SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Prospectus Statement
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Interstate Bakeries Corporation
..............................................................................
(Name of Registrant as Specified in its Charter)
Interstate Bakeries Corporation
..............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
......................................................................
2) Aggregate number of securities to which transaction applies:
......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
......................................................................
4) Proposed maximum aggregate value of transaction:
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*Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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INTERSTATE BAKERIES CORPORATION
12 East Armour Boulevard
Kansas City, Missouri 64111
(816) 561-6600
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 20, 1995
-------------------
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Interstate Bakeries Corporation (the
"Company") will be held on September 20, 1995 at 10:00 a.m., at the Waddell &
Reed Auditorium, 6300 Lamar, Shawnee Mission, Kansas 66202, for the following
purposes:
1. To elect three Class 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 as the independent
auditors of the books and accounts of the Company for the fiscal
year ending June 1, 1996.
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, 1995, 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 21, 1995
INTERSTATE BAKERIES CORPORATION
_________________
PROXY STATEMENT
_________________
This Proxy Statement, which is being mailed to stockholders on August 21,
1995, is furnished in connection with the solicitation by the Board of
Directors of Interstate Bakeries Corporation (the "Company") on proxies to be
voted at the Annual Meeting of Stockholders (the "Meeting") to be held on
September 20, 1995, commencing at 10:00 a.m. at the Waddell & Reed Auditorium,
6300 Lamar, Shawnee Mission, Kansas 66202. Proxies will be voted for the
items listed in the accompanying notice. A stockholder may revoke his or her
proxy by delivering a written notice to the Corporate Secretary of the Company
at any time prior to the voting or by attending the Meeting and voting the
shares in person.
The Company will bear the entire cost of solicitation of proxies in the
enclosed form, including preparation, assembly, printing and mailing of this
Proxy Statement, the proxy card and any additional information furnished to
stockholders. Original solicitation of proxies by mail may be supplemented by
telephone, telegraph or personal solicitation by directors, officers or other
regular employees of the Company. No additional compensation will be paid to
directors, officers or other regular employees of the Company for such
services.
The Board of Directors has fixed the close of business on August 7, 1995, 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, 1995, the Company had outstanding 36,582,667 shares of common
stock, $.01 par value (the "Common Stock"), entitled to one vote per share.
A vote of a plurality of all shares of Common Stock present in person or by
proxy at the Meeting is necessary for the election of directors and the
ratification of the appointment of the independent auditors. Votes submitted
as abstentions on any matter to be voted on at the Meeting will be counted as
votes against such matter.
The Company's Annual Report on Form 10-K, including the financial statements
and the financial statement schedules, as filed with the Securities and
Exchange Commission for the fiscal year ended June 3, 1995, 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, 1995. 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.
SECURITY OWNERSHIP
Principal Stockholders
The following table sets forth information as of July 31, 1995, regarding the
ownership of the Company's Common Stock by each person known to the Company
to be the beneficial owner of more than 5% of the Company's Common Stock.
Amount
Beneficially Percentage
Name and Address Owned Held
---------------- ------------ ----------
VCS Holding Company 16,923,077 46.26%
c/o Ralston Purina
Checkerboard Square
St. Louis, MO 63164
Harris Associates L.P. 2,511,275 6.86
2 N. LaSalle - Suite 500
Chicago, IL 60602
Metropolitan Life Insurance Company 2,418,430 6.61
Mezzanine Investment Limited
Partnership 8
1 Madison Avenue (10th Floor)
New York, NY 10010
Wellington Management 2,010,550 5.50
75 State Street
Boston, MA 02109
Common Stock Owned by Management
The number of shares of Common Stock of the Company beneficially owned as of
July 31, 1995, by the Directors, the Named Executive Officers (as defined
below) and all Directors and Executive Officers as a group are set forth
below:
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership Percentage Held
------------------------ -------------------- ---------------
Charles A. Sullivan 402,875 (1) 1.10%
G. Kenneth Baum 204,606 (2) *
Leo Benatar 3,000 *
E. Garrett Bewkes, Jr. 6,000 *
Philip Briggs 1,000 *
Robert B. Calhoun, Jr. 1,366 *
Frank E. Horton 2,000 *
Vincent J. Lupinacci - -
Ray Sandy Sutton 39,819 (1) *
H. L. Shetler 81,720 (1) *
Robert P. Morgan 54,963 (1) *
All Directors and Executive
Officers as a Group(14 persons) 905,204 (1) 2.45
---------------------------
*Less than 1%
(1) Of the shares indicated, 165,000 (Mr. Sullivan), 35,000 (Mr. Sutton),
63,849 (Mr. Shetler), 47,500 (Mr. Morgan), and 394,019 (all Directors and
Executive Officers as a group), are attributable to currently exercisable
employee stock options.
(2) Mr. Baum is Chairman of the Board of George K. Baum Group, Inc. Mr.
Baum is the majority stockholder of George K. Baum Group, Inc. Of the
204,606 shares indicated, 152,879 of such shares are held by George K. Baum
Group, Inc. Mr. Baum may be deemed to beneficially own all 152,879 shares
of Common Stock held by George K. Baum Group, Inc.
Based on its review of copies of Forms 3, 4 and 5 received by it, the Company
believes that these forms were timely filed pursuant to Section 16 of the
Securities Exchange Act of 1934 with the exception of one Form 4 filed by Dr.
Horton and one Form 4 filed by Metropolitan Life Insurance Company.
EXECUTIVE OFFICERS
Set forth below is the name, age and present principal occupation or
employment and five year employment history of each executive officer of the
Company. The executive officers of the Company serve at the pleasure of the
Board of Directors. The business address of each person listed below is 12
East Armour Boulevard, Kansas City, Missouri 64111. None of the executive
officers is related to any other director or executive officer by blood,
marriage or adoption, and each is a citizen of the United States.
Present Principal Occupation or Employment
Name and Age and Five Year Employment History
------------ ------------------------------------------
Charles A. Sullivan, 60 Chairman of the Board of the Company since
May 1991, President (until January 1995) and
Chief Executive Officer of the Company and
Interstate Brands Corporation ("Brands") for
more than one year prior thereto, director
of the Company since August 1989.
Vincent J. Lupinacci, 43 President and Chief Operating Officer of
the Company and Brands since January 1995;
formerly Vice President - Sales and Marketing
for Sara Lee Meat Group, both domestic and
international, from July 1992 to January 1995;
Vice President - Sales for Pepsi Cola Company
for more than two years prior thereto.
Ray Sandy Sutton, 57 Vice President, Corporate Secretary and
General Counsel of the Company and Brands for
more than the past five years.
H.L. Shetler, 62 Executive Vice President - Bread Division of
Brands for more than the past five years.
Robert P. Morgan, 39 Executive Vice President - Cake Division of
Brands since February 1992; Vice President of
Sales - Cake Division of Brands for more than
two years prior thereto.
Timothy W. Cranor, 43 Senior Vice President - Purchasing of Brands
since July 1995; formerly Executive Vice
President for Cereal Food Processors Inc.
for more than the past five years.
Mark D. Dirkes, 47 Vice President - Corporate Marketing of
Brands for more than the past five years.
John F. McKenny, 45 Vice President and Corporate Controller of
the Company and Brands for more than the
past five years.
Paul E. Yarick, 56 Vice President and Treasurer of the Company
and Brands for more than the past five years.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes: Class I,
Class II and Class III. Directors in each such class are elected for three
year terms, with each class standing for election in a different year. At the
Meeting, 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. Philip Briggs, Robert B. Calhoun, Jr. and Frank E. Horton,
the current Class II 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 III Directors (whose terms expire in 1996) and the Class
I Directors (whose terms expire in 1997). None of the directors is related
to any other director or executive officer by blood, marriage or adoption,
and each is a citizen of the United States.
Name and Age Information About Directors
------------ ---------------------------
Class II Directors
------------------
Philip Briggs, 67 Chairman of the Board of Empire Blue Cross
Blue Shield since July 1993; Chairman of the
Board and Chief Executive Officer of Empire
Blue Cross Blue Shield from July 1993 to August
1993; formerly Vice-Chairman and director of
Metropolitan Life Insurance Company for more than
three years prior thereto; director of Trizec
Corporation. Mr. Briggs became a director of the
Company in August 1991.
Robert B. Calhoun, Jr., 52 President of the Clipper Capital Corporation
since January 1994; Chief Executive Officer of
the Clipper Group, L.P., from January 1991 to
December 1993; Managing Director of The First
Boston Corporation for more than one year prior
thereto; director of American Medical Holdings,
Inc. Mr. Calhoun became a director of the
Company in May 1991.
Frank E. Horton, 56 President, The University of Toledo for more than
the past five years; member of the Advisory Board
of Northwest Ohio Society Bank & Trust. Dr.
Horton became a director of the Company in
September 1992.
Class III Directors (Term expires in 1996)
-----------------------------------------
G. Kenneth Baum, 65 Chairman of the Board of George K. Baum Group,
Inc., an investment company, from May 1994 to
present; Chairman of the Board of George K.
Baum & Company from 1982 until May 1994;
director of H & R Block, Inc., Sealright Co.,
Inc. and Unitog Company. Mr. Baum became a
director of the Company in April 1988.
E. Garrett Bewkes, Jr., 68 Consultant and Chairman of a number of
PaineWebber mutual funds for more than the
past five years; director of PaineWebber Group,
Inc. and Napro Bio-Pharmaceutical, Inc. Mr.
Bewkes became a director of the Company in
August 1991.
James R. Elsesser, 51 Vice President and Chief Financial Officer of
Ralston Purina Company for more than the past
five years. Mr. Elsesser became a director of
the Company in July 1995.
Class I Directors (Term expires in 1997)
------------------------------------------
Leo Benatar, 65 Chairman of the Board and President of Engraph,
Inc. (a subsidiary of Sonoco Products Company
since October 1993) for more than the past five
years; Chairman and director of Federal Reserve
Bank of Atlanta; director of Riverwood
International Corp., Mohawk, Inc., Aaron Rents,
Inc. and Sonoco Products Company. Mr. Benatar
became a director of the Company in August 1991.
Charles A. Sullivan, 60 Chairman of the Company since May 1991, President
(until January 1995) and Chief Executive Officer
of the Company and Brands for more than two years
prior thereto; director of UMB Bank, n.a., and
Sealright Co., Inc. Mr. Sullivan became a
director of the Company in August 1989.
William P. Stiritz, 6l Chairman of the Board, Chief Executive Officer
and President of Ralston Purina Company for more
than the past five years; Chairman of the Board
of Ralcorp Holdings, Inc.; director of Angelica
Corporation, Boatmen's Bancshares, Inc.,
Reinsurance Group of America, Inc., the May
Dept. Stores Company and Ball Corporation.
Mr. Stiritz became a director of the Company
in July 1995.
During the 1995 fiscal year, the Board of Directors held five meetings plus two
telephonic meetings. All directors attended more than 75% of the Board of
Directors' meetings.
Committees of the Board
The Board of Directors has appointed an Audit Committee and a Compensation and
Stock Option Committee (the "Compensation Committee") to assist in handling
the various functions of the Board.
The Audit Committee members are Leo Benatar, Philip Briggs and E. Garrett
Bewkes, Jr. Mr. Benatar serves as Chairman of the Audit Committee. The Audit
Committee recommends to the full Board of Directors the engagement of
independent auditors, reviews with the auditors the scope and results of the
audit, reviews with the Company's internal auditors the scope and results of
the Company's internal audit procedures, reviews the independence of the
auditors and non-audit services provided by the auditors, considers the range
of audit and non-audit fees, reviews with the Company's independent auditors
and management the effectiveness of the Company's system of internal
accounting controls and makes inquiries into other matters within the scope
of its duties. The Audit Committee held two meetings during the 1995 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 options (the "Stock Options") granted
under the Company's 1991 Stock Option Plan. The Compensation Committee held
two meetings during the 1995 fiscal year. All members of the Compensation
Committee attended the meetings.
Directors' Compensation
Directors who are not salaried employees of, or consultants to, the Company
are entitled to an annual retainer of $24,000 plus $2,000 for each Board
Meeting attended. In addition, directors who are members of committees of the
Board of Directors and who are not salaried employees of, or consultants to,
the Company are entitled to receive $1,000 for each committee meeting attended
that is not conducted on the same day as a meeting of the full Board of
Directors and $750 for each committee meeting attended that is conducted on
the same day as a meeting of the full Board of Directors.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee was an officer, employee or a former
officer or employee of the Company or any of its subsidiaries during the last
fiscal year.
COMMON STOCK PERFORMANCE
The graph set forth below compares the yearly percentage change in cumulative
stockholder return of the Company's Common Stock since July 24, 1991 (the date
the Company completed its initial public offering of Common Stock) against the
cumulative return of the Standard and Poor's Composite 500 Stock Index ("S&P
500") and the Standard and Poor's Food Index ("S&P Food Index") covering the
same time period. The graph is based on $100 invested on July 24, 1991, in
the Company's Common Stock, the S&P 500 and the S&P Food Index, each assuming
dividend reinvestment. The historical stock price performance shown on this
graph is not necessarily indicative of future performance.
PERFORMANCE GRAPH
7/24/91 5/30/92 5/29/93 5/28/94 6/3/95
------- ------- ------- ------- ------
Interstate Bakeries l00.00 95.59 111.09 81.30 102.76
S&P 500 Index 100.00 l09.54 122.26 127.46 153.19
S&P Food Index 100.00 101.67 106.61 105.90 133.55
EXECUTIVE COMPENSATION
The Compensation Committee consists of three outside directors. The
Compensation Committee recommends to the full Board of Directors the
compensation of the Chief Executive Officer. The Compensation Committee
approves and monitors compensation guidelines for the Company's other
executive officers as recommended by the Chief Executive Officer. The
Compensation Committee's report for fiscal 1995 is set forth below.
Compensation Committee Report
The Compensation Committee believes that it is in the best interest of the
stockholders for the Company to attract, maintain and motivate top quality
management personnel, especially its executive officers, by offering a
competitive compensation package that maintains an appropriate relationship
between executive pay and the creation of stockholder value. The general
philosophy of the Compensation Committee is to integrate (i) reasonable levels
of annual base salary, (ii) annual incentive bonus awards based upon
achievement of short-term corporate and individual performance goals, such
that executive compensation levels will be higher in years in which
performance goals are achieved or exceeded and (iii) stock option grants, to
ensure that management has a continuing stake in the long-term success of the
Company in return of value to its stockholders.
The Compensation Committee recognizes that it must retain base salary levels
commensurate with other comparable companies in the food industry with whom
the Company competes for management personnel (the "Comparable Companies").
However, the Compensation Committee believes that the compensation program for
its executive officers and key management personnel should be primarily based
upon performance. Therefore, base salaries for executive officers and other
key management personnel are maintained at a level slightly below the mid-
range level of such base salaries at the Comparable Companies. The
Compensation Committee utilizes external salary surveys to establish base
salaries in reference to the Comparable Companies. In addition to the
external salary surveys, the individual executive's level of responsibility,
prior experience, breadth of knowledge and overall skills are factors
considered by the Compensation Committee in recommending base salaries for
each individual executive officer or key manager. Base salaries are adjusted
annually to reflect the operating performance of the Company for the preceding
fiscal year and average increases among the Comparable Companies. Additional
adjustments to reflect changes in the market or in individual responsibilities
may be appropriate from time to time.
All executive officers and key management personnel of the Company are
eligible to receive cash incentive bonuses under the Company's Incentive
Compensation Plan. Incentive bonus awards are based upon the Company
achieving certain operating cash flow objectives. The Chief Executive Officer
submits proposed minimum, target and maximum operating cash flow objectives to
the Board of Directors for approval. Annual incentive bonus payments are
calculated based on a formula which compares the Company's actual operating
cash flow levels achieved to the objectives approved by the Board of
Directors. Payments range from zero to 200% of target bonus amounts for the
Chief Executive Officer and the divisional and corporate officers and zero to
150% for bakery management.
Awards of Stock Options comprise the third element of the compensation program
for executive officers and key management personnel. The Compensation
Committee believes the Company's executive officers and key management
personnel should have a stake in the Company's ongoing success through stock
ownership.
The value of the Stock Options is related directly to the market price of the
Common Stock and thus to the long-term performance of the Company. The
exercise price (the "Exercise Price") of Stock Options granted to employees is
the fair market value of the Common Stock on the date of grant. The
Compensation Committee has complete discretion to select the optionees and to
establish the terms and conditions of each option, subject in all cases to the
provisions of the Company's 1991 Stock Option Plan. The 1991 Stock Option
Plan is designed to reward the executives for long-term results. The
executives' potential to receive value from Stock Options will occur only if
the Company's stock price increases above the Exercise Price. The number of
Stock Options granted to any individual executive is generally based upon that
executive's level of responsibility.
The Compensation Committee utilizes the same factors and criteria to recommend
the compensation for the Chief Executive Officer as it does for all executives
of the Company. Mr. Sullivan's minimum base salary of $400,000 is established
under the terms of an Employment Agreement (the "Employment Agreement") with
the Company, but the Board of Directors has discretion to set his base salary
at an amount greater than the minimum. Although the Compensation Committee
does specifically discuss the Chief Executive Officer's contributions toward
achieving the overall Company performance results, there are no unique
criteria applied to the compensation of the Chief Executive Officer that are
not also applied to other key executives and managers of the Company.
Mr. Sullivan's fiscal 1995 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
1995 performance was within the range of goals, therefore, Mr. Sullivan was
eligible for an incentive bonus for fiscal 1995.
New Section 162(m) of the Internal Revenue Code of 1986 imposes a $1 million
cap on the deductibility of compensation to certain executive officers of
public companies. The Compensation Committee is studying the cap and intends
to take the necessary steps to conform the compensation policies of the
Company to comply.
Compensation Committee
E. Garrett Bewkes, Jr., Chairman
G. Kenneth Baum
Frank E. Horton
Summary Compensation Table
The following table sets forth information concerning compensation received
by (i) the Chief Executive Officer of the Company as of June 3, 1995 and (ii)
the four other most highly compensated executive officers of the Company as
of June 3, 1995, whose annual compensation exceeded $100,000 for the fiscal
year ended June 3, 1995 ((i) and (ii) collectively the "Named Executive
Officers"). The Company does not currently award stock appreciation rights,
restricted stock or other long-term incentive compensation (other than Stock
Options) under its executive compensation program.
Long-Term All Other
Compensation Compensation
Name and Principal Fiscal ------------ ------------
Position Year Salary $ Bonus $ Options (#) ($) (1)
------------------ ------ -------- -------- ------------ ------------
Charles A. Sullivan (3) 1995 $453,846 $192,830 75,000 $12,000
Chairman of the Board 1994 400,000 - 40,000 14,501
and Chief Executive 1993 400,000 180,190 25,000 30,000
Officer
Vincent J. Lupinacci 1995 100,961 62,500 50,000 75,048(2)
President and Chief 1994 - - - -
Operating Officer 1993 - - - -
Ray Sandy Sutton 1995 137,063 85,738 20,000 12,000
Vice President, 1994 132,042 - 5,000 10,563
Corporate Secretary 1993 128,000 56,757 5,000 13,857
and General Counsel
H. L. Shetler 1995 143,298 141,476 35,000 12,000
Executive Vice President 1994 134,415 31,184 20,000 12,007
Bread Division 1993 130,000 111,836 5,000 18,138
Robert P. Morgan 1995 123,562 17,148 25,000 11,256
Executive Vice President 1994 113,911 - 17,500 9,113
Cake Division 1993 110,000 37,696 5,000 11,077
(1) The amounts represent contributions by the Company to the Company's
Retirement Income Plan for the benefit of each executive, excluding the
amount described in (2) below.
(2) Mr. Lupinacci was employed by the Company on January 9, 1995. In
conjunction with his employment, Mr. Lupinacci was paid a relocation
bonus of $65,000.
(3) The Employment Agreement 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 $400,000 and will be eligible for an annual bonus, each
to be determined by the Board of Directors.
In the event Mr. Sullivan's employment with the Company is terminated
without his consent, the Employment Agreement limits Mr. Sullivan's ability
to compete with the Company and provides for full salary and benefits for a
period of two years from the date of such termination and a lump sum
payment equal to the aggregate annual bonuses paid to Mr. Sullivan for the
two most recent fiscal years prior to such termination.
Stock Options
The following two tables set forth information for the last completed fiscal
year relating to (i) the grant of Stock Options to the Named Executive
Officers and (ii) the exercise and appreciation of Stock Options held by the
Named Executive Officers.
OPTION GRANTS IN THE FISCAL YEAR ENDED JUNE 3, 1995
Percent of Total Potential Realizable
(#) Options Granted Exercise Value of Stock Price
Options to Employees or Base Expiration Appreciation (2)
Name Granted in FY Price($/sh)(1) Date 5% 10%
-------------------- ------- ---------------- -------------- ---------- -------- --------
Charles A. Sullivan 35,000 4.84% $12.500 10/09/04 $275,141 $697,262
40,000 5.53 14.375 04/30/05 361,614 916,402
Vincent J. Lupinacci 30,000 4.15 14.000 01/08/05 264,136 669,372
20,000 2.77 14.375 04/30/05 180,807 458,201
Ray Sandy Sutton 10,000 1.38 12.500 10/09/04 78,612 199,218
10,000 1.38 14.375 04/30/05 90,404 229,101
H. L. Shetler 15,000 2.07 12.500 10/09/04 117,918 298,827
20,000 2.77 14.375 04/30/05 180,807 458,201
Robert P. Morgan 15,000 2.07 12.500 10/09/04 117,918 298,827
10,000 1.38 14.375 04/30/05 90,404 229,101
(1) All Stock Options were granted at an Exercise Price equal to the fair
market value of the underlying Common Stock on the date of grant. The Stock
Options become exercisable one year after the date of grant.
(2) Potential realizable value is based on the assumption that the price of
the Company's Common Stock appreciates at the annual rate shown (compounded
annually) from the date of option grant until the end of the 10-year option
term. There can be no assurance that the potential realizable values shown
in the table will be achieved.
AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND OPTION VALUES AT JUNE 3, 1995
Number of Unexercised Value of Unexercised
Options at Fiscal In-The-Money Options
Shares Year-end at Fiscal Year-end (1)
Acquired On Value -------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---------------- ----------- ---------- ----------- ------------- ----------- -------------
Charles A. Sullivan - $ - 165,000 75,000 $ 38,750 $84,375
Vincent J. Lupinacci - - - 50,000 - 23,750
Ray Sandy Sutton 5,000 64,675 35,000 20,000 625 23,750
H. L. Shetler - - 63,849 35,000 224,910 36,875
Robert P. Morgan - - 47,500 25,000 24,688 34,375
(1) The value of unexercised, in-the-money options is the difference between
the Exercise Price of the options and the fair market value of the Company's
Common Stock at June 3, 1995 ($14.625).
CERTAIN TRANSACTIONS
Management Loans
The Company in 1988 established a loan program to enable certain members of
management to purchase shares of Common Stock and the Company's previously
outstanding $12.00 Cumulative Exchangeable Redeemable Preferred Stock. The
loans are payable on demand, bear interest at the rate of 3% per annum and are
secured by a pledge of Common Stock owned. None of the loans is in default.
In connection with the Company's initial public offering of Common Stock on
July 24, 1991, the $12.00 Cumulative Exchangeable Redeemable Preferred Stock
was redeemed and the loan program was terminated. Loan balances due from
executive officers have been paid with the exception of the amounts as of
June 3, 1995, for executive officers; Mark D. Dirkes-$44,000; John F.
McKenny-$64,000; Robert P. Morgan-$41,000.
Other Matters
The Company pays fees and reimburses related expenses in respect of
investment advisory services rendered to the Company by George K. Baum &
Company. G. Kenneth Baum, a director of the Company, served as Chairman
of the Board of George K. Baum & Company from 1982 through May 1984. G.
Kenneth Baum is presently Chairman of the Board of George K. Baum Group,
Inc., a corporation unaffiliated with George K. Baum & Company. In
connection with the acquisition of Continental Baking Company ("CBC")
by the Company, George K. Baum & Company received a fee of $700,000 for
providing investment advisory services to the Company.
Mr. Leo Benatar, who is a director of the Company, is Chairman of the Board
and President of Engraph, Inc. Engraph, Inc. manufactures graphic items for
various uses. The Company has purchased truck decals from Engraph, Inc. in
the past and will continue to do so. During fiscal 1995, the Company
purchased approximately $128,000 worth of truck decals from Engraph, Inc.
The Company purchases such decals from a variety of sources to ensure that
such purchases are made at competitive prices.
Mr. William P. Stiritz and Mr. James R. Elsesser were appointed to the Board
of the Company upon the consummation of the acquisition of CBC by the Company.
Mr. Stiritz is the Chairman of the Board, Chief Executive Officer and
President of Ralston Purina Company ("RPC") and Mr. Elsesser is Vice President
and Chief Financial Officer of RPC. Pursuant to the terms of the Purchase
Agreement, the Company and RPC entered into a Transition Services Agreement
and two Lease Agreements upon the consummation of the acquisition. Pursuant
to the terms of the Transition Services Agreement, RPC is providing to the
Company certain data processing services at no charge and other services at
RPC's cost. Pursuant to the terms of the two Lease Agreements, RPC is leasing
to the Company certain headquarters and research and development facilities
in St. Louis, Missouri, for a period of up to one year and two years,
respectively, at no charge. However, the Company may incur incidental costs
in connection with these Lease Agreements. The Company believes all such
charges are at rates equal to or better than those that would be available
from unaffiliated third parties.
THE ACQUISITION
On April 12, 1995, the Company entered into a Sale and Purchase Agreement by
and among the Company, Interstate Brands Corporation ("Brands") and RPC, VCS
Holding Company ("VCS") and CBC (the "Purchase Agreement").
On July 21, 1995, the Company held a Special Meeting of Stockholders pursuant
to which the Stockholders approved, among other things, the acquisition of
CBC by the Company for the payment to RPC of $220,000,000 in cash and the
issuance of 16,923,077 shares of the Common Stock of the Company. The
acquisition of CBC by the Company pursuant to the terms of the Purchase
Agreement was consummated on July 22, 1995 and on July 24, 1995, CBC was
merged with and into Brands pursuant to Delaware law.
RPC and VCS acquired the 16,923,077 shares of the Common Stock of the Company
(the "IBC Equity") pursuant to the terms of a Shareholder Agreement dated
July 22, 1995. The Shareholder Agreement restricts the ability of RPC and
VCS to influence or control the Company, acquire additional shares of the
Common Stock of the Company or transfer the IBC Equity. The Company has a
right of first offer for the IBC Equity under certain circumstances. The
Company has granted RPC and VCS five demand registration rights to facilitate
RPC and VCS divesting that number of shares of the IBC Equity necessary so
that they own no more than 14.9% of the total outstanding shares of the
Common Stock of the Company on the fifth anniversary date of the Shareholder
Agreement.
The Purchase Agreement, Shareholder Agreement, other ancillary agreements
thereto and the acquisition are described in the Proxy Statement of the
Company dated June 20, 1995, relating to the Special Meeting of Stockholders
held on July 21, 1995.
APPOINTMENT OF AUDITORS
Stockholders are asked to ratify the appointment of Deloitte & Touche as
independent auditors of the books and accounts of the Company for the fiscal
year ending June 1, 1996.
Representatives of Deloitte & Touche plan to attend the Meeting and will have
an opportunity to make a statement, if they desire to do so, and will be
available to respond to appropriate questions.
SUBMISSION OF STOCKHOLDERS' PROPOSALS AND OTHER MATTERS
Proposals of stockholders intended to be present at the 1996 Annual Meeting
must be made in compliance with all Securities and Exchange Commission rules
and regulations and be received by the Corporate Secretary, Interstate
Bakeries Corporation, 12 East Armour Boulevard, Kansas City, Missouri 64111,
no later than April 25, 1996, in order to be included in the agenda.
Management is not aware of any matters to come before the Meeting other than
those referred to in the Proxy Statement. However, if any other matters
should properly come before the Meeting, it is intended that the proxies
solicited hereby will be voted thereon in accordance with the judgment
of the person voting such proxies.
By Order of the Board of Directors
/s/ Ray Sandy Sutton
Ray Sandy Sutton
Corporate Secretary
INTERSTATE BAKERIES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints PAUL E. YARICK, RAY SANDY SUTTON and LINDA
L. THOMPSON, in the order named, as proxies (each with the power to act
alone and with power of substitution) to vote, as directed below, all shares
of common stock of INTERSTATE BAKERIES CORPORATION which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders to be held on Wednesday, September 20, 1995, at 10:00 a.m. at
the Waddell & Reed Auditorium, 6300 Lamar, Shawnee Mission, Kansas or any
adjournment thereof, as follows:
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below)
Philip Briggs, 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:
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2. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE as independent
auditors of the Company for the fiscal year ending June 1, 1996.
/ / FOR / / AGAINST / / ABSTAIN
3. In accordance with their discretion upon such other matters as may
properly come before the meeting and any adjournment thereof.
(to be signed and dated on reverse side.)
When properly executed, this proxy will be voted in the manner directed
by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR the election of Directors and FOR ratification of the
appointment of Deloitte & Touche as auditors of the Company. The Board of
Directors recommends a vote FOR proposals 1 and 2.
Please sign exactly as name appears below.
DATED , 1995
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(Signature)
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(Signature)
Please sign here exactly as name appears
to the left. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. Each joint
owner or trustee should sign the proxy.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.