AMENDMENT #2 TO SHAREHOLDER AGREEMENT
AND AMENDMENT TO SUPPLEMENT AGREEMENT
This Amendment #2 to the Shareholder Agreement, dated as of July 24, 2000,
("Amendment #2"), is made by and among Interstate Bakeries Corporation, a
Delaware corporation ("IBC"), Ralston Purina Company, a Missouri corporation
("Ralston"), and Tower Holding Company, Inc., a Delaware corporation ("Tower
Holding"), a wholly owned subsidiary of Ralston and the transferee of all shares
of IBC common stock formerly held by VCS Holding Company ("VCS").
This Amendment #2 amends and supplements the Shareholder Agreement by and among
IBC, Ralston and VCS, dated July 22, 1995 (the "Shareholder Agreement"), as
supplemented and amended by the Supplement to Shareholder Agreement by and among
IBC, Ralston and VCS, dated July 25, 1995 (the "Supplement Agreement"), and
further supplemented and amended by a Letter Agreement by and among IBC and
Ralston, dated July 3, 1997 (the "Letter Agreement"), and further supplemented
and amended by the Amendment to Shareholder Agreement by and among IBC, Ralston
and Tower Holding, dated March 30, 2000 (the "Amendment to Shareholder
Agreement").
Defined terms used herein without definition shall have the meanings ascribed to
them in the Shareholder Agreement or the Amendment to Shareholder Agreement.
WITNESSETH
WHEREAS, IBC, Ralston and VCS entered into the Shareholder Agreement to provide
certain rights and restrictions with respect to the IBC Equity owned by Ralston;
and
WHEREAS, the parties have agreed to enter this Amendment #2 to make certain
amendments to the Shareholder Agreement and the Amendment to Shareholder
Agreement; and
WHEREAS, the parties agree that by entering this Amendment #2, they acknowledge
and confirm that they will continue to be bound by the terms of the Shareholder
Agreement, as previously supplemented and amended by the Supplement Agreement,
the Letter Agreement and the Amendment to Shareholder Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and obligations set
forth herein, the parties agree as follows:
1. The amendment set forth in Section 9 of the Amendment to Shareholder
Agreement, which amended Section 4.1(a) of the Shareholder Agreement, is hereby
deleted in its entirety and replaced with the following:
"(a) Except for Transfers permitted by Seciton 3.2(a) and (b) and Section
10.6(a), and Transfers to a Person making a tender offer for outstanding IBC
Equity which is recommended to shareholders of IBC by the board of directors of
IBC, during the term of this Agreement, Ralston and its Affiliates shall not
sell any shares of IBC Equity to any Person unless it has first made an offer
(the "First Offer") to sell such shares to IBC in accordance with this Article
IV and such First Offer shall have been rejected or not accepted within the
Applicable Acceptance Period (as hereinafter defined); provided, however, that
if Ralston or any of its Affiliates propose to sell a specified number of shares
of IBC Equity pursuant to a Transfer permitted by Section 3.2(f) and the First
Offer shall have been rejected by IBC, the proposed Transfer by Ralston or its
Affiliates may proceed at any time thereafter under Rule 144 without regard to
the 20 day period referenced in Section 4.1(d)."
2. The amendment set forth in Section 15 of the Amendment to Shareholder
Agreement, which amended Section 10.6 of the Shareholder Agreement, is hereby
deleted in its entirety and replaced with the following:
"Section 10.6 - Maximum Allowed Ownership of IBC Securities.
"(a) Ralston and Tower Holding agree to sell, and IBC agrees to purchase, on
August 1, 2000, 15,498,000 shares of IBC Stock owned by Ralston and Tower
Holding at a price per share equal to the average closing price per share for
the IBC Stock trading regular way on the New York Stock Exchange for the most
recent 20 consecutive trading days ending on and including July 31, 2000.
"(b) Ralston covenants and agrees that by August 1, 2004, the ownership of IBC
Securities by Ralston and its Affiliates shall be not more than 15% of the then
total outstanding IBC Securities.
"(c) Ralston covenants and agrees that by August 1, 2005, the ownership of IBC
Securities by Ralston and its Affiliates shall be not more than 10% of the then
total outstanding IBC Securities.
"(d) In the event that Ralston and its Affiliates do not attain the levels of
ownership of IBC Equity provided for in paragraphs (b) and (c) above by the
prescribed dates, IBC shall thereafter be entitled to purchase at one time or
from time to time, all or any portion of the IBC Equity then owned by Ralston
and its Affiliates which would have otherwise been required to have been sold,
at a purchase price equal to the IBC Market Price of the IBC Equity."
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3. Paragraph 4 of the Supplement Agreement is deleted in its entirety and a
new Paragraph 4 inserted to read as follows:
"If the Chief Executive Officer of IBC notifies RPC that the number of shares of
IBC Securities owned by officers, directors and employees who are or would be
deemed to be Affiliates of Ralston exceed the amount owned as of August 1, 2000,
then Ralston shall immediately take such action necessary (including the
delivery of one of its Demand Notices) to divest at least that number of shares
of IBC Securities equal to the number of shares owned by such Affiliates in
excess of the amount they owed as of August 1, 2000; provided, that the
exercise of IBC stock options held on today's date or received in the future by
James R. Elsesser shall not be considered an increase in his ownership of IBC
Securities."
4. In all other respects, the parties hereby agree that the Shareholder
Agreement, the Supplement Agreement, the Letter Agreement and the Amendment to
Shareholder Agreement, as amended by this Amendment #2, remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Amendment #2 as of the 24th
day of July, 2000.
INTERSTATE BAKERIES CORPORATION
By \s\ Ray Sandy Sutton
------------------------------
Ray Sandy Sutton
Vice President & General Counsel
RALSTON PURINA COMPANY
By \s\ James M. Neville
-------------------------------
James M. Neville
Vice President & Senior Counsel - Law
TOWER HOLDING COMPANY, INC.
By \s\ Nancy E. Hamilton
--------------------------------
Nancy E. Hamilton
Vice President & Secretary
