**Exhibit10.7**

 

**MANAGEMENTCONTINUITY AGREEMENT**

 

This **MANAGEMENT CONTINUITY AGREEMENT**(this “Agreement”), is enteredinto by and between Interstate Bakeries Corporation (“IBC”), a Delawarecorporation, and                        ,an individual (the “Executive”).

 

**WITNESSETH:**

 

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

 

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

 

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

 

**WHEREAS,**  the Board of Directors believes that thepayments, which may be made under this Agreement, constitute additionalreasonable compensation for services to be rendered by the Executive inconnection with a Change in Control;

 

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

 

**Article1.  Definitions:**Forpurposes of this Agreement, the following terms shall have the meanings setforth below:

 

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

 

b.                                      **BaseCompensation: **The BaseCompensation shall mean the sum of:

 

(i)            theExecutive’s monthly gross salary paid by IBC or one of its Affiliates, whetherpaid or deferred, for the last full month preceding the Executive’s QualifyingTermination 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 ratablyover the relevant period) of the greater of (x) the Executive’s most recentannual (or, if applicable, pro rata portion of the annual) bonus received fromIBC or one of its Affiliates, whether paid or deferred, preceding theExecutive’s Qualifying Termination or the Change in Control, whichever isgreater and (y) the target incentive award for the Executive under theIncentive Plan;

 

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

 

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

 

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

 

f.                                         **Change inControl:**  A Change in Controlshall mean an occurrence set forth in Article 2.

 

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

 

h.                                      **CommonStock:**  Common Stock shallmean the $.01 par value common stock of IBC, and such other IBC voting stockthat may be issued, prior to a Change in Control, in lieu of, or in additionto, 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) thereclassification of any of the foregoing.

 

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

 

j.                                          **ContinuingDirector:**  A ContinuingDirector 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 Boardof 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 apower, directly or indirectly, whether through ownership of securities, bycontract or otherwise:

 

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

 

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

 

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

 

m.                                    **DiscountRate:**  The Discount Rateshall mean the “applicable interest rate” (and the mortality tables, ifapplicable) prescribed under Section 417(e)(3) of the Code at the time of theExecutive’s Qualifying Termination.

 

n.                                      **ExchangeAct:**  The Exchange Act shallmean the Securities Exchange Act of 1934, as amended.

 

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

 

p.                                      **IncentivePlan:**  The Incentive Plan shallmean the Interstate Brands Corporation Incentive Compensation Plan forCorporate and Division Management as the same may be amended from time to timeand all similar plans adopted during the term of this Agreement.

 

q.                                      **PaymentPeriod:**  The Payment Periodshall mean the period commencing with the first day of the month following themonth 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 stockcompany, limited liability company, business trust, trust, association or anyother business organization or entity, whether incorporated or unincorporated,or any division thereof.

 

s.                                       **Qualifying Termination:**  A Qualifying Termination shall mean theExecutive’s termination of employment, within two (2) years after a Change inControl, 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 accountof:

 

(i)                                     theExecutive’s transfer of employment at any time during the term of thisAgreement between any two Persons comprised of IBC or its Successor, and any oftheir Affiliates, provided that, upon such a transfer after a Change inControl, the Executive has

 

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

 

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

 

(iii)                               theExecutive’s death; or

 

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

 

It is expressly understood that Executive shall in noevent be deemed to have waived his or her right to Severance Benefits underArticle 4 of this Agreement if Executive remains employed during or after atime during which he or she ceased to have Substantially the Same Employmentafter a Change in Control, as long as the Executive incurs a termination ofemployment within two (2) years after such Change in Control and suchtermination of employment is not a termination as described in Article 1 s.(i), (ii) or (iii).

 

t.                                         **RetirementPlan:**  The Retirement Planshall mean the Interstate Brands Corporation Retirement Income Plan, asamended, or any successor retirement plan adopted by IBC.

 

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

 

v.                                      **Substantiallythe 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 Controlcompared to immediately prior to a Change in Control:

 

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

 

(ii)                                  noreduction in the annual bonus award opportunity below the performance targetapplicable to the Executive, for both personal

 

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

 

(iii)                               nosubstantial reduction in Executive’s participation in any executive incentivecompensation plans in which Executive participated immediately before theChange in Control, unless a substantially equivalent arrangement (embodied inan ongoing substitute or alternative plan) has been made with respect to suchexecutive incentive compensation plans, and such arrangement provides benefitsnot materially less favorable to the Executive (both in terms of the amount ofbenefits provided and the level of the Executive’s participation relative toother participants); and

 

(iv)                              nosubstantial reduction in employee pension benefits (including plans qualifiedunder Section 401(a) of the Code and non-qualified plans) and welfare andfringe benefits applicable to the Executive, so that the benefit programs forwhich the Executive is eligible are, in the aggregate, substantially equivalent;and

 

(v)                                 noreduction of a substantial nature in the Executive’s duties orresponsibilities, or assignment of new duties inconsistent with the Executive’sskills, education and experience; and

 

(vi)          no substantialreduction 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, uponthe 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 interestsof another Person.

 

x.                                        **SupplementalPlan:**  The Supplemental Planshall mean the IBC Supplemental Executive Retirement Plan, as amended, or anysuccessor supplemental retirement plan adopted by IBC.

 

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

 

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

 

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b.                                      Anacquisition by any Person or Group, or by a Person and its Affiliates or by aGroup and Affiliates of members of such Group, of the Beneficial Ownership offifty percent (50%) or more of the then-outstanding Common Stock of IBC (otherthan acquisitions by IBC, an IBC Affiliate, or any trustee or other fiduciaryholding IBC Common Stock pursuant to the terms of any IBC benefit plan); or

 

c.                                       Eitherof the following: (i) a sale of all or substantially all of the assets of IBCin a transaction subject to the provisions of Section 271 of the DelawareGeneral Corporation Law; or (ii) a sale or other disposition to a Person or aGroup, or to a Person and its Affiliates or to a Group and Affiliates ofmembers of such Group, (excluding a sale or disposition to an Affiliate orAffiliates of IBC), of all or substantially all of the assets of thosebusinesses of IBC and its Affiliates which, in the aggregate, accounted for (asof the end of the fiscal quarter ending coincident with or immediatelypreceding such sale) all or substantially all of IBC’s operating profit; or

 

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

 

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

 

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

 

**Article3.  Operation of Agreement:**  This Agreement shall not create anyobligation on the part of IBC or its Affiliates, or the Executive, to continuethe Executive’s employment relationship. Anything in this Agreement to the contrary notwithstanding, theExecutive shall not be entitled to Severance Benefits, as defined below, underthis Agreement unless and until there has been a Change in Control and theExecutive has had a Qualifying Termination. Except as hereinafter provided, this Agreement shall not affect anyother benefit program (as such programs may be amended) applicable to theExecutive; provided, that, by execution of this Agreement, the Executive herebywaives any and all claims to benefits under any termination or severance planor similar severance arrangement offered by IBC or its Affiliates to all orsome of their employees during the term of this Agreement, that would otherwiseby payable to the Executive on account of, or coincident with, a Change inControl and termination of employment.

 

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**Article4.  Severance Benefits:**  If the Executive remains in the employ ofIBC or one of its Affiliates until a Change in Control has occurred, then uponthe Executive’s Qualifying Termination within two (2) years after a Change inControl, the Executive shall be entitled to the following benefits (“SeveranceBenefits”), subject to withholding of any federal, state or local taxes which,in the opinion of counsel for the payor of the Severance Benefits, are requiredto be withheld, and further subject to Article 5 of this Agreement:

 

a.                                       Paymentin a lump sum in cash, within sixty (60) days of the Executive’s QualifyingTermination, of an amount equal to the Executive’s Base Compensation multipliedby twenty-four (24); and

 

b.                                      Continuation,from the date of the Executive’s Qualifying Termination and continuing duringthe Payment Period, of life, health, accident and disability benefits no lessfavorable than those provided to the Executive under life, health, accident anddisability benefit plans and programs in effect immediately prior to the Changein Control (including, but not limited to, the Interstate Brands CorporationWelfare Benefit Plan), subject to all terms and conditions of such plansimmediately 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 thanthose paid by active employees under the rate structure in effect immediatelyprior to the Change in Control; and further provided, that such health benefitsshall not terminate at the end of the Payment Period but shall continue throughthe Executive’s sixty-fifth (65th) birthday and, with respect to theExecutive’s spouse and dependents, for such period provided under the aforesaidprovisions regarding the extent and duration of spouse and dependent coverage,and subject to payment of premiums charged at rates no greater than those paidby active employees under the rate structure in effect immediately prior to theChange in Control; and

 

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

 

d.                                      Duringthe Payment Period, the Executive may request in writing, and IBC or one of itsAffiliates shall at its expense engage within a reasonable time following suchwritten request, an outplacement counseling service of national reputation toassist the Executive in obtaining employment. The Executive shall be entitled to outplacement services which arecustomary 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.                                       Anythingin this Agreement to the contrary notwithstanding, and except as set forthbelow, 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 Affiliateof the foregoing (“Payor”), to or for the benefit of the Executive (whetherpaid or payable or distributed or distributable pursuant to the terms of thisAgreement 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 otherforms of compensation, if such vesting occurs as a result of a Change inControl; but (ii) without regard to any additional payments required under thisArticle 5) (a “Payment”) would be subject to the excise tax imposed by Section4999 of the Code, or any interest or penalties are incurred by the Executivewith respect to such excise tax (such excise tax, together with any suchinterest and penalties, are hereinafter collectively referred to as the “ExciseTax”), then the Executive shall be entitled to receive an additional payment (a“Gross-Up Payment”).  This Gross-UpPayment shall be equal to an amount such that, after payment by the Executiveof all taxes (including any interest or penalties imposed with respect to suchtaxes), including, without limitation, (i) any income and FICA taxes (and anyinterest and penalties imposed with respect thereto) and (ii) Excise Taximposed upon the Gross-Up Payment, the Executive retains an amount of theGross-Up Payment equal to the Excise Tax imposed upon the payments.  The obligation of IBC or one of itsAffiliates to make Gross-Up Payments under this Article 5(a) shall not beconditioned upon the Executive’s Qualifying Termination of Employment.  For purposes of determining the amount ofthe Gross-Up Payment, the Executive shall be deemed to pay federal income taxesat the highest marginal rate of federal income taxation in the calendar year inwhich the Gross-Up Payment is to be made, and state and local income taxes atthe highest marginal rate of taxation in either the state and locality of theExecutive’s place of employment at the time of the Change in Control or in thestate 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 obtainedfrom the deduction of the state and local taxes.

 

Notwithstanding the foregoing provisions of thisArticle 5(a), if it shall be determined that the Executive is entitled to aGross-Up Payment, but that the Payments do not exceed 110 percent of thegreatest amount (the “Reduced Amount”) that could be paid to the Executive suchthat the receipt of Payments would not give rise to any Excise Tax, then noGross-Up Payment shall be made to the Executive, and the Payments, in theaggregate, 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 inany event shall be made in such a manner as to maximize the value of allPayments actually made to the Executive. For purposes of reducing the payments to the Reduced Amount, only amountspayable under this Agreement (and no other

 

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Payments) shall be reduced.  If the reduction of amounts payable under this Agreement wouldnot result in the payment of the Reduced Amount, no amounts payable under thisAgreement shall be reduced.

 

b.                                      IBCshall provide written notice to the Executive with respect to each Paymentpromptly 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 whetherand when a Gross-Up Payment is required and the amount of such Gross-Up Paymentand the assumptions to be utilized in arriving at such determination, shall bemade by a nationally recognized certified public accounting firm as may bedesignated by the Executive (the “Accounting Firm”).  Within 15 days after the Accounting Firm has been notified by theExecutive or IBC that a Payment has occurred, the Accounting Firm shall providedetailed supporting calculations with respect to such Payment both to IBC andthe Executive.  All fees and expenses ofthe 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 daysof the receipt of the Accounting Firm’s determination.  Any determination by the Accounting Firmshall be binding upon IBC or its Affiliate and the Executive.  As a result of any uncertainty in theapplication of Section 4999 of the Code at the time of the initialdetermination by the Accounting Firm hereunder, it is possible that Gross-UpPayments which will not have been made by IBC or one of its Affiliates shouldhave been made (“Underpayment”), consistent with the calculations required tobe made hereunder.  In the event thatIBC exhausts its remedies pursuant to Article 5(c) and the Executive thereafteris required to make a payment of any Excise Tax, the Accounting Firm shalldetermine the amount of the Underpayment that has occurred and any suchUnderpayment shall be promptly paid by IBC or one of its Affiliates to or forthe benefit of the Executive.

 

c.                                       TheExecutive shall notify IBC in writing of any written communication from theInternal Revenue Service or other taxing authority concerning the Gross-UpPayment or other matters arising under this Agreement.  Such notification shall be given as soon aspracticable but no later than ten business days after the Executive receivessuch written communication and shall apprise IBC of the content of suchcommunication.  Failure to give timelynotice shall not be deemed to prejudice the Executive’s rights to Gross-UpPayment and rights of indemnity hereunder. The Executive shall not pay any claim pursuant to such writtencommunication prior to the expiration of the 30-day period following the dateon which the Executive gives such notice to IBC (or such shorter period endingon the date that any payment of taxes with respect to such claim is due).  If IBC notifies the Executive in writingprior to the expiration of such period that it desires to contest such claim,the Executive shall (i) give IBC any information reasonably requested by IBCrelating to such claim, (ii) take such action in connection with contesting suchclaim as IBC shall reasonably request in writing from time to time, including,without limitation, accepting legal representation with respect to such claimby 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 allcosts and expenses (including additional interest and penalties) incurred inconnection with such contest and shall indemnify and hold the Executiveharmless, such that after payment by the Executive of any and all income taxes,Excise Taxes and FICA taxes (including any interest and penalties imposed withrespect thereto) (“Taxes”) that may be imposed as a result of suchrepresentation and payment of costs and expenses by IBC or one of itsAffiliates, the Executive retains an amount equal to such Taxes.  Without limitation on the foregoingprovisions of this Article 5(c), IBC shall control all proceedings taken inconnection with such contest and, at its sole option, may pursue or forgo anyand all administrative appeals, proceedings, hearings and conferences with thetaxing authority in respect of such claim and may, at its sole option, eitherdirect the Executive to pay Taxes claimed and sue for a refund or contest theclaim in any permissible manner, and the Executive agrees to prosecute suchcontest to a determination before any administrative tribunal, in a court ofinitial jurisdiction and in one or more appellate courts, as IBC shalldetermine; provided, however, that if IBC directs the Executive to pay suchclaim and sue for a refund, IBC or one of its Affiliates shall advance theamount of such payment to the Executive, on an interest-free basis, and shallindemnify and hold the Executive harmless such that, after payment by theExecutive of Taxes imposed with respect to such advance or with respect to anyimputed income with respect to such advance, the Executive retains an amountequal to such Taxes.  Furthermore, IBC’scontrol of the contest shall be limited to issues with respect to which aGross-Up Payment would be payable hereunder and the Executive shall be entitledto settle or contest, as the case may be, any other issue raised by theInternal Revenue Service or any other taxing authority unrelated to the subjectmatter of this Agreement.

 

d.                                      If,after the receipt by the Executive of an amount advanced by IBC or one of itsAffiliates pursuant to Article 5(c), the Executive becomes entitled to receiveany refund with respect to such claim, the Executive shall (subject to IBC’scomplying with the requirements of Article 5(c)) promptly pay to IBC or itsAffiliate the amount of such refund (together with any interest paid orcredited thereon after Taxes applicable thereto).  If, after the receipt by the Executive of an amount advanced byIBC or one of its Affiliates pursuant to Article 5(c), a determination is madethat the Executive shall not be entitled to any refund with respect to suchclaim and IBC does not notify the Executive in writing of its intent to contestsuch denial of refund prior to the expiration of 30 days after suchdetermination, then such advance shall be deemed to be a part of the Gross-UpPayment and shall not be required to be repaid.

 

**Article6.  Designated Beneficiary:** The Executive, by notice in accordance withArticle 12 hereof, may designate a beneficiary or contingent beneficiaries toreceive the Severance Benefits described in Article 4 and the Gross-Up Paymentdescribed in Article 5 in the event of the Executive’s death following theExecutive’s Qualifying Termination

 

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but prior to payment in full of said Severance Benefits and/or Gross-upPayments by IBC, one of its Affiliates, or their Successor or assigns.  The Executive may, from time to time, revokeor change any such designation of beneficiary. Any designation of beneficiary made pursuant to this Agreement shall becontrolling over any other designation made by the Executive, testamentary orotherwise; provided, that if IBC or one of its Affiliates shall be in doubt asto the right of a beneficiary to receive payments, it may determine in its solediscretion to pay such amounts to the legal representative of the Executive’sestate.

 

**Article7.  Early Separation:**  In the event that, prior to a Change inControl, the Executive executes a separation agreement with IBC or any of itsAffiliates during the term of this Agreement which, by its terms, specificallyaddresses issues related to the Executive’s termination of employment andbenefits to be paid upon such termination, all of the Executive’s rights,claims and entitlements under this Agreement shall terminate even if, under theterms of such separation agreement, the Executive remains employed by IBC orone of its Affiliates for a period of time after execution of such separationagreement.

 

**Article8.  Restrictions:**  The Executive agrees, as a condition ofreceiving the Severance Benefits described under Article 4 or the Gross-UpPayment described under Article 5, that during the Payment Period the Executivewill not, as an individual or as a partner, employee, agent, advisor, consultantor 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 publiclytraded corporation, do any of the following:

 

a.                                       carryon any business, or become involved in any business activity, which iscompetitive with the business conducted by IBC or an Affiliate immediatelyprior to a Change in Control; or

 

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

 

The Executive agrees (i) that the restraints containedin this Article 8, both separately and in total, are reasonable in view of thelegitimate interests of IBC in protecting its, and its Affiliates’, tradesecret information and business relationships; and (ii) to disclose to anypotential future employer during the Payment Period, the terms of therestrictions against competition contained in this Article 8.  The requirement of this Article 8 will bewaived by IBC in the event the Executive (i) does not receive any of theSeverance Benefits described under Article 4 or the Gross-Up Payment describedunder Article 5 and (ii) voluntarily disclaims, in writing, all of his or herrights to receive any such Severance Benefits or Gross-Up Payment pursuant tothe terms of this Agreement and any other severance payments and benefits inconnection with the Executive’s Qualifying Termination.

 

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If any provision or subpart of this Article 8 is adjudicatedto be invalid or unenforceable under applicable law, the validity orenforceability of the remaining provisions and subparts shall beunaffected.  If any provision or subpartof this Article 8 is adjudicated to be invalid or unenforceable because it isoverbroad or unreasonable, that provision or subpart shall not be void butrather shall be limited to the extent required to make it reasonable and shallbe 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 inArticle 4 and the Gross-Up Payment described in Article 5 that have not beenpaid as of the date of the breach, or (ii) shall be entitled, in addition toany other legal or equitable remedies it may have, to temporary, preliminaryand permanent injunctive relief restraining such breach.

 

**Article9.  Successors and Assigns:**  This Agreement shall inure to the benefitof, and be binding upon, IBC, its Affiliates and their Successors.  IBC and its Affiliates may not assign thisAgreement without the Executive’s prior written consent.  IBC and its Affiliates will require anyPerson to which it assigns this Agreement to assume expressly the Agreement andagree to perform this Agreement in the same manner and to the same extent thatIBC and its Affiliates would be required to perform it if no such assignmenthad taken place.  No assignment of thisAgreement shall relieve IBC or its Affiliates from liability for any of itsobligations hereunder, and in the event of any such assignment, IBC, itsAffiliates or their Successor shall continue to remain primarily liable forpayment of the Severance Benefits described in Article 4 and the Gross-UpPayment in Article 5 and for the performance and observance of the agreementsprovided herein to be performed and observed by IBC and its Affiliates.  The Executive shall have no right totransfer or assign the right to receive any Severance Benefits under Article 4and the Gross-Up Payment under Article 5 of this Agreement, except as permittedunder Article 6.

 

**Article10.  Costs:**  Irrespective of the success of theExecutive’s claim, IBC or one of its Affiliates will reimburse the Executive,or the legal representative of the Executive’s estate, for reasonable attorney’sfees and costs in the event that the Executive brings legal action to enforcepayment by IBC, its Affiliates or assigns, or any Successors to any of theforegoing, of the Severance Benefits described in Article 4 and the Gross-UpPayment under Article 5 (plus interest at the applicable federal rate providedfor in Section 7872(f)(2) of the Code on payments of such Severance Benefitsand the Gross-Up Payment due but not timely made).

 

**Article11.  Term of Agreement:**  This Agreement shall expire upon the earliestof the following to occur:

 

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

 

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

 

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

 

After the expiration of this Agreement, the Executive shall have norights to any Severance Benefits described in Article 4 and the Gross-UpPayment described in Article 5; provided, however, if a Change in Controloccurs prior to the expiration of this Agreement, then the Executive shall beentitled to the Gross-Up Payment described in Article 5 and, upon a subsequentQualifying Termination, Severance Benefits described in Article 4, and the termof 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-UpPayment due under Article 5; or (c) the expiration of the period for whichhealth benefits are to be provided under Article 4(b).

 

**Article12.  Notice:**  Any notice or other communication requiredor permitted hereunder is deemed delivered when delivered in person; on thenext business day when sent by an overnight delivery service; or on the thirdbusiness 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:** |   |                                                                                                        |
|                   |   |                                                                                                        |
|                   |   |                                                                                                        |

 

**Article13.  Venue:  ANY ACTION OR LEGAL PROCEEDING TO ENFORCEPAYMENT OF SEVERANCE BENEFITS DESCRIBED IN ARTICLE 4 OR COMPLIANCE WITH THECOVENANTS CONTAINED IN ARTICLES 5 OR 8 OF THIS AGREEMENT SHALL BE BROUGHT IN AFEDERAL OR STATE COURT LOCATED WITHIN THE WESTERN DISTRICT OF MISSOURI, AND THEPARTIES TO THIS AGREEMENT CONSENT TO THE JURISDICTION AND VENUE OF SUCH COURT.**

 

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**Article14.  Missouri Law to Govern:**  This Agreement shall be governed by the lawsof the State of Missouri without regard to its conflict of laws provisions.

 

**Article15.  Entire Agreement:**This Agreement, constitutes the entire understanding between the parties heretowith respect to the subject matter hereof, and supersedes and replaces anyprevious management continuity agreement or any employment contract (oral orwritten) 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 thisAgreement, all parties agree that any prior agreement (other than stock optionor equity award agreements) or employment contract covering severance payments(or other severance-type payments) shall be considered null and void and of nofurther effect in the event of a Qualifying Termination or with respect toIBC’s or an Affiliates’ obligation to make Gross-Up Payments.

 

**INWITNESS WHEREOF**, IBC and the Executive have executed thisAgreement effective as of the 3rd day of February, 2003.

 

 
| **ATTEST:**  |   | **INTERSTATE  BAKERIES****CORPORATION** |
|--------------|--------|-----------------------------------------|
|         |   |                                    |
|         |   |                                    |
|         |   |                                    |
|         |   |                                    |
|         |   |                                    |
| **WITNESS:** |   |                                    |
|         |   |                                    |
|         |   |                                    |
|         |   |                                    |

 

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