<PAGE>
<PAGE>
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:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
/X/ Definitive Proxy Statement Commission Only (as permitted
/ / Definitive Additional Materials by Rule 14a-6(e)(2))
/ / Soliciting Material Pursuant to
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 TRANSACTION 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.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
[Earthgrains Logo]
THE EARTHGRAINS COMPANY
8400 Maryland Avenue
Saint Louis, Missouri 63105
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 16, 1999
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, in Saint Louis, Missouri, on Friday, July 16, 1999 at
10:00 a.m., for the following purposes:
1. To elect three directors for a three-year term expiring in
2002.
2. To re-approve the Exceptional Performance Plan ("EPP") as
required by Section 162(m) of the Internal Revenue Code.
3. To act upon such other matters, including a shareholder
proposal for a declassified board, as may properly come
before the meeting.
You may vote on these matters if you were a shareholder on the
record date, May 28, 1999. It is important that your shares be
represented and voted at the annual meeting. Whether you plan to
attend the annual meeting or not, we encourage you to vote in one of
these ways:
* MARK, SIGN, DATE AND PROMPTLY RETURN the enclosed proxy form
in the enclosed business reply envelope; OR
* USE THE TOLL-FREE TELEPHONE NUMBER shown on the proxy form.
A copy of Earthgrains' Annual Report for fiscal year 1999
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 14, 1999
<PAGE>
TABLE OF CONTENTS
Voting Information and Procedures............. 2
Election of Directors (Item 1)................ 3
Information About Your Board of Directors..... 3
Stock Ownership Information................... 6
Re-approval of the Exceptional Performance
Plan (Item 2)............................... 8
Shareholder Proposal Concerning Declassified
Board (Item 3).............................. 10
Response to Declassified Board Proposal....... 10
Executive Compensation........................ 12
Summary Compensation Table.................... 15
Option Grants in Last Fiscal Year............. 17
Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year End Option Values...... 17
Pension Plan Table............................ 18
Stock Price Performance Graph................. 19
Independent Public Accountants................ 20
Section 16(a) Beneficial Ownership Reporting
Compliance.................................. 20
Other Matters................................. 21
Appendix A--the Exceptional Performance
Plan........................................ A-1
<PAGE>
<PAGE>
[Earthgrains Logo]
THE EARTHGRAINS COMPANY
PROXY STATEMENT
The Board of Directors of The Earthgrains Company ("Earthgrains" or
"Company") is soliciting proxies to be used at the 1999 annual
meeting. This proxy statement and the proxy form are being mailed to
shareholders on or about June 14, 1999. A copy of Earthgrains' 1999
Annual Report containing financial statements for the fiscal year
ended March 30, 1999 has been mailed with this proxy statement.
YOUR VOTE IS VERY IMPORTANT
VOTING INFORMATION AND PROCEDURES
WHO CAN VOTE
Record holders of Earthgrains' Common Stock on May 28, 1999 may vote
at the meeting. On May 28, 1999, there were 42,700,640 shares of
Common Stock outstanding.
HOW YOU CAN VOTE
* Voting by Mail. Mark your proxy form, sign and date it, and return
it in the postage-paid envelope provided.
* Voting by Telephone. Call the toll-free telephone number on your
proxy form. Telephone voting is available 24 hours a day. If you
vote by telephone, do not return your proxy form.
* If your shares are held in the name of a bank or broker, follow
the voting instructions you receive from your bank or broker.
HOW YOU CAN REVOKE OR CHANGE YOUR VOTE
* Send written notice to the Corporate Secretary;
* Submit another proper proxy form by mail or telephone ballot; or
* Attend the Annual Meeting and vote in person. If you are not the
holder of record of your shares, you must obtain a proxy from the
holder of record in order to do so.
GENERAL VOTING INFORMATION
You are entitled to cast one vote for each share of Earthgrains'
Common Stock you own on the record date. A majority of the
outstanding shares entitled to vote must be represented in person or
by proxy in order to conduct the election of directors and other
matters described in this proxy statement.
Shares represented by a proxy form marked "abstain" on a matter will
be considered to be represented at the annual meeting, but not
voted, for these purposes. Shares registered in the name of a broker
or other "street name" agent, for which proxies are voted on some
but not all matters, will be considered to be represented at the
annual meeting and voted only as to those matters actually marked on
the proxy form.
All shares that are properly voted--whether by mail or telephone--
will be voted at the annual meeting in accordance with your instructions.
If you sign the proxy form but do not give voting instructions, the
shares represented by your proxy will be voted as recommended by the
Board of Directors.
If any other matters are properly presented at the annual meeting,
the people named on the proxy form will use their discretion to vote
for you. As of the date this proxy statement went to press,
Earthgrains did not know of any other matters to be raised at the
annual meeting.
VOTES REQUIRED
* ITEM 1--The three nominees for director receiving the highest
number of votes cast will be elected.
* ITEMS 2 & 3--At least a majority of the votes cast are necessary
for approval.
2
<PAGE>
<PAGE>
BOARD RECOMMENDATIONS
* FOR the three nominees for director;
* FOR re-approval of the Exceptional Performance Plan; and
* AGAINST the shareholder proposal for a declassified board
PROXY SOLICITATION
Earthgrains will pay for preparing and printing this proxy statement
and proxy form. Earthgrains will also pay for soliciting proxies.
Costs related to soliciting proxies include postage and handling,
including the expenses of brokerage houses, custodians, nominees and
fiduciaries for forwarding documents to beneficial owners of
Earthgrains' Common Stock. Votes on proxy forms will be solicited by
mail. Proxies may also be solicited by officers and employees of
Earthgrains in person, by telephone or by mail. 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.
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,
three directors in Group III will be elected for a three-year term
expiring in 2002.
Each nominee is currently serving as a director and has agreed to
serve for a new term. The Board does not contemplate that any of the
nominees will be unable to stand for election. However, if any
nominee becomes unable to serve before the annual meeting, your
proxy form will be voted for a person the Board nominates in his or
her place, unless you withhold authority to vote for all nominees.
Vacancies which may occur during the year may be filled by a
majority of the directors then in office, even if they 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 and until his or
her successor is duly elected and qualified.
INFORMATION ABOUT YOUR BOARD OF DIRECTORS
The Board of Directors has nominated three people, each of whom is
currently a director, for election for a three-year term expiring in
2002. These director nominees are Barry H. Beracha, Peter F. Benoist,
and Maxine K. Clark. Background and other information regarding the
three nominees and Earthgrains' other directors is set out below.
TO BE ELECTED FOR A THREE-YEAR TERM EXPIRING IN 2002 (GROUP III DIRECTORS)
[PHOTO] BARRY H. BERACHA DIRECTOR SINCE 1993
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 Companies, Inc. ("Anheuser-Busch"), and
during that time served in various positions for various
Anheuser-Busch subsidiaries. Mr. Beracha is a member of the
Board of Directors of Pepsi Bottling Group. He also serves
as a member of the Board of Trustees of Saint Louis
University. Age: 57
3
<PAGE>
<PAGE>
[PHOTO] PETER F. BENOIST DIRECTOR SINCE 1996
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: 51
[PHOTO] MAXINE K. CLARK DIRECTOR SINCE 1996
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: 50
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION OF THESE NOMINEES.
DIRECTORS WHOSE TERM EXPIRES IN 2000 (GROUP I DIRECTORS)
[PHOTO] JAIME IGLESIAS DIRECTOR SINCE 1996
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 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: 68
[PHOTO] WILLIAM E. STEVENS DIRECTOR SINCE 1996
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: 56
4
<PAGE>
<PAGE>
DIRECTORS WHOSE TERM EXPIRES IN 2001 (GROUP II DIRECTORS)
[PHOTO] J. JOE ADORJAN DIRECTOR SINCE 1996
Chairman of Borg-Warner Security Corporation
("Borg-Warner"), a Chicago-based provider of security
services. Mr. Adorjan has been Chairman of Borg-Warner since
January 1996; he was Chief Executive Officer from October
1995 to March 1999, President from April 1995 to March of
1999 and has been a Director of Borg-Warner since 1993. Mr.
Adorjan 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, Goss Graphic
Systems, Inc., Hussmann International, Inc. and Loomis,
Fargo & Co. He also serves as the Chairman of the Board of
Trustees of Saint Louis University and as a Trustee of the
School of the Art Institute in Chicago, Illinois. Age: 60
[PHOTO] JERRY E. RITTER DIRECTOR SINCE 1995
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 Chairman of the
Board of Commissioners of the Saint Louis Science Center.
Age: 64
BOARD SERVICE SUMMARY
The directors presently serve on the Board committees shown in the
following table. Meeting attendance information for fiscal year 1999
also is given in the table.
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMMITTEES
---------------------------------
COMPENSATION
AUDIT & & HUMAN ATTENDED 75% OR MORE OF BOARD
DIRECTOR BOARD FINANCE RESOURCES AND APPLICABLE COMMITTEE MEETINGS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Barry H. Beracha X<F*> X
- ----------------------------------------------------------------------------------------------------------------------------------
J. Joe Adorjan X X<F*> X
- ----------------------------------------------------------------------------------------------------------------------------------
Peter F. Benoist X X<F*> X
- ----------------------------------------------------------------------------------------------------------------------------------
Maxine K. Clark X X X
- ----------------------------------------------------------------------------------------------------------------------------------
Jaime Iglesias X X X
- ----------------------------------------------------------------------------------------------------------------------------------
Jerry E. Ritter X X<F**> X
- ----------------------------------------------------------------------------------------------------------------------------------
William E. Stevens X X<F**> X
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Meetings Held in FY 1999 6 6 8
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
<F*>Chair
<F**>As of November 6, 1998; Mr. Ritter previously served on the
Compensation and Human Resources Committee and Mr. Stevens
previously served on the Audit and Finance Committee.
</TABLE>
5
<PAGE>
<PAGE>
STANDING BOARD COMMITTEES
Audit and Finance--recommends to the Board the selection of
independent accountants, reviews the scope and results of the
independent audit and internal audit function, and reviews
Earthgrains' financial plans and policies related to borrowings,
dividends and capital structure.
Compensation and Human Resources--considers and makes
recommendations to the Board as to the salaries and other
compensation to be paid to Earthgrains' executive officers, other
officers and upper management employees of Earthgrains and its
subsidiaries.
Nominating--Earthgrains has no standing nominating committee.
COMPENSATION
An employee director receives no additional compensation for service
on the Board.
Non-employee directors receive the following for their services on
the Board:
<TABLE>
<S> <C>
Annual Fee:....................... $23,000
Fee for Each Board Meeting
Attended:....................... $ 1,500
Fee for Each Committee Meeting
Attended:....................... $ 750
Annual Fee for Chairing a
Committee:...................... $ 3,500
Annual Common Stock Grant:........ 400 shares
</TABLE>
Each non-employee director who served as a director in 1996 received
a one-time grant of 2,000 shares of Common Stock. The shares granted
to non-employee directors 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.
Each non-employee director is required to defer 25% of his or her
director's fees and maintain an account in Earthgrains' Non-Employee
Directors Deferred Fee Plan. Directors may elect to defer up to 100%
of their directors' fees. Each director may choose whether his or
her elective deferred fees, if any, are credited to a cash account
or a share equivalent account that tracks the value of Earthgrains'
Common Stock. At the director's option, amounts deferred under the
plan are paid in cash in a lump sum on a date the director specifies
or over a period of time, not to exceed 10 years.
STOCK OWNERSHIP INFORMATION
BENEFICIAL OWNERS OF MORE THAN FIVE PERCENT
The table below lists the persons or groups known by Earthgrains to
own more than 5% of its Common Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF % OF SHARES EXPLANATORY
OF BENEFICIAL OWNER COMMON SHARES OUTSTANDING NOTES
------------------- ------------- ----------- -----------
<S> <C> <C> <C>
FMR Corp. 3,183,204 7.405 <Fa><Fc>
82 Devonshire Street
Boston, Massachusetts 02109
Mellon Bank Corporation 2,468,446 5.740 <Fb><Fc>
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
<FN>
- -------
<Fa> FMR Corp. and its subsidiaries have sole voting power as to 75,400 shares
and sole investment power as to 3,183,204 shares.
<Fb> Mellon Bank Corporation and its subsidiaries have sole voting power as to
2,259,662 shares, shared voting power as to 3,084 shares, sole investment
power as to 1,042,314 shares, and shared investment power as to 23,116
shares.
<Fc> As reported to the Securities and Exchange Commission by the beneficial
owner as of 12/31/98.
</TABLE>
6
<PAGE>
COMMON STOCK BENEFICIALLY OWNED BY MANAGEMENT
The following table summarizes the beneficial ownership of
Earthgrains' Common Stock as of March 30, 1999, for each director
and nominee for director, each of the executive officers named in
the Summary Compensation Table (see page 15 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 the shares reported. Included are shares which were
beneficially owned on March 30, 1999 or which could be acquired
within 60 days after that date by exercising employee stock options.
<TABLE>
<CAPTION>
NUMBER EXERCISABLE % OF SHARES
NAME OF SHARES OPTIONS TOTAL OUTSTANDING
---- --------- ----------- ----- -----------
<S> <C> <C> <C> <C>
Barry H. Beracha.......................... 721,100<F1> 581,464 1,302,564 3.00%
J. Joe Adorjan............................ 11,297<F2> - 0 - 11,297 <F*>
Peter F. Benoist.......................... 12,573<F3> - 0 - 12,573 <F*>
Maxine K. Clark........................... 6,109<F4> - 0 - 6,109 <F*>
Jaime Iglesias............................ 11,574<F5> - 0 - 11,574 <F*>
Jerry E. Ritter........................... 20,199<F6> - 0 - 20,199 <F*>
William E. Stevens........................ 14,669<F7> - 0 - 14,669 <F*>
John W. Iselin, Jr........................ 77,676<F8> 151,832 229,508 <F*>
William H. Opdyke......................... 42,680<F9> 64,831 107,511 <F*>
Mark H. Krieger........................... 27,591<F10> 46,566 74,157 <F*>
Todd A. Brown............................. 40,506<F11> 43,498 84,004 <F*>
All directors and executive officers as a
group (22 persons)...................... 1,180,873<F12> 1,353,230 2,534,103 5.73%
<FN>
- -------
<F*> Person beneficially owns less than 1% of Earthgrains'
outstanding Common Stock.
<F1> Includes 333,332 shares of restricted stock, subject to
forfeiture, 37,372 shares owned indirectly by Mr. Beracha
through his 401(k) plan accounts and 4,800 shares owned by
children of Mr. Beracha, the beneficial ownership of which is
disclaimed.
<F2> Includes 3,200 shares of stock, subject to transfer
restrictions.
<F3> Includes 3,200 shares of stock, subject to transfer
restrictions.
<F4> Includes 3,200 shares of stock, subject to transfer
restrictions.
<F5> Includes 3,200 shares of stock, subject to transfer
restrictions.
<F6> Includes 3,200 shares of stock, subject to transfer
restrictions, and 16,918 shares held by a family limited
partnership, the beneficial ownership of 1,600 of which is
disclaimed.
<F7> Includes 3,200 shares of stock, subject to transfer
restrictions and 4,000 shares held in an irrevocable trust for
the benefit of Mr. Stevens' children, the beneficial ownership
of which is disclaimed.
<F8> Includes 71,668 shares of restricted stock, subject to
forfeiture and 1,788 shares owned indirectly by Mr. Iselin
through his 401(k) plan accounts.
<F9> Includes 38,332 shares of restricted stock, subject to
forfeiture, and 3,624 shares owned indirectly by Mr. Opdyke
through his 401(k) plan accounts.
<F10> Includes 24,168 shares of restricted stock, subject to
forfeiture and 1,315 shares owned indirectly by Mr. Krieger
through his 401(k) plan accounts.
<F11> Includes 30,000 shares of restricted stock, subject to
forfeiture and 9,410 shares owned indirectly by Mr. Brown
through his 401(k) plan accounts.
<F12> Includes restricted stock and shares owned indirectly through
401(k) plan accounts and otherwise.
</TABLE>
7
<PAGE>
RE-APPROVAL OF THE EXCEPTIONAL PERFORMANCE PLAN
(ITEM 2 ON PROXY FORM)
On July 25, 1997 shareholders approved Earthgrains' Exceptional
Performance Plan (the "EPP"). The EPP provides a framework for key
executives to receive cash bonuses for exceptional performance over
a measured performance period that may be longer than a given fiscal
year. Programs established from time to time under the EPP specify
the performance period, performance goals and formulas for
determining bonus amounts.
Section 162(m) of the Internal Revenue Code requires shareholder
approval in order to obtain a deduction for awards paid under a
qualified performance-based plan to the CEO and other highly
compensated executives whose compensation for any taxable year
may be in excess of $1 million. The material terms of a
performance-based plan like the EPP must be disclosed to and
re-approved by the shareholders at least every five years so that
Earthgrains may exclude amounts paid under the EPP from the $1
million deductibility limit. This limit on deductibility became
effective in 1994. We are seeking re-approval before 2002--when it
would be required--because Earthgrains wants your re-approval before
the current mid-term program--the 1998 Cash Incentive Program--
terminates and before another mid-term program under the EPP is
implemented.
If approved this year, and unless the material terms of the EPP are
subsequently changed, the tax rules will not require shareholder
approval again until 2004.
The material terms of the EPP and a description of programs
established under it to date are described below:
SUMMARY DESCRIPTION OF THE EPP
The following is a description of the major provisions of the EPP.
All capitalized terms have the meaning ascribed to them in the EPP
which is attached as Appendix A to this Proxy Statement.
Administration by Committee. The EPP must be administered by a
committee (which may be a subcommittee of a Board committee)
comprised solely of two or more outside directors of Earthgrains. A
Tax Qualified Subcommittee of the Human Resources and Executive
Compensation Committee is presently serving as the Committee for the
EPP.
Incentive Programs. The EPP authorizes the Committee to establish
one or more Programs which allow payment of cash Bonuses to
Participants based on pre-established performance goal(s) for
designated Performance Periods.
Eligibility and Participation. Key executive employees of
Earthgrains and its Affiliates are eligible to participate in the
EPP; approximately 220 individuals meet this requirement. For each
Program, the Committee will designate one or more Eligible Employees
as Participants and will identify those individuals who are or may
become Covered Employees for the applicable Performance Period.
Performance Criteria and Goals. For each Program, the Committee will
establish one or more objective Performance Goals which must be tied
to one or more of the following Performance Criteria: 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. No Covered Employee will
receive any Bonus under the EPP if the applicable Performance Goal
is not met.
Amount of Bonuses. The Committee must establish one or more formulas
or standards for determining the amounts of Bonuses which may be
paid to Participants under each Program. Bonuses paid to any Covered
Employee under the EPP in any year cannot exceed $1 million. The
Committee is authorized to increase or reduce the amounts of Bonuses
payable to non-Covered Employees from the Bonus Formula amounts. The
Committee has discretionary authority to reduce, but not to
increase, the amount payable to each Covered Employee from the
applicable formula amount.
Change in Control. Upon a Change in Control of Earthgrains, the
Committee has the authority to make appropriate adjustments to the
Performance Goal(s), Performance Periods, and Bonus Formulas to
prevent or limit forfeiture of Bonuses under a Program.
Amendment and Termination. The Board may amend or terminate the EPP
at any time. However,
8
<PAGE>
it may not make any amendment to the class of individuals qualifying
as Eligible Employees, the Performance Criteria, or the maximum
amount of Bonuses which may be paid to a Covered Employee under the
EPP in any year, without shareholder approval. The Committee may
amend the EPP in any way so long as shareholder approval is not
required and the amendment does not jeopardize qualification of
Bonuses paid to Covered Employees as performance-based compensation
under Section 162(m) of the Internal Revenue Code.
Federal Income Tax Consequences. Participants will recognize
ordinary income in the amount of any Bonuses received in the year of
payment. With the possible exception of Bonuses paid upon a Change
in Control, Earthgrains will be able to deduct the amount
constituting ordinary income to all Participants in the EPP.
ESTABLISHED PROGRAMS UNDER THE EPP
The 1998 Cash Incentive Program ("1998 Program"). The 1998 Program
began on March 26, 1997 and has a five year performance period,
which is subject to earlier termination if its Primary and Secondary
Performance Goals are achieved. The Performance Goals are both tied
to a cash flow measure and a return on capital measure. The Primary
Performance goal was achieved in the fourth quarter of fiscal year
1999, and bonus awards pertaining to this performance goal were paid
in the first quarter of fiscal year 2000. The Secondary Performance
goal is expected to be attained later in fiscal year 2000.
The 2000 Leadership Excellence Achievement Program ("2000 Program").
In anticipation of the termination of the 1998 Program, the
Committee established the 2000 Program in March of 1999. The
performance period of the 2000 Program is three years from its
effective date, which has yet to be set. The Performance Goals for
the 2000 Program are tied to a cash flow measure, a return on
capital measure, and an average annual revenue growth measure.
CEO Incentive Programs (1998, 1999, and 2000 CEO Incentive
Programs). The performance period for each of the three existing CEO
Incentive Programs established to date is the fiscal year in the
program's title. Performance goals for all three CEO Incentive
Programs are tied to Mr. Beracha's performance, a cash flow measure
and a return on capital measure. The 1998 and 1999 CEO Incentive
Programs are completed and the bonus amounts paid to Mr. Beracha
were $300,000 and $381,888, respectively. The maximum bonus payable
is $698,880 under the 2000 CEO Incentive Program.
ESTIMATE OF EPP BENEFITS
Bonus formula amounts for the 1998 Program 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. Actual
bonuses paid will depend on the extent to which performance goals
are achieved and the extent to which the Committee exercises its
reserved discretion.
Because the Primary Performance Goal for the 1998 Program was
achieved, the following bonus amounts were paid in May, 1999 (fiscal
year 2000):
* Mr. Beracha $274,980
* Mr. Iselin 128,700
* Mr. Opdyke 97,950
* Mr. Krieger 89,400
* Mr. Brown 91,500
* Executive Officers
as a group: 1,525,740
* Non-Executive Officer Employees
as a group: 5,984,934
Because the applicable Performance Period for the 2000 CEO Incentive
Program has not elapsed and the 2000 Program has not yet become
effective, it is not possible to determine if the Performance Goals
will be met nor the amount of any bonuses that might be paid.
OTHER PROGRAMS AND BONUSES
While the Programs mentioned above are the only Programs established
to date under the EPP, the Committee is authorized to establish, and
may establish, additional Programs under the EPP. Also, bonuses may
be paid outside of the EPP and its Programs.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
PROPOSAL TO RE-APPROVE THE EXCEPTIONAL PERFORMANCE PLAN.
9
<PAGE>
SHAREHOLDER PROPOSAL CONCERNING DECLASSIFIED BOARD
(ITEM 3 ON PROXY FORM)
The Trust for the International Brotherhood of Electrical Workers'
Pension Benefit Fund, 1125 Fifteenth Street, N.W., Washington, D.C.
20005, holder of 33,855 shares of Earthgrains' common stock, has
informed Earthgrains that it intends to propose at the meeting that
the shareholders adopt the following resolution and has furnished
the following supporting statement:
"RESOLVED: That the shareholders of the Earthgrains Company (the
"Company") urge that the Board of Directors (the "Board") take the
necessary steps to declassify the Board for the purpose of
Establishing annual elections for directors. The Board
declassification shall be done in a manner that does not affect the
unexpired terms of directors previously elected."
"SUPPORTING STATEMENT: The election of corporate directors is a
primary avenue for shareholders to influence corporate affairs and
ensure management is accountable to the Company's shareholders.
However, under the classified voting system at the Company,
individual directors face election only once every three years, and
shareholders only vote on roughly one-third of the board each year.
Such a system serves to insulate the Board and management from
shareholder input and the consequences of poor financial
performance.
"By eliminating the classified board, shareholders can register
their views annually on the performance of the board and each
individual director. This will promote a culture of responsiveness
and dynamism at the Company, qualities necessary to meet the
challenge of increasing shareholder value.
"According to the Investor Responsibility Research Center,
shareholder support for declassified board 'reached an all-time
high' in 1998, with proposals averaging nearly 45% of votes cast.
Last year, proposals to declassify the board passed at companies
such as Bausch & Lomb, Bristol-Myers Squibb, Eastman Kodak, and
Reebok. In addition, many leading companies have responded to
increasing shareholder opposition and voluntarily declassified their
boards, including Time Warner, Travelers Group, and Occidental
Petroleum.
"In some [sic], by introducing annual elections and eliminating the
classified board at the Company, management and the Board will be
more accountable to shareholders. By aligning the interests of the
Board and management with the interests of shareholders, our Company
will be better equipped to enhance shareholder value.
"For the above reasons, we urge a vote FOR the resolution."
RESPONSE TO DECLASSIFIED BOARD PROPOSAL
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE
ABOVE PROPOSAL.
When Earthgrains became independent in March, 1996, management and
the Board determined that a classified board structure, where
directors are elected to staggered three-year terms, was in the best
interests of the Company and its shareholders. We continue to
believe that a classified board structure remains in the best
interests of the Company and its shareholders primarily for two
reasons: (1) a classified structure promotes sound and stable
management; and (2) a classified structure encourages any third
party seeking to take control of the Company to negotiate with the
Board, which would act in the interests of all shareholders rather
than only certain factions.
Classification is commonly used in the United States to provide
continuity and stability of the board. Classification helps ensure
that at any given time a majority of the directors will have
experience in the Company's business and affairs and will bring a
long-term perspective to the development and execution of the
Company's strategic plans. That experience and perspective are
particularly important for Earthgrains, which is in a highly
competitive and rapidly evolving industry in which significant
opportunities for consolidation constantly arise. The classified
board structure is an appropriate and effective approach for
Earthgrains
10
<PAGE>
to anticipate and meet the demands of its industry and to create
value for its shareholders.
A classified board structure also is intended to discourage a third
party from launching a sudden bid to take control of the company,
particularly a bid which disadvantages some shareholders relative to
others, without first negotiating with the Board at arm's length.
The classified structure may give the Board an extra opportunity to
negotiate on behalf of all Earthgrains' shareholders, intelligently
evaluate alternatives, and otherwise take action in the best
interests of the shareholders as a whole.
We disagree with the proponent's implication that directors are
accountable to the shareholders only if elected annually. The legal
duty of directors to represent the best interests of all
shareholders is not affected by the election cycle.
For the proposal to be approved, the holders of a majority of the
shares actually voted on this item must vote in favor of the
proposal. Even if approved, the proposal itself would not eliminate
the classified board structure. The Company's Amended and Restated
Certificate of Incorporation would have to be amended to legally
eliminate classification. Such an amendment would require approval
by the Board and, in a separate vote, by the holders of a majority
of all shares that are outstanding and entitled to vote, which is a
higher threshold than the approval needed for this item.
FOR THESE REASONS, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE AGAINST THIS PROPOSAL.
11
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND HUMAN RESOURCES COMMITTEE FOR FISCAL
YEAR 1999
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, equity-based incentives, mid to 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 fixed, short-term
variable (based on short-term performance), and mid to long-term
incentive (based on mid to long-term corporate results) elements of
compensation. In determining the structure and design of these pay
elements as well as how much is awarded under each component, the
Committee considers several principles:
* To attract, motivate and retain executives, a base compensation
package that is competitive with median practices in the
commodity and branded segments of the food industry.
* Both short-term and mid to long-term incentives that are matched
with short-term and mid to long-term corporate performance,
respectively, to achieve Earthgrains' financial performance
objectives.
* All Earthgrains' awards should be aligned with maximizing the
economic value of Earthgrains.
* Each component of compensation available to executives should be
clearly communicated to them, as should 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 four 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 Foods Index, as
reflected in Earthgrains' stock price performance graph on page 19.
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 four compensation components: (1) base salary, (2) annual
incentives, (3) equity-based incentives, and (4) mid to long-term
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; mid to long-term incentives are awarded by the Committee
pursuant to plans approved by the Committee. The following
discussion outlines the factors the Committee considers and applies
when awarding each of the four 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
12
<PAGE>
* The median base salaries paid to executives in comparable
positions at the survey companies.
In determining such base salaries, the Committee took into account
the factors outlined above.
The Committee reviews 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:
* Earnings before interest expense and income taxes ("EBIT");
* Growth in earnings before interest expense, income taxes,
depreciation and amortization ("EBITDA");
* Return on capital employed; and
* Appreciation in value of common shares to shareholders.
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
executives occupying comparable positions at the survey companies
and are based on the performance of both Earthgrains and the
individual executive. The Committee establishes a targeted annual
incentive for each executive officer. Assuming that Earthgrains'
performance approaches the annual performance goal, the actual bonus
payable to any executive may equal a pre-defined range of
percentages of the target bonus.
For the last fiscal year, bonuses for executive officers were
determined on the basis of Earthgrains' EBIT compared with a target
established by the Committee. Bonuses for executive officers
assigned to 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 in part on the basis of international EBIT for those
operations.
For the last fiscal year, Earthgrains exceeded its target EBIT goal.
Executive officers thus became eligible for annual bonuses based on
a percentage 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.
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 Earthgrain's long-term
performance, the Committee considers certain subjective factors in
addition to certain objective factors.
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, a subcommittee of the
Committee established the 1998 Cash Incentive Program (the "1998
Program"). Approximately 220 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
13
<PAGE>
and the extent to which the performance goals are achieved. The
performance period for the 1998 Program has not elapsed; no bonuses
were paid to any executives under the 1998 Program during fiscal
year 1999.
In March 1999, the Committee established the 2000 Leadership
Excellence Achievement Program (the "2000 Program") to become
effective upon the achievement of the performance goals under the
1998 Program or the lapse of the 1998 Program. Approximately 220
executives of Earthgrains, including the named executive officers,
are designated participants of the 2000 Program. The performance
period for the 2000 Program will terminate on the third anniversary
of the effective date. The performance goals for the 2000 Program
are tied to a cash flow measure, a return on capital measure, and an
average annual revenue growth measure.
CEO COMPENSATION
The factors used to evaluate Mr. Beracha's performance 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 and improvements
in Earthgrains' operating performance. Change over the year in
Earthgrains' stock price also was a factor. 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 $600,000 for the last fiscal
year. Most of Mr. Beracha's bonus for the last fiscal year was paid
pursuant to the 1999 CEO Cash Incentive Program (the "1999 CEO
Program"), established by the Committee under the EPP in June 1998.
The performance period for the 1999 CEO Program was fiscal year
1999. Mr. Beracha's 1999 CEO Program 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 for fiscal year 1999
was $415,000.
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
William E. Stevens
14
<PAGE>
SUMMARY COMPENSATION TABLE
The table below summarizes the compensation paid by Earthgrains for
services rendered by the named executive officers during the past
three fiscal years.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION<F1> LONG TERM COMPENSATION
------------------------------------ ----------------------------
RESTRICTED SECURITIES ALL OTHER
NAME AND FISCAL OTHER ANNUAL STOCK UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS<F2> COMPENSATION AWARDS<F3> OPTIONS(#)<F4> SATION<F5>
------------------ ------ ------ --------- ------------ ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Barry H. Beracha.......... 1999 $600,000 $415,000 $ 5,857<F6> $ - 0 - 40,000 $44,004
Chairman of the Board & 1998 549,960 445,000 <F6> - 0 - 30,000 31,866
Chief Executive Officer 1997 500,004 300,000 <F6> 2,583,323 950,532 25,504
John W. Iselin, Jr........ 1999 272,820 124,178 4,566<F6> - 0 - 25,000 14,303
President, Worldwide 1998 257,400 155,956 <F6> - 0 - 12,500 10,437
Bakery Products 1997 245,040 156,194 <F6> 555,427 159,000 6,562
William H. Opdyke......... 1999 215,400 117,274 3,603<F6> - 0 - 20,000 14,839
President, Worldwide 1998 195,900 108,553 <F6> - 0 - 10,000 10,373
Refrigerated Dough 1997 190,008 100,912 <F6> 297,073 66,832 9,209
Products, Technology
& Purchasing
Mark H. Krieger........... 1999 209,520 72,960 67,041<F6> - 0 - 15,840 10,043
Vice President & Chief 1998 178,800 79,516 <F6> - 0 - 5,800 7,148
Financial Officer 1997 152,040 48,921 <F6> 187,302 50,200 3,054
Todd A. Brown............. 1999 190,680 81,603 39,943<F6> - 0 - 3,730 11,508
Vice President Operations 1998 183,000 81,428 <F6> - 0 - 3,500 8,680
& Administration, U.S. 1997 178,020 49,621 <F6> 232,500 44,332 6,298
Refrigerated Dough
Products
<FN>
- ---------
<F1> Salary and bonus amounts include any amounts earned in a given
fiscal year and subsequently 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 include one-time retention
bonuses for the following named executive officers:
* Mr. Iselin, $38,800
* Mr. Opdyke, $31,500
* Mr. Krieger, $19,000
* Mr. Brown, $24,000
<F3> Earthgrains did not award any Restricted Stock to the named
executive officers during fiscal year 1999. The 1996 Stock
Incentive Plan, as Amended and Restated to reflect two
two-for-one stock splits that were effected in 1997 and 1998,
currently authorizes grants of 666,204 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 Restricted Stock also has a tax payment feature; some of
the shares can be used to pay the withholding taxes related to
the vesting of the Restricted Stock award. 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
15
<PAGE>
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 30, 1999 are as follows:
<CAPTION>
NUMBER VALUE AT
OF SHARES FISCAL YEAR END
--------- ---------------
<S> <C> <C>
* Mr. Beracha 333,332 $7,083,305
* Mr. Iselin 71,668 1,522,945
* Mr. Opdyke 38,332 814,555
* Mr. Krieger 24,168 513,570
* Mr. Brown 30,000 637,500
<FN>
<F4> Awards for fiscal years 1997 and 1998 have been adjusted to
reflect two two-for-one stock splits effected in 1997 and 1998.
<F5> The amounts shown in this column consist of the following for
fiscal year 1999:
(i) Matching Contributions under Earthgrains' 401(k) and 401(k)
restoration plans:
* Mr. Beracha, $24,000
* Mr. Iselin, $10,913
* Mr. Opdyke, $8,581
* Mr. Krieger, $7,703
* Mr. Brown, $7,627
In the event of a change in control of Earthgrains, the unvested
portion of a participant's 401(k) account will immediately become
100% non-forfeitable, and the entire amount accrued in the 401(k)
restoration plan on behalf of a participant will be paid in a
single lump sum within 30 days of the date of the change in
control.
(ii) Amounts imputed as income for federal income tax purposes
under Earthgrains' life insurance plan:
* Mr. Beracha, $20,004
* Mr. Iselin, $3,391
* Mr. Opdyke, $6,257
* Mr. Krieger, $2,339
* Mr. Brown, $3,881
<F6> Amounts reported in the table include tax reimbursements and
certain perquisites (to the extent the reporting thresholds of
the Securities and Exchange Commission are exceeded). The
amounts reported for Mr. Krieger and Mr. Brown consist
primarily of the value of country club memberships:
* Mr. Krieger, $38,053
* Mr. Brown, $27,020
</TABLE>
16
<PAGE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE AT
SHARES GRANTED TO ASSUMED ANNUAL RATES OF STOCK PRICE
UNDERLYING EMPLOYEES EXERCISE APPRECIATION FOR OPTION TERM<F3>
OPTIONS IN FISCAL PRICE PER EXPIRATION -----------------------------------
NAME GRANTED<F1> YEAR 1999<F2> SHARE DATE 0% 5% 10%
---- ----------- ------------- --------- ---------- ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Barry H. Beracha...... 40,000 5.67% $22.4063 3/18/09 - 0 - $563,648 $1,428,395
John W. Iselin, Jr.... 25,000 3.54% $22.4063 3/18/09 - 0 - 352,280 892,747
William H. Opdyke..... 20,000 2.83% $22.4063 3/18/09 - 0 - 281,824 714,197
Mark H. Krieger....... 15,840 2.24% $22.4063 3/18/09 - 0 - 223,205 565,644
Todd A. Brown......... 3,730 0.53% $22.4063 3/18/09 - 0 - 52,560 133,198
<FN>
- --------
<F1> All options granted to the named executive officers were
granted on March 19, 1999. 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. In addition, some of the options (NQSOs) were
granted with a tax payment feature; the option stock can be
used to pay the withholding taxes related to an option
exercise.
The number of NQSOs granted in fiscal year 1999 to the named
officers were:
* Mr. Beracha, 36,000
* Mr. Iselin, 21,000
* Mr. Opdyke, 16,000
* Mr. Krieger, 11,840
* Mr. Brown, 0
<F2> Based on option grants for 706,028 shares of Earthgrains'
Common Stock to 217 employees in fiscal year 1999.
<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, as evidenced by the 0% column. The assumed 5%
annual rate of appreciation would result in the market price of
Earthgrains' Common Stock increasing from $22.4063 to $36.50.
The assumed 10% annual rate of appreciation would result in an
increase from $22.4063 to $58.12.
</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 VALUE AT FISCAL YEAR END YEAR END<F2><F3>
NAME EXERCISE<F1> REALIZED<F2> EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Barry H. Beracha.......... 200,000 $3,884,370 581,464/99,068 $7,345,921/319,861
John W. Iselin, Jr........ - 0 - - 0 - 151,832/44,668 1,884,790/ 92,797
William H. Opdyke......... - 0 - - 0 - 64,831/32,001 778,323/ 43,672
Mark H. Krieger........... 500 11,359 46,566/24,774 551,947/ 41,486
Todd A. Brown............. - 0 - - 0 - 43,498/ 8,064 553,824/ 16,375
<FN>
- --------
<F1> Shares acquired reflect two two-for-one stock splits effected
in 1997 and 1998.
<F2> Value before income taxes payable as a result of exercise.
<F3> The closing price of Earthgrains' Common Stock on March 30,
1999 was $21.25 per share. Options granted with a higher
exercise price are ignored in this column.
</TABLE>
17
<PAGE>
<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>
The Earthgrains Company Pension Plan (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 will 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:
* Mr. Beracha, 31.7 years and $630,823
* Mr. Iselin, 19.7 years and $278,282
* Mr. Opdyke, 19.3 years and $214,643
* Mr. Krieger, 18.3 years and $204,982
* Mr. Brown, 20 years and $192,660
18
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
CUMULATIVE TOTAL RETURN
BASED ON INVESTMENT OF $100<F*>
MARCH 27, 1996 -- MARCH 30, 1999
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
Supercomposite, and (c) the S&P Foods Index. Both of the Indices are
weighted by capitalization. The S&P 1500 Supercomposite is comprised
of 500 companies with large capitalization (S&P 500), 400 companies
with medium capitalization (S&P 400) and 600 companies with small
capitalization (S&P 600) and reflects the performance of those 1500
companies. The S&P Foods Index reflects the performance of 12
companies represented in the foods sector of the S&P 500 Index.
[GRAPH]
<TABLE>
<CAPTION>
DOLLAR VALUE OF $100 INVESTMENT<F*> AT
--------------------------------------
MARCH 27, 1996 MARCH 25, 1997 MARCH 31, 1998 MARCH 30, 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
The Earthgrains Company.......... 100.00 169.72 293.26 283.49
S&P 1500 Supercomposite.......... 100.00 122.66 174.55 203.25
S&P Foods Index.................. 100.00 128.26 176.58 157.17
<FN>
- -------
<F*> Assumes 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>
19
<PAGE>
EXECUTIVE AGREEMENTS
Mr. Beracha's 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.
Mr. Beracha's employment agreement provides that he may be
terminated at any time without "cause," but if such termination
occurs prior to the end of the term of the employment agreement, he
is entitled to receive his base salary through the end of the term.
Notwithstanding these provisions, Earthgrains is entitled to
terminate Mr. Beracha's employment agreement immediately and without
notice if he 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 his base salary prorated to the date of the termination
event. The employment agreement excludes participation in any
severance pay plan established by Earthgrains in the event of
termination for any reason.
The Board recently approved executive severance agreements
("Severance Agreements") which will be offered to Mr. Beracha, the
other executive officers named in the Summary Compensation Table on
page 15, and certain other key executives of Earthgrains. The
Severance Agreements will be effective for a three-year period with
automatic one-year extensions, unless a termination notice is given.
The Severance Agreements provide if the executive's employment
terminates in certain ways following a change in control of
Earthgrains, the executive would receive certain severance benefits.
The severance benefits would consist of cash payments by Earthgrains
equal to two times (three times in the case of Mr. Beracha) the
executive's average base salary and target bonus. In addition, the
executive's welfare benefits (e.g. health and life insurance) would
continue for two years (three years in the case of Mr. Beracha),
certain supplemental pension benefits would vest, and Earthgrains
would be required to pay any excise taxes imposed in connection with
the severance benefits. No severance benefits would be provided if
an executive were terminated for cause, death, or disability, or if
no change in control of Earthgrains were to occur.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit and Finance Committee of the Board of Directors has
selected PricewaterhouseCoopers LLP to be the Company's independent
public accountants for fiscal year 2000. A representative of
PricewaterhouseCoopers 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 those reports, other
documents 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 inadvertently reported late one purchase of Common
Stock.
20
<PAGE>
OTHER MATTERS
SHAREHOLDER PROPOSALS FOR 2000
To be included in Earthgrains' proxy materials for its 2000 meeting,
a shareholder proposal must be received by Earthgrains in writing no
later than February 15, 2000. 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 2000 proxy materials.
If you wish to make a proposal for the 2000 annual meeting, you must
comply with Earthgrains' By-Laws, whether or not your proposal also
is included in Earthgrains' written proxy materials for that
meeting. The Company's By-Laws require, among other things, that any
shareholder wishing to submit a proposal must send a written notice
of the proposal to the Company's Secretary between April 17 and May
17, 2000, and must attend the meeting (in person or by proxy) and
introduce the proposal for action. The written notice must contain
certain information required by the By-Laws, depending on the
subject matter of the proposal. You may request a copy of the
applicable By-Laws at any time; send your written request to the
attention of the Company's Secretary at its headquarters in
St. Louis.
FORM 10-K
Upon written request and at no charge, Earthgrains will provide to
each person receiving a Proxy Statement, a copy of Earthgrains'
Annual Report on Form 10-K, including financial statements and
schedules, 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, OR VOTE BY TELEPHONE. YOUR COOPERATION IS
APPRECIATED.
St. Louis, Missouri
June 14, 1999
21
<PAGE>
APPENDIX A
----------
THE EARTHGRAINS COMPANY
EXCEPTIONAL PERFORMANCE PLAN
EFFECTIVE MARCH 26, 1997
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.
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 Company 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
A-1
<PAGE>
(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 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.
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
A-2
<PAGE>
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.
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.
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.
A-3
<PAGE>
Earthgrains Logo
THE EARTHGRAINS COMPANY
ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, JULY 16, 1999, 10:00 A.M.
IN EDISON THEATRE, WASHINGTON UNIVERSITY'S MALLINCKRODT CENTER
OFF FORSYTH BOULEVARD
SAINT LOUIS, MISSOURI 63130
DIRECTIONS TO EDISON THEATRE:
FROM I-70 EASTBOUND:
Take I-70 South to 64-40 East. Exit to the right at McCausland, and
turn left on to McCausland, which becomes Skinker Blvd. Turn left on
Forsyth Blvd. and follow Forsyth Blvd. to Hadley Way (which will be
on your right). Turn right on Hadley Way.
FROM I-70 WESTBOUND:
Take U.S. 40 exit (farthest left lane) as you cross the Poplar
Street Bridge (over Mississippi River) and continue on U.S. 40 to
the Clayton Rd./Skinker Blvd. exit. Turn right on Skinker Blvd. and
follow to Forsyth Blvd. Turn left on Forsyth Blvd., and continue to
Hadley Way (which will be on your right). Turn right on Hadley Way.
FROM I-55 NORTHBOUND:
Take U.S. 44 exit (44 West). Take 44 West to Hampton north (right on
Hampton) and Hampton north to U.S. 40 West. Take U.S. 40 West to the
Clayton Rd./Skinker Blvd. exit then follow the directions in
italics.
FROM U.S. 44 EASTBOUND:
Take 44 East to Hampton exit. Turn north (left) on Hampton and
follow to U.S. 40 West. Take U.S. 40 West to the Clayton Rd./Skinker
Blvd. exit and then follow the directions in italics.
PARKING INFORMATION:
Limited parking is available for $3.00 in a pay-to-park lot west of
Edison Theatre on Hadley Way. Additional parking is available at
two-hour meters in front of Edison Theatre and on some of the
streets surrounding Washington University. Please avoid parking in
any spaces where signs indicate a parking permit is required.
Parking in such spaces without a permit could result in your car
being ticketed.
<PAGE>
<PAGE>
PROXY FORM
THE EARTHGRAINS COMPANY
ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, JULY 16, 1999, 10:00 A.M.
IN EDISON THEATRE, 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 16, 1999, at 10:00 A.M. and at any adjournments thereof.
(BE SURE TO SIGN AND DATE THE REVERSE SIDE OF THIS FORM)
- ------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
ADMISSION TICKET
THE EARTHGRAINS COMPANY
ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, JULY 16, 1999, 10:00 A.M.
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 OR VOTE BY TELEPHONE.
================================================================================
IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK THE APPROPRIATE BOX ON THE PROXY
FORM ON THE REVERSE SIDE AND MAIL IT 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
Response Center at 1-888-213-0971.
<PAGE>
THE BOARD OF DIRECTORS THE EARTHGRAINS COMPANY Please mark / X /
RECOMMENDS A VOTE PROXY FORM your votes as
FOR ITEMS 1 AND 2 AND indicated in
- --- this example
AGAINST ITEM 3.
- -------
1. Election of Directors
FOR all nominees WITHHOLD (Instruction: to withhold authority
listed to the right AUTHORITY to vote for any individual nominee,
(except as marked to vote for all strike a line through the nominee's
to the contrary) nominees listed name.)
to the right
01 Barry H. Beracha
/ / / / 02 Peter F. Benoist
03 Maxine K. Clark
2. Re-approval of the Exceptional Performance Plan
FOR AGAINST ABSTAIN
/ / / / / /
3. Shareholder proposal for a declassified board of directors
FOR AGAINST ABSTAIN
/ / / / / /
4. 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. / /
==========================================================================
***IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW***
==========================================================================
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS. WHEN PROPERLY EXECUTED, IT WILL BE
VOTED FOR ITEMS #1 AND #2 AND AGAINST ITEM #3
--- -------
UNLESS CONTRARY INSTRUCTIONS ARE INDICATED.
Dated: , 1999
------------------------------------
-----------------------------------------------
-----------------------------------------------
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 vote and authority.)
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE.
<PAGE>
- ----------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
VOTE BY TELEPHONE
QUICK *** EASY *** IMMEDIATE
YOUR VOTE IS IMPORTANT!-YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: CALL TOLL-FREE 1-800-840-1208 ON A TOUCH TONE TELEPHONE 24
HOURS A DAY-7 DAYS A WEEK
THERE IS NO CHARGE TO YOU FOR THIS CALL. - HAVE YOUR PROXY FORM IN HAND.
YOU WILL BE ASKED TO ENTER A CONTROL NUMBER, WHICH IS LOCATED IN THE BOX IN
THE LOWER RIGHT HAND CORNER OF THIS FORM
- -------------------------------------------------------------------------------
OPTION 1: To vote as the Board of Directors recommends on ALL Items,
press 1
- -------------------------------------------------------------------------------
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
- -------------------------------------------------------------------------------
OPTION 2: If you choose to vote on each Item separately, press 0.
You will hear these instructions:
- -------------------------------------------------------------------------------
Item 1 - To vote FOR ALL nominees, press 1; to WITHHOLD FOR
ALL nominees, press 9
To WITHHOLD FOR AN INDIVIDUAL nominee, Press 0 and listen
to instructions
Item 2 - To vote FOR, press 1; AGAINST, press 9;
ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
Item 3 - The instructions are the same.
OR
--
2. TO VOTE BY PROXY: Mark, sign and date your proxy form and return promptly in
the enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your Proxy Form.
THANK YOU FOR VOTING.
<PAGE>
<PAGE>
APPENDIX
Page 19 of the printed Proxy contains a Performance Graph. The information
contained in the graph appears in the table immediately following the graph.
