Document:

EXHIBIT 10.1

           THIS EMPLOYMENT  AGREEMENT is made and entered into as of the 4th day
of September,  2002, by and among INTERSTATE BAKERIES CORPORATION  ("Bakeries"),
INTERSTATE BRANDS CORPORATION  ("Brands") and INTERSTATE BRANDS WEST CORPORATION
("West"),  each a Delaware corporation  (Bakeries,  Brands and West collectively
are referred to as the "Companies"), and James R. Elsesser ("Employee").

           The Companies and Employee hereby mutually agree as follows:

           1.   Employment.

           (a) The Companies shall employ Employee, and Employee shall serve the
Companies  on the terms and  subject to the  conditions  set forth  herein for a
period  commencing on October 1, 2002,  and  terminating on October 1, 2005 (the
"Expiration  Date"),  except as provided in Section 1(b) below.  Employee  shall
serve in the capacity of Chief Executive  Officer of the Companies.  The duties,
responsibilities  and  authority  of Employee  shall be those that are  normally
incident to the office to be held by  Employee.  Employee  shall devote his best
efforts and  abilities and all his business time to the affairs and interests of
the Companies  (except as may be otherwise  authorized by the Board of Directors
of  the  Companies).  Employee's  principal  office  shall  be at  Kansas  City,
Missouri.

           (b) On the  "Expiration  Date" of the  Employment  Agreement and each
subsequent anniversary of the Expiration Date, the Employment Agreement shall be
automatically  renewed for an additional  one year period  unless  terminated by
either the  Companies or Employee,  by delivery,  on or prior to April 1 of such
year, of a termination notice to the other party.

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           2.   Compensation.    For    his    services    to   the
Companies, Employee shall be entitled:

           (a) To receive (i)  commencing  October 1, 2002,  an  aggregate  base
annual  salary  in the  amount  not less than  seven  hundred  thousand  dollars
($700,000)  and (ii)  commencing  with the fiscal  year  beginning  June 2, 2002
("Fiscal  2003"),  an  annual  bonus  pursuant  to the  terms  of the  Incentive
Compensation  Plan ("Plan") at the level  available to the Chairman of the Board
and Chief  Executive  Officer of the Companies  immediately  prior to October 1,
2002; provided,  however,  that Employee shall be guaranteed a minimum bonus for
Fiscal 2003 equal to one-half of the target level bonus  payable  under the Plan
for Fiscal  2003,  regardless  of actual  results of Fiscal  2003.  At annual or
approximate annual intervals,  Bakeries shall conduct, or cause to be conducted,
a review of  Employee's  salary,  giving  attention  to all  pertinent  factors,
including without  limitation the performance of the Companies,  the performance
of  Employee  and  compensation  practices  inside and  outside  the  Companies.
Bakeries shall, after such review,  determine  Employee's base salary to be paid
until the completion of the next review.

           (b) To be  covered  by  noncash  benefit  plans and  programs  of the
Companies  that are the same as those that were  provided to the Chairman of the
Board and Chief Executive Officer  immediately prior to October 1, 2002, by each
such Company, including without limitation retirement plans and programs, health
and medical insurance coverage, long-term disability insurance coverage and life
insurance coverage.

           (c) To  participate  in any  other  benefit  programs  that  are made
available to other executives of the Companies.

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<PAGE>

           (d) To receive  from  Bakeries  the  deferred  share award and option
grant described in Section 3.

           (e) To  receive  perquisites  that are the same as  those  that  were
provided to the Chairman of the Board and Chief  Executive  Officer  immediately
prior to October 1, 2002, by the Companies,  including without limitation a club
membership (including initiation fees and monthly dues), a new company car every
three  (3)  years  comparable  in style  and cost to any  sedan or SUV  model of
Cadillac or Lincoln,  a $7,500 annual  allowance for financial  counseling  (any
unused amount may be rolled over to the next  succeeding  year provided that the
amount available in any given year will not exceed $15,000) and paid vacations.

           3. Deferred Share Award and Option Grant.  As soon as practical after
the Effective  Time (as defined in Section 16), as authorized by the  Interstate
Bakeries Corporation 1996 Stock Incentive Plan and in accordance with its terms,
Bakeries  will grant to Employee (i) the right to receive in the future  150,000
shares of  Bakeries'  Common  Stock  vesting over three (3) years at the rate of
50,000  shares  per year and  subject to the  additional  terms set forth in the
Deferred  Share  Award  Notice   attached   hereto  as  Exhibit  A  and  (ii)  a
non-qualified  option  grant for 250,000  shares of Common  Stock,  vesting over
three  years,  with an exercise  price  equal to the closing  sales price of the
Common  Stock on the New York  Stock  Exchange  on the  date of the  grant,  and
subject  to the  additional  terms  set  forth in the form of Award  Notice  and
Non-Qualified Stock Option Agreement attached hereto as Exhibit B.

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           4.   Termination; Effect of Termination.

           (a)  Employee's    employment    hereunder    shall   be
terminated prior to the Expiration Date if Employee dies or becomes  permanently
disabled  under  circumstances  in which he would be  entitled  to the  benefits
therefor  under the  long-term  disability  insurance  coverage  referred  to in
Section 2(b),  in which case the  Companies and Employee  shall be released from
all further  obligations and liabilities  hereunder  (except as provided in this
Section  4, for  obligations  accrued  but not yet paid,  for those set forth in
Section 6, for  liability  arising from any breach of this  Agreement  occurring
prior to such termination and except that Employee and his  beneficiaries  shall
be entitled to receive all disability and other benefits  payable upon his death
or disability).

           (b) If  Employee's  employment  hereunder is terminated by any of the
Companies without his consent or for any reason specified in Section 4(a) or for
his failure to consent under Section 13 (each a "Termination  Event"),  then the
Companies shall be obligated for a period of time equal to the longer of (A) the
balance of the three (3) year term of this Employment  Agreement as set forth in
Section 1 remaining as of such  Termination  Event and (B) one (1) year from the
date of such Termination Event (the "Severance  Period") to continue to (i) make
the full salary  payments to Employee  required by Section 2 and (ii) provide to
Employee all health, medical,  disability and insurance coverage provided for in
Section 2(b).

           (c)  For purposes hereof, during the Severance Period Employee  shall
be deemed to be in  service  and shall  continue  to accrue  benefits  under any
retirement  plan of the  Companies  and  any  supplemental  retirement  benefits
agreement in effect between the Companies and Employee  immediately prior to the
Severance Period. All

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such payments shall be made without reference to or deduction for any subsequent
employment obtained or obtainable by Employee.  In the event that Employee would
be ineligible  to  participate  in or be covered by any noncash  benefit plan or
program  by reason of such  termination  of his  employment,  one or more of the
Companies shall provide substantially similar benefits or coverage through other
sources.

           (d) During the Severance  Period the Companies shall continue to make
all payments of their  portion of the premiums for the life  insurance in effect
with respect to Employee's  life.  Employee shall also be entitled to receive or
exercise  during the Severance  Period all other  benefits and rights  available
under any benefit plans or programs to terminated or discharged employees.

           5. Travel Expense. Employee's duties under this Agreement may require
a reasonable  amount of travel and the  incurrence of travel and other  business
expenses.  The Companies shall pay or reimburse Employee for all such reasonable
expenses  incurred or paid by him upon  presentation  of expense  statements  or
vouchers and such other information as West may reasonably require.

           6.  Confidentiality.  Employee  shall not at any time during or after
the term of this Agreement (and without regard to the circumstances  under which
this Agreement or Employee's employment hereunder may have terminated), directly
or indirectly,  disclose or permit those under his control to disclose,  or use,
or permit  those under his control to use,  except as shall be  necessary in the
performance  of his duties  hereunder,  any trade  secrets or other  proprietary
information  owned by or  confidential  to any of the  Companies or any of their
subsidiaries  without the prior written  consent of the Companies  including but
not  limited  to (i)  any  confidential  information  concerning  the  business,
affairs, properties, management or prospects (financial or otherwise) of the

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Companies or any of their  subsidiaries  that he may have acquired in the course
of, or as an  incident  to,  his  employment  by the  Companies  or any of their
subsidiaries or predecessors or (ii) any confidential  information  entrusted to
the  Companies  or any of their  subsidiaries  or  predecessors  which  any such
company is obligated to keep confidential.

           7. Board Seat.  Employee  will  continue to be a member of  Bakeries'
Board of Directors  throughout the term of his employment hereunder and Bakeries
shall  include him in the  management  slate for election as a director at every
stockholders' meeting at which his term as a director would otherwise expire.

           8. Kansas City  Residence.  Employee  understands,  and by  accepting
employment  hereunder  agrees,  that it is currently  impracticable  to move the
principal  office  of the  Companies  and  that  he will be  required  to  spend
substantially  all of his  business  time and,  on  average,  approximately  two
weekends per month in Kansas City. In light of the foregoing, promptly after the
Effective Time,  Employee shall locate  acceptable  living quarters for Employee
and his wife in the Kansas City area. Bakeries shall pay or cause to be paid the
reasonable and necessary  moving costs  associated  with  obtaining  Kansas City
living quarters.

           9.  Arbitration.  Any controversy or claim arising out of or relating
to this  Agreement,  or the  breach or  asserted  breach of its  terms,  will be
settled by arbitration before a single arbitrator in Kansas City,  Missouri,  in
accordance  with the rules then  obtaining of the Federal  Arbitration  Act, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof.  No claim may be arbitrated  unless  written notice of the basis of the
claim is received within 180 days after the party first knew of the existence of
the general facts upon which the claim is based. All arbitration

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hearings  must  commence  within 90 days after the written  notice of the claim.
Employee  and  Bakeries  shall  share  equally  any  fees  and  expenses  of any
arbitrator.  The arbitrator  will decide what amount,  if any, of the prevailing
party's legal fees and expenses will be paid by the  non-prevailing  party.  For
all purposes, this Agreement will be interpreted and enforced under Missouri and
United States law, as respectively applicable.

           10. Entire Agreement.  This Agreement is the entire agreement between
the  parties  hereto  with  respect to  Employee's  employment  and shall not be
amended,  altered  or  modified  in any manner  whatsoever,  except by a written
instrument executed by the parties hereto.  This Agreement  supersedes all prior
agreements  between  any of the  Companies  and  Employee  and  all  such  prior
agreements  shall be void and of no further  force or effect as of the Effective
Time.

           11.  No  Continuous  Waiver.  The  waiver  by any  party hereto  of a
breach of any  provision  of this  Agreement by the other party hereto shall not
operate or be construed as a waiver of any subsequent breach by such party.

           12.  Governing  Law.  This  Agreement  shall  be  subject to, and  be
governed by, the laws of the State of Missouri.

           13. Transfer, Assignment,  Modification,  etc. This Agreement may not
be transferred,  assigned, modified, amended or waived without the prior written
consent of all parties.  Further,  this Agreement and all rights and obligations
of the Companies  hereunder  shall not inure to the benefit of their  respective
successors  and  assigns  without  the  written  consent of  Employee.  The term
"successor"  shall mean only any person,  corporation  or other entity that,  by
merger, consolidation, purchase of assets, liquidation, voluntary or involuntary
assignment or otherwise, acquires all or a substantial part of the assets of one
or more of the Companies or succeeds to one or more lines of

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business of one or more of the Companies.  For purposes of this  Agreement,  any
such  acquisition  or succession by merger,  consolidation,  purchase of assets,
liquidation,  voluntary or involuntary assignment, shall be deemed a termination
of Employee's  employment by the Companies for purposes of Sections 4(b), unless
Employee consents otherwise in writing to Bakeries.

           14.  Severability.  If any  one or  more  of the  provisions  of this
Agreement,  as applied to any party or any circumstance,  shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality  or  unenforceability  shall not affect any other  provision  of this
Agreement,  and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained in the Agreement. If any one or
more of the provisions of this Agreement  shall,  for any reason,  be held to be
unenforceable as to duration,  scope,  activity or subject, such provision shall
be  construed  by  limiting  and  reducing  it  so  as to  make  such  provision
enforceable to the extent compatible with the then existing applicable law.

           15.  Notices.   All  notices  hereunder  shall  be in writing,  shall
be  delivered  personally  or sent by  certified  or  registered  mail,  postage
prepaid,  return  receipt  requested,  or  by  overnight  delivery  utilizing  a
recognized  national express delivery carrier such as FedEx, if to Employee,  to
his attention at the principal office of Bakeries,  and if to the Companies,  to
Bakeries at its principal office, Attention: General Counsel. No notice shall be
effective if given otherwise than as provided  herein.

           16. Effective Time.  This  Agreement  may be signed in  any number of
counterparts  each of  which shall  be an original  and all of which, when taken
together,

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<PAGE>

shall  constitute one and the same  instrument and shall become  effective as of
October 1, 2002 (the "Effective Time") upon the execution and delivery hereof by
the parties hereto.

           IN  WITNESS  WHEREOF,  the  parties  hereto  have duly  executed  and
delivered this Agreement as of the day and year first above written.

                          INTERSTATE BAKERIES CORPORATION

                          By:     /s/ Charles A. Sullivan
                                  ----------------------------------------------
                                  Charles A. Sullivan
                          Title:  Chairman and Chief Executive Officer

                          INTERSTATE BRANDS CORPORATION

                          By:     /s/ Charles A. Sullivan
                                  ----------------------------------------------
                                  Charles A. Sullivan
                          Title:  Chairman and Chief Executive Officer

                          INTERSTATE BRANDS WEST CORPORATION

                          By:     /s/ Charles A. Sullivan
                                  ----------------------------------------------
                                  Charles A. Sullivan
                          Title:  Chairman and Chief Executive Officer

                          /s/ James R. Elsesser
                          ------------------------------------------------------
                          James R. Elsesser

                                       9EXHIBIT 10.2

                           DEFERRED SHARE AWARD NOTICE

           THIS  DEFERRED  SHARE AWARD  NOTICE  ("Notice")  is  effective  as of
October 1,  2002,  (the "Date of  Grant")  by and  between  Interstate  Bakeries
Corporation,  a Delaware corporation ("IBC"), and James R. Elsesser, an employee
of IBC (the "Grantee").

1.    Deferred Share Award Notice

      (a)  The  Grantee  is  hereby  granted  by IBC,  subject  to the terms and
           conditions  of the Plan and the terms and  conditions of this Notice,
           the right to receive  in the  future up to 150,000  shares (as may be
           adjusted  from  time to time,  the  "Shares")  of Common  Stock  (the
           "Award").

      (b)  The number of Shares to which  Grantee  shall be  entitled  hereunder
           shall  be  appropriately  adjusted  for any  stock  dividends,  stock
           splits, splits, reverse splits,  combinations,  recapitalizations and
           the like  affecting  the  Common  Stock  occurring  after the Date of
           Grant.

      (c)  In the event that (i) the  Company  declares a dividend  on shares of
           the Common Stock  subsequent to the Date of Grant and (ii) the record
           date for such  dividend  occurs prior to the Issue Date,  then,  with
           respect  to each such  dividend,  the number of Shares  specified  in
           Section  1(a)  above  shall be  increased  by an amount  equal to the
           number  obtained by dividing  (x) the amount of the dividend to which
           the Grantee would have been entitled  (regardless  of vesting) had he
           actually  owned the  number of Shares of Common  Stock  specified  in
           Section 1(a) above (taking into account prior  adjustments under this
           Section 2) by (y) the per share Fair Market Value of the Common Stock
           on the  record  date for such  dividend.  With  respect  to each such
           dividend,  the  additional  number  of  Shares  calculated  under the
           preceding sentence shall be rounded to the nearest whole number.

      (d)  The Grantee's right to receive the Common Stock in the future (as set
           forth below) would vest over three (3) years as follows:

           (i)  1/3 of the  Shares if the  Grantee  is  employed  by IBC on the
                first anniversary of the Date of Grant;

           (ii) An  additional  1/3 of the Shares if the Grantee is employed by
                IBC on the second anniversary of the Date of Grant; and

           (iii)An  additional  1/3 of the Shares if the  Grantee is employed by
                IBC on the third anniversary of the Date of Grant.

<PAGE>

           The Shares with  respect to which rights shall have vested in Grantee
           shall be issued to Grantee  within one hundred  eighty  (180) days of
           the termination of his employment for any reason (the "Issue Date").

2.    Restrictions on Transfer

      The Grantee  shall not sell,  transfer,  assign,  pledge,  or encumber the
      Award,   except  for   transfer  by  will  or  the  laws  of  descent  and
      distribution.  Any attempt to transfer,  assign,  pledge,  hypothecate  or
      otherwise  dispose of the Award,  or to  subject  the Award to  execution,
      attachment or similar process,  except as permitted herein,  shall be void
      and ineffective, shall give no right to any purported transferee, and may,
      at the discretion of the Committee, result in the Award being forfeited.

3.    Other Conditions

      (a)  If the  Grantee  dies  before all of the rights  subject to the Award
           have vested and is employed by IBC or a Subsidiary of IBC at the time
           of death,  or if the  Grantee  dies  within a period of three  months
           following the  termination of his employment  (but before the vesting
           of rights under the Award),  the vesting of the remaining rights will
           be accelerated  and the Shares related to such rights shall be issued
           on the Issue Date to the estate of the Grantee, or to the persons who
           shall have acquired the Award directly from the Grantee by bequest or
           inheritance.

      (b)  In the event of the termination of the Grantee's  employment  because
           of a "disability" (as defined in Section 22(e)(3) of the Code) of the
           Grantee,   then  any  rights   under  the  Award  not  vested   shall
           automatically  be vested and the Shares  related to such rights shall
           be issuable to Grantee on the Issue Date.

      (c)  Upon the  occurrence  of a Change of Control  Event,  the Award shall
           fully vest and all of the Shares  shall be issuable to the Grantee on
           the Issue Date.  At the time of issuance,  if Grantee so elects,  IBC
           shall  purchase the Shares  subject to the Award at a purchase  price
           equal to the Fair  Market  Value of the  Shares  on the  Issue  Date.
           Notwithstanding  the  foregoing,  in the  event  that  Grantee  would
           receive benefits under this Notice (or under any other plan,  program
           or  policy  that is  sponsored  by IBC)  which  would be  treated  as
           "parachute  payments" within the meaning of Section  280G(b)(2)(A) of
           the Internal Revenue Code of 1986 (the "Section 280G payments"), then
           the payments to which Grantee is entitled  under this Notice shall be
           reduced (but by the minimum  possible  amount) so that the  Aggregate
           present  value  of such  Section  280G  payments  equals  2.99  times
           Grantee's  "base  amount," as defined under Code Section  280G(b)(3);
           provided,  however,  that these payment  reduction  provisions  shall
           apply  only if IBC has made a good faith  determination  that the net
           after-tax

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<PAGE>

           benefits to Grantee under this Notice (and all other plans,  programs
           or  policies  sponsored  by IBC) would be greater as a result of such
           reduction.

      (d)  If  Grantee's  employment  is  terminated  on  account of any act of
           fraud,      intentional       misrepresentation,       embezzlement,
           misappropriation  or  conversion  of  assets,  the  Award  shall  be
           cancelled pursuant to the Plan.

4.    Miscellaneous

      (a)  The  Committee  may  allow  the  Grantee  to pay the  amount of taxes
           required by law to be withheld at any time with  respect to the Award
           (including,  without limitation,  with respect to the issuance of the
           Shares) (i) in cash,  or by check,  bank draft or money order payable
           to the order of IBC,  or (ii) by  allowing  the Grantee to deliver to
           IBC shares of Common Stock having a Fair Market Value, on the date of
           payment,  equal to the amount of such required  withholding taxes. To
           the  extent  the  Grantee  fails to  satisfy  the  above  withholding
           obligation, IBC shall, to the extent permitted by law, have the right
           to deduct from any payments of any kind otherwise due to the Grantee,
           any such withholding taxes.

      (b)  The Grantee shall have no rights as a shareholder with respect to any
           shares  of Common  Stock  subject  to the Award  prior to the date of
           issuance to him of a certificate for such shares.

      (c)  The Grantee  agrees to be bound by all of the terms and provisions of
           the Plan. The terms of the Plan as it presently exists, and as it may
           hereafter be amended,  are deemed  incorporated  herein by reference,
           and any  conflict  between the terms of this Notice and the terms and
           provisions  of the Plan shall be  resolved  by the  Committee,  whose
           determination  shall be final and binding on all parties. In general,
           and except as otherwise  determined by the Committee,  the provisions
           of the Plan  shall be  deemed to  supersede  the  provisions  of this
           Notice  to the  extent  of any  conflict  between  the  Plan and this
           Notice.

      (d)  Any notice  hereunder to IBC shall be  addressed to it at  Interstate
           Bakeries  Corporation,   Compensation   Committee,   12  East  Armour
           Boulevard,   Kansas  City,  Missouri  64111,   attention:   Corporate
           Secretary.  Any notice hereunder to the Grantee shall be addressed to
           him at the  address set forth  below,  subject to the right of either
           party at any time  hereafter  to  designate  in  writing a  different
           address.

      (e)  The  Committee  may at any time  unilaterally  amend  the  terms  and
           conditions pertaining to the Award,  provided,  however that any such
           amendment which is adverse to the Grantee shall require the Grantee's
           written  consent.  Any other amendment of this Notice shall require a
           written agreement executed by both parties.

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<PAGE>

                     IN  WITNESS  WHEREOF,  IBC has  caused  this  Notice to be
executed by its duly authorized officer and the Grantee has executed this Notice
to be effective as of the Date of Grant.

                               INTERSTATE BAKERIES CORPORATION

                               By:  /s/ Kent B. Magill
                                    --------------------------
                               Name:  Kent B. Magill
                               Title: Vice President and General Counsel

                               ACCEPTED AND AGREED TO:

                               /s/ James R. Elsesser
                               --------------------------------
                               James R. Elsesser

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