SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only (as
permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTERSTATE BAKERIES CORP.
---------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
INTERSTATE BAKERIES CORP.
---------------------------------------------------------------------------
(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.
<PAGE>
(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.
[ ] 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 26, 2000
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Interstate Bakeries Corporation
(the "Company") will be held on September 26, 2000, 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 I Directors to serve a term of three years
expiring in 2003;
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 June 2, 2001; 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 11,
2000, are entitled to notice of and to vote at the meeting or any
adjournment thereof.
All stockholders are cordially invited to attend the meeting. Whether
or not you expect to attend the meeting, please complete, date, sign and
return the enclosed proxy as promptly as possible in order to ensure your
representation at the meeting. A postage prepaid envelope is enclosed for
that purpose. The prompt return of proxies will assure a quorum and save
the Company the expense of further solicitation. If you attend the
meeting, you may vote personally on all matters, and in that event, the
proxy will not be voted.
By Order of the Board of Directors
/s/ Ray Sandy Sutton
--------------------
Ray Sandy Sutton
Corporate Secretary
August 28, 2000
<PAGE>
INTERSTATE BAKERIES CORPORATION
PROXY STATEMENT
This Proxy Statement, which is being mailed to stockholders on or
about August 28, 2000, 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 26, 2000, 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 11,
2000, 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 11, 2000, the Company had outstanding
63,338,217 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 June 3, 2000 is being provided to each
stockholder of record as of the close of business on August 11, 2000. The
Company's Form 10-K to be filed with the Securities and Exchange
Commission for the fiscal year ended June 3, 2000, will be mailed upon
request, free of charge, to all persons who are record or beneficial
holders of the Common Stock as of August 11, 2000. To obtain a copy of
such report, written request should be made to the Company (Attention:
Mr. Ray Sandy Sutton, Corporate Secretary) at 12 East Armour Boulevard,
Kansas City, Missouri 64111.
1
<PAGE>
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. 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 on 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 independent 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.
2
<PAGE>
SECURITY OWNERSHIP
Principal Stockholders
The following table sets forth information as of August 2, 2000,
regarding the ownership of the Company's Common Stock by each person
known to the Company to be the beneficial owner of more than 5% of the
Company's Common Stock.
Amount and Nature of Percentage
Name and Address of Beneficial Owners Beneficial Ownership Held
------------------------------------- -------------------- ----
Tower Holding Company, Inc.(1) 27,795,134 43.88%
c/o Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164
Harris Associates, L.P. 3,955,628 6.25
Two North LaSalle Street
Suite 500
Chicago, IL 60602-3790
American Century Investment 3,798,200 6.00
Management, Inc.
4500 Main Street
P. O. Box 418210
Kansas City, MO 64141-9210
Trimark Financial Corporation 3,693,050 5.83
One First Canadian Place, Suite 5600
P. O. Box 487
Toronto, Ontario M5X 1E5 Canada
----------
(1) Includes 12,946,980 shares of Common Stock which is subject to a
repurchase agreement by the Company on September 1, 2000.
<PAGE>
Common Stock Owned By Management
The number of shares of Common Stock of the Company beneficially
owned as of August 2, 2000, by the directors, the Named Executive Officers
(as defined below) and all directors and executive officers as a group,
are set forth below:
Amount and Nature of Percentage
Name Beneficial Ownership Held
----- --------------------- ----
Charles A. Sullivan 777,623 (1)(7) 1.22%
Michael J. Anderson 30,350 (5) *
G. Kenneth Baum 190,812 (2) *
Leo Benatar 77,410 (3) *
E. Garrett Bewkes, Jr. 91,810 (3) *
Robert B. Calhoun, Jr. 72,732 (3) *
James R. Elsesser 79,100 (3) *
Frank E. Horton 56,000 (4) *
Richard L. Metrick 20,000 (6) *
Michael D. Kafoure 426,767 (1) *
Frank W. Coffey 41,167 (1) *
Ray Sandy Sutton 97,002 (1) *
Brian E. Stevenson 70,188 (1) *
All directors and executive officers 2,359,899 (1)(7) 3.63
as a group (16 persons)
----------
*Less than 1%
3
(l) Of the shares indicated, 184,000 (Mr. Sullivan), 415,073 (Mr.
Kafoure), 16,667 (Mr. Coffey), 96,667 (Mr. Sutton), 60,001 (Mr. Stevenson)
and 1,415,498 (all directors and executive officers as a group) are
attributable to currently exercisable employee 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 190,812 shares indicated, 70,000 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, 70,000 are attributable to currently
exercisable stock options.
(4) Of the shares indicated, 50,000 are attributable to currently
exercisable stock options.
(5) Of the shares indicated, 30,000 are attributable to currently
exercisable stock options.
(6) Of the shares indicated, 10,000 are attributable to currently
exercisable stock options.
(7) Of the shares indicated, 200,000 shares are vested or to be
vested within 60 days under the deferred share award granted September 23,
1997, as described in footnote 3 to the Summary Compensation Table.
<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, to the Company's knowledge, all forms
required to be filed by "reporting persons" of the Company were timely
filed pursuant to Section 16(a) of the Exchange Act, with the exception of
a Form 4 inadvertently filed late for G. Kenneth Baum.
4
<PAGE>
COMMON STOCK PERFORMANCE
The graph set forth below compares the yearly percentage change in
cumulative stockholder return of the Company's Common Stock since June 3,
1995 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 June 3, 1995, 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
TOTAL SHAREHOLDER RETURNS
<TABLE>
<CAPTION>
6/03/95 6/01/96 5/31/97 5/30/98 5/29/99 6/03/00
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Interstate Bakeries
Corporation 100.00 193.49 381.48 467.03 316.32 216.61
S&P 500 Index 100.00 128.44 166.22 217.23 262.90 290.45
S&P Food Index 100.00 117.81 155.47 210.55 185.99 168.58
</TABLE>
5
<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 and its wholly owned subsidiaries, Interstate Brands
Corporation and Interstate Brands West Corporation (such subsidiaries
collectively referred to herein as "Brands"). The executive officers of
the Company and Brands 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 65 Chairman of the Board and Chief Executive
Officer of the Company and Brands for
more than the past five years; director
of the Company since August 1989.
Michael D. Kafoure 51 President and Chief Operating Officer of
the Company and Brands for the past five
years.
Frank W. Coffey 57 Senior Vice President and Chief Financial
Officer of the Company and Brands since
May 1999; Vice President of Corporate
Development of the Company from January
1999 to May 1999; President and Co-Owner
of My Bread Baking Company for more
than four years prior thereto.
Mark D. Dirkes 53 Senior Vice President and Director of
Corporate Marketing of Brands for the
past five years.
Brian E. Stevenson 45 Senior Vice President and Director of
Purchasing of Brands since September 1997;
Director of Marketing of Farmland Grain,
a division of Farmland Industries, from
August 1995 to September 1997.
Ray Sandy Sutton 62 Vice President, Corporate Secretary and
General Counsel of the Company and Brands
for more than the past five years.
John F. McKenny 50 Vice President and Corporate Controller of
the Company and Brands for more than the
past five years.
Paul E. Yarick 61 Vice President and Treasurer of the
Company and Brands for more than the past
five years.
6
<PAGE>
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 2000 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 Common Stock. Additional adjustments to
reflect changes in the market or in individual responsibilities may be
appropriate from time to time.
<PAGE>
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 or earnings per share
objectives. The Chief Executive Officer submits proposed minimum, target
and maximum operating cash flow and earnings per share objectives to the
board of directors for approval. Annual incentive bonus payments are
calculated based on a formula which compares the Company's actual
operating cash flow and/or earnings per share levels achieved to the
objectives approved by the board of directors. Payments range from zero
to 200% of target bonus amounts for the Chief Executive Officer and
the divisional and corporate officers and zero to 150% for bakery
management.
Awards 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.
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
7
<PAGE>
options granted to employees under 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 2000 compensation was determined in accordance
with the Company's compensation policy which provides that executive
compensation levels will be higher in years in which performance goals
are achieved or exceeded. Incentive compensation is based on earnings per
share objectives defined with minimum, target and maximum levels. Fiscal
2000 performance was not within the range of goals, therefore, Mr.
Sullivan was not eligible for an incentive bonus for fiscal 2000.
The Compensation Committee believes it is 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
8
<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 June 3, 2000 and (ii) the four
other most highly compensated executive officers of the Company and Brands
as of June 3, 2000, whose annual compensation exceeded $100,000 for the
fiscal year ended June 3, 2000 (the individuals in (i) and (ii) are
collectively referred to as the Named Executive Officers).
<TABLE>
<CAPTION>
Compensation All Other
Annual Compensation ----------------- Compensation
Name and Principal Fiscal ------------------- Shares Under- ------------
Position Year Salary ($) Bonus ($) lying Options (#) ($) (1)
-------------------------- ------ ----------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
Charles A. Sullivan (2)(3) 2000 $815,385 -- 40,000 $13,600
Chairman of the Board 1999 800,000 324,211 -- 12,800
and Chief Executive Officer 1998 800,000 1,120,000 -- 12,800
Michael D. Kafoure 2000 433,173 -- 30,000 13,600
President and Chief 1999 425,000 135,329(4) 25,000 12,800
Operating Officer 1998 401,923 467,500(4) 200,000 12,800
Frank W. Coffey (5) 2000 254,808 -- 30,000 13,600
Senior Vice President 1999 63,470 18,575 50,000 6,563
and Chief Financial Officer 1998 -- -- -- --
Ray Sandy Sutton 2000 234,423 -- 20,000 13,600
Vice President, 1999 230,000 51,447 15,000 12,800
Corporate Secretary 1998 202,308 177,726 50,000 12,800
and General Counsel
Brian E. Stevenson 2000 173,269 -- 10,000 13,600
Senior Vice President 1999 170,000 28,066 10,000 12,800
and Director of Purchasing 1998 87,885 96,954 50,000 50,300 (6)
----------
</TABLE>
<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, two-thirds of the shares have vested and Mr. Sullivan holds no
restricted stock.
9
(4) Of the bonus amounts indicated, in 1999 and 1998, 25 percent and
15 percent, respectively, have been deferred until retirement.
(5) Mr. Coffey became Senior Vice President and Chief Financial
Officer of the Company on May 28, 1999.
(6) Mr. Stevenson was employed by the Company on September 15, 1997.
In conjunction with his employment, Mr. Stevenson was paid a sign-on bonus
of $37,500.
<PAGE>
Stock Options
The following two tables set forth information for the last completed
fiscal year relating to (i) the grant of stock options to the Named
Executive Officers and (ii) the exercise and appreciation of stock options
held by the Named Executive Officers.
OPTION GRANTS IN THE FISCAL YEAR ENDED JUNE 3, 2000
<TABLE>
<CAPTION>
Potential Realizable
Number of Percent of Total Value of Stock Price
Shares Under- Options Granted Exercise Appreciation (2)
lying Options to Employees or Base Expiration -------------------------
Name Granted (1) in FY Price ($/sh) Date 5% 10%
------------------- ------------- ---------------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Sullivan 40,000 2.02% $ 14.50 05/08/10 $ 364,759 $ 924,370
Michael D. Kafoure 30,000 1.51 23.75 07/13/09 448,087 1,135,541
30,000 1.51 14.50 05/08/10 273,569 693,278
Frank W. Coffey 30,000 1.51 14.50 05/08/10 273,569 693,278
Ray Sandy Sutton 20,000 1.01 23.75 07/13/09 298,725 757,028
20,000 1.01 14.50 05/08/10 182,379 462,185
Brian E. Stevenson 10,000 .50 23.75 07/13/09 149,362 378,514
10,000 .50 14.50 05/08/10 91,190 231,093
----------
</TABLE>
(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 2000 AND OPTION VALUES AT JUNE 3, 2000
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised Options In-The-Money Options
Shares at Fiscal Year-end at Fiscal Year-end (1)
Acquired on Value ------------------------------ ---------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Sullivan 86,088 $1,153,809 184,000 40,000 $257,125 $ 10,000
Michael D. Kafoure 11,594 95,650 330,074 143,332 381,487 7,500
Frank W. Coffey -- -- 16,667 63,333 -- 7,500
Ray Sandy Sutton -- -- 68,334 66,666 -- 5,000
Brian E. Stevenson -- -- 43,334 36,666 -- 2,500
----------
</TABLE>
(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 3, 2000 ($14.75).
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.
10
<PAGE>
On July 29, 1997, RPC issued $479,953,687.50 of 7% Stock Appreciation
Income Linked Securities(SM) ("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.
On July 24, 2000, RPC announced that it would exchange its SAILS for cash
on August 1, 2000.
Pursuant to certain rights of first refusal of the Company as
provided in the Shareholder Agreement, in connection with the SAILS
transaction, during fiscal 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 fiscal 1998, the Company purchased from RPC
1,200,000 shares of the Company's Common Stock at an average price of
$31.375 per share. During fiscal 1999, the Company purchased from RPC
500,000 shares of the Company's Common Stock at $28.375 per share.
On March 31, 2000, the Company announced it had extended the
Shareholder Agreement with RPC. Under the amended agreement, RPC was
required to reduce its ownership of IBC's Common Stock to no more than
20% by September 30, 2000, 15% by August 1, 2004 and 10% by August 1,
2005. RPC also agreed to use the Company's Common Stock to satisfy its
SAILS obligations.
On July 24, 2000, the Company signed an agreement with RPC and an
affiliate of RPC to purchase from the RPC affiliate 15,498,000 shares of
the Company's Common Stock, at a price per share equal to the average
closing price per share for the Company's Common Stock for the most recent
20 consecutive trading days ending on and including July 31, 2000, for
shares of the Company's Common Stock purchased on August 1, 2000, and for
such per share price, plus an interest component, for shares of the
Company's Common Stock purchased on September 1, 2000. On August 1, 2000,
the Company purchased 2,551,020 shares of the Company's Common Stock for
a total of $39,999,993.60 pursuant to this agreement. On September 1,
2000, the Company is obligated to purchase 12,946,980 shares of the
Company's Common Stock for a total of $203,008,646.40, plus an interest
component of $1,419,700.08, pursuant to this agreement. After this
repurchase, RPC will own approximately 29.5 percent of the Company's
outstanding Common Stock.
In connection with this repurchase agreement, the Shareholder
Agreement was amended to, among other provisions, eliminate the
requirement that RPC reduce its ownership to no more than 20% of the
Company's Common Stock by September 30, 2000. RPC and its affiliates
are now required to reduce their ownership of the Company's Common
Stock to no more than 15% by August 1, 2004 and to no more than 10% by
August 1, 2005. The Company has the right of first offer on disposal of
any of the Company's Common Stock owned by RPC and its affiliates.
Further, this amendment deleted the requirement of RPC to use the
Company's Common Stock to satisfy its SAILS obligations.
<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 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 three persons in the election of Class I directors
at the Meeting. Charles A. Sullivan, Leo Benatar and Richard L. Metrick,
current Class I directors of the Company, have been nominated for
re-election. The following table sets forth certain information
with respect to the three nominees, the Class II directors (whose terms
expire in 2001) and the Class III directors (whose terms expire in 2002).
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.
11
<PAGE>
NOMINEES FOR ELECTION AS CLASS I DIRECTORS FOR
A THREE-YEAR TERM EXPIRING AT THE 2003 ANNUAL MEETING
Principal Occupation or
Director Employment for the
Name Age Since Last Five Years and Directorships
---- --- -------- ---------------------------------
Charles A. Sullivan 65 1989 Chairman of the Board and Chief
Executive Officer of the
Company and Brands for more than
the past five years. Mr.
Sullivan is a director of UMB
Bank, n.a., JPS Packaging
Company and The Andersons, Inc.
Leo Benatar(1) 70 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; 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.
Richard L. Metrick 59 2000 Senior Managing Director in the
Investment Banking Department
of Bear Stearns & Co., Inc.
for more than the past five
years.
<PAGE>
CLASS II DIRECTORS CONTINUING IN OFFICE
WHOSE TERMS EXPIRE AT THE 2001 ANNUAL MEETING
Principal Occupation or
Director Employment for the
Name Age Since Last Five Years and Directorships
---- --- -------- ---------------------------------
Michael J. Anderson(1) 49 1998 President and Chief Executive
Officer of The Andersons, Inc.
since 1999; President and
Chief Operating Officer from
1996 to 1998; Vice President
and General Manager of the Retail
Group of The Andersons, Inc.
from 1994 to 1996. Mr. Anderson
is a director of The Andersons,
Inc. and Fifth Third BancCorp of
Northwest Ohio.
Robert B. Calhoun, Jr. 57 1991 Managing Director of Monitor
Clipper Partners since April
1997; Chief Executive Officer of
The Clipper Group, L.P., since
January 1991. Mr. Calhoun is a
director of Avondale Mills, Inc.,
TravelCenters of America, Inc.
and David's Bridal, Inc..
Frank E. Horton(1)(2) 61 1992 Interim President, Southern
Illinois University since
February 2000; Principal
Associate, Horton & Associates,
Consultants in higher education,
Denver, Colorado, since 1999;
President, The University of
Toledo for more than four years
prior thereto. Dr. Horton is a
director of GAC Corp.
12
<PAGE>
CLASS III DIRECTORS CONTINUING IN OFFICE
WHOSE TERMS EXPIRE AT THE 2002 ANNUAL MEETING
Principal Occupation or
Director Employment for the
Name Age Since Last Five Years and Directorships
---- --- -------- ---------------------------------
G. Kenneth Baum(2) 70 1988 Chairman of the Board of George
K. Baum Group, Inc. for more
than the past five years. Mr.
Baum is a director of H & R
Block, Inc. and JPS Packaging
Company.
E. Garrett Bewkes, Jr. 73 1991 Consultant and Chairman for a
(1)(2) 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 56 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.
During the 2000 fiscal year, the board of directors held five
meetings and acted by written consent on one occasion. All directors
attended more than 75% of the aggregate number of board of directors'
meetings and board of directors' Committee meetings on which the respected
directors served.
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, Michael J. Anderson, 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 2000
fiscal year. All members of the Audit Committee attended the meetings,
except Messrs. Benatar and Bewkes, each unable to attend one meeting.
<PAGE>
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. The Compensation Committee held three meetings during the
2000 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
13
<PAGE>
shares of common stock pursuant to the 1996 Plan. In fiscal 2000, each
of the non-employee directors was granted an option to purchase 10,000
shares of the Company's Common Stock at an exercise price of $23.75 per
share, which was the closing sales price of the Company's Common Stock on
the date of the grant (July 13, 1999), exercisable immediately and an
option to purchase 10,000 shares of the Company's Common Stock at an
exercise price of $14.50 per share, which was the closing sales price
of the Company's Common Stock on the date of grant (May 8, 2000)
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 nor was formerly an officer of the Company
during the last fiscal year.
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 June 2, 2001.
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 are expected to 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 2001 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 30, 2001, in order to be
eligible for inclusion in the Company's fiscal year 2001 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
Cut or tear along perforated edge
---------------------------------------------------------------------------
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 26,
2000, 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
Charles A. Sullivan, Leo Benatar, Richard L. Metrick
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 June 2, 2001.
/ / 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>
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 auditors of the Company. The
Board of Directors recommends a vote FOR proposals 1 and 2. None of the
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 , 2000
---------------------------
---------------------------------------
(Signature)
---------------------------------------
(Signature if held jointly)
Please sign here 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.
