SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Interstate Bakeries Corporation
..............................................................................
(Name of Registrant as Specified in its Charter)
..............................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
......................................................................
4) Proposed maximum aggregate value of transaction:
......................................................................
5) Total fee paid:
......................................................................
<PAGE>
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
.......................................................
2) Form, Schedule or Registration Statement No.:
.......................................................
3) Filing Party:
.......................................................
4) Date Filed:
.......................................................
<PAGE>
INTERSTATE BAKERIES CORPORATION
12 East Armour Boulevard
Kansas City, Missouri 64111
(816) 502-4000
--------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 24, 1996
--------------
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Interstate Bakeries Corporation
(the "Company") will be held on September 24, 1996, at 10:00 a.m., at the
Waddell & Reed Auditorium, 6300 Lamar, Shawnee Mission, Kansas 66202, for the
following purposes:
1. To elect three Class III Directors to serve a term of three years
and until their successors shall be elected and qualified;
2. To consider and vote upon a proposal to adopt the Interstate
Bakeries Corporation 1996 Stock Incentive Plan (the "1996 Plan");
3. To ratify the appointment of Deloitte & Touche LLP as the independent
auditors of the books and accounts of the Company for the fiscal year
ending May 31, 1997; and
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 9, 1996,
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 26, 1996
<PAGE>
INTERSTATE BAKERIES CORPORATION
----------
PROXY STATEMENT
----------
This Proxy Statement, which is being mailed to stockholders on August 26,
1996, 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 24, 1996, 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, mailgram 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 9,
1996, 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 9, 1996, the Company had outstanding 37,393,532 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. The
1996 Plan proposal and the ratification of the accountants require the
approval of a majority of shares of Common Stock present, in person or by
proxy, at the Meeting, assuming a quorum is represented. 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 not count for or against the
election of directors, the 1996 Plan proposal or the ratification of the
appointment of the independent auditors. The Company's stockholders will not
have dissenters' rights of appraisal with respect to any of the proposals in
this Proxy Statement.
The Company's Annual Report on Form l0-K, including the financial
statements and the financial statement schedules, as filed with the Securities
and Exchange Commission for the fiscal year ended June 1, 1996, will be
mailed, upon request, free of charge, to all persons who are record or
beneficial holders of the Common Stock as of August 9, 1996. 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.
<PAGE>
SECURITY OWNERSHIP
Principal Stockholders
The following table sets forth information as of August 1, 1996,
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
- ---------------- ------------ ----------
VCS Holding Company 16,923,077 45.36%
c/o Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164
Harris Associates L.P. 2,453,375 6.58
2 North LaSalle - Suite 500
Chicago, IL 60602
Metropolitan Life Insurance Company 2,433,130 6.52
Mezzanine Investment Limited
Partnership 8
1 Madison Avenue (10th Floor)
New York, NY 10010
Wellington Management 2,042,900 5.48
75 State Street
Boston, MA 02109
<PAGE>
Common Stock Owned By Management
The number of shares of Common Stock of the Company beneficially owned as
of August 1, 1996, 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 471,454 (l) 1.26%
G. Kenneth Baum 204,606 (2) *
Leo Benatar 3,000 *
E. Garrett Bewkes, Jr. 6,000 *
Philip Briggs 1,000 *
Robert B. Calhoun, Jr. 1,366 *
James R. Elsesser 4,550 *
Frank E. Horton 2,500 *
William P. Stiritz 585,050 1.57
Ray Sandy Sutton 15,115 (1) *
H. L. Shetler 76,167 (1) *
Michael D. Kafoure 10,000 (1) *
Timothy W. Cranor 30,602 (1) *
All Directors and Executive
Officers as a Group (16 persons) 1,537,456 (1) 4.07
- ---------------------------------
*Less than 1%
(l) Of the shares indicated 240,000 (Mr. Sullivan), 10,000 (Mr. Sutton),
58,849 (Mr. Shetler), 10,000 (Mr. Kafoure), 30,000 (Mr. Cranor) and 449,019
(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 204,606 shares indicated, 152,879 of such shares are held by
George K. Baum Group, Inc. Mr. Baum may be deemed to beneficially own all
152,879 shares of the Common Stock held by George K. Baum Group, Inc.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires executive officers and directors of the Company, and persons who
beneficially own more than ten percent (10%) of the Common Stock ("reporting
persons"), to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission ("SEC"). Executive
officers, directors and greater than ten percent (10%) beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely upon a review of copies of Forms 3 and 4 and amendments
thereto furnished to the Company during its most recent fiscal year and Form 5
and amendments thereto furnished to the Company with respect to its most
recent fiscal year, the Company believes that all these forms required to be
filed by "reporting persons" of the Company were timely filed pursuant to
Section 16(a) of the Exchange Act.
<PAGE>
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, 61 Chairman of the Board and Chief Executive
Officer of the Company and Interstate Brands
Corporation ("Brands") for more than the past
five years; President of the Company and Brands
until January 1995; director of the Company
since August 1989.
Michael D. Kafoure, 47 President and Chief Operating Officer of the
Company and Brands since September 1995; Senior
Vice President of the Western Division -
North from July 1995 to September 1995;
President and Chief Operating Officer of
Merico, Inc., a subsidiary of Campbell Taggart,
Inc., from April 1994 to June 1995; President
and Chief Operating Officer of the U.S. Bakery
Division of Campbell Taggart, Inc. for more than
three years prior thereto.
Ray Sandy Sutton, 58 Vice President, Corporate Secretary and General
Counsel of the Company and Brands for more than
the past five years.
H. L. Shetler, 63 Executive Vice President of Brands for more than
the past five years.
Timothy W. Cranor, 44 Senior Vice President - Purchasing of Brands
since July 1995; formerly Executive Vice
President of Cereal Food Processors Inc. for
more than four years prior thereto.
Mark D. Dirkes, 48 Senior Vice President - Corporate Marketing of
Brands since July 1995; Vice President -
Corporate Marketing of Brands for more than four
years prior thereto.
John F. McKenny, 46 Vice President and Corporate Controller of the
Company and Brands for more than the past five
years.
Paul E. Yarick, 57 Vice President and Treasurer of the Company and
Brands for more than the past five years.
<PAGE>
PROPOSAL NO. 1 - 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, three Class III 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 three persons in the election of Class III Directors at
the Meeting. G. Kenneth Baum, E. Garrett Bewkes, Jr. and James R. Elsesser,
the current Class III Directors of the Company, have been nominated for re-
election. The following table sets forth certain information with respect to
the three nominees, the Class I Directors (whose terms expire in 1997) and the
Class II Directors (whose terms expire in 1998). 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.
Name and Age Information about Directors
- ------------ ---------------------------
Class III Directors
- -------------------
G. Kenneth Baum, 66 Chairman of the Board of George K. Baum Group,
Inc. from May 1994 to present; Chairman of the
Board of George K. Baum & Company, an investment
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., 69 Consultant and Chairman of a number of
PaineWebber mutual funds for more than the past
five years; formerly Chairman of American
Bakeries Company; director of PaineWebber
Group, Inc. and Napro Bio-Pharmaceutical, Inc.
Mr. Bewkes became a director of the Company in
August 1991.
James R. Elsesser, 52 Vice President and Chief Financial Officer of
Ralston Purina Company for more than the past
five years. Mr. Elsesser became a director of
the Company in July 1995.
Class I Directors (Term expires in 1997)
- ----------------------------------------
Charles A. Sullivan, 61 Chairman of the Board and Chief Executive
Officer of the Company and Brands for more than
the past five years; President of the Company
and Brands until January 1995; director of UMB
Bank, n.a. and Sealright Co., Inc. Mr. Sullivan
became a director of the Company in August 1989.
<PAGE>
Leo Benatar, 66 Associated Consultant for A. T. Kearney, Inc.
and Principal for Benatar & Associates from June
1996 to present; Chairman of the Board of
Engraph, Inc. (a subsidiary of Sonoco
Products Company) and Senior Vice President of
Sonoco Products Company from October 1993 until
May 1996; Chairman and CEO of Engraph, Inc. from
1981 until October 1993; director of Sonoco
Products Company, Schuller Corporation, Mohawk
Industries, Inc., PAXAR Corporation and Aaron
Rents, Inc.; Chairman and director of Federal
Reserve Bank of Atlanta until January 1996.
Mr. Benatar became a director of the Company
in August 1991.
William P. Stiritz, 62 Chairman of the Board, Chief Executive Officer
and President of Ralston Purina Company for more
than the past five years; director of Ralcorp
Holdings, Inc., Angelica Corporation, Boatmen's
Bancshares, Inc., Reinsurance Group of America,
Inc., the May Dept. Stores Company and Ball
Corporation. Mr. Stiritz became a director of
the Company in July 1995.
Class II Directors (Term expires in 1998)
- -----------------------------------------
Philip Briggs, 68 Chairman of the Board of Empire Blue Cross Blue
Shield since July 1993; formerly Vice-Chairman
and director of Metropolitan Life Insurance
Company for more than two years prior thereto.
Mr. Briggs became a director of the Company in
August 1991.
Robert B. Calhoun, Jr., 53 President of the Clipper Capital Corporation
since January 1994; Chief Executive Officer of
the Clipper Group, L.P., from January 1991 to
December 1993; director of Avondale Mills, Inc.
and Highway Master Communications, Inc. Mr.
Calhoun became a director of the Company in May
1991.
Frank E. Horton, 57 President, The 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.
During the 1996 fiscal year, the Board of Directors held four meetings.
All directors attended 75% or more of the Board of Directors' meetings.
<PAGE>
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 1996 fiscal
year. All members of the Audit Committee attended both meetings, except one
member 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 "1991 Plan"). The Compensation
Committee held three meetings during the 1996 fiscal year. All members of the
Compensation Committee attended the meetings. If the 1996 Stock Incentive
Plan (the "1996 Plan") is approved by the stockholders as described herein,
the current members of the Compensation Committee will administer the 1996
Plan.
Directors' Compensation
Directors who are not salaried employees of, or consultants to, the
Company are entitled to an annual retainer of $24,000 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 $1,000 for each committee
meeting attended that is not conducted on the same day as a meeting of the
full Board of Directors and $750 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.
<PAGE>
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 6/3/95 6/1/96
------- ------- ------- ------- ------ ------
Interstate
Bakeries 100.00 95.59 111.09 81.30 102.76 198.73
S&P 500 Index 100.00 109.54 122.26 127.46 153.19 195.81
S&P Food Index 100.00 101.67 106.61 105.90 133.55 157.19
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 1996 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.
<PAGE>
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 and earnings per share objectives. The
Chief Executive Officer submits proposed minimum, target and maximum operating
cash flow and earnings per share 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 and earnings per share
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.
<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 1996 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 earnings per share objectives
defined with minimum, target and maximum goals. Fiscal 1996 performance was
within the range of goals, therefore, Mr. Sullivan was eligible for an
incentive bonus for fiscal 1996.
Section 162(n) of the Internal Revenue Code of 1986 (the "Code") imposes
a $1 million cap on the deductibility of compensation to certain executive
officers of public companies. The Compensation Committee continues to
evaluate the impact of the cap on its compensation policies so as to conform
such policies of the Company, to the extent practicable, to the Code.
Compensation Committee
E. Garrett Bewkes, Jr., Chairman
G. Kenneth Baum
Frank E. Horton
<PAGE>
Summary Compensation Table
The following table sets forth information concerning compensation
received by (i) the Chief Executive Officer of the Company as of June 1, 1996
and (ii) the four other most highly compensated executive officers of the
Company as of June 1, 1996, whose annual compensation exceeded $100,000 for
the fiscal year ended June 1, 1996 ((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) 1996 $600,000 $598,416 - $12,400
Chairman of the 1995 453,846 192,830 75,000 12,000
Board and Chief 1994 400,000 - 40,000 14,501
Executive Officer
Michael D. Kafoure 1996 228,367 248,568 50,000 37,400(3)
President and Chief 1995 - - - -
Operating Officer 1994 - - - -
H. L. Shetler 1996 180,415 220,000 - 12,400
Executive Vice 1995 143,298 141,476 35,000 12,000
President 1994 134,415 31,184 20,000 12,007
Ray Sandy Sutton 1996 145,577 161,580 - 12,400
Vice President, 1995 137,063 85,738 20,000 12,000
Corporate Secretary 1994 132,042 - 5,000 10,563
and General Counsel
Timothy W. Cranor 1996 151,846 102,714 30,000 98,400(3)
Senior Vice 1995 - - - -
President - 1994 - - - -
Purchasing
(1) These amounts represent contributions by the Company to the Company's
Retirement Income Plan for the benefit of each executive, excluding the
amounts described in (3) below.
(2) The Employment Agreement between the Company and Mr. Sullivan provides
that Mr. Sullivan will serve as Chairman of the Board of the Company 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.
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.
<PAGE>
(3) Mr. Kafoure was employed by the Company on July 19, 1995 and Mr. Cranor
was employed by the Company on July 21, 1995. In conjunction with their
employment, Mr. Kafoure and Mr. Cranor were paid relocation bonuses of $25,000
and $86,000 respectively.
Stock Options
The following two tables set forth information for the last completed
fiscal year relating to (i) the grant of Stock Options to the Named Executive
Officers and (ii) the exercise and appreciation of Stock Options held by the
Named Executive Officers.
OPTION GRANTS IN THE FISCAL YEAR ENDED JUNE 1, 1996
<TABLE>
<CAPTION>
Potential
Percent of Realizable
Total Value of Stock
Options Exercise Price
(#) Granted to or Base Appreciation(2)
Options Employees Price Expiration ---------------------
Name Granted(1) in FY ($/sh) Date 5% 10%
- ---- ------- ---------- ----------- ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Charles A.
Sullivan - -% $ - - $ - $ -
Michael D.
Kafoure 10,000 3.98 17.25 07/18/05 108,484 274,920
40,000 15.90 21.25 09/19/05 534,560 1,354,681
Ray Sandy
Sutton - - - - - -
H. L. Shetler - - - - - -
Timothy W.
Cranor 30,000 11.93 17.25 07/20/05 325,452 824,761
(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 l0-year option
term. There can be no assurance that the potential realizable values shown in
the table will be achieved.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND OPTION VALUES AT JUNE 1, 1996
Number of Unexercised Value of Unexercised
Shares Options at Fiscal In-The-Money Options
Acquired Year-end at Fiscal Year-end(1)
on Value -------------------------- --------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles A.
Sullivan - $ - 240,000 - $3,046,250 $ -
Michael D.
Kafoure - - - 50,000 - 358,750
Ray Sandy
Sutton 45,000 293,125 10,000 - 132,500 -
H. L.
Shetler 40,000 189,375 58,849 - 1,025,572 -
Timothy W.
Cranor - - - 30,000 - 311,250
(l) 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 June 1, 1996 ($27.625).
</TABLE>
CERTAIN TRANSACTIONS
Other Matters
Mr. Leo Benatar, who is a director of the Company, was Chairman of the
Board and President (until May 1996) of Engraph, Inc., which 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 1996, the
Company purchased approximately $167,000 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 a competitive price.
Acquisition of Continental Baking Company
On April 12, 1995, the Company entered into a Sale and Purchase Agreement
by and among the Company, Brands, Continental Baking Company ("CBC"), Ralston
Purina Company ("RPC") and VCS Holding Company ("VCS") (the "Purchase
Agreement"), pursuant to which on July 22, 1995, the Company acquired CBC from
RPC for $220,000,000 in cash and the issuance to RPC of 16,923,077 shares of
Common Stock. CBC was then merged with and into Brands pursuant to Delaware
law.
RPC acquired the 16,923,077 shares of Common Stock pursuant to the terms
of a Shareholder Agreement dated July 22, 1995 (the "Shareholder Agreement").
In accordance with the terms of the Shareholder Agreement, Mr. Stiritz and Mr.
Elsesser of RPC were elected to the Board of the Company to serve until 1997
and 1998, respectively.
<PAGE>
Between June 3, 1995 and June 1, 1996, RPC or its affiliates received
approximately $1,200,000 in payments from the Company primarily in connection
with post-closing obligations, including transition services.
During fiscal 1996, the Company paid RPC's affiliate, Protein
Technologies International ("PTI") a total of $414,000 for purchases of
isolated soy protein. The balance owed to PTI by the Company at June 1, 1996
was approximately $106,000.
The Purchase Agreement, Shareholder Agreement, other ancillary agreements
thereto and the acquisition are described in the Proxy Statement of the
Company dated July 20, 1995, relating to the Special Meeting of Stockholders
held on July 21, 1995.
PROPOSAL NO. 2 - APPROVAL OF THE 1996 STOCK INCENTIVE PLAN
General
The Board of Directors has adopted, subject to shareholder approval, the
1996 Plan, which substantially modifies, amends and supplements the 1991 Plan.
If the 1996 Plan is adopted by the shareholders, no further options will be
granted under the 1991 Plan. All shares reserved under the 1991 Plan not
allocated to options previously granted will be transferred to the 1996 Plan.
Like the 1991 Plan, the purpose of the 1996 Plan is to establish and
continue a close identity between the Company, its subsidiaries and their
employees. The 1996 Plan provides additional flexibility to the Company with
respect to the types of incentives that can be crafted to reward employees for
past service, retain current employees in the service of the Company and
induce other executives or key employees to become associated with the Company
or a subsidiary.
The affirmative vote of the holders of a majority of the issued and
outstanding shares of the Common Stock present in person or represented by
proxy at the Meeting and entitled to vote is required to approve the 1996
Plan. The full text of the 1996 Plan is attached to this Proxy Statement.
The summary of the provisions of the 1996 Plan set forth below is qualified in
its entirety by reference to the 1996 Plan as set forth hereto.
Summary of the 1996 Plan
The 1996 Plan is designed to enable employees and non-employee directors
of the Company to acquire or increase their equity interests in the Company on
such reasonable terms as the Committee or the Board determines. The
opportunity so provided is intended to foster in participants a strong
incentive to put forth maximum effort for the continued success and growth of
the Company, to aid in retaining individuals who put forth such efforts and to
assist in attracting the best available individuals in the future. Toward
these objectives, the 1996 Plan provides for the granting of (i) stock
options, restricted stock awards, performance share awards and other incentive
awards to employees, as approved by the Committee and (ii) stock options and
other awards to non-employee directors, as approved by the Board. The 1996
Plan also provides that members of the Board may elect to receive their
retainer in shares of Common Stock of the Company, all as described therein.
<PAGE>
Administration. The 1996 Plan provides for administration by the
Committee, or another committee designated by the Board, consisting of two or
more "non-employee directors" as defined in Section 16 of the Exchange Act.
Members of the Committee may participate in the 1996 Plan, but only to the
extent set forth below in the sections titled "Director Options" and "Director
Awards." Among the powers granted to the Committee are the powers to
interpret the 1996 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. Awards may be granted under the 1996 Plan
to any employee of the Company or subsidiaries of the Company. Officers shall
be employees for this purpose, whether or not they are also directors. Awards
may also be granted to directors who are not employees of the Company or its
subsidiaries, but only to the extent set forth below in the sections titled
"Director Options" and "Director Awards."
Shares Reserved for Issuance Under the 1996 Plan. Approximately
2,166,500 shares remain available for use in future grants under the 1991
Plan. The Board has approved an increase in the number of shares reserved for
issuance under the 1996 Plan from 4,000,000 to 6,833,500 to facilitate the
achievement of the goals of the 1996 Plan. The Board believes that the
5,000,000 unallocated shares of Common Stock that would be available for
further grants under the 1996 Plan are reasonable to achieve the goals of the
1996 Plan.
Type of Awards. The Plan provides for the granting of any or all of the
following types of awards: (i) stock options, including non-qualified stock
options and stock options intended to qualify as "incentive stock options"
under Section 422 of the Code, (ii) performance shares, (iii) restricted
Common Stock, (iv) Common Stock, and (v) any other incentive award of, or
based on, the Company's Common Stock which is established by the Committee and
which is consistent with the 1996 Plan's purpose. The awards may be granted
singly, in combination or in tandem as determined by the Committee.
Amendment of 1996 Plan. The Company, through the Board, may suspend or
terminate the 1996 Plan. In addition, the Board may, from time to time, amend
the 1996 Plan in any manner, but may not, without shareholder approval, adopt
any amendment which would materially increase the aggregate number of shares
of Common Stock which may be issued under the 1996 Plan (except for certain
antidilution provisions specified in Article XI of the 1996 Plan), or
materially modify the 1996 Plan's eligibility requirements.
Other Components of the 1996 Plan. The 1996 Plan authorizes the
Committee to grant awards during the period beginning on the date the 1996
Plan is approved by the shareholders until ten years after such date. Any
shares of Common Stock related to awards, including those granted under the
1991 Plan, which terminate by expiration, forfeiture, cancellation or
otherwise without the issuance of shares of Common Stock, are settled in cash
in lieu of Common Stock, or are exchanged at the Committee's discretion for
awards not involving shares of Common Stock, will be available for use in
connection with awards under the 1996 Plan.
<PAGE>
Stock Options. Under the 1996 Plan, the Committee may grant awards in
the form of options to purchase shares of the Company's Common Stock (an
"Option"). The Committee will, with regard to each Option, determine the
number of shares subject to the Option, the manner and timing of the Option's
exercise, and the exercise price of the Option, provided that such exercise
price be at least equal to fair market value of the underlying Common Stock on
the date of grant. The exercise price of an Option may, at the discretion of
the Committee, be paid by a participant in cash, shares of the Company's
Common Stock, a combination thereof, or such other consideration as the
Committee may deem appropriate. The Committee may grant non-qualified options
or incentive stock options which satisfy the applicable requirements of
Section 422 of the Code.
Director Options. The 1996 Plan permits the grant of Options to purchase
shares of Common Stock to each person who is a non-employee director, provided
each such grant is approved by the Board with the recipient of such award
abstaining from the vote. The exercise price per share shall be equal to the
Fair Market Value, which is the last sale price per share on the New York
Stock Exchange of one share of Common Stock on the date the Director Option is
granted. The period within which each such Option may be exercised shall
expire ten years from the date the Option is granted, unless it expires sooner
due to the death of the optionee, or is fully exercised prior to the end of
such period. Payment of the option price may be paid in full in cash, shares
of the Company's Common Stock, a combination thereof, or such other
consideration as the Board may deem appropriate. Director Options shall be
forfeited if the directorship of an optionee is terminated on account of any
act of fraud, intentional misrepresentation, embezzlement, misappropriation or
conversion of assets or opportunities of the Company or any of its
subsidiaries.
Performance Shares. The 1996 Plan also allows for the granting of
performance share awards. Such awards will be contingent upon the attainment
over a period to be determined by the Committee of certain performance
objectives. The performance objectives to be achieved during a performance
period and the measure of whether and to what degree such objectives have been
attained will also be determined by the Committee.
Restricted Stock Awards. The 1996 Plan authorizes the Committee to grant
awards in the form of restricted shares of the Company's Common Stock
("Restricted Stock Awards"). Such awards will be subject to such terms,
conditions, restrictions and/or limitations, if any, as the Committee deems
appropriate including, but not limited to, restrictions on transferability and
continued employment.
Other Incentive Awards. Under the 1996 Plan, the Committee also has the
discretion to grant other types of awards, including stock appreciation rights
and other awards, under which the Company's Common Stock is or may in the
future be acquired by a participant. Such awards may include grants of debt
securities convertible into or exchangeable for shares of the Company's Common
Stock upon the attainment of performance goals or such other conditions as the
Committee shall determine.
<PAGE>
Director-Stock Awards. An award of shares of the Company's Common Stock
may be granted to a non-employee director at the discretion and with the
approval of the Board, with the recipient of such shares abstaining from such
vote. In addition, the Board may, at its discretion, grant such other awards
based on the Common Stock of the Company as it deems appropriate. In
addition, members of the Board may elect to take their retainer in shares of
the Company's Common Stock, provided such election is made at least six months
after an "opposite way" transaction in the Company's shares, as described in
the 1996 Plan.
Other Terms of Awards. Options will be exercisable for, and Restricted
Stock Awards will be made in, Common Stock of the Company. Performance Share
Awards may be paid in cash, Common Stock or a combination of cash and Common
Stock, as the Committee shall determine. If an award is granted in the form
of an Option, Restricted Stock Award or Other Incentive Award, the Committee
may include as part of such award an entitlement to receive dividends or
dividend equivalents.
The 1996 Plan provides for the forfeiture of awards under certain
circumstances as determined by the Committee. The 1996 Plan authorizes the
Committee to promulgate administrative guidelines for the purpose of
determining what treatment will be afforded to a participant under the 1996
Plan in the event of death, disability, retirement or termination for an
approved reason.
Upon granting of any award, the Committee, or the Board, may, by way of
an award notice or otherwise, establish such other terms, conditions,
restrictions and/or limitations governing the granting of such award as are
not inconsistent with the 1996 Plan. In addition, the Committee, or the
Board, may modify the terms and conditions of awards under certain
circumstances.
Change of Control Event. Upon the occurrence of a Change of Control
Event (as defined in the 1996 Plan), awards may be treated as follows: (i)
all of the participant's outstanding awards could become immediately vested,
fully earned, exercisable, and/or in the case of Options, converted into stock
appreciation rights, as appropriate, and (ii) the Company could make full
payment to each such participant with respect to any Performance Share Award,
stock appreciation right or other incentive award, deliver certificates to
such participant with respect to each Restricted Stock Award and permit the
exercise of Options, respectively, granted to such participant.
Federal Tax Treatment. Under current federal tax law, the following are
the federal tax consequences generally arising with respect to awards under
the 1996 Plan.
<PAGE>
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. Conversely, if the participant disposes of shares of
Common Stock acquired pursuant to an incentive stock option before the later
of two years after the date of grant of such option and one year after the
transfer of such shares to him, any gain or loss realized will be treated as
ordinary income and the Company will be entitled to a deduction for federal
income tax purposes.
A participant who is granted a non-qualified stock option does not have
taxable income at the time of grant, but does have taxable income at the time
of exercise equal to the difference between the exercise price of the shares
acquired pursuant to such option and the market value of the shares on the
date of exercise. The Company is entitled to a corresponding deduction for
federal income tax purposes in the same amount.
A participant who has been granted a Performance Share Award will not
realize taxable income at the time of the grant, and the Company will not be
entitled to a deduction at such time. A participant will realize ordinary
income at the time the award is paid and the Company will have a corresponding
deduction.
A participant who has been granted a Restricted Stock Award generally
will not realize taxable income at the time of the grant, and the Company will
not be entitled to a deduction at the time of the grant, assuming that the
restrictions constitute a substantial risk of forfeiture for federal income
tax purposes. When such restrictions lapse, the participant will realize
taxable income in an amount equal to the excess of the fair market value of
the shares at such time over the amount, if any, paid for such shares. The
Company will be entitled to a corresponding deduction.
The award of an outright grant of non-restricted Common Stock to a
participant will produce immediate tax consequences for both the participant
and the Company. The participant will be treated as having received taxable
compensation in an amount equal to the then fair market value of the Common
Stock distributed to him. The Company will receive a corresponding deduction
for the same amount.
<PAGE>
New Plan Benefits
1996 Stock Incentive Plan (1)
Name and Position Dollar Value Number of Units
- ----------------- ------------ ---------------
Charles A. Sullivan, CEO (2) $ - -
Michael D. Kafoure, President (2) 358,750 50,000
H.L. Shetler, Executive Vice President (2) - -
Ray Sandy Sutton, Vice President (2) - -
Timothy W. Cranor, Senior Vice President (2) 311,250 30,000
Executive Group (2) 670,000 80,000
Non-Executive Office Employee Group (2) 1,095,188 171,500
Non-Employee Director Group (3) 171,000 7,890
(1) The 1996 Stock Incentive Plan provides for the discretionary grant of
awards. Such awards are not presently determinable due to the discretionary
nature of the Plan. The information provided states the benefits and amount
which would have been allocated for the last fiscal year if the Plan had been
in effect.
(2) The figures provided assume that the same number of options were granted
under the 1996 Plan as were granted under the 1991 Plan and the dollar value
is calculated using the market price of the Company's Common Stock at fiscal
year end of $27.625.
(3) The figures provided assume that each non-employee director elected to
take his retainer in stock in lieu of cash. The dollar value is the aggregate
amount paid to the non-employee director group as retainer in the last fiscal
year. The number of units is the number of shares of the Company's Common
Stock such dollar amount would have purchased based on the market price of the
Company's Common Stock on the date of payment of such retainer. The total
value of such shares at June 1, 1996 using the market price of the Company's
Common Stock at fiscal year end of $27.625 would have been $217,961.
Comparison of 1991 Plan with 1996 Plan
Type and Number of Awards. Pursuant to the 1991 Plan, non-qualified
stock options and incentive stock options may be awarded by the Stock Option
Committee (as defined in the 1991 Plan, which Stock Option Committee was later
designated by the Board as the Compensation Committee). In addition to non-
qualified stock options and incentive stock options, the 1996 Plan would allow
the Committee to grant performance share awards, stock appreciation rights,
restricted Common Stock, and any other award based on Common Stock to eligible
employees and directors. Additionally, the 1996 Plan would allow the Board to
award non-employee directors (as defined in the 1996 Plan) non-qualified stock
options, shares of Common Stock and other awards. Non-employee directors may
also elect to be paid their cash retainer in Common Stock in lieu of cash.
<PAGE>
Administration. The 1991 Plan is administered by the Committee, which
must be composed of at least two directors, each of whom are disinterested
within the meaning of the old Rule 16b-3 promulgated pursuant to the Exchange
Act. The 1996 Plan would be administered by the Committee which would be
composed of two or more members, each of whom would be a non-employee director
within the meaning of the new Rule 16b-3. Members of the Committee who
currently administer the 1991 Plan would be eligible to administer the 1996
Plan pursuant to the new rules.
Eligible Participants. The 1991 Plan provides that any key employee of
the Company or any of its subsidiaries is eligible to receive awards. Non-
employee directors are not eligible to receive awards under the 1991 Plan.
Pursuant to the 1996 Plan any employees of the Company and its subsidiaries,
including executive officers and directors who are executive officers, would
be eligible to receive awards. Additionally, the 1996 Plan will allow non-
employee directors to receive non-qualified stock options, Common Stock and
other awards and Common Stock in lieu of their cash retainer. Each director
shall be required to abstain from voting to approve their own receipt of any
awards under the 1996 Plan.
Required Terms for Awards. The 1991 Plan allows the Committee to set, at
its discretion, the terms of Options, subject to the requirement that the
exercise of the Option be no earlier than one year after the date of the
grant. The exercise price could be paid in cash or in stock, or a combination
thereof at the discretion of the Committee. The 1996 Plan will allow the
Committee to set the terms of awards at its discretion subject to the
requirement that the exercise price be equal to the fair market price of the
underlying shares on the date of the grant.
Other Information
The last sale price of the Company's Common Stock reported by the New
York Stock Exchange on August 9, 1996 was $27.75 per share.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR THIS PROPOSAL
PROPOSAL NO. 3 - APPOINTMENT OF AUDITORS
Stockholders are asked to ratify the appointment of Deloitte & Touche LLP
as independent auditors of the books and accounts of the Company for the
fiscal year ending May 31, 1997.
Representatives of Deloitte & Touche LLP 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.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR THIS PROPOSAL
SUBMISSION OF STOCKHOLDERS' PROPOSALS AND OTHER MATTERS
Proposals of stockholders intended to be presented at the 1997 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 23, 1997, in order to be included in the agenda.
<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
<PAGE>
INTERSTATE BAKERIES CORPORATION
1996 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
PAGE
ARTICLE I PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Establishment. . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .1
2.1 Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.2 Award Notice . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.3 Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.4 Change of Control Event. . . . . . . . . . . . . . . . . . . . .2
2.5 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.6 Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.7 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.8 Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.9 Date of Grant. . . . . . . . . . . . . . . . . . . . . . . . . .3
2.10 Director Options . . . . . . . . . . . . . . . . . . . . . . . .3
2.11 Director Awards. . . . . . . . . . . . . . . . . . . . . . . . .3
2.12 Eligible Employee. . . . . . . . . . . . . . . . . . . . . . . .3
2.13 Employee Director. . . . . . . . . . . . . . . . . . . . . . . .3
2.14 Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.15 Fair Market Value. . . . . . . . . . . . . . . . . . . . . . . .3
2.16 Incentive Stock Option . . . . . . . . . . . . . . . . . . . . .3
2.17 Non-Employee Directors . . . . . . . . . . . . . . . . . . . . .3
2.18 Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.19 Other Incentive Award. . . . . . . . . . . . . . . . . . . . . .3
2.20 Participant. . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.21 Performance Share Award. . . . . . . . . . . . . . . . . . . . .4
2.22 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.23 Restricted Stock Award . . . . . . . . . . . . . . . . . . . . .4
2.24 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE III ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . .4
3.1 Administration by Committee. . . . . . . . . . . . . . . . . . .4
3.2 Committee to Make Rules and Interpret Plan . . . . . . . . . . .5
3.3 Committee Members Ineligible . . . . . . . . . . . . . . . . . .5
ARTICLE IV GRANT OF AWARDS; SHARES
SUBJECT TO THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . .5
ARTICLE V ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE VI STOCK OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . .6
6.1 Grant of Options . . . . . . . . . . . . . . . . . . . . . . . .6
6.2 Conditions of Options. . . . . . . . . . . . . . . . . . . . . .7
6.3 Options to Non-Employee Directors. . . . . . . . . . . . . . . .8
ARTICLE VII PERFORMANCE SHARE AWARDS. . . . . . . . . . . . . . . . . . .9
7.1 Grant of Performance Shares. . . . . . . . . . . . . . . . . . .9
7.2 Conditions of Performance Share Awards . . . . . . . . . . . . .9
<PAGE>
ARTICLE VIII RESTRICTED STOCK AWARDS. . . . . . . . . . . . . . . . . . 10
8.1 Grant of Restricted Stock Awards . . . . . . . . . . . . . . . 10
8.2 Conditions of Restricted Stock Awards. . . . . . . . . . . . . 11
ARTICLE IX OTHER INCENTIVE AWARDS . . . . . . . . . . . . . . . . . . . 11
9.1 Grant of Other Incentive Awards. . . . . . . . . . . . . . . . 11
9.2 Conditions of Other Incentive Awards . . . . . . . . . . . . . 11
ARTICLE X NON-EMPLOYEE DIRECTOR AWARDS. . . . . . . . . . . . . . . . . 12
10.1 Awards to Non-Employee Directors . . . . . . . . . . . . . . . 12
10.2 Common Stock in Lieu of Retainer . . . . . . . . . . . . . . . 12
ARTICLE XI STOCK ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE XII GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.1 Amendment or Termination of Plan . . . . . . . . . . . . . . . 13
12.2 Dividends and Dividend Equivalents . . . . . . . . . . . . . . 14
12.3 Termination of Employment. . . . . . . . . . . . . . . . . . . 14
12.4 Withholding Taxes. . . . . . . . . . . . . . . . . . . . . . . 14
12.5 Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.6 Change of Control. . . . . . . . . . . . . . . . . . . . . . . 15
12.7 Amendments to Awards . . . . . . . . . . . . . . . . . . . . . 15
12.8 Regulatory Approval and Listings . . . . . . . . . . . . . . . 15
12.9 Right to Continued Employment. . . . . . . . . . . . . . . . . 15
12.10 Beneficiaries . . . . . . . . . . . . . . . . . . . . . . 16
12.11 Indemnification . . . . . . . . . . . . . . . . . . . . . 16
12.12 Reliance on Reports . . . . . . . . . . . . . . . . . . . 16
12.13 Relationship to Other Benefits. . . . . . . . . . . . . . 16
12.14 Compliance with the Exchange Act. . . . . . . . . . . . . 17
12.15 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 17
12.16 Construction. . . . . . . . . . . . . . . . . . . . . . . 17
12.17 Governing Law . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
INTERSTATE BAKERIES CORPORATION
1996 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE
1.1 Purpose. The Plan is designed to enable Employee-Directors, Non-
Employee Directors, executive officers and employees of the Corporation to
acquire or increase their equity interests in the Corporation on such
reasonable terms as the Board or the Committee shall determine. The
opportunity so provided is intended to foster in participants a strong
incentive to put forth maximum effort for the continued success and growth of
the Corporation, to aid in retaining individuals who put forth such efforts,
and to assist in attracting the best available individuals in the future. So
that the appropriate incentive can be provided, the Plan provides for granting
(i) Stock Options, Restricted Stock Awards, Performance Shares, and/or Other
Incentive Awards to employees of the Corporation and its Subsidiaries on the
terms and subject to the conditions set forth in the Plan, and (ii) Director
Options and Director Awards to Non-Employee Directors of the Company as
approved by the Board.
1.2 Establishment. The Plan is effective as of the date it is
approved by the shareholders of the Corporation (the "Effective Date"), and
subject to the provisions of Section 12.1, Awards may be granted hereunder for
a period of ten years after such date.
The Plan shall continue in effect until all matters relating to the
payment of awards and administration of the Plan have been settled.
ARTICLE II
DEFINITIONS
2.1 "Award" means, individually, collectively or in tandem, any
Option, Restricted Stock Award, Performance Share Award, or Other Incentive
Award granted under the Plan by the Committee pursuant to such terms,
conditions, restrictions, and/or limitations, if any, as the Committee (or the
Board, with respect to Director Options and Director Awards) may establish by
an Award Notice or otherwise.
2.2 "Award Notice" means any written instrument that establishes the
terms, conditions, restrictions, and/or limitations applicable to an Award in
addition to those established by this Plan and by the Committee's exercise of
its administrative powers.
2.3 "Board" means the Board of Directors of the Corporation.
2.4 "Change of Control Event" means each of the following:
(a) any person or entity is or becomes the beneficial owner (as
defined in the Exchange Act), directly or indirectly, of securities of
the Corporation (excluding securities acquired directly from the
Corporation or its affiliates) representing 25% or more of the combined
voting power of the Corporation's then outstanding securities (other
than any beneficial owner of such percentage or more of such voting
power existing as of the Effective Date); or
<PAGE>
(b) during any period of two consecutive years (not including
any period prior to the Effective Date of the Plan), individuals who at
the beginning of such period constitute the Board, and any new director
(other than a director designated by a person or entity who has entered
into an agreement with the Corporation to effect a transaction described
in clause (a), (c) or (d) of this paragraph) whose election by the Board
or nomination for election by the Corporation's shareholders was
approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously approved, cease for
any reason to constitute a majority thereof; or
(c) the shareholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than
(i) a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity), in
combination with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation, at least
75% of the combined voting power of the voting securities of the
Corporation or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Corporation (or similar transaction)
in which no person or entity acquires more than 50% of the combined
voting power of the Corporation's then outstanding securities; or
(d) the shareholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all the
Corporation's assets.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include
any amendments or successor provisions to such section and any regulations
under such section.
2.6 "Committee" means the Compensation Committee of the Board, or such
other committee designated by the Board, authorized to administer the Plan
under Article III hereof. The Committee shall consist of not less than two
members, each of whom is a Non-Employee Director within the meaning of Rule
16b-3 promulgated under Section 16 of the Exchange Act.
2
2.7 "Common Stock" means the common stock, par value $0.01 per share,
of the Corporation, and after substitution, such other stock as shall be
substituted therefor as provided in Article XI.
2.8 "Corporation" means Interstate Bakeries Corporation.
2.9 "Date of Grant" means the date on which the granting of an Award
is authorized or such later date as may be specified in such authorization.
2.10 "Director Options" means non-qualified Options awarded under
Section 6.3 of the Plan.
<PAGE>
2.11 "Director Awards" means an Award granted or Common Stock issued
under Article X of the Plan.
2.12 "Eligible Employee" means any employee of the Corporation or a
Subsidiary who satisfies all of the requirements of Article V.
2.13 "Employee Director" shall mean a director of the Corporation who
is not a Non-Employee Director.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.15 "Fair Market Value" means the closing sales price of the Common
Stock on the New York Stock Exchange (or such other exchange that the Common
Stock is then traded) on the day for which such value is to be determined, or
if no sale of the Common Stock shall have been made on such exchange that day,
on the next preceding day on which there was a sale of such Common Stock.
2.16 "Incentive Stock Option" means an Option meeting the requirements
of Section 422 of the Code.
2.17 "Non-Employee Directors" means a director who is not, at the time
of determination of such status, an officer or otherwise employed by the
Corporation, or a subsidiary of the Corporation, does not receive compensation
directly or indirectly from the Corporation or a subsidiary of the
Corporation, for services rendered as a consultant or in any capacity other
than as a director, except for an amount for which disclosure would not be
required pursuant to Item 404(a) of Regulation S-K; does not possess an
interest in any other transactions for which disclosure would be required
pursuant to Item 404(a) of Regulation S-K; and is not engaged in a business
relationship for which disclosure would be required pursuant to Item 404(b) of
Regulation S-K.
2.18 "Option" means an Award granted under Article VI of the Plan and
includes both non-qualified Options and Incentive Stock Options.
2.19 "Other Incentive Award" means an Award granted under Article IX of
the Plan.
3
2.20 "Participant" means an Eligible Employee of the Corporation or a
Subsidiary to whom an Award has been granted by the Committee under this Plan.
2.21 "Performance Share Award" means an Award granted under Article VII
of the Plan.
2.22 "Plan" means the Interstate Bakeries Corporation 1996 Stock
Incentive Plan.
2.23 "Restricted Stock Award" means an Award granted under Article VIII
of the Plan.
2.24 "Subsidiary" means any corporation of which a majority of the
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Corporation.
<PAGE>
ARTICLE III
ADMINISTRATION
3.1 Administration by Committee. The Committee shall administer the
Plan, provided that any Director Options or Director Awards shall be approved
by the Board (with the director being granted such Director Option or Director
Awards abstaining from any approval thereof). Unless otherwise provided in
the bylaws of the Corporation or the resolutions adopted from time to time by
the Board establishing the Committee, the Board may from time to time remove
members from, or add members to, the Committee; vacancies on the Committee,
howsoever caused, shall be filled by the Board. The Committee shall designate
one of its members as Chairman. It shall hold its meetings at such times and
places as it may determine. A majority of its members shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members at the time in office. Any determination reduced to writing and
signed by all members shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may appoint a
Secretary, who need not be a member of the Committee, and may establish and
amend such rules and regulations for the conduct of its business as it shall
deem advisable.
Subject to the provisions of the Plan, the Committee shall have the
power to:
(a) Select the Eligible Employees to participate in the Plan.
(b) Determine the time or times when Awards will be made.
(c) Determine the form of an Award, whether a Stock Option, a
Restricted Stock Award, a Performance Share Award, or Other Incentive
Award, the number of shares of Common Stock subject to the Award or with
reference to which the Award is determined, all the terms, conditions
(including performance requirements), restrictions and/or limitations,
if any, of an Award, including the time and conditions of exercise or
vesting, and the terms of any Award Notice, which may include the waiver
or amendment of prior terms and conditions or acceleration or early
4
vesting or payment of an Award under certain circumstances determined by
the Committee.
(d) Determine whether Awards will be granted singly, in
combination or in tandem.
(e) Grant waivers of Plan terms, conditions, restrictions and
limitations.
(f) Accelerate the vesting, exercise, or payment of an Award or
the performance period of an Award when such action or actions would be
in the best interest of the Corporation.
(g) Take any and all other action it deems necessary or
advisable for the proper operation or administration of the Plan.
<PAGE>
The Committee shall also have the authority to grant Awards in
replacement of Awards previously granted under this Plan or any other
executive compensation plan of the Corporation or a Subsidiary.
3.2 Committee to Make Rules and Interpret Plan. The Committee shall
have the authority, subject to the provisions of the Plan, to establish,
adopt, or revise such rules and regulations and to make all such
determinations relating to the Plan as it may deem necessary or advisable for
the administration of the Plan. The Committee's interpretation of the Plan or
any Awards granted pursuant thereto and all decisions and determinations by
the Committee with respect to the Plan shall be final, binding, and conclusive
on all parties unless otherwise determined by the Board.
3.3 Committee Members Ineligible. No Committee member shall be
eligible to participate in the Plan except to the extent set forth in Sections
6.3 and Article X.
ARTICLE IV
GRANT OF AWARDS; SHARES
SUBJECT TO THE PLAN
Awards to one or more Eligible Employees and Non-Employee Directors may
be made; provided, however, that:
(a) Subject to Article XI, an aggregate of 6,841,500 shares of
Common Stock are hereby reserved for use in connection with Awards under
the Plan, which amount shall be the maximum number of shares with
respect to which Options may be granted to any one employee during the
term of the Plan.
5
(b) Any Awards which terminate by expiration, forfeiture,
cancellation, or otherwise without the issuance of shares of Common
Stock, are settled in cash in lieu of Common Stock, or are exchanged in
the Committee's discretion for Awards not involving Common Stock, shall
be available again for grant under the Plan, so long as the holder of
any such Award received no benefits of Common Stock ownership (including
but not limited to dividends) from the shares of Common Stock related to
such Award.
(c) Any shares of Common Stock issued by the Corporation through
the assumption or substitution of outstanding grants from an acquired
company shall reduce the shares available for grants under the Plan.
(d) Common Stock delivered by the Corporation in payment of any
Award under the Plan may be authorized and unissued Common Stock or
Common Stock held in the treasury of the Corporation or may be purchased
on the open market or by private purchase.
(e) The Committee shall, in its sole discretion, determine the
manner in which fractional shares arising under this Plan shall be
treated.
<PAGE>
ARTICLE V
ELIGIBILITY
Awards may be granted under the Plan to any employee of the Corporation
or a Subsidiary. Officers shall be employees for this purpose, whether or not
they are also directors. Awards may also be granted to Non-Employee
Directors, but only in the manner and to the extent set forth in Sections 6.3
and Article X hereof. Awards may be granted to Eligible Employees whether or
not they have received prior Awards under the Plan or under any previously
adopted plan, and whether or not they are participants in other benefit plans
of the Corporation.
Subject to the provisions of the Plan, the Committee shall, from time to
time, select from the Eligible Employees those to whom Awards shall be granted
and shall determine the type or types of Awards to be made and shall establish
in the related Award Notices the terms, conditions, restrictions and/or
limitations, if any, applicable to the Awards in addition to those set forth
in the Plan and the administrative rules and regulations issued by the
Committee.
ARTICLE VI
STOCK OPTIONS
6.1 Grant of Options. The Committee may, from time to time, subject
to the provisions of the Plan and such other terms and conditions as it may
determine, grant Options to Eligible Employees. These Options may be
Incentive Stock Options or non-qualified Options, or a combination of both.
6
Each grant of an Option shall be evidenced by an Award Notice executed by the
Corporation and the Participant, and shall contain such terms and conditions
and be in such form as the Committee may from time to time approve, subject to
the requirements of Section 6.2.
6.2 Conditions of Options. Each Option so granted shall be subject to
the following conditions:
(a) Exercise price. As limited by Section 6.2(e) below, each
Option shall state the exercise price which shall be set by the
Committee at the Date of Grant, which price shall not be less than 100%
of the Fair Market Value of the Common Stock on the Date of Grant.
(b) Form of payment. The exercise price of an Option may be
paid: (i) in cash or by check, bank draft or money order payable to the
order of the Corporation; (ii) in shares of Common Stock; (iii) a
combination of the foregoing; or (iv) such other consideration as the
Committee may deem appropriate. In addition to the foregoing, subject
to the discretion of the Committee, any Option granted under the Plan
may be exercised by a broker-dealer acting on behalf of a Participant if
(A) the broker-dealer has received from the Participant or the
Corporation a fully- and duly-endorsed agreement evidencing such Option
and instructions signed by the Participant requesting the Corporation to
<PAGE>
deliver the shares of Common Stock subject to such Option to the broker-
dealer on behalf of the Participant and specifying the account into
which such shares should be deposited, (B) adequate provision has been
made with respect to the payment of any withholding taxes due upon such
exercise, and (C) the broker-dealer and the Participant have otherwise
complied with Section 220.3(e)(4) of Regulation T, 12 CFR, Part 220 and
any successor rules and regulations applicable to such exercise
("Cashless Exercise"). The Committee shall establish appropriate
methods for accepting Common Stock, and may impose such conditions as it
deems appropriate on the use of such Common Stock in payment of the
exercise price. Common Stock used to exercise an Option shall be valued
at its then Fair Market Value.
(c) Exercise of Options. Options granted under the Plan shall
be exercisable, in whole or in installments, and at such times, and
shall expire at such time, as shall be provided by the Committee in the
Award Notice. Exercise of an Option shall be by written notice stating
the election to exercise in the form and manner determined by the
Committee. Every share of Common Stock acquired through the exercise of
an Option shall be deemed to be fully paid at the time of exercise and
payment of the exercise price.
(d) Other terms and conditions. Among other conditions that may
be imposed by the Committee, if deemed appropriate, are those relating
to: (i) the period or periods and the conditions of exercisability of
any Option; (ii) the minimum periods during which Participants must be
employed by the Corporation or its Subsidiaries, or must hold Options
before they may be exercised; (iii) the minimum periods during which
shares acquired upon exercise must be held before sale or transfer shall
be permitted; (iv) conditions under which such Options or shares may be
subject to forfeiture; (v) restrictions on transferability; and (vi) the
frequency of exercise or the minimum or maximum number of shares that
may be acquired at any one time.
7
(e) Special restrictions relating to Incentive Stock Options.
Options issued in the form of Incentive Stock Options shall, in addition
to being subject to all applicable terms, conditions, restrictions
and/or limitations established by the Committee, comply with the
requirements of Section 422 of the Code (or any successor section
thereto), including, without limitation, the requirement that the
exercise price of an Incentive Stock Option not be less than 100% of the
Fair Market Value of the Common Stock on the Date of Grant, the
requirement that each Incentive Stock Option, unless sooner exercised,
terminated, or canceled, expire no later than ten years from its Date of
Grant, and the requirement that the aggregate Fair Market Value
(determined on the Date of Grant) of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year (under this Plan or any other Plan
of the Corporation or any Subsidiary) not exceed $100,000.
(f) Application of funds. The proceeds received by the
Corporation from the sale of Common Stock pursuant to Options will be
used for general corporate purposes.
<PAGE>
6.3 Options to Non-Employee Directors.
(a) Special restrictions relating to Incentive Stock Options.
Notwithstanding any other provision herein, no Options shall be granted
hereunder to Non-Employee Directors other than the Director Options
granted pursuant to this Section 6.3. Director Options may be awarded
at the discretion and with the approval of the Board with the recipient
of such Award abstaining from the vote. Such Director Options shall be
granted at such time, in such number and with such restrictions as
determined by the Board.
(b) Special restrictions relating to Incentive Stock Options.
Each Director Option shall be evidenced by an Award Notice executed by
the Corporation and the Non-Employee Director, and shall include the
following terms and provisions:
(i) The Option exercise price per share shall be equal to
the Fair Market Value of one share of Common Stock on the date the
Director Option is granted. The period within which each Option
may be exercised shall expire ten years from the date the option
is granted (the "Option Period"), unless it expires sooner due to
the death or termination of the directorship of the optionee, or
if fully exercised prior to the end of such ten year period.
(ii) If the directorship of an optionee is terminated
within the Option Period for any reason other than (i) the death
of the optionee or (ii) on account of any act of fraud,
intentional misrepresentation, embezzlement, misappropriation, or
conversion of assets or opportunities of the Corporation or any of
its Subsidiaries, the Director Option may be exercised by the
optionee, to the extent the optionee was able to do so at the date
of termination of the directorship, within the Option Period.
(iii) If an optionee dies during the Option Period while a
Non-Employee Director of the Corporation, or if an optionee dies
within three months of serving as a Non-Employee Director, the
8
Director Option may be exercised, to the extent the optionee was
entitled to exercise such Option at the date of his or her death,
within one year after such death (if otherwise within the Option
Period), by the executor or the administrator of the estate of the
optionee, or by the person or persons who shall have lawfully
acquired the Director Option directly from the optionee.
(iv) If the directorship of the optionee is terminated
within the Option Period for any of the reasons enumerated in
Section 6.3(b)(ii), such Director Options shall automatically
terminate as of the date of termination of such directorship.
(v) Form of payment. The exercise price of an Option may
be paid: (A) in cash or by check, bank draft or money order
payable to the order of the Corporation; (B) in shares of Common
Stock; (C) a combination of the foregoing; or (D) such other
<PAGE>
consideration as the Board may deem appropriate. In addition to
the foregoing, subject to the discretion of the Board, any Option
granted under the Plan may be exercised by Cashless Exercise. The
Board shall establish appropriate methods for accepting Common
Stock, and may impose such conditions as it deems appropriate on
the use of such Common Stock in payment of the exercise price.
Common Stock used to exercise an Option shall be valued at its
then Fair Market Value.
ARTICLE VII
PERFORMANCE SHARE AWARDS
7.1 Grant of Performance Shares. Grants of Performance Share Awards
may be made by the Committee to any Eligible Employee during the term of the
Plan. Each Performance Share Award shall be evidenced by an Award Notice.
There may be more than one award in existence at any one time for any
Participant and performance periods for separate Performance Share Awards may
differ.
The Performance Shares may be paid out in full or in part on the basis
of performance of the Corporation following the beginning of the Corporation's
fiscal year in which the Performance Share Award is made as hereinafter set
forth. In determining the size of Performance Share Awards, the Committee may
take into account a Participant's responsibility level, performance,
potential, and cash compensation level, as well as such other considerations
as it deems appropriate.
7.2 Conditions of Performance Share Awards. A Performance Share Award
shall be subject to the following terms and conditions:
9
(a) Performance Share Account. Performance Share Awards shall
be credited to a Performance Share account to be maintained for each
holder. A Performance Share Award under the Plan shall only constitute
a contractual right and shall not entitle the holder to any interest in
the Common Stock or to any dividend, voting or other rights of a
shareholder.
(b) Performance Period and Criteria. Performance Shares shall
be contingent upon the attainment during a performance period of certain
performance objectives. The length of the performance period for each
Performance Share Award, the performance objectives to be achieved
during the Performance Share Award period and the measure of whether and
to what degree such objectives have been attained shall be conclusively
determined by the Committee in the exercise of its discretion. The
Committee may revise performance objectives at such times as it deems
appropriate during the Performance Share Award period in order to take
into account or into consideration any unforeseen events or changes in
circumstances; provided, however, that any such revision which is
adverse to the holder of a Performance Share Award shall require the
holder's consent.
<PAGE>
(c) Payment of Award. Following the end of the Performance
Share Award period, the holder of a Performance Share Award shall be
entitled to receive payment of an amount based on the achievement of the
performance measures for such Performance Share Award period.
The Committee may authorize payment of a Performance Share Award
in any combination of cash and Common Stock or all in cash or all in
Common Stock, as it deems appropriate. Such shares may include any
restrictions on transfer and forfeiture provisions as the Committee,
from time to time, deems appropriate.
(d) Additional terms and conditions. The Committee may, by way
of the Award Notice or otherwise, determine such other terms,
conditions, restrictions and/or limitations, if any, of any Performance
Share Award, provided they are not inconsistent with the Plan.
ARTICLE VIII
RESTRICTED STOCK AWARDS
8.1 Grant of Restricted Stock Awards. The Committee may grant a
Restricted Stock Award to any Eligible Employee. Restricted Stock Awards
shall be awarded in such number and at such times during the term of the Plan
as the Committee shall determine. Each Restricted Stock Award may be
evidenced in such manner as the Committee deems appropriate, including,
without limitation, book-entry registration or issuance of a stock certificate
or certificates, and by an Award Notice setting forth the terms of such
Restricted Stock Award.
10
8.2 Conditions of Restricted Stock Awards. The grant of a Restricted
Stock Award shall be subject to the following:
(a) Restriction period. The Committee shall determine the
restriction period (the "Restriction Period") which shall apply to the
shares of Common Stock covered by each Restricted Stock Award or portion
thereof. At the end of the Restriction Period the restrictions imposed
hereunder shall lapse with respect to the shares of Common Stock covered
by the Restricted Stock Award.
(b) Restrictions. The holder of a Restricted Stock Award may
not sell, transfer, pledge, exchange, hypothecate or otherwise dispose
of the shares of Common Stock during any applicable Restriction Period.
The Committee shall impose such other restrictions on any shares of
Common Stock covered by a Restricted Stock Award as it may deem
advisable including, without limitation, restrictions under applicable
Federal or state securities laws, and may legend the certificates
representing Restricted Stock to give appropriate notice of such
restrictions.
<PAGE>
(c) Rights as shareholders. During any Restriction Period, the
Committee may, in its discretion, grant to the holder of a Restricted
Stock Award all or any of the rights of a shareholder with respect to
said shares, including, but not by way of limitation, the right to vote
such shares and to receive dividends. If any dividends or other
distributions are paid in shares of Common Stock, all such shares shall
be subject to the same restrictions on transferability as the shares of
Restricted Stock with respect to which they were paid.
ARTICLE IX
OTHER INCENTIVE AWARDS
9.1 Grant of Other Incentive Awards. The Committee may, in its
discretion, grant other types of awards of, or based on, the Common Stock,
including stock appreciation rights. Such awards may also include grants of
debt securities convertible into or exchangeable for shares of the Common
Stock upon such conditions, including attainment of performance goals, as the
Committee shall determine.
9.2 Conditions of Other Incentive Awards. Each grant of an Other
Incentive Award shall be evidenced by an Award Notice executed by the
Corporation and the Participant, and shall contain such terms and conditions
and be in such form as the Committee may from time to time approve. The
recipient of an Other Incentive Award will have the rights of a shareholder
only to the extent, if any, specified in the Award Notice governing such Other
Incentive Award.
11
ARTICLE X
NON-EMPLOYEE DIRECTOR AWARDS
10.1 Awards to Non-Employee Directors.
(a) Shares of restricted or unrestricted Common Stock may
be awarded to Non-Employee Directors at the discretion and with
the approval of the Board, with the recipient of such shares
abstaining from such vote. Such Awards shall be granted at such
time, in such number and with such restrictions as determined by
the Board. The Board may also, in its discretion, approve other
types of Awards for Non-Employee Directors which are based on the
Common Stock, including stock appreciation rights, stock
performance rights and other incentive awards
(b) Each Director Award shall be evidenced by an Award
Notice executed by the Corporation and the Non-Employee Director
containing the terms, conditions and restrictions of each Director
Award.
<PAGE>
10.2 Common Stock in Lieu of Retainer. Any member of the Board may
elect to receive shares of the Common Stock in lieu of their usual and
customary cash retainer provided that such election is made at least six
months after the date of the most recent election with respect to a Plan
transaction that was a volitional disposition by the Participant and results
in either (i) an intra-plan transfer involving a Common Stock fund or (ii) a
cash distribution funded by a volitional disposition of Common Stock. If an
election to receive shares of Common Stock in lieu of a cash retainer is made,
the electing Board member shall receive that number of shares of Common Stock
equal to the amount of the retainer divided by the Fair Market Value
calculated as of the date of payment of the retainer. An election to receive
shares in lieu of cash which is made in connection with the Participant s
death, disability, retirement or termination of employment need not meet the
requirements of this Section 10.2.
ARTICLE XI
STOCK ADJUSTMENTS
In the event that the shares of Common Stock, as presently constituted,
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of the Corporation or of another corporation
(whether by reason of merger, consolidation, recapitalization,
reclassification, stock split, combination of shares or otherwise), or if the
number of such shares of Common Stock shall be increased through the payment
of a stock dividend, or a dividend on the shares of Common Stock or rights or
warrants to purchase securities of the Corporation shall be made, then there
shall be substituted for or added to each share available under and subject to
the Plan as provided in Article IV hereof, and each share theretofore
12
appropriated or thereafter subject or which may become subject to Awards under
the Plan, the number and kind of shares of stock or other securities into
which each outstanding share of Common Stock shall be so changed or for which
each such share shall be exchanged or to which each such share shall be
entitled, as the case may be. In the event there shall be any other change in
the number or kind of the outstanding shares of Common Stock, or any stock or
other securities into which the Common Stock shall have been changed or for
which it shall have been exchanged, then if the Committee (or the Board with
respect to Director Options and Director Awards) shall, in its sole
discretion, determine that such change equitably requires an adjustment in the
shares available under and subject to the Plan, or in any Award theretofore
granted or which may be granted under the Plan, such adjustments shall be made
in accordance with such determination, except that no adjustment of the number
of shares of Common Stock available under the Plan or to which any Award
relates that would otherwise be required shall be made unless and until such
adjustment either by itself or with other adjustments not previously made
would require an increase or decrease of at least 1% in the number of shares
of Common Stock available under the Plan or to which any Award relates
immediately prior to the making of such adjustment (the "Minimum Adjustment").
Any adjustment representing a change of less than such minimum amount shall be
carried forward and made as soon as such adjustment together with other
adjustments required by this Article XI and not previously made would result
in a Minimum Adjustment. Notwithstanding the foregoing, any adjustment
required by this Article XI which otherwise would not result in a Minimum
Adjustment shall be made with respect to shares of Common Stock relating to
any Award immediately prior to exercise, payment or settlement of such Award.
<PAGE>
No fractional shares of Common Stock or units of other securities shall
be issued pursuant to any such adjustment, and any fractions resulting from
any such adjustment shall be eliminated in each case by rounding downward to
the nearest whole share.
ARTICLE XII
GENERAL
12.1 Amendment or Termination of Plan. The Board may suspend or
terminate the Plan at any time. In addition, the Board may, from time to
time, amend the Plan in any manner, but may not without shareholder approval
adopt any amendment which would:
(a) increase the aggregate number of shares of Common Stock
available under the Plan (except by operation of Article XI); and
(b) materially modify the requirements as to eligibility for
participation in the Plan;
13
provided, that any amendment to the Plan shall require approval of the
shareholders if, in the opinion of counsel to the Corporation, such approval
is required by Section 16(b) or any other section of the Exchange Act, any
other Federal or state law or any regulations or rules promulgated thereunder
or the rules of the New York Stock Exchange (or such other exchange on which
the Common Stock is listed).
12.2 Dividends and Dividend Equivalents. The Committee or the Board
may choose, at the time of the grant of an Award or any time thereafter up to
the time of payment of such Award, to include as part of such Award an
entitlement to receive dividends or dividend equivalents subject to such
terms, conditions, restrictions, and/or limitations, if any, as the Committee
(or the Board) may establish. Dividends and dividend equivalents granted
hereunder shall be paid in such form and manner (i.e., lump sum or
installments), and at such time as the Committee (or the Board) shall
determine. All dividends or dividend equivalents which are not paid currently
may, at the Committee's (or the Board's) discretion, accrue interest, be
reinvested into additional shares of Common Stock or, in the case of dividends
or dividend equivalents credited in connection with a Performance Share Award,
be credited as additional Performance Shares and paid to the Participant if
and when, and to the extent that, payment is made pursuant to such Performance
Share Award.
12.3 Termination of Employment. If a Participant's employment with the
Corporation or a Subsidiary terminates for a reason other than death,
disability, retirement or any approved reason, all unexercised, unearned
and/or unpaid Awards, including, but not by way of limitation, Awards earned
but not yet paid, all unpaid dividends and dividend equivalents, and all
interest accrued on the foregoing, shall be canceled or forfeited, as the case
may be, unless the Participant's Award Notice provides otherwise. The
Committee shall have the authority to promulgate rules and regulations to (i)
determine what events constitute disability, retirement, or termination for an
<PAGE>
approved reason for purposes of the Plan, and (ii) determine the treatment of
a Participant under the Plan in the event of his or her death, disability,
retirement, or termination for an approved reason. Such rules and regulations
may include, without limitation, the method, if any, for prorating a
Performance Share Award, accelerating the vesting of any Options or Restricted
Stock Award, or providing for the exercise of any unexercised Options in the
event of a Participant's death, disability, retirement or termination for an
approved reason.
12.4 Withholding Taxes. The Corporation shall be entitled to deduct
from any payment under the Plan, regardless of the form of such payment, the
amount of all applicable income and employment taxes required by law to be
withheld with respect to such payment or may require the Award holder to pay
to it such tax prior to and as a condition of the making of such payment. In
accordance with any applicable administrative guidelines it establishes, the
Committee may allow an Award holder to pay the amount of taxes required by law
to be withheld from an Award by withholding from any payment of Common Stock
due as a result of such Award, or by permitting the Award holder to deliver to
the Corporation, shares of Common Stock, having a Fair Market Value, on the
date of payment, equal to the amount of such required withholding taxes.
14
12.5 Forfeiture. If the employment of a Participant is terminated on
account of any act of fraud, intentional misrepresentation, embezzlement,
misappropriation or conversion of assets or opportunities of the Corporation
or any of its Subsidiaries, any Award granted hereunder, whether and
regardless of the extent to which such Award is vested, earned or exercisable,
shall automatically terminate as of the date of termination of such
employment.
12.6 Change of Control. Awards granted under the Plan may, in the
discretion of the Committee (or the Board), provide that (a) such Awards shall
be immediately vested, fully earned, exercisable, and/or, in the case of
Options, converted into stock appreciation rights, as appropriate, upon a
Change of Control Event, and (b) the Corporation shall make full payment with
respect to any Award, and permit the exercise of Options, respectively,
granted hereunder.
12.7 Amendments to Awards. The Committee (or the Board) may at any
time unilaterally amend the terms of any Award Notice for any Award, whether
or not presently exercisable, earned, paid or vested, to the extent it deems
appropriate; provided, however, that any such amendment which is adverse to
the Award holder shall require the holder's consent. Any action required to
be taken by or approved by the Board hereunder with respect to an Award to a
director of the Corporation shall be approved by a majority of the
disinterested directors of the Board.
12.8 Regulatory Approval and Listings. The Corporation shall use its
best efforts to file with the Securities and Exchange Commission as soon as
practicable following the Effective Date, and keep continuously effective and
usable, a Registration Statement on Form S-8 with respect to shares of Common
Stock subject to Awards hereunder. Notwithstanding anything contained in this
Plan to the contrary, the Corporation shall have no obligation to issue or
deliver certificates representing shares of Common Stock evidencing Restricted
Stock Awards or any other Awards relating to shares of Common Stock prior to:
<PAGE>
(a) the obtaining of any approval from, or satisfaction of any
waiting period or other condition imposed by, any governmental agency
which the Committee shall, in its sole discretion, determine to be
necessary or advisable; and
(b) the completion of any registration or other qualification of
said shares under any state or Federal law or ruling of any governmental
body which the Committee shall, in its sole discretion, determine to be
necessary or advisable.
12.9 Right to Continued Employment. Participation in the Plan shall
not give any Eligible Employee any right to remain in the employ of the
Corporation or any Subsidiary. The Corporation or, in the case of employment
with a Subsidiary, the Subsidiary, reserves the right to terminate any
Eligible Employee at any time. Further, the adoption of this plan shall not
be deemed to give any Eligible Employee or any other individual any right to
be selected as a Participant or to be granted an Award.
15
12.10 Beneficiaries. Each Participant and Non-Employee Director shall
file with the Committee a written designation of one or more persons as the
beneficiary (the "Beneficiary") who shall be entitled to receive the amount,
if any, payable under the Plan upon his death. Such person may, from time to
time, revoke or change his Beneficiary designation without the consent of any
prior Beneficiary by filing a new designation with the Committee. The last
such designation received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death,
and in no event shall be effective as of a date prior to such receipt.
If such Beneficiary designation is not in effect at the time of an Award
holder's death, or if no designated Beneficiary survives such person, or such
designation conflicts with law, the payment of the amount, if any, payable
under the Plan upon his death shall be made to such person's estate. If the
Committee is in doubt as to the right of any person to receive such amount,
the Committee may retain such amount, without liability or any interest
thereon, until the rights thereon are determined, or the Committee may pay
such amount into any court of appropriate jurisdiction and such payment shall
be a complete discharge of the liability of the Plan, the Corporation and the
Committee therefor.
12.11 Indemnification. Each person who is or shall have been a member
of the Committee or of the Board shall be indemnified and held harmless by the
Corporation against and from any loss, cost, liability or expense that may be
imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may
be a party or in which he or she may be involved by reason of any action or
failure to act under the Plan and against and from any and all amounts paid by
such person in satisfaction of judgment in any such action, suit, or
proceeding against such person. He or she shall give the Corporation an
opportunity, at its own expense, to handle and defend the same before he or
she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which such persons may be entitled under the
Corporation's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Corporation may have to indemnify or hold
harmless any such person.
<PAGE>
12.12 Reliance on Reports. Each member of the Committee and each
member of the Board shall be fully justified in relying or acting in good
faith upon any report made by the independent public accountants of the
Corporation and its Subsidiaries and upon any other information furnished in
connection with the Plan by any person or persons other than himself. In no
event shall any person who is or shall have been a member of the Committee or
of the Board be liable for any determination made or other action taken or
any omission to act in reliance upon any such report or information or for
any action taken, including the furnishing of information, or failure to act,
if in good faith.
12.13 Relationship to Other Benefits. No payment under the Plan shall
be taken into account in determining any benefits under any pension,
retirement, profit sharing, group insurance or other benefit plan of the
Corporation or any Subsidiary.
16
12.14 Compliance with the Exchange Act. With respect to persons
subject to Section 16 of the Exchange Act, transactions under this Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent any provision of the Plan
or action by the Committee or the Board fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by
the Committee or the Board. Moreover, in the event the Plan does not include
a provision required by Rule 16b-3 to be stated therein, such provision
(other than one relating to eligibility requirements, or the price and amount
of awards) shall be deemed automatically to be incorporated by reference into
the Plan insofar as Participants and Non-Employee Directors subject to
Section 16 are concerned.
12.15 Expenses. The expenses of administering the Plan shall be borne
by the Corporation subject to such allocation to its Subsidiaries as it deems
appropriate.
12.16 Construction. Masculine pronouns and other words of masculine
gender shall refer to both men and women. The titles and headings of the
articles and sections in the Plan are for the convenience of reference only,
and in the event of any conflict, the text of the Plan, rather than such
titles or headings, shall control.
12.17 Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Delaware except as superseded by
applicable Federal law.
<PAGE>
FORM OF PROXY
-------------
INTERSTATE BAKERIES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints RAY SANDY SUTTON, PAUL E. YARICK, 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 (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders to be held on Tuesday, September 24, 1996, 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)
G. Kenneth Baum E. Garrett Bewkes, Jr. James R. Elsesser
INSTRUCTION: To withhold authority to vote for any individual nominee, strike
through that nominee's name.
2. APPROVAL OF THE INTERSTATE BAKERIES CORPORATION 1996 STOCK INCENTIVE PLAN
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP as independent
auditors of the Company for the fiscal year ending May 31, 1997.
/ / 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.)
<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, FOR approval of the 1996 Stock Incentive
Plan and FOR ratification of the appointment of Deloitte & Touche LLP 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 , 1996
---------------------------
-----------------------------------------
(Signature)
-----------------------------------------
(Signature)
Please sign here exactly as name appears to the
left. When signing as attorney, executor,
administrator, trustee or guardian, please give
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.
