Key Employee Retention Plan

Exhibit 10.27 Interstate Bakeries Corporation Key Employee Retention Planullet Introduction . Interstate Bakeries Corporation, along with seven of its subsidiaries and affiliates 1 (collectively, " Interstate Bakeries" ), currently is pursuing a restructuring of its financial obligations and operations through chapter 11 proceedings (the " Restructuring" ) that Interstate Bakeries anticipates will result in the confirmation of a plan of reorganization whereby Interstate Bakeries would emerge as a reorganized entity on a stand alone basis (a " Plan of Reorganization" ). However, notwithstanding Interstate Bakeries' current expectations, the Restructuring conceivably could involve the sale of all or substantially all of Interstate Bakeries' assets and operations as a going concern (a " Sale" ) followed by a plan of reorganization that distributes the proceeds from the Sale, instead of a Plan of Reorganization. In connection with the Restructuring, Interstate Bakeries has developed a key employee retention plan (the " Retention Plan" ), which will compensate certain critical employees in order to assure their retention and availability to Interstate Bakeries during the Restructuring, whether the ultimate result is a Plan of Reorganization or a Sale. Interstate Bakeries anticipates that the Retention Plan will have two components: (1) retention bonuses that would reward critical employees who remain with Interstate Bakeries during and through the completion of the Restructuring (" Retention Bonuses" ); and (2) in lieu of Interstate Bakeries existing annual incentive plan, incentive bonuses that would reward key management employees upon completion of the Restructuring if Interstate Bakeries' fiscal 2005 EBITDAR 2 meets or exceeds a predetermined target range (" Restructuring Performance Bonuses" ). 1 The subsidiaries and affiliates are: Armour and Main Redevelopment Corporation; Baker' s Inn Quality Baked Goods, LLC; IBC Sales Corporation; IBC Services, LLC; IBC Trucking LLC; Interstate Brands Corporation; and New England Bakery Distributors, L.L.C. 2 Earnings Before Interest, Taxes, Depreciation, Amortization and Restructuring.


ullet Key Employees . Interstate Bakeries expects approximately four hundred ninety four (494) critical employees (the " Participants" ) to participate in the Retention Plan. Such employees are divided into seven (7) tiers. The first tier (" Tier One" ) consists of up to five (5) executive vice presidents and senior vice presidents and one (1) vice president (collectively, the " Tier One Participants" ). The second tier (" Tier Two" ) consists of up to twenty (26) executive vice presidents, senior vice presidents, directors, 3 and also includes other key employees (the " Tier Two Participants" ). The third tier (" Tier Three" ) consists of up to thirteen (13) vice presidents, directors and managers (the " Tier Three Participants" ). The fourth tier (" Tier Four" ) consists of up to eighty eight (88) vice presidents, directors and managers (the " Tier Four Participants" ). The fifth tier (" Tier Five" ) consists of up to twenty one (21) vice presidents, directors and managers (the " Tier Five Participants" ). The sixth tier (" Tier Six" ) consists of up to forty eight (48) plant managers (the " Tier Six Participants ," and collectively with the Tier One Participants through Tier Five Participants, the " Senior Participants" ). The seventh tier (" Tier Seven" ) consists of up to two hundred ninety two (292) other managers (the " Tier Seven Participants" ). Attached hereto as Exhibit A is a chart setting forth the composition of each Tier of Participants. The Participants are considered by Interstate Bakeries to be absolutely essential to its Restructuring efforts. Specifically, these employees possess unique or critical knowledge of Interstate Bakeries' businesses and the fresh baked goods industry. Such institutional knowledge, which could not readily be replaced on the open market, is necessary not only to secure Interstate Bakeries' ongoing business enterprise, but also to assure the successful completion of the Restructuring. ullet Retention Bonuses . Retention Bonuses are designed to encourage Senior Participants to remain with Interstate Bakeries by providing cash bonuses to Senior Participants who remain in Interstate Bakeries' employ during and throughout the Restructuring. The Retention Bonuses for Senior Participants would range from twenty percent (20.0%) to sixty percent (60.0%) of a Senior Participant' s base salary as follows: (a) twenty percent (20.0%) of base salary for Tier Six Participants; (b) twenty five percent (25.0%) of base salary for Tier Five Participants; (c) thirty five percent (35.0%) of base salary for Tier Four Participants; (d) forty percent (40.0%) of base salary for Tier Three Participants; (e) fifty percent (50.0%) of base salary for Tier Two Participants; and (f) sixty percent (60.0%) of base salary for Tier One Participants. A Retention Bonus shall be in addition to any other compensation that a Senior Participant may otherwise be entitled to receive. Retention Bonuses will be paid in three (3) installments in the following amounts and on 3 The term " directors" refers to Interstate Bakeries' employees having the job title of " director," not to members of Interstate Bakeries' Board of Directors.

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the following dates, if such Senior Participants are employed by Interstate Bakeries on such dates. Senior Participants shall be paid twenty five percent (25.0%) of their Retention Bonus (the " First and Second Retention Installments" ) on each of May 1, 2005 and November 1, 2005 (together, the " Initial Retention Installment Dates" ); provided , however , that Tier One Participants shall receive their First Retention Installment on the later of (a) May 1, 2005 and (b) the date on which (i) Interstate Bakeries delivers a budget, in a form consistent with the first updated Budget required pursuant Section 5.1(i) of the Revolving Credit Agreement, dated September 23, 2004 (the " DIP Credit Agreement" )), or (ii) the requirement in Section 5.1(i) of the DIP Credit Agreement with respect to the first updated Budget is satisfied or waived; provided further that (a) Tier One Participant' s Second Retention Installment shall not be subject to any limitation with respect to Section 5.1(i) of the DIP Credit Agreement, and (b) in any event Tier One Participants shall receive their First Retention Installment no later than the Final Retention Installment Date (defined below). The remaining fifty percent (50.0%) of a Senior Participants' Retention Bonus (the " Final Retention Installment" ) will be payable on the date (the " Final Retention Installment Date" ) that is thirty (30) days after the occurrence (the " Effective Date" ) of either (a) the substantial consummation of a confirmed Plan of Reorganization, or (b) the closing of a Sale; provided , however , that in no event shall the Final Retention Installment be paid prior to November 1, 2005. The maximum possible aggregate amount of Retention Bonuses is approximately $7.7 million. Attached as Exhibit B is a chart setting forth the calculations regarding the Retention Bonuses. ullet Restructuring Performance Bonuses . Restructuring Performance Bonuses are designed to encourage all Participants to increase Interstate Bakeries' enterprise value, and thus increase value and returns for all stakeholders, during the Restructuring, by paying cash bonuses to Participants if Interstate Bakeries achieves certain predetermined financial objectives. Restructuring Performance Bonuses are intended to replace Interstate Bakeries' prepetition incentive plans which will be terminated. Restructuring Performance Bonuses will be based upon Interstate Bakeries achieving a target EBITDAR of $53 million for fiscal 2005 (the " Target EBITDAR" ). If Interstate Bakeries achieves the Target EBITDAR ( i.e. , Interstate Bakeries' a ...