Net periodic postretirement
benefits expense $ 3.6 $ 0.8 $ 2.7 $ 1.5
================================================================================================
</TABLE>
In measuring the APBO, a 10.0% annual trend rate for health care costs
was assumed for fiscal year 1997 and 12.5% was used for prior periods
presented. This rate is assumed to decline ratably over the next 9-12 years
to 5.0% and remain at that level thereafter. The weighted-average discount
rate used in determining the APBO was 8.0% at March 25, 1997 and March 26,
1996.
If the assumed health care cost rate changed by 1%, the APBO as of the
end of fiscal year 1997 would change by 8.7%. The effect of a 1% change in
the cost trend rate on the service and interest cost components of net
periodic postretirement benefits expense would be a change of 10.1%.
8. EMPLOYEE STOCK OWNERSHIP PLAN
- -----------------------------------
Substantially all domestic regular salaried and hourly employees are eligible
for participation in the new company-sponsored Employee Stock Ownership Plan
(ESOP) that became effective July 1, 1996. The ESOP borrowed $16.8 million
from the Company for a term of 10 years at an interest rate of 8.0% and used
the proceeds to buy 513,114 shares of common stock from the Company. ESOP
shares are being allocated to participants over the 10-year period, as
contributions are made to the plan.
The ESOP cash contributions and ESOP expense accrued during the plan
year are determined by several factors, including the market price and number
of shares allocated to participants, ESOP debt service, dividends on
unallocated shares and the Company's 401(k) matching contribution. Over the
10-year life of the ESOP, total expense recognized will equal the total cash
contributions made by the Company.
The ESOP is based on a June 30 plan year with cash contributions made
monthly. Cash contributions and dividends on unallocated ESOP shares for
fiscal 1997 were $1.9 million, and $0.1 million, respectively.
THE EARTHGRAINS COMPANY 31
<PAGE> 34
Notes to Consolidated Financial Statements
(CONTINUED)
- -------------------------------------------------------------------------------
9. STOCK OPTIONS AND RESTRICTED STOCK
- ----------------------------------------
In connection with its spin-off from Anheuser-Busch, Earthgrains adopted and
Anheuser-Busch, then the sole shareholder of the Company, approved The
Earthgrains Company 1996 Stock Incentive Plan (the 1996 Incentive Plan). The
1996 Incentive Plan authorizes the issuance of up to 1,130,000 shares of
Earthgrains Common Stock pursuant to the grant of restricted stock and the
exercise of incentive stock options, nonqualified stock options and stock
appreciation rights. Grants under the 1996 Incentive Plan are made at the
market price on the date of the grant. Options granted pursuant to the 1996
Incentive Plan vest over a three year period from the date of grant and, once
vested, are generally exercisable over ten years from the anniversary of the
grant date. The plan also provides for the granting of stock appreciation
rights (SARs) in tandem with stock options. The exercise of an SAR cancels
the related option and the exercise of an option cancels the related SAR. At
March 25, 1997, there were no SARs outstanding under the plan.
Under the 1996 Incentive Plan, 166,551 restricted shares of Earthgrains
Common Stock were issued to certain officers of the Company. Restricted
share awards vest one half each after 54 and 66 months following the date of
the award. Compensation cost is recognized over the vesting period. No
further shares of restricted stock are authorized under the 1996 Incentive
Plan.
The Company applies Accounting Principles Board Opinion No. 25 (APB
25), "Accounting for Stock Issued to Employees," in accounting for its stock
option plans. Accordingly, because the grant price equals the market price
on the date of grant, no compensation expense is recognized for stock option
grants. Had compensation cost for the Company's stock options been
determined based upon the fair value at the grant date consistent with the
methodology prescribed under FAS 123, the Company's net income and earnings
per share for the year ended March 25, 1997, would have been affected as
follows (in millions except shares, per grant and per share amounts):
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Fiscal Year
1997
- ------------------------------------------------------------
<S> <C>
Reported net income $16.2
Pro forma net income $14.4
Reported earnings per share $1.60
Pro forma earnings per share $1.42
</TABLE>
The weighted-average fair value of options granted (which is amortized
to expense over the option vesting period in determining the pro forma
impact), is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
1997
- ------------------------------------------------------------
<S> <C>
Risk-free interest rate 6.4%
Expected life of option 4 Yrs.
Expected volatility of Earthgrains stock 25%
Expected dividend yield on Earthgrains stock 0.7%
</TABLE>
The weighted-average fair value of options granted during 1997 is as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
1997
- ------------------------------------------------------------
<S> <C>
Fair value of each option granted $ 10.23
Number of options granted 801,773
- ------------------------------------------------------------
Total fair value of all options granted $ 8.2
============================================================
</TABLE>
In accordance with FAS 123, the weighted-average fair value of stock
options granted is required to be based on a theoretical statistical model in
accord with assumptions noted above. In actuality, because employee stock
options do not trade on a secondary exchange, employees receive no benefit
and derive no value from holding stock options under these plans without an
increase in the market price of Earthgrains stock. Such an increase in stock
price would benefit all stockholders.
The following table summarizes the stock option transactions under the
Earthgrains 1996 Incentive Plan:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Option Weighted Average
Shares Exercise Price
- --------------------------------------------------------------------------
<S> <C> <C>
Outstanding, March 26, 1996 -0- --
Granted 829,645 $37.37
Exercised -- --
Cancelled 27,872 $30.63
- ------------------------------------------------------
Outstanding, March 25, 1997 801,773 $37.60
==========================================================================
</TABLE>
32 THE EARTHGRAINS COMPANY
<PAGE> 35
- -------------------------------------------------------------------------------
The following table summarizes information for options currently
outstanding at March 25, 1997:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Options Outstanding
- ------------------------------------------------------------
Wtd. Avg. Wtd. Avg.
Range Remaining Exercise
of Prices Number Life Price
- ------------------------------------------------------------
<S> <C> <C> <C>
$30-36 536,393 10 Yrs $30.64
46-52 265,380 10 Yrs 51.67
-------
$30-52 801,773 10 Yrs $37.60
</TABLE>
At March 25, 1997, no options outstanding were exercisable and 161,676
shares of Earthgrains Common Stock were available for future awards under the
1996 Incentive Plan. The plan provides for acceleration of exercisability of
outstanding options and the vesting of restricted shares upon the occurrence
of certain events relating to a change of control, merger, sale of assets or
liquidation of the Company.
10. CAPITAL STOCK
- -------------------
On February 26, 1996, the Board of Directors of Anheuser-Busch declared a
distribution (the Distribution) of one share of Earthgrains common stock,
$.01 par value, for every 25 shares of Anheuser-Busch common stock
outstanding. On March 26, 1996, Earthgrains was spun off from Anheuser-Busch,
and 10,092,133 shares of Earthgrains Common Stock were distributed to
Anheuser-Busch shareholders. Effective March 29, 1996, 1,130,000 shares were
authorized for the issuance under the 1996 Stock Incentive Plan. Of those
shares, 166,551 were issued as restricted share grants to certain Earthgrains
Officers. Additionally, 513,114 shares were authorized for the Employee
Stock Ownership Plan, activated on July 1, 1996, of which 55,246 shares have
been allocated to participants. 3,600 shares were granted as restricted
shares and 2,652 shares were issued as compensation to members of the Board
of Directors. As of March 25, 1997, 10,788,050 shares of Earthgrains Common
Stock and no shares of Earthgrains Preferred Stock were issued and
outstanding.
11. INCOME TAXES
- ------------------
The provision (benefit) for income taxes consists of the following amounts
for the periods ended (in millions):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Fiscal Transition Fiscal Fiscal
Year Period Year Year
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current tax provision (benefit):
Federal $ 2.0 $ 1.9 $(5.0) $(12.6)
State and foreign 2.8 2.1 5.2 7.5
- ------------------------------------------------------------------------------------------------
4.8 4.0 0.2 (5.1)
- ------------------------------------------------------------------------------------------------
Deferred tax provision (benefit):
Federal (0.8) (5.7) 0.6 16.6
State and foreign 2.5 (0.5) 1.9 3.5
- ------------------------------------------------------------------------------------------------
1.7 (6.2) 2.5 20.1
Provision for income taxes $ 6.5 $(2.2) $ 2.7 $ 15.0
================================================================================================
</TABLE>
The deferred tax assets and deferred tax liabilities as of the end of each
period are comprised of the following (in millions):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
March 25, March 26,
1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation and property differences $139.1 $139.2
Deferred systems development costs 8.0 6.9
Pension plan 4.2 4.6
Other 15.9 16.6
- ------------------------------------------------------------------------
Deferred tax liabilities 167.2 167.3
- ------------------------------------------------------------------------
Deferred tax assets:
Postretirement benefits other
than pensions (47.8) (48.9)
Self-insurance reserves (20.3) (21.0)
Reserve for restructuring
and consolidation (5.1) (5.7)
Accrued liabilities (9.8) (16.4)
Other (10.3) (3.1)
- ------------------------------------------------------------------------
Deferred tax (assets) (93.3) (95.1)
- ------------------------------------------------------------------------
Net deferred tax liabilities $ 73.9 $ 72.2
========================================================================
</TABLE>
A reconciliation between the statutory rate and the effective rate is
presented below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax at statutory rate $ 7.9 $(2.5) $(1.4) $ 9.2
State income taxes,
net of Federal benefit -- (0.2) 0.5 1.7
Amortization of goodwill 1.9 0.4 2.9 1.9
Foreign tax credits and other (4.4) -- -- --
Meals and entertainment 0.5 0.1 0.6 0.5
Other, net 0.6 -- 0.1 1.7
- ------------------------------------------------------------------------------------
Provision for income taxes $ 6.5 $(2.2) $ 2.7 $15.0
====================================================================================
</TABLE>
THE EARTHGRAINS COMPANY 33
<PAGE> 36
Notes to Consolidated Financial Statements
(CONTINUED)
- -------------------------------------------------------------------------------
12. CASH FLOWS
- ----------------
Supplemental information with respect to the Consolidated Statements of Cash
Flows for each of the periods is presented below (in millions):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Fiscal Transition Fiscal Fiscal
Year Period Year Year
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest paid, net of capitalized interest $ 5.4 $ -- $ 2.0 $ 1.6
Income taxes paid (refunded) 3.4 -- (6.0) 36.3
Changes in noncash working capital, net of effect of acquisition:
Decrease (increase) in noncash current assets:
Accounts receivable, net $ (2.9) $ 0.1 $ 10.8 $ 1.4
Inventories, net 2.1 2.6 8.0 (1.2)
Other current assets (0.3) (6.3) 5.8 (10.0)
Increase (decrease) in current liabilities:
Accounts payable 23.1 3.9 (15.4) 6.9
Accrued salaries, wages and benefits (2.1) 5.3 (5.6) (4.0)
Accrual for restructuring and consolidation (12.5) (2.5) (8.0) (45.8)
Income taxes payable -- -- -- (39.2)
Other current liabilities (14.3) 14.0 10.0 --
- ------------------------------------------------------------------------------------------------------------------------
(Increase) decrease in noncash working capital $ (6.9) $17.1 $ 5.6 $(91.9)
========================================================================================================================
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
- -----------------------------------
The Company and certain of its subsidiaries are involved in certain claims
and legal proceedings in which monetary damages and other relief are sought.
These proceedings, arising in the normal course of business, are in varying
stages and may proceed for protracted periods of time.
Although it is impossible to predict the outcome of any legal
proceeding, the Company believes that it has meritorious defenses or
insurance coverage to meet the proceedings pending against it 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.
The operations of Earthgrains, like those of similar businesses, are
subject to various Federal, state and local laws and regulations with respect
to environmental matters, including air and water quality, underground fuel
storage tanks, and other regulations intended to protect public health and
the environment. Earthgrains has been identified as a potentially
responsible party ("PRP") at certain locations under the Comprehensive
Environmental Responses, Compensation and Liability Act, and the Company may
be required to share in the cost of cleanup with respect to two sites.
Although 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.
Future rental commitments under noncancelable operating leases in
effect as of the end of fiscal year 1997 were, in millions: 1998 - $8.5,
1999 - $6.8, 2000 - $5.8, 2001 - $4.1, 2002 - $2.2, thereafter - $1.0.
34 THE EARTHGRAINS COMPANY
<PAGE> 37
- -------------------------------------------------------------------------------
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
- -----------------------------------------
Summarized quarterly financial data for each of the fiscal years appear below
(each quarter represents a period of twelve weeks except for the December
quarter, which includes sixteen weeks):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Selected Quarterly Financial Data (Unaudited)
-------------------------------------------------------------------
June September December March Fiscal
(In millions, except per share data) Quarter Quarter Quarter Quarter Year
- ------------------------------------------------------------------------------------------------------------------
1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $370.5 $381.8 $522.7 $387.6 $1,662.6
Gross profit 145.2 156.6 211.8 160.2 673.8
Net income 0.7 4.5 9.1 1.9<Fa> 16.2
Earnings per share<Fc> $ .07 $ .45 $ .91 $ .19<Fa> $ 1.60
- ------------------------------------------------------------------------------------------------------------------
1996 Transition Period
- ------------------------------------------------------------------------------------------------------------------
Sales $367.7 $ 367.7
Gross profit 138.9 138.9
Net (loss) (5.1) (5.1)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
March June September December Calendar
Quarter Quarter Quarter Quarter Fiscal Year
- ------------------------------------------------------------------------------------------------------------------
1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $371.8 $384.8 $383.1 $524.9 $1,664.6
Gross profit 145.7 150.1 145.4 188.7 629.9
Net income (loss) (0.3) 1.8 (0.1) (8.0)<Fb> (6.6)
- ------------------------------------------------------------------------------------------------------------------
<FN>
<Fa> Quarter's results include the $11.7 million pre-tax provision for
restructuring and consolidation and $5.3 million in one-time Spanish
tax incentives and credits.
<Fb> Quarter's results were reduced by $18.0 million of the year's $27.5
million pre-tax provision for restructuring and consolidation,
increased by the $18.4 million gain on sale of businesses and reduced
by the $7.8 million pre-tax provision for the Spanish work force
reduction program.
<Fc> Earnings per share is computed independently for each of the periods
presented, therefore, the sum of the earnings per share amounts for
the quarters may not equal the total for the year.
</TABLE>
THE EARTHGRAINS COMPANY 35
<PAGE> 38
Notes to Consolidated Financial Statement
(CONTINUED)
- -------------------------------------------------------------------------------
15. GEOGRAPHIC INFORMATION
- ---------------------------
The Company operates in the United States and Europe. The foreign
information below is comprised primarily of the Company's Spanish subsidiary.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Consolidated
(In millions) Domestic Foreign Total
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
1997 $1,297.1 $365.5 $1,662.6
1996 (twelve weeks) 284.9 82.8 367.7
1995 1,308.1 356.5 1,664.6
1994 1,404.3 316.2 1,720.5
Operating income (loss)
1997 2.4<Fa> 25.2 27.6<Fa>
1996 (twelve weeks) (11.0) 3.9 (7.1)
1995 (18.9)<Fb> 12.2<Fc> (6.7)<Fb><Fc>
1994 12.1 13.5 25.6
Identifiable assets
1997 849.8 182.3 1,032.1
1996 863.1 184.2 1,047.3
1995 886.7 178.9 1,065.6
1994 871.3 166.8 1,038.1
<FN>
<Fa> 1997 operating income was reduced by the $12.7 pre-tax provision for
restructuring and consolidation.
<Fb> 1995 operating income was reduced by the $27.5 pre-tax provision for
restructuring and consolidation and increased by the $18.4 million
gain on sale of businesses.
<Fc> 1995 operating income was reduced by $7.8 million for the Spanish work
force reduction program.
</TABLE>
16. SUBSEQUENT EVENT (UNAUDITED)
- ----------------------------------
On May 5, 1997, the Earthgrains Board of Directors declared a two-for-one
stock split for shareholders of record as of May 30, 1997. The split is
effective July 28, 1997.
17. QUARTERLY COMMON STOCK PRICE RANGES AND DIVIDENDS
- -------------------------------------------------------
The Earthgrains Company Common Stock is listed and traded on the New York
Stock Exchange under the ticker symbol "EGR." The table below presents the
high and low market for the stock and cash dividend information for each
quarter of fiscal 1997.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Fiscal 1997 High Low Dividends
- ---------------------------------------------------------------
<S> <C> <C> <C>
June Quarter $36 $29-1/8 $ --
September Quarter $36 $31-1/2 .05
December Quarter $53-7/8 $33-1/4 .05
March Quarter $57-3/8 $43-3/4 .05
</TABLE>
Earthgrains Common Stock began trading on the New York Stock Exchange
March 27, 1996, following the spin-off from Anheuser-Busch. Earthgrains'
first dividend to shareholders as an independent public company was declared
in the June quarter and paid in the September quarter of fiscal 1997.
36 THE EARTHGRAINS COMPANY
<PAGE> 39
- -------------------------------------------------------------------------------
18. SUPPLEMENTAL BALANCE SHEET INFORMATION
- --------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
March 25, March 26,
(In millions) 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C>
Receivables:
Trade $ 147.5 $ 142.7
Allowance for doubtful accounts 6.0 6.8
- ------------------------------------------------------------------------------------
$ 141.5 $ 135.9
====================================================================================
Inventories:
Raw materials $ 51.6 $ 53.6
Finished goods 14.8 14.4
- ------------------------------------------------------------------------------------
$ 66.4 $ 68.0
====================================================================================
Other assets:
Litigation escrow fund $ -- $ 13.4
Other 28.8 25.2
- ------------------------------------------------------------------------------------
$ 28.8 $ 38.6
====================================================================================
Plant and equipment:
Land $ 65.1 $ 65.1
Buildings 460.7 441.7
Machinery and equipment 718.3 696.1
Construction in progress 37.0 80.7
- ------------------------------------------------------------------------------------
1,281.1 1,283.6
Less accumulated depreciation (574.4) (560.4)
- ------------------------------------------------------------------------------------
$ 706.7 $ 723.2
====================================================================================
Accrued salaries, wages and benefits:
Accrued payroll $ 16.9 $ 21.8
Accrued vacation 15.3 14.7
Accrued group benefits 14.4 12.1
- ------------------------------------------------------------------------------------
$ 46.6 $ 48.6
====================================================================================
Other current liabilities:
Current portion of self-insurance reserves $ 17.0 $ 15.2
Reserve for litigation settlement -- 6.3
Accrued taxes, other than income taxes 9.0 10.8
Spanish work force reduction program 0.9 7.8
Other items 5.7 9.3
- ------------------------------------------------------------------------------------
$ 32.6 $ 49.4
====================================================================================
Other noncurrent liabilities:
Self-insurance reserves $ 36.4 $ 40.1
Litigation reserve -- 13.4
Other items 11.7 15.3
- ------------------------------------------------------------------------------------
$ 48.1 $ 68.8
====================================================================================
</TABLE>
Supplemental balance sheet information (in millions) (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Fiscal Transition Fiscal Fiscal
Year Period Year Year
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Balance, beginning
of period $ 6.8 $ 6.4 $ 5.5 $ 5.1
Provision charged
to expense 0.2 0.7 1.8 1.4
Write-offs,
less recoveries (1.0) (0.3) (0.9) (1.0)
- ------------------------------------------------------------------------------------------------------------
Balance, end of period $ 6.0 $ 6.8 $ 6.4 $ 5.5
============================================================================================================
</TABLE>
THE EARTHGRAINS COMPANY 37
<PAGE> 40
Responsibility for Financial Statements
- -------------------------------------------------------------------------------
The management of The Earthgrains Company is responsible for the preparation
and integrity of the consolidated financial statements appearing in this
annual report. The financial statements were prepared in conformity with
generally accepted accounting principles appropriate in the circumstances
and, accordingly, include certain amounts based on our best judgments and
estimates.
We are responsible for maintaining a system of internal accounting
controls and procedures which we believe are adequate to provide reasonable
assurance, at an appropriate cost/benefit relationship, that assets are
safeguarded against loss from unauthorized use or disposition and financial
records provide a reliable basis for preparation of the financial statements.
The internal accounting control system is augmented by a program of internal
audits and appropriate reviews by management, written policies and
guidelines, careful selection and training of qualified personnel and a
written Code of Business Conduct adopted by our Company's Board of Directors,
applicable to all management employees of our Company.
The Audit and Finance Committee of our Company's Board of Directors,
composed solely of directors who are not officers of our Company, meets with
the independent auditors, management and internal auditors periodically to
discuss internal accounting controls and auditing and financial reporting
matters. The Committee reviews with the independent auditors the scope and
results of the audit effort. The Committee also meets with the independent
auditors and the chief internal auditor without management present to ensure
that the independent auditors and the chief internal auditor have free access
to the Committee.
Price Waterhouse LLP is engaged to audit the consolidated financial
statements of The Earthgrains Company and conduct such tests and related
procedures as it deems necessary in conformity with generally accepted
auditing standards. The opinion of the independent auditors, based upon
their audits of the consolidated financial statements, is shown below.
Report of Independent Accountants
- -------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of The Earthgrains Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of cash flows, and of shareholders'
equity present fairly, in all material respects, the financial position of
The Earthgrains Company at March 25, 1997 and March 26, 1996, and the results
of its operations and its cash flows for the fiscal year ended March 25,
1997, the 12-week period ended March 26, 1996, and the fiscal years ended
January 2, 1996, and January 3, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
St. Louis, Missouri
May 2, 1997
38 THE EARTHGRAINS COMPANY
<PAGE> 41
Five-Year Financial Highlights
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
For the
twelve,
weeks ended Fiscal Years
(In millions, except per share data) Fiscal Year March 26, ---------------------------------------------------
1997 1996<Fa> 1995<Fa> 1994<Fa><Fb> 1993<Fa> 1992<Fa>
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Net sales $1,662.6 $ 367.7 $1,664.6 $1,720.5 $1,740.6 $1,766.0
Cost of products sold 988.8 228.8 1,034.7 1,071.0 1,039.4 1,049.5
- ----------------------------------------------------------------------------------------------------------------------
Gross profit 673.8 138.9 629.9 649.5 701.2 716.5
Marketing, distribution and
administrative expenses 633.5 146.0 627.5 623.9 616.9 653.9
Provision for restructuring
and consolidation, net 12.7 -- 9.1 -- 114.6 --
- ----------------------------------------------------------------------------------------------------------------------
Operating income (loss) 27.6 (7.1) (6.7) 25.6 (30.3) 62.6
Other income and expenses:
Interest (expense) (6.3) (0.1) (1.9) (1.9) (3.4) (4.0)
Other income (expense), net 1.4 (0.1) 4.7 2.6 2.2 3.4
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 22.7 (7.3) (3.9) 26.3 (31.5) 62.0
Provision (benefit) for income taxes 6.5 (2.2) 2.7 15.0 (4.5) 23.4
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) before cumulative
effect of accounting changes 16.2 (5.1) (6.6) 11.3 (27.0) 38.6
Cumulative effect of changes in accounting
(FAS 106 and FAS 109) -- -- -- -- -- (28.2)
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 16.2<Fc> $ (5.1) $ (6.6)<Fd> $ 11.3 $ (27.0)<Fd> $ 10.4
======================================================================================================================
Earnings per share $ 1.60
==================================================
Weighted average shares outstanding 10.1
==================================================
Balance Sheet Data:
Working capital $ 80.6 $ 74.0 $ 63.1 $ 69.3 $ 15.6 $ 82.7
Current ratio 1.4x 1.4x 1.3x 1.4x 1.1x 1.3x
Plant and equipment, net $ 706.7 $ 723.2 $ 713.6 $ 706.2 $ 708.0 $ 706.3
Long-term debt $ 103.0 $ 92.6 $ 1.5 $ 11.6 $ 12.0 $ 12.2
Deferred income taxes, net $ 73.9 $ 72.2 $ 109.4 $ 106.9 $ 86.8 $ 123.5
Anheuser-Busch equity investment $ -- $ 582.1 $ 701.3 $ 684.3 $ 636.3 $ 694.7
Shareholders' equity $ 582.4 $ -- $ -- $ -- $ -- $ --
Total assets $1,172.1 $1,177.6 $1,197.2 $1,177.2 $1,208.4 $1,273.4
- ----------------------------------------------------------------------------------------------------------------------
<FN>
<Fa> Earthgrains was a wholly-owned subsidiary of Anheuser-Busch Companies,
Inc. until March 27, 1996. Accordingly, statements for prior
periods do not include costs associated with being an independent
public company. See unaudited Pro Forma Financial Information on
page 17 of this report for comparative purposes.
<Fb> Fiscal year 1994 includes 53 weeks.
<Fc> Reflects the effect of the provision for restructuring and consolidation
and one-time Spanish tax incentives and credits. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition" and Footnote 4 in the Notes to the Consolidated Financial
Statements.
<Fd> Reflects the effect of the provision for restructuring and consolidation.
See "Management's Discussion and Analysis of Results of Operations
and Financial Condition."
</TABLE>
THE EARTHGRAINS COMPANY 39
<PAGE> 42
Officers of The Earthgrains Company and Its Principal Subsidiaries
- -------------------------------------------------------------------------------
THE EARTHGRAINS COMPANY
- -----------------------
Policy Committee
Barry H. Beracha
Chairman and
Chief Executive Officer
John W. Iselin, Jr.
Executive Vice President
(Domestic Baking)
Xavier Argente
Executive Vice President (Bimbo)
William H. Opdyke
Executive Vice President
(Refrigerated Dough Products)
Larry G. Bergner
Vice President -- Technology
Todd A. Brown
Vice President -- Operations
(Refrigerated Dough Products)
Bary M. Horner
Vice President -- Bakery
Operations
Mark H. Krieger
Vice President and
Chief Financial Officer
Timothy J. Mitchell
Vice President -- Sales
(Refrigerated Dough Products)
Joseph M. Noelker
Vice Prresident, General Counsel
and Corporate Secretary
Larry D. Pearson
Vice President -- Diversified
Products
Bryan A. Torcivia
Vice President -- Planning,
Purchasing and Europate
Richard W. Witherspoon
Vice President -- Business
Development
(Refrigerated Dough Products)
Edward J. Wizeman
Vice President -- Human
Resources
Other Officers
Steven M. Brazile
Vice President -- Business Systems
George L. Moore
Vice President -- Labor Relations
William J. Palmer
Vice President -- Materials and
Transportation
John T. Reeves
Vice President -- Research and
Development
Virgil H. Rehkemper
Vice President and Controller
Michael A. Salamone
Vice President and Treasurer
Molly R. Salky
Vice President -- Investor Relations
and Communications
EARTHGRAINS BAKING COMPANIES, INC.
- ----------------------------------
John W. Iselin, Jr.
President
Barry M. Horner
Executive Vice President --
Operations
Larry D. Pearson
Executive Vice President --
Diversified Products
H. Edward Broome
Senior Vice President and General
Manager -- Mid-South Region
Thomas E. Coover
Vice President -- Sales
(Diversified Products)
Gary M. Feil
Senior Vice President and General
Manager -- California Region
Earl W. Heiner, Jr.
Senior Vice President and
General Manager -- Heiner's
Gary L. Jensen
Senior Vice President -- Marketing
Talmadge L. Miles
Senior Vice President and General
Manager -- Southeast Region
Steven V. Proscino
Senior Vice President and General
Manager -- Central Region
V. Anthony Ricker
Senior Vice President and
General Manager -- Texas Region
Philip L. Sexton
Senior Vice President --
National Accounts
Michael P. Swanson
Vice President -- Operations
(Diversified Products)
Jerry W. Thompson
Senior Vice President and General
Manager -- Southwest Region
Martha S. Uhlhorn
Vice President -- ECR and
Sales Technology
Joseph J. Waters
Vice President --
Field Services
Donald J. Wyant
Vice President --
Baking Technology
EARTHGRAINS REFRIGERATED DOUGH PRODUCTS, INC.
- ---------------------------------------------
William H. Opdyke
President
Todd A. Brown
Executive Vice President --
Operations
Timothy J. Mitchell
Executive Vice President --
Sales
Richard W. Witherspoon
Executive Vice President --
Business Development
William S. Cantzler
Regional Vice President -- Sales
William H. Crosby
Regional Vice President -- Sales
David M. Epps
Regional Vice President -- Sales
Dave A. Hall
Regional Vice President -- Sales
Thomas L. Rigdon
Regional Vice President -- Sales
BIMBO, S.A.
- -----------
Xavier Argente
Chief Executive Officer
Fermin Altarriba
Managing Director -- PIMAD
Enrique Belda
Vice President -- Industrial
Santiago Guerra
Managing Director -- CATDES
(Canary Islands)
EUROPATE, S.A.
- --------------
Bryan A. Torcivia
Chief Executive Officer
Henri Patacz
President
Gilbert Caratte
Director of Operations
Miguel Llado
Vice President -- Marketing
and Sales
Manuel Marcet
Vice President -- Human Resources
Carlos Martinez
Vice President -- Finance and
Administration
Leonor Sa Machado
Managing Director -- Portugal
Thierry Jonquois
Director of Sales
Jean-Louis Sabin
Director of Finance and
Administration
40 THE EARTHGRAINS COMPANY
<PAGE> 43
Board of Directors
- -------------------------------------------------------------------------------
[PHOTO]
Barry H. Beracha (55)
Chairman and
Chief Executive Officer
The Earthgrains Company
Director; Metal Container Co.
Director since 1993
[PHOTO]
Peter F. Benoist (49)
Executive Vice President,
Mercantile Bank of St. Louis, N.A.
Director; St. Louis Equity Fund
Director since 1996
[PHOTO]
Jaime Iglesias (66)
Retired Chairman,
Anheuser-Busch Europe Inc.
Director since 1996
[PHOTO]
William E. Stevens (54)
Executive Vice President,
Mills & Partners
Director; McCormick &
Company, Inc.
Director since 1996
[PHOTO]
J. Joe Adorjan (58)
Chairman and
Chief Executive Officer,
Borg-Warner Security Corporation
Director; ESCO Electronics,
California Microwave Corporation,
Goss Printing Company
Director since 1996
[PHOTO]
Maxine K. Clark (48)
President and
Chief Executive Officer,
Smart Stuff, Inc.
Director; Tandy Brands
Accessories, Inc.; Wave Technologies
Director since 1996
[PHOTO]
Jerry E. Ritter (62)
Chairman,
Clark Enterprises
Director; Brown Group, Inc.;
OmniQuip International, Inc.;
O'Gara Company
Director since 1995
Corporate Information
- -------------------------------------------------------------------------------
The Earthgrains Company
Headquarters
8400 Maryland Avenue
St. Louis, Missouri 63105-3668
314-259-7000
Annual Meeting
Friday, July 25, 1997, 10:00 a.m.
America's Center
1 Convention Plaza
St. Louis, Missouri 63102
Transfer Agent, Registrar
and Dividend Payments
ChaseMellon Shareholder
Services
450 West 33rd Street
New York, New York 10001
1-888-213-0971
Investor Information
and Media Inquiries
Investor Relations
and Communications --
The Earthgrains Company
8400 Maryland Avenue
St. Louis, Missouri 63105-3668
314-259-7000
E-mail at [email protected]
Quarterly information is
available to all shareholders,
free of charge, via fax or mail,
by calling 1-888-213-0971.
SEC Filings
The Earthgrains Company files
forms 10-K and 10-Q with
the Securities and Exchange
Commission; shareholders may
obtain a copy of these forms,
without charge, by contacting
the Corporate Secretary at
Earthgrains headquarters.
Stock Trading Information
Listed on New York
Stock Exchange
Ticker Symbol: EGR
Newspaper Listing: Earthgr
Independent Accountants
Price Waterhouse LLP
800 Market Street
St. Louis, Missouri 63101
Dividends
Dividends are normally paid
in the months of May, August,
November, and February.
The Earthgrains Company
Principal Subsidiaries:
A U.S. manufacturer of fresh
baked goods with distribution
throughout the Southeast,
South, Midwest, Southwest
and Northern California.
Earthgrains Refrigerated
Dough Products, Inc.
Manufactures refrigerated
dough products and baked
toaster pastries at plants in
Forest Park, Georgia, and
Carrollton, Texas, and
distributes its products
nationally.
Bimbo, S.A.
Operates eight bakeries in
Spain and the Canary Islands
and is constructing a bakery
in Portugal. Distributes prod-
ucts in Spain and Portugal.
Europate, S.A.
Operates a refrigerated dough
plant in France and distributes
products throughout Europe.
Trademarks
All product or service names
appearing in type form different
from that of the surorunding
text are trademarks or service
marks owned by or licensed to
The Earthgrains Company and
its subsidiaries or affiliates.
THE EARTHGRAINS COMPANY 41
<PAGE> 44
A DAY IN THE LIFE OF EARTHGRAINS | On Thursday, March 27, 1997, we
celebrated [PICTURE] our first year as an independent public company.
On that day, as on every other, we baked more than 70 million
servings of packaged fresh bread, rolls, and buns [PICTURE] in America
and Spain. We delivered these fresh goods to customers along more
than 3,900 delivery routes across the United States and Europe. We also
produced and sold more than 12 million servings of toaster pastries
and refrigerated dough -- canned biscuits, cinnamon rolls, [PICTURE]
croissants, pastry rolls, and cookie dough -- in America, France and
elsewhere in Europe. [PICTURE] Day in and day out, we serve our
customers and consumers with a variety of healthy, quality, fresh
and tasty products made from grain. We are EARTHGRAINS.
THE EARTHGRAINS COMPANY 8400 MARYLAND AVENUE | ST. LOUIS, MISSOURI 63105-3668
<PAGE> 1
Exhibit 21.1
------------
<TABLE>
Subsidiaries of The Earthgrains Company
- ---------------------------------------
<CAPTION>
Name Place of Incorporation
- ---- ----------------------
<S> <C>
Earthgrains Baking Companies, Inc. Delaware
Earthgrains of West Virginia, Inc. Delaware
Earthgrains International Holdings, Inc. Delaware
Europate, S.A. Lievin, France
Bimbo, S.A. Barcelona, Spain
Catdes, S.A. Barcelona, Spain
Pimad, S.A. Madrid, Spain
Bimbo-Productos Alimentares, Limitada Lisbon, Portugal
Supan, S.A. Barcelona, Spain
Commonwealth Cold Storage, Inc. Puerto Rico
Eagle Crest Foods, Inc. Delaware
Earthgrains Refrigerated Dough Products, Inc. Texas
Earth Grains of Lexington, Inc. Delaware
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-2858 and No. 333-2636) of The Earthgrains
Company of our report dated May 2, 1997 appearing on page 38 of The
Earthgrains Company's Annual Report to Shareholders which is incorporated by
reference in this Annual Report on Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
St. Louis, Missouri
June 18, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Company's
consolidated financial statements for the 52 weeks ended March 25, 1997 included
in this report on Form 10-K and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-25-1997
<PERIOD-END> MAR-25-1997
<CASH> 43,100
<SECURITIES> 0
<RECEIVABLES> 147,600
<ALLOWANCES> 6,000
<INVENTORY> 66,400
<CURRENT-ASSETS> 296,600
<PP&E> 1,281,100
<DEPRECIATION> 574,400
<TOTAL-ASSETS> 1,172,100
<CURRENT-LIABILITIES> 216,000
<BONDS> 1,500
0
0
<COMMON> 100
<OTHER-SE> 582,300
<TOTAL-LIABILITY-AND-EQUITY> 1,172,100
<SALES> 1,662,600
<TOTAL-REVENUES> 1,662,600
<CGS> 988,800
<TOTAL-COSTS> 988,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 200
<INTEREST-EXPENSE> 6,300
<INCOME-PRETAX> 22,700
<INCOME-TAX> 6,500
<INCOME-CONTINUING> 16,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,200
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 0
</TABLE>
