hostesslogoa50.jpg [hostesslogoa50.jpg]

Hostess Brands, Inc. Incentive Compensation Plan
for Exempt Non-Sales Employees

Introduction
The Hostess Brands, Inc. (the “Company”) Incentive Compensation Plan for Exempt
Non-Sales Employees (the “Plan”) provides the opportunity for compensation in
addition to base salary to designated employees. The Plan is designed to
motivate eligible employees to grow the business through increased sales,
profitability and valuable contribution within their area of expertise. While
employees play many different roles within the Company, the Company will only be
successful if all employees are focused on achieving common goals, strive
individually for functional excellence in their assigned roles and contribute to
organizational excellence as a team. Eligible employees will receive incentive
compensation under the Plan (“Incentive Comp”) if the Company achieves certain
designated results (the “Metric(s)”). EBIDTA and Net Revenue Metric(s) will be
approved by the Talent and Compensation Committee (the “Committee”).

Administration
•
The Plan will be administered by the Committee, which will have the full power
and authority to interpret and administer the Plan. All decisions and
determinations of the Committee shall be final, conclusive and binding. The
Committee may delegate such duties or responsibilities to an officer of the
Company as it deems desirable.

•
The Plan year begins on January 1st and ends on December 31st. The calculation
of any Incentive Comp payments will be based on an eligible employee’s Incentive
Comp level and current base salary. Eligible employees, as defined below, are
assigned an Incentive Comp level (percentage of base salary) based on their
position or specified in their offer letter. For example, if an eligible
employee’s base salary is $100,000, paid in equal increments over a year and
that employee has a 20% Incentive Comp level, the Incentive Comp opportunity
would be $100,000 x 20% or $20,000.

•
Plan Metrics will measure achievement of (i) EBITDA, (ii) Net Revenue, and (iii)
Strategic Goals weighted as follows:

•
40% - EBITDA

•
40% - Net Revenue

•
20% - Strategic Goals (team or individual goals as applicable)

•
Attainment of not less than 93% of the Company’s Annual Operating Plan
established EBITDA must be achieved in order to establish funding for Incentive
Comp payments under any Metric to occur. If achieved, funding for each Metric is
independent and will be calculated based on the weighting noted above.

•
The amount eligible for payment based on attainment of the Net Revenue Metric
will be determined based on the same schedule as EBITDA set out below. For
example, if 98% of the Net Revenue Metric is achieved, 85% of the amount payable
based on attainment of the Net Revenue Metric would be eligible for payment.

•
Strategic Goals Metrics will be based on actual performance on budgeted
financial and other established goals, such as revenue growth, cost control,
case or dollar volume, specific tasks to be accomplished, etc.

•
Minimum of 3 goals and a maximum of 5 goals are set by the functional Manager
near the start of the Plan year.

•
The amount eligible for payment related to Strategic Goals Metrics would range
from 0% to 100% based on the proportion of goals achieved. So, for example, if
three out of four team goals were achieved, team component for that group would
fund at 75% of target.

•
The Committee shall determine the extent to which EBITDA and Net Revenue Metrics
are achieved.

•
The EBITDA Metric will fund on the following schedule, subject to the Company’s
discretion, as described below:

--------------------------------------------------------------------------------

% of EBITDA Achieved
% Funded
Below 93%
0%
93%
40%
94%
50%
95%
60%
96%
65%
97%
75%
98%
85%
99%
95%
100%
100%
—
—
105%
150%
—
—
110%
200%

Plan will fund incrementally at the rate 10% for every 1% of EBITDA achieved
over 100%, up to a total payout of 200% performance against Plan.

•
Notwithstanding any term or condition contained in this Plan to the contrary,

◦
In the event that the Company does not achieve at least 93% of the EBITDA
Metric, thereby disallowing funding under the Plan, the Chief Executive Officer
(“CEO”) may recommend to the Committee, for its approval, that a pool equal to
up to 10% of target Incentive Comp, be distributed to deserving employees, at
the discretion of the CEO or, in the case of executive officers, the Committee,
at the time Incentive Comp payments would otherwise be paid pursuant to this
Plan.  In no event shall this provision result in the payment of more than 100%
of the target Incentive Comp to any single eligible employee.

◦
The Committee may adjust the performance results for any Metric on account of
extraordinary items or other events, as the Committee deems appropriate.

◦
Working with the funds available under the Plan and within the established
guidelines, Managers will be able to differentiate final award payouts by
performance as to Strategic Goals Metrics.

◦
Any and all Incentive Comp payouts under this Plan remain subject to Company
discretion. The Company may reduce or eliminate any eligible employee’s
Incentive Comp payment on account of overall individual or functional team
performance, regardless of the extent to which any Metric has been achieved.
Company achievement of the EBITDA or Net Revenue Metrics does not guarantee
payment hereunder to any eligible employee.

Eligibility
For purposes of the Plan, “eligible” employees are designated as full time (30
hours or more), exempt (salaried), are in a position that has been designated as
eligible for Incentive Comp under this Plan and do not participate in any other
annual incentive compensation plan.

Designated employees are eligible to participate in the Plan if they meet the
following criteria:

•
Employees who commence employment or are promoted to an eligible position after
January 1st and prior to October 1st of a Plan year will receive a pro-rated
Incentive Comp based upon their service date.

•
Employees who remain employed by the Company but are transferred out of an
eligible position on or before June 30th are not eligible to receive an
Incentive Comp payment under the Plan for the year of transfer. Employees who
are transferred out of an eligible position after June 30th will continue to be
eligible to receive an Incentive Comp

--------------------------------------------------------------------------------

payment for the year of transfer, based on the portion of the Plan year the
employee was employed in an eligible position.

•
Employees hired or promoted to an eligible position on or after October 1 of a
Plan year will not be eligible for an Incentive Comp for that year.

•
An Employee must be an active employee of the Company and on the payroll as of
the date on which the applicable Incentive Comp is paid.

•
As consideration for being eligible for receipt of Incentive Comp in any Plan
year, an employee must have executed and delivered to the Company a mutually
agreed form of Confidentiality Agreement and any other agreement requested by
the Company in connection with such employee’s employment.

Eligible Income
•
Any sums paid to an eligible employee that are other than base salary payments
will not be included in an Incentive Comp payment calculation.

•
The Incentive Comp payment will be pro-rated for any approved unpaid leave of
absence lasting 4 consecutive weeks or more, to the extent permitted by law.

•
If during a Plan year, an employee becomes Incentive Comp eligible after January
1st and prior to October 1st, or changes from Incentive Comp eligible to
non-Incentive Comp eligible after June 30th, actual salary for the period of
employment, while in an Incentive Comp eligible position, paid during the Plan
year will be the salary used for Incentive Comp calculation purposes. Thus, a
person who has been hired at a base salary of $100,000 on September 30 and was
paid $25,000 in salary (1/4 of base salary for working 1/4 of the year) during
the Plan year and had a 20% Incentive Comp level, assuming 100% of each Metric
is achieved, would be eligible for an Incentive Comp payment of $25,000 x 20% or
$5,000 for the short year.

Payment of Incentive Comp under the Plan
Incentive Comp will be paid, if at all, after completion of the audit by the
Company’s independent auditor of the annual financial statements for the
applicable Plan year, which the Company anticipates, but cannot ensure, will be
around the middle of March of the successive year.

Amendment and Termination of the Plan
The Company reserves the right to amend, modify, suspend or terminate this Plan
in whole or in part at any time without advance notice to or prior approval of
the Plan participants. Eligibility for participation in the Plan in one year
does not confer upon any participant eligibility to participate in any
subsequent year.

Additional Information
•
Incentive Comp payments will not be treated as compensation for purposes of any
of the Company’s employee benefit plans or programs, unless otherwise provided
in such employee benefit plan or program.

•
Participation in the Plan is not a guarantee of any particular level of
compensation or of continued employment for any period. Nothing in the Plan
interferes with the Company’s right to terminate an employee’s employment for
any reason or no reason at any time.

•
The Company will withhold from any payments under the Plan an amount to satisfy
applicable federal, state and local tax withholding requirements. Payments under
the Plan are intended to be exempt from or comply with Section 409A of the
Internal Revenue Code. However, the Company shall not be liable for any taxes,
penalties, interest or other expenses that may be incurred by a participant on
account of non-compliance with Section 409A of the Code.

•
The Plan will be construed, administered and governed in all respect in
accordance with the laws of the State of Delaware, without reference to
principles of conflicts of laws.

--------------------------------------------------------------------------------

Exhibit A

Incentive Comp Calculation
Below is an example of how a potential Incentive Comp payment would be
calculated:

Eligible employee $100,000 annual salary with a 20% Incentive Comp level. The
Company attains 100% of EBITDA Metric, 98% of Net Revenue Metric and achievement
of 2/3 of Strategic Goals.

Element
Weighting
Performance % of Metric
Funding % of Metric
Amount
Description
EBITDA
40%
100%
100%
$8,000
$20,000 Incentive Comp potential x 40% EBITDA weighting x 100% EBITDA
performance
Net Revenue
40%
98%
85%
$6,800
$20,000 Incentive Comp potential x 40% Net Rev weighting x 85% Net Rev
performance
Strategic Goals
Case Volume - Met (1/3)
Trade Spend +/- 2% - Met (1/3)
Snack Cake AOP - Not Met (0/3)

20%
66.6%
(33.3% for each met metric)
66.6%
$2,664
$20,000 Incentive Comp potential x 20% Strategic Goals weighting x 66.6%
Strategic Goals performance
Total Incentive Comp Achieved
 
 
 
$17,464