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 Section 240.14a-11(c) or Section 240.
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/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
......................................................................
2) Aggregate number of securities to which transaction applies:
......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
......................................................................
4) Proposed maximum aggregate value of transaction:
......................................................................
5) Total fee paid:
.....................................................................
/ / Fee paid previously with preliminary materials.
<PAGE>
/ / 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 22, 1998
--------------
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Interstate Bakeries Corporation
(the "Company") will be held on September 22, 1998, at 10:00 a.m., in the
Atkins Auditorium of The Nelson-Atkins Museum of Art, 4525 Oak Street, Kansas
City, Missouri 64111, for the following purposes:
1. To elect three Class II Directors to serve a term of three years and
until their successors shall be elected and qualified;
2. 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 29, 1999; and
3. 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 7, 1998,
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. You may also vote via the Internet as indicated on the proxy
card instructions. 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 1998
accompanies this Notice and the Proxy Statement.
By order of the Board of Directors
/s/ Ray Sandy Sutton
Ray Sandy Sutton
Corporate Secretary
August 24, 1998
<PAGE>
INTERSTATE BAKERIES CORPORATION
---------------
PROXY STATEMENT
---------------
This Proxy Statement, which is being mailed to stockholders on or about
August 24, 1998, 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 22, 1998, commencing at 10:00 a.m. in the Atkins Auditorium of The
Nelson-Atkins Museum of Art, 4525 Oak Street, Kansas City, Missouri 64111. 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 7, 1998,
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 7, 1998, the Company had outstanding 72,164,135 shares of common stock,
$.01 par value per share (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 30, 1998 has been mailed with this Proxy Statement
to each stockholder of record as of the close of business on August 7, 1998.
The Company's Form l0-K as filed with the Securities and Exchange Commission
for the fiscal year ended May 30, 1998, will be mailed upon request, free of
charge, to all persons who are record or beneficial holders of the Common
Stock as of August 7, 1998. 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>
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 and FOR the ratification of the
appointment of Deloitte & Touche LLP as independent auditors of the Company.
If any of the director 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 in accordance with the judgment of the person
voting such proxies.
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 three 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 ratification of the appointment of independent auditors
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 ratify the appointment
of auditors, an instruction to "abstain" from voting 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
ratification of 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.
STOCK SPLIT
On September 23, 1997, the Company declared a two-for-one stock split
effected in the form of a stock dividend payable November 3, 1997 to
stockholders of record of the Company's common stock at the close of business
October 15, 1997. All share and per share amounts have been adjusted to reflect
this stock split.
<PAGE>
SECURITY OWNERSHIP
Principal Stockholders
The following table sets forth information as of July 31, 1998, 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.
Name and Address Shares and Nature of Percentage
of Beneficial Owners Beneficial Ownership Held
- -------------------- -------------------- ----------
VCS Holding Company(1) 30,846,154 42.4%
c/o Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164
Metropolitan Life Insurance Company(2) 4,881,260 6.7
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) Up to 4,825,060 of such shares are subject to a securities lending
arrangement with Credit Suisse First Boston Corp., pursuant to
which Credit Suisse First Boston Corp. has the right to vote such
shares. Metropolitan Life may terminate such arrangement at any
time and reacquire such shares.
<PAGE>
Common Stock Owned By Management
The number of shares of Common Stock of the Company beneficially owned as
of July 31, 1998, by the directors, the Named Executive Officers (as defined
below) and all directors and executive officers as a group, are set forth
below:
Shares and Nature of Percentage
Name Beneficial Ownership Held
- ---- -------------------- ----------
Charles A. Sullivan 694,961(l) 1.0%
Michael J. Anderson - -
G. Kenneth Baum 155,812(2) *
Leo Benatar 48,000(3) *
E. Garrett Bewkes, Jr. 49,810(3) *
Philip Briggs 22,000(4)(5) *
Robert B. Calhoun, Jr. 42,732(3) *
James R. Elsesser 49,100(3) *
Frank E. Horton 25,000(4) *
Michael D. Kafoure 233,334(1) *
H. L. Shetler 177,504(1) *
Ray Sandy Sutton 47,275(1) *
Paul E. Yarick 92,243(1) *
All directors and executive officers
as a group (14 persons) 1,659,442(1) 2.2
_____________________
*Less than 1%
(l) Of the shares indicated, 276,296 (Mr. Sullivan), 233,334 (Mr.
Kafoure), 95,024 (Mr. Shetler), 36,668 (Mr. Sutton), 31,017 (Mr.
Yarick) and 933,672 (all directors and executive officers as a
group) are attributable to currently exercisable stock options or
stock options exercisable within 60 days.
(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 155,812 shares indicated, 40,000 are
attributable to currently exercisable stock options and 72,358 of
such shares are held by George K. Baum Group, Inc. Mr. Baum may be
deemed to beneficially own all 72,358 shares of the Common Stock
held by George K. Baum Group, Inc.
(3) Of the shares indicated, 40,000 are attributable to currently
exercisable stock options.
(4) Of the shares indicated, 20,000 are attributable to currently
exercisable stock options.
(5) Mr. Briggs is not standing for re-election as a director.
<PAGE>
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 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.
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 29, 1993
against the cumulative return of the Standard and Poor's Composite 500 Stock
Index ("S&P 500 Index") 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 29, 1993, in the Company's Common Stock, the S&P 500 Index 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
5/29/93 5/28/94 6/03/95 6/01/96 5/31/97 5/30/98
------- ------- ------- ------- ------- -------
Interstate Bakeries 100.00 73.12 92.41 178.73 352.46 431.56
Corporation
S&P 500 Index 100.00 99.34 125.27 147.43 194.57 263.51
S&P Food Index 100.00 104.26 125.31 160.16 207.27 270.87
<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 Age and Five-Year Employment History
---- --- ------------------------------------------
Charles A. Sullivan 63 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 49 President and Chief Operating Officer of the
Company and Brands since September 1995; Senior
Vice President of the Western Division of the
Northwest Region 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
one year prior thereto.
H. L. Shetler 65 Executive Vice President of the Company and
Brands for more than the past five years.
Ray Sandy Sutton 60 Vice President, Corporate Secretary and General
Counsel of the Company and Brands for more than
the past five years.
John F. McKenny 48 Vice President and Corporate Controller of the
Company and Brands for more than the past five
years.
Paul E. Yarick 59 Vice President and Treasurer of the Company and
Brands for more than the past five years.
EXECUTIVE COMPENSATION
The Compensation and Stock Incentive Committee (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 1998 is set forth
below.
<PAGE>
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 Company's 1996 Stock Incentive Plan (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.
<PAGE>
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 Stock Option Plan (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 1998 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
1998 performance was within the range of goals, therefore, Mr. Sullivan was
eligible for an incentive bonus for fiscal 1998.
The Compensation Committee also believes it important to provide incentive to
Mr. Sullivan through equity participation plans. In furtherance of this goal,
during fiscal 1998 the Company granted to Mr. Sullivan the right to receive in
the future up to 200,000 shares of Common Stock, which vests over three years,
one-third per year that he remains employed by the Company, as described in
footnote 3 to the Summary Compensation Table.
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 evaluates 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
<PAGE>
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 30, 1998 and (ii) the four other most highly
compensated executive officers of the Company as of May 30, 1998, whose annual
compensation exceeded $100,000 for the fiscal year ended May 30, 1998 (the
individuals in (i) and (ii) are collectively referred to as the Named
Executive Officers).
Long-Term
Compensation All Other
------------- Compensa-
Annual Compensation Shares Under- tion
Name and Principal Fiscal ---------------------- lying Options ----------
Position Year Salary($) Bonus ($) (#) ($) (1)
- ------------------ ------ --------- ------------ ------------- ----------
Charles A. Sullivan
(2)(3) 1998 $800,000 $1,120,000 -- $12,800
Chairman of the 1997 615,385 1,120,000 150,000 12,800
Board and Chief 1996 600,000 598,416 -- 12,400
Executive Officer
Michael D. Kafoure 1998 401,923 467,500(4) 200,000 12,800
President and Chief 1997 307,692 440,000 100,000 12,800
Operating Officer 1996 228,367 248,568 100,000 37,400(5)
H. L. Shetler 1998 195,385 220,000(4) 30,000 12,800
Executive Vice 1997 186,138 220,000 40,000 12,800
President 1996 180,415 220,000 -- 12,400
Ray Sandy Sutton 1998 202,308 177,726 50,000 12,800
Vice President, 1997 172,308 177,726 30,000 12,800
Corporate Secretary 1996 145,577 161,580 -- 12,400
and General Counsel
Paul E. Yarick 1998 145,769 96,954 24,000 12,800
Vice President 1997 133,461 96,954 20,000 12,800
and Treasurer 1996 119,576 88,146 -- 12,400
_____________________
<PAGE>
(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) Pursuant to a deferred share award granted under the 1996 Plan, on
September 23, 1997, the Company granted to Mr. Sullivan the right to
receive in the future 200,000 shares of Common Stock. Mr.
Sullivan's right to receive the Common Stock in the future vests over
three years, one-third per year that he remains employed by the Company.
Such vesting is accelerated upon Mr. Sullivan's death, disability or upon
the occurrence of a Change of Control Event (as defined in the 1996
Plan). The shares with respect to which rights shall have vested shall
be issued to Mr. Sullivan on the first day of the fiscal year following
the fiscal year in which his employment terminates. As of the date of
this Proxy Statement, none of the shares have vested and Mr. Sullivan
holds no restricted stock.
(4) Of the bonus amounts indicated, 100% (Mr. Shetler) and 15% (Mr. Kafoure)
have been deferred.
(5) Mr. Kafoure was employed by the Company on July 19, 1995. In conjunction
with his employment, Mr. Kafoure was paid a relocation bonus of $25,000.
<PAGE>
Stock Options
The following two tables set forth information for the last completed
fiscal year relating to (i) the grant of stock options to the Named Executive
Officers and (ii) the exercise and appreciation of stock options held by the
Named Executive Officers.
OPTION GRANTS IN THE FISCAL YEAR ENDED MAY 30, 1998
Exer-
Number of Percent of cise Potential Realizable
Shares Total Options or Value of Stock Price
Underlying Granted to Base Appreciation(2)
Options Employees Price Expiration ----------------------
Name Granted(1) In FY ($/sh) Date 5% 10%
- ---- ---------- ------------- ------ ---------- ---------- -----------
Charles A.
Sullivan -- -- $ -- -- $ -- $ --
Michael D.
Kafoure 200,000 7.97 33.90 09/22/07 4,264,698 10,807,582
H. L.
Shetler 30,000 1.20 33.90 09/22/07 639,705 1,621,137
Ray Sandy
Sutton 50,000 1.99 33.90 09/22/07 1,066,175 2,701,895
Paul E.
Yarick 24,000 .96 33.90 09/22/07 511,764 1,296,910
__________________
(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, another 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
ten year option term. There can be no assurance that the potential
realizable values shown in the table will be achieved.
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND OPTION VALUES AT
MAY 30, 1998
Number of Shares Value of
Underlying Unexercised
Unexercised Options In-The-Money Options
Shares At Fiscal Year-end at Fiscal Year-end(1)
Acquired -------------------- ---------------------
on Value Exercis- Unexercis- Exercis- Unexercis-
Name Exercise Realized able able able able
- ---- -------- ---------- -------- ---------- ---------- ----------
Charles A.
Sullivan 60,000 $1,395,000 226,296 100,000 $5,271,642 $1,412,500
Michael D.
Kafoure -- -- 133,332 266,668 2,710,815 941,686
H. L.
Shetler 41,842 1,301,021 51,690 56,668 1,242,208 376,686
Ray Sandy
Sutton 10,000 301,875 10,000 70,000 141,250 282,500
Paul E.
Yarick 45,316 1,355,824 16,350 37,334 405,064 188,343
_____________________
(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 May 30, 1998 ($32.0625).
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 33,846,154
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
below 15% by August 15, 2000.
On July 29, 1997, RPC issued $479,953,687.50 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 SEC
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 $500,000.
Pursuant to certain rights of first refusal of the Company as provided in
the Shareholder Agreement, in connection with the SAILS transaction, during
1997 the Company purchased from RPC 2,000,000 shares of the Company's Common
Stock for $60,079,375 or $30.0396875 per 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 of $30.96875, less a 3% discount. During 1998 the
Company has purchased from RPC 1,200,000 shares of the Company's Common Stock
at an average price of $31.375 per share.
<PAGE>
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, three Class II
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 II Directors at the Meeting. Robert B.
Calhoun, Jr. and Frank E. Horton, current Class II Directors of the Company,
have been nominated for re-election and Michael J. Anderson has been nominated
as a new Class II Director. Philip Briggs who also currently serves as a
Class II Director is not standing for re-election. The following table sets
forth certain information with respect to the three nominees, the Class III
Directors (whose terms expire in 1999) and the Class I Directors (whose terms
expire in 2000). 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 II DIRECTORS FOR
A THREE YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
Principal Occupation
Director or Employment for the Last
Name Age Since Five Years and Directorships
---- --- -------- ----------------------------
Michael J. Anderson 46 1998 President and Chief Operating
Officer of The Andersons, Inc.
since 1996; Vice President and
General Manager of the Retail
Group of The Andersons, Inc.
from 1994 to 1996; Vice
President and General Manager
Grain Group of The Andersons,
Inc. for more than one year
prior thereto. Mr.
Anderson is a director of The
Andersons, Inc.
Robert B. Calhoun, Jr. 55 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., Hvide
Marine and TravelCenters of
America, Inc.
Frank E. Horton(1)(2) 59 1992 President, The University of
Toledo for more than the past
five years; Dr. Horton is a
member of the Advisory Board
of Keybank of Northwest Ohio.
<PAGE>
CLASS III DIRECTORS CONTINUING IN OFFICE
WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING
Principal Occupation
Director or Employment for the Last
Name Age Since Five Years and Directorships
---- --- -------- ----------------------------
G. Kenneth Baum(2) 68 1988 Chairman of the Board of
George K. Baum Group, Inc.
from May 1994 to present;
Chairman of the Board of
George K. Baum & Company for
more than one year prior
thereto. Mr. Baum is a
director of H & R Block, Inc.,
JPS Packaging Company and
Unitog Company.
E. Garrett Bewkes,
Jr.(1)(2) 71 1991 Consultant and Chairman for a
number of 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.
James R. Elsesser 54 1995 Vice President and Chief
Financial Officer of Ralston
Purina Company for more than
the past five years.
<PAGE>
CLASS I DIRECTORS CONTINUING IN OFFICE
WHOSE TERMS EXPIRE AT THE 2000 ANNUAL MEETING
Principal Occupation
Director or Employment for the Last
Name Age Since Five Years and Directorships
---- --- -------- ----------------------------
Charles A. Sullivan 63 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., JPS Packaging
Company and The Andersons,
Inc.
Leo Benatar(1) 68 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, JPS Packaging
Company and Aaron Rents, Inc.;
Chairman and director of
Federal Reserve Bank of
Atlanta until January 1996.
_____________________
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
During the 1998 fiscal year, the Board of Directors held six meetings
(one meeting was held by means of telephone conference call) and acted by
written consent on four separate occasions. All directors attended more than
75% of the Board of Directors' meetings.
<PAGE>
Committees of the Board
The Board of Directors has appointed an Audit Committee and a
Compensation Committee to assist in handling the various functions of the
Board.
The Audit Committee members are Leo Benatar, 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 1998 fiscal
year. All members of the Audit Committee attended the meetings.
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
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 Plan pursuant to which only stock options were awarded. The
Compensation Committee held three meetings during the 1998 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.
In fiscal 1998, each of the non-employee directors was granted an option to
purchase 20,000 shares of the Company's Common Stock at an exercise price of
$33.90625 per share, which was the closing sales price of the Company's Common
Stock on the date of the grant (September 23, 1997), exercisable immediately.
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.
<PAGE>
PROPOSAL NO. 2 - 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 29, 1999.
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 1999 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 26, 1999, in order to be eligible for
inclusion in the Company's fiscal year 1999 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
<PAGE>
FORM OF PROXY
INTERSTATE BAKERIES CORPORATION
ANNUAL MEETING
Atkins Auditorium
The Nelson-Atkins Museum of Art
4525 Oak Street
Kansas City, Missouri
Tuesday, September 22, 1998
10:00 a.m. Central Daylight Time
VOTE BY INTERNET
Your Internet vote is quick, convenient and your vote is immediately
submitted. Just follow these easy steps:
1. Read the accompanying Proxy Statement.
2. Visit our Internet voting site at http://www.umb.com/proxy and follow
the instructions on the screen.
Your Internet vote authorizes the named proxies to vote your shares to
the same extent as if you marked, signed, dated and returned the proxy card.
Please note that all votes cast by Internet must be submitted prior to 5:00
p.m. Central Time, September 21, 1998.
If you vote by Internet, please do not return your proxy by mail.
THANK YOU FOR YOUR VOTE.
Cut or tear along perforated edge
- ------------------------------------------------------------------------------
<PAGE>
INTERSTATE BAKERIES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints PAUL E. YARICK, RAY SANDY SUTTON and
LINDA L. THOMPSON, in the order named, as proxies (each with the power to act
alone and with power of substitution) to vote, as directed below, all shares
of common stock of INTERSTATE BAKERIES CORPORATION (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 22, 1998, at 10:00
a.m. in the Atkins Auditorium of The Nelson-Atkins Museum of Art, 4525 Oak,
Kansas City, Missouri, or any adjournment thereof, as follows:
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) below
Michael J. Anderson, Robert B. Calhoun, Jr., Frank E. Horton
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
-----------------------------------------------
2. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP as independent
auditors of the Company for the fiscal year ending May 29, 1999.
/ / FOR / / AGAINST / / ABSTAIN
3. In accordance with their discretion upon such other matters as may
properly come before the meeting and any adjournment thereof.
(Continued and to be signed and dated on reverse side.)
<PAGE>
INTERSTATE BAKERIES CORPORATION
ANNUAL MEETING
Atkins Auditorium
The Nelson-Atkins Museum of Art
4525 Oak Street
Kansas City, Missouri
Tuesday, September 22, 1998
10:00 a.m. Central Daylight Time
VOTE BY INTERNET
Your Internet vote is quick, convenient and your vote is immediately
submitted. Just follow these easy steps:
1. Read the accompanying Proxy Statement.
2. Visit our Internet voting site at http://www.umb.com/proxy and follow
the instructions on the screen.
Your Internet vote authorizes the named proxies to vote your shares to
the same extent as if you marked, signed, dated and returned the proxy card.
Please note that all votes cast by Internet must be submitted prior to 5:00
p.m. Central Time, September 21, 1998.
If you vote by Internet, please do not return your proxy by mail.
THANK YOU FOR YOUR VOTE.
Cut or tear along perforated edge
- ------------------------------------------------------------------------------
When properly executed, this proxy will be voted in the manner directed by
the undersigned stockholder. If no direction is made, this proxy will be
voted FOR the election of Directors and FOR ratification of the appointment of
Deloitte & Touche LLP as independent auditors of the Company. The Board of
Directors recommends a vote FOR proposals 1 and 2. None of the above
proposals are related to or conditioned on the approval of other matters, and
each proposal has been proposed by the Company.
Please sign exactly as name appears below.
DATED , 1998
---------------------------
---------------------------------------
(Signature)
---------------------------------------
(Signature)
Please sign exactly as name appears at 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.
