SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended January 4, 2000
Commission file number 1-7554
THE EARTHGRAINS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-3201045
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8400 Maryland Avenue, St. Louis, Missouri 63105
(Address of Principal Executive Offices) (Zip)
314-259-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X ] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
$.01 Par Value Common Stock - 42,405,381 shares
as of February 1, 2000
<PAGE>
THE EARTHGRAINS COMPANY
Index
Page No.
--------
Part I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of
Earnings 3
Condensed Consolidated Statements of
Cash Flows 4
Notes to Condensed Consolidated
Financial Statements 5
Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Part II. OTHER INFORMATION
Other Information 11
Exhibits and Reports on Form 8-K 11
<PAGE>
<TABLE>
THE EARTHGRAINS COMPANY
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)
<CAPTION>
January 4, March 30,
2000 1999
---------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 28.8 $ 53.1
Accounts receivable, net of
allowance for doubtful
accounts of $5.5 and $5.6,
respectively 237.6 184.5
Inventories 78.6 77.7
Deferred income taxes and
other 77.4 69.4
-------- --------
Total current assets 422.4 384.7
Other assets, net 44.1 46.0
Goodwill, net 422.8 399.8
Plant and equipment, net 745.9 761.1
-------- --------
Total assets $1,635.2 $1,591.6
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 145.4 $ 125.5
Accrued salaries, wages and
benefits 59.7 56.9
Accrual for restructuring and
consolidation 20.3 32.4
Other current liabilities 71.1 67.8
-------- --------
Total current liabilities 296.5 282.6
Postretirement benefits 109.7 114.0
Long-term debt 380.3 369.3
Deferred income taxes 101.9 102.7
Other noncurrent liabilities 79.9 73.6
Commitments and contingencies -- --
Minority interest-mandatorily
redeemable preferred stock of
subsidiary 10.0 10.0
Shareholders' equity
Common stock 0.4 0.4
Additional paid-in capital 621.0 616.6
Retained earnings 120.3 79.1
Unearned ESOP shares (11.6) (13.0)
Treasury stock (33.9) (20.4)
Unearned portion of restricted
stock (1.8) (2.5)
Accumulated other comprehensive
income (37.5) (20.8)
-------- --------
Shareholders' equity 656.9 639.4
-------- --------
Total liabilities and
shareholders' equity $1,635.2 $1,591.6
======== ========
<FN>
See accompanying Notes to Condensed Consolidated
Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
THE EARTHGRAINS COMPANY
Condensed Consolidated Statements of Earnings
(In millions except per share data)
(Unaudited)
<CAPTION>
16-week period ended 40-week period ended
---------------------- ----------------------
January 4, January 5, January 4, January 5,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $642.8 $609.2 $1,561.8 $1,484.6
Cost of products sold 356.0 347.9 864.0 842.0
------ ------ -------- --------
Gross profit 286.8 261.3 697.8 642.6
Marketing, distribution
and administrative
expenses 247.8 225.8 604.0 561.5
Provision for restructuring
and consolidation 2.3 2.6 2.3 8.4
------ ------ -------- --------
Operating income 36.7 32.9 91.5 72.7
Other income and expenses:
Interest expense (7.9) (6.3) (18.9) (15.1)
Other income (expense),
net 1.2 1.1 3.2 5.1
----- ----- ----- -----
Income before income taxes 30.0 27.7 75.8 62.7
Provision for income taxes 11.1 10.7 28.4 24.8
Minority interest expense,
net of tax (0.2) - (0.5) -
----- ----- ----- -----
Net income $18.7 $17.0 $46.9 $37.9
===== ===== ===== =====
Earnings per share:
Basic
Net earnings $0.46 $0.42 $1.16 $0.93
===== ===== ===== =====
Weighted average
shares outstanding 40.6 40.7 40.5 40.7
==== ==== ==== ====
Diluted
Net earnings $0.45 $0.40 $1.12 $0.89
===== ===== ===== =====
Weighted average
shares outstanding 41.9 42.9 42.0 42.8
==== ==== ==== ====
<FN>
See accompanying Notes to Condensed Consolidated
Financial Statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
THE EARTHGRAINS COMPANY
Condensed Consolidated Statements of Cash Flows
(In millions except per share data)
(Unaudited)
<CAPTION>
For the 40-week
period ended
-------------------------
January 4, January 5,
2000 1999
---------- ----------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 46.9 $ 37.9
Adjustments to reconcile earnings
to net cash flow provided by
operations:
Depreciation and amortization 86.7 76.7
Deferred income taxes (0.3) (3.7)
Provision for restructuring
and consolidation ($2.3
million, less cash payments
of $0.9 million; $8.4 million,
less cash payments of $1.3
million) 1.4 7.1
(Gain) on disposal of fixed assets (0.6) (4.6)
Changes in noncash working capital,
net of effect of Acquisitions (49.7) (17.7)
Other, net (16.3) (1.0)
------ ------
Net cash flow from operations 68.1 94.7
------ ------
Cash flows from investing activities:
Capital expenditures (62.7) (57.2)
Acquisitions, net of cash acquired (20.2) (78.2)
Other, net 5.9 35.6
------ ------
Net cash used by investing
activities (77.0) (99.8)
------ ------
Cash flows from financing activities:
Proceeds from borrowings 9.6 27.5
Payments on long-term debt (2.7) (0.4)
Dividends to shareholders (5.7) (4.5)
Purchases of treasury stock (13.5) (3.5)
Other 1.5 --
------ ------
Net cash (used by) provided
by financing activities (10.8) 19.1
Effect of exchange rate changes on
cash (4.6) 3.8
Net (decrease) increase in cash
and cash equivalents (24.3) 17.8
Cash and cash equivalents, beginning
of period 53.1 43.7
------ ------
Cash and cash equivalents, end of
period $ 28.8 $ 61.5
====== ======
<FN>
See accompanying Notes to Condensed Consolidated
Financial Statements.
</FN>
</TABLE>
4
<PAGE>
Notes to Condensed Consolidated Financial Statements
- ----------------------------------------------------
Note 1 - In the opinion of the Company, the accompanying
unaudited condensed consolidated financial statements
contain all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the
financial statements pursuant to the applicable SEC rules
and guidelines pertaining to interim financial information.
Operating results for any quarter are not necessarily
indicative of the results for any other quarter or for the
full year. These condensed consolidated financial
statements should be read in conjunction with the
consolidated financial statements and notes thereto included
in the Annual Report to Shareholders for the year ended
March 30, 1999.
Note 2 - Inventories are carried at the lower of cost or
market. Cost is determined under the first-in, first-out
method.
Total inventories consisted of the following:
January 4, March 30,
2000 1999
---------- ---------
Raw materials $ 61.5 $ 59.8
Finished goods 17.1 17.9
-------- -------
$ 78.6 $ 77.7
======== =======
Note 3 - Earnings per share are based on the weighted
average number of shares of Earthgrains common stock
outstanding for the periods presented. The difference in
the weighted average shares outstanding used in the basic
and dilutive earnings per share calculations represents the
assumed conversion of stock options.
Note 4 - Effective in the first quarter of fiscal 1999, the
Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS
130 requires that noncash changes in shareholders' equity be
combined with net income and reported as "comprehensive
income." The Company has elected to report comprehensive
income in its Statement of Shareholders' Equity. Other
comprehensive income for the Company relates only to foreign
currency translation adjustments. Adoption of SFAS 130 had
no impact on the results of the Company's operations. For
the 16- and 40-week periods ended January 4, 2000 and
January 5, 1999, comprehensive income was $7.2 million and
$30.2 million, and $23.8 million and $47.7 million,
respectively.
5
<PAGE>
Note 5 - In the fourth quarter of 1999, the Company adopted
FAS 131, "Disclosures about Segments of an Enterprise and
Related Information." The business segments of the Company
are Bakery Products, which consists of the U.S. Bakery
Products division and the European Bakery Products division,
and Refrigerated Dough Products, which contains the U.S.
Refrigerated Dough Products division and the European
Refrigerated Dough Products division. There have been no
changes to the basis of segmentation or to the basis of
measurement as presented in the 1999 Annual Report to
Shareholders. Summarized below is the Company's business
segment information through the third quarter of fiscal 2000
and 1999 (in millions):
<TABLE>
<CAPTION>
16-week period ended 40-week period ended
-------------------- --------------------
January 4, January 5, January 4, January 5,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income Statement
Information:
Net Sales
Bakery Products $ 535.8 $ 506.7 $1,339.9 $1,262.2
Refrigerated Dough
Products 107.0 102.5 221.9 222.4
------- ------- -------- --------
Total $ 642.8 $ 609.2 $1,561.8 $1,484.6
------- ------- -------- --------
Operating Income
Bakery Products (b) $ 22.9 $ 19.9 $ 70.8 $ 55.0
Refrigerated Dough
Products 17.4 16.6 29.6 26.6
Corporate (a) (3.6) (3.6) (8.9) (8.9)
------- ------- -------- --------
Total $ 36.7 $ 32.9 $ 91.5 $ 72.7
------- ------- -------- --------
Depreciation & Amortization
Bakery Products $ 27.2 $ 25.6 $ 66.0 $ 58.0
Refrigerated Dough
Products 5.3 4.1 11.8 9.8
Corporate (a) 3.6 3.6 8.9 8.9
------- ------- -------- --------
Total $ 36.1 $ 33.3 $ 86.7 $ 76.7
------- ------- -------- --------
Balance Sheet Information:
Capital Expenditures
Bakery Products $ 23.0 $ 20.9 $ 49.0 $ 49.7
Refrigerated Dough
Products 5.4 2.6 13.7 7.5
------- ------- -------- --------
Total $ 28.4 $ 23.5 $ 62.7 $ 57.2
------- ------- -------- --------
<FN>
(a) Amounts represent purchase accounting valuation in conjunction with the
acquisition of the Company by Anheuser-Busch in 1982 and the related
depreciation and amortization thereon.
</FN>
<FN>
(b) Includes the $2.3 million pretax provision for restructuring and
consolidation recorded in the third quarter of fiscal 2000 and the $2.6
million and $8.4 million pretax provisions for restructuring and
consolidation recorded in fiscal 1999 for the 16-week and 40-week periods,
respectively.
</FN>
</TABLE>
6
<PAGE>
Note 6 - On November 15, 1999, Earthgrains announced that it
had entered into an agreement to acquire the stock of Metz
Baking Company. Metz Baking operates 21 bread and specialty
bakeries in the upper midwest. The acquisition is pending
customary governmental review.
Additionally, during the second quarter of fiscal 2000, the
Company completed the acquisition of Patrick Raulet, S.A., a
leading producer of refrigerated dough products in Dole,
France, effective June 30, 1999. This acquisition
complements the Company's existing European Refrigerated
Dough Products business, making it the largest refrigerated
dough supplier in France. This acquisition was funded
through the cash flows of the local existing operations and
has been accounted for using the purchase method.
Accordingly, the results of operations, which have had a
positive impact during the periods presented, are reflected
in the consolidated statement of earnings from the date of
acquisition.
7
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
INTRODUCTION
- ------------
This discussion summarizes the significant factors affecting
the consolidated operating results, financial condition and
liquidity of The Earthgrains Company for the 16- and 40-week
periods ended January 4, 2000 compared to the 16- and 40-
week periods ended January 5, 1999. This discussion should
be read in conjunction with the consolidated financial
statements and notes thereto for the fiscal year ended March
30, 1999 included in the Company's Annual Report to
Shareholders.
RESULTS OF OPERATIONS
- ---------------------
Net sales for the 16-week period ended January 4, 2000,
increased 5.5% to $642.8 million from $609.2 million
reported for the comparable prior-year period, despite a
$14.7 million unfavorable impact from foreign exchange
rates. For the respective 40-week periods, net sales
increased 5.2% to $1,561.8 million from the year-ago
$1,484.6 million. Excluding the impact of foreign exchange
rates, sales increased 7.9% for the current quarter and 6.5%
on a year-to-date basis. Sales growth can be attributed to
the impact of European acquisitions, Reposteria Martinez and
Patrick Raulet, combined with continued company-wide price
and mix improvements. The year-to-date increase was
partially offset by a decline in Refrigerated Dough Product
revenues, primarily as a result of the conclusion of a
domestic cookie dough co-packing arrangement in December
1998, and an early Easter holiday in 1999.
Gross margins increased significantly in the current period
to 44.6% from 42.9% a year ago and to 44.7% from 43.2% year
to date. The margin improvements can be attributed to
continued favorable product mix shift and lower ingredient
costs across both business segments, bakery and refrigerated
dough products, and benefits from the European acquisitions.
On a percentage-of-sales basis, marketing, distribution and
administrative expenses increased to 38.5% from 37.1% in the
year-ago quarter and to 38.7% from 37.8% on a year-to-date
comparison. The increase can primarily be attributed to the
increases in fuel costs and additional supply agreement and
goodwill amortization relative to acquisitions.
The $2.3 million pretax restructuring charge recorded in the
current quarter was for costs associated with closing the
Johnson City, Tennessee bakery, as a part of acquisition-
related consolidation in the southeast. In the year-ago
quarter, the $2.6 million pretax charge was for costs to
close the Pueblo, Colorado bakery. The $5.8 million pre-tax
restructuring charge recorded in the year-ago second quarter
was for costs to close the Macon, Georgia and Montgomery,
Alabama bakeries, and for severance costs related to the
creation of a Financial Shared Services Center in St. Louis.
The increase in interest expense is directly related to the
increased long-term debt, resulting from acquisitions and
shares repurchased for the treasury.
The year-to-date decrease in other income is primarily
related to a $1.7 million pre-tax gain on the sale of
property reflected in the year-ago first quarter.
The lower effective income tax rate in the current year
reflects continued benefits of ongoing state tax planning
strategies and a European bakery tax structure established
in the fourth quarter of fiscal 1999.
8
<PAGE>
Net earnings for the 16-week period were $18.7 million or
$0.45 per diluted share, compared to $17.0 million, or $0.40
per diluted share in the prior year's comparable period.
Year-to-date earnings were $46.9 million or $1.12 per
diluted share compared to $37.9 million or $0.89 per diluted
share in fiscal 1999. The significant improvement in
earnings is reflective of continued benefits and
efficiencies achieved from the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flow from operations continues to be a primary source
of liquidity. Net working capital, excluding cash and cash
equivalents, was $97.1 million at January 4, 2000 compared
to $49.0 million at March 30, 1999. The increase can be
primarily attributed to the seasonality of the business and
the temporary increase in accounts receivable in conjunction
with the transition of processing to the Shared Services
Center.
$62.7 million has been invested in capital expenditures to
date, with spending for the fiscal year planned for a level
of $90-95 million. Additionally, 133,200 shares were
repurchased during the current quarter for the treasury at a
cost of $2.6 million; 596,100 shares have been purchased
year to date at a cost of $13.5 million.
On April 20, 1999, Earthgrains issued $150 million in 10-
year, 6.5% fixed-rate senior debentures under a $250 million
shelf registration statement filed with the Securities and
Exchange Commission. Proceeds from the offering were used
to repay borrowings under the Company's $450 million
syndicated, revolving-credit facility, to fund capital
expenditures and for general corporate purposes.
In July 1999, Earthgrains established a $400 million
commercial paper program to provide short-term financing for
its working capital and operating requirements. The
revolving-credit facility, which expires in September 2002,
will serve as a liquidity backup for commercial paper.
In conjunction with the pending acquisition of Metz Baking
Company, the Company has recently secured a $600 million,
364-day committed credit line as a bridge facility to
initially finance the transaction. The Company will later
refinance the transaction to maintain its overall financing
objective of an investment-grade debt rating.
The Company's primary routine cash requirements will consist
of funding capital expenditures, interest payments pursuant
to the credit facilities and dividends to shareholders.
Cash provided by operations and borrowings available under
the existing credit facilities and the new shelf
registration and commercial paper program should continue to
provide the necessary funding for ongoing cash requirements.
YEAR 2000
- ---------
Many computer systems process dates in application software
and data files based upon two digits for the year of a
transaction rather than a full four digits. As a result,
there was uncertainty as to the ability of these systems to
properly process dates in the year 2000. Consequently,
businesses and governmental entities were at risk for
possible miscalculations or systems failures causing
disruptions in their business operations.
In 1994, in order to improve access to business information
through integrated systems across the company, and
accordingly gain efficiencies and cost improvements,
Earthgrains embarked on a company-wide systems integration
project using SAP software. Additionally, in the past two
years, the
9
<PAGE>
Company has purchased a new mainframe computer to increase
capacity in support of its acquisition growth strategy and
has replaced all handheld computers, upgrading to the latest
technology to enhance route distribution efficiency. These
new components, which comprise the majority of the Company's
core business computer systems, are Year 2000 compliant. The
purchase of new systems and hardware as a part of the
company-wide business systems improvement program are being
capitalized. This improvement program is proceeding as
planned in support of the Company's ongoing business
strategy.
The Company undertook a process of executing a plan to
address the Year 2000 issue with the objective to have all
of its significant business systems and software
applications that are date-sensitive, including those
related to facilities and manufacturing activities,
operating effectively before January 1, 2000. Additionally,
the plan was to address the ability of suppliers and trading
partners to bring their systems into Year 2000 compliance.
Earthgrains successfully completed all Year 2000 remediation
and contingency planning activities during the current
quarter. As a result of these accomplishments, the Company
did not experience any system failures or disruptions in
business operations.
Incremental project costs associated with Year 2000
compliance were expensed as incurred, or capitalized where
appropriate, and totaled approximately $5 million. No
subsequent events related to the Year 2000 issue are
expected to materially affect the Company's financial
position or results of operations.
ENVIRONMENTAL MATTERS
- ---------------------
The Company is subject to Federal, state and local
environmental protection laws and regulations and is
operating within such laws or is taking action aimed at
assuring compliance with such laws and regulations.
Earthgrains has been identified as a potentially responsible
party ("PRP") at certain locations by the EPA and may be
required to share in the cost of cleanup with respect to two
sites. While it is difficult to quantify with certainty the
financial impact of actions related to environmental
matters, based on the information currently available it is
management's opinion that the ultimate liability arising
from such matters, taking into consideration established
reserves, should not have a material effect on the Company's
results of operations or financial position.
10
<PAGE>
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings. The Company has no legal
proceedings which have become a reportable event in the
current period.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security-
Holders. No matters were submitted to a vote of security
holders.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - 10.1 - Form of Executive Severance
Agreement for the Chief
Executive Officer
- 10.2 - Form of Executive Severance
Agreement for certain other
executive officers.
- 27 - Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
On November 18, 1999, the Company filed with
the Securities and Exchange Commission a
current report on Form 8-K disclosing the
announcement of the pending acquisition of
Metz Baking Company.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
THE EARTHGRAINS COMPANY
(Registrant)
Date: February 16, 2000 By: Mark H. Krieger
/S/ MARK H. KRIEGER
Mark H. Krieger
Vice President and Chief
Financial Officer
<PAGE>
Tier I
Form of
Executive Severance Agreement
for _______________________
The Earthgrains Company
<PAGE>
Contents
Article 1. Establishment, Term, and Purpose 1
Article 2. Definitions 2
Article 3. Severance Benefits 5
Article 4. Form and Timing of Severance Benefits 7
Article 5. Excise Tax Equalization Payment 7
Article 6. Establishment of Trust 9
Article 7: Mitigation 9
Article 8. Confidentiality and Noncompetition 9
Article 9. Legal Remedies 10
Article 10. Outplacement Assistance 11
Article 11. Successors and Assignment 11
Article 12. Miscellaneous 12
<PAGE>
The Earthgrains Company
Executive Severance Agreement
THIS AGREEMENT is made and entered into as of the
______day of ______, 1999 (the "Effective Date"), by and
between The Earthgrains Company (hereinafter referred to as
the "Company") and (hereinafter referred to as the
"Executive").
WHEREAS, the Board of Directors of the Company has
approved the Company entering into severance agreements with
certain key executives of the Company;
WHEREAS, the Executive is the Chairman of the Board of
Directors and Chief Executive Officer of the Company;
WHEREAS, should the possibility of a Change in Control
of the Company arise, the Board believes it is imperative
that the Company and the Board should be able to rely upon
the Executive to continue in his position, and that the
Company should be able to receive and rely upon the
Executive's advice, if requested, as to the best interests
of the Company and its shareholders without concern that the
Executive might be distracted by the personal uncertainties
and risks created by the possibility of a Change in Control;
WHEREAS, should the possibility of a Change in Control
arise, in addition to his regular duties, the Executive may
be called upon to assist in the assessment of such possible
Change in Control, advise management and the Board as to
whether such Change in Control would be in the best
interests of the Company and its shareholders, and to take
such other actions as the Board might determine to be
appropriate; and
NOW THEREFORE, to assure the Company that it will have
the continued dedication of the Executive and the
availability of his advice and counsel notwithstanding the
possibility, threat, or occurrence of a Change in Control of
the Company, and to induce the Executive to remain in the
employ of the Company, and for other good and valuable
consideration, the Company and the Executive agree as
follows:
Article 1. Establishment, Term, and Purpose
This Agreement will commence on the Effective Date and
shall continue in effect for three (3) full years. However,
at the end of such three (3) year period and, if extended,
at the end of each additional year thereafter, the term of
this Agreement shall be extended automatically for one (1)
additional year, unless the Committee delivers written
notice six (6) months prior to the end of such term, or
extended term, to the Executive, that the Agreement will not
be extended. In such case, the Agreement will terminate at
the end of the term, or extended term, then in progress.
However, in the event a Change in Control occurs during
the original or any extended term, this Agreement will
remain in effect for the longer of: (i) twenty-four (24)
months beyond the month in which such Change in Control
occurred; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all benefits
required hereunder have been paid to the Executive.
1
<PAGE>
Article 2. Definitions
Whenever used in this Agreement, the following terms
shall have the meanings set forth below and, when the
meaning is intended, the initial letter of the word is
capitalized.
(a) "Base Salary" means the salary of record paid to
an Executive as annual salary, excluding amounts received
under incentive or other bonus plans, whether or not
deferred.
(b) "Beneficial Owner" shall have the meaning ascribed
to such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act.
(c) "Beneficiary" means the persons or entities
designated or deemed designated by the Executive pursuant to
Paragraph 12.2 herein.
(d) "Board" means the Board of Directors of the
Company.
(e) "Cause" means:
(i) The Executive's willful and continued failure
to substantially perform his duties with the Company (other
than any such failure resulting from disability or occurring
after issuance by the Executive of a Notice of Termination
for Good Reason), after a written demand for substantial
performance is delivered to the Executive that specifically
identifies the manner in which the Company believes that the
Executive has willfully failed to substantially perform his
duties, and after the Executive has failed to resume
substantial performance of his duties on a continuous basis
within thirty (30) calendar days of receiving such demand;
(ii) The Executive's willfully engaging in
conduct (other than conduct covered under (i) above) which
is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of this subparagraph,
no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief
that the action or omission was in the best interests of the
Company; or
(iii) The Executive's having been convicted of a
felony.
(f) "Change in Control" of the Company shall be deemed
to have occurred as of the first day that any one or more of
the following conditions is satisfied:
(i) The "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act) of securities
representing more than thirty percent (30%) of the combined
voting power of the Company is acquired by a Person (other
than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
an affiliate thereof, or any corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
stock of the Company); or
2
<PAGE>
(ii) The stockholders of the Company approve a
definitive agreement to merge or consolidate the Company
with or into another company;
(iii) The stockholders of the Company (a) approve
an agreement for the sale or disposition of all or
substantially all of the Company's assets, or (b) adopt a
plan for liquidation; or
(iv) The Incumbent Directors cease for any reason
to constitute at least a majority of the Board of Directors.
However, in no event shall a Change in Control be deemed to
have occurred, with respect to the Executive, if the
Executive is part of a purchasing group which consummates
the Change-in-Control transaction. The Executive shall be
deemed "part of a purchasing group" for purposes of the
preceding sentence if the Executive is an equity participant
in the purchasing company or group (except for: (a) passive
ownership of less than three percent (3%) of the stock of
the purchasing company; or (b) ownership of equity
participation in the purchasing company or group which is
otherwise not significant, as determined prior to the Change
in Control by a majority of the nonemployee continuing
Directors).
Notwithstanding the occurrence of any of the foregoing
events, a Change in Control should not occur with respect to
the Executive if, in advance of such event, Executive agrees
in writing that such event shall not constitute a Change in
Control.
(g) "Code" means the United States Internal Revenue
Code of 1986, as amended, and any successors thereto.
(h) "Committee" means the Compensation and Human
Resources Committee of the Board or any other committee
appointed by the Board.
(i) "Company" means The Earthgrains Company, a
Delaware corporation, or any successor thereto as provided
in Article 11 herein.
(j) "Effective Date of Termination" means the date on
which a Qualifying Termination occurs which triggers the
payment of Severance Benefits hereunder.
(k) "Exchange Act" means the United States Securities
Exchange Act of 1934, as amended, and any successors
thereto.
(l) "Good Reason" shall mean, without the Executive's
express written consent, the occurrence of any one or more
of the following:
(i) The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices and
reporting requirements) as an employee of the Company, or a
reduction in the nature or status of the Executive's
authorities, duties, or responsibilities from the greater
of: (a) those in effect on the Effective Date; (b) those in
effect during the
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fiscal year immediately preceding the year of the Change in
Control; or (c) those in effect immediately preceding the
Change in Control;
(ii) The Company's requiring the Executive to
relocate his place of employment to a new location and as a
direct result of such relocation, Executive's one-way
commute from the Executive's primary residence to the
Executive's place of employment would increase by fifty (50)
miles;
(iii) A reduction by the Company in the
Executive's Base Salary as in effect on the Effective Date
or as the same shall be increased from time to time;
(iv) A material reduction in the Executive's
level of participation in any of the Company's short- and/or
long-term incentive compensation plans, or employee benefit
or retirement plans, policies, practices, or arrangements in
which the Executive participates from the greater of the
levels in place on: (a) the Effective Date; (b) the fiscal
year immediately preceding the Change in Control; or (c)
immediately preceding the Change in Control; provided,
however, that reductions in the levels of participation in
any such plans shall not be deemed to be "Good Reason" if
the Executive's reduced level of participation in each such
program remains substantially consistent with the average
level of participation of other executives of the Company
who have positions commensurate with the Executive's
position;
(v) The failure of the Company to obtain a
satisfactory agreement from any successor to the Company to
assume and agree to perform this Agreement, as contemplated
in Article 11 herein; or
(vi) Any termination of Executive's employment by
the Company that is not effected pursuant to a Notice of
Termination;
provided, however, that any action or omission by the
Company after a Merger of Equals that is specified in
clauses (i), (ii), (iii), (iv), and (v) of this subparagraph
and is not intentional or willful shall not constitute Good
Reason unless (x) the Executive shall give the Company a
written notice that identifies such action or omission and
specifically refers to this Paragraph, and (y) the Company
shall fail for any reason to cure such act or omission
within 30 days after the Executive gives the Company such
notice.
The Executive's continued employment shall not constitute a
waiver of the Executive's rights with respect to any
circumstance constituting Good Reason.
(m) "Incumbent Directors" shall mean as of the
effective dates, individuals then serving as members of the
Board who were members of the Board as of the date
immediately preceding such baseline date; provided that any
subsequently-appointed or elected member of the Board whose
election to the Board or nomination for election by the
Company's stockholders was approved by a vote of at least
two-thirds (2/3) 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
approved.
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(n) "Merger of Equals" means, as of any date, a
transaction that, notwithstanding the fact that such
transaction may also qualify as a Change in Control pursuant
to subparagraph 2(f)(ii), satisfies all of the terms and
conditions set forth in (i) and (ii) below:
(i) At least sixty percent (60%), but not more
than seventy percent (70%), of the combined voting power of
the voting securities of the surviving entity outstanding
immediately after the consummation of the transaction shall
be owned, directly or indirectly, by the persons who were
the owners, directly or indirectly, of the voting securities
of the Company immediately before such consummation in
substantially the same proportions as their respective
direct or indirect ownership, immediately before such
consummation, of the voting securities of the Company; and
(ii) Incumbent Directors shall continue to
constitute a majority of the members of the Board of
Directors.
(o) "Notice of Termination" shall mean a written
notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's
employment under the provision so indicated.
(p) "Person" shall have the meaning ascribed to such
term in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a "group" as
provided in Section 13(d).
(q) "Qualifying Termination" means any of the events
described in Paragraph 3.2 herein, the occurrence of which
triggers the payment of Severance Benefits hereunder.
(r) "Severance Benefits" means the payment of
severance compensation as provided in Paragraph 3.3 herein.
(s) "Trust" means the Company grantor trust to be
created pursuant to Article 6 of this Agreement.
Article 3. Severance Benefits
3.1 Right to Severance Benefits. The Executive shall
be entitled to receive from the Company Severance Benefits,
as described in Paragraph 3.3 herein, if there has been a
Qualifying Termination.
The Executive shall not be entitled to receive
Severance Benefits if he is terminated for Cause.
3.2 Qualifying Termination. The occurrence of any one
or more of the following events shall trigger the payment of
Severance Benefits to the Executive under this Agreement:
(a) An involuntary termination of the Executive's
employment by the Company for reasons other than Cause
within twenty-four (24) calendar months following a Change
in Control of the Company pursuant to a Notice of
Termination delivered to the Executive by the Company;
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(b) A voluntary termination by the Executive for
Good Reason within twenty-four (24) calendar months
following a Change in Control of the Company pursuant to a
Notice of Termination delivered to the Company by the
Executive;
(c) A voluntary termination by the Executive for
any reason during the thirty (30) day period beginning on
the first day of the eleventh calendar month after a Change
in Control of the Company pursuant to a Notice of
Termination delivered to the Company by the Executive; or
(d) The Company or any successor company breaches
any of the provisions of this Agreement.
provided, however, that in the event of a Merger of Equals,
a voluntary termination pursuant to subparagraph 3.2(c)
shall not be considered a Qualifying Termination and shall
not trigger the payment of severance benefits to the
Executive under this Agreement.
3.3 Description of Severance Benefits. In the event
the Executive becomes entitled to receive Severance
Benefits, as provided in Paragraphs 3.1 and 3.2 herein, the
Company shall pay to the Executive and provide him with the
following:
(a) An amount equal to three (3) times the
highest rate of the Executive's annualized Base Salary in
effect at any time up to and including the Effective Date of
Termination.
(b) An amount equal to three (3) times the
Executive's highest target annual bonus for any plan year up
to and including the year in which the Executive's Effective
Date of Termination occurs.
(c) An amount equal to the Executive's unpaid
Base Salary, accrued vacation pay, and earned but not taken
vacation pay through the Effective Date of Termination.
(d) An amount equal to the Executive's unpaid
target annual bonus, established for the plan year in which
the Executive's Effective Date of Termination occurs,
multiplied by a fraction, the numerator of which is the
number of days completed in the then-existing fiscal year
through the Effective Date of Termination and the
denominator of which is three hundred sixty-five (365).
(e) A continuation for thirty-six (36) months
after the Effective Date of Termination of the welfare
benefits (including medical, prescription, dental,
disability, salary continuation, individual life, group
life, accidental death, and travel accident insurance plans
and programs) which are at least as favorable as the most
favorable plans and programs as applicable to other peer
executives and their families as of the Effective Date of
Termination, but which are in no event less favorable than
the most favorable plans and programs applicable to other
peer executives and their families during the ninety (90)
day period immediately before the Effective date.
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(f) These benefits shall be provided to the
Executive at the same premium cost, and at the same coverage
level, as in effect as of the Executive's Effective Date of
Termination. However, in the event the premium cost and/or
level of coverage shall change for all employees of the
Company, or for management employees with respect to
supplemental benefits, the cost and/or coverage level,
likewise, shall change for the Executive in a corresponding
manner.
The continuation of these welfare benefits shall be
discontinued prior to the end of the thirty-six (36) month
period in the event the Executive has available
substantially similar benefits at a comparable cost from a
subsequent employer, as determined by the Committee.
In the event the Executive became entitled to receive
Severance Benefits, as provided in Paragraphs 3.1 and 3.2
herein, the Executive shall immediately be fully vested in
all benefits accrued by the Executive under The Earthgrains
Company Supplemental Executive Retirement Plan (the "SERP"),
and successor plans thereto sponsored by the Company. The
aggregate benefits accrued by the Executive as of the
Effective Date of Termination under the The Earthgrains
Company 401(k) Restoration Plan, the SERP, and successor
plans thereto sponsored by the Company shall be paid in cash
to the Executive in a single lump sum as soon as practical
following the Effective Date of Termination. For purposes of
the Company's nonqualified retirement plans, such benefits
shall be calculated under the assumption that the
Executive's employment continued following the Effective
Date of Termination for thirty-six (36) months (i.e., three
(3) additional years of age and service credits shall be
added); provided, however, that for purposes of determining
"final average pay" under such programs, the Executive's
actual pay history as of the Effective Date of Termination
shall be used.
3.4 Notice of Termination. Any termination of
employment by the Company or by the Executive for Good
Reason shall be communicated by a Notice of Termination.
Once a Notice of Termination has been provided, the
Executive's subsequent death or disability shall have no
effect upon such executive's right, or the right of such
executive's estate, to collect the Severance Benefits.
Article 4. Form and Timing of Severance Benefits
4.1 Form and Timing of Severance Benefits. The
Severance Benefits described in Paragraphs 3.3(a), 3.3(b),
3.3(c), and 3.3(d) herein shall be paid in cash to the
Executive in a single lump sum as soon as practicable
following the Effective Date of Termination, but in no event
beyond thirty (30) days from such date.
4.2 Withholding of Taxes. The Company shall be
entitled to withhold from any amounts payable under this
Agreement all taxes as legally shall be required (including,
without limitation, any United States federal taxes and any
other state, city, or local taxes).
Article 5. Excise Tax Equalization Payment
5.1 Excise Tax Equalization Payment. In the event that
the Executive becomes entitled to Severance Benefits or any
other payment or benefit under this Agreement, or under any
other agreement with or plan of the company (in the
aggregate, the "Total Payments"), if all or any part of
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the Total Payments will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code or any similar tax
that may hereafter be imposed ("Section 4999), the Company
shall pay to the Executive in cash an additional amount (the
"Gross-Up Payment") which after deduction of: (i) any Excise
Tax under Section 4999 thereon; (ii) any federal, state, and
local income tax thereon; and (iii) any F.I.C.A tax thereon
shall be equal to the Excise Tax on such Total Payments. The
Gross-Up Payment shall be made by the Company to the
Executive as soon as practical following the Effective Date
of Termination, but in no event beyond thirty (30) days from
such date.
5.2 Tax Computation. For purposes of determining
whether any of the Total Payments will be subject to the
Excise Tax and the amounts of such Excise Tax:
(a) Any other payments or benefits received or to
be received by the Executive in connection with a Change in
Control of the Company or the Executive's termination of
employment (whether pursuant to the terms of this Agreement
or any other plan, arrangement, or agreement with the
Company, or with any Person whose actions result in a Change
in Control of the Company or any Person affiliated with the
Company or such Persons) shall be treated as "parachute
payments" within the meaning of Paragraph 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning
of Paragraph 280G(b)(1) shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel as
supported by the Company's independent auditors and
acceptable to the Executive, such other payments or benefits
(in whole or in part) do not constitute parachute payments,
or unless such excess parachute payments (in whole or in
part) represent reasonable compensation for services
actually rendered within the meaning of Paragraph 280G(b)(4)
of the Code in excess of the base amount within the meaning
of Paragraph 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax;
(b) The amount of the Total Payments which shall
be treated as subject to the Excise Tax shall be equal to
the lesser of: (i) the total amount of the Total Payments;
or (ii) the amount of excess parachute payments within the
meaning of Paragraph 280G(b)(1) (after applying clause (a)
above); and
(c) The value of any noncash benefits or any
deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the
principles of Paragraphs 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment
is to be made, and state and local income taxes at the
highest marginal rate of taxation in the state and locality
of the Executive's residence on the Effective Date of
Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state
and local taxes.
5.3 Subsequent Recalculation. In the event the
Internal Revenue Service adjusts the computation of the
Company under Paragraph 5.2 herein so that the Executive did
not receive the
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greatest net benefit, the Company shall reimburse the
Executive for the full amount necessary to make the
Executive whole, plus a market rate of interest, as
determined by the Committee.
Article 6. Establishment of Trust
As soon as practicable following the Effective Date
hereof, the Company shall create a Trust (which shall be a
grantor trust within the meaning of Paragraphs 671-678 of
the Internal Revenue Code) for the benefit of the Executive
and Beneficiaries, as appropriate. The Trust shall have a
Trustee as selected by the Company, and shall have certain
restrictions as to the Company's ability to amend the Trust
or cancel benefits provided thereunder. Any assets contained
in the Trust shall, at all times, be specifically subject to
the claims of the Company's general creditors in the event
of bankruptcy or insolvency; such terms to be specifically
defined within the provisions of the Trust, along with the
required procedure for notifying the Trustee of any
bankruptcy or insolvency.
At any time following the Effective Date hereof, the
Company may, but is not obligated to, deposit assets in the
Trust in an amount equal to or less than the aggregate
Severance Benefits with may become due to the Executive
under Paragraphs 3.3 and 5.1 of this Agreement.
Upon a Change in Control, the Trust shall become
irrevocable and the Company shall deposit assets in such
Trust in an amount equal to the aggregate Severance Benefits
which may become due to the Executive under Paragraphs 3.3
and 5.1 of this Agreement.
Article 7. Mitigation
The Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or
arrangements made under any provision of this Agreement, and
the obtaining of any such other employment shall in no event
effect any reduction of the Company's obligations to make
the payments and arrangements required to be made under this
Agreement, except to the extent provided in Paragraph 3.3(e)
herein.
Article 8. Confidentiality and Noncompetition
8.1 Confidentiality. During the term of this Agreement
and thereafter in perpetuity, the Employee will not directly
or indirectly divulge or appropriate to his own use, or to
the use of any third party, "trade secrets" (as defined in
Paragraph 8.3), other secret or confidential information,
knowledge or financial information of the Company or any of
the Company's subsidiaries or affiliates (hereinafter, the
Company and its subsidiaries and affiliates shall be
collectively referred to as the "Company Group"), except as
may be in the public domain other than by violation of this
Agreement.
8.2 Noncompetition. From the date hereof until two (2)
years after the termination of his employment hereunder, the
Executive will not (i) directly or indirectly own any equity
or proprietary interest in (except for ownership of shares
in a publicly traded company not exceeding five percent (5%)
of any class of outstanding securities), or be an employee,
agent, director, advisor, or consultant to or for any
corporation (other than the Company Group), business
enterprise or any person engaged anywhere in the United
States of America whether on his own behalf or on behalf of
any person other than the Company Group, in [the
manufacture, procuring, sale, marketing, promotion or
distribution of any product or product lines functioning
competitively with any product or product lines] of the
Company Group during the term of this Agreement, and the
Executive will not assist in, manage or supervise any of the
foregone activities; (ii) undertake any action to induce or
cause any
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customer or client or the Company Group to discontinue any
part of its business with the Company Group; (iii) cause,
induce or in any way facilitate the employment by any other
persons or organization of any employee of or consultant to
the Company Group, provided, that this covenant shall become
operative only upon the termination of the Executive's
employment; or (iv) take or assist directly or indirectly in
the taking, by action as consultant to a third party or
otherwise of any position on any matter involving the
Company and pending before any state or other public agency,
when such position is adverse to the position being promoted
by or such agency at the time by the Company.
8.3 Trade Secrets. "Trade secrets" as used herein
means all secret discoveries, invention, formulae, designs,
methods, processes, techniques of production and know-how
relating to the Company Group's business. "Confidential
Information" as used herein means the Company Group's
internal policies and procedures, suppliers, customers,
financial information and marketing practices, as well as
secret discoveries, inventions, formulae, designs,
techniques of production, know-how and other information
relating to the Company Group's business not rising to the
level of a trade secret under applicable law.
8.4 Breach. The breach by the Employee of any of the
covenant continued in this Article 8 shall rely the company
of all further payment obligation under Paragraph 3.3 and
5.1 of this Agreement.
Article 9. Legal Remedies
9.1 Payment of Legal Fees. To the extent permitted by
law and in the event the Executive prevails in any judicial
and/or arbitration proceeding, the Company shall pay all
legal fees, costs of litigation, prejudgment interest, and
other expenses incurred in good faith by the Executive as a
result of:
(a) The Company's refusal to provide the
Severance Benefits to which the Executive becomes entitled
under this Agreement;
(b) The Company's contesting the validity,
enforceability, or interpretation of this Agreement; or
(c) Conflict (including conflicts related to the
calculation of parachute payments) between the parties
pertaining to this Agreement.
9.2 Arbitration.
(a) Any dispute, controversy, or claim arising
out of or relating to this Agreement and/or any renewals,
extensions, changes, amendments, additions, or modifications
of or to this Agreement, or the breach, termination, or
invalidity of any of the foregoing, shall be finally
resolved by arbitration.
(b) The arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("the Rules") to the extent
that the Rules do not conflict with any provision of this
Paragraph 8.2.
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(c) The arbitration shall be heard and determined
by one arbitrator selected in accordance with the Rules.
(d) The arbitration, including the rendering of
the award, shall take place in the County of St. Louis
County, Missouri.
(e) Any arbitration proceeding shall be conducted
on a confidential basis.
(f) The arbitrator shall interpret this Agreement
and render an award, order, or judgement in accordance with
the substantive laws of the State of Missouri, and if the
arbitrator fails to do so, the arbitrator shall be deemed to
have exceeded his or her powers.
(g) The arbitrator shall decide only those issues
submitted to him or her in the notice and answering
statement (and counterclaim and answering statement hereto,
if any) and any award, order, or judgement, or portion
thereof, which goes beyond the scope of such issues shall be
void and shall be deemed to have been rendered in excess of
the arbitrator's powers.
(h) Any award, order, or judgement shall in
included in a written decision which shall contain detailed
findings of fact and conclusions of law, including, but not
limited to, all the elements involved in the calculation of
any award of damages.
(i) The arbitrator is not authorized to award
punitive or exemplary damages.
(j) All of the reasonable legal fees and expenses
incurred by the Executive and all arbitration costs will be
paid by the Company, unless prohibited by law. The Company
further agrees to pay prejudgement interest on any money
judgement obtained by the Executive calculated at the prime
interest rate reported in The Wall Street Journal in effect
from time to time from the date that payment to the
Executive should have been made under this Agreement.
(k) Any award, order, or judgement made pursuant
to such arbitration shall be deemed final and may be entered
and enforced in any state or federal court of competent
jurisdiction. The parties agree to submit to the
jurisdiction of any such court for purposes of the
enforcement of any such award, order, or judgment.
Article 10. Outplacement Assistance
Following a Qualifying Termination, the Executive shall
be reimbursed by the Company for the costs of all
outplacement services obtained by the Executive within the
two (2) year period after the Effective Date of Termination;
provided, however, that the total reimbursement shall be
limited to an amount equal to the lesser of seventy-five
thousand dollars ($75,000) or fifteen percent (15%) of the
Executive's Base Salary as of the Effective Date of
Termination.
Article 11. Successors and Assignment
11.1 Successors to the Company. The Company will
require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) of all or
substantially all of the business
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and/or assets of the Company or of any division or
subsidiary thereof to expressly assume and agree to perform
the Company's obligations under this Agreement in the same
manner and to the same extent that the Company would be
required to perform them if no such succession had taken
place. The date on which any such succession becomes
effective shall be deemed to be the date of the Change in
Control.
11.2 Assignment by the Executive. This Agreement shall
inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees,
and legatees. If the Executive dies while any amount would
still be payable to him hereunder had he continued to live,
all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the
Executive's Beneficiary. If the Executive has not named a
Beneficiary, then such amounts shall be paid to the
Executive's devisee, legatee, or other designee, or if there
is no such designee, to the Executive's estate.
Article 12. Miscellaneous
12.1 Employment Status. Except as may be provided
under any other agreement between the Executive and the
Company, the employment of the Executive by the Company is
"at will," and may be terminated by either the Executive or
the Company at any time, subject to applicable law.
12.2 Beneficiaries. The Executive may designate one or
more persons or entities as the primary and/or contingent
Beneficiaries of any Severance Benefits owing to the
Executive under this Agreement. Such designation must be in
the form of a signed writing acceptable to the Committee.
The Executive may make or change such designations at any
time.
12.3 Severability. In the event any provision of this
Agreement shall be held illegal or invalid for any reason,
the illegality or invalidity shall not affect the remaining
parts of the Agreement, and the Agreement shall be construed
and enforced as if the illegal or invalid provision had not
been included. Further, the captions of this Agreement are
not part of the provisions hereof and shall have no force
and effect.
12.4 Modification. No provision of this Agreement may
be modified, waived, or discharged unless such modification,
waiver, or discharge is agreed to in writing and signed by
the Executive and by an authorized member of the Committee,
or by the respective parties' legal representatives and
successors.
12.5 Applicable Law. To the extent not preempted by
the laws of the United States, the laws of the state of
Delaware shall be the controlling law in all matters
relating to this Agreement.
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Tier II
Form of
Executive Severance Agreement
for ________________________
Earthgrains Company
<PAGE>
Contents
Article 1. Establishment, Term, and Purpose 1
Article 2. Definitions 2
Article 3. Severance Benefits 5
Article 4. Form and Timing of Severance Benefits 7
Article 5. Excise Tax Equalization Payment 7
Article 6. Establishment of Trust 9
Article 7: Mitigation 9
Article 8. Legal Remedies 9
Article 9. Outplacement Assistance 11
Article 10. Successors and Assignment 11
Article 11. Miscellaneous 11
<PAGE>
The Earthgrains Company
Executive Severance Agreement
THIS AGREEMENT is made and entered into as of the
____day of ____, 1999 (the "Effective Date"), by and between
The Earthgrains Company (hereinafter referred to as the
"Company") and ____________ (hereinafter referred to as the
"Executive").
WHEREAS, the Board of Directors of the Company has
approved the Company entering into severance agreements with
certain key executives of the Company;
WHEREAS, the Executive is a key executive of the
Company;
WHEREAS, should the possibility of a Change in Control
of the Company arise, the Board believes it is imperative
that the Company and the Board should be able to rely upon
the Executive to continue in his position, and that the
Company should be able to receive and rely upon the
Executive's advice, if requested, as to the best interests
of the Company and its shareholders without concern that the
Executive might be distracted by the personal uncertainties
and risks created by the possibility of a Change in Control;
WHEREAS, should the possibility of a Change in Control
arise, in addition to his regular duties, the Executive may
be called upon to assist in the assessment of such possible
Change in Control, advise management and the Board as to
whether such Change in Control would be in the best
interests of the Company and its shareholders, and to take
such other actions as the Board might determine to be
appropriate; and
NOW THEREFORE, to assure the Company that it will have
the continued dedication of the Executive and the
availability of his advice and counsel notwithstanding the
possibility, threat, or occurrence of a Change in Control of
the Company, and to induce the Executive to remain in the
employ of the Company, and for other good and valuable
consideration, the Company and the Executive agree as
follows:
Article 1. Establishment, Term, and Purpose
This Agreement will commence on the Effective Date and
shall continue in effect for three (3) full years. However,
at the end of such three (3) year period and, if extended,
at the end of each additional year thereafter, the term of
this Agreement shall be extended automatically for one (1)
additional year, unless the Committee delivers written
notice six (6) months prior to the end of such term, or
extended term, to the Executive, that the Agreement will not
be extended. In such case, the Agreement will terminate at
the end of the term, or extended term, then in progress.
However, in the event a Change in Control occurs during
the original or any extended term, this Agreement will
remain in effect for the longer of: (i) twenty-four (24)
months beyond the month in which such Change in Control
occurred; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all benefits
required hereunder have been paid to the Executive.
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Article 2. Definitions
Whenever used in this Agreement, the following terms
shall have the meanings set forth below and, when the
meaning is intended, the initial letter of the word is
capitalized.
(a) "Base Salary" means the salary of record paid to
an Executive as annual salary, excluding amounts received
under incentive or other bonus plans, whether or not
deferred.
(b) "Beneficial Owner" shall have the meaning ascribed
to such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act.
(c) "Beneficiary" means the persons or entities
designated or deemed designated by the Executive pursuant to
Paragraph 11.2 herein.
(d) "Board" means the Board of Directors of the
Company.
(e) "Cause" means:
(i) The Executive's willful and continued failure
to substantially perform his duties with the Company (other
than any such failure resulting from disability or occurring
after issuance by the Executive of a Notice of Termination
for Good Reason), after a written demand for substantial
performance is delivered to the Executive that specifically
identifies the manner in which the Company believes that the
Executive has willfully failed to substantially perform his
duties, and after the Executive has failed to resume
substantial performance of his duties on a continuous basis
within thirty (30) calendar days of receiving such demand;
(ii) The Executive's willfully engaging in
conduct (other than conduct covered under (i) above) which
is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of this subparagraph,
no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief
that the action or omission was in the best interests of the
Company; or
(iii) The Executive's having been convicted of a
felony.
(f) "Change in Control" of the Company shall be deemed
to have occurred as of the first day that any one or more of
the following conditions is satisfied:
(i) The "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act) of securities
representing more than thirty percent (30%) of the combined
voting power of the Company is acquired by a Person (other
than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
an affiliate thereof, or any corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
stock of the Company); or
2
<PAGE>
(ii) The stockholders of the Company approve a
definitive agreement to merge or consolidate the Company
with or into another company;
(iii) The stockholders of the Company (a) approve
an agreement for the sale or disposition of all or
substantially all of the Company's assets, or (b) adopt a
plan for liquidation; or
(iv) The Incumbent Directors cease for any reason to
constitute at least a majority of the Board of Directors.
However, in no event shall a Change in Control be deemed to
have occurred, with respect to the Executive, if the
Executive is part of a purchasing group which consummates
the Change-in-Control transaction. The Executive shall be
deemed "part of a purchasing group" for purposes of the
preceding sentence if the Executive is an equity participant
in the purchasing company or group (except for: (a) passive
ownership of less than three percent (3%) of the stock of
the purchasing company; or (b) ownership of equity
participation in the purchasing company or group which is
otherwise not significant, as determined prior to the Change
in Control by a majority of the nonemployee continuing
Directors).
Notwithstanding the occurrence of any of the foregoing
events, a Change in Control should not occur with respect to
the Executive if, in advance of such event, Executive agrees
in writing that such event shall not constitute a Change in
Control.
(g) "Code" means the United States Internal Revenue
Code of 1986, as amended, and any successors thereto.
(h) "Committee" means the Compensation and Human
Resources Committee of the Board or any other committee
appointed by the Board.
(i) "Company" means The Earthgrains Company, a
Delaware corporation, or any successor thereto as provided
in Article 10 herein.
(j) "Effective Date of Termination" means the date on
which a Qualifying Termination occurs which triggers the
payment of Severance Benefits hereunder.
(k) "Exchange Act" means the United States Securities
Exchange Act of 1934, as amended, and any successors
thereto.
(l) "Good Reason" shall mean, without the Executive's
express written consent, the occurrence of any one or more
of the following:
(i) The assignment of the Executive to duties
materially inconsistent with the Executive's authorities,
duties, responsibilities, and status (including offices and
reporting requirements) as an employee of the Company, or a
reduction in the nature or status of the Executive's
authorities, duties, or responsibilities from the greater
of: (a) those in effect on the Effective Date; (b) those in
effect during the
3
<PAGE>
fiscal year immediately preceding the year of the Change in
Control; or (c) those in effect immediately preceding the
Change in Control;
(ii) The Company's requiring the Executive to
relocate his place of employment to a new location and as a
direct result of such relocation, Executive's one-way
commute from the Executive's primary residence to the
Executive's place of employment would increase by fifty (50)
miles;
(iii) A reduction by the Company in the
Executive's Base Salary as in effect on the Effective Date
or as the same shall be increased from time to time;
(iv) A material reduction in the Executive's
level of participation in any of the Company's short-and/or
long-term incentive compensation plans, or employee benefit
or retirement plans, policies, practices, or arrangements in
which the Executive participates from the greater of the
levels in place on: (a) the Effective Date; (b) the fiscal
year immediately preceding the Change in Control; or (c)
immediately preceding the Change in Control; provided,
however, that reductions in the levels of participation in
any such plans shall not be deemed to be "Good Reason" if
the Executive's reduced level of participation in each such
program remains substantially consistent with the average
level of participation of other executives of the Company
who have positions commensurate with the Executive's
position;
(v) The failure of the Company to obtain a
satisfactory agreement from any successor to the Company to
assume and agree to perform this Agreement, as contemplated
in Article 10 herein; or
(vi) Any termination of Executive's employment by
the Company that is not effected pursuant to a Notice of
Termination;
provided, however, that any action or omission by the
Company after a Merger of Equals that is specified in
clauses (i), (ii), (iii), (iv), and (v) of this subparagraph
and is not intentional or willful shall not constitute Good
Reason unless (x) the Executive shall give the Company a
written notice that identifies such action or omission and
specifically refers to this Paragraph, and (y) the Company
shall fail for any reason to cure such act or omission
within 30 days after the Executive gives the Company such
notice.
The Executive's continued employment shall not constitute a
waiver of the Executive's rights with respect to any
circumstance constituting Good Reason.
(m) "Incumbent Directors" shall mean as of the
Effective Date, individuals then serving as members of the
Board who were members of the Board as of the date
immediately preceding such baseline date; provided that any
subsequently-appointed or elected member of the Board whose
election to the Board or nomination for election by the
Company's stockholders was approved by a vote of at least
two-thirds (2/3) 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
approved.
4
<PAGE>
(n) "Merger of Equals" means, as of any date, a
transaction that, notwithstanding the fact that such
transaction may also qualify as a Change in Control pursuant
to subparagraph 2(f)(ii), satisfies all of the terms and
conditions set forth in (i) and (ii) below:
(i) At least sixty percent (60%), but not more
than seventy percent (70%), of the combined voting power of
the voting securities of the surviving entity outstanding
immediately after the consummation of the transaction shall
be owned, directly or indirectly, by the persons who were
the owners, directly or indirectly, of the voting securities
of the Company immediately before such consummation in
substantially the same proportions as their respective
direct or indirect ownership, immediately before such
consummation, of the voting securities of the Company; and
(ii) Incumbent Directors shall continue to
constitute a majority of the members of the Board of
Directors.
(o) "Notice of Termination" shall mean a written
notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's
employment under the provision so indicated.
(p) "Person" shall have the meaning ascribed to such
term in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a "group" as
provided in Section 13(d).
(q) "Qualifying Termination" means any of the events
described in Paragraph 3.2 herein, the occurrence of which
triggers the payment of Severance Benefits hereunder.
(r) "Severance Benefits" means the payment of
severance compensation as provided in Paragraph 3.3 herein.
(s) "Trust" means the Company grantor trust to be
created pursuant to Article 6 of this Agreement.
Article 3. Severance Benefits
3.1 Right to Severance Benefits. The Executive shall
be entitled to receive from the Company Severance Benefits,
as described in Paragraph 3.3 herein, if there has been a
Qualifying Termination.
The Executive shall not be entitled to receive
Severance Benefits if he is terminated for Cause.
3.2 Qualifying Termination. The occurrence of any one
or more of the following events shall trigger the payment of
Severance Benefits to the Executive under this Agreement:
(a) An involuntary termination of the Executive's
employment by the Company for reasons other than Cause
within twenty-four (24) calendar months following a Change
in Control of the Company pursuant to a Notice of
Termination delivered to the Executive by the Company;
5
<PAGE>
(b) A voluntary termination by the Executive for
Good Reason within twenty-four (24) calendar months
following a Change in Control of the Company pursuant to a
Notice of Termination delivered to the Company by the
Executive;
(c) The Company or any successor company breaches
any of the provisions of this Agreement.
3.3 Description of Severance Benefits. In the event
the Executive becomes entitled to receive Severance
Benefits, as provided in Paragraphs 3.1 and 3.2 herein, the
Company shall pay to the Executive and provide him with the
following:
(a) An amount equal to two (2) times the highest
rate of the Executive's annualized Base Salary in effect at
any time up to and including the Effective Date of
Termination.
(b) An amount equal to two (2) times the
Executive's highest target annual bonus for any plan year up
to and including the year in which the Executive's Effective
Date of Termination occurs.
(c) An amount equal to the Executive's unpaid
Base Salary, accrued vacation pay, and earned but not taken
vacation pay through the Effective Date of Termination.
(d) An amount equal to the Executive's unpaid
target annual bonus, established for the plan year in which
the Executive's Effective Date of Termination occurs,
multiplied by a fraction, the numerator of which is the
number of days completed in the then-existing fiscal year
through the Effective Date of Termination and the
denominator of which is three hundred sixty-five (365).
(e) A continuation for twenty-four (24) months
after the Effective Date of Termination of the welfare
benefits (including medical, prescription, dental,
disability, salary continuation, individual life, group
life, accidental death, and travel accident insurance plans
and programs) which are at least as favorable as the most
favorable plans and programs as applicable to other peer
executives and their families as of the Effective Date of
Termination, but which are in no event less favorable than
the most favorable plans and programs applicable to other
peer executives and their families during the ninety (90)
day period immediately before the Effective date.
These benefits shall be provided to the Executive at the
same premium cost, and at the same coverage level, as in
effect as of the Executive's Effective Date of Termination.
However, in the event the premium cost and/or level of
coverage shall change for all employees of the Company, or
for management employees with respect to supplemental
benefits, the cost and/or coverage level, likewise, shall
change for the Executive in a corresponding manner.
6
<PAGE>
(f) The continuation of these welfare benefits
shall be discontinued prior to the end of the twenty-four
(24) month period in the event the Executive has available
substantially similar benefits at a comparable cost from a
subsequent employer, as determined by the Committee.
In the event the Executive became entitled to receive
Severance Benefits, as provided in Paragraphs 3.1 and 3.2
herein, the Executive shall immediately be fully vested in
all benefits accrued by the Executive under The Earthgrains
Company Supplemental Executive Retirement Plan (the "SERP"),
and successor plans thereto sponsored by the Company. The
aggregate benefits accrued by the Executive as of the
Effective Date of Termination under the The Earthgrains
Company 401(k) Restoration Plan, the SERP, and successor
plans thereto sponsored by the Company shall be paid in cash
to the Executive in a single lump sum as soon as practical
following the Effective Date of Termination. For purposes of
the Company's nonqualified retirement plans, such benefits
shall be calculated under the assumption that the
Executive's employment continued following the Effective
Date of Termination for twenty-four (24) months (i.e., two
(2) additional years of age and service credits shall be
added); provided, however, that for purposes of determining
"final average pay" under such programs, the Executive's
actual pay history as of the Effective Date of Termination
shall be used.
3.4 Notice of Termination. Any termination of
employment by the Company or by the Executive for Good
Reason shall be communicated by a Notice of Termination.
Once a Notice of Termination has been provided, the
Executive's subsequent death or diability shall have no
effect upon such executive's right or the right of such
executive's estate, to collect the Severance Benefits.
Article 4. Form and Timing of Severance Benefits
4.1 Form and Timing of Severance Benefits. The
Severance Benefits described in Paragraphs 3.3(a), 3.3(b),
3.3(c), and 3.3(d) herein shall be paid in cash to the
Executive in a single lump sum as soon as practicable
following the Effective Date of Termination, but in no event
beyond thirty (30) days from such date.
4.2 Withholding of Taxes. The Company shall be
entitled to withhold from any amounts payable under this
Agreement all taxes as legally shall be required (including,
without limitation, any United States federal taxes and any
other state, city, or local taxes).
Article 5. Excise Tax Equalization Payment
5.1 Excise Tax Equalization Payment. In the event that
the Executive becomes entitled to Severance Benefits or any
other payment or benefit under this Agreement, or under any
other agreement with or plan of the company (in the
aggregate, the "Total Payments"), if all or any part of the
Total Payments will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Code or any similar tax that
may hereafter be imposed ("Section 4999), the Company shall
pay to the Executive in cash an additional amount (the
"Gross-Up Payment") which after deduction of: (i) any Excise
Tax under Section 4999 thereon; (ii) any federal, state, and
local income tax thereon; and (iii) any F.I.C.A tax thereon
shall be equal to the Excise Tax on such Total Payments. The
Gross-Up Payment shall be made by the Company to the
Executive as soon as practical following the Effective Date
of Termination, but in no event beyond thirty (30) days from
such date.
7
<PAGE>
5.2 Tax Computation. For purposes of determining
whether any of the Total Payments will be subject to the
Excise Tax and the amounts of such Excise Tax:
(a)Any other payments or benefits received or to
be received by the Executive in connection with a Change in
Control of the Company or the Executive's termination of
employment (whether pursuant to the terms of this Agreement
or any other plan, arrangement, or agreement with the
Company, or with any Person whose actions result in a Change
in Control of the Company or any Person affiliated with the
Company or such Persons) shall be treated as "parachute
payments" within the meaning of Paragraph 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning
of Paragraph 280G(b)(1) shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel as
supported by the Company's independent auditors and
acceptable to the Executive, such other payments or benefits
(in whole or in part) do not constitute parachute payments,
or unless such excess parachute payments (in whole or in
part) represent reasonable compensation for services
actually rendered within the meaning of Paragraph 280G(b)(4)
of the Code in excess of the base amount within the meaning
of Paragraph 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax;
(b) The amount of the Total Payments which shall
be treated as subject to the Excise Tax shall be equal to
the lesser of: (i) the total amount of the Total Payments;
or (ii) the amount of excess parachute payments within the
meaning of Paragraph 280G(b)(1) (after applying clause (a)
above); and
(c) The value of any noncash benefits or any
deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the
principles of Paragraphs 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment
is to be made, and state and local income taxes at the
highest marginal rate of taxation in the state and locality
of the Executive's residence on the Effective Date of
Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state
and local taxes.
5.3 Subsequent Recalculation. In the event the
Internal Revenue Service adjusts the computation of the
Company under Paragraph 5.2 herein so that the Executive did
not receive the greatest net benefit, the Company shall
reimburse the Executive for the full amount necessary to
make the Executive whole, plus a market rate of interest, as
determined by the Committee.
8
<PAGE>
Article 6. Establishment of Trust
As soon as practicable following the Effective Date
hereof, the Company shall create a Trust (which shall be a
grantor trust within the meaning of Paragraphs 671-678 of
the Internal Revenue Code) for the benefit of the Executive
and Beneficiaries, as appropriate. The Trust shall have a
Trustee as selected by the Company, and shall have certain
restrictions as to the Company's ability to amend the Trust
or cancel benefits provided thereunder. Any assets contained
in the Trust shall, at all times, be specifically subject to
the claims of the Company's general creditors in the event
of bankruptcy or insolvency; such terms to be specifically
defined within the provisions of the Trust, along with the
required procedure for notifying the Trustee of any
bankruptcy or insolvency.
At any time following the Effective Date hereof, the
Company may, but is not obligated to, deposit assets in the
Trust in an amount equal to or less than the aggregate
Severance Benefits with may become due to the Executive
under Paragraphs 3.3 and 5.1 of this Agreement.
Upon a Change in Control, the Trust shall become
irrevocable and the Company shall deposit assets in such
Trust in an amount equal to the aggregate Severance Benefits
which may become due to the Executive under Paragraphs 3.3
and 5.1 of this Agreement.
Article 7. Mitigation
The Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or
arrangements made under any provision of this Agreement, and
the obtaining of any such other employment shall in no event
effect any reduction of the Company's obligations to make
the payments and arrangements required to be made under this
Agreement, except to the extent provided in Paragraph 3.3(e)
herein.
Article 8. Legal Remedies
8.1 Payment of Legal Fees. To the extent permitted by
law and in the event the Executive prevails in any judicial
and/or arbitration proceeding, the Company shall pay all
legal fees, costs of litigation, prejudgment interest, and
other expenses incurred in good faith by the Executive as a
result of:
(a) The Company's refusal to provide the
Severance Benefits to which the Executive becomes entitled
under this Agreement;
(b) The Company's contesting the validity,
enforceability, or interpretation of this Agreement; or
(c) Conflict (including conflicts related to the
calculation of parachute payments) between the parties
pertaining to this Agreement.
9
<PAGE>
8.2 Arbitration.
(a) Any dispute, controversy, or claim arising
out of or relating to this Agreement and/or any renewals,
extensions, changes, amendments, additions, or modifications
of or to this Agreement, or the breach, termination, or
invalidity of any of the foregoing, shall be finally
resolved by arbitration.
(b) The arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("the Rules") to the extent
that the Rules do not conflict with any provision of this
Paragraph 8.2.
(c) The arbitration shall be heard and determined
by one arbitrator selected in accordance with the Rules.
(d) The arbitration, including the rendering of
the award, shall take place in the County of St. Louis
County, Missouri.
(e) Any arbitration proceeding shall be conducted
on a confidential basis.
(f) The arbitrator shall interpret this Agreement
and render an award, order, or judgement in accordance with
the substantive laws of the State of Missouri, and if the
arbitrator fails to do so, the arbitrator shall be deemed to
have exceeded his or her powers.
(g) The arbitrator shall decide only those issues
submitted to him or her in the notice and answering
statement (and counterclaim and answering statement hereto,
if any) and any award, order, or judgement, or portion
thereof, which goes beyond the scope of such issues shall be
void and shall be deemed to have been rendered in excess of
the arbitrator's powers.
(h) Any award, order, or judgement shall in
included in a written decision which shall contain detailed
findings of fact and conclusions of law, including, but not
limited to, all the elements involved in the calculation of
any award of damages.
(i) The arbitrator is not authorized to award
punitive or exemplary damages.
(j) All of the reasonable legal fees and expenses
incurred by the Executive and all arbitration costs will be
paid by the Company, unless prohibited by law. The Company
further agrees to pay prejudgement interest on any money
judgement obtained by the Executive calculated at the prime
interest rate reported in The Wall Street Journal in effect
from time to time from the date that payment to the
Executive should have been made under this Agreement.
(k) Any award, order, or judgement made pursuant
to such arbitration shall be deemed final and may be entered
and enforced in any state or federal court of competent
jurisdiction. The parties agree to submit to the
jurisdiction of any such court for purposes of the
enforcement of any such award, order, or judgment.
10
<PAGE>
Article 9. Outplacement Assistance
Following a Qualifying Termination, the Executive shall
be reimbursed by the Company for the costs of all
outplacement services obtained by the Executive within the
two (2) year period after the Effective Date of Termination;
provided, however, that the total reimbursement shall be
limited to an amount equal to the lesser of fifty thousand
dollars ($50,000) or fifteen percent (15%) of the
Executive's Base Salary as of the Effective Date of
Termination.
Article 10. Successors and Assignment
10.1 Successors to the Company. The Company will
require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) of all or
substantially all of the business and/or assets of the
Company or of any division or subsidiary thereof to
expressly assume and agree to perform the Company's
obligations under this Agreement in the same manner and to
the same extent that the Company would be required to
perform them if no such succession had taken place. The date
on which any such succession becomes effective shall be
deemed to be the date of the Change in Control.
10.2 Assignment by the Executive. This Agreement shall
inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees,
and legatees. If the Executive dies while any amount would
still be payable to him hereunder had he continued to live,
all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the
Executive's Beneficiary. If the Executive has not named a
Beneficiary, then such amounts shall be paid to the
Executive's devisee, legatee, or other designee, or if there
is no such designee, to the Executive's estate.
Article 11. Miscellaneous
11.1 Employment Status. Except as may be provided
under any other agreement between the Executive and the
Company, the employment of the Executive by the Company is
"at will," and may be terminated by either the Executive or
the Company at any time, subject to applicable law.
11.2 Beneficiaries. The Executive may designate one or
more persons or entities as the primary and/or contingent
Beneficiaries of any Severance Benefits owing to the
Executive under this Agreement. Such designation must be in
the form of a signed writing acceptable to the Committee.
The Executive may make or change such designations at any
time.
11.3 Severability. In the event any provision of this
Agreement shall be held illegal or invalid for any reason,
the illegality or invalidity shall not affect the remaining
parts of the Agreement, and the Agreement shall be construed
and enforced as if the illegal or invalid provision had not
been included. Further, the captions of this Agreement are
not part of the provisions hereof and shall have no force
and effect.
11.4 Modification. No provision of this Agreement may
be modified, waived, or discharged unless such modification,
waiver, or discharge is agreed to in writing and signed by
the Executive and by an authorized member of the Committee,
or by the respective parties' legal representatives and
successors.
11
<PAGE>
11.5 Applicable Law. To the extent not preempted by
the laws of the United States, the laws of the state of
Delaware shall be the controlling law in all matters
relating to this Agreement.
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Company's
consolidated financial statements for the forty weeks ended January 4,
2000 included in this report on Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000 <F1>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-30-1999
<PERIOD-START> MAR-31-1999
<PERIOD-END> JAN-04-2000
<CASH> 28,800
<SECURITIES> 0
<RECEIVABLES> 243,100
<ALLOWANCES> 5,500
<INVENTORY> 78,600
<CURRENT-ASSETS> 422,400
<PP&E> 1,450,200
<DEPRECIATION> 704,300
<TOTAL-ASSETS> 1,635,200
<CURRENT-LIABILITIES> 296,500
<BONDS> 151,500
0
0
<COMMON> 400
<OTHER-SE> 656,500
<TOTAL-LIABILITY-AND-EQUITY> 1,635,200
<SALES> 1,561,800
<TOTAL-REVENUES> 1,561,800
<CGS> 864,000
<TOTAL-COSTS> 864,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,700
<INTEREST-EXPENSE> 18,900
<INCOME-PRETAX> 75,800
<INCOME-TAX> 28,400
<INCOME-CONTINUING> 46,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,900
<EPS-BASIC> 1.16
<EPS-DILUTED> 1.12
<FN>
<F1>Footnote to electronic filing only: as presented,
data is rounded to the nearest $100 except for per
share data.
</FN>
</TABLE>
