Exhibit
10.7


 


MANAGEMENT
CONTINUITY AGREEMENT


 


This MANAGEMENT CONTINUITY AGREEMENT (this “Agreement”), is entered
into by and between Interstate Bakeries Corporation (“IBC”), a Delaware
corporation, and
                        ,
an individual (the “Executive”).


 


WITNESSETH:


 


WHEREAS,
the Compensation Committee, as defined herein, in action
taken at a meeting held on February 3, 2003, and subsequently approved by the
Board of Directors in action taken at a meeting on February 4, 2003, has
authorized IBC and its wholly owned subsidiaries, Interstate Brands Corporation
(“Brands”) and Interstate Brands West Corporation (“Brands West”) to enter into
a Management Continuity Agreement (the “Agreement”) with certain key executives
of IBC; and


 


WHEREAS,
the Board of Directors believes it is imperative, in the
event of an attempted Change in Control, as defined herein, that certain key
executives continue employment with IBC or one of its Affiliates, and that IBC
be able to receive and rely upon the advice of such executives on the best
interests of IBC and its shareholders, without concern that the executives may
be distracted by uncertainties as to their own position or security; and


 


WHEREAS,  the Executive is a key
executive of IBC or one of its Affiliates and has been selected by the Board of
Directors to be offered this Agreement; and


 


WHEREAS,  the Board of Directors believes that the
payments, which may be made under this Agreement, constitute additional
reasonable compensation for services to be rendered by the Executive in
connection with a Change in Control;


 


NOW,
THEREFORE, for and in consideration of the premises and other
good and valuable consideration, IBC and the Executive agree as follows:


 


Article
1.  Definitions: For
purposes of this Agreement, the following terms shall have the meanings set
forth below:


 


a.                                       Affiliate:  An Affiliate shall mean any
Person who, directly or indirectly or through one or more intermediaries,
Controls another Person, is Controlled by another Person, or is under common
Control with another Person.


 


b.                                      Base
Compensation:  The Base
Compensation shall mean the sum of:


 


(i)            the
Executive’s monthly gross salary paid by IBC or one of its Affiliates, whether
paid or deferred, for the last full month preceding the Executive’s Qualifying
Termination or for the last full month preceding the Change in Control,
whichever is greater; and


 


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(ii) a one (1) month portion (as if earned ratably
over the relevant period) of the greater of (x) the Executive’s most recent
annual (or, if applicable, pro rata portion of the annual) bonus received from
IBC or one of its Affiliates, whether paid or deferred, preceding the
Executive’s Qualifying Termination or the Change in Control, whichever is
greater and (y) the target incentive award for the Executive under the
Incentive Plan;


 


c.                                       Beneficial
Ownership: Beneficial Ownership shall mean “beneficial ownership” as
defined in Rule 13d-3 promulgated under Section 13(d) of the Exchange Act.


 


d.                                      Board of
Directors:  The Board of
Directors shall mean the Board of Directors of IBC.


 


e.                                       Buyer:  A Person which, alone or with its
Affiliates, purchases the business or businesses of IBC and/or one of IBC’s
Affiliates in a transaction or transactions described in Article 2(c).


 


f.                                         Change in
Control:  A Change in Control
shall mean an occurrence set forth in Article 2.


 


g.                                      Code:  The Code shall mean the Internal Revenue
Code of 1986, as amended or replaced from time to time and including any
rulings and Treasury regulations issued thereunder.


 


h.                                      Common
Stock:  Common Stock shall
mean the $.01 par value common stock of IBC, and such other IBC voting stock
that may be issued, prior to a Change in Control, in lieu of, or in addition
to, the Common Stock, as a result of (i) a merger or consolidation of IBC, (ii)
the creation of a class or classes of tracking stock, or (iii) the
reclassification of any of the foregoing.


 


i.                                          Compensation
Committee:  The Compensation
Committee shall mean the Compensation Committee of IBC.


 


j.                                          Continuing
Director:  A Continuing
Director shall mean a member of the Board of Directors as of the date hereof,
and any other director who was appointed or nominated for election to the Board
of Directors by a majority of the Continuing Directors then in office.


 


k.                                       Control:  Control (including the terms “controlling”,
“Controlled by” and “under common control with”) shall mean the possession of a
power, directly or indirectly, whether through ownership of securities, by
contract or otherwise:


 


(i)            to
elect a majority of the Board of Directors of a Person; or


 


(ii)           to
direct the business, management and policies of a Person or direct the sale of
a substantial portion of its assets.


 


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l.                                          Disability:  A Disability shall mean a condition where
the Executive suffers a complete inability to perform the Executive’s work
assignments because of injury or sickness, and such inability is expected to
continue indefinitely.  To determine
Disability, IBC shall rely on a determination with respect to disability of the
Executive made under the Interstate Brands Corporation Long Term Disability
Plan or any successor disability plan. 
If no such determination has been made within seven (7) months after the
Executive’s last day worked, or if the Executive is not enrolled in any such
Long Term Disability Plan, the determination shall be made by a licensed
physician jointly selected by IBC and the Executive.  Fees and expenses of any physician, and all costs of examinations
of the Executive, shall be paid by IBC or one of its Affiliates.


 


m.                                    Discount
Rate:  The Discount Rate
shall mean the “applicable interest rate” (and the mortality tables, if
applicable) prescribed under Section 417(e)(3) of the Code at the time of the
Executive’s Qualifying Termination.


 


n.                                      Exchange
Act:  The Exchange Act shall
mean the Securities Exchange Act of 1934, as amended.


 


o.                                      Group:  A Group shall mean “group” as defined in
Section 13(d)(3) of the Exchange Act.


 


p.                                      Incentive
Plan:  The Incentive Plan shall
mean the Interstate Brands Corporation Incentive Compensation Plan for
Corporate and Division Management as the same may be amended from time to time
and all similar plans adopted during the term of this Agreement.


 


q.                                      Payment
Period:  The Payment Period
shall mean the period commencing with the first day of the month following the
month in which a Qualifying Termination occurs and continuing for twenty-four
(24) months thereafter.


 


r.                                         Person:  Person shall mean any natural person, firm,
individual, company, corporation, partnership, joint venture, joint stock
company, limited liability company, business trust, trust, association or any
other business organization or entity, whether incorporated or unincorporated,
or any division thereof.


 


s.                                       Qualifying Termination:  A Qualifying Termination shall mean the
Executive’s termination of employment, within two (2) years after a Change in
Control, from IBC, a Buyer or an Affiliate or a Successor of the foregoing;
provided that, a Qualifying Termination shall not be deemed to occur on account
of:


 


(i)                                     the
Executive’s transfer of employment at any time during the term of this
Agreement between any two Persons comprised of IBC or its Successor, and any of
their Affiliates, provided that, upon such a transfer after a Change in
Control, the Executive has


 


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Substantially the Same Employment after such transfer
as immediately prior to the Change in Control; or


 


(ii)                                  the
Executive’s being employed by a Buyer or any Affiliate or Successor of such
Buyer, in connection with a Change in Control described in Article 2(c),
provided that, during the term of this Agreement, the Executive has
Substantially the Same Employment as immediately prior to the Change in
Control; or


 


(iii)                               the
Executive’s death; or


 


(iv)                              the
Executive’s voluntary termination of employment with IBC, a Buyer or an
Affiliate or Successor of the foregoing within two (2) years after such Change
in Control, if the Executive has, at all times, Substantially the Same
Employment as immediately prior to the Change in Control.


 


It is expressly understood that Executive shall in no
event be deemed to have waived his or her right to Severance Benefits under
Article 4 of this Agreement if Executive remains employed during or after a
time during which he or she ceased to have Substantially the Same Employment
after a Change in Control, as long as the Executive incurs a termination of
employment within two (2) years after such Change in Control and such
termination of employment is not a termination as described in Article 1 s.
(i), (ii) or (iii).


 


t.                                         Retirement
Plan:  The Retirement Plan
shall mean the Interstate Brands Corporation Retirement Income Plan, as
amended, or any successor retirement plan adopted by IBC.


 


u.                                      Spin-off:  A Spin-off shall mean a spin-off, reverse
spin-off or similar type of transaction, including a management-led leveraged
buyout, resulting in the disposition to IBC’s shareholders, or to a
management-led leveraged buyout group, of all or substantially all of the stock
and/or assets of any business conducted by IBC and/or its Affiliates.


 


v.                                      Substantially
the Same Employment: 
Substantially the Same Employment shall mean employment where there is,
at all times during the period of up to two (2) years after a Change in Control
compared to immediately prior to a Change in Control:


 


(i)                                     no
reduction in the Executive’s base salary and no less than such annual increases
in the Executive’s base salary as were customary with respect to the Executive
prior to the Change in Control; and


 


(ii)                                  no
reduction in the annual bonus award opportunity below the performance target
applicable to the Executive, for both personal


 


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and company or business unit performance, unless a
substantially equivalent arrangement (embodied in an ongoing substitute or
alternative annual bonus award plan) has been made with respect to such annual
bonus award, and such arrangement provides benefits not materially less
favorable to the Executive (both in terms of the amount of benefits provided
and the level of the Executive’s participation relative to other participants);
and


 


(iii)                               no
substantial reduction in Executive’s participation in any executive incentive
compensation plans in which Executive participated immediately before the
Change in Control, unless a substantially equivalent arrangement (embodied in
an ongoing substitute or alternative plan) has been made with respect to such
executive incentive compensation plans, and such arrangement provides benefits
not materially less favorable to the Executive (both in terms of the amount of
benefits provided and the level of the Executive’s participation relative to
other participants); and


 


(iv)                              no
substantial reduction in employee pension benefits (including plans qualified
under Section 401(a) of the Code and non-qualified plans) and welfare and
fringe benefits applicable to the Executive, so that the benefit programs for
which the Executive is eligible are, in the aggregate, substantially equivalent;
and


 


(v)                                 no
reduction of a substantial nature in the Executive’s duties or
responsibilities, or assignment of new duties inconsistent with the Executive’s
skills, education and experience; and


 


(vi)          no substantial
reduction in the Executive’s access to administrative support services.


 


w.                                    Successor:  A Successor shall mean (i) the continuing,
surviving or successor Person which is created, or remains in existence, upon
the merger or consolidation of two Persons; or (ii) a Person which otherwise succeeds
(by operation of law, contract or otherwise) to the rights, duties or interests
of another Person.


 


x.                                        Supplemental
Plan:  The Supplemental Plan
shall mean the IBC Supplemental Executive Retirement Plan, as amended, or any
successor supplemental retirement plan adopted by IBC.


 


Article 2.  Change in Control:  A Change in Control will occur if there is:


 


a.                                       Such
a change in the membership of the Board of Directors that Continuing Directors
shall have ceased (for any reason) to constitute at least a majority of the
Board of Directors; or


 


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b.                                      An
acquisition by any Person or Group, or by a Person and its Affiliates or by a
Group and Affiliates of members of such Group, of the Beneficial Ownership of
fifty percent (50%) or more of the then-outstanding Common Stock of IBC (other
than acquisitions by IBC, an IBC Affiliate, or any trustee or other fiduciary
holding IBC Common Stock pursuant to the terms of any IBC benefit plan); or


 


c.                                       Either
of the following: (i) a sale of all or substantially all of the assets of IBC
in a transaction subject to the provisions of Section 271 of the Delaware
General Corporation Law; or (ii) a sale or other disposition to a Person or a
Group, or to a Person and its Affiliates or to a Group and Affiliates of
members of such Group, (excluding a sale or disposition to an Affiliate or
Affiliates of IBC), of all or substantially all of the assets of those
businesses of IBC and its Affiliates which, in the aggregate, accounted for (as
of the end of the fiscal quarter ending coincident with or immediately
preceding such sale) all or substantially all of IBC’s operating profit; or


 


d.                                      A
merger, share exchange, reorganization or consolidation of IBC with any other
Person other than an Affiliate of IBC (a “Business Combination”), unless the
voting power of the Common Stock outstanding immediately before such Business
Combination continues to represent, immediately following such Business
Combination (either by remaining outstanding or by being converted into voting
securities of the Person surviving after such Business Combination or its
Affiliate), more than 50% of the combined voting power of the then-outstanding
voting securities of such surviving Person (or its Affiliate) including (if applicable)
IBC; or


 


e.                                       A
finding by a majority of the Continuing Directors that a sale, disposition,
merger or other transaction or event designated by such Continuing Directors in
their sole discretion shall, under this Agreement, constitute a Change in Control
with respect to the Executive.


 


Notwithstanding the foregoing, in no event shall a Spin-off be deemed
to constitute a Change in Control.


 


Article
3.  Operation of Agreement:  This Agreement shall not create any
obligation on the part of IBC or its Affiliates, or the Executive, to continue
the Executive’s employment relationship. 
Anything in this Agreement to the contrary notwithstanding, the
Executive shall not be entitled to Severance Benefits, as defined below, under
this Agreement unless and until there has been a Change in Control and the
Executive has had a Qualifying Termination. 
Except as hereinafter provided, this Agreement shall not affect any
other benefit program (as such programs may be amended) applicable to the
Executive; provided, that, by execution of this Agreement, the Executive hereby
waives any and all claims to benefits under any termination or severance plan
or similar severance arrangement offered by IBC or its Affiliates to all or
some of their employees during the term of this Agreement, that would otherwise
by payable to the Executive on account of, or coincident with, a Change in
Control and termination of employment.


 


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Article
4.  Severance Benefits:  If the Executive remains in the employ of
IBC or one of its Affiliates until a Change in Control has occurred, then upon
the Executive’s Qualifying Termination within two (2) years after a Change in
Control, the Executive shall be entitled to the following benefits (“Severance
Benefits”), subject to withholding of any federal, state or local taxes which,
in the opinion of counsel for the payor of the Severance Benefits, are required
to be withheld, and further subject to Article 5 of this Agreement:


 


a.                                       Payment
in a lump sum in cash, within sixty (60) days of the Executive’s Qualifying
Termination, of an amount equal to the Executive’s Base Compensation multiplied
by twenty-four (24); and


 


b.                                      Continuation,
from the date of the Executive’s Qualifying Termination and continuing during
the Payment Period, of life, health, accident and disability benefits no less
favorable than those provided to the Executive under life, health, accident and
disability benefit plans and programs in effect immediately prior to the Change
in Control (including, but not limited to, the Interstate Brands Corporation
Welfare Benefit Plan), subject to all terms and conditions of such plans
immediately prior to such Change in Control including, but not limited to,
provisions regarding the extent and duration of spouse and dependent coverage,
and subject to payment of premiums, if any, charged at rates no greater than
those paid by active employees under the rate structure in effect immediately
prior to the Change in Control; and further provided, that such health benefits
shall not terminate at the end of the Payment Period but shall continue through
the Executive’s sixty-fifth (65th) birthday and, with respect to the
Executive’s spouse and dependents, for such period provided under the aforesaid
provisions regarding the extent and duration of spouse and dependent coverage,
and subject to payment of premiums charged at rates no greater than those paid
by active employees under the rate structure in effect immediately prior to the
Change in Control; and


 


c.                                       Immediate
and full vesting under the Supplemental Plan, subject only to forfeiture as
provided in Section 3.2 (c)(ii) of the Supplemental Plan, and additional Years
of Credited Service (as defined in the Supplemental Plan) equal to the greater
of (i) two (2) and (ii) ten (10) minus the number of Years of Credited Service
as of the Executive’s Qualifying Termination, provided that in no event shall
the Executive’s resulting Years of Credited Service, after adjustment as
provided in this Article 4(c), exceed twenty (20).


 


d.                                      During
the Payment Period, the Executive may request in writing, and IBC or one of its
Affiliates shall at its expense engage within a reasonable time following such
written request, an outplacement counseling service of national reputation to
assist the Executive in obtaining employment. 
The Executive shall be entitled to outplacement services which are
customary for someone in the Executive’s position at a cost not to exceed
$15,000.


 


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Article 5.  Excise Taxes and Gross-Up Payment:


 


a.                                       Anything
in this Agreement to the contrary notwithstanding, and except as set forth
below, in the event it shall be determined under the provisions of Article 5(b)
that any payment or distribution by IBC, a Buyer, or any Successor or Affiliate
of the foregoing (“Payor”), to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, including without limitation any other plan,
arrangement or agreement with such Payor, and including a determination (i)
with regard to the value of any accelerated vesting of stock awards or other
forms of compensation, if such vesting occurs as a result of a Change in
Control; but (ii) without regard to any additional payments required under this
Article 5) (a “Payment”) would be subject to the excise tax imposed by Section
4999 of the Code, or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the “Excise
Tax”), then the Executive shall be entitled to receive an additional payment (a
“Gross-Up Payment”).  This Gross-Up
Payment shall be equal to an amount such that, after payment by the Executive
of all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, (i) any income and FICA taxes (and any
interest and penalties imposed with respect thereto) and (ii) Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the payments.  The obligation of IBC or one of its
Affiliates to make Gross-Up Payments under this Article 5(a) shall not be
conditioned upon the Executive’s Qualifying Termination of Employment.  For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made, and state and local income taxes at
the highest marginal rate of taxation in either the state and locality of the
Executive’s place of employment at the time of the Change in Control or in the
state and locality of residence at the time or times of payment, as applicable,
net of the maximum reduction in federal income taxes that could be obtained
from the deduction of the state and local taxes.


 


Notwithstanding the foregoing provisions of this
Article 5(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Payments do not exceed 110 percent of the
greatest amount (the “Reduced Amount”) that could be paid to the Executive such
that the receipt of Payments would not give rise to any Excise Tax, then no
Gross-Up Payment shall be made to the Executive, and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.  The reduction of the amounts payable hereunder, if applicable,
shall be made by first reducing the payments under Article 4(a) hereof, and in
any event shall be made in such a manner as to maximize the value of all
Payments actually made to the Executive. 
For purposes of reducing the payments to the Reduced Amount, only amounts
payable under this Agreement (and no other


 


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Payments) shall be reduced.  If the reduction of amounts payable under this Agreement would
not result in the payment of the Reduced Amount, no amounts payable under this
Agreement shall be reduced.


 


b.                                      IBC
shall provide written notice to the Executive with respect to each Payment
promptly after it occurs, setting forth the nature of such Payment.  Subject to the provisions of Article 5(c),
all determinations required to be made under this Article 5, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by a nationally recognized certified public accounting firm as may be
designated by the Executive (the “Accounting Firm”).  Within 15 days after the Accounting Firm has been notified by the
Executive or IBC that a Payment has occurred, the Accounting Firm shall provide
detailed supporting calculations with respect to such Payment both to IBC and
the Executive.  All fees and expenses of
the Accounting Firm shall be borne solely by IBC.  Any Gross-Up Payment, as determined pursuant to this Article 5,
shall be paid by IBC or one of its Affiliates to the Executive within five days
of the receipt of the Accounting Firm’s determination.  Any determination by the Accounting Firm
shall be binding upon IBC or its Affiliate and the Executive.  As a result of any uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by IBC or one of its Affiliates should
have been made (“Underpayment”), consistent with the calculations required to
be made hereunder.  In the event that
IBC exhausts its remedies pursuant to Article 5(c) and the Executive thereafter
is required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by IBC or one of its Affiliates to or for
the benefit of the Executive.


 


c.                                       The
Executive shall notify IBC in writing of any written communication from the
Internal Revenue Service or other taxing authority concerning the Gross-Up
Payment or other matters arising under this Agreement.  Such notification shall be given as soon as
practicable but no later than ten business days after the Executive receives
such written communication and shall apprise IBC of the content of such
communication.  Failure to give timely
notice shall not be deemed to prejudice the Executive’s rights to Gross-Up
Payment and rights of indemnity hereunder. 
The Executive shall not pay any claim pursuant to such written
communication prior to the expiration of the 30-day period following the date
on which the Executive gives such notice to IBC (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due).  If IBC notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall (i) give IBC any information reasonably requested by IBC
relating to such claim, (ii) take such action in connection with contesting such
claim as IBC shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by IBC, (iii) cooperate with IBC in good


 


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faith in order to effectively contest such claim, and
(iv) permit IBC to participate in any proceedings relating to such claim;
provided, however, IBC or one of its Affiliates shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, such that after payment by the Executive of any and all income taxes,
Excise Taxes and FICA taxes (including any interest and penalties imposed with
respect thereto) (“Taxes”) that may be imposed as a result of such
representation and payment of costs and expenses by IBC or one of its
Affiliates, the Executive retains an amount equal to such Taxes.  Without limitation on the foregoing
provisions of this Article 5(c), IBC shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay Taxes claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as IBC shall
determine; provided, however, that if IBC directs the Executive to pay such
claim and sue for a refund, IBC or one of its Affiliates shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless such that, after payment by the
Executive of Taxes imposed with respect to such advance or with respect to any
imputed income with respect to such advance, the Executive retains an amount
equal to such Taxes.  Furthermore, IBC’s
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority unrelated to the subject
matter of this Agreement.


 


d.                                      If,
after the receipt by the Executive of an amount advanced by IBC or one of its
Affiliates pursuant to Article 5(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to IBC’s
complying with the requirements of Article 5(c)) promptly pay to IBC or its
Affiliate the amount of such refund (together with any interest paid or
credited thereon after Taxes applicable thereto).  If, after the receipt by the Executive of an amount advanced by
IBC or one of its Affiliates pursuant to Article 5(c), a determination is made
that the Executive shall not be entitled to any refund with respect to such
claim and IBC does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be deemed to be a part of the Gross-Up
Payment and shall not be required to be repaid.


 


Article
6.  Designated Beneficiary:  The Executive, by notice in accordance with
Article 12 hereof, may designate a beneficiary or contingent beneficiaries to
receive the Severance Benefits described in Article 4 and the Gross-Up Payment
described in Article 5 in the event of the Executive’s death following the
Executive’s Qualifying Termination


 


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but prior to payment in full of said Severance Benefits and/or Gross-up
Payments by IBC, one of its Affiliates, or their Successor or assigns.  The Executive may, from time to time, revoke
or change any such designation of beneficiary. 
Any designation of beneficiary made pursuant to this Agreement shall be
controlling over any other designation made by the Executive, testamentary or
otherwise; provided, that if IBC or one of its Affiliates shall be in doubt as
to the right of a beneficiary to receive payments, it may determine in its sole
discretion to pay such amounts to the legal representative of the Executive’s
estate.


 


Article
7.  Early Separation:  In the event that, prior to a Change in
Control, the Executive executes a separation agreement with IBC or any of its
Affiliates during the term of this Agreement which, by its terms, specifically
addresses issues related to the Executive’s termination of employment and
benefits to be paid upon such termination, all of the Executive’s rights,
claims and entitlements under this Agreement shall terminate even if, under the
terms of such separation agreement, the Executive remains employed by IBC or
one of its Affiliates for a period of time after execution of such separation
agreement.


 


Article
8.  Restrictions:  The Executive agrees, as a condition of
receiving the Severance Benefits described under Article 4 or the Gross-Up
Payment described under Article 5, that during the Payment Period the Executive
will not, as an individual or as a partner, employee, agent, advisor, consultant
or in any other capacity of or to any person, firm, corporation or other entity
(excluding IBC, a Buyer, or a Successor or Affiliate of the foregoing),
directly or indirectly, other than as a 2% or less shareholder of a publicly
traded corporation, do any of the following:


 


a.                                       carry
on any business, or become involved in any business activity, which is
competitive with the business conducted by IBC or an Affiliate immediately
prior to a Change in Control; or


 


b.                                      induce
or attempt to induce, or assist anyone else to induce or attempt to induce, any
customer of IBC or any Affiliate to discontinue its business with IBC or any
Affiliate or disclose to anyone else any confidential information relating to
the identities, preferences, and/or requirements of any such customer.


 


The Executive agrees (i) that the restraints contained
in this Article 8, both separately and in total, are reasonable in view of the
legitimate interests of IBC in protecting its, and its Affiliates’, trade
secret information and business relationships; and (ii) to disclose to any
potential future employer during the Payment Period, the terms of the
restrictions against competition contained in this Article 8.  The requirement of this Article 8 will be
waived by IBC in the event the Executive (i) does not receive any of the
Severance Benefits described under Article 4 or the Gross-Up Payment described
under Article 5 and (ii) voluntarily disclaims, in writing, all of his or her
rights to receive any such Severance Benefits or Gross-Up Payment pursuant to
the terms of this Agreement and any other severance payments and benefits in
connection with the Executive’s Qualifying Termination.


 


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If any provision or subpart of this Article 8 is adjudicated
to be invalid or unenforceable under applicable law, the validity or
enforceability of the remaining provisions and subparts shall be
unaffected.  If any provision or subpart
of this Article 8 is adjudicated to be invalid or unenforceable because it is
overbroad or unreasonable, that provision or subpart shall not be void but
rather shall be limited to the extent required to make it reasonable and shall
be enforced as so limited.


 


In the event of a breach of this Article 8, IBC (i)
shall have no further liability for any of the Severance Benefits described in
Article 4 and the Gross-Up Payment described in Article 5 that have not been
paid as of the date of the breach, or (ii) shall be entitled, in addition to
any other legal or equitable remedies it may have, to temporary, preliminary
and permanent injunctive relief restraining such breach.


 


Article
9.  Successors and Assigns:  This Agreement shall inure to the benefit
of, and be binding upon, IBC, its Affiliates and their Successors.  IBC and its Affiliates may not assign this
Agreement without the Executive’s prior written consent.  IBC and its Affiliates will require any
Person to which it assigns this Agreement to assume expressly the Agreement and
agree to perform this Agreement in the same manner and to the same extent that
IBC and its Affiliates would be required to perform it if no such assignment
had taken place.  No assignment of this
Agreement shall relieve IBC or its Affiliates from liability for any of its
obligations hereunder, and in the event of any such assignment, IBC, its
Affiliates or their Successor shall continue to remain primarily liable for
payment of the Severance Benefits described in Article 4 and the Gross-Up
Payment in Article 5 and for the performance and observance of the agreements
provided herein to be performed and observed by IBC and its Affiliates.  The Executive shall have no right to
transfer or assign the right to receive any Severance Benefits under Article 4
and the Gross-Up Payment under Article 5 of this Agreement, except as permitted
under Article 6.


 


Article
10.  Costs:  Irrespective of the success of the
Executive’s claim, IBC or one of its Affiliates will reimburse the Executive,
or the legal representative of the Executive’s estate, for reasonable attorney’s
fees and costs in the event that the Executive brings legal action to enforce
payment by IBC, its Affiliates or assigns, or any Successors to any of the
foregoing, of the Severance Benefits described in Article 4 and the Gross-Up
Payment under Article 5 (plus interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code on payments of such Severance Benefits
and the Gross-Up Payment due but not timely made).


 


Article
11.  Term of Agreement:  This Agreement shall expire upon the earliest
of the following to occur:


 


a.                                       five
(5) years from its effective date, unless extended by the Board of Directors on
or before such expiration date;


 


12

















 


b.                                      if
a determination of the Executive’s Disability is made before a Change in
Control while this Agreement is in effect, the day following such
determination; or


 


c.                                       if
the Executive ceases to be employed with IBC and any of its Affiliates prior to
a Change in Control, the last day of such employment; provided that, if the
Executive and IBC or one of its Affiliates enters into a separation agreement
as described in Article 7 while this Agreement is in effect, the effective date
of such separation agreement.


 


After the expiration of this Agreement, the Executive shall have no
rights to any Severance Benefits described in Article 4 and the Gross-Up
Payment described in Article 5; provided, however, if a Change in Control
occurs prior to the expiration of this Agreement, then the Executive shall be
entitled to the Gross-Up Payment described in Article 5 and, upon a subsequent
Qualifying Termination, Severance Benefits described in Article 4, and the term
of this Agreement shall be extended until the latest to occur of the following:
(a) the expiration of the Payment Period; (b) the date of the final Gross-Up
Payment due under Article 5; or (c) the expiration of the period for which
health benefits are to be provided under Article 4(b).


 


Article
12.  Notice:  Any notice or other communication required
or permitted hereunder is deemed delivered when delivered in person; on the
next business day when sent by an overnight delivery service; or on the third
business day when sent by U.S. mail service, as follows:


 


 


	
  To
  IBC:

  	
   

  	
  Corporate Secretary

  Interstate Bakeries Corporation

  12 East Armour Boulevard

  Kansas City, MO  64111

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  To the
  Executive:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


Article
13.  Venue:  ANY ACTION OR LEGAL PROCEEDING TO ENFORCE
PAYMENT OF SEVERANCE BENEFITS DESCRIBED IN ARTICLE 4 OR COMPLIANCE WITH THE
COVENANTS CONTAINED IN ARTICLES 5 OR 8 OF THIS AGREEMENT SHALL BE BROUGHT IN A
FEDERAL OR STATE COURT LOCATED WITHIN THE WESTERN DISTRICT OF MISSOURI, AND THE
PARTIES TO THIS AGREEMENT CONSENT TO THE JURISDICTION AND VENUE OF SUCH COURT.


 


13

















 


Article
14.  Missouri Law to Govern:  This Agreement shall be governed by the laws
of the State of Missouri without regard to its conflict of laws provisions.


 


Article
15.  Entire Agreement:
This Agreement, constitutes the entire understanding between the parties hereto
with respect to the subject matter hereof, and supersedes and replaces any
previous management continuity agreement or any employment contract (oral or
written) between IBC or any of its Affiliates and the Executive relating to (i)
a Qualifying Termination and (ii) Gross-Up Payments. Upon the execution of this
Agreement, all parties agree that any prior agreement (other than stock option
or equity award agreements) or employment contract covering severance payments
(or other severance-type payments) shall be considered null and void and of no
further effect in the event of a Qualifying Termination or with respect to
IBC’s or an Affiliates’ obligation to make Gross-Up Payments.


 


IN
WITNESS WHEREOF, IBC and the Executive have executed this
Agreement effective as of the 3rd day of February, 2003.


 


 


	
  ATTEST:

  	
   

  	
  INTERSTATE
  BAKERIES

  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


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