<PAGE>
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 Prospectus Statement
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Interstate Bakeries Corporation
..............................................................................
(Name of Registrant as Specified in its Charter)
Interstate Bakeries Corporation
..............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:*
......................................................................
4) Proposed maximum aggregate value of transaction:
......................................................................
*Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / 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>
INTERSTATE BAKERIES CORPORATION
12 East Armour Boulevard
Kansas City, Missouri 64111
(816) 561-6600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 21, 1994
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Interstate Bakeries Corporation (the
"Company") will be held on September 21, 1994, at 10:00 a.m., at the Waddell &
Reed Auditorium, 6300 Lamar, Shawnee Mission, Kansas 66202, for the following
purposes:
1. To elect two Class I Directors to serve a term of three years and
until their successors shall be elected and qualified.
2. To approve amendment of the Company's 1991 Stock Option Plan.
3. To ratify the appointment of Deloitte & Touche as the independent
auditors of the books and accounts of the Company for the fiscal year
ending June 3, 1995.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on August 8, 1994, are
entitled to notice of and to vote at the meeting or any adjournment thereof.
All stockholders are cordially invited to attend the meeting. Whether or not
you expect to attend the meeting, please complete, date, sign and return the
enclosed proxy as promptly as possible in order to ensure your representation
at the meeting. A postage-prepaid envelope is enclosed for that purpose. The
prompt return of proxies will assure a quorum and save the Company the expense
of further solicitation. If you attend the meeting, you may vote personally
on all matters, and in that event, the proxy will not be voted.
By Order of the Board of Directors
/s/ Ray Sandy Sutton
Ray Sandy Sutton
Corporate Secretary
August 18, 1994
<PAGE>
INTERSTATE BAKERIES CORPORATION
_________________
PROXY STATEMENT
_________________
This Proxy Statement, which is being mailed to stockholders on August 18,
1994, is furnished in connection with the solicitation by the Board of
Directors of Interstate Bakeries Corporation (the "Company") of proxies to be
voted at the Annual Meeting of Stockholders (the "Meeting") to be held on
September 21, 1994, commencing at 10:00 a.m. at the Waddell & Reed Auditorium,
6300 Lamar, Shawnee Mission, Kansas 66202. Proxies will be voted for the
items listed in the accompanying notice. A stockholder may revoke his or her
proxy by delivering a written notice to the Corporate Secretary of the Company
at any time prior to the voting or by attending the Meeting and voting the
shares in person.
The Company will bear the entire cost of solicitation of proxies in the
enclosed form, including preparation, assembly, printing and mailing of this
Proxy Statement, the proxy card and any additional information furnished to
stockholders. Original solicitation of proxies by mail may be supplemented by
telephone, telegraph or personal solicitation by directors, officers or other
regular employees of the Company. No additional compensation will be paid to
directors, officers or other regular employees of the Company for such
services.
The Board of Directors has fixed the close of business on August 8, 1994, as
the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting or any adjournment thereof, and only stockholders
of record at the close of business on that date will be entitled to vote. On
August 8, 1994, the Company had outstanding 19,640,563 shares of common stock,
$.01 par value (the "Common Stock"), entitled to one vote per share. A vote
of a plurality of all shares of Common Stock present in person or by proxy at
the Meeting is necessary for the election of directors and the ratification
of the appointment of the independent auditors. A vote of a majority of all
shares of Common Stock present in person or by proxy is necessary to approve
amendment of the 1991 Stock Option Plan. Votes submitted as abstentions on
any matter to be voted on at the Meeting will be counted as votes against such
matter. Broker non-votes will effectively be votes against the approval of the
amendment of the Company's 1991 Stock Option Plan, but will not count for or
against the election of directors or the ratification of the appointment of
the independent auditors.
The Company's Annual Report on Form 10-K, including the financial statements
and the financial statement schedules, as filed with the Securities and
Exchange Commission for the fiscal year ended May 28, 1994, will be mailed,
upon request, free of charge, to all persons who are record or beneficial
holders of the Common Stock as of August 8, 1994. To obtain a copy of such
report, written request should be made to the Company (Attention: Mr. Ray
Sandy Sutton, Corporate Secretary) at 12 East Armour Boulevard, Kansas City,
Missouri 64111.
1
<PAGE>
SECURITY OWNERSHIP
Principal Stockholders
The following table sets forth information as of August 1, 1994, regarding the
ownership of the Company's Common Stock by each person known to the Company to
be the beneficial owner of more than 5% of the Company's Common Stock.
Amount
Beneficially Percentage
Name and Address Owned Held
- ---------------- ------------ ----------
Harris Associates L.P. 2,466,575 12.56%
2 N. LaSalle - Suite 500
Chicago, IL 60602
Metropolitan Life Insurance Company 2,412,530 12.28%
Mezzanine Investment Limited
Partnership 8
1 Madison Avenue (10th Floor)
New York, NY 10010
Ark Asset Management Co., Inc. 2,028,100 10.33%
One New York Plaza
New York, NY 10004
Wellington Management 2,018,000 10.27%
75 State Street
Boston, MA 02109
Sound Shore Management, Inc. 1,746,100 8.89%
8 Sound Shore Drive
Greenwich, CT 06836
Common Stock Owned by Management
The number of shares of Common Stock of the Company beneficially owned as of
August 1, 1994, by the Directors, the Named Executive Officers (as defined
below) and all Directors and Executive Officers as a group are set forth
below:
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership Percentage Held
- ------------------------ -------------------- ---------------
Charles A. Sullivan 358,978 (1) 1.82%
G. Kenneth Baum 205,206 (2) 1.04%
Leo Benatar 3,000 *
E. Garrett Bewkes, Jr. 1,000 *
Philip Briggs 1,000 *
Robert B. Calhoun, Jr. 1,366 *
Frank E. Horton 1,100 *
Ray Sandy Sutton 39,711 (1) *
H. L. Shetler 61,731 (1) *
Robert P. Morgan 37,457 (1) *
Paul E. Yarick 38,694 (1) *
All Directors and Executive
Officers as a Group
(14 persons) 834,166 (1) 4.18%
- ---------------------------
*Less than 1%
(1) Of the shares indicated, 125,000 (Mr. Sullivan), 35,000 (Mr. Sutton),
43,849 (Mr. Shetler), 30,000 (Mr. Morgan), 33,291 (Mr. Yarick) and 332,019
(all Directors and Executive Officers as a group), are attributable to
currently exercisable employee stock options.
(2) Mr. Baum is a director and Chairman of the Board of George K. Baum Group,
Inc. Mr. Baum is the majority stockholder of George K. Baum Group, Inc. Of
the 205,206 shares indicated, 152,879 of
2
<PAGE>
such shares are held by George K.
Baum Group, Inc. Mr. Baum may be deemed to beneficially own all 152,879
shares of Common Stock held by George K. Baum Group, Inc.
Based on its review of copies of Forms 3, 4 and 5 received by it, the Company
believes that these forms were timely filed pursuant to Section 16 of the
Securities Exchange Act of 1934 with the exception of one Form 4 filed by Mr.
Shetler.
EXECUTIVE OFFICERS
Set forth below is the name, age and present principal occupation or
employment and five year employment history of each executive officer of the
Company. The executive officers of the Company serve at the pleasure of the
Board of Directors. The business address of each person listed below is 12
East Armour Boulevard, Kansas City, Missouri 64111. None of the executive
officers is related to any other director or executive officer by blood,
marriage or adoption, and each is a citizen of the United States.
Present Principal Occupation or Employment
Name and Age and Five Year Employment History
- ------------ ------------------------------------------
Charles A. Sullivan, 59 Chairman of the Board of the Company since
May 1991, President and Chief Executive
Officer of the Company and Interstate Brands
Corporation ("Brands") for more than two
years prior thereto, director of the Company
since August 1989.
Ray Sandy Sutton, 56 Vice President, Corporate Secretary and
General Counsel of the Company and Brands for
more than the past five years.
H.L. Shetler, 61 Executive Vice President - Bread Division of
Brands for more than the past five years.
Robert P. Morgan, 38 Executive Vice President - Cake Division of
Brands since February 1992; Vice President of
Sales - Cake Division of Brands for more than
three years prior thereto.
Eugene J. Blum, 53 Vice President - Purchasing of Brands since
March 1992; Director of Purchasing of Best
Foods Baking Group (a division of CPC
International) for more than three years
prior thereto.
Mark D. Dirkes, 46 Vice President - Corporate Marketing of
Brands for more than the past five years.
John F. McKenny, 44 Vice President and Corporate Controller of
the Company and Brands for more than the
past five years.
Paul E. Yarick, 55 Vice President and Treasurer of the Company
and Brands for more than the past five years.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes: Class I,
Class II and Class III. Directors in each such class are elected for three
year terms, with each class standing for election in a different year. At the
Meeting, two Class I Directors will be elected to serve until the third
succeeding Annual Meeting of the stockholders of the Company. Proxies may not
be voted for more than two persons in the election of Class I Directors at the
Meeting. Leo Benatar and Charles A. Sullivan, the current Class I Directors
of the Company, have been nominated for re-election. The following table sets
forth certain information with respect to the two nominees, the Class II
Directors (whose terms expire in 1995) and the Class III Directors (whose
terms expire in 1996). None of the directors is related to any other director
or executive officer by blood, marriage or adoption, and each is a citizen of
the United States.
3
<PAGE>
Name and Age Information About Directors
- ------------ ---------------------------
Class I Directors
- -----------------
Leo Benatar, 64 Chairman of the Board and President of Engraph,
Inc. (a subsidiary of Sonoco Products Company
since October 1993) for more than the past five
years; Chairman and director of Federal Reserve
Bank of Atlanta; director of Riverwood
International Corp., Mohawk, Inc. and Sonoco
Products Company. Mr. Benatar became a director
of the Company in August 1991.
Charles A. Sullivan, 59 Chairman of the Company since May 1991, President
and Chief Executive Officer of the Company and
Brands for more than two years prior thereto;
director of United Missouri Bank, n.a., and
Sealright Co., Inc. Mr. Sullivan became a
director of the Company in August 1989.
Class II Directors (Term expires in 1995)
- -----------------------------------------
Philip Briggs, 66 Chairman of the Board of Empire Blue Cross Blue
Shield since July 1993; Chairman of the Board and
Chief Executive Officer of Empire Blue Cross Blue
Shield from July 1993 to August 1993; formerly
Vice-Chairman and director of Metropolitan Life
Insurance Company for more than four years prior
thereto; director of Trizec Corporation.
Mr. Briggs became a director of the Company in
August 1991.
Robert B. Calhoun, Jr., 51 President of Clipper Capital Corporation since
January 1994; Chief Executive Officer of the
Clipper Group, L.P., from January 1991 to
December 1993; Managing Director of the First
Boston Corporation for more than two years prior
thereto; director of American Medical Holdings,
Inc. Mr. Calhoun became a director of the
Company in May 1991.
Frank E. Horton, 55 President, University of Toledo for more than
the past five years; member of the Advisory Board
of Northwest Ohio Society Bank & Trust. Dr.
Horton became a director of the Company in
September 1992.
Class III Directors (Term expires in 1996)
- ------------------------------------------
G. Kenneth Baum, 64 Chairman of the Board of George K. Baum Group,
Inc., an investment company, from May 1994 to
present; Chairman of the Board of George K. Baum
& Company from 1982 until May 1994; director of
H & R Block, Inc., Sealright Co., Inc. and Unitog
Company. Mr. Baum became a director of the
Company in April 1988.
E. Garrett Bewkes, Jr., 67 Consultant and Chairman of a number of
PaineWebber mutual funds for more than the past
five years; director of PaineWebber Group, Inc.
Mr. Bewkes became a director of the Company in
August 1991.
During the 1994 fiscal year, the Board of Directors held five meetings. All
directors attended more than 75% of Board of Directors' meetings with the
exception of Mr. Baum who was unable to attend two meetings.
Committees of the Board
The Board of Directors has appointed an Audit Committee and a Compensation and
Stock Option Committee (the "Compensation Committee") to assist in handling
the various functions of the Board.
The Audit Committee members are Leo Benatar, Philip Briggs and E. Garrett
Bewkes, Jr. Mr. Benatar serves as Chairman of the Audit Committee. The Audit
Committee recommends to the full Board of Directors the engagement of
independent auditors, reviews with the auditors the scope and results of the
audit, reviews with the Company's internal auditors the scope and results of
the Company's internal audit procedures, reviews the independence of the
auditors and non-audit services provided by the auditors, considers the range
of audit and non-audit fees, reviews with the Company's independent auditors
and management the effectiveness of the Company's system of internal
accounting controls and makes inquiries into other matters within the scope
of its duties. The Audit Committee held two meetings during the 1994 fiscal
year. All members of the Audit Committee attended the
4
<PAGE>
meetings with the exception of Mr. Briggs who was unable to attend one meeting.
The Compensation Committee members are E. Garrett Bewkes, Jr., G. Kenneth Baum
and Frank E. Horton. Mr. Bewkes serves as Chairman of the Compensation
Committee. The Compensation Committee recommends to the full Board of
Directors remuneration arrangements for senior management and directors, and
determines the number and terms of options (the "Stock Options") granted
under the Company's 1991 Stock Option Plan. The Compensation Committee held
two meetings during the 1994 fiscal year. All members of the Compensation
Committee attended the meetings with the exception of Mr. Baum who was unable
to attend one meeting.
Directors' Compensation
Directors who are not salaried employees of, or consultants to, the Company
are entitled to an annual retainer of $18,000 plus $2,000 for each Board
Meeting attended. In addition, directors who are members of committees of the
Board of Directors and who are not salaried employees of, or consultants to,
the Company are entitled to receive $750 for each committee meeting attended
that is not conducted on the same day as a meeting of the full Board of
Directors and $500 for each committee meeting attended that is conducted on
the same day as a meeting of the full Board of Directors.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee was an officer, employee or a former
officer or employee of the Company or any of its subsidiaries during the last
fiscal year.
COMMON STOCK PERFORMANCE
The graph set forth below compares the yearly percentage change in cumulative
stockholder return of the Company's Common Stock since July 24, 1991 (the date
the Company completed its initial public offering of Common Stock) against the
cumulative return of the Standard and Poor's Composite 500 Stock Index ("S&P
500") and the Standard and Poor's Food Index ("S&P Food Index") covering the
same time period. The graph is based on $100 invested on July 24, 1991, in
the Company's Common Stock, the S&P 500 and the S&P Food Index, each assuming
dividend reinvestment. The historical stock price performance shown on this
graph is not necessarily indicative of future performance.
PERFORMANCE GRAPH
7/24/91 5/30/92 5/29/93 5/28/94
------- ------- ------- -------
Interstate Bakeries 100.00 95.59 111.09 81.30
S & P 500 Index 100.00 109.54 122.26 127.46
S & P Food Index 100.00 101.67 106.61 105.90
5
<PAGE>
EXECUTIVE COMPENSATION
The Compensation Committee consists of three outside directors. The
Compensation Committee recommends to the full Board of Directors the
compensation of the Chief Executive Officer. The Compensation Committee
approves and monitors compensation guidelines for the Company's other
executive officers as recommended by the Chief Executive Officer. The
Compensation Committee's report for fiscal 1994 is set forth below.
Compensation Committee Report
The Compensation Committee believes that it is in the best interest of the
stockholders for the Company to attract, maintain and motivate top quality
management personnel, especially its executive officers, by offering a
competitive compensation package that maintains an appropriate relationship
between executive pay and the creation of stockholder value. The general
philosophy of the Compensation Committee is to integrate (i) reasonable levels
of annual base salary, (ii) annual incentive bonus awards based upon
achievement of short-term corporate and individual performance goals, such
that executive compensation levels will be higher in years in which
performance goals are achieved or exceeded and (iii) stock option grants, to
ensure that management has a continuing stake in the long-term success of the
Company in return of value to its stockholders.
The Compensation Committee recognizes that it must retain base salary levels
commensurate with other comparable companies in the food industry with whom
the Company competes for management personnel (the "Comparable Companies").
However, the Compensation Committee believes that the compensation program for
its executive officers and key management personnel should be primarily based
upon performance. Therefore, base salaries for executive officers and other
key management personnel are maintained at a level slightly below the mid-
range level of such base salaries at the Comparable Companies. The
Compensation Committee utilizes external salary surveys to establish base
salaries in reference to the Comparable Companies. In addition to the
external salary surveys, the individual executive's level of responsibility,
prior experience, breadth of knowledge and overall skills are factors
considered by the Compensation Committee in recommending base salaries for
each individual executive officer or key manager. Base salaries are adjusted
annually to reflect the operating performance of the Company for the preceding
fiscal year and average increases among the Comparable Companies. Additional
adjustments to reflect changes in the market or in individual responsibilities
may be appropriate from time to time.
All executive officers and key management personnel of the Company are
eligible to receive cash incentive bonuses under the Company's Incentive
Compensation Plan. Incentive bonus awards are based upon the Company
achieving certain operating cash flow objectives. The Chief Executive Officer
submits proposed minimum, target and maximum operating cash flow objectives to
the Board of Directors for approval. Annual incentive bonus payments are
calculated based on a formula which compares the Company's actual operating
cash flow levels achieved to the objectives approved by the Board of
Directors. Payments range from zero to 200% of target bonus amounts for the
Chief Executive Officer and the divisional and corporate officers and zero to
150% for bakery management.
Awards of Stock Options comprise the third element of the compensation program
for executive officers and key management personnel. The Compensation
Committee believes the Company's executive officers and key management
personnel should have a stake in the Company's ongoing success through stock
ownership.
The value of the Stock Options is related directly to the market price of the
Common Stock and thus to the long-term performance of the Company. The
exercise price (the "Exercise Price") of Stock Options granted to employees is
the fair market value of the Common Stock on the date of grant. The
Compensation Committee has complete discretion to select the optionees and to
establish the terms and conditions of each option, subject in all cases to the
provisions of the Company's 1991 Stock Option Plan. The 1991 Stock Option
Plan is designed to reward the executives for long-term results. The
executives' potential to receive value from Stock Options will occur only if
the Company's stock price increases above the Exercise Price. The number of
Stock Options granted to any individual executive is generally based upon that
executive's level of responsibility.
6
<PAGE>
The Compensation Committee utilizes the same factors and criteria to recommend
the compensation for the Chief Executive Officer as it does for all executives
of the Company. Mr. Sullivan's minimum base salary of $400,000 is established
under the terms of an Employment Agreement (the "Employment Agreement") with
the Company, but the Board of Directors has discretion to set his base salary
at an amount greater than the minimum. Although the Compensation Committee
does specifically discuss the Chief Executive Officer's contributions toward
achieving the overall Company performance results, there are no unique
criteria applied to the compensation of the Chief Executive Officer that are
not also applied to other key executives and managers of the Company.
Mr. Sullivan's fiscal 1994 compensation was determined in accordance with the
Company's compensation policy which provides that executive compensation
levels will be higher in years in which performance goals are achieved or
exceeded. Incentive compensation is based on operating cash flow objectives
defined with minimum, target and maximum operating cash flow goals. Fiscal
1994 operating cash flow results were not within the range of goals,
therefore, Mr. Sullivan was not eligible for an incentive bonus for fiscal
1994.
New Section 162 (m) of the Internal Revenue Code of 1986 imposes a $1 million
cap on the deductibility of compensation to certain executive officers of
public companies. The Compensation Committee is studying the cap and intends
to take the necessary steps to conform the compensation policies of the
Company to comply.
Compensation Committee
E. Garrett Bewkes, Jr., Chairman
G. Kenneth Baum
Frank E. Horton
Summary Compensation Table
The following table sets forth information concerning compensation received by
(i) the Chief Executive Officer of the Company as of May 28, 1994 and (ii) the
four other most highly compensated executive officers of the Company as of May
28, 1994, whose annual compensation exceeded $100,000 for the fiscal year
ended May 28, 1994 ((i) and (ii) collectively the "Named Executive Officers").
The Company does not currently award stock appreciation rights, restricted
stock or other long-term incentive compensation (other than Stock Options)
under its executive compensation program.
Long-Term All Other
Compensation Compensation
Name and Principal Fiscal ------------ ------------
Position Year Salary $ Bonus $ Options (#) ($) (1)
- ------------------ ------ -------- ------- ------------ ------------
Charles A. Sullivan (2) 1994 400,000 0 40,000 14,501
Chairman of the Board, 1993 400,000 180,190 25,000 30,000
President and Chief 1992 353,846 291,696 100,000
Executive Officer
Ray Sandy Sutton 1994 132,042 0 5,000 10,563
Vice President, 1993 128,000 56,757 5,000 13,857
Corporate Secretary 1992 122,235 91,880 25,000
and General Counsel
H. L. Shetler 1994 134,415 31,184 20,000 12,007
Executive Vice President 1993 130,000 111,836 5,000 18,138
Bread Division 1992 122,389 110,434 25,000
Robert P. Morgan 1994 113,911 0 17,500 9,113
Executive Vice President 1993 110,000 37,696 5,000 11,077
Cake Division 1992 83,380 41,201 25,000
Paul E. Yarick 1994 103,158 0 5,000 8,253
Vice President and 1993 100,000 33,179 3,750 9,988
Treasurer 1992 95,154 46,019 18,750
(1) The amounts represent contributions by the Company to the Company's
Retirement Income Plan for the benefit of each executive. Under the
transition rules, no disclosure is required for fiscal 1992.
7
<PAGE>
(2) The Employment Agreement provides that Mr. Sullivan will serve as
Chairman of the Board of the Company and President and Chief Executive Officer
of the Company and Brands. The Employment Agreement, which is automatically
renewed on May 31 of each year unless terminated by the Company and Brands or
Mr. Sullivan, further provides that Mr. Sullivan will receive a minimum annual
salary of $400,000 and will be eligible for an annual bonus, each to be
determined by the Board of Directors.
In the event Mr. Sullivan's employment with the Company is terminated without
his consent, the Employment Agreement limits Mr. Sullivan's ability to compete
with the Company and provides for full salary and benefits for a period of two
years from the date of such termination and a lump sum payment equal to the
aggregate annual bonuses paid to Mr. Sullivan for the two most recent fiscal
years prior to such termination.
Stock Options
The following two tables set forth information for the last completed fiscal
year relating to (i) the grant of Stock Options to the Named Executive
Officers and (ii) the exercise and appreciation of Stock Options held by the
Named Executive Officers.
OPTION GRANTS IN THE FISCAL YEAR ENDED MAY 28, 1994
<TABLE>
<CAPTION>
Percent of Potential Realizable
Total Value of Stock Price
(#) Options Granted Exercise Appreciation (2)
Options to Employees or Base Expiration --------------------
Name Granted (1) in FY Price ($/sh) Date 5% 10%
- --------------------- ----------- --------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Sullivan 25,000 25.0% 14.50 12-19-98 $100,152 $221,310
15,000 23.8 12.25 04-27-99 50,767 112,181
Ray Sandy Sutton 5,000 5.0 14.50 12-19-98 20,030 44,262
H. L. Shetler 10,000 10.0 14.50 12-19-98 40,061 88,524
10,000 15.9 12.25 04-27-99 33,844 74,787
Robert P. Morgan 7,500 7.5 14.50 12-19-98 30,046 66,393
10,000 15.9 12.25 04-27-99 33,844 74,787
Paul E. Yarick 5,000 5.0 14.50 12-19-98 20,030 44,262
(1) All Stock Options were granted at an Exercise Price equal to the fair
market value of the underlying Common Stock on the date of grant. The Stock
Options become exercisable one year after the date of grant.
(2) Potential realizable value is based on the assumption that the price of
the Company's Common Stock appreciates at the annual rate shown (compounded
annually) from the date of option grant until the end of the 5-year option
term. There can be no assurance that the potential realizable values shown in
the table will be achieved.
</TABLE>
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1994 AND OPTION VALUES AT MAY 28, 1994
<CAPTION>
Number of Unexercised Value of Unexercised
Options at Fiscal In-The-Money Options
Shares Year-end at Fiscal Year-end (1)
Acquired On Value ---------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Sullivan 0 $ 0 125,000 40,000 0 0
Ray Sandy Sutton 10,591 146,262 35,000 5,000 58,425 0
H. L. Shetler 0 0 43,849 20,000 161,826 0
Robert P. Morgan 0 0 30,000 17,500 0 0
Paul E. Yarick 0 0 33,291 5,000 126,093 0
(1) The value of unexercised, in-the-money options is the difference between
the Exercise Price of the options and the fair market value of the Company's
Common Stock at May 28, 1994 ($11.875).
8
<PAGE>
CERTAIN TRANSACTIONS
Management Loans
The Company in 1988 established a loan program to enable certain members of
management to purchase shares of Common Stock and the Company's previous
outstanding $12.00 Cumulative Exchangeable Redeemable Preferred Stock. The
loans are payable on demand, bear interest at the rate of 3% per annum and are
secured by a pledge of Common Stock owned. None of the loans is in default.
In connection with the Company's initial public offering of Common Stock on
July 24, 1991, the $12.00 Cumulative Exchangeable Redeemable Preferred Stock
was redeemed and the loan program was terminated. Loan balances due from
executive officers have been paid with the exception of the amounts as of May
28, 1994, for executive officers: Mark D. Dirkes - $46,000; John F. McKenny -
$64,000; Robert P. Morgan - $41,000.
Other Matters
Leo Benatar, who is a director of the Company, is Chairman of the Board and
President of Engraph, Inc. Engraph, Inc. manufactures graphic items for
various uses. The Company has purchased truck decals from Engraph, Inc. in
the past and will continue to do so. During fiscal 1994, the Company
purchased approximately $112,000 worth of truck decals from Engraph, Inc. The
Company purchases such decals from a variety of sources to ensure that such
purchases are made at competitive prices.
AMENDMENT OF COMPANY'S 1991 STOCK OPTION PLAN
The Board of Directors of the Company has adopted a resolution amending
Section 8 of the 1991 Stock Option Plan (the "1991 Plan") to increase the
aggregate number of shares of Common Stock available under the 1991 Plan from
1,031,534 to 2,031,534. Pursuant to Section 26 of the 1991 Plan, the 1991
Plan Amendment is subject to the approval of the stockholders of the Company.
Of the 1,031,534 shares of Common Stock currently subject to the 1991 Plan,
approximately 52,034 shares remain available for use in future grants. The
1991 Plan Amendment is being proposed to facilitate the achievement of the
goals of the 1991 Plan by providing additional shares for grants to induce new
key employees to join the Company, for grants to additional existing key
employees or for additional grants to existing key employees who currently
participate in the 1991 Plan. The Board of Directors believes that the
approximately 1,052,034 shares of Common Stock that would be available for
further grants and the total of 1,000,000 shares of Common Stock that would be
subject to the 1991 Plan Amendment are reasonable to achieve the goals of the
1991 Plan in light of the approximately 21,653,393 shares of Common Stock that
would be issued and outstanding on a fully diluted basis after adoption of the
1991 Plan Amendment.
Background/Administration. The purpose of the 1991 Plan is to establish and
- ------------------------- continue a close identity between the interests of
the Company, its subsidiaries and those of their employees. The 1991 Plan
serves to reward employees for past services, to retain those employees in the
service of the Corporation or any subsidiary and to induce new executives or
other key employees to become associated with the Corporation or a subsidiary.
The 1991 Plan provides for the granting of stock options, including non-
qualified stock options and stock options intended to qualify as "incentive
stock options" under Section 422 of the Internal Revenue Code of 1986, as
amended. The 1991 Plan provides for administration by a committee (the "Plan
Committee") to be comprised of no fewer than two Directors, as determined by
the Board of Directors, each of which shall be "disinterested" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934. The
functions of the Plan Committee are currently handled by the Compensation
Committee. Among the powers granted to the Plan Committee are the powers to
interpret the 1991 Plan, establish rules and regulations for its operation,
select employees of the Company and its subsidiaries to receive awards and
determine the timing, form, amount and other terms and conditions pertaining
to any award.
Eligibility for Participation. Any key employee of the Company or any of its
- ----------------------------- subsidiaries is eligible to participate in the
1991 Plan, provided, however, that members of the Plan Committee are not
eligible to receive options. The selection of participants from among key
employees is within the discretion of the Plan Committee. Approximately 60 key
employees are eligible to participate in the 1991 Plan.
9
<PAGE>
Amendment of the 1991 Plan. The Company, through the Board, may amend the
- -------------------------- 1991 Plan at any time, but may not, without the
shareholder approval, adopt any amendment which would materially increase the
benefits accruing to participants, materially increase the number of options
which may be granted under the 1991 Plan or materially modify the 1991 Plan's
eligibility requirements.
Other Components of the 1991 Plan. The 1991 Plan authorizes the Committee
- --------------------------------- to grant options during the period
beginning on the effective date of the 1991 Plan and ending on July 22, 2001.
Upon adoption of the 1991 Plan Amendment, 1,968,534 shares of Common Stock
will be reserved for issuance subject to awards under the 1991 Plan. Shares
of Common Stock subject to awards which terminate by expiration, forfeiture,
cancellation or otherwise without the issuance of shares, will again be
available for issuance subject to awards under the 1991 Plan.
Stock Options. The Plan Committee may grant awards in the form of options
- ------------- to purchase shares of Common Stock (an "Option"). The Plan
Committee will, with regard to each Option, determine the number of shares
subject to the Option, the manner and time of the Option's exercise and the
exercise price per share of stock subject to the Option. No Option shall be
exercisable with respect to any of the shares of Common Stock subject thereto
earlier than the date which is one year from the grant of such Option. Each
Option shall expire, if not previously exercised, on not later than the tenth
anniversary of the date of grant. Options are not transferable. The exercise
price of an Option may, at the discretion of the Plan Committee, be paid by a
participant in cash, shares of the Company's Common Stock, a combination
thereof or such other consideration as the Plan Committee may deem appropriate.
The 1991 Plan provides that Options shall be exercisable only while the
optionee is an employee of the Company or a subsidiary thereof (subject to
specific provision on exercisability upon death, disability or retirement
of the participant).
Federal Tax Treatment. Under current federal tax law, the following are the
- --------------------- federal tax consequences generally arising with respect
to awards under the 1991 Plan. A participant who is granted an incentive stock
option does not realize any taxable income at the time of the grant or at the
time of exercise. Similarly, the Company is not entitled to any deduction at
the time of grant or at the time of exercise. If the participant makes no
disposition of the shares acquired pursuant to an incentive stock Option before
the later of two years from the date of grant of such option and one year of
the transfer of such shares to him, any gain or loss realized on a subsequent
disposition of the shares will be treated as a long-term capital gain or loss.
Under such circumstances, the Company will not be entitled to any deduction
for federal income tax purposes.
The participant who is granted a non-qualified stock option has taxable income
at the time of exercise equal to the difference between the exercise price of
the shares and the market value of the shares on the date of exercise. The
Company is entitled to a corresponding deduction for the same amount.
Market Value. The closing price of the Company's Common Stock as reported on
- ------------ the New York Stock Exchange on August 1, 1994, was $12.625
per share.
Vote Required. To be adopted, the 1991 Plan Amendment must be approved by the
- ------------- holders of a majority of the shares of Common Stock represented
in person or by proxy and entitled to vote at the Annual Meeting.
Benefits of 1991 Plan. The benefits received under the 1991 Plan are set forth
- --------------------- above under "EXECUTIVE COMPENSATION."
APPOINTMENT OF AUDITORS
Stockholders are asked to ratify the appointment of Deloitte & Touche as
independent auditors of the books and accounts of the Company for the fiscal
year ending June 3, 1995.
Representatives of Deloitte & Touche plan to attend the Meeting and will have
an opportunity to make a statement, if they desire to do so, and will be
available to respond to appropriate questions.
SUBMISSION OF STOCKHOLDERS' PROPOSALS AND OTHER MATTERS
Proposals of stockholders intended to be presented at the 1995 Annual Meeting
must be made in compliance with all Securities and Exchange Commission rules
and regulations and be received by the Corporate Secretary, Interstate
Bakeries Corporation, 12 East Armour Boulevard, Kansas City, Missouri 64111,
no later than April 20, 1995, in order to be included in the agenda.
10
<PAGE>
Management is not aware of any matters to come before the Meeting other than
those referred to in the Proxy Statement. However, if any other matters
should properly come before the Meeting, it is intended that the proxies
solicited hereby will be voted thereon in accordance with the judgment of the
person voting such proxies.
By Order of the Board of Directors
/s/ Ray Sandy Sutton
Ray Sandy Sutton
Corporate Secretary
<PAGE>
ANNEX
Section 8 of the Interstate Bakeries Corporation 1991 Stock Option Plan, which
is incorporated herein by reference to Exhibit 10.1 to the Registration
Statement on Form S-1 of Interstate Bakeries Corporation, File No. 33-40830,
is proposed to be amended to read as follows:
SECTION 8: SHARES AVAILABLE. The Committee may, but shall not
be required to, grant in accordance with the terms of the Plan
Options to purchase not more than, in the aggregate, 2,031,534
shares of Stock. Such shares may be authorized and unissued
shares or issued shares held in the Corporation's treasury.
The number of shares of Stock available under this Plan, as
set forth above, shall be computed prior to any adjustment
resulting from stock dividends, stock splits, reorganizations,
or other substitutions of securities for the present Stock of
the Corporation. Stock covered by Options which have terminated
in accordance with the provisions of the Plan may be treated by
the Committee as Stock which is eligible for other and further
granting of Options in accordance with the terms of the Plan.
This annex is not a part of the Proxy Statement mailed to stockholders on
August 18, 1994.
<PAGE>
INTERSTATE BAKERIES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints PAUL E. YARICK, RAY SANDY SUTTON and LINDA L.
THOMPSON, in the order named, as proxies (each with the power to act alone and
with power of substitution) to vote, as directed below, all shares of common
stock of INTERSTATE BAKERIES CORPORATION which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders
to be held on Wednesday, September 21, 1994, at 10:00 a.m. at the Waddell &
Reed Auditorium, 6300 Lamar, Shawnee Mission, Kansas or any adjournment
thereof, as follows:
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) below
Leo Benatar, Charles A. Sullivan
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:
__________________________________________________________________________
2. APPROVAL OF AMENDMENT OF THE COMPANY'S 1991 STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE as independent
auditors of the Company for the fiscal year ending June 3, 1995.
/ / FOR / / AGAINST / / ABSTAIN
4. In accordance with their discretion upon such other matters as may
properly come before the meeting and any adjournment thereof.
(to be signed and dated on reverse side.)
(over)
<PAGE>
When properly executed, this proxy will be voted in the manner directed
by the undersigned stockholder. If no direction is made, this proxy
will be voted FOR the election of Directors and FOR approval of amendment
of the Company's 1991 Stock Option Plan and FOR ratification of the
appointment of Deloitte & Touche as auditors of the Company. The Board
of Directors recommends a vote FOR proposals 1, 2 and 3.
Please sign exactly as name appears below.
DATED:____________________________, 1994
________________________________________
(Signature)
________________________________________
(Signature)
Please sign here exactly as name appears
at the left. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title as
such. Each joint owner or trustee
should sign the proxy.
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
</TABLE>
