<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
/ / Definitive Proxy Statement Commission Only
/ / Definitive Additional Materials (as permitted by Rule
/ / Soliciting Material Pursuant to 14a-6(e)(2))
Rule 14a-11(c) or Rule 14a-12
The Earthgrains Company
- ------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
- ------------------------------------------------------------------------------
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTIONS APPLIES:
- ------------------------------------------------------------------------------
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON WHICH THE FILING
FEE IS CALCULATED AND STATE HOW IT WAS DETERMINED):
- ------------------------------------------------------------------------------
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
- ------------------------------------------------------------------------------
(5) TOTAL FEE PAID:
- ------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- ------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
EARTHGRAINS [LOGO]
THE EARTHGRAINS COMPANY
8400 Maryland Avenue
Saint Louis, Missouri 63105
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 17, 1998
TO THE SHAREHOLDERS OF
THE EARTHGRAINS COMPANY:
We are pleased to notify you that the Annual Meeting of the Shareholders of
The Earthgrains Company will be held in Edison Theatre at Washington
University's Mallinckrodt Center, off Forsyth Boulevard, Saint Louis, Missouri
63130, on Friday, July 17, 1998 at 10:00 a.m. local time, for the following
purposes:
1. To elect two directors for a three-year term expiring in 2001.
2. To consider and vote upon a proposal to amend Earthgrains' Amended and
Restated Certificate of Incorporation to increase the number of
authorized shares of common stock from 50,000,000 to 150,000,000.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The record date for determining shareholders entitled to notice of and to
vote at the meeting is the close of business on May 29, 1998.
A copy of Earthgrains' Annual Report for fiscal year 1998 accompanies this
notice and proxy statement.
By order of the Board of Directors
/s/ Joseph M. Noelker
Joseph M. Noelker
Vice President, General Counsel
and Corporate Secretary
June 15, 1998
PLEASE DATE AND SIGN THE ACCOMPANYING PROXY FORM AND RETURN
IT PROMPTLY IN THE ENCLOSED BUSINESS REPLY ENVELOPE.
<PAGE> 3
EARTHGRAINS [LOGO]
THE EARTHGRAINS COMPANY
PROXY STATEMENT
This Proxy Statement is being furnished to all shareholders of record of
The Earthgrains Company ("Earthgrains") by its Board of Directors. The Board
is using this Proxy Statement to solicit votes on the proxy form which
accompanies this Proxy Statement, which votes will be used at the Annual
Meeting of Shareholders of Earthgrains (the "Meeting"), to be held on July
17, 1998 and at any adjournment thereof. The purposes of the Meeting, and of
the solicitation of votes, is described in the Notice of Annual Meeting of
Shareholders which is printed as the first page of this Proxy Statement
booklet. If the enclosed proxy form is signed and returned, it may nevertheless
be revoked before it has been exercised by taking any of these actions: (i)
signing and returning another proxy form bearing a later date, (ii) notifying
the Corporate Secretary of Earthgrains in writing at any time before the proxy
form is exercised, or (iii) attending the Meeting in person and casting a
ballot. Any proxy form returned to Earthgrains will be voted as marked. If the
proxy form is signed and returned but, as to any issue, no vote is marked, the
proxy will be voted in accordance with the Board's recommendation for that
issue, as described in this Proxy Statement. Those recommendations are: FOR the
election of the two nominees for directors named in this Proxy Statement, and
FOR Item 2 (approval of an amendment to increase the number of authorized
shares of common stock from 50,000,000 to 150,000,000).
A copy of Earthgrains' Annual Report containing financial statements for
the fiscal year ended March 31, 1998 has been mailed with this Proxy Statement
to each shareholder of record as of the close of business on May 29, 1998.
PROXY SOLICITATION
Votes on proxy forms will be solicited by mail. They may also be solicited
by officers and regular employees of Earthgrains, in person or by telephone or
mail. The cost of soliciting votes will be borne by Earthgrains, and will
consist primarily of printing, postage, and handling, including the expenses of
brokerage houses, custodians, nominees, and fiduciaries in forwarding documents
to beneficial owners of Earthgrains' common stock. In addition, to assist in
the solicitation of votes on proxy forms from banks, brokers, other
institutional holders and from other shareholders, Earthgrains has engaged
ChaseMellon Shareholder Services, L.L.C. for a fee of $6,500.
RECORD DATE, VOTING SECURITIES, AND SIGNIFICANT STOCKHOLDERS
All holders of record on the record date of shares of Earthgrains' common
stock, $.01 par value per share ("Common Stock") are entitled to vote at the
Meeting. Each shareholder entitled to vote shall have one vote for each share
of Common Stock registered in such shareholder's name on the books of
Earthgrains as of the record date.
The record date fixed by the Board of Directors for determining
shareholders entitled to vote at the Meeting is the close of business on May
29, 1998. There were --------- shares of Common Stock outstanding and entitled
to vote at the close of business on the record date.
A majority of the outstanding shares entitled to vote must be represented
in person or by proxy at the Meeting in order to conduct the election of
directors and any other matters properly brought before the Meeting. If such a
majority is represented at the Meeting, then the two nominees for director who
receive the highest number of the votes cast will be elected. Any other matters
require the approving vote of at least a majority of the shares of Common Stock
that are actually voted and have the power to vote at the Meeting. Proxies for
shares marked "abstain" on a matter will be considered to be represented at
the Meeting, but not voted, for these purposes. Shares registered in the names
of brokers or other "street name" agents, for which proxies are voted on some
but not all matters, will be considered to be represented at the Meeting and
voted only as to those matters actually marked on the proxy form.
As of March 31, 1998, Earthgrains knew of no person or entity reporting to
be the beneficial owner of more than 5% of its Common Stock.
2
<PAGE> 4
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY FORM)
Presently seven members serve on the Board of Directors. The Board is
divided into three groups, each group as nearly equal in number as possible,
serving staggered three-year terms. At this Meeting, two directors in Group II
will be elected for a three-year term expiring in 2001.
Under Earthgrains' Certificate of Incorporation, vacancies in the Board of
Directors which may occur during the year may be filled by a majority of the
directors then in office, even if those then in office are too few to make a
legal quorum. So long as the directors are divided into groups, any director
chosen to fill a vacancy shall be of the same group as the director he or she
succeeded, and shall hold office until the next election of that group of
directors by the shareholders of Earthgrains and until his or her successor is
duly elected and qualified.
Each signed and returned proxy form will be voted for the election of all
of the nominees of the Board of Directors named below unless such authority is
withheld as to all nominees or as to any specific nominee. Should any nominee
become unavailable, for any reason, before the election (which is not
anticipated), the proxy form will be voted for substitute person(s) to be
selected by the Board of Directors of Earthgrains unless authority to vote for
all of the nominees is withheld.
INFORMATION AS TO DIRECTORS, INCLUDING NOMINEES FOR ELECTION
The Board of Directors has nominated two persons, each of whom is currently
a director, for election for a three-year term expiring in 2001. These director
nominees are J. Joe Adorjan and Jerry E. Ritter.
The following information is submitted with respect to the nominees for
election and the other directors of Earthgrains:
TO BE ELECTED FOR A THREE-YEAR TERM EXPIRING IN 2001 (GROUP II DIRECTORS)
<TABLE>
<S> <C>
J. JOE ADORJAN DIRECTOR SINCE 1996
[PHOTO] Chairman and Chief Executive Officer of Borg-Warner Security Corporation ("Borg-
Warner"), a Chicago-based provider of security services. Mr. Adorjan was President
and Chief Operating Officer of Borg-Warner from April, 1995 to October, 1995 and has
been a Director of Borg-Warner since 1993. He was Chairman and Chief Executive Officer
of ESCO Electronics Corporation ("ESCO") from 1990 to 1992. He served as President
of Emerson Electric Company from 1993 until April 1995. Mr. Adorjan is also a member
of the Board of Directors of ESCO, Illinova Corporation and Goss Graphic Systems, Inc.
He also serves as the Chairman of the Board of Trustees of Saint Louis University and
as a Trustee of The School in Chicago, Illinois. Age: 59
JERRY E. RITTER DIRECTOR SINCE 1995
[PHOTO] Chairman of the Board of Clark Enterprises--Parent Company of the Saint Louis Blues
Hockey Club and Kiel Center (the Club's home venue). Mr. Ritter also serves as a
consultant to Anheuser-Busch. He was Executive Vice President--Chief Financial and
Administrative Officer of Anheuser-Busch from 1991 to 1996, and served in several
executive capacities at Anheuser-Busch, including Vice President and Group Executive
from 1984 to 1990, Vice President--Finance from 1981 to 1983, and Vice
President--Finance and Treasurer from 1975 to 1981. Mr. Ritter is also a member of the
Board of Directors of Brown Group, Inc., OmniQuip International, Inc., and The
Kroll-O'Gara Company. He also serves as the Vice Chairman of the Board of
Commissioners of the Saint Louis Science Center. Age: 63
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE ELECTION OF THESE NOMINEES.
---
3
<PAGE> 5
DIRECTORS WHOSE TERM EXPIRES IN 1999 (GROUP III DIRECTORS)
BARRY H. BERACHA DIRECTOR SINCE 1993
[PHOTO] Chief Executive Officer and Chairman of the Board of Directors of Earthgrains since
March 1996. From 1976 through March, 1996, he was a Vice President and Group Executive
of Anheuser-Busch, and during that time served in various positions for various
Anheuser-Busch subsidiaries. Mr. Beracha is also a member of the Board of Directors of
Metal Container Company, a subsidiary of Anheuser-Busch, and The American Bottling
Company, a joint venture between Cadbury Schweppes plc and The Carlyle Group. Mr.
Beracha also serves as a member of the Board of Trustees of Saint Louis University.
Age: 56
PETER F. BENOIST DIRECTOR SINCE 1996
[PHOTO] Senior Executive Vice President, Chief Operating Officer of Mercantile Bank of St.
Louis since February, 1998. Executive Vice President of Mark Twain Bancshares, Inc.
from 1984 to 1997; Director of Mark Twain Bancshares, Inc. from 1991 to 1997; Chairman
of the Board of Mark Twain Bank from 1986 until June 1996; President of Mark Twain
Bank from 1986 until 1989; Chairman of Mark Twain Kansas City Bank from 1992 until
June 1996. Mr. Benoist is Director of Ecumenical Housing Production Corp.; Director
and Vice Chairman of St. Louis Priory; Trustee of Maryville University; and Director
of St. Louis Equity Fund. Age: 50
MAXINE K. CLARK DIRECTOR SINCE 1996
[PHOTO] President and Chief Executive Officer of The Build-A-Bear Workshop, a children's
entertainment retail company. Since 1996, Ms. Clark has been President and Chief
Executive Officer of Smart Stuff, Inc., a Saint Louis retail and business consulting
firm, and the developer of The Build-A-Bear Workshop. She was President and Chief
Merchandising Officer of Payless ShoeSource, Inc. from 1992 until 1996, and Executive
Vice President for Venture Stores, Inc. from 1988 until 1992. Ms. Clark also is a
member of the Board of Directors of Tandy Brands Accessories, Inc., Wave Technologies
and Department 56, Inc. Ms. Clark serves as a member of the Board of Trustees of the
University of Georgia Foundation; as a member of the Advisory Board for The Hatchery,
Washington University; and as a member of the Advisory Board for the Greater Saint
Louis Council of Girl Scouts. Age: 49
DIRECTORS WHOSE TERM EXPIRES IN 2000 (GROUP I DIRECTORS)
JAIME IGLESIAS DIRECTOR SINCE 1996
[PHOTO] Retired since March, 1996. From January 1993 to March 1996, Mr. Iglesias was
Chairman of the Board of Anheuser-Busch Europe Inc. ("ABEI"), which is a
subsidiary of Earthgrains' former parent company, Anheuser-Busch Companies, Inc.
("Anheuser-Busch"). He was Chief Executive Officer of ABEI from 1989 until March
1996 and President of ABEI from 1988 until March 1996. Mr. Iglesias was appointed
President--International Operations of Earthgrains and prior to that served as
Earthgrains' Vice President--International from 1983 to 1996. He was also Chairman and
President of Bimbo and President and Senior Vice President--Europe of Anheuser-Busch's
subsidiary, Anheuser-Busch International, Inc., ("ABII") and has served in such
capacities since 1978 and March 1996, respectively. He also served as President and
Managing Director--Europe of ABII from 1988 until March 1996. Age: 67
WILLIAM E. STEVENS DIRECTOR SINCE 1996
[PHOTO] Executive Vice President of Mills & Partners since 1996. Mr. Stevens was President,
Chief Executive Officer and a member of the Board of Directors of United Industries
Corporation from 1989-1996. Prior to 1989, Mr. Stevens was Executive Vice President
and a member of the Board of Directors of Black & Decker Corporation. He also serves
on the Board of Directors of McCormick & Company, Inc. Age: 55
</TABLE>
4
<PAGE> 6
BOARD OF DIRECTORS MEETINGS, COMMITTEES, AND COMPENSATION
CERTAIN STANDING COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation and Human Resources Committee and
an Audit and Finance Committee, but no standing nominating committee.
Compensation and Human Resources Committee
Members of the Compensation and Human Resources Committee of the Board of
Directors are J. Joe Adorjan, Maxine K. Clark and Jerry E. Ritter, with Mr.
Adorjan serving as Chairman. The Compensation and Human Resources Committee
considers and make recommendations to the Board of Directors as to salaries and
other compensation to be paid to the executive officers of Earthgrains and to
other officers and upper-management employees of Earthgrains and its
subsidiaries.
Audit and Finance Committee
Members of the Audit and Finance Committee are Peter F. Benoist, Jaime
Iglesias and William E. Stevens, with Mr. Benoist serving as Chairman. The
Audit and Finance Committee is responsible for recommending to the Board the
selection of independent accountants, for reviewing the scope and results of
the independent audit and the internal audit function, for the general
oversight of Earthgrains' financial reporting, and for the consideration of any
recommendations of the independent accountants and internal audit regarding
internal controls and other matters. The Committee is also responsible for
reviewing Earthgrains' financial plans and policies related to borrowings,
dividends and capital structure.
MEETINGS
During fiscal year 1998, the Board of Directors met six times. In that same
period, both the Compensation and Human Resources Committee and the Audit and
Finance Committee met five times. No incumbent director attended fewer than 75%
of the aggregate of the total number of meetings of the Board of Directors and
all committees of the Board on which he or she served during the period that he
or she served.
COMPENSATION OF DIRECTORS
Any director who is also an employee of Earthgrains does not receive
additional compensation for service as a director. Directors of Earthgrains who
are not employees of Earthgrains or its subsidiaries are paid an annual fee of
$20,000 and a fee of $1,500 for each Board of Directors meeting they attend. In
addition, each such director is paid $750 for attendance at a committee meeting
or for any other meeting where less than a quorum is present. The Chairpersons
of the Committees receive an annual fee of $3,500. Non-employee directors
receive 25% of their annual compensation in Common Stock and, at their
election, may receive up to 100% of their annual compensation in Common Stock.
Each original non-employee director, upon becoming a director, received an
initial grant of 1,000 shares of Common Stock and each non-employee director
will automatically receive annual grants of 200 shares of Common Stock. The
initial 1,000 and automatic 200 share grants are subject to transfer
restrictions which lapse after 10 years or, if earlier, when the director
leaves the Board (other than upon removal by shareholders) or upon a change in
control of Earthgrains.
STOCK SPLIT
On May 26, 1998 Earthgrains announced a two-for-one stock split for
shareholders of record as of July 10, 1998, effective July 20, 1998. This stock
split will be the second stock split for Earthgrains. The first stock split,
also two-for-one, was effective July 28, 1997. All references to the number of
shares of Earthgrains' Common Stock and all prices per share in this Proxy
Statement are reported to reflect the first stock split, but not the second
stock split, except as discussed in Item 2.
5
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of Earthgrains' Common Stock as of March 31, 1998, for each director
and nominee for director, each of the executive officers named in the Summary
Compensation Table (see page 11 below), and all directors and executive
officers as a group. Except as otherwise noted, the individuals have sole
voting and investment power with respect to such securities. Included are
numbers of shares which were beneficially owned on March 31, 1998 or may be
acquired within 60 days after that date pursuant to exercisable employee stock
options.
<TABLE>
COMMON STOCK BENEFICIALLY OWNED
<CAPTION>
NUMBER
OF % OF SHARES
NAME SHARES OUTSTANDING
- ---- ------ -----------
<S> <C> <C>
Barry H. Beracha......... 487,566<F1> 2.24%
J. Joe Adorjan........... 5,271<F2> <F*>
Peter F. Benoist......... 4,505<F3> <F*>
Maxine K. Clark.......... 2,479<F4> <F*>
Jaime Iglesias........... 5,220<F5> <F*>
Jerry E. Ritter.......... 9,363<F6> <F*>
William E. Stevens....... 5,004<F7> <F*>
John W. Iselin, Jr....... 85,973<F8> 0.40%
Xavier Argente........... 37,479<F9> 0.17%
William H. Opdyke........ 40,653<F10> 0.19%
Barry M. Horner.......... 27,409<F11> 0.13%
All directors and
executives officers as
a group (22 persons)... 921,434<F12> 4.26%
<FN>
- --------
<F*> Person beneficially owns less than 0.1% of Earthgrains' outstanding
Common Stock.
<F1> Includes 227,310 shares subject to currently exercisable stock options,
166,666 shares of restricted stock, subject to forfeiture, and 18,392
shares owned indirectly by Mr. Beracha through his 401(k) plan accounts.
Also includes 2,400 shares owned by children of Mr. Beracha, the
beneficial ownership of which is disclaimed.
<F2> Includes 1,400 shares of restricted stock, subject to transfer
restrictions.
<F3> Includes 1,400 shares of restricted stock, subject to transfer
restrictions.
<F4> Includes 1,400 shares of restricted stock, subject to transfer
restrictions.
<F5> Includes 1,400 shares of restricted stock, subject to transfer
restrictions.
<F6> Includes 1,400 shares of restricted stock, subject to transfer
restrictions and 800 shares owned by Mr. Ritter's wife, the beneficial
ownership of which is disclaimed.
<F7> Includes 1,400 shares of restricted stock, subject to transfer
restrictions and 1,000 shares held in an irrevocable trust for the
benefit of Mr. Stevens' children, the beneficial ownership of which is
disclaimed.
<F8> Includes 47,334 shares subject to currently exercisable stock options,
35,834 shares of restricted stock, subject to forfeiture and 695 shares
owned indirectly by Mr. Iselin through his 401(k) plan accounts.
<F9> Includes 26,867 shares subject to currently exercisable stock options and
9,166 shares of restricted stock, subject to forfeiture.
<F10> Includes 19,611 shares subject to currently exercisable stock options,
19,166 shares of restricted stock, subject to forfeiture, and 1,514
shares owned indirectly by Mr. Opdyke through his 401(k) plan accounts.
<F11> Includes 14,200 shares subject to currently exercisable stock options,
12,084 shares of restricted stock, subject to forfeiture, and 967 shares
owned indirectly by Mr. Horner through his 401(k) plan accounts.
<F12> Includes shares subject to currently exercisable stock options,
restricted stock and shares owned indirectly through 401(k) plan accounts
and otherwise.
</TABLE>
6
<PAGE> 8
INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(ITEM 2 ON PROXY FORM)
The Board of Directors has directed that there be submitted to the
shareholders a proposal to approve an amendment (the "Amendment") to Article
FOURTH of the Amended and Restated Certificate of Incorporation of Earthgrains
(the "Certificate") so as to increase the number of shares of $.01 par value
Common Stock which Earthgrains has authority to issue from 50,000,000 to
150,000,000. The number of preferred shares authorized would not be changed by
this Amendment, nor would the par value of either the common or the preferred
shares be affected in any way.
As of March 31, 1998, 21,667,464 shares of Common Stock were issued
(including 168,600 shares held in the Treasury) and an aggregate of 2,676,802
shares were reserved for issuance pursuant to Earthgrains' various stock plans.
Therefore, as of such date, 25,655,734 shares were authorized and available for
issuance. However, when the stock split becomes effective July 20, 1998,
approximately 43,334,928 shares will be issued and 5,353,604 shares will be
reserved for issuance pursuant to stock plans. Under the current Certificate,
less than two million shares (approximately 1,311,468) will be authorized and
available for issuance unless the Amendment is approved. If the proposed
Amendment is approved, in the aggregate there will be approximately 101,311,468
shares of Common Stock available for issuance after the split.
The additional shares of Common Stock for which authorization is sought
herein would be identical to the shares of Common Stock now authorized under
the Certificate. The authorized shares will be used from time to time in
connection with stock dividends or splits, capital raising, future
acquisitions, employee benefit plans and other stock requirements of
Earthgrains. Having such additional authorized shares of Common Stock available
for issuance in the future will give Earthgrains greater flexibility and may
allow such shares to be issued without the expense and delay of a special
shareholders' meeting. All authorized but unissued shares of Common Stock,
including the additional shares of Common Stock authorized by the Amendment,
will be available for issuance without further authorization of the
shareholders, unless, as in the case of executive stock plans, such action is
required by applicable law or the rules of a stock exchange on which
Earthgrains' Common Stock may be listed.
Shareholders have no preemptive rights to acquire shares issued by
Earthgrains under its existing Certificate, and shareholders would not acquire
any such rights with respect to the additional shares under the proposed
Amendment to the Certificate. Under some circumstances, issuance of additional
shares of Common Stock could dilute voting rights, equity and earnings per
share of existing shareholders. The authorization or issuance of the additional
shares would not otherwise affect the legal rights of the shareholders of the
outstanding shares of Common Stock.
The increase in authorized but unissued Common Stock could be considered an
anti-takeover measure because the additional authorized but unissued shares of
Common Stock could be used by the Board of Directors to make a change in
control of Earthgrains more difficult. The Board of Directors' purpose in
recommending this proposal is not as an anti-takeover measure, but for the
reasons discussed above.
The Board of Directors believes that it is in the best interests of
Earthgrains and its shareholders to increase the number of authorized but
unissued shares of its Common Stock. The increase will provide a reserve of
shares available for issuance upon sole authorization of the Board of Directors
for any general corporate purpose.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of Earthgrains'
outstanding Common Stock is required to approve the proposed increase in the
authorized shares. If the proposed Amendment is approved, the first sentence of
Article FOURTH of the Certificate will be as follows:
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is 160,000,000, 150,000,000 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
---
CERTIFICATE TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
7
<PAGE> 9
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND HUMAN RESOURCES COMMITTEE FOR FISCAL YEAR 1998
The Compensation and Human Resources Committee of the Board of Directors
(the "Committee") of Earthgrains is comprised entirely of independent,
non-employee directors. The Committee operates under the authority delegated to
it by the Board. The Committee's responsibilities include review and approval
of salary, annual incentives, long-term incentives and other compensation for
executive officers, including the Chief Executive Officer (the "CEO"). The
Committee also administers Earthgrains' employee incentive programs. The
following discussion summarizes the philosophies and methods which guide the
Committee in carrying out its responsibilities.
COMPENSATION PHILOSOPHY
Earthgrains' principal goal is to maximize shareholder value. Accordingly,
the Committee's paramount objective is to strengthen and monitor the connection
between executive compensation and the creation of value by Earthgrains. The
Committee endeavors to accomplish this through a compensation program that
attracts, motivates and retains top executive talent, and that rewards those
executives for maximizing the key elements of Earthgrains' economic value.
Earthgrains' executive officers are eligible for both fixed and variable
(based on performance) components of compensation. In determining the structure
and design of these pay components as well as how much is awarded under each
component, the Committee considers several principles:
* To attract, motivate and retain key executives, the total compensation
package must be competitive with median practices in the commodity and
branded segments of the food industry.
* Both annual and long-term incentives must be utilized to achieve
Earthgrains' financial performance objectives.
* All Earthgrains' awards will be aligned with maximizing the economic
value of Earthgrains.
* Each component of compensation available to executives will be clearly
communicated to them, as will the performance required to earn variable
components of compensation. Such communication is essential to an
effective compensation program.
The Committee reviews compensation based on these principles, Earthgrains'
performance and competitive practices. As part of its review, the Committee
looks at compensation of a broad group of companies in the food industry (the
"survey companies"), including but not limited to the companies included in
the S&P Food Index, as reflected in Earthgrains' stock price performance graph
on page 15.
Qualifying compensation for tax deductibility under the Internal Revenue
Code is favored by the Committee; Section 162(m) limits to $1 million the
annual deduction a publicly held corporation may take for compensation paid to
any executive, except with respect to certain performance-based compensation.
However, tax savings are but one consideration among many in the executive
compensation equation, and will not be solely determinative where the
Committee, in its discretion, finds other considerations to be more important.
COMPENSATION PROGRAM COMPONENTS
During the last fiscal year, Earthgrains' executives were eligible for
three compensation components: (1) base salary, (2) annual incentive, and (3)
equity-based incentives. In general, base salary is set in advance but can be
adjusted periodically at the discretion of the Committee; annual and
equity-based incentives are awarded at the discretion of the Committee. The
following discussion outlines the factors the Committee considers and applies
when awarding each of the three components.
BASE SALARY
Each executive's base salary, including that of the CEO, was initially
established to reflect:
* The executive's experience and the responsibilities attendant to the
position; and
* The median base salaries paid to executives in comparable positions at
the survey companies.
8
<PAGE> 10
The base salaries of the named executive officers, other than Mr. Argente,
were governed by their respective employment agreements. In determining such
base salaries, the Committee took into account the factors outlined above. Mr.
Argente's agreement contains a minimum annual base sum that serves as a floor
amount for his annual salary.
The Committee will review base salaries annually. In evaluating whether an
adjustment to an executive's base salary is appropriate, the Committee
considers the pay levels at the survey companies and Earthgrains' overall
financial performance during the prior fiscal year including such measures as:
* Sales volumes and market share performance;
* Operating and net income margin trends;
* Growth in earnings and cash flow per share;
* Returns on capital and equity; and
* Appreciation in value of common shares.
Special consideration may be given to performance measures that bear a
close relationship to an executive's particular duties, as well as to the
complexity of an individual's responsibilities and the executive's immediate
supervisor's evaluation as to how well those responsibilities were discharged.
The Committee, however, does not employ a precise formula in adjusting base
salaries and to this extent the determination involves some degree of
subjectivity. In accordance with the foregoing, the Committee increased the
base salaries of executive officers, including the named executive officers, in
the last fiscal year by an average of 7.0% (5.4% can be attributed to merit
increases; the remainder to equity adjustments).
ANNUAL INCENTIVE
Annual incentives are targeted at the median annual bonuses paid to the
executives occupying comparable positions at the survey companies and are based
on the performance of both Earthgrains and the individual executive. The
Committee established a targeted annual incentive for each executive officer
ranging from 30% to 55% of the executive's base salary. Assuming that
Earthgrains' performance is at least 80% of the annual performance goal the
actual bonus payable to any executive may range from 40% to 168% of the target
bonus.
For the last fiscal year, bonuses for executive officers were determined on
the basis of Earthgrains' earnings before interest expense and income taxes
("EBIT ") compared with a target established by the Committee. Bonuses for
executive officers assigned to the Earthgrains' domestic operations were
determined in part on the basis of domestic EBIT for those operations and
bonuses for executive officers assigned to international operations were
determined on the basis of international EBIT for those operations.
For the last fiscal year, Earthgrains exceeded its target EBIT goal.
Executive officers became eligible for annual bonuses ranging from 58%-148% of
their target annual bonuses. The bonuses were then adjusted for all executive
officers based on the Committee's assessment of individual performance. This
assessment was discretionary and took into account a number of factors that
varied from individual to individual. No specific weight was given to any
particular factor. After taking into account these individual adjustments,
annual bonuses were awarded to executives that were, on average, 144.8% of
target bonuses.
EQUITY-BASED INCENTIVES
Earthgrains continues to use stock options, and has used restricted stock
as a means of retaining and motivating executives over the long term, and
creating a commonality of interest between executives and shareholders. An
executive's background, position, responsibilities, and individual performance
are relevant to the Committee's decision whether to make an award to an
executive, as well as to the amount and composition of any such award. Because
awards involve the Committee's estimation of an individual executive's
potential to contribute to Earthgrains' long-term performance, the Committee
considers certain subjective factors in addition to certain objective factors.
9
<PAGE> 11
OTHER MID TO LONG TERM INCENTIVES
At the 1997 Annual Meeting, shareholders approved Earthgrains' Exceptional
Performance Plan (the "EPP"), which had been adopted by the Board on May 2,
1997. Also on May 2, 1997, the Committee established the 1998 Cash Incentive
Program (the "1998 Program"). Approximately 200 key executives of
Earthgrains, including the named executive officers, are currently designated as
participants. The performance period for the 1998 Program began on March 26,
1997 and terminates on March 25, 2002, the last day of fiscal year 2002, unless
the performance goals are achieved earlier. The performance goals of the 1998
Program are tied to both a cash flow measure and a return on capital measure,
and the bonus each executive will receive depends on the applicable bonus
formula amount and the extent to which the performance goals are achieved. The
performance period for the 1998 Program has not elapsed; no bonuses were
awarded to any executives under the 1998 Program during fiscal year 1998.
CEO COMPENSATION
The factors used to evaluate Mr. Beracha's perfomance were his continued
success in transitioning Earthgrains from an Anheuser-Busch subsidiary to a
thriving independent company, the development of sound strategic and operating
plans, improvements in Earthgrains' operating performance, and the resulting
improvement in Earthgrains' stock price. No specific weighting was assigned to
these factors.
Mr. Beracha's compensation is governed, in part, by his employment
agreement with Earthgrains. Pursuant to his employment agreement, Mr. Beracha
received a base salary of $ for the last fiscal year. The majority of
Mr. Beracha's bonus for the last fiscal year was paid pursuant to the 1998 CEO
Cash Incentive Program (the "1998 CEO Program"), established by the Committee
under the EPP on June 13, 1997. The performance period for the 1998 CEO Program
was fiscal year 1998. Mr. Beracha's 1998 CEO Program bonus was tied to both
Earthgrains' and Mr. Beracha's performance, using a cash flow measure and a
return on capital measure. Mr. Beracha's bonus pursuant to the 1998 CEO Program
was $ . His total bonus for the last fiscal year was $ . The
additional $ was related to Mr. Beracha's employment agreement with
Earthgrains.
EXECUTIVE STOCK OWNERSHIP
The Committee believes that it is important for every executive to have an
ownership interest in Earthgrains that is significant relative to the
executive's base salary. Accordingly, Earthgrains adopted minimum stock
ownership guidelines for executive officers, which guidelines are expected to
be implemented over the next several years.
COMPENSATION AND HUMAN RESOURCES COMMITTEE
J. Joe Adorjan, Chair
Maxine K. Clark
Jerry E. Ritter
10
<PAGE> 12
SUMMARY COMPENSATION TABLE
The table below summarizes the compensation paid by Earthgrains for
services rendered by the named executive officers during fiscal years 1997 and
1998.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL
COMPENSATION<F1> LONG TERM COMPENSATION
--------------------- ----------------------------
RESTRICTED SECURITIES ALL OTHER
NAME AND FISCAL STOCK UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS<F2> AWARDS<F3> OPTIONS(#)<F4> SATION<F5>
------------------ ------ ------ --------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Barry H. Beracha.............. 1998 $ $ $ $
Chairman of the Board & Chief 1997 500,004 300,000 2,583,323 475,266 25,504
Executive Officer
John W. Iselin, Jr............ 1998
Executive Vice President 1997 245,040 156,194 555,427 79,500 6,562
(Domestic Baking)
Xavier Argente<F6>............ 1998
Executive Vice 1997 233,245 89,333 174,620 68,800 1,713
President--Bimbo
William H. Opdyke............. 1998
Executive Vice President 1997 190,008 100,912 297,073 33,416 9,209
(Refrigerated Dough
Products)
Barry M. Horner............... 1998
Vice President--Bakery 1997 173,750 85,376 187,302 25,100 6,554
Operations
<FN>
- --------
<F1> Salary and bonus amounts include any amounts deferred under Earthgrains'
Executive Deferred Compensation Plan. If a change in control of
Earthgrains occurred, the entire amount accrued on behalf of a participant
would be paid to the participant in a single lump sum within 30 days of
the date of the change in control. If an excise tax were imposed on a
participant's accrued benefits on account of a change in control, the
participant's benefits would be increased to the extent required to put
the participant in the same position after payment of taxes as if no such
excise tax had been imposed.
<F2> For fiscal year 1997, bonus amounts for Messrs. Iselin, Opdyke and Horner
include one-time retention bonuses of $38,800, $31,500, and $20,700,
respectively. For fiscal year 1998, $ of Mr. Beracha's salary was
paid pursuant to the 1998 CEO Program under the Exceptional Performance
Plan.
<F3> Earthgrains did not award any Restricted Stock to the named executive
officers during fiscal year 1998. The 1996 Stock Incentive Plan, as
Amended and Restated to reflect a two-for-one stock split effective July
28, 1997, currently authorizes grants of 333,102 shares of Restricted
Stock. At this time, all such shares have been granted to the named
executive officers and other eligible employees under the Plan.
Non-preferential dividends are paid on Restricted Stock. The Compensation
and Human Resources Committee of the Board may accelerate the vesting of a
Restricted Stock award at any time, and all shares of Restricted Stock
automatically vest upon the recipient's death or upon disability, as that
term is defined in the Plan. If certain events occur which would result in
a change in control of Earthgrains, all shares of Restricted Stock become
nonforfeitable and freely transferable (except for restrictions imposed by
applicable federal and state securities laws), and all previously
unsatisfied conditions to unrestricted ownership lapse. The number of shares
and value of Restricted Stock holdings as of March 31, 1998 for Messrs.
Beracha, Iselin, Argente, Opdyke and Horner are 166,666 and $7,364,554;
35,834 and $1,583,415; 9,166 and $405,023; 19,166 and $846,898; and 12,084
and $533,962, respectively.
<F4> Awards for fiscal year 1997 have been adjusted to reflect the two-for-one
stock split effective July 28, 1997.
<F5> Includes matching contributions made by Earthgrains pursuant to its 401(k)
and 401(k) restoration plans for the accounts of Messrs. Beracha, Iselin,
Opdyke and Horner of $ , $ , $ and $ , respectively, and
amounts imputed as income for federal income tax purposes under
Earthgrains' life insurance plan for Messrs. Beracha, Iselin, Argente,
Opdyke and Horner of $ , $ , $ , $ and $ ,
respectively for fiscal year 1998. Mr. Argente is not eligible to
participate in Earthgrains' 401(k) and 401(k) restoration plans. In the
event of a change in control of Earthgrains, the unvested portion of a
participant's 401(k) account shall immediately become 100% non-forfeitable,
and the entire amount accrued in the 401(k) restoration plan on behalf of a
participant shall be paid in a single lump sum within 30 days of the date
of the change in control.
11
<PAGE> 13
<F6> Mr. Argente's salary and the majority of his bonus are paid in Spanish
pesetas. The dollar values listed in the table above represent the
approximate U.S. dollar amounts Mr. Argente would have received based on
the average conversion rate of 148.58 and 128.62 Spanish pesetas to
one U.S. dollar for fiscal years 1998 and 1997, respectively.
</TABLE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK PRICE
SHARES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM<F3>
OPTIONS IN FISCAL PRICE PER EXPIRATION -------------------------------------
NAME GRANTED<F1> YEAR 1998<F2> SHARE DATE 0% 5% 10%
---- ----------- ------------- --------- ---------- ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Barry H. Beracha......... % $ - 0 - $ $
John W. Iselin, Jr....... % $ - 0 -
Xavier Argente........... % $ - 0 -
William H. Opdyke........ % $ - 0 -
Barry M. Horner.......... % $ - 0 -
<FN>
- --------
<F1> All options granted to the named executive officers were granted on
. The options become exercisable in three equal parts on the
first, second and third anniversaries of the grant date; however, the
Compensation and Human Resources Committee of the Board is authorized to
accelerate exercisability at any time, and acceleration occurs
automatically in the event of the optionee's death, or the optionee's
disability or retirement as those terms are defined in the 1996 Stock
Incentive Plan and its agreements, or if certain events occur which would
result in a change in control of Earthgrains.
<F2> Based on option grants for shares of Earthgrain's Common Stock to
203 employees in fiscal year 1998.
<F3> The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the SEC and therefore are not intended to
forecast possible future appreciation of Earthgrains' Common Stock. If the
value of Earthgrains' Common Stock does not appreciate, the options will
be valueless. The assumed 5% annual rate of appreciation would result in
the market price of Earthgrains' Common Stock increasing from: $43.4688 to
$70.8100. The assumed 10% annual rate of appreciation would result in an
increase from $43.4688 to $112.7500.
</TABLE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT FISCAL
SHARES ACQUIRED ON AT FISCAL YEAR END YEAR END<F2><F3>
NAME EXERCISE<F1> VALUE REALIZED<F2> EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------ ------------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Barry H. Beracha............... $ $
John W. Iselin, Jr............. - 0 - - 0 -
Xavier Argente................. - 0 - - 0 -
William H. Opdyke.............. - 0 - - 0 -
Barry M. Horner................. - 0 - - 0 -
<FN>
- --------
<F1> Shares acquired reflect the two-for-one stock split effective July 28,
1997.
<F2> Value before income taxes payable as a result of exercise.
<F3> The closing price of Earthgrains' Common Stock on March 31, 1998 was
$44.1875 per share.
</TABLE>
12
<PAGE> 14
LONG-TERM INCENTIVE PLANS
At last year's Meeting, shareholders approved Earthgrains' Exceptional
Performance Plan (the "EPP"), which had been adopted by the Board on May 2,
1997. The EPP provides a framework through which key executives, including the
named executive officers, can receive appropriate cash bonuses for exceptional
performance over a measured performance period which may be longer than
Earthgrains' fiscal year. Also on May 2, 1997, a subcommittee of the
Compensation and Human Resources Committee of the Board (the "Committee"),
established the 1998 Cash Incentive Program under the EPP (the "1998
Program"). On June 13, 1997, the Committee established the 1998 CEO Cash
Incentive Program (the "1998 CEO Program") under the EPP.
Information regarding the 1998 Program is provided in the table below.
Since the performance period of the 1998 CEO Program was fiscal year 1998, Mr.
Beracha's cash bonus pursuant to the 1998 CEO Program is reported in the
Summary Compensation Table on page 11. While the 1998 Program and the 1998 CEO
Program are the only Programs currently established under the EPP, the
Committee is authorized to, and may, establish additional EPP Programs.
<TABLE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
PERFORMANCE OR OTHER <F3><F4><F5>
PERIOD UNTIL ---------------------------------------
MATURATION OR PAYOUT THRESHOLD TARGET MAXIMUM
NAME <F1><F2><F3> ($) ($) ($)
---- -------------------- --------- --------- -------
<S> <C> <C> <C> <C>
Barry H. Beracha.......... March 25, 2002 -- --
John W. Iselin, Jr........ March 25, 2002 -- --
Xavier Argente............ March 25, 2002 -- --
William H. Opdyke......... March 25, 2002 -- --
Barry M. Horner........... March 25, 2002 -- --
<FN>
- --------
<F1> The performance period is subject to earlier termination if both the
primary and secondary performance goals are met.
<F2> Because the applicable performance period has not elapsed and performance
goals have not been attained, it is not possible to determine if
performance goals triggering bonuses will be met. Even assuming
performance goals were achieved, predicting bonus amounts would remain
impossible because the Committee has discretion to reduce the bonuses of
covered employees below bonus formula amounts and may otherwise adjust
amounts payable to non-covered employees from bonus formula amounts.
<F3> In the event of a change in control of Earthgrains, the Committee has the
authority to make adjustments to the performance goals, performance
periods and bonus formulas to prevent or limit the forfeiture of bonuses
under EPP Programs. Under the existing Programs, the Committee has
exercised its discretion under the EPP to require payment of maximum
bonuses upon a change in control.
<F4> Program performance goals are tied to both a cash flow measure and a
return on capital measure. Bonus formula amounts range from 25%-50% of
fiscal year 1998 salary for some covered employees and from 50%-100% of
fiscal year 1998 salary for other covered employees, including the named
executive officers, depending on the extent to which performance goals are
achieved.
<F5> Representative target amounts are based on the bonus formula range of
50%-100% of fiscal year 1998 salaries because target awards are not
currently determinable.
</TABLE>
13
<PAGE> 15
PENSION PLAN
<TABLE>
PENSION PLAN TABLE
<CAPTION>
YEARS OF CREDITED SERVICE
-----------------------------------------------------------------------
COMPENSATION 15 20 25 30 35 40 AND OVER
- ------------ ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 41,820 48,759 55,698 62,637 69,576 76,515
200,000 56,947 68,079 83,333 100,000 101,356 112,458
300,000 75,000 100,000 125,000 150,000 150,000 150,000
400,000 100,000 133,333 166,667 200,000 200,000 200,000
600,000 150,000 200,000 250,000 300,000 300,000 300,000
800,000 200,000 266,667 333,333 400,000 400,000 400,000
1,000,000 250,000 333,333 416,667 500,000 500,000 500,000
</TABLE>
Earthgrains adopted The Earthgrains Company Pension Plan (the "Pension
Plan") effective as of April 1, 1996. The Pension Plan is a defined benefit
pension plan intended to comply with the requirements of Section 401(a) of the
Internal Revenue Code. Under the Pension Plan, eligible employees receive a
benefit based on final average pay and accumulated benefit credits. The benefit
is paid in a lump sum or annuity payments for life. Final average pay is the
highest five consecutive complete calendar years of pay out of the last ten
complete calendar years of pay. "Pay" is all compensation received by a
participant excluding bonuses and other forms of compensation which are
specifically excluded under the terms of the Pension Plan. Benefit credits are
earned according to the following schedule:
<TABLE>
<CAPTION>
AGE ANNUAL BENEFIT CREDIT
- ----------------------------------- ---------------------
<S> <C>
Up to 50........................... 12%
51-53.............................. 13%
54-56.............................. 14%
57-59.............................. 15%
60 and over........................ 16%
</TABLE>
The Pension Plan Table above presents the estimated annual pension benefits
payable to a covered participant at normal retirement age (age 65) under the
Pension Plan, as well as all nonqualified supplemental pension plans, based on
pay that is covered under the plans and years of service with Earthgrains.
These benefit amounts will be offset by Social Security benefits payable at age
65 and a prior plan benefit for service prior to March 26, 1996. However,
benefits offset by the prior plan will never be less than the benefits
calculated using service after March 26, 1996 with no offset for the prior
plan. In the event of a change in control of Earthgrains, a participant's
accrued benefits shall immediately become 100% non-forfeitable, and all
benefits accrued under any nonqualified supplemental pension plans become
payable in a single lump sum within 30 days of the date of the change in
control.
The years of credited service and the compensation covered under the
Pension Plan for each of the named executive officers are as follows: Barry H.
Beracha, 29 years and $ ; John W. Iselin, Jr., 17 years and $ ;
William H. Opdyke, 17 years and $ ; and Barry M. Horner, 27 years and
$ . Xavier Argente is not eligible to participate in the Pension Plan or
the non-qualified pension plans.
STOCK PRICE PERFORMANCE
The following performance graph compares the changes, for the period
indicated, in the cumulative total value of $100 hypothetically invested in
each of (a) Earthgrains Common Stock, (b) the S&P 1500 Stock Index, and (c) the
S&P Food Index. Both of the Indices are weighted by capitalization. The S&P
1500 Stock Index is comprised of 500 companies with large capitalization, 400
companies with medium capitalization and 600 companies with small
capitalization and reflects the performance of those 1500 publicly traded
companies. The S&P Food Index reflects the performance of 13 publicly traded
companies, the primary line-of-business of each of which is food products.
14
<PAGE> 16
STOCK PRICE PERFORMANCE GRAPH
CUMULATIVE TOTAL RETURN
BASED ON INVESTMENT OF $100
MARCH 27, 1996 -- MARCH 31, 1998
[GRAPH]
<TABLE>
<CAPTION>
DOLLAR VALUE<F*> OF $100 INVESTMENT AT
---------------------------------------------------
MARCH 27, 1996 MARCH 25, 1997 MARCH 31, 1998
-------------- -------------- --------------
<S> <C> <C> <C>
The Earthgrains Company 100.00 169.72 293.26
S&P 1500 Stock Index 100.00 122.66 174.55
S&P Food Index 100.00 128.26 176.58
<FN>
- --------
<F*> The graph and table above show the values of $100 invested in Earthgrains'
Common Stock, the S&P 1500 Stock Index, and the S&P Food Index, assuming
reinvestment of all dividends. March 27, 1996 was the first day on which
Earthgrains' Common Stock opened for trading on the New York Stock
Exchange.
</TABLE>
15
<PAGE> 17
EXECUTIVE EMPLOYMENT AGREEMENTS
Messrs. Beracha, Iselin, Argente, Opdyke and Horner have employment
agreements with Earthgrains.
Mr. Beracha's employment agreement provides that he became the Chief
Executive Officer of Earthgrains effective on March 26, 1996. The current
employment agreement ends on March 31, 2001, but may be extended by mutual
agreement. Mr. Beracha's agreement provides for a base salary of $500,004 per
year which is subject to adjustment, except that his salary may not be adjusted
downward during the current term of the agreement. If Mr. Beracha becomes
disabled, incapacitated or dies during the term of his employment agreement, he
or his revocable living trust or estate will receive his base salary through
March 31, 2001.
Messrs. Iselin, Opdyke and Horner have entered into employment agreements
with Earthgrains, pursuant to which they hold the positions of Executive Vice
President (Domestic Baking), Executive Vice President (Refrigerated Dough
Products) and Vice President--Bakery Operations, respectively. Messrs. Iselin,
Opdyke and Horner have agreements that provide for base salaries of $245,040,
$190,008 and $173,750, respectively. Their agreements allow for salary
adjustment, except that a downward adjustment may not occur during the current
term of each agreement. The term of each of their current employment agreements
ends on December 31, 1998, but each may be extended by mutual agreement.
Each of these named executive officers is eligible to receive an annual
incentive bonus, subject to Earthgrains attaining certain performance goals.
They are also eligible to participate in Earthgrains' 401(k) and 401(k)
restoration plans, receive stock options, stock grants and miscellaneous
benefits and perquisites pursuant to programs established by the Compensation
and Human Resources Committee of the Board of Directors.
All of the employment agreements discussed above provide that an executive
officer may be terminated at any time without "cause," but if such
termination occurs prior to the end of the term of the employment agreement,
the executive officer is entitled to receive his base salary through the end of
the term. Notwithstanding these provisions, Earthgrains is entitled to
terminate an executive officer's employment agreement immediately and without
notice if the executive officer engages in certain specified conduct, including
the refusal without cause to perform his assigned duties, the open criticism of
Earthgrains in the media and the participation in any conduct that the Board of
Directors determines to be inimical or contrary to the best interests of
Earthgrains ("Termination for Cause"). Upon Termination for Cause,
Earthgrains is obligated only to pay the executive officer's base salary
prorated to the date of the termination event. The employment agreements
exclude participation in any severance pay plan established by Earthgrains in
the event of termination for any reason.
Any dispute or controversy arising under these employment agreements is to
be settled exclusively by arbitration in accordance with the rules of the
American Arbitration Association and the applicable arbitration provisions of
the laws of the State of Missouri.
Mr. Argente entered into an employment agreement with Earthgrains that was
executed in Barcelona, Spain. As such, Mr. Argente's agreement is in a
different form than those of the other named executive officers and is governed
by Spanish law. Pursuant to the agreement, Mr. Argente is the Chief Executive
Officer of Bimbo, S.A. and holds the position of Executive Vice
President--Bimbo with Earthgrains. He receives a minimum gross annual salary of
30,000,000 pesetas, paid in fifteen installments, one each month, with
additional installments in May, July and December. Mr. Argente is also eligible
to receive stock options and grants in accordance with Earthgrains' program for
making such awards, and an annual bonus based on terms and conditions as
mutually determined from time to time. He also receives travel expense
reimbursement and, like the other named executive officers, receives certain
miscellaneous benefits and perquisites pursuant to programs established by
Earthgrains' Compensation and Human Resources Committee. Mr. Argente's current
employment agreement ends on December 31, 1998, but is subject to three year
renewal terms.
A violation of confidentiality, a trade secrecy provision or a breach of
trust are "fair grounds" for termination of Mr. Argente, and Earthgrains may
claim relevant compensation for damages. Earthgrains may also terminate Mr.
Argente in the event he seriously breaches the agreement. Either party may also
voluntarily terminate the agreement at any time by giving the other party
requisite notice. If such termination is declared to have been for fair
grounds, Mr. Argente is not entitled to severance. If the termination is deemed
unfair or Earthgrains voluntarily terminates the agreement, the amount of
severance Mr. Argente receives varies with the timing of the termination and
its reason. Should Earthgrains decide not to renew Mr. Argente's agreement, he
is entitled to receive a payment in the amount of some multiple of his salary,
depending upon the circumstances.
16
<PAGE> 18
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for Earthgrains for the fiscal year
ended March 31, 1998 was the independent certified public accounting firm of
Price Waterhouse LLP, which firm was selected by the Audit and
Finance Committee and Board of Directors of Earthgrains. A representative of
Price Waterhouse LLP is expected to attend the Meeting and will have the
opportunity to make a statement and respond to appropriate questions from
shareholders.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Earthgrains' executive officers and directors are required under the
Securities Exchange Act of 1934 to file reports of ownership and changes in
ownership of Earthgrains' Common Stock with the Securities and Exchange
Commission and the New York Stock Exchange. Copies of those reports must also
be furnished to Earthgrains.
Based solely on a review of the copies of reports furnished to Earthgrains
and written representations that no other reports were required, Earthgrains
believes that all filing requirements applicable to executive officers and
directors have been complied with during the preceding fiscal year, except that
Peter F. Benoist and Maxine K. Clark each inadvertently reported late one
purchase of Common Stock. In addition, due to a rounding error, Larry G.
Bergner inadvertently underreported ownership of fractional shares.
OTHER BUSINESS
Management of Earthgrains does not intend to bring any other matters before
the Meeting and, at the date of this Proxy Statement, management is not
informed of any matters that others may bring before the Meeting. However, if
any other matters properly come before the Meeting, the persons named in the
proxy form submitted herewith will vote such proxy form in accordance with
their best judgment on such matters, determined in the manner provided therein.
SHAREHOLDER PROPOSALS
To be included in Earthgrains' proxy materials for its 1999 Meeting, a
shareholder proposal must be received by Earthgrains in writing no later than
February 15, 1999. Such proposals must meet the requirements set forth in the
rules and regulations of the Securities and Exchange Commission in order to be
eligible for inclusion in Earthgrains' fiscal year 1999 proxy materials.
Under Earthgrains' By-Laws, in order for a shareholder proposal to be acted
upon at the 1999 Meeting, whether included in Earthgrains' proxy materials or
not, the submitting shareholder(s) must provide notice to Earthgrains. The
notice must be in writing and received by the Corporate Secretary of
Earthgrains between April 19, 1999 and May 18, 1999, which is not less than 60
days nor more than 90 days prior to the first anniversary date of the preceding
year's Meeting. The written notice must satisfy certain specific requirements
in the By-Laws. A copy of the applicable provisions of the By-Laws will be sent
to any shareholder upon written request to the Corporate Secretary. In
addition, the proponent must attend the Meeting in person, or have his or her
proxy attend the Meeting in person to introduce the proposal for action.
FORM 10-K
Pursuant to rules of the Securities and Exchange Commission, Earthgrains
will provide to each person receiving a Proxy Statement, upon a written request
of such person, without charge, a copy of Earthgrains' Annual Report on Form
10-K including the financial statements and schedules thereto, for its most
recent fiscal year required to be filed with that Commission. Earthgrains may
impose a reasonable fee for expenses in connection with providing copies of the
separate exhibits to such report when such exhibits are requested.
NOTICES OR REQUESTS
Any notice or request discussed above should be directed to Joseph M.
Noelker, Corporate Secretary, The Earthgrains Company, 8400 Maryland Avenue,
St. Louis, Missouri 63105.
PLEASE DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY FORM
IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. YOUR COOPERATION IS APPRECIATED.
St. Louis, Missouri
June 15, 1998
17
<PAGE> 19
PROXY FORM
The Earthgrains Company
Annual Meeting of Shareholders
Friday, July 17, 1998, 10:00 A.M. (local time)
in Edison Theatre at Washington University's Mallinckrodt Center
off Forsyth Boulevard
Saint Louis, Missouri 63130
The person(s) signing this proxy form hereby appoints Barry H. Beracha and
Joseph M. Noelker as proxies, each with the power of substitution, and hereby
authorizes them to represent and to vote, as designated on the reverse side
of this form, all of the shares of stock that the person(s) signing this proxy
form would be entitled to vote upon the matters set forth in the Notice of
Meeting or which may properly come before the Annual Meeting of Shareholders of
The Earthgrains Company to be held in Edison Theatre at Washington University's
Mallinckrodt Center, off Forsyth Boulevard, St. Louis, Missouri, on July 17,
1998, at 10:00 A.M. local time and at any adjournments thereof.
(Be sure to sign and date the reverse side of this form)
- -------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
[EARTHGRAINS LOGO]
<PAGE> 20
Directors recommend a vote FOR THE EARTHGRAINS COMPANY Please mark
Items 1 and 2 PROXY FORM your vote as
indicated in /X/
this example
- --------------------------------------------------------------------------------
1. Election of Directors
FOR all nominees WITHHOLD (Instruction: To withhold authority
listed AUTHORITY to vote for any individual nominee,
(except as marked to vote for strike a line through the nominee's
to the contrary) all nominees name.)
listed J. Joe Adorjan Jerry E. Ritter
/ / / /
- -------------------------------------------------------------------------------
2. Approval of an amendment to the Certificate
of Incorporation to increase the number of
authorized shares of Common Stock:
FOR AGAINST ABSTAIN
/ / / / / /
- -------------------------------------------------------------------------------
3. In their discretion, the proxies are authorized to
vote upon such other business as may properly
come before the meeting.
- -------------------------------------------------------------------------------
Check here if you plan to attend
the Annual Meeting. / /
- -------------------------------------------------------------------------------
This proxy is solicited on behalf of
the Board of Directors. When properly
executed, it will be voted FOR Items
#1 and #2, unless contrary instructions
are indicated.
Dated:___________________________, 1998
_______________________________________
_______________________________________
SIGNATURE OF SHAREHOLDER(S)
(Sign exactly as your name or names
appear at the left; in the case of
shares held by joint owners, all joint
owners should sign; fiduciaries should
indicate title and authority.)
PLEASE MARK, SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
* PLEASE DETACH PROXY FORM HERE, SIGN AND MAIL *
ADMISSION TICKET
The Earthgrains Company
Annual Meeting of Shareholders
Friday, July 17, 1998, 10:00 A.M. (local time)
in Edison Theatre at Washington University's Mallinckrodt Center
off Forsyth Boulevard
Saint Louis, Missouri 63130
Please present this ticket
for admittance.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING, WHETHER OR
NOT YOU ATTEND THE MEETING IN PERSON. TO MAKE SURE YOUR SHARES ARE REPRESENTED,
WE URGE YOU TO COMPLETE, DETACH AND MAIL THE PROXY FORM.
===============================================================================
If you plan to attend the Meeting, please mark the appropriate box on the
proxy form above and mail to the tabulator in the enclosed business reply
envelope. Present this ticket to The Earthgrains Company representative
at the entrance to the Meeting.
===============================================================================
ChaseMellon Shareholder Services is the transfer agent for The Earthgrains
Company. Telephone inquiries regarding your shares of Earthgrains' stock should
be made to ChaseMellon Shareholder Services' Automated Toll-Free Telephone
Response Center at 1-888-213-0971.
<PAGE> 21
APPENDIX
Page 15 of the printed proxy contains a stock performance graph. The
information contained in the graph has been presented in a tabular format
following the graph.
