CRAIG D. JUNG

 

                              EMPLOYMENT AGREEMENT

 

         EMPLOYMENT AGREEMENT, dated as of January 30, 2007 (but is effective

and binding upon the Parties as provided in subsection 19(b) below) by and

among INTERSTATE BRANDS CORPORATION, a Delaware corporation, (unless the

context otherwise requires, together with its successors and permitted assigns,

the "Company"), INTERSTATE BAKERIES CORPORATION, a Delaware corporation, and

CRAIG D. JUNG (the "Executive").

 

                              W I T N E S S E T H:

 

         WHEREAS, the Company desires to employ the Executive and to enter into

an agreement embodying the terms of such employment;

 

         WHEREAS, the Executive desires to accept employment with the Company,

subject to the terms and provisions of this Agreement;

 

         NOW, THEREFORE, in consideration of the promises and mutual covenants

contained herein and for other good and valuable consideration, the receipt of

which is mutually acknowledged, the Parties agree as follows:

 

         1. Definitions. Capitalized terms not otherwise defined herein shall

have the meanings set forth in Exhibit A.

 

         2. Term. The term of the Executive's employment hereunder (the "Term")

shall be for a period commencing on the Effective Date and ending on the third

(3rd) anniversary of the Effective Date; provided, however, that the Term shall

thereafter be automatically extended for additional one-year periods unless

either the Company or the Executive gives the other written notice at least 120

days prior to the then-scheduled date of expiration of the Term that such Party

is electing not to so extend the Term (it being understood that the Executive

will continue to serve through the then -scheduled date of expiration of the

Term in the event that such a notice is given). Notwithstanding the foregoing,

the Term may be earlier terminated in accordance with the provisions of Section

10 below.

 

         3. Positions, Duties and Location. (a) During the Term, the Executive

shall serve as the Chief Executive Officer of the Company, and of IBC and each

of its subsidiaries, and shall be a member of the Board and of the boards of

directors of IBC's subsidiaries. The Executive shall report solely and directly

to the Board. The Executive shall be responsible for the general management of

the affairs of IBC and its subsidiaries (including the Company) and shall have

all authorities, duties and responsibilities customarily exercised by an

individual serving as the Chief Executive Officer in a corporation of the size

and nature of IBC.

 

                  (b) During the Term, the Executive shall devote substantially

all of his business time and efforts to the affairs of IBC and its

subsidiaries; provided that nothing herein shall preclude the Executive from:

(i) serving on the boards of a reasonable number of other business entities,

trade associations and charitable organizations, consistent with IBC's

Corporate Governance Guidelines applicable to all directors as adopted and

approved by the Board from time to time, (ii) engaging in other charitable

activities and community affairs and (iii) managing his personal investments

and affairs, provided that such activities do not materially interfere with the

proper performance of his duties and responsibilities hereunder.

 

                  (c) During the Term, the Executive's principal office, and

principal place of employment, shall be in Kansas City, Missouri or such other

place that the Executive consents to in writing.

 

         4. Base Salary. Executive shall receive an annual base salary of

$900,000 (the "Base Salary"), which shall be paid in accordance with the

customary payroll practices of the Company, but in no event less frequently

than monthly. During the Term, the Executive's Base Salary shall be reviewed at

least annually by the Compensation Committee of the Board (the "Compensation

Committee") on or before May 1 of each year (beginning with May 1, 2008, for

the Fiscal Year ending in 2009) and may be increased (but not decreased) from

time to time as shall be determined by the Compensation Committee. After any

such increase, the term "Base Salary" as utilized in this Agreement shall

thereafter refer to the increased amount.

 

         5. Bonuses. (a) During the Term, beginning with the Company's Fiscal

Year ending in 2009, the Executive shall be eligible to receive an annual

performance-based cash bonus award (a "Bonus") with a target of no less than

one hundred percent (100%) of Executive's then current Base Salary (the "Target

Bonus") pursuant to the terms and conditions of Company's annual performance

bonus plan and in accordance with an annual performance plan to be adopted by

the Compensation Committee on or before the 90th day after the start of each

Fiscal Year after due consultation with the Executive (beginning with the

Fiscal Year ending in 2009); provided that the actual cash bonus paid to the

Executive for any Fiscal Year shall not exceed two hundred percent (200%) of

the Executive's Base Salary. The Bonus shall be based on IBC's consolidated

actual performance compared to such annual performance plan with linear

interpolation applied for incremental performance achieved. During the Term,

beginning with the Company's Fiscal Year ending in 2010, the Executive's Target

Bonus shall be reviewed at least annually by the Compensation Committee on or

before May 1 of each year and may be increased (but not decreased) from time to

time as shall be determined by the Compensation Committee. After any such

increase, the term "Target Bonus" as utilized in this Agreement shall

thereafter refer to the increased amount. The Executive shall be paid his Bonus

at the same time as the other senior executives of IBC and/or the Company are

paid their annual performance bonuses, but in no event later than the date on

which IBC is required under applicable law to file its Annual Report on Form

10-K (without extension) with the Securities and Exchange Commission (or would

have been so required, if at the applicable time IBC had been subject to the

reporting requirements of the Securities Exchange Act of 1934, as amended)

unless, pursuant to a deferred compensation arrangement approved by the Board

or a committee thereof, the Executive elects to defer such payment.

 

                  (b) The Executive shall also be entitled to receive the

following special cash awards in accordance with this subsection 5(b):

 

                  (i)      The Executive shall be entitled to receive a special

                           cash award (the "Enhanced Enterprise Value Award")

                           as follows:

 

                           o    0.25% of Total Enterprise Value in excess of

                                $500 million but less than $600 million, plus

 

                           o    An additional 0.50% of Total Enterprise Value

                                in excess of $600 million but less than $700

                                million, plus

 

                           o    An additional 0.75% of Total Enterprise Value

                                in excess of $700 million but less than $800

                                million, plus

 

                           o    An additional 1.0% of Total Enterprise Value in

                                excess of $800 million.

 

Notwithstanding the calculations above, the Enhanced Enterprise Value Award

described in this subsection 5(b)(i) shall in no event exceed $3,000,000.

 

                  (ii)     In addition to Enhanced Enterprise Value Award,

                           Executive shall be entitled to another special cash

                           award (the "Total Enterprise Value Over Claims

                           Award"; and together with the Enhanced Enterprise

                           Value Award, the "Special Awards") equal to one and

                           three quarters percent (1.75%) of Total Enterprise

                           Value in excess of an amount equal to the sum of:

 

                           (1) $700 million, plus

 

                           (2) 95% of the Triggered Contingent Claims Amount.

 

                  (iii)    Total Enterprise Value (for purposes of subsections

                           5(b)(i) and 5(b)(ii) above) and the Triggered

                           Contingent Claims Amount (and each of their

                           respective component parts) shall be (a) based upon

                           the consolidated books and records of IBC and its

                           subsidiaries as reviewed by IBC's independent

                           auditor, (b) determined in good faith by the Board

                           and IBC's advisors and appraisers as contemplated in

                           the definition of Total Enterprise Value which

                           appears at Exhibit A hereto as of the applicable

                           Determination Date and (c) set forth in writing to

                           the Executive from IBC and such advisors and

                           appraisers, together with supporting schedules,

                           calculations and other information in reasonable

                           detail (the "IBC Determination"), and shall be

                           delivered to the Executive within thirty (30) days

                           of the applicable Determination Date. In the event

                           the Executive disputes any aspect of the IBC

                           Determination (whether for purposes of the Enhanced

                           Enterprise Value Award, the Total Enterprise Value

                           Over Claims Award or both), the Executive shall send

                           a dispute notice to IBC specifying the items in

                           dispute and the reasons therefore in reasonable

                           detail (a "Dispute Notice") within a thirty (30) day

                           period following receipt by the Executive of the IBC

                           Determination. During such thirty (30) day period,

                           IBC shall provide the Executive and his

                           representatives with full access to all of the books

                           and records of IBC and its subsidiaries, and to

                           their financial personnel having information

                           relevant to such review, their advisors, appraisers

                           and independent auditors and their work papers for

                           the purpose of reviewing and verifying the IBC

                           Determination. If the Executive and IBC are unable

                           to resolve such dispute within ten (10) days after

                           receipt by IBC of a Dispute Notice, the Executive

                           and IBC shall each promptly designate one accounting

                           firm and those two firms shall promptly and jointly

                           designate a separate accounting firm, investment

                           banking firm or actuarial firm as appropriate (as

                           determined by such accounting firms) to determine

                           the disputed items in respect of the calculations of

                           the Total Enterprise Value, the Triggered Contingent

                           Claims Amount or both depending upon which is

                           subject to dispute (the accounting, investment

                           banking or actuarial firm so designated, the

                           "Evaluation Firm"). The Evaluation Firm shall not

                           have served IBC or any of its subsidiaries during

                           the two (2) years preceding its designation. The

                           determination of the Evaluation Firm shall be set

                           forth in writing in reasonable detail and delivered

                           to the Executive and IBC and shall be final and

                           binding on the Parties absent manifest error (the

                           "Final Determination"). All fees and expenses of the

                           Evaluation Firm shall be borne solely by IBC;

                           provided, however, that if the calculation of (a)

                           the Total Enterprise Value as determined by the

                           Evaluation Firm is less than 110% of IBC's

                           calculation of the Total Enterprise Value or (b) the

                           amount of Triggered Contingent Claims Amount as

                           determined by the Evaluation Firm is not less than

                           90% of IBC's calculation of Triggered Contingent

                           Claims Amount, then 50% of the fees and expenses of

                           the Evaluation Firm shall be borne by the Executive.

 

                  (iv)     The amounts of the Special Awards described in

                           subsections 5(b)(i) and 5(b)(ii) above shall be

                           determined as of the applicable Determination Date.

                           The payment of the Special Awards shall, unless

                           disputed, be made in cash in a lump sum on the date

                           which is sixty (60) days after the applicable

                           Determination Date (or, if sooner, five (5) business

                           days after the Executive notifies IBC that he will

                           not dispute the IBC Determination). If the Executive

                           has timely delivered a Dispute Notice, payment to

                           the Executive of that portion, if any, of the

                           Special Awards which is not in dispute shall be made

                           in cash in a lump sum on the date which is sixty

                           (60) days after the applicable Determination Date

                           (or, if sooner, five (5) business days after the

                           Executive notifies IBC that he will not dispute such

                           portion) and payment to the Executive of that

                           portion (including the whole, if so disputed) of the

                           Special Awards which is in dispute shall be made in

                           cash in a lump sum within five (5) business days

                           after the delivery of the Final Determination to the

                           Parties.

 

 

         6. Sign-on Arrangements. On the Company's first payroll date after the

Effective Date, the Company shall pay the Executive $1,200,000 in a lump sum in

cash (the "Signing Bonus"). In the event that the Executive ceases to be

employed by IBC and its subsidiaries (including the Company) before the first

anniversary of the Effective Date (other than as a result of termination of

employment without Cause by the Company or a Constructive Termination Without

Cause by the Executive), the Executive shall, within thirty (30) days of the

Termination Date, repay to the Company a portion of the Signing Bonus equal to

the Signing Bonus multiplied by a fraction, the numerator of which is the

number of days remaining from the Termination Date to the last day of Company's

Fiscal Year ending in 2008, and the denominator of which is the number of days

from the Effective Date to the last day of the Company's Fiscal Year ending in

2008, subject to an appropriate reduction in the amount of the Signing Bonus

otherwise required to be repaid by the Executive to take into account the

Federal, state and local income tax, earnings and employment tax consequences

to the Executive (determined at the highest marginal rates applicable to the

Executive) of receiving and then repaying such portion of the Signing Bonus (it

being the intent of this provision that the Executive shall not have to incur

any net tax liability as a result of his receipt and subsequent repayment of a

portion of the Signing Bonus ). Notwithstanding the foregoing or any provision

in Section 10 to the contrary, the Parties agree that any amount owed by the

Executive in accordance with the preceding sentence shall first be paid by

reducing the cash amounts otherwise payable to the Executive (or his estate or

beneficiaries) under subsections 10(a), (b) or (c) below, and only the portion,

if any, of the amount owed by the Executive that is in excess of the amount

reduced shall be repaid by the Executive (or his estate or beneficiaries)

pursuant to the preceding sentence.

 

         7. Equity. (a) The Executive shall be granted an equity interest in

IBC at the same time as all other Persons who, or which, are to be equity

holders of IBC in accordance with the Plan receive their equity in IBC, subject

to the Executive's rights in such equity interest being subject to vesting (and

acceleration in vesting) as set forth herein; provided that if no new or

additional equity in IBC is to be issued on the Emergence Date to any Person

(other than the Executive) in accordance with the Plan, then the Executive's

equity interest in IBC shall be granted on the Emergence Date. At such time,

the Executive shall receive from IBC a grant of Capital Stock and options to

purchase Capital Stock (the "Options") as provided in this Section 7 (the "Post

Emergence Equity Award"). The aggregate number of shares of Capital Stock

comprising the Post Emergence Equity Award (as shares of Capital Stock and as

shares of Capital Stock underlying the Options) shall be equal to two percent

(2%) of the number of shares of Capital Stock issued and outstanding on the

Emergence Date, after giving effect to the issuances of Capital Stock to the

Executive and the issuances of Capital Stock (if any) to all other

post-emergence Capital Stock holders, and calculated on a fully diluted basis

(taking into account all classes of capital stock and all securities

convertible, exchangeable or exercisable into Capital Stock (collectively,

"Rights"), whether or not at the time convertible, exchangeable or

exercisable). Fifty percent (50%) of the Post Emergence Equity Award shall be

in the form of a grant of shares of Capital Stock and fifty percent (50%) of

the Post Emergence Equity Award shall be in the form of Options. Twenty five

percent (25%) of the number of shares of Capital Stock and twenty five percent

(25%) of the Options comprising the Post Emergence Equity Award shall vest

(and, in the case of Options, become exercisable) immediately upon the grant to

the Executive of the Post Emergence Equity Award. The remaining unvested shares

of Capital Stock and Options comprising the Post Emergence Equity Award shall,

so long as the Executive's employment by the Company or an Affiliate thereof

continues, vest (and, in the case of Options, become exercisable) pro rata on a

monthly basis over a thirty-six (36) month period beginning with the last day

of the month in which the Emergence Date occurs. Once vested, all such shares

of Capital Stock and Options shall be nonforfeitable in all circumstances. The

exercise price per share of Capital Stock underlying the Options shall be equal

to the fair market value per share of Capital Stock (determined, in the case of

Capital Stock which is publicly traded on an established securities market or

exchange, as the average of the closing prices per share for such Capital Stock

for the five (5) trading days first occurring within thirty (30) days following

the Emergence Date as reported on the securities exchange on which such Capital

Stock is listed for trading, or if not so listed, in the over the counter

market, and, if the Capital Stock is not so publicly traded within a thirty

(30) day period following the Emergence Date, determined in good faith by the

Board in accordance with the requirements for determining such value as set

forth in the regulations, and in the rulings, notices and other guidance issued

by the Internal Revenue Service, under section 409A of the Code). Subject to

the next sentence, all Options comprising part of the Post Emergence Equity

Award shall, upon vesting, be exercisable for a period of ten (10) years after

the date of grant. After termination of the Executive's employment for any

reason, all Options (to the extent vested) shall be exercisable for a period

equal to the lesser of (i) two (2) years beginning on the applicable

Termination Date and (ii) the period of time remaining until the tenth (10th)

anniversary of the Emergence Date. The Post Emergence Equity Award shall be

entitled to the following anti-dilution protection until the first (1st)

anniversary date of the Emergence Date: in the event that IBC shall issue

additional shares of Capital Stock and/or Rights to any Person, it shall also

simultaneously issue additional shares of Capital Stock (and/or Options in the

case of the issuance of Rights) to the Executive (for nominal consideration in

the case of shares of Capital Stock) in order to fully maintain the Executive's

fully diluted two percent (2%) interest in the Capital Stock, calculated as

aforesaid.

 

                  (b) Upon issuance to the Executive, the Capital Stock and the

Capital Stock underlying the Options comprising the Post Emergence Equity Award

shall be effectively registered on Form S-8 (or the successor to such Form)

under the Securities Act of 1933, as amended (the "Securities Act"), which

registration statement shall contain all of the provisions necessary to permit

the resale to the public by the Executive of such Capital Stock and Capital

Stock acquired by him pursuant to the exercise of such Options; provided that

if for any reason such Form is not available for such purpose and the Executive

is unable to sell publicly all of the shares of Capital Stock comprising the

Post Emergence Equity Award within ninety (90) days after the issuance of the

Post Emergence Equity Award to the Executive pursuant to Rule 144 under the

Securities Act, IBC shall promptly use its commercially reasonable efforts to

register the resale of the Capital Stock comprising and underlying the Post

Emergence Equity Award on the appropriate registration statement under the

Securities Act. The Executive shall also be granted "piggy-back" registration

rights at IBC's expense and otherwise commensurate with any such rights granted

to other holders of the Company's equity as and when so granted in connection

with IBC's emergence from bankruptcy.

 

                  (c) The Executive shall be prohibited from selling in the

public markets shares of Capital Stock comprising and underlying the Post

Emergence Equity Award until twelve (12) months after the grant date of the

Post Emergence Equity Award, except that the Executive may sell shares in such

markets (and otherwise) attributable to the Post Emergence Equity Award with an

aggregate market value at the time of such sale equal to the amount of any tax

liability he incurs in connection with the grant and/or vesting of such award

that is not satisfied through the withholding of shares of Capital Stock by IBC

upon the grant of such award in accordance with subsection 19(j) below,

including any tax liability incurred in connection with the sale(s) permitted

by this subsection (c).

 

                  (d) Notwithstanding anything in this Agreement to the

contrary, the Executive does not have any right or interest in and to the Post

Emergence Equity Award or any value with respect thereto in the event that the

Emergence Date does not occur during the Term; provided that notwithstanding

the foregoing and notwithstanding anything in this Agreement to the contrary,

the Executive shall be granted the Post Emergence Equity Award at the time

otherwise required pursuant to subsection 7(a) above in the event that the

Executive's employment is terminated hereunder at any time within sixty (60)

days prior to the Emergence Date by the Company without Cause or by the

Executive as a result of a Constructive Termination Without Cause. In such

circumstances, the Post Emergence Equity Award shall be fully vested upon grant

and shall otherwise have the terms and conditions applicable to the Post

Emergence Equity Award provided in this Section 7.

 

         8. Employee Benefits and Perquisites. (a) During the Term, the

Executive and, to the extent permissible under the applicable plans and

programs, his eligible dependents shall be eligible to participate in all

employee benefit and welfare plans and programs applicable to senior executives

of IBC and its subsidiaries generally, including medical/dental and

hospitalization plans, life insurance, short- and long-term disability

programs, accidental death and dismemberment protection, travel accident

insurance, and pension (including any 401(k) plan), savings, profit-sharing and

deferred compensation plans, in each case at a level and on terms and

conditions consistent with his positions and no less favorable than those

provided to other senior executives.

 

                  (b) During the Term, the Executive shall be entitled to not

less than four (4) weeks' paid vacation and to such other perquisites on the

same basis as are made available to other senior executives of IBC and its

subsidiaries.

 

         9. Reimbursement of Business Expenses and Relocation.

 

                  (a) The Executive shall be promptly reimbursed for all

reasonable business expenses incurred by him in the conduct of his services

hereunder, subject to the submission of appropriate documentation in accordance

with the Company's policy, and shall be promptly reimbursed for all reasonable

legal fees and expenses incurred by the Executive in connection with the

preparation and negotiation of this Agreement (and the term sheet related

thereto).

 

                  (b) The Executive shall be entitled to prompt reimbursement

of all costs and expenses reasonably incurred by him and his family in

relocating him, his family and their household goods from Weston, Florida to

his new principal place of employment in the Kansas City, Missouri area. Such

reimbursement shall include:

 

                  (i)      the brokerage commission of up to six percent (6%)

                           of the sales price of his current residence and all

                           reasonable legal and other closing costs associated

                           with such sale;

 

                  (ii)     all reasonable costs for (x) temporary living

                           expenses during the two (2) months after the

                           Effective Date, including taxis, rental car, meals

                           and lodging, (y) one (1) round trip for the

                           Executive and his wife to Kansas City, Missouri to

                           arrange for living accommodations (including

                           business-class airfare, taxis, rental car, meals and

                           lodging), and (z) during the first two (2) months

                           after the Effective Date, one round trip per week

                           between Weston, Florida and Kansas City, Missouri

                           for Executive and his wife (including business-class

                           airfare, taxis, rental car, meals and lodging);

 

                  (iii)    all reasonable expenses incurred in connection with

                           moving his and his family's household goods and

                           automobiles;

 

                  (iv)     all reasonable storage costs for his and his

                           family's household goods for up to twelve (12)

                           months; and

 

                  (v)      all reasonable legal and other closing costs

                           associated with the purchase of a new residence in

                           the Kansas City, Missouri area.

 

                  (c) All taxable payments or reimbursements required pursuant

to subsection 9(b) above shall be grossed up for Federal, state and local

income, earnings and employment tax purposes, such that the Company shall,

together with each such payment or reimbursement, pay the Executive an amount

in respect of any such taxable payment or reimbursement that, after all

Federal, state and local income, earnings and employment taxes thereon and on

such amount (determined at the highest marginal rates for Federal, state and

local income and earnings taxes applicable to the Executive), shall be equal to

such payment or reimbursement. In the event of a subsequent relocation of the

Company's principal offices to a new location outside the Kansas City, Missouri

area, to which he consents, the Executive shall be promptly reimbursed for the

costs and expenses of that relocation on the same basis as provided in

subsection 9(b) above and in this subsection 9(c).

 

                  (d) All reimbursements and tax gross up amounts to be paid to

the Executive pursuant to this Section 9 shall be paid to him promptly and in

any event no later than by March 15 following the close of the calendar year in

which the costs entitling the Executive to reimbursement hereunder are

incurred.

 

         10. Termination of Employment.

 

                  (a) Termination Due to Death. In the event that the

Executive's employment hereunder is terminated due to his death, his estate or

his beneficiaries (as the case may be) shall be entitled to, without

duplication (subject to Section 6 above):

 

                  (i)      Base Salary through the Termination Date, payable on

                           the first payroll date after the Termination Date;

 

                  (ii)     a pro-rata cash Bonus for the year of death, based

                           on the Target Bonus for the year of death, payable

                           within thirty (30) days after the Termination Date;

 

                  (iii)    full and immediate vesting of (A) all outstanding

                           and unvested Capital Stock and Options comprising

                           the Post Emergence Equity Award and (B) all other

                           unvested equity awards (if any) at the Termination

                           Date;

 

                  (iv)     continued participation for his eligible dependents,

                           at the Company's cost, for twelve (12) months after

                           the Termination Date in all medical, dental, and

                           hospitalization plans and programs and in all other

                           employee welfare plans and programs in which his

                           eligible dependents were participating on the

                           Termination Date, provided, however, that in the

                           event that any of the benefit plans or programs do

                           not permit his eligible dependents' continued

                           participation, the Company shall provide them with

                           the economic equivalent on an after-tax basis; and

 

                  (v)      all Accrued Obligations, payable within thirty (30)

                           days after the Termination Date or otherwise in the

                           manner specified in the applicable benefit or

                           compensation plan, program or arrangement.

 

 

                  (b) Termination Due to Disability. In the event that the

Executive's employment hereunder is terminated due to Disability, he shall be

entitled to, without duplication (subject to Section 6 above):

 

                  (i)      Base Salary through the Termination Date, payable on

                           the first payroll date after the Termination Date;

 

                  (ii)     disability benefits in accordance with the long-term

                           disability program and other disability benefits

                           described in Section 8(a) above;

 

                  (iii)    a pro-rata cash Bonus for the year of termination,

                           based on the Target Bonus for the year of

                           termination, payable within thirty (30) days after

                           the Termination Date;

 

                  (iv)     full and immediate vesting of (A) all outstanding

                           and unvested Capital Stock and Options and (B) all

                           other unvested equity awards (if any) at the

                           Termination Date;

 

                  (v)      continued participation for himself and his eligible

                           dependents, at the Company's cost, for twelve (12)

                           months after the Termination Date in all medical,

                           dental, hospitalization and life insurance plans and

                           programs and in all other employee welfare plans and

                           programs in which he and his eligible dependents

                           were participating on the Termination Date,

                           provided, however, that in the event that any of the

                           benefit plans or programs do not permit his and his

                           eligible dependents' continued participation, the

                           Company shall provide him with the economic

                           equivalent on an after-tax basis; and

 

                  (vi)     all Accrued Obligations, payable within thirty (30)

                           days after the Termination Date or otherwise in the

                           manner specified in the applicable benefit or

                           compensation plan, program or arrangement.

 

No termination of the Executive's employment hereunder for Disability shall be

effective unless the Party terminating his employment first gives thirty (30)

days' written notice of such termination to the other Party.

 

                  (c) Termination by the Company for Cause and Voluntary

Termination by the Executive.

 

                  (i)      In the event the Executive is terminated by the

                           Company for Cause or the Executive voluntarily

                           terminates his employment (other than upon

                           Disability or a Constructive Termination Without

                           Cause), the Executive shall be entitled to, without

                           duplication (subject to Section 6 above):

 

                  (a) Base Salary through the Termination Date, payable on the

first payroll date after the Termination Date;

 

                  (b) all Accrued Obligations, payable within thirty (30) days

after the Termination Date or otherwise in the manner specified in the

applicable benefit or compensation plan, program or arrangement; but

 

                  (c) the Executive and his eligible dependants shall no longer

be permitted to participate at the Company's expense in medical, dental,

hospitalization and life insurance plans and programs or in any other employee

welfare plans and programs for which he and his eligible dependents were

otherwise entitled to receive or participate in but for the Executive's

termination (for clarity, other than for Accrued Obligations and provided that

the Executive shall be entitled to exercise his rights under COBRA).

 

In the circumstances contemplated by this subsection 10(c)(i), the Executive

shall forfeit all unvested Capital Stock and Options comprising the Post

Emergence Equity Award at the Termination Date. A voluntary termination of his

employment by the Executive shall not be a breach of this Agreement.

 

                  (ii) No termination of the Executive's employment hereunder

by the Company for Cause shall be effective as a termination for Cause unless

the provisions of this subsection 10(c)(ii) shall first have been complied

with. The Executive shall be given written notice by the Board, with such

notice stating in reasonable detail the particular circumstances that

constitute the grounds on which the proposed termination for Cause is based.

The Executive shall have ten (10) business days after receipt of such notice to

fully cure such alleged violation. If he fails to cure such alleged violation

within such ten (10)-business day period, the Executive shall then be entitled

to a hearing in person before the full Board. If after such hearing, the Board

gives written notice to the Executive confirming that a majority of the members

of the full Board voted after the hearing to terminate him for Cause, the

Executive's employment shall thereupon be terminated for Cause.

 

                  (d) Termination Without Cause, Constructive Termination

without Cause or Termination upon Non-Renewal of the Term. In the event that

(x) the Executive's employment hereunder is terminated by the Company (other

than upon Disability in accordance with subsection 10(b) above or for Cause in

accordance with subsection 10(c)(ii) above), (y) a Constructive Termination

Without Cause occurs, or (z) the Company provides the Executive with a notice

of non-renewal of the Term in accordance with Section 2 above, the Executive

shall be entitled to, without duplication:

 

                  (i)      Base Salary through the Termination Date, payable on

                           the first payroll date after the Termination Date;

 

                  (ii)     a pro-rata cash Bonus for the year of termination,

                           based on the Target Bonus for the year of

                           termination, payable within thirty (30) days after

                           the Termination Date;

 

                  (iii)    an amount equal to two (2) times the Executive's

                           Base Salary, at the annualized rate in effect on the

                           Termination Date, payable in twenty-four (24) equal

                           monthly installments commencing promptly (but not

                           more than fifteen (15) days) after the Termination

                           Date;

 

                  (iv)     an amount equal to two (2) times the cash Bonus,

                           based on the Target Bonus for the year of

                           termination (it being assumed for any termination

                           occurring in Fiscal Years 2007 or 2008 that the

                           Executive would have a Target Bonus equal to 100% of

                           Base Salary), payable in twenty-four (24) equal

                           monthly installments commencing promptly (but not

                           more than fifteen (15) days) after the Termination

                           Date;

 

                  (v)      full and immediate vesting of (A) all outstanding

                           and unvested Capital Stock and Options comprising

                           the Post Emergence Equity Award and (B) all other

                           unvested equity awards (if any) at the Termination

                           Date (for clarity, the Executive shall be entitled

                           to the grant of the Post Emergence Equity Award in

                           the circumstances and on the terms set forth in

                           subsection 7(d) above);

 

                  (vi)     continued participation for himself and his eligible

                           dependents, at the Company's cost, in all medical,

                           dental, hospitalization and life insurance plans and

                           programs and in all other employee welfare plans and

                           programs in which he and his eligible dependents

                           were participating on the Termination Date until the

                           end of the 24-month period following the Termination

                           Date, provided, however, that in the event that any

                           of the benefit plans or programs do not permit his

                           and his eligible dependents' continued

                           participation, the Company shall provide him with

                           the economic equivalent on an after-tax basis;

 

                  (vii)    prompt reimbursement of the reasonable costs of

                           relocation for the Executive, his family and their

                           household goods to a location of the Executive's

                           choice within the United States in an amount up to

                           $50,000 (grossed up in the same manner and payable

                           at the same time as provided in subsections 9(c) and

                           9(d) above);

 

                  (viii)   a lump sum payment of the Special Awards, determined

                           and payable in accordance with Section 5(b) above

                           (if the Termination Date is the Determination Date;

                           and

 

                  (ix)     all Accrued Obligations, payable within thirty (30)

                           days after the Termination Date or otherwise in the

                           manner specified in the applicable benefit or

                           compensation plan, program or arrangement.

 

                  (e) No Mitigation/No Offset. In the event of any termination

of the Executive's employment hereunder for any reason, the Executive shall be

under no obligation to seek other employment or otherwise mitigate the

obligations of the Company under this Agreement. There shall be no offset

against amounts due the Executive under this Agreement on account of any

remuneration or other benefit earned or received by the Executive after such

termination or on account of any claim that the Company or any of its

Affiliates may have against him.

 

         11. Change in Control. (a) Upon a Change in Control, all outstanding

and unvested Capital Stock and Options comprising the Post Emergence Equity

Award and all other unvested equity awards (if any) shall immediately and fully

vest (and in the case of Options and other Rights, become exercisable and

remain exercisable for their remaining terms). If, upon a Change in Control or

during the two (2) year period following a Change in Control, the Executive's

employment is terminated by the Company without Cause, a Constructive

Termination Without Cause occurs, or the Company provides the Executive with a

notice of nonrenewal of the Term in accordance with Section 2 above, then the

severance multiple used to determine the Executive's severance benefit under

subsections 10(d)(iii) and 10(d)(iv) above shall be three times (3x) the

Executive's Base Salary and three times (3x) the Executive's cash Bonus (based

on the Target Bonus) for the year in which termination occurs (it being assumed

for a termination occurring during either of the Fiscal Years ending in 2007 or

2008 that the Executive would be entitled to receive a cash Target Bonus equal

to 100% of Base Salary); provided, however, that the salary and bonus

multipliers contained in this subsection 11(a) shall be two times (2x) (as

opposed to three times (3x)) in the instance that a severance payment is

otherwise due to the Executive pursuant to this subsection 11(a) as a result of

a Change in Control of the type described in subparts (iii), (iv) or (v) of the

definition of Change in Control in the event that the occurrences described in

such subparts are specifically approved by the Board at a meeting thereof duly

called and held for such purpose within twelve (12) months of the Effective

Date.

 

                  (b) If any of the payments or benefits received or to be

received by the Executive (whether pursuant to the terms of this Agreement or

any other plan, arrangement or agreement with the Company, any Person whose

actions result in a Change in Control, or any Person affiliated with the

Company or such Person) (such payments or benefits, excluding the Gross-Up

Payment, being hereinafter referred to as the "Total Payments") shall be

subject to any excise tax (the "Excise Tax") imposed by section 4999 of the

Code (or any successor to such section), the Company shall promptly (and in any

event prior to the due date of such Excise Tax) pay to the Executive an

additional amount (the "Gross-Up Payment") such that the net amount retained by

the Executive, after deduction of any Excise Tax on the Total Payments and any

federal, state and local income, earnings and employment taxes and Excise Tax

on the Gross-Up Payment, shall be equal to the Total Payments.

 

                  (c) For purposes of determining whether any of the Total

Payments will be subject to the Excise Tax and the amount of such Excise Tax,

(i) all of the Total Payments shall be treated as "parachute payments" (within

the meaning of section 280G(b)(2) of the Code) unless, in the opinion of an

independent accounting firm selected by the Company and reasonably acceptable

to the Executive (the "Adviser"), such payments or benefits (in whole or in

part) do not constitute parachute payments, including by reason of section

280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the

meaning of section 280G(b)(l) of the Code shall be treated as subject to the

Excise Tax unless, in the opinion of the Adviser, such excess parachute

payments (in whole or in part) represent reasonable compensation for services

actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in

excess of the base amount (within the meaning of section 280G(b)(3) of the

Code) allocable to such reasonable compensation, or are otherwise not subject

to the Excise Tax, and (iii) the value of any non-cash benefits or any deferred

payment or benefit shall be determined by the Adviser in accordance with the

principles of sections 280G(d)(3) and (4) of the Code. For purposes of

determining the amount of the Gross-Up Payment, the Executive shall be deemed

to pay federal income tax 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 and earnings taxes at the highest marginal rate of

taxation in such calendar year in the state and locality of the Executive's

residence or principal place of business, as applicable, on the Date of

Termination, net of the maximum reduction in federal income taxes which would

be obtained from deduction of such state and local taxes.

 

                  (d) In the event that the Excise Tax is finally determined to

be less than the amount taken into account hereunder in calculating the

Gross-Up Payment, the Executive shall repay to the Company, within five (5)

business days following the time that the amount of such reduction in the

Excise Tax is finally determined, the portion of the Gross-Up Payment

attributable to such reduction (plus that portion of the Gross-Up Payment

attributable to the Excise Tax and federal, state and local income, earnings

and employment taxes imposed on the Gross-Up Payment being repaid by the

Executive, to the extent that such repayment results in a reduction in the

Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income

and wages for purposes of federal, state and local income, earnings and

employment taxes); provided that such repayment shall be subject to an

appropriate reduction in the amount of the repayment otherwise required to be

repaid by the Executive to take into account the Federal, state and local

income tax and employment tax consequences to the Executive (determined at the

highest marginal rate applicable to the Executive) of receiving and then

repaying such repayment amount (it being the intent of this provision that the

Executive shall not have to incur any net tax liability as a result of his

receipt and subsequent repayment of such repayment amount). In the event that

the Excise Tax is determined to exceed the amount taken into account hereunder

in calculating the Gross-Up Payment (including by reason of any payment the

existence or amount of which cannot be determined at the time of the Gross-Up

Payment), the Company shall promptly make an additional Gross-Up Payment in

respect of such excess (plus any interest, penalties or additions payable by

the Executive with respect to such excess) within five (5) business days

following the time that the amount of such excess is determined. The Executive

and the Company shall each reasonably cooperate with the other in connection

with any administrative or judicial proceedings concerning the existence or

amount of liability for Excise Tax with respect to the Total Payments, and the

Company shall promptly reimburse the Executive for all reasonable out-of-pocket

costs and expenses, including legal fees, incurred in connection therewith.

 

                  (e) An initial determination as to whether any of the Total

Payments received by the Executive during any calendar year ending after the

occurrence of a Change in Control shall be subject to the Excise Tax shall be

made by no later than March 15 following the close of such year, and a Gross-Up

Payment shall be made to the Executive in a single cash lump sum by no later

than such date with respect to any Excise Tax determined to be payable with

respect to such Total Payments. The Executive shall be furnished with written

notice of all determinations made as to the Excise Tax payable with respect to

his Total Payments, together with all related calculations and copies of all

opinions rendered by the Advisor under subsection 11(b) above, within two (2)

business days after such determinations and opinions have been delivered to the

Company.

 

         12. Indemnification.

 

                  (a) If the Executive is made a party, or is threatened to be

made a party, to any Proceeding by reason of the fact that he is or was a

director, officer, employee, agent, manager, consultant or representative of

IBC, the Company or any of IBC's Affiliates or is or was serving at the request

of IBC, the Company or any of IBC's Affiliates, or in connection with his

service hereunder, as a director, officer, member, employee, agent, manager,

consultant or representative of any other Person, or if any Claim is made, or

is threatened to be made, that arises out of or relates to the Executive's

service in any of the foregoing capacities, then the Executive shall promptly

be indemnified and held harmless, and shall be entitled to prompt advancement

of expenses, including without limitation attorneys' fees and other charges of

counsel, in each case to the fullest extent provided under applicable law,

IBC's or the Company's By-Laws and Certificate of Incorporation, and officers'

and directors' liability insurance policies and programs.

 

                  (b) During the Term and for a period of six (6) years

thereafter, a directors' and officers' liability insurance policy (or policies)

shall be kept in place providing coverage of at least $50 million to all

covered officers and directors including the Executive and that is no less

favorable to him in any respect (including without limitation, with respect to

scope, exclusions, sub-amounts, and deductibles) than (x) the coverage then

being provided to any other present or former senior executive or director of

IBC or of the Company and (y) the coverage provided to him as of the Effective

Date.

 

         13. Confidentiality. The Executive hereby agrees that, other than in

the ordinary course of performing his duties for the Company or any Affiliate,

he shall not divulge to any Person other than the Company or any Affiliate,

without the Company's express written authorization, any information

constituting trade secrets or proprietary information belonging to IBC and its

subsidiaries, or other confidential information, including operating budgets,

strategic plans, or research methods, projects or plans of IBC and its

subsidiaries, received by him in the course of his employment by the Company or

in connection with his duties with the Company ("Confidential Information").

Anything herein to the contrary notwithstanding, the provisions of this Section

13 shall not apply (i) when disclosure is required by law or by any court,

arbitrator, mediator or administrative or legislative body (including any

committee thereof) with apparent jurisdiction to order the Executive to

disclose or make accessible any information, provided that, unless otherwise

prohibited by law and provided such information is not related to any illegal

activities of IBC and its subsidiaries, the Executive shall provide Company

with prompt notice of any such requested or required disclosure and shall

reasonably cooperate with the Company in any effort by the Company to prevent

or otherwise contest such disclosure, (ii) with respect to any other

litigation, arbitration or mediation involving this Agreement, including, but

not limited to, the enforcement of this Agreement or (iii) as to Confidential

Information that becomes generally known to the public or within the relevant

trade or industry other than due to the Executive's violation of this Section

13. The provisions of this Section 13 shall survive termination of this

Agreement.

 

         14. Non-Competition and Non-Solicitation. (a) Upon the termination of

the Executive's employment for any reason, for a period of one (1) year

following the Termination Date, the Executive shall not, without the prior

written consent of the Board, provide services, as an employee, officer,

consultant or director of, to any Person primarily engaged in business which is

directly competitive with the business conducted on the Termination Date by IBC

and its subsidiaries in the same geographic areas as IBC and its subsidiaries

(a "Competitor"). Notwithstanding the foregoing, the Executive may serve as an

employee, officer, consultant or director of any Person that provides

investment, financial or consulting services to a Competitor, provided that the

Executive does not have direct responsibility for or direct involvement in the

provision of any such advice or services to such Competitor.

 

                  (b) Upon the termination of the Executive's employment for

any reason, for a period of one (1) year following the Termination Date, the

Executive shall not, without the prior written consent of the Board, solicit

for employment, either for himself or on behalf of any other Person in which he

is an officer, director, employee or consultant, any employee of IBC or any of

its subsidiaries, provided that nothing in this subsection 14(b) shall prohibit

the Executive from providing employment or personal references for any such

employee.

 

                  (c) Executive acknowledges and confirms that (i) the

restrictive covenants contained in this Section 14 are reasonably necessary to

protect the legitimate business interests of the Company and (ii) the

restrictions contained in this Section 14 (including without limitation the

length of the term of the provisions of this Section 14) are not overbroad and

are not the result of overreaching, duress or coercion of any kind. The

Executive further acknowledges that the restrictions contained in this Section

14 are intended to be, and shall be, for the benefit of and shall be

enforceable by, the Company's successors and permitted assigns.

 

                  (d) In the event that a court of competent jurisdiction shall

determine that any provision of this Section 14 is invalid or more restrictive

than permitted under the governing law of such jurisdiction, then, only as to

enforcement of this Section 14 within the jurisdiction of such court, such

provision shall be interpreted and enforced as if it provided for the maximum

restriction permitted under such governing law.

 

         15. Assignability; Binding Nature. (a) This Agreement shall be binding

upon and inure to the benefit of the Parties and their respective successors,

heirs and beneficiaries (in the case of the Executive), and permitted assigns,

including for clarity, any successor entities of the Company, and of IBC and

any of its Affiliates, on the Emergence Date.

 

                  (b) No rights or obligations of the Company or IBC under this

Agreement may be assigned or transferred by the Company or IBC, except that

such rights or obligations may be assigned or transferred pursuant to a merger,

consolidation or other combination in which the Company or IBC is not the

continuing entity, or in connection with the sale or liquidation of all or

substantially all of the business and assets of IBC and its subsidiaries;

provided that the assignee or transferee is the successor to all or

substantially all of the business and assets of IBC and its subsidiaries and

such assignee or transferee expressly assumes the liabilities, obligations and

duties of the Company and IBC as set forth in this Agreement. In the event of

any merger, consolidation or other combination, or the sale or liquidation of

business and assets, as described in the preceding sentence, the Company shall

use its reasonable best efforts to cause such assignee or transferee to

promptly and expressly assume the liabilities, obligations and duties of the

Company and IBC hereunder.

 

                  (c) No rights or obligations of the Executive under this

Agreement may be assigned or transferred by the Executive other than his rights

to compensation and benefits, which may be transferred only by will or

operation of law, except as provided in subsection 20(d) below.

 

         16. Representations. (a) The Company represents and warrants that (i)

it and IBC are fully authorized by action of the Board, the Company's board of

directors and of any other Person whose action is required (other than the

Bankruptcy Court) to enter into this Agreement and to perform their respective

obligations; (ii) the execution, delivery and performance of this Agreement by

it and IBC does not and will not violate any applicable law, regulation, order,

judgment or decree or any agreement, plan or corporate governance document to

which it or IBC is a party or by which it or IBC is bound; and (iii) upon the

execution and delivery of this Agreement by the Parties and subject to the

satisfaction of the conditions to the occurrence of the Effective Date as set

forth in subsection 19(b) below, this Agreement shall be a valid and binding

obligation of the Company and IBC, enforceable against each of them in

accordance with its terms.

 

                  (b) The Executive represents and warrants that (i) the

execution, delivery and performance of this Agreement by him does not violate

any applicable law, regulation, order, judgment or decree or any agreement to

which the Executive is a party or by which he is bound (no representation or

warranty is made herein by the Executive regarding any required approval of

this Agreement by the Bankruptcy Court) and (ii) upon the execution and

delivery of this Agreement by the Parties and subject to the satisfaction of

the conditions to the occurrence of the Effective Date as set forth in

subsection 19(b) below, this Agreement shall be a valid and binding obligation

of the Executive, enforceable against him in accordance with its terms.

 

         17. Resolution of Disputes. Any Claim arising out of or relating to

this Agreement, any other agreement between the Executive and the Company or

any of its Affiliates, or the Executive's employment with the Company or the

termination thereof (collectively, "Covered Claims") shall be resolved by

binding arbitration, to be held in the city in which IBC's principal offices

are then located, in accordance with the Commercial Arbitration Rules (and not

the National Rules for the Resolution of Employment Disputes) of the American

Arbitration Association and this Section 17. Judgment upon the award rendered

by the arbitrator(s) may be entered in any court having jurisdiction thereof.

Both during and after the Executive's employment hereunder, the Company will

pay all of the legal and accounting fees incurred in connection with

enforcement by the Executive (or his estate or beneficiaries) of any rights

under any IBC or Company benefit or compensation plan or program, pursuant to

this Agreement or in defending against any challenge by any Person to such

rights, including by any court or governmental agency. In the event that the

arbitrator shall rule against the Executive (such that the Executive receives

in such arbitration less than 90% of that which he claims), the Executive shall

promptly reimburse the Company for 50% of all legal and accounting fees

previously paid by the Company. The Company and its Affiliates shall be

responsible for their own costs and expenses, including without limitation,

attorneys' fees. Pending the resolution of any Covered Claim, the Executive

(and his estate or beneficiaries) shall continue to receive all payments and

benefits due under this Agreement or otherwise. The foregoing notwithstanding,

in the event of any actual, threatened or suspected breach hereof by any Party,

the non-breaching Party shall be entitled to obtain injunctive and such other

equitable relief with respect to such breach.

 

         18. Notices. Any notice, consent, demand, request, or other

communication given to a Person in connection with this Agreement shall be in

writing and shall be deemed to have been given to such Person (a) when

delivered personally to such Person or (b) three (3) days after being sent by

prepaid certified or registered mail provided that a written acknowledgment of

receipt is obtained, or two (2) days after being sent by a nationally

recognized overnight courier, in either instance to the address (if any)

specified below for such Person (or to such other address as such Person shall

have specified by ten (10) days' advance notice given in accordance with this

Section 18) or (c) in the case of the Company only, on the first business day

after it is sent by facsimile to the facsimile number set forth below (or to

such other facsimile number as the Company shall have specified by ten (10)

days' advance notice given in accordance with this Section 18), with a

confirmatory copy sent by certified or registered mail or by overnight courier

in accordance with this Section 18.

 

 

If to the Company:                  12 East Armour Boulevard

                                    Kansas City, Missouri  64111

                                    Facsimile:  (816) 502-4138

                                    Attn:  General Counsel

 

If                                  to the Executive: The address of his

                                    principal residence as it appears in the

                                    Company's records, with a copy to him

                                    (during the Term) at his office in Kansas

                                    City, Missouri or such other place where it

                                    may have been relocated.

 

If to the estate or

a beneficiary of the

Executive:                          The address most recently specified by the

                                    Executive, estate or beneficiary.

 

         19. Miscellaneous. (a) Entire Agreement. This Agreement (including

Exhibit A) contains the entire understanding and agreement between the Parties

concerning the subject matter hereof and supersedes all prior agreements,

understandings, term sheets, discussions, negotiations and undertakings,

whether written or oral, between them relating to the subject matter of this

Agreement. In the event of any inconsistency between any provision of this

Agreement and any provision of any plan, employee handbook, personnel manual,

program, policy, arrangement or agreement of IBC, the Company or any of their

Affiliates, the provisions of this Agreement shall control.

 

                  (b) Effective Date. This Agreement shall become effective and

binding upon the parties on the date (the "Effective Date") which is the later

to occur of (i) the execution hereof by the Executive, the Company and IBC and

(ii) the entry by the Bankruptcy Court of an order (the "Order") in a form and

substance reasonably acceptable to each of the Parties authorizing and

approving the terms hereof (including, without limitation, granting to the

Executive administrative priority claim status with respect to the Special

Awards and all other amounts payable hereunder prior to the Emergence Date);

provided that this Agreement shall automatically terminate (1) at the close of

business on February 28, 2007, if the Bankruptcy Court has not so entered the

Order or (2) if any of the Parties notifies the others within two (2) business

days of receipt of the Order that the terms of the Order are not reasonably

acceptable to such Party.

 

                  (c) Amendment or Waiver. No provision in this Agreement may

be amended unless such amendment is set forth in a writing and is signed by the

Executive and by an authorized officer of the Company other than the Executive.

No waiver by any Party of any breach of any condition or provision contained in

this Agreement shall be deemed a waiver of any similar or dissimilar condition

or provision at the same or any prior or subsequent time.

 

                  (d) Headings. The headings of the Sections and subsections

contained in this Agreement are for convenience only and shall not be deemed to

control or affect the meaning or construction of any provision of this

Agreement.

 

                  (e) Beneficiaries/References. The Executive shall be

entitled, to the extent permitted under applicable law, to select and change a

beneficiary or beneficiaries to receive any compensation or benefit hereunder

following the Executive's death by giving the Company written notice thereof.

In the event of the Executive's death or a judicial determination of his

incompetence, references in this Agreement to the Executive shall be deemed,

where appropriate, to refer to his beneficiary, estate or other legal

representative.

 

                  (f) Non-Exclusivity of Rights. Nothing in this Agreement

shall prevent or limit the Executive's continuing or future participation in,

or entitlements under, any benefit, bonus, incentive or other plan or program

of IBC, the Company or any of their Affiliates for which Executive may qualify,

nor shall anything herein limit or reduce such rights as the Executive may have

under any other agreement with IBC, the Company or any of their Affiliates.

 

                  (g) Guaranty. IBC hereby unconditionally and irrevocably

guarantees to the Executive, as a primary obligor, the prompt payment and

performance of all of the liabilities, obligations and duties of the Company

under this Agreement when due and owing. The Parties intend this guaranty to be

a guaranty of payment and not of collectability.

 

                  (h) Severability. In the event that any provision or portion

of this Agreement shall be determined to be invalid or unenforceable for any

reason, the remaining provisions or portions of this Agreement shall be

unaffected thereby and shall remain in full force and effect to the fullest

extent permitted by law.

 

                  (i) Survivorship. Except as otherwise expressly set forth in

this Agreement, to the extent necessary to carry out the intentions of the

Parties hereunder, the respective rights and obligations of the Parties

hereunder shall survive any termination of the Executive's employment.

 

                  (j) Withholding Taxes. The Company may withhold from any

amounts or benefits payable under this Agreement (including without limitation,

the Post Emergence Equity Award) income taxes that are required to be withheld

pursuant to any applicable law or regulation.

 

                  (k) Section 409A, Etc. All benefits and payments to the

Executive hereunder are intended to be in accordance with Section 409A of the

Code, and the Company shall have the right, acting reasonably, in good faith

and upon prior notice to the Executive and/or when requested by the Executive,

to amend or modify this Agreement, but only to the extent necessary to avoid

the imposition of additional taxes, penalties and interest under such Section

409A; provided that such amendment or modification substantially preserves the

value to the Executive of the affected benefit or payment. Without limiting the

generality of the foregoing and notwithstanding any provision in this Agreement

to the contrary, any payment otherwise required to be made hereunder to the

Executive at any date shall be delayed for such period of time as may be

necessary to meet the requirements of Section 409(a)(2)(B)(i) of the Code. On

the earliest date on which any payments so delayed can be made without

violating the requirements of Section 409(a)(2)(B)(i) of the Code (the "Delayed

Payment Date"), there shall be paid to the Executive (or if the Executive has

died, to his estate or beneficiaries), in a single cash lump sum, an amount

equal to the aggregate amount of all payments delayed pursuant to the preceding

sentence, plus interest thereon at the Delayed Payment Interest Rate (as

defined below) computed from the date on which each such delayed payment

otherwise would have been made to Executive until the Delayed Payment Date. For

purposes of the foregoing, the "Delayed Payment Interest Rate" shall mean the

national average annual rate of interest payable on jumbo six-month bank

certificates of deposit, as quoted in the business section of the most recently

published Sunday edition of the New York Times preceding the date as of which

Executive is treated as having incurred a "separation from service" for

purposes of Section 409(a)(2)(B)(i). The Parties also agree that all amounts

required to be paid hereunder to the Executive or to his estate or

beneficiaries shall, notwithstanding any other provision in this Agreement

requiring such amounts to be paid at a different time, be paid by no later than

the latest date by which such amounts would have to be paid in order not to be

treated under Section 409A as includible in gross income for any tax year

earlier than the tax year in which such payment otherwise was scheduled to be

made under the terms of this Agreement.

 

                  (l) Governing Law. This Agreement shall be governed,

construed, performed and enforced in accordance with its express terms, and

otherwise in accordance with the laws of the State of Missouri, without

reference to principles of conflict of laws.

 

                  (m) Counterparts. This Agreement may be executed in two or

more counterparts, each of which shall be deemed an original and all of which

together shall be deemed to be one and the same instrument. Signatures

delivered by facsimile or pdf shall be valid and binding for all purposes.

 

                                     * * *

 

<PAGE>

 

 

         THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE

ENFORCED BY THE PARTIES.

 

         IN WITNESS WHEREOF, the undersigned have executed this Agreement as of

the date first set forth above.

 

                                       INTERSTATE BRANDS CORPORATION

 

 

                                       By: /s/ Kent Magill

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

                                           Name:   Kent Magill

                                           Title:  Executive Vice President,

                                                   General Counsel and Corporate

                                                   Secretary

 

 

                                       INTERSTATE BAKERIES CORPORATION

 

 

                                       By: /s/ Robert C. Calhoun

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

                                           Name:  Robert C. Calhoun

 

 

                                       The Executive:

 

 

                                       By: /s/ Craig D. Jung

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

                                           Craig D. Jung

 

 

<PAGE>

 

 

                                                                      EXHIBIT A

 

 

                                  DEFINITIONS

 

         a. "Accrued Obligations" shall mean, at any point in time, any amounts

vested, earned or accrued but not yet paid to the Executive including, but not

limited to, each of the following (but only to the extent such amounts are

vested, earned or accrued at the time of payment), salary, bonus amounts

described in subsection 5(a) of the Agreement, Special Award amounts as

provided in subsection 5(b) of the Agreement, and any other payments,

entitlements or benefits vested, earned or accrued but unpaid under applicable

benefit and compensation plans, programs and other arrangements with IBC and/or

any of its subsidiaries, including the Company.

 

         b. "Affiliate" of a Person shall mean any other Person that directly

or indirectly controls, is controlled by, or is under common control with, such

Person.

 

         c. "Aggregate Consideration" shall mean the total amount of cash and

the fair market value (on the date of closing of an Asset Sale) of all

Securities and Other Property paid or payable, directly or indirectly:

 

                  (i) by the acquiring party (the "Acquiror") to the acquired

party or the seller of the acquired business or assets (in either case, the

"Acquired"), and

 

                  (ii) to the Acquired's contract parties, claim holders and

security holders, in connection with a sale or a transaction related thereto.

 

Aggregate Consideration shall also include the value of any claims and

liabilities (including without limitation, obligations relating to any

capitalized leases and the principal amount of any indebtedness for borrowed

money) assumed directly or indirectly by the Acquiror in connection with an

Asset Sale or which are otherwise cancelled or terminated in connection with an

Asset Sale.

 

         d. "Agreement" shall mean the Employment Agreement of which this

Exhibit A is a part.

 

         e. "Asset Sales" shall have the meaning set forth in the definition of

Triggered Contingent Claims Amount.

 

         f. "Bankruptcy Court" shall mean the United States Bankruptcy Court

for the Western District of Missouri.

 

         g. "Board" shall mean the board of directors of IBC.

 

         h. "Capital Stock" shall mean the class of capital stock of IBC which

is publicly traded upon (or which is to be so traded within a reasonable period

of time after) the occurrence of the Emergence Date, or if no class of capital

stock of IBC is (or is to be) so traded at such time, then the class of capital

stock of IBC at such time which is entitled to vote in the election of

directors under all circumstances.

 

         i. "Cause" shall mean a termination based upon any of the following:

(i) the Executive has been convicted of (or pleads guilty or no contest to) a

felony involving theft or moral turpitude; (ii) the Executive has engaged in

conduct that constitutes willful gross misconduct in the performance of his

duties; (iii) a material breach of the Agreement by the Executive that is not

fully cured within ten (10) business days of written notice provided by the

Company; (iv) a material breach by the Executive of a written policy of the

Company determined by the Board in good faith to be material to the Company

that is not fully cured within ten (10) business days of written notice

provided by the Company; or (v) any failure by the Executive to reasonably

cooperate in any investigation involving IBC and its subsidiaries that is not

fully cured within ten (10) business days of written notice provided by the

Company.

 

         j. "Change in Control" shall mean the occurrence of any of the

following events:

 

                  (i) any "person" (other than any stockholder of IBC holding

15% or more of the Voting Stock of IBC on the Emergence Date), as such term is

used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934,

becomes a "beneficial owner," as such term is used in Rule 13d-3 promulgated

under such Act, of 50% or more of the Voting Stock of IBC;

 

                  (ii) the majority of the Board consists of individuals other

than Incumbent Directors, which term means the members of the Board on the

Effective Date or, in the event of confirmation of a Plan, the members of the

Board who are designated to serve upon the occurrence of the Emergence Date;

provided that any person becoming a director subsequent to such date whose

election or nomination for election was voted for by a majority of the

directors who then comprised the Incumbent Directors shall be considered to be

an Incumbent Director;

 

                  (iii) IBC adopts or its subsidiaries adopt any plan of

liquidation providing for the liquidation of all or substantially all of IBC's

and its subsidiaries' assets (for avoidance of doubt, a plan of liquidation as

covered by this clause (iii) is to be contrasted with, and shall not include, a

sale or sales, whether in one or a series of transactions, whether or not

related, of assets, business lines, divisions, segments, subsidiaries or other

business units at a time when the Board has not determined to liquidate IBC and

its subsidiaries substantially in whole or has determined to sell all or

substantially all of the businesses and assets of IBC and its subsidiaries as a

going concern(s)); provided that, during the period that IBC is in the Chapter

11 Cases, a Change in Control will not be deemed to occur if IBC adopts (or

effects) or its subsidiaries adopt (or effect) a plan of liquidation within the

meaning set forth in this clause (iii);

 

                  (iv) all or substantially all of the consolidated assets or

business of IBC and its subsidiaries are disposed of pursuant to a merger or

consolidation in which IBC and/or its subsidiaries is/are not the surviving

company or are sold or otherwise transferred in another transaction (other than

pursuant to a plan of liquidation as provided in clause (iii) above), whether

in one or a series of related transactions or whether occurring pursuant to 11

U.S.C. section 363, the Plan or otherwise (unless the stockholders of IBC

immediately prior to such merger, consolidation or other transaction

beneficially own, directly or indirectly, 50% or more of the Voting Stock of

the combined company or other ownership interests of the entity or entities, if

any, that succeed to the business of IBC and its subsidiaries); or

 

                  (v) IBC combines with another company and is the surviving

corporation but, immediately after the combination, the stockholders of IBC

immediately prior to the combination hold, directly or indirectly, 50% or less

of the Voting Stock of the combined company (there being excluded from the

number of shares held by such stockholders, but not from the Voting Stock of

the combined company, any shares received by Affiliates of such other company

in exchange for stock of such other company).

 

For the avoidance of doubt, there shall not occur a "Change in Control" as

contemplated in subsection j(iv) or j(v) above in the event that IBC and its

subsidiaries emerge from the Chapter 11 Cases pursuant to a "stand alone" Plan,

the result of which is that stockholders holding IBC's common stock immediately

prior to the Emergence Date do not hold more than fifty percent (50%) of the

Voting Stock immediately after the Emergence Date, but rather the result of

which is that creditors in the Chapter 11 Cases (and not a third party

acquirer(s)) of IBC and its subsidiaries or of all or substantially all of

their assets and businesses) collectively hold more than fifty percent (50%) of

the Voting Stock immediately after the Emergence Date.

 

For purposes of this Change in Control definition, "Voting Stock" shall mean

securities of any class or classes having general voting power under ordinary

circumstances, in the absence of contingencies, to elect the directors of a

corporation.

 

         k. "Chapter 11 Cases" shall mean the chapter 11 cases commenced by IBC

and its subsidiaries on September 22, 2004 (and, in one instance, on January

14, 2006) in the Bankruptcy Court and which presently are pending before such

court.

 

         l. "Claim" shall mean any claim, demand, request, investigation,

dispute, controversy, threat, discovery request, or request for testimony or

information.

 

         m. "Code" shall mean the Internal Revenue Code of 1986, as amended.

 

         n. "Constructive Termination Without Cause" shall be defined as

follows: The Executive shall have the right to resign his employment and

terminate the remaining Term for "Constructive Termination Without Cause" if,

without the Executive's consent there shall occur:

 

                  (i)      a reduction of the Executive's Base Salary or Target

                           Bonus opportunity, other than in connection with any

                           across-the-board and proportionate reduction of base

                           salaries or target bonus opportunities of senior

                           executives of IBC and its subsidiaries;

 

                  (ii)     the failure of the Company or IBC to pay any

                           compensation or material benefit when (including,

                           without limitation, the Special Awards) due that is

                           not cured after notice from the Executive within ten

                           (10) days of such notice;

 

                  (iii)    the failure of IBC to issue the Post Emergence

                           Equity Award;

 

                  (iv)     prior to the Emergence Date, the failure of the

                           Executive to be a member of the Board, or upon and

                           after the Emergence Date, any failure by IBC to

                           nominate the Executive for election by IBC's

                           stockholders as a member of the Board or the failure

                           to re-elect the Executive as a member of the Board;

 

                  (v)      any requirement that the Executive report to any

                           Person other than the Board;

 

                   (vi)    a material diminution in or interference with the

                           Executive's duties or responsibilities or assignment

                           to the Executive of duties or responsibilities

                           inconsistent with his such duties or

                           responsibilities;

 

                  (vii)    the failure of the acquirer of all or substantially

                           all of the assets of IBC or its subsidiaries to

                           assume the Agreement if IBC or such subsidiaries, as

                           applicable, is/are to be liquidated within a

                           reasonable period of time following such

                           acquisition; or

 

                  (viii)   any requirement that the Executive relocate his

                           principal executive office or residence to a

                           location that is more than 50 miles from IBC's

                           executive office on the Effective Date.

 

A Constructive Termination Without Cause under any of clauses (i) through (vi)

shall not take effect unless the following provisions are satisfied. The

Executive's notice of termination shall be given to the Company within ninety

(90) days after Executive has notice or otherwise learns of such act or acts or

failure or failures to act that form the grounds for "Constructive Termination

Without Cause." The Company shall have thirty (30) days after the date that

such notice of termination has been given within which to cure such conduct. If

the Company fails to cure such conduct, the Executive shall be deemed to have

terminated his employment for Constructive Termination Without Cause on the

31st day after such notice of termination is given to the Company.

 

         o. "Determination Date" shall be the earlier of:

 

                  (i)      the Emergence Date;

 

                  (ii)     the date the Chapter 11 Cases are converted from

                           chapter 11 to chapter 7 of the Bankruptcy Code;

 

                  (iii)    the date of the consummation of the sale or other

                           transfer of all or substantially all of the assets

                           of IBC and its subsidiaries whether in one or a

                           series of transactions, whether or not related; or

 

                  (iv)     the date upon which the Executive is terminated

                           without Cause or resigns as a result of a

                           Constructive Termination Without Cause, or the date

                           upon which the Term expires due to delivery of a

                           notice by the Company pursuant to Section 2 of the

                           Agreement not to renew the Term.

 

         p. "Disability" shall mean the Executive's inability, due to physical

or mental incapacity, substantially to perform his duties and responsibilities

under the Agreement for a period of 180 consecutive days as determined by a

medical doctor selected by the Company and the Executive. If the Company and

the Executive cannot agree on a medical doctor, each shall select a medical

doctor and the two doctors shall select a third who shall be the approved

medical doctor for this purpose.

 

         q. "Distributable Cash" shall equal the total cash and cash equivalent

balances of IBC and its subsidiaries as of the Determination Date (from

whatever source) plus, without duplication, the Aggregate Consideration

received or receivable by IBC and/or any of its subsidiaries from Asset Sales

occurring after the Effective Date (provided that the cash portion of such

Aggregate Consideration shall not be included as "Aggregate Consideration" (but

shall be included in Distributable Cash as "cash"; the intent of the Parties

being that dollars be counted only once) if such cash was not distributed, used

or applied for any purpose by IBC or its subsidiaries prior to the

Determination Date), minus, to the extent applicable, Operating Cash as of the

Determination Date. For the avoidance of doubt, if the cash proceeds from any

financing obtained by IBC and its subsidiaries in anticipation of their

emergence from bankruptcy and earmarked for distribution in satisfaction of

claims against IBC and/or its subsidiaries payable upon their emergence from

bankruptcy remain on the balance sheet of IBC and its subsidiaries as of the

Determination Date, such cash shall be excluded from Distributable Cash to the

extent such financing is reflected in Total Enterprise Value; the intent of the

Parties being that such financing (and cash) be reflected only once in such

value.

 

         r. "Emergence Date" shall mean the date upon which the Plan is

substantially consummated, as such term is defined in 11 U.S.C. section

1101(2).

 

         s. "Fiscal Year" shall mean the fiscal year of IBC and its

subsidiaries ending on the Saturday closest to the last day of May in each

year.

 

         t. "IBC" shall mean Interstate Bakeries Corporation, a Delaware

corporation, or such other entity which shall be the parent entity of such

corporation and its subsidiaries or which shall otherwise succeed to all or

substantially all of the assets and business of such corporation, in any case,

immediately following the Emergence Date, unless the context otherwise

requires, together in any case with its successors and permitted assigns.

 

         u. "Operating Cash" shall be defined as the average (by reference to

the two (2) year period prior to the applicable time of determination) and

seasonally adjusted level of cash (from whatever source, including amounts

borrowed under any working capital facility or amounts constituting Aggregate

Consideration) historically maintained in the ordinary course of business by

IBC and its subsidiaries as working capital as determined in good faith by the

Board and set forth in a written notice from the Board to the Executive,

together with supporting schedules and calculations in reasonable detail.

 

         v. "Parties" shall mean the Company, IBC and the Executive.

 

         w. "Person" shall mean any individual, corporation, partnership,

limited liability company, joint venture, trust, estate, board, committee,

agency, body, employee benefit plan, or other person or entity.

 

         x. "Plan" shall mean the plan of reorganization or liquidation

confirmed in IBC's Chapter 11 Cases and that is substantially consummated, as

that term is defined in 11 U.S.C. section 1101(2).

 

         y. "Proceeding" shall mean any threatened or actual action, suit or

proceeding, whether civil, criminal, administrative, investigative, appellate

or other.

         z. "Securities and Other Property" shall include, without limitation,

the face amount of any indebtedness or securities, and the fair market value of

any other property, "credit bid" by any Person in any Asset Sale.

 

         aa. "Termination Date" shall mean:

 

                  (i) in the case of death, the date of death;

 

                  (ii) in the case of Disability, thirty (30) days after the

written notice of termination is given as specified in subsection 10(b) of the

Agreement;

 

                  (iii) in the case of a termination by the Company for Cause,

the date on which the Executive receives the notice as specified in subsection

10(c)(ii) of the Agreement that a majority of the members of the Board voted,

after the hearing referred to therein, to terminate him for Cause;

 

                  (iv) in the case of a voluntary termination, the last day of

the Executive's employment;

 

                  (v) in the case where the Executive's employment is

terminated by the Company after providing a notice of non-renewal in accordance

with Section 2 of the Agreement, the end of the Term;

 

                  (vi) in the case where the Executive's employment is

terminated by the Company without Cause (other than for Disability) thirty (30)

days after written notice is given to the Executive thereof; and

 

                  (vii) in the case of a Constructive Termination Without

Cause, thirty (30) days after the Executive gives the notice provided in this

Exhibit A, subclause (n) above, unless the Company has fully cured all alleged

grounds for such termination within thirty (30) days after the Executive gives

such notice.

 

         bb. "Total Enterprise Value" shall equal the sum of Distributable

Cash, plus:

 

                  (i) in the case of a Determination Date under clause (i) of

the definition of Determination Date, the midpoint total enterprise value set

forth in the final approved disclosure statement issued with respect to the

Plan;

 

                  (ii) in the case of a Determination Date under clause (ii) of

the definition of Determination Date, the estimated fair market value of IBC's

and its subsidiaries' assets as determined in good faith by IBC's financial

advisors and appraisers and set forth in a written notice from such advisors

and appraisers to the Executive, together with supporting schedules and

calculations in reasonable detail;

 

                  (iii) in the case of a Determination Date under clause (iii)

of the definition of Determination Date, the Aggregate Consideration received

and receivable from all applicable sales and transfers; or

 

                  (iv) in the case of a Determination Date under clause (iv) of

the definition of Determination Date, the total enterprise value of the IBC and

its subsidiaries, as determined in good faith by IBC's financial advisors and

appraisers (using the same methodology as would have been used to arrive at the

midpoint total enterprise value referred to in clause (i) above) and set forth

in a written notice from such advisors and appraisers to the Executive,

together with supporting schedules and calculations in reasonable detail.

 

         cc. "Triggered Contingent Claims Amount" shall mean the amount of

contingent claims against IBC and its subsidiaries under the Multiemployer

Pension Plan Amendments Act of 1980 (ERISA sections 4201-4303) and the amount

of other employee-related contingent claims against IBC and its subsidiaries

that become no longer contingent after the Effective Date (and remain IBC's or

any of its subsidiaries' primary obligation) as a result of (x) sales of IBC's

(or any of its subsidiaries') business units, segments, subsidiaries, divisions

or other major assets ("Asset Sale(s)") after such date, (y) operational

changes or modifications approved by the Executive and implemented by IBC or

any of its subsidiaries after such date or (z) the substantial consummation of

a Plan.

</TEXT>

</DOCUMENT>