Related Party Transactions and Outside Related Director Information

Interstate Bakeries Corporation (IBCIQ.PK)

8/22/2003 Proxy Information

Our Company, through its operating subsidiaries, purchases flour at market prices from Cereal Food Processors, Inc., a long-standing supplier, in the regular course of our Company's business under a contract terminating in 2005. G. Kenneth Baum, a current director, beneficially owns more than a 10% equity interest in Cereal Food Processors. During fiscal 2003, our Company's flour purchases from Cereal Food Processors totaled approximately $78 million.

On October 2, 2002, our Company and Brands entered into a consulting agreement with Charles A. Sullivan that expires on May 28, 2005. The agreement replaced Mr. Sullivan's employment agreement with our Company, which was scheduled to expire on May 31, 2003. The new agreement provides for Mr. Sullivan to assist our Company in connection with issues unique to the baking industry and our Company's operations, and the development and assessment of a strategic plan for our Company. For his services under the agreement, Mr. Sullivan is entitled to receive (i) fees equal to $533,333, the remaining eight months of salary under his employment agreement, paid in monthly installments through May 31, 2003, (ii) for June 1, 2003 through May 28, 2005, fees equal to $800,000, payable in 24 equal monthly installments, (iii) 133,000 shares of our Company's common stock issued pursuant to a share award agreement, (iv) medical insurance coverage equivalent to that provided to participating employees and (v) reasonable office accommodations and secretarial support. The agreement requires Mr. Sullivan to maintain the confidentiality of our Company's confidential information prior to public disclosure by our Company. In addition, he is prohibited from competing with our Company during the term of the agreement and for one year thereafter. In addition, the agreement amended the Deferred Share Award Notice dated as of September 23, 1997 to provide for the issuance of the 213,163 shares of common stock granted under the deferred share award within a reasonable period of time following Mr. Sullivan's retirement instead of on June 1, 2003.