SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/x / Preliminary Proxy Statement / /Confidential, for Use of the
Comission Only (as permitted by
Rule 14a-6(e)(2))
/ / 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:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
.......................................................
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PRELIMINARY MATERIALS
INTERSTATE BAKERIES CORPORATION
12 East Armour Boulevard
Kansas City, Missouri 64111
(816) 502-4000
________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 23, 1997
________________
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Interstate Bakeries
Corporation (the "Company") will be held on September 23, 1997,
at 10:00 a.m., at the Waddell & Reed Auditorium, 6300 Lamar,
Shawnee Mission, Kansas 66202, for the following purposes:
1. To elect two Class I Directors to serve a term of three years and
until their successors shall be elected and qualified;
2. To consider and act upon a proposal to amend Section 4.01 of
Article Fourth of the Company's Restated Certificate of
Incorporation to increase the number of shares of all classes of
stock which the Company shall have the authority to issue from
61,000,000 shares, consisting of 60,000,000 shares of Common
Stock, par value $.01 per share and 1,000,000 shares of Preferred
Stock, par value $.01 per share, to 121,000,000 shares, consisting
of 120,000,000 shares of Common Stock, par value $.01 per share
and 1,000,000 shares of Preferred Stock, par value $.01 per share.
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 30, 1998; 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 August 8,
1997, 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. A copy of the Company's Annual Report for fiscal year
1997 accompanies this Notice and the Proxy Statement.
By order of the Board of Directors
/s/ Ray Sandy Sutton
Ray Sandy Sutton
Corporate Secretary
August 25, 1997
PRELIMINARY MATERIALS
INTERSTATE BAKERIES CORPORATION
_____________
PROXY STATEMENT
_____________
This Proxy Statement, which is being mailed to stockholders
on or about August 25, 1997, 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 23,
1997, commencing at 10:00 a.m. at the Waddell & Reed Auditorium,
6300 Lamar, Shawnee Mission, Kansas 66202. 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,
telegram, facsimile or personal solicitation by directors, officers or
other regular employees of the Company, and the Company may
reimburse brokers or other persons holding stock in their names or in
the names of nominees for their expenses in sending proxy soliciting
materials to beneficial owners. No additional compensation will be
paid to directors, officers or other regular employees of the Company
for such services.
The Board of Directors has fixed the close of business on
August 8, 1997, as the record date for the determination of
stockholders entitled to notice of and to vote at the Meeting or any
adjournment thereof and only stockholders of record at the close of
business on that date will be entitled to vote. On August 8, 1997, the
Company had outstanding ____________ shares of common stock,
$.01 par value (the "Common Stock"), entitled to one vote per share.
A copy of the Company's Annual Report containing financial
statements for the fiscal year ended May 31, 1997 has been mailed
with this Proxy Statement to each stockholder of record as of the
close of business on August 8, 1997. The Company's Form l0-K as
filed with the Securities and Exchange Commission for the fiscal year
ended May 31, 1997, will be mailed upon request, free of charge, to
all persons who are record or beneficial holders of the Common Stock
as of August 8, 1997. 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.
VOTING PROCEDURES
Shares represented by a properly signed proxy received
pursuant to this solicitation will be voted in accordance with
instructions thereon. If the proxy is properly signed and returned and
no instructions are given on the proxy with respect to the matters to
be acted upon, the shares represented by the proxy will be voted at the
Meeting FOR the election, as directors of the Company, of the
nominees hereinafter named, FOR the approval of the Amendment to
Section 4.01 of Article Fourth of the Company's Restated Certificate
of Incorporation to increase the number of authorized shares and FOR
the ratification of the appointment of Deloitte & Touche as
independent public accountants of the Company. If any of the
nominees should unexpectedly become unavailable for election for
any reason, the shares represented by the proxy will be voted for such
substituted nominee or nominees as the Board of Directors may
name. Each of the nominees hereinafter named has indicated his
willingness to serve if elected, and it is not anticipated that any of
them will become unavailable for election.
The proxy confers discretionary authority, with respect to the
voting of the shares represented thereby, on any other business that
may properly come before the Meeting. The Board of Directors is
not aware that any such other business, other than as set forth in this
Proxy Statement and except for matters incident to the conduct of the
Meeting, is to be presented for action at the Meeting and does not
itself intend to present any such other business; however, if any such
other business does come before the Meeting, shares represented by
proxies properly signed and returned pursuant to this solicitation will
be voted as directed by the Board of Directors.
A majority of the outstanding shares entitled to vote must be
represented in person or by proxy at the Meeting in order to take
action on the proposals presented in this Proxy Statement. If such a
majority is represented at the Meeting, then the two nominees for
Director receiving the greatest number of votes at the Meeting will be
elected as Directors. Any shares not voted (whether by abstention,
broker non-vote, or otherwise) have no impact in the election of
directors except to the extent the failure to vote for an individual
results in another individual receiving a larger proportion of the total
votes. The Amendment to Section 4.01 of Article Fourth of the
Restated Certificate of Incorporation requires the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock
entitled to notice of and to vote at the Meeting. The ratification of the
appointment of independent public accountants requires the
affirmative vote of a majority of shares present in person or
represented by proxy, and entitled to vote on the matter. For
purposes of determining the outcome of the vote on the proposal to
amend the Restated Certificate of Incorporation and to ratify the
appointment of accountants, an instruction to "abstain" from voting
on either such proposal will be treated as shares present and entitled
to vote, and will have the same effect as a vote against such proposal.
"Broker non-votes," which occur when brokers are prohibited from
exercising discretionary voting authority for beneficial owners who
have not provided voting instructions, are not counted for the purpose
of determining the number of shares present in person or represented
by proxy on a voting matter and will have no effect on the outcome
of the vote on the Amendment to the Restated Certificate of
Incorporation or the ratification of appointment of accountants. The
Company's stockholders will not have dissenters' rights of appraisal
with respect to any of the proposals in this Proxy Statement.
SECURITY OWNERSHIP
Principal Stockholders
The following table sets forth information as of July 31, 1997,
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.
Shares and Nature of Percentage
Name and Address of Beneficial Owners Beneficial Ownership Held
VCS Holding Company(1) (15,923,077) _____
c/o Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164
Metropolitan Life Insurance Company(2) 2,423,930 6.50
Mezzanine Investment Limited Partnership 8
1 Madison Avenue (10th Floor)
New York, NY 10010
_____________________
(1) Includes Common Stock which may be exchangeable by Ralston Purina
Company ("RPC") upon the maturity of its SAILS, as described under
Certain Transactions.
(2)
Common Stock Owned By Management
The number of shares of Common Stock of the Company
beneficially owned as of July 31, 1997, by the Directors, the Named
Executive Officers (as defined below) and all Directors and Executive
Officers as a group, are set forth below:
Name Number of Shares Percentage Held
Charles A. Sullivan 406,177 (l) ___ %
G. Kenneth Baum 67,906 (2) *
Leo Benatar 13,000 (3) *
E. Garrett Bewkes, Jr. 15,480 (3) *
Philip Briggs 1,000 *
Robert B. Calhoun, Jr. 11,366 (3) *
James R. Elsesser 14,550 (3) *
Frank E. Horton 12,500 (3) *
William P. Stiritz 595,050 (3)(4) ___
Ray Sandy Sutton 10,157 (1) *
H. L. Shetler 70,277 (1) *
Michael D. Kafoure 50,000 (1) *
Paul E. Yarick 44,545 (1) *
All Directors and Executive Officers 1,335,399 (1) ___
as a Group (14 persons)
_____________________
*Less than 1%
(l) Of the shares indicated, 118,148 (Mr. Sullivan), 5,000 (Mr.
Sutton), 40,100 (Mr. Shetler), 50,000 (Mr. Kafoure), 27,500
(Mr. Yarick) and 240,748 (all Directors and Executive
Officers as a group) are attributable to currently exercisable
stock options or stock options exercisable within 60 days after
July 24, 1997.
(2) Mr. Baum is a director and Chairman of the Board of George
K. Baum Group, Inc. Mr. Baum is also the majority
stockholder of George K. Baum Group, Inc. Of the 67,906
shares indicated, 10,000 are attributable to currently
exercisable stock options or stock options exercisable within
60 days after July 24, 1997, 36,179 of such shares are held by
George K. Baum Group, Inc. Mr. Baum may be deemed to
beneficially own all 36,179 shares of the Common Stock held
by George K. Baum Group, Inc.
(3) Of the shares indicated, 10,000 are attributable to currently
exercisable stock options or stock options exercisable within
60 days after July 24, 1997.
(4) Mr. Stiritz is not standing for re-election as a Director.
Section 16(a) Beneficial Ownership Reporting Compliance
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 the copies of such forms and
amendments thereto furnished to the Company and written
representations from the executive officers and directors, the
Company believes that all forms required to be filed by "reporting
persons" of the Company were timely filed pursuant to Section 16(a)
of the Exchange Act.
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 Age and Five Year Employment History
Charles A. Sullivan 62 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 48 President and Chief Operating Officer of the
Company and Brands since September 1995; Senior
Vice President - 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 two years prior thereto.
Ray Sandy Sutton 59 Vice President, Corporate Secretary and General
Counsel of the Company and Brands for more than
the past five years.
H.L. Shetler 64 Executive Vice President of the Company and
Brands for more than the past five years.
John F. McKenny 47 Vice President and Corporate Controller of the
Company and Brands for more than the past five
years.
Paul E. Yarick 58 Vice President and Treasurer of the Company and
Brands for more than the past five years.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Company's Board of Directors consists of between five
and nine members, 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 successive years. At
the Meeting, two Class I Directors will be elected to serve until the
third succeeding Annual Meeting of the stockholders of the
Company. Proxies may not be voted for more than two persons in the
election of Class I Directors at the Meeting. Charles A. Sullivan and
Leo Benatar, current Class I Directors of the Company, have been
nominated for re-election. William P. Stiritz who also currently
serves as a Class I Director is not standing for re-election. The
following table sets forth certain information with respect to the two
nominees, the Class II Directors (whose terms expire in 1998) and the
Class III Directors (whose terms expire in 1999). 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.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS FOR
A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL
MEETING
<TABLE>
<CAPTION>
Director Principal Ocupation or Employment for
Name Age Since the Last Five Years and Directorships
<S> <C> <C> <S>
Charles A. Sullivan 62 1989 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.
Mr. Sullivan is a director of UMB Bank, n.a.,
Sealright Co., Inc. and The Andersons, Inc.
Leo Benatar(1) 67 1991 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 Chief
Executive Officer of Engraph, Inc. from 1981
until October 1993. Mr. Benatar is a director
of Johns Manville Corporation, Mohawk
Industries, Inc., PAXAR Corporation,
Graphics Industries, Inc. and Aaron Rents,
Inc., Chairman and director of Federal Reserve
Bank of Atlanta until January 1996.
</TABLE>
CLASS II DIRECTORS CONTINUING IN OFFICE
WHOSE TERMS EXPIRE AT THE 1998 ANNUAL MEETING
<TABLE>
<CAPTION>
Director Principal Occupation or Employment for the
Name Age Since Last Five Years and Directorships
<S> <C> <C> <S>
Philip Briggs(1) 69 1991 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 one year
prior thereto.
Robert B. Calhoun, Jr. 54 1991 Managing Director of Monitor Clipper
Partners since April 1997; Chief Executive
Officer of the Clipper Group, L.P., from
January 1991; Mr. Calhoun is a director of
Avondale Mills, Inc., Sterling Chemicals,
Hvide Marine and TravelCenters of America,
Inc.
Frank E. Horton(1)(2) 58 1992 President, The University of Toledo for more
than the past five years. Dr. Horton is a
member of the Advisory Board of Northwest
Ohio Keybank.
</TABLE>
CLASS III DIRECTORS CONTINUING IN OFFICE
WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING
<TABLE>
<CAPTION>
Director Principal Occupation or Employment for the
Name Age Since Last Five Years and Directorships
<S> <C> <C> <S> <C>
G. Kenneth Baum(2) 67 1988 Chairman of the Board of George K. Baum
Group, Inc. from May 1994 to present;
Mr. Baum is a director of H&R Block, Inc.,
Sealright Co., Inc. and Unitog Company.
E. Garrett Bewkes, Jr. 70 1991 Consultant and Chairman for a number of
(1)(2) PaineWebber mutual funds for more than the
past five years; formerly Chairman of
American Bakeries Company. Mr. Bewkes is
a director of PaineWebber Group, Inc. and
Napro Bio-Pharmaceutical, Inc.
James R. Elsesser 53 1995 Vice President and Chief Financial Officer of
Ralston Purina Company for more than the
past five years.
_____________________
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
</TABLE>
During the 1997 fiscal year, the Board of Directors held five
meetings and acted by written consent on six separate occasions. All
directors attended more than 75% of the Board of Directors' meetings.
Committees of the Board
The Board of Directors has appointed an Audit Committee
and a Compensation and Stock Option Committee (the
"Compensation Committee") to assist in handling the various
functions of the Board.
The Audit Committee members are Leo Benatar, Philip
Briggs, E. Garrett Bewkes, Jr. and Frank E. Horton. 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 1997 fiscal year.
All members of the Audit Committee attended the meetings, except
Mr. Benatar who was unable to attend either 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 Awards granted under the
Company's 1996 Stock Incentive Plan (the "1996 Plan") which was
approved by the stockholders at the 1996 Annual Meeting. Prior to
the establishment of the 1996 Plan, the Compensation Committee
administered the 1991 Stock Option Plan (the "1991 Plan") pursuant
to which only stock options were awarded. The Compensation
Committee held three meetings during the 1997 fiscal year. All
members of the Compensation Committee attended the meetings.
The Company does not have a standing nominating
committee.
Directors' Fees and Related Information
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. In addition, non-employee directors are
eligible for awards of stock options and restricted or unrestricted
shares of common stock pursuant to the 1996 Plan. However, no
such awards were made to the non-employee directors in fiscal 1997.
Directors may also elect to receive their retainers in the form of
Common Stock pursuant to the 1996 Plan.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee was an officer,
employee or a former officer or employee of the Company or any of
its subsidiaries during the last fiscal year.
COMMON STOCK PERFORMANCE
The graph set forth below compares the yearly percentage
change in cumulative stockholder return of the Company's Common
Stock since May 30, 1992 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 May 30,
1992, 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
<TABLE>
<CAPTION>
5/30/92 5/29/93 5/28/94 6/03/95 6/01/96 5/31/97
<S> <C> <C> <C> <C> <C> <C>
Interstate Bakeries 100.00 116.31 85.05 107.49 207.87 409.95
S&P 500 Index 100.00 111.61 116.36 139.86 178.75 231.33
S&P Food Index 100.00 104.86 104.16 131.36 154.60 204.02
</TABLE>
EXECUTIVE COMPENSATION
The Compensation Committee, which consists of three non-employee
directors, recommends to the full Board of Directors the
compensation of the Chief Executive Officer. The Compensation
Committee also 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
1997 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 dedicated and talented 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) equity
based grants, to ensure that management has a continuing stake in the
long-term success of the Company in return of value to its
stockholders.
The Compensation Committee recognizes that it must
maintain base salary levels approximately commensurate with other
comparable companies in the food industry with whom the Company
competes for management personnel including, but not limited to
those included in the S&P Food Index (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
approving 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. Operating
performance of the Company includes such measures as sales
volumes, market share performance, operating and net income margin
trends, growth in earnings and cash flow per share, returns on capital
and equity and increases in the value of the Company's Common
Stock. Additional adjustments to reflect changes in the market or in
individual responsibilities may be appropriate from time to time.
All executive officers and key management personnel of the
Company are eligible to receive cash incentive bonuses under the
Company's Incentive Compensation Plan. Incentive bonus awards
are based upon the Company achieving certain operating cash flow
objectives. The Chief Executive Officer submits proposed minimum,
target and maximum operating cash flow objectives to the Board of
Directors for approval. Annual incentive bonus payments are
calculated based on a formula which compares the Company's actual
operating cash flow levels achieved to the objectives approved by the
Board of Directors. Payments range from zero to 200% of target
bonus amounts for the Chief Executive Officer and the divisional and
corporate officers and zero to 150% for bakery management.
Awards granted pursuant to the 1996 Plan 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 and
other equity based ownership. To date, only stock options have been
granted pursuant to the 1991 Plan and 1996 Plan.
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 under both the 1991 Plan and the 1996
Plan 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 1996 Plan. The
1996 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.
As with all executive officers of the Company, the
compensation of the Chief Executive Officer is reviewed by the
Compensation Committee on a regular basis in comparison to
compensation paid to executives holding comparable positions of
responsibility including those employed at Comparable Companies.
When recommending compensation for the Chief Executive Officer,
the Compensation Committee utilizes the same factors applied to the
other 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 specifically discusses 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 1997 compensation was determined in
accordance with the Company's compensation policy which provides
that executive compensation levels will be higher in years in which
performance goals are achieved or exceeded. Incentive compensation
is based on operating cash flow objectives defined with minimum,
target and maximum operating cash flow goals. Fiscal 1997
performance was within the range of goals, therefore Mr. Sullivan
was eligible for an incentive bonus for fiscal 1997.
Section 162(m) of the Internal Revenue Code of 1986 (the
"IRC") imposes a $1 million cap on the deductibility of compensation
(other than certain performance based compensation) to certain
executive officers of public companies. The Compensation
Committee will 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 IRC. However, in any such evaluation, other
considerations, such as the retention of key personnel, may be
determined to be of more importance than tax savings.
Compensation Committee
E. Garrett Bewkes, Jr., Chairman
G. Kenneth Baum
Frank E. Horton
Summary Compensation Table
The following table sets forth information concerning
compensation received for each of the last three fiscal years by (i) the
Chief Executive Officer of the Company as of May 31, 1997 and (ii)
the four other most highly compensated executive officers of the
Company as of May 31, 1997, whose annual compensation exceeded
$100,000 for the fiscal year ended May 31, 1997 ((i) and (ii)
collectively the "Named Executive Officers"). The Company has not
awarded stock appreciation rights, restricted stock or other long-term
incentive compensation (other than stock options) under the 1996
Plan.
<TABLE>
<CAPTION>
Long-Term
Compensation All Other
Name and Principal Fiscal Annual Compensation Shares Under- Compensation
Position Year Salary $ Bonus $ lying Options (#) ($) (1)
<S> <C> <C> <C> <C> <C>
Charles A. Sullivan(2) 1997 $615,385 $1,120,000(3) 75,000 $12,800
Chairman of the 1996 600,000 598,416 -- 12,400
Board and Chief 1995 453,846 192,830 75,000 12,000
Executive Officer
Michael D. Kafoure 1997 307,692 440,000(3) 50,000 12,800
President and Chief 1996 228,367 248,568 50,000 36,400 (4)
Operating Officer 1995 -- -- -- --
H. L. Shetler 1997 186,138 220,000(3) 20,000 12,800
Executive Vice 1996 180,415 220,000 -- 12,400
President 1995 143,298 141,476 35,000 12,000
Ray Sandy Sutton 1997 172,308 177,726 15,000 12,800
Vice President, 1996 145,577 161,580 -- 12,400
Corporate Secretary 1995 137,063 85,738 20,000 12,000
and General Counsel
Paul E. Yarick 1997 133,461 96,954 10,000 12,800
Vice President 1996 119,576 88,146 -- 12,400
and Treasurer 1995 107,080 60,507 20,000 12,000
_____________________
(1) These amounts represent contributions by the Company to the
Company's Retirement Income Plan for the benefit of each executive.
(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.
(3) Of the bonus amounts indicated, 76% (Mr. Sullivan), 100%
(Mr. Shetler) and 15% (Mr. Kafoure) have been deferred.
(4) Mr. Kafoure was employed by the Company on July 19, 1995.
In conjunction with his employment, Mr. Kafoure was paid a
relocation bonus of $25,000.
</TABLE>
Stock Options
The following two tables set forth information for the last
completed fiscal year relating to (i) the grant of stock options to the
Named Executive Officers and (ii) the exercise and appreciation of
stock options held by the Named Executive Officers.
OPTION GRANTS IN THE FISCAL YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
Number of Percent
Shares Total Options Potential Realizable
Underlying Granted to Exercise or Value of Stock Price
Options Employees Base Price Expiration Appreciation (2)
Name Granted(1) in FY ($/sh) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Charles A. Sullivan 75,000 7.19 $37.00 09/23/06 $1,745,183 $4,422,635
Michael D. Kafoure 50,000 4.79 37.00 09/23/06 1,163,455 2,948,424
Ray Sandy Sutton 15,000 1.44 37.00 09/23/06 349,037 884,527
H.L. Shetler 20,000 1.92 37.00 09/23/06 465,382 1,179,369
Paul E. Yarick 10,000 .96 37.00 09/23/06 232,691 589,685
_____________________
(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 over a three year period after the date
of grant - one-third after the first year, one-third after the second year and
the total option shares after three years.
(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>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND OPTION VALUES AT
MAY 31, 1997
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Shares Underlying Unexercised Options In-The-Money Options
Acquired Value at Fiscal Year-end at Fiscal Year-end (1)
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Charles A Sullivan 121,852 $2,400,380 118,148 75,000 $4,666,689 $1,256,250
Michael D. Kafoure ---- ---- 50,000 50,000 1,665,000 837,500
Ray Sandy Sutton 5,000 183,125 5,000 15,000 196,875 251,250
H.L. Shetler 18,749 643,506 40,100 20,000 1,219,562 335,000
Paul E. Yarick 20,792 708,037 27,500 10,000 904,375 167,500
_____________________
(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, 1997 ($53.75).
</TABLE>
CERTAIN TRANSACTIONS
On July 22, 1995, the Company acquired Continental Baking
Company ("CBC") from Ralston Purina Company ("RPC") for
$220,000,000 in cash and 16,923,077 shares of the Company's
Common Stock. In connection therewith, RPC and the Company
entered into a Shareholder Agreement which provided, among other
things, that Mr. Elsesser be elected to the Board of the Company to
serve until 1999 and that RPC reduce its ownership of the Company's
Common Stock to or below 14.9% by August 15, 2000.
On July 29,1997, RPC issued $419,998,187.50 of 7% Stock
Appreciation Income Linked Securities ("SAILS") which may be
exchangeable upon maturity on August 1, 2000 for shares of the
Common Stock of the Company owned by RPC. Registration
Statements covering the SAILS and the related Common Stock were
filed pursuant to the Shareholder Agreement and declared effective
by the Securities Exchange Commission on July 23, 1997. In
connection with the registration of the SAILS and the Common
Stock, the Company paid certain filing fees, printing expenses and
related fees in the approximate amount of $503,712.
Pursuant to certain rights of first refusal of the Company as
provided in the Shareholder Agreement, in connection with the
SAILS transaction, the Company purchased from RPC 1,000,000
shares of the Company's Common Stock for $60,079,375 or
$61.9375 a share, which amount was the closing sales price of the
Common Stock on the New York Stock Exchange on the date of
pricing of the SAILS, less a 3% discount.
PROPOSAL NO. 2 - AMENDMENT TO THE RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SALES
The Board of Directors has unanimously approved an
amendment to Section 4.01 of Article FOURTH of the Restated
Certificate of Incorporation to increase the number of shares of all
classes of stock which the Company shall have authority to issue
from 61,000,000, consisting of 60,000,000 shares of Common Stock,
par value $.01 per share and 1,000,000 shares of Preferred Stock, par
value $.01 per share, to 121,000,000 shares, consisting of
120,000,000 shares of Common Stock, par value $.01 per share and
1,000,000 shares of Preferred Stock, par value $.01 per share.
Currently, section 4.01 of ARTICLE FOURTH provides as
follows:
The total number of shares of all
classes of stock which the Corporation
shall have the authority to issue is
61,000,000 shares, consisting of
60,000,000 shares of Common Stock
of $.01 par value ("Common Stock")
and 1,000,000 shares of Preferred
Stock of $.01 par value ("Preferred
Stock").
As amended, Section 4.01 of ARTICLE FOURTH would read
in its entirety as follows:
The total number of shares of all
classes of stock which the Corporation
shall have the authority to issue is
121,000,000 shares, consisting of
120,000,000 shares of Common Stock
of $.01 par value ("Common Stock")
and 1,000,000 shares of Preferred
Stock of $.01 par value ("Preferred
Stock").
In all other respects the Restated Certificate of Incorporation
will remain unchanged. The text of the proposed Amendment is
attached hereto as Appendix A.
As of August 8, 1997, ____________ shares of Common
Stock were issued and outstanding and no shares of Preferred Stock
were issued and outstanding. An additional 5,510,838 shares of
Common Stock are reserved for issuance upon exercise of
outstanding stock options under the Company's 1996 Stock Incentive
Plan. The Board of Directors believes that the additional shares of
Common Stock will afford the Company greater flexibility in
meeting the future capital requirements of the Company and for other
corporate needs which may arise. This might include, without
limitation, issuances as part or all of the consideration paid by the
Company for the possible acquisition of a property, business or entity
and obtaining capital for use in the Company's business and
operations. The Company has no agreements, plans, proposals,
commitments, undertakings or arrangements which would result in
the issuance of any additional shares of Common Stock and there can
be no assurance that any such transaction will be entered into
resulting in the issuance of additional shares. The additional
authorized shares will have no preemptive rights.
The Board of Directors may issue the additional authorized
shares without further action or authorization by the stockholders
(except as may be required by law or by any stock exchange on which
the Company's securities may then be listed) for corporate purposes
which the Board of Directors may deem desirable, including, without
limitation, stock splits, stock dividends or other distributions,
financings, acquisitions, stock grants, options and employee benefit
plans.
Difficulty in Effecting Changes in Control
Certain provisions of the Company's Certificate of
Incorporation and Bylaws could discourage potential acquisition
proposals and could delay or prevent a change in control of the
Company. The Company is authorized to issue up to one million
shares of Preferred Stock, the relative rights and preferences of which
may be fixed by the Company's Board of Directors, without
stockholder approval. While the Company has no present plans to
issue any shares of Preferred Stock, the future issuance thereof could
have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from acquiring, outstanding voting
stock of the Company.
Generally, pursuant to the Company's Certificate of
Incorporation, any business combination between the Company and
a stockholder who beneficially owns 5% or more of the Company's
outstanding voting stock (an "Interested Stockholder") must be
approved by the affirmative vote of not less than a majority of the
Company's outstanding voting stock held by the stockholders who
are not involved in the transaction. Exceptions to this rule exist for:
(1) a business combination that is solely between the Company and
another corporation whose voting stock is 100% owned, directly or
indirectly, by the Company, and (2) a business combination that is a
merger or consolidation and the value of the consideration to be
received per share by holders of Common Stock is not less than the
highest per-share price (with appropriate adjustments for
recapitalizations and for stock splits, stock dividends, and like
distributions), paid by the Interested Stockholder in acquiring any of
its holdings of Common Stock. Further, the conditions of the
provision may be waived by the Company's Board of Directors in
appropriate circumstances as set forth in the Certificate of
Incorporation.
The term "business combination" generally includes: (1) a
merger or consolidation of the Company or a subsidiary with or into
an Interested Stockholder; (2) a sale, lease, exchange, transfer or other
disposition to an Interested Stockholder of all or any substantial part
of the assets either of the Company or of a subsidiary; (3) any merger
or consolidation of an Interested Stockholder with or into the
Company or a subsidiary; (4) any sale, lease, exchange, transfer or
other disposition of all or any substantial part of the assets of an
Interested Stockholder to the Company or a subsidiary; (5) except in
certain circumstances, the issuance of any securities of the Company
or a subsidiary to an Interested Stockholder; (6) any recapitalization
that would have the effect of increasing the voting power of an
Interested Stockholder by more than 10%; and (7) any agreement,
contract or other arrangement providing for any of the transactions
described above.
The Company's Certificate of Incorporation provides for a
classified board of directors with staggered three-year terms, a
provision that increases the difficulty of removing all of the
incumbent directors at one time which, in turn, could discourage a
proxy contest.
Board Recommendation
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to notice of and to vote
at the Annual Meeting is required under Delaware law for the
adoption of the Amendment to Section 4.01 of Article Fourth of the
Company's Restated Certificate of Incorporation. Accordingly, if the
proposal is adopted, the Board of Directors intends to file an
amendment to the Company's Restated Certificate of Incorporation
following the Annual Meeting, in substantially the final form of
Appendix A to this Proxy Statement, subject to any changes as may
be required by law or otherwise deemed advisable. THE BOARD
OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION
OF THE AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION.
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 30, 1998.
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 1998
Annual Meeting must be made in compliance with the rules and
regulations of the Securities and Exchange Commission and be
received by the Corporate Secretary, Interstate Bakeries Corporation,
12 East Armour Boulevard, Kansas City, Missouri 64111, no later
than April 22, 1998, in order to be eligible for inclusion in the
Company's fiscal year 1998 proxy materials.
Management does not intend to bring any other matters before
the Meeting and is not aware of any matters to come before the
Meeting other than those referred to in the Proxy Statement.
However, if any other matters should properly come before the
Meeting, it is intended that the proxies solicited hereby will be voted
thereon in accordance with the judgment of the person voting such
proxies.
By Order of the Board of Directors
/s/ Ray Sandy Sutton
Ray Sandy Sutton
Corporate Secretary
APPENDIX A
BE IT RESOLVED, that, subject to the approval of the
stockholders, ARTICLE FOURTH of the Restated Certificate of
Incorporation of the Company be amended to read as follows:
Section 4.01 Authorized Capital. The total
number of shares of all classes of stock which the
Corporation shall have the authority to issue is
121,000,000 shares, consisting of 120,000,000 shares
of Common Stock of $.01 par value ("Common
Stock") and 1,000,000 shares of Preferred Stock of
$.01 par value ("Preferred Stock").
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 23, 1997,
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 / /WITHHOLD AUTHORITY
listed below to vote for all nominees
below
(except as marked to the contrary below)
Charles A. Sullivan, Leo Benatar
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.
2. APPROVAL OF AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORORATION
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE
LLP as independent auditors of the Company for the fiscal year ending
May 30, 1998.
/ / 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.)
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 amendment of the Company's
Restated Certificate of Incorporation 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 ___________________________, 1997
-----------------------------------------
(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.
