<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1997
REGISTRATION NO. 333-27959
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
Ralston Purina Company
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
MISSOURI 43-0470580
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
CHECKERBOARD SQUARE
ST. LOUIS, MISSOURI 63164
TEL. (314) 982-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
J. M. NEVILLE, VICE PRESIDENT AND GENERAL COUNSEL
RALSTON PURINA COMPANY
CHECKERBOARD SQUARE
ST. LOUIS, MISSOURI 63164
TEL. (314) 982-1266
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
JOHN P. DENNEEN, ESQ. RAYMOND W. WAGNER, ESQ.
BRYAN CAVE LLP SIMPSON THACHER & BARTLETT
ONE METROPOLITAN SQUARE 425 LEXINGTON AVENUE
211 NORTH BROADWAY NEW YORK, NEW YORK 10017
ST. LOUIS, MISSOURI 63102 (212) 455-2568
(314) 259-2265
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement as
determined in light of market conditions.
----------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS HEREIN
IS A COMBINED PROSPECTUS AND ALSO RELATES TO REGISTRATION STATEMENT NO. 333-
2069 PREVIOUSLY FILED WITH THE COMMISSION ON FORM S-3 AND EFFECTIVE APRIL 21,
1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JULY 21, 1997
$360,000,000
RALSTON PURINA COMPANY
% Exchangeable Notes Due 2000
5,697,329 Stock Appreciation Income Linked SecuritiesSM (SAILSSM)
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The principal amount of each of the % Exchangeable Notes Due August 1, 2000
(each, a "SAILS"), of Ralston Purina Company, a Missouri corporation
("Ralston"), being offered hereby will be $ (the last sale price of the
common stock, par value $.01 per share (the "IBC Common Stock"), of
Interstate Bakeries Corporation, a Delaware corporation ("IBC"), on
July , 1997, as reported on the New York Stock Exchange Composite
Tape) (the "Initial Price"). Interest on the SAILS, at the rate of
% of the principal amount per annum, is payable quarterly on ,
, , of each year, beginning , 1997. The SAILS are
not subject to redemption or any sinking fund prior to
maturity.
At maturity (including as a result of acceleration or otherwise), the principal
amount of each SAILS will be mandatorily exchanged by Ralston into a number of
shares of IBC Common Stock (or, at Ralston's option, the cash equivalent
and/or such other consideration as permitted or required by the terms of the
SAILS) at the Exchange Rate (as defined herein). The Exchange Rate is equal
to, subject to certain adjustments, (a) if the Maturity Market Price (as
defined below) is greater than or equal to the Threshold Appreciation Price
of $ , . of a share of IBC Common Stock per SAILS, (b) if the Maturity
Market Price is less than the Threshold Appreciation Price of $ but is
greater than the Initial Price, a fraction of a share of IBC Common Stock
per SAILS having a value (determined using the Maturity Market Price)
equal to the Initial Price and (c) if the Maturity Market Price is less
than or equal to the Initial Price, one share of IBC Common Stock per
SAILS. Holders of SAILS will realize no equity appreciation if at
maturity the Maturity Market Price is less than the Threshold
Appreciation Price and will realize only % of the appreciation above
the Threshold Appreciation Price for the period prior to maturity if
at maturity the Maturity Market Price is above the Threshold
Appreciation Price. The "Maturity Market Price" means the average
Closing Price (as defined herein) per share of IBC Common Stock for
the 20 Trading Days (as defined herein) immediately prior to
maturity, except as otherwise described herein. Accordingly, the
value of the IBC Common Stock to be received by holders of the
SAILS (or, at Ralston's option, the cash equivalent and/or such
other consideration as permitted or required by the terms of the
SAILS) at maturity will not necessarily equal the principal
amount thereof.
The SAILS will be general senior unsecured obligations of Ralston ranking pari
passu with all of its other general senior unsecured and unsubordinated
indebtedness and will rank senior in right of payment to any future
subordinated obligations of Ralston. The SAILS will be effectively
subordinated to all indebtedness of Ralston's subsidiaries. As of March
31, 1997, (i) the total amount of outstanding indebtedness of Ralston
(which will be pari passu with the SAILS) was $362.2 million, and (ii)
the total amount of outstanding indebtedness of Ralston's subsidiaries
was $429.6 million. IBC will have no obligations with respect to the
SAILS. See "Description of the SAILS."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE SAILS, SEE "RISK FACTORS RELATING TO SAILS"
BEGINNING ON PAGE 4.
Attached hereto is a prospectus of IBC relating to the shares of IBC Common
Stock that may be received by holders of the SAILS at maturity. The IBC
Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "IBC." Application has been made for listing
of the SAILS on the NYSE.
For a discussion of certain United States federal
income tax consequences for holders of SAILS, see
"Certain United States Federal Income
Tax Considerations."
"Stock Appreciation Income Linked Securities" and "SAILS" are service marks of
Credit Suisse First Boston, Inc.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS RALSTON(1)(2)
--------- ------------- -------------
<S> <C> <C> <C>
Per SAILS................................. $ $ $
Total(3).................................. $ $ $
</TABLE>
(1) Plus accrued interest from the issue date.
(2) Before deducting expenses payable by Ralston, estimated to be $635,155.
(3) Ralston has granted to the Underwriters an option, exercisable by Credit
Suisse First Boston Corporation for 30 days from the date of this
prospectus supplement, to purchase a maximum of 633,036 additional SAILS to
cover over-allotments of SAILS. If the option is exercised in full, the
total Price to Public will be $ , Underwriting Discounts and Commissions
will be $ and Proceeds to Ralston will be $ . See "Underwriting."
The SAILS are offered by the several Underwriters when, as and if issued by
Ralston, delivered to and accepted by, the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of the
SAILS in book-entry form will be made through the facilities of The Depository
Trust Company on or about July , 1997, against payment in immediately
available funds.
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
J.P. MORGAN & CO.
SALOMON BROTHERS INC
Prospectus dated July , 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SAILS OR IBC
COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
AVAILABLE INFORMATION
Ralston is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other informational documents
with the Securities and Exchange Commission (the "Commission"). Such documents
can be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at the following regional offices of the
Commission: Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains an Internet site on the World Wide Web at
http://www.sec.gov that contains reports, proxy statements and other
information regarding Ralston. Such documents can also be inspected at the
offices of The New York Stock Exchange, Inc., 20 Broad Street, New York, N.Y.
10005, the Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois
60605, and The Pacific Stock Exchange, Incorporated, 301 Pine Street, San
Francisco, California 94104.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the SAILS. This Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and to the exhibits relating thereto for
further information with respect to Ralston and the SAILS offered hereby. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and in each instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed with the Commission by Ralston
under the Exchange Act, are incorporated herein by reference:
(i) Annual Report on Form 10-K for the fiscal year ended September 30,
1996;
(ii) Quarterly Report on Form 10-Q for the fiscal quarters ended December
31, 1996 and March 31, 1997; and
(iii) Current Reports on Form 8-K dated May 23, 1997 and July 21, 1997.
All documents filed by Ralston pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the SAILS shall be deemed to be incorporated in
this Prospectus by reference and to be a part hereof from the date of filing
of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Ralston will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon written or oral request of such person, a copy
of any documents incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference in
such documents). Such a request may be directed in writing to the Investor
Relations Department, Ralston Purina Company, Checkerboard Square, St. Louis,
Missouri 63164 or by telephone to (314) 982-2374.
2
<PAGE>
SUMMARY OF THE OFFERING
Securities Offered..........
5,697,329 SAILS-- % Exchangeable Notes Due August
1, 2000 of Ralston.
Price to Public.............
$ . per SAILS (the last sales price per
share of the IBC Common Stock on July , 1997).
% per annum, payable quarterly on each , ,
Interest.................... , and of each year, beginning ,
1997.
Mandatory Exchange.......... On August 1, 2000 (including as a result of
acceleration or otherwise, "Maturity") the
principal amount of each SAILS will be
mandatorily exchanged by Ralston into a number of
shares of IBC Common Stock (or, at Ralston's
option, the cash equivalent and/or such other
consideration as permitted or required by the
terms of the SAILS) at an Exchange Rate equal to
(a) if the Maturity Market Price is greater than
or equal to the Threshold Appreciation Price
($ ), . of a share of IBC Common Stock per
SAILS, (b) if the Maturity Market Price is less
than the Threshold Appreciation Price of $ but
is greater than the Initial Price, a fraction of
a share of IBC Common Stock per SAILS, determined
by dividing the Initial Price by the Maturity
Market Price, that would have a value (determined
using the Maturity Market Price) equal to the
Initial Price and (c) if the Maturity Market
Price is less than or equal to the Initial Price,
one share of IBC Common Stock per SAILS, subject
in each case to adjustment in certain events. See
"Description of the SAILS--Dilution Adjustments;
Other Adjustment Events."
Enhanced Yield; Less Equity
Appreciation...............
Holders of SAILS will be entitled to receive
quarterly payments of interest at the rate of %
of the principal amount of the SAILS per annum.
IBC currently pays cash dividends at the rate of
$0.54 per share per annum (equivalent to % of
the Initial Price); however, until such time as
Ralston delivers shares of IBC Common Stock to
holders of SAILS at Maturity, holders of SAILS
will not be entitled to receive any IBC
dividends. The opportunity for equity
appreciation afforded by an investment in the
SAILS prior to Maturity is less than that
afforded by an investment in IBC Common Stock.
Holders of the SAILS will realize no equity
appreciation if at Maturity the Maturity Market
Price is less than the Threshold Appreciation
Price (which has been set at $ or % above the
Initial Price), and will realize only % of the
appreciation above the Threshold Appreciation
Price for the period prior to Maturity if at
Maturity the Maturity Market Price is above the
Threshold Appreciation Price. Holders of the
SAILS will realize the entire decline in equity
value for that period if at Maturity the Maturity
Market Price is below the Initial Price.
The SAILS are not redeemable prior to Maturity.
Not Redeemable..............
Ranking..................... The SAILS will be general senior unsecured
obligations of Ralston ranking pari passu with
all of its other general senior unsecured and
unsubordinated indebtedness. See
"Capitalization." IBC will have no obligations
with respect to the SAILS.
Application has been made for listing of the
Listing..................... SAILS on the NYSE.
3
<PAGE>
RISK FACTORS RELATING TO SAILS
As described in more detail below, the trading price of the SAILS may vary
considerably prior to Maturity, due to, among other things, fluctuations in
the market price of IBC Common Stock and other events that are difficult to
predict and beyond Ralston's control.
AMOUNT PAYABLE AT MATURITY BASED ON IBC COMMON STOCK PRICE
The terms of the SAILS differ from those of ordinary debt securities in that
the value of the IBC Common Stock (or cash equivalent) that a holder of the
SAILS will receive upon the mandatory exchange of the principal amount thereof
at Maturity (the "Amount Receivable at Maturity") is not fixed, but is based
on the market price of the IBC Common Stock at Maturity ("Maturity Market
Price") as specified in the Exchange Rate (as defined under "Description of
the SAILS"). Because the market price of the IBC Common Stock is subject to
market fluctuations, the Amount Receivable at Maturity may be more or less
than the principal amount of the SAILS. For example, if the Maturity Market
Price of the IBC Common Stock is less than the Initial Price, the Amount
Receivable at Maturity will be less than the principal amount paid for the
SAILS, in which case an investment in SAILS would result in a loss of
principal and, if IBC is insolvent or bankrupt, could result in a total loss
of the principal amount. Holders of SAILS, therefore, bear the full risk of a
decline in the value of the IBC Common Stock prior to Maturity.
OPPORTUNITY FOR EQUITY APPRECIATION LESS THAN IBC COMMON STOCK
Because each of the SAILS will be mandatorily exchangeable for less than one
share of IBC Common Stock (or its cash equivalent) at Maturity if the Maturity
Market Price exceeds the Initial Price, the opportunity for equity
appreciation afforded by an investment in the SAILS during the period prior to
Maturity is less than the opportunity for equity appreciation afforded by a
direct investment in IBC Common Stock. If the Maturity Market Price is above
the Initial Price but below the Threshold Appreciation Price (as defined under
"Description of the SAILS"), which has been set at $ and which represents
an appreciation of % over the Initial Price, holders of the SAILS would
realize no equity appreciation on the IBC Common Stock for that period. If the
Maturity Market Price is above the Threshold Appreciation Price, holders of
SAILS will realize only % of the appreciation of the IBC Common Stock for
that period above the Threshold Appreciation Price. See "Description of the
SAILS" for an illustration of the Amount Receivable at Maturity that a SAILS
holder would receive at various Maturity Market Prices.
UNPREDICTABILITY OF MARKET PRICE FOR IBC COMMON STOCK
It is impossible to predict whether the market price of IBC Common Stock
will rise or fall. Trading prices of IBC Common Stock will be influenced by
changes in IBC's financial condition, results of operations and prospects, and
by complex and interrelated political, economic, financial and other factors
that can affect the capital markets generally, the stock exchange or quotation
system on which IBC Common Stock is traded and the market segment of which IBC
is a part. See the prospectus relating to IBC and to IBC Common Stock attached
hereto. Any market that develops for the SAILS is likely to influence and be
influenced by the market for IBC Common Stock. For example, the price of the
IBC Common Stock could become more volatile and could be depressed by
investors' anticipation of the potential distribution into the market, upon
the Maturity of the SAILS, of the additional number of shares of IBC Common
Stock held by Ralston which may be delivered by Ralston upon Maturity of the
SAILS. Such shares, as of May 30, 1997, constituted approximately 16.85% of
the outstanding IBC Common Stock (assuming the Underwriters' overallotment
option is exercised in full). See "Relationship between Ralston Purina Company
and Interstate Bakeries Corporation." The price of IBC Common Stock could also
be affected by possible sales of IBC Common Stock by investors who view the
SAILS as a more attractive means of equity participation in IBC and by hedging
or arbitrage trading activity that may develop involving the SAILS and the IBC
Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Trading prices of IBC Common Stock also may be influenced if Ralston, IBC,
another market participant or another principal stockholder of IBC hereafter
issues securities with terms similar to those of the SAILS or
4
<PAGE>
sells or otherwise transfers a substantial amount of shares of IBC Common
Stock. Ralston owns an aggregate of 16,923,077 shares of IBC Common Stock,
constituting approximately 45% of the outstanding shares of IBC Common Stock
as of May 30, 1997. Pursuant to the Shareholder Agreement (described below)
Ralston has agreed to own no more than 14.9% of IBC's voting securities
outstanding on August 15, 2000. If IBC's purchase of 1,000,000 shares of IBC
Common Stock described under "Relationship Between Ralston Purina Company and
Interstate Bakeries Corporation" had been completed as of May 30, 1997,
Ralston would have held approximately 43.5% of IBC's Common Stock. Assuming
that Ralston delivers one share of IBC Common Stock per SAILS at Maturity and
the number of shares of outstanding IBC Common Stock at August 15, 2000 is the
same as the number of such shares outstanding as of May 30, 1997, under the
Shareholder Agreement Ralston would be required to dispose of an additional
4,778,755 shares of IBC Common Stock prior to August 15, 2000 (4,145,719
additional shares if the Underwriters' overallotment option is exercised in
full). In addition, Mr. William P. Stiritz, Chairman of the Board and Chief
Executive Officer of Ralston, and Mr. James R. Elsesser, Vice President and
Chief Financial Officer of Ralston, held 595,050 shares and 14,550 shares of
IBC Common Stock, respectively, constituting approximately 1.6% as of May 30,
1997, of the outstanding shares of IBC Common Stock. Ralston is unable to
predict whether Mr. Stiritz or Mr. Elsesser may sell shares of IBC Common
Stock as Ralston reduces its ownership of IBC Common Stock.
POTENTIAL DILUTION OF IBC COMMON STOCK
The Amount Receivable at Maturity is subject to adjustment for certain
described events arising from stock splits and combinations, stock dividends,
certain other actions of IBC that modify its capital structure and certain
other transactions involving IBC. See "Description of the SAILS--Dilution
Adjustments; Other Adjustment Events." The Amount Receivable at Maturity will
not be adjusted for other events, such as employee stock option grants and
offerings of IBC Common Stock for cash or in connection with acquisitions or
for certain other transactions involving IBC which are not specifically
described as "Adjustment Events," that may adversely affect the price of IBC
Common Stock, and possibly reduce its liquidity. Because of the relationship
of such Amount Receivable at Maturity to the price of IBC Common Stock, such
other events may adversely affect the trading price of the SAILS. There can be
no assurance that IBC will not make offerings of IBC Common Stock or as to the
amount of such offerings, if any, nor that IBC will not take such other action
in the future.
NO RIGHTS AS IBC STOCKHOLDERS
Until such time, if any, as Ralston shall deliver shares of IBC Common Stock
to holders of the SAILS at Maturity, holders of the SAILS will not be entitled
to any rights with respect to such shares of IBC Common Stock (including,
without limitation, voting rights (including voting rights in respect of IBC
transactions such as an acquisition of IBC), rights to respond to tender
offers and rights to receive any dividends or other distributions in respect
thereof). See "Relationship Between Ralston and IBC" below for a description
of the restrictions on Ralston's right to vote its shares of IBC Common Stock.
SAILS ARE GENERAL SENIOR UNSECURED OBLIGATIONS OF RALSTON
The Indenture does not contain any restriction on Ralston's use of the
proceeds of this offering or on the ability of Ralston to sell, pledge or
convey all or any portion of the IBC Common Stock held by it or its
subsidiaries, and no such shares of IBC Common Stock will be pledged or
otherwise held in escrow for use at Maturity of the SAILS, and the SAILS are
not secured by any other assets of Ralston. There is no limitation in the
Indenture on the incurrence of additional senior debt of Ralston ranking pari
passu with the SAILS or additional indebtedness of subsidiaries of Ralston to
which holders of SAILS would be effectively subordinated. Consequently, in the
event of a bankruptcy, insolvency or liquidation of Ralston or its
subsidiaries, the IBC Common Stock, if any, owned by Ralston or its
subsidiaries will be subject to the claims of creditors of Ralston, including
holders of SAILS, or its subsidiaries, respectively. The SAILS do not contain
sinking fund or other mandatory redemption provisions. The SAILS are not
subject to payment prior to Maturity at the option of the holder.
The Indenture does not afford holders of the SAILS protection in the event
of a highly leveraged transaction except as may be described under
"Description of the SAILS--Certain Covenants."
FIXED YIELD
Although holders of SAILS will be entitled to receive quarterly payments of
interest at the rate of % of the principal amount of the SAILS per annum
and IBC currently pays cash dividends at the rate of $0.54 per
5
<PAGE>
share per annum (equivalent to % of the Initial Price per annum), there can
be no assurance that the yield on the SAILS will remain higher than the
dividend yield on shares of IBC Common Stock.
NO PRIOR MARKET FOR THE SAILS
The SAILS are novel and innovative securities and there is currently no
secondary market for the SAILS. It is impossible to predict how the SAILS will
trade in the secondary market or whether such market will be liquid. The
Underwriters currently intend, but are not obligated, to make a market in the
SAILS. There can be no assurance that a secondary market will develop or, if a
secondary market does develop, that it will provide the holders of the SAILS
with liquidity or that it will continue for the life of the SAILS.
Application has been made for listing of the SAILS on the NYSE. However,
there can be no assurance that the SAILS will be listed on the NYSE. Even if
the SAILS are listed, the NYSE could revoke the listing or stop trading of the
SAILS at any time. If the SAILS are no longer listed or traded on any
securities exchange or trading market, or if the NYSE or a securities exchange
or trading market stops trading of the SAILS, holders of the SAILS may have
difficulty obtaining pricing information and it may be more difficult to
resell the SAILS.
UNCERTAINTY OF FEDERAL INCOME TAX CONSEQUENCES
No statutory, judicial or administrative authority directly addresses the
characterization of the SAILS or instruments similar to the SAILS, for U.S.
federal income tax purposes and, as a result, significant aspects of the U.S.
federal income tax consequences of an investment in the SAILS are not certain.
No ruling is being requested from the Internal Revenue Service ("IRS") with
respect to the SAILS and Ralston has not received an opinion of counsel with
respect to the specific tax consequences of owning or disposing of SAILS.
Accordingly, no assurance can be given that the IRS will agree with the
conclusions expressed under "Certain United States Federal Income Tax
Considerations."
RISK FACTORS RELATING TO IBC
Investors in the SAILS should carefully consider the information in the
prospectus of IBC attached hereto, including the information contained therein
under "Risk Factors" beginning on page 7 of such prospectus.
NO OBLIGATION ON THE PART OF IBC WITH RESPECT TO THE SAILS
IBC has no obligations with respect to the SAILS or the Amount Receivable at
Maturity, including any obligation to take the interests of Ralston or of
holders of the SAILS into consideration for any reason. See "Relationship
Between Ralston Purina Company and Interstate Bakeries Corporation." IBC will
not receive any of the proceeds of the offering of the SAILS made hereby and
is not responsible for, and has not participated in, the determination of the
timing of the offering or the prices for or quantities of SAILS to be issued.
IBC is not involved with the administration or trading of the SAILS or the
determination or calculation of the Amount Receivable at Maturity.
RELATIONSHIP BETWEEN RALSTON AND IBC
Because of the provisions in the Shareholder Agreement between Ralston and
IBC that limit Ralston's voting rights as described below (see "Relationship
Between Ralston Purina Company and Interstate Bakeries Corporation"), Ralston
is not in a position to influence the voting by holders of IBC Common Stock on
any matter other than any proposed merger of IBC or sale of all or
substantially all of the assets of IBC or creation of any other class of IBC
voting stock. In addition, the Shareholder Agreement provides that, unless
specifically permitted in writing in advance by the Chairman of the Board of
IBC, Ralston may not acquire additional shares of IBC Common Stock (except to
prevent dilution of its interest in certain circumstances) or propose or seek
to effect any business combination with IBC at any time prior to July 22,
2001. Accordingly, Ralston does not believe it should be deemed a controlling
shareholder of IBC.
Two executive officers of Ralston currently serve on IBC's nine member Board
of Directors pursuant to the terms of the Shareholder Agreement (however, IBC
has no obligation under the terms of such Shareholder Agreement to nominate
any Ralston designee after their respective terms expire in 1997 and 1999).
Accordingly, Ralston is not in a position to control the voting of IBC's Board
of Directors on any matter involving the relationship between the two
companies. If IBC's Board of Directors is presented with a proposal putting
these officers in a conflicting situation between the interests of IBC and the
interests of Ralston, they may abstain from
6
<PAGE>
participating in the consideration of such proposal and any such proposal
would then be considered by, and be subject to the approval of, a majority of
the disinterested directors of IBC.
See "Relationship Between Ralston Purina Company and Interstate Bakeries
Corporation."
RALSTON PURINA COMPANY
Ralston, incorporated in Missouri in 1894, is the world's largest producer
of dry dog and dry and soft-moist cat foods. Ralston's pet foods are sold
under the Purina name, including "Dog Chow(R)," "Cat Chow(R)" and numerous
other dog and cat food brands. Ralston is also a significant manufacturer of
primary batteries, rechargeable batteries and battery-powered lighting
products, principally under the trademarks "Eveready(R)" and "Energizer(R)."
Ralston is also a major producer of other pet products, including cat box
filler (under the "Golden Cat(R)" and "Tidy Cat(R)" names), dietary soy
protein, fiber food ingredients and polymer products, and, outside the United
States, feeds for livestock and poultry.
On March 29, 1996, Ralston announced its intention to separate its
international agricultural animal feeds business in a tax-free spin-off to
shareholders. That business manufactures and markets a complete line of
formula feeds and animal health products, including feeds for hogs, dairy
cows, cattle, poultry, rabbits, horses, shrimp and fish, in 16 countries
outside of the United States. For the fiscal year ended September 30, 1996,
the international animal feeds segment accounted for approximately 23% of
sales and 6% of operating profit of Ralston. At this time, the assets and
liabilities and debt to be assumed by the spun-off entity have not yet been
determined. Ralston has announced that it expects the spin-off to be completed
in early 1998. Completion is contingent upon a favorable tax ruling from the
IRS and final approval by Ralston's Board of Directors. Ralston believes that
the spin-off will have no material effect on its results of operations or on
its ability to meet its obligations under the SAILS.
On May 23, 1997, Ralston announced that Mr. William P. Stiritz will resign
as Chief Executive Officer and President on September 30, 1997, but will
remain as Ralston's Chairman of the Board, and will serve as Chairman and
Chief Executive Officer of Ralston's international animal feeds business upon
its spin-off. Messrs. W. Patrick McGinnis and J. Patrick Mulcahy will be
appointed as Co-Chief Executive Officers as of October 1, 1997.
Ralston maintains its principal executive offices at Checkerboard Square,
St. Louis, Missouri 63164, Tel. (314) 982-1000.
For additional information with respect to Ralston, see the documents
specified under "Incorporation of Certain Documents by Reference."
USE OF PROCEEDS
The net proceeds to be received by Ralston from the sale of the SAILS
offered hereby, after deducting underwriting discounts and commissions, but
before related expenses payable by Ralston, are estimated to be $349.2 million
($388.0 million if the Underwriter's over-allotment option is exercised in
full). Ralston intends to use the net proceeds from the offering of the SAILS
to repay short-term debt. At June 30, 1997, $505 million of short-term debt
was outstanding which at such date carried a weighted average interest rate of
5.8%.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
Ralston for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, ------------------------
1997 1996 1995 1994 1993 1992
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(a)...... 3.8 3.3 2.9 2.4 2.8 2.7
</TABLE>
- --------
(a) For the purpose of this ratio, "Earnings" consists of earnings before
income taxes, equity earnings, extraordinary item (1992, 1993, 1994, 1995
and 1996), cumulative effect of accounting changes (1993) and "fixed
charges." "Fixed charges" consist of preferred stock dividends, interest
and amortization of debt discount and expense on all indebtedness, and a
portion of net rental expense representative of the interest factor.
7
<PAGE>
INTERSTATE BAKERIES CORPORATION
IBC, through its wholly-owned operating subsidiary, Interstate Brands
Corporation ("Brands"), is the largest baker and distributor of fresh bakery
products in the United States. IBC produces, markets, distributes and sells a
wide range of breads, rolls, snack cakes, donuts, sweet goods and related
products. These products are sold under a number of national brand names, such
as "Wonder(R)," "Hostess(R)" and "Home Pride(R)," as well as regional brand
names, including "Butternut(R)," "Dolly Madison(R)" and "Merita(R)."
"Wonder(R)" white bread and "Home Pride(R)" wheat bread are the number one and
two top selling branded breads sold in the United States. "Hostess(R)"
products, including "Twinkies(R)," CupCakes, and "Ho-Ho's(R)" are among the
leading snack cake products sold in the United States.
IBC distributes its products in markets representing approximately 90% of
the United States population. IBC operates 67 bakeries and 1,400 thrift stores
and employs over 32,000 people. IBC's driver-salesmen deliver products
directly from IBC's over 1,200 distribution centers to more than 200,000 food
outlets and stores.
IBC has grown to its present size primarily through the acquisition of other
bakery businesses. In July 1995, IBC acquired Continental Baking Company
("CBC") from Ralston for $220.0 million in cash and 16,923,077 shares of IBC
Common Stock. Since the acquisition of CBC, IBC has taken significant steps to
continue to build and capitalize on the brand equity in the "Wonder(R)" and
"Hostess(R)" brands. IBC has also worked to realize cost savings from the CBC
acquisition and to achieve economies of scale in the operations of Brands and
CBC. As a result of the CBC acquisition and these actions, IBC has
significantly increased net sales and profitability. In fiscal 1997, IBC
reported net sales of approximately $3.2 billion, an 11.6% increase from the
prior year's net sales of approximately $2.9 billion (which included only 45
weeks of combined operations of IBC and CBC), and net income of approximately
$97.2 million, or $2.55 per share, compared to the prior year's $24.5 million,
or $0.70 per share ($0.85 before a one-time pre-tax charge of $9.5 million).
IBC's operating income as a percentage of net sales increased to nearly 6% in
1997 from 2.7% in fiscal 1996 (3.1% before the one-time pre-tax charge).
For additional information about IBC, including risks associated with an
investment in IBC Common Stock, see the prospectus of IBC attached hereto. IBC
is subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). The prospectus of IBC attached hereto
incorporates its Annual Report on Form 10-K for the fiscal year ended June 1,
1996, its Quarterly Reports on Form 10-Q for the quarters ended August 24,
1996, November 16, 1996 and March 8, 1997, the description of the IBC Common
Stock contained in IBC's Registration Statement on Form 8-A filed on May 28,
1992 and all documents filed by IBC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of such prospectus and prior
to the termination of this SAILS offering. Such documents may be inspected and
copied at the public reference facilities maintained by the Commission in
Washington, D.C. and at its regional offices and at the offices of the NYSE on
which the IBC Common Stock is listed. Such documents, without exhibits, also
may be obtained by writing to Ray Sandy Sutton, Corporate Secretary,
Interstate Bakeries Corporation, 12 East Armour Boulevard, Kansas City, MO
64111 (telephone number (816) 502-4000). See "Available Information" and
"Incorporation of Certain Documents by Reference" in the prospectus of IBC
attached hereto. All information relating to IBC which is contained in this
Prospectus or contained in or incorporated by reference in the prospectus of
IBC attached hereto was provided by IBC. Ralston assumes no responsibility for
the accuracy of such information.
8
<PAGE>
RELATIONSHIP BETWEEN RALSTON PURINA COMPANY
AND INTERSTATE BAKERIES CORPORATION
Ralston, through a wholly-owned subsidiary, currently owns 16,923,077 shares
of IBC Common Stock, constituting approximately 45% of the outstanding shares
of IBC Common Stock as of May 30, 1997.
Pursuant to a Shareholder Agreement, dated as of July 22, 1995, as amended
(the "Shareholder Agreement"), among Ralston, IBC and a subsidiary of Ralston,
Ralston agreed, with certain limited exceptions, not to acquire any additional
shares of IBC Common Stock prior to July 22, 2001. Ralston also agreed
pursuant to the Shareholder Agreement to reduce its ownership of IBC Common
Stock, by August 15, 2000, to no more than 14.9% of IBC's total outstanding
voting securities. Ralston has registration rights with respect to the IBC
Common Stock owned by it, but the Shareholder Agreement provides that, with
certain limited exceptions, Ralston may not sell any of such IBC Common Stock
without first offering the securities to IBC. Ralston has offered to sell, and
IBC has declined the opportunity to purchase, the IBC Common Stock which may
be delivered pursuant to the SAILS offered hereby. IBC also has the right,
between August 15, 2000 and August 14, 2001, to acquire any of the IBC Common
Stock then held by Ralston at a price equal to 110% of its then current market
price, as defined in the Shareholder Agreement.
The Shareholder Agreement requires that Ralston vote the shares of IBC
Common Stock in accordance with the recommendation of IBC's Board of Directors
with respect to shareholder proposals and nominations to the IBC Board, and,
with respect to other proposals, in proportion to the votes of all other
shareholders; provided that Ralston may vote as it deems appropriate with
respect to proposals for the merger of IBC, the sale of all or substantially
all of IBC's assets or the issuance of any other class of voting stock of IBC.
Mr. William P. Stiritz and Mr. James R. Elsesser serve on the Board of
Directors of IBC at the request of Ralston pursuant to the terms of the
Shareholder Agreement. Mr. Stiritz's term expires in 1997 and Mr. Elsesser's
term expires in 1999. Upon expiration of their respective terms, IBC will have
no further obligation under the Shareholder Agreement or otherwise to nominate
any designee of Ralston for election as a director of IBC, but the Board of
Directors of IBC may ask either Mr. Stiritz or Mr. Elsesser, or both, to stand
for reelection at the end of their respective terms. If either or both are
reelected, their terms would extend beyond the Maturity of the SAILS.
IBC has agreed, simultaneously with the closing of the SAILS transaction, to
purchase from Ralston 1,000,000 shares of IBC Common Stock at a purchase price
per share equal to the Initial Price, less a 3% discount. For information
concerning the number of shares of IBC Common Stock, Ralston has agreed to
sell under the Shareholder Agreement, see "Risk Factors Relating to SAILS--
Shares Eligible for Future Sale."
IBC has agreed to indemnify Ralston against any losses caused by any untrue
statement or alleged untrue statement with regard to IBC Common Stock or IBC
contained in this Prospectus or the prospectus of IBC attached hereto.
IBC has no obligations with respect to the SAILS. See "Risk Factors Relating
to SAILS--No Obligation on the Part of IBC with Respect to the SAILS."
9
<PAGE>
PRICE RANGE OF INTERSTATE BAKERIES CORPORATION
COMMON STOCK AND DIVIDENDS
IBC Common Stock is listed and traded on the NYSE under the symbol "IBC."
The following table sets forth, for each of the quarterly periods indicated,
the high and low sales prices for IBC Common Stock, as reported on the NYSE
Composite Tape, and cash dividends paid, during fiscal 1998, 1997, 1996 and
1995.
<TABLE>
<CAPTION>
FISCAL 1998 QUARTER HIGH LOW DIVIDENDS
- ------------------- ------- ------- ---------
<S> <C> <C> <C>
First (through July 17, 1997)......... $63.812 $54.625 $.135(1)
FISCAL 1997 QUARTER
- -------------------
First................................. $30.125 $25.500 $.125
Second................................ 45.250 29.625 .135
Third................................. 51.000 42.250 .135
Fourth..................................55.125 46.375 .135
FISCAL 1996 QUARTER
- -------------------
First................................. $19.500 $14.375 $.125
Second................................ 22.250 18.875 .125
Third................................. 23.250 20.500 .125
Fourth................................ 27.625 22.500 .125
FISCAL 1995 QUARTER
- -------------------
First................................. $12.875 $11.875 $.125
Second................................ 13.500 12.500 .125
Third................................. 15.375 12.500 .125
Fourth................................ 14.875 14.125 .125
</TABLE>
- --------
(1) The Board of Directors of IBC has declared a dividend to be paid to
shareholders of record on July 15, 1997, payable on August 1, 1997.
As of July 17, 1997, there were 4,740 holders of record of IBC Common Stock.
For a recent sales price of the IBC Common Stock, see the cover page of this
Prospectus.
Ralston makes no representation as to the amount of dividends, if any, that
IBC will pay in the future. In any event, holders of the SAILS will not be
entitled to receive any dividends or other distributions that may be payable
on the IBC Common Stock until such time as Ralston, if it so elects, delivers
shares of IBC Common Stock at Maturity of the SAILS, and then only with
respect to dividends or other distributions having a record date on or after
the date of delivery of such shares of IBC Common Stock. See "Description of
the SAILS."
10
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of Ralston at
March 31, 1997, and as adjusted to reflect the application of the estimated
net proceeds from the sale of the SAILS (assuming the Underwriter's over-
allotment option is not exercised) to pay short-term debt.
<TABLE>
<CAPTION>
AT MARCH 31, 1997
----------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN MILLIONS)
<S> <C> <C>
Short-term debt, excluding current maturities:
Notes Payable.......................................... $ 791.8 $ 442.6
Long-term debt:
Debentures, 7 3/4%-9.30%............................... 1,206.0 1,206.0
ESOP Loan Guarantee.................................... 87.7 87.7
Medium Term Notes, 8.52%-10.18%........................ 71.9 71.9
Capitalized Lease Obligations, 5.8%-6.5%............... 6.2 6.2
Industrial Revenue Bonds, 4.5%-12.75%.................. 29.1 29.1
Revolving Credit Agreement LIBOR + 15 basis points..... 50.0 50.0
Other.................................................. 95.3 95.3
-------- --------
Total existing long-term debt........................ 1,546.2 1,546.2
SAILS.................................................. -- 360.0
-------- --------
Total long-term debt................................. 1,546.2 1,906.2
Current maturities of long-term debt..................... 97.5 97.5
-------- --------
Total long-term debt, less current maturities........ 1,448.7 1,808.7
-------- --------
Redeemable Preferred Stock............................... 314.3 314.3
-------- --------
Total shareholders' equity............................... 801.3 801.3
-------- --------
Total capitalization................................. $3,453.6 $3,464.4
======== ========
</TABLE>
The foregoing financial data should be read in conjunction with the
consolidated financial statements for the indicated periods which are included
in the documents incorporated by reference under "Incorporation of Certain
Documents by Reference." The SAILS debt will initially be recorded on the
balance sheet at the principal amount as of issuance. At each subsequent
balance sheet date, the SAILS will be marked to the cash value of the
underlying IBC shares for which the SAILS may be exchanged. Any changes in
value will be recorded in earnings each period.
11
<PAGE>
SELECTED FINANCIAL INFORMATION OF RALSTON
The following table sets forth selected financial information for Ralston
for, and at the end of, the six-month periods ended March 31, 1997 and 1996
and each of the five years in the period ended September 30, 1996. The
selected financial information for the five years ended September 30, 1996 has
been derived from Ralston's consolidated financial statements, which have been
audited by Price Waterhouse LLP, independent auditors. Certain
reclassifications have been made to historical financial information to
conform with current year presentation. The selected financial information for
the six-month periods ended March 31, 1997 and 1996 is derived from unaudited
financial statements. The unaudited financial statements, in the opinion of
Ralston's management, include all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for these periods. Financial information for the interim
periods presented is not necessarily indicative of financial information to be
anticipated for the full year. The information should be read in conjunction
with the consolidated financial statements, related notes and other financial
information incorporated by reference herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
------------------ ------------------------------------------------
1997 1996 1996 1995(1) 1994(2) 1993 1992
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS EXCEPT PER SHARE AND PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
DATA
Net Sales............... $3,279.8 $3,071.4 $6,114.3 $7,171.6 $7,676.6 $7,874.8 $7,725.9
Costs and Expenses
Cost of products sold.. 1,956.7 1,812.1 3,668.1 4,088.0 4,282.5 4,322.0 4,223.1
Selling, general and
administrative........ 571.8 529.4 1,068.1 1,734.1 1,861.3 1,879.8 1,784.9
Advertising and
promotion............. 348.5 319.0 592.8 598.4 771.2 848.1 904.8
Interest expense....... 87.0 99.2 190.3 199.8 220.4 238.1 242.9
Provisions for
restructuring......... -- -- 18.0 90.8 99.9 -- 79.0
Gain on sale of CBC.... -- -- -- (50.3) -- -- --
Gain on sale of
assets................ -- -- -- -- -- -- (41.5)
Other (income)/expense,
net................... (0.9) 14.4 14.7 (3.4) 19.6 6.4 (9.4)
-------- -------- -------- -------- -------- -------- --------
Earnings before Income
Taxes, Equity
Earnings,
Extraordinary Item and
Cumulative Effect of
Accounting Changes.... 316.7 297.3 562.3 514.2 421.7 580.4 542.1
Income Taxes........... (117.2) (113.0) (212.2) (215.0) (203.3) (239.1) (221.4)
-------- -------- -------- -------- -------- -------- --------
Earnings before Equity
Earnings, Extraordinary
Item, and Cumulative
Effect of Accounting
Changes................ 199.5 184.3 350.1 299.2 218.4 341.3 320.7
Equity Earnings, Net of
Taxes.................. 14.6 3.3 11.6 0.9 -- -- --
-------- -------- -------- -------- -------- -------- --------
Earnings before
Extraordinary Item and
Cumulative Effect of
Accounting Changes..... 214.1 187.6 361.7 300.1 218.4 341.3 320.7
Extraordinary Item--Loss
on Early Retirement of
Debt................... -- -- (2.1) (3.7) (9.5) (11.8) (7.5)
-------- -------- -------- -------- -------- -------- --------
Earnings before
Cumulative Effect of
Accounting Changes..... 214.1 187.6 359.6 296.4 208.9 329.5 313.2
Cumulative Effect of
Accounting Changes:
Postretirement benefits
other than pensions... -- -- -- -- -- (171.9) --
Income taxes........... -- -- -- -- -- (35.0) --
-------- -------- -------- -------- -------- -------- --------
Net Earnings............ $ 214.1 $ 187.6 $ 359.6 $ 296.4 $ 208.9 $ 122.6 $ 313.2
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA
Total Assets............ $4,811.7 $4,671.5 $4,785.1 $4,567.2 $4,622.3 $5,071.9 $5,150.5
-------- -------- -------- -------- -------- -------- --------
Long-Term Debt.......... 1,448.7 1,547.2 1,437.0 1,602.1 1,594.6 2,054.5 2,111.3
-------- -------- -------- -------- -------- -------- --------
Stockholders Equity..... 801.3 602.3 689.0 494.2 355.6 469.8 655.2
-------- -------- -------- -------- -------- -------- --------
</TABLE>
- --------
(1) Effective July 22, 1995, Ralston sold CBC. Ralston's earnings and cash
flows reflect the operations of CBC through July 22, 1995.
(2) On March 31, 1994, Ralston effected a spin-off of Ralcorp Holdings, Inc.,
its private label and branded cereal, baby food, crackers and cookies, ski
resort and coupon redemption businesses. Ralston's earnings and cash flows
reflect the operations of those businesses through March 31, 1994.
12
<PAGE>
DESCRIPTION OF THE SAILS
GENERAL
The SAILS are to be issued under an indenture, dated as of May 26, 1995, as
supplemented by a supplemental indenture dated as of July 1, 1997, (the
"Indenture"), between Ralston and The First National Bank of Chicago, as
Trustee (the "Trustee"). A copy of the Indenture has been included as an
exhibit to the Registration Statement of which this Prospectus is a part. The
following summaries of certain provisions of the Indenture are subject to, and
are qualified in their entirety by reference to, all the provisions of the
Indenture, including the definition therein of certain terms. Initially
capitalized terms used herein and not defined herein shall bear the meanings
ascribed thereto in the Indenture.
The SAILS will be unsecured and unsubordinated senior indebtedness of
Ralston and will rank pari passu with all other general senior unsecured and
unsubordinated indebtedness of Ralston. The Indenture does not limit the
amount of debt securities which can be issued thereunder and provides that
debt securities may be issued thereunder in series up to the aggregate
principal amount which may be authorized from time to time by Ralston. The
SAILS constitute a single series of the debt securities issued under the
Indenture. The aggregate number of SAILS to be issued will be 5,697,329 plus
such additional number of SAILS as may be issued pursuant to the over-
allotment option granted by Ralston to the Underwriters. See "Underwriting."
The SAILS will mature on August 1, 2000 (the "Stated Maturity"). The Indenture
does not afford holders of the SAILS protection in the event of a highly
leveraged transaction except as may be described under "Certain Covenants"
below.
Each of the SAILS, which will be issued with a principal amount of $ ,
will bear interest at the annual rate of % of the principal amount per annum
(or approximately $ per annum) from the date of original issuance, or from
the most recent Interest Payment Date (as defined below) to which interest has
been paid or provided for, until the principal amount thereof is exchanged at
Maturity pursuant to the terms of the SAILS. Interest on the SAILS will be
payable quarterly in arrears on , , and , commencing , 1997
(each, an "Interest Payment Date"), to the persons in whose names the SAILS
are registered at the close of business on the day of the calendar month
immediately preceding such Interest Payment Date, provided that interest
payable at Maturity shall be payable to the person to whom the principal is
payable. Interest on the SAILS will be computed on the basis of a 360-day year
of twelve 30-day months. If an Interest Payment Date falls on a day which is
not a business day or which is a legal holiday on which the corporate trust
office of the Trustee or banking institutions in the place of payment are
authorized or required to close, the interest payment to be made on such
Interest Payment Date will be made on the next succeeding business day with
the same force and effect as if made on such Interest Payment Date, and no
additional interest will accrue as a result of such delayed payment.
At Maturity, the principal amount of each of the SAILS will be mandatorily
exchanged by Ralston into a number of shares of IBC Common Stock (or, at
Ralston's option, the equivalent amount of cash and/or such other
consideration as permitted or required to be paid by the terms of the SAILS)
at the Exchange Rate (as defined below). The "Exchange Rate" is equal to, (a)
if the Maturity Market Price (as defined below) is greater than or equal to
$ (the "Threshold Appreciation Price"), . of a share of IBC Common Stock
per SAILS, (b) if the Maturity Market Price is less than the Threshold
Appreciation Price but is greater than the Initial Price, (i) a fraction equal
to the Initial Price divided by the Maturity Market Price of (ii) one share of
IBC Common Stock per SAILS that would have a value (determined at the Maturity
Market Price) equal to the Initial Price and (c) if the Maturity Market Price
is less than or equal to the Initial Price, one share of IBC Common Stock per
SAILS. The Exchange Rate is subject to adjustment as provided below under
"Dilution Adjustments; Other Adjustment Events." THE VALUE OF THE IBC COMMON
STOCK TO BE RECEIVED BY HOLDERS OF THE SAILS (OR, AS DISCUSSED BELOW, THE CASH
EQUIVALENT TO BE RECEIVED IN LIEU OF SUCH SHARES) AT MATURITY WILL NOT
NECESSARILY EQUAL THE PRINCIPAL
13
<PAGE>
AMOUNT OF SUCH SAILS. The ratios of shares of IBC Common Stock per SAILS
specified in clauses (a), (b) (ii) and (c) above of the Exchange Rate
definition are hereinafter referred to as the "Share Components." Any shares
of IBC Common Stock delivered by Ralston to the holders of the SAILS who are
not affiliated with IBC shall be free of any transfer restrictions, and the
holders of the SAILS will be responsible for the payment of any and all
brokerage costs upon the subsequent sale of such shares. No fractional shares
of IBC Common Stock will be issued at Maturity as provided under "Fractional
Shares" below. Although it is Ralston's current intention to deliver shares of
IBC Common Stock at Maturity, Ralston may, at its option, deliver cash, in
lieu of delivering such shares of IBC Common Stock. The amount of cash
deliverable in respect of each SAILS shall be equal to the product of the
number of shares of IBC Common Stock otherwise deliverable in respect of such
SAILS on the date of Maturity multiplied by the Maturity Market Price. In the
event Ralston elects to deliver cash in lieu of shares of IBC Common Stock at
Maturity, it will be obligated pursuant to the Indenture to deliver cash to
all Holders of SAILS. Factors Ralston may consider in determining whether to
deliver cash or IBC Common Stock at Maturity include the long-term outlook for
return on IBC Common Stock and the limitations agreed to by Ralston in the
Shareholder Agreement. On or prior to the fourth Business Day prior to August
1, 2000, Ralston will notify the Trustee, which in turn will notify the
registered Holders of the SAILS (which, so long as the SAILS shall be in the
form of one or more Global Securities, shall be The Depository Trust Company
or its nominee), and publish a notice in a daily newspaper of national
circulation stating whether the principal amount of each SAILS will be
exchanged for shares of IBC Common Stock or cash (and/or such other
consideration as permitted or required by the terms of the SAILS); provided,
however, that if Ralston intends to deliver cash, Ralston shall have the
right, as a condition to delivery of such cash, to require certification as to
the domicile and residency of each beneficial Holder of the SAILS.
Notwithstanding the foregoing, (i) in the case of certain dilution events,
the Exchange Rate will be subject to adjustment and (ii) in the case of
certain adjustment events, the consideration received by Holders of the SAILS
at Maturity will be shares of IBC Common Stock, other securities and/or cash.
See "Dilution Adjustments; Other Adjustment Events" below.
The "Maturity Market Price" is defined as the average Closing Price per
share of IBC Common Stock for the 20 Trading Days immediately prior to (but
not including) the date of Maturity; provided, however, that if there are not
20 Trading Days for the IBC Common Stock occurring later than the 60th
calendar day immediately prior to, but not including, the date of Maturity,
"Maturity Market Price" will be defined as the market value per share of IBC
Common Stock at Maturity as determined by a nationally recognized investment
banking firm retained for such purpose by Ralston. The Maturity Market Price
is subject to adjustment as provided under "Dilution Adjustments; Other
Adjustment Events" below. The "Closing Price" of any security on any date of
determination means (i) the closing sale price (or, if no closing sale price
is reported, the last reported sale price) of such security (regular way) on
the NYSE on such date, (ii) if such security is not listed for trading on the
NYSE on any such date, as reported in the composite transactions for the
principal United States securities exchange on which such security is so
listed, (iii) if such security is not so listed on a United States national or
regional securities exchange, as reported by the NASDAQ Stock Market, (iv) if
such security is not so reported, the last quoted bid price for such security
in the over-the-counter market as reported by the National Quotation Bureau or
similar organization, or (v) if such security is not so quoted, the average of
the mid-point of the last bid and ask prices for such security from each of at
least three nationally recognized investment banking firms selected by Ralston
for such purpose. A "Trading Day" is defined as a Business Day on which the
Closing Price of the security to be valued (A) is not suspended from trading
on any national or regional securities exchange or association or over-the-
counter market at the close of business and (B) has traded at least once on
the national or regional securities exchange or association or over-the-
counter market that is the primary market for the trading of such security.
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which the NYSE, banking institutions or trust companies in The City of New
York are authorized or obligated by law or executive order to close.
For illustrative purposes only, the following chart shows the number of
shares of IBC Common Stock or the amount of cash that a holder of the SAILS
would receive for each SAILS at various Maturity Market Prices. The table
assumes that there will be no adjustments to the Exchange Rate described under
"Dilution
14
<PAGE>
Adjustments; Other Adjustment Events" below. There can be no assurance that
the Maturity Market Price will be within the range set forth below. Given the
Initial Price of $ per SAILS and the Threshold Appreciation Price of $ ,
a SAILS Holder would receive at Maturity the following number of shares of IBC
Common Stock or amount of cash (if Ralston elects to pay the SAILS in cash):
<TABLE>
<CAPTION>
MATURITY MARKET PRICE OF NUMBER OF SHARES OF AMOUNT OF
IBC COMMON STOCK IBC COMMON STOCK CASH
------------------------ ------------------- ---------
<S> <C> <C>
$
$
$
$
</TABLE>
As the foregoing chart illustrates, if at Maturity, the Maturity Market
Price is greater than or equal to $ , Ralston will be obligated to deliver
. of a share of IBC Common Stock per SAILS, resulting in Ralston receiving
% of the appreciation in market value of the IBC Common Stock for the
period between the date hereof and Maturity and the SAILS holder receiving
% of the appreciation in such market value above $ . If at Maturity, the
Maturity Market Price is greater than $ and less than $ , Ralston will be
obligated to deliver only a fraction of a share of IBC Common Stock having a
market value equal to $ , resulting in Ralston retaining all appreciation in
the market value of the IBC Common Stock for that period. If at Maturity, the
Maturity Market Price is less than or equal to $ , Ralston will be obligated
to deliver one share of IBC Common Stock per SAILS, regardless of the market
price of such shares, resulting in the SAILS holder realizing the entire loss
on the decline in market value of the IBC Common Stock for that period.
Interest on the SAILS will be payable, and delivery of IBC Common Stock (or,
at the option of Ralston, its cash equivalent and/or such other consideration
as permitted or required as described below) in exchange for the SAILS at
Maturity will be made upon surrender of such SAILS, at the office or agency of
Ralston maintained for such purposes; provided, however, that payment of
interest may be made at the option of Ralston by check mailed to the persons
in whose names the SAILS are registered at the close of business on the day
of the calendar month immediately preceding the relevant Interest Payment
Date. See "Book-Entry System" below. Initially such office will be the
principal corporate trust office of the Trustee, First National Plaza, Suite
126, Chicago, Illinois 60670.
The SAILS will be transferrable at any time or from time to time at the
aforementioned office. No service charge will be made to the Holder for any
such transfer except for any tax or governmental charge payable in connection
therewith.
The Indenture does not contain any restriction on the ability of Ralston to
sell, pledge or convey all or any portion of the IBC Common Stock held by it
or its subsidiaries, and no shares of IBC Common Stock will be pledged or
otherwise held in escrow for use at Maturity of the SAILS. Consequently, in
the event of a bankruptcy, insolvency or liquidation of Ralston or its
subsidiaries, the IBC Common Stock, if any, owned by Ralston or its
subsidiaries will be subject to the claims of the creditors of Ralston or its
subsidiaries, respectively, including Holders of SAILS. In addition, as
described herein, Ralston will have the option, exercisable in its sole
discretion, to satisfy its obligations pursuant to the mandatory exchange for
the principal amount of each SAILS at Maturity by delivering to holders of the
SAILS either the number of shares of IBC Common Stock specified above or cash
in an amount equal to the product of such number of shares multiplied by the
Maturity Market Price. As a result, there can be no assurance that Ralston
will elect at Maturity to deliver IBC Common Stock or, if it so elects, that
it will use all or any portion of its holdings of IBC Common Stock at that
time, if any, to make such delivery. Holders of the SAILS will not be entitled
to any rights with respect to IBC Common Stock (including, without limitation,
voting rights (including voting rights in respect of IBC transactions such as
an acquisition of IBC), rights to respond to tender offers, and rights to
receive any dividends or other distributions in respect thereof) until such
time, if any, as Ralston shall have delivered shares of IBC Common Stock to
holders of the SAILS at Maturity thereof, and the applicable record date, if
any, for the exercise of such rights occurs after such date.
15
<PAGE>
DILUTION ADJUSTMENTS; OTHER ADJUSTMENT EVENTS
The Exchange Rate is subject to adjustment if IBC shall (i) pay a stock
dividend or make a distribution, in each case, with respect to IBC Common
Stock in shares of IBC Common Stock, (ii) subdivide or split its outstanding
shares of IBC Common Stock into a greater number of shares, (iii) effect a
reverse stock split or other action which combines the outstanding shares of
IBC Common Stock into a smaller number of shares, (iv) issue by
reclassification (other than a reclassification pursuant to clause (ii),
(iii), (iv) or (v) of the definition of Adjustment Event below) of the
outstanding shares of IBC Common Stock any shares of common stock of IBC, or
(v) issue rights or warrants to all holders of IBC Common Stock entitling them
to subscribe for or purchase shares of IBC Common Stock at a price per share
less than the Market Price (as defined below) of the IBC Common Stock on the
Business Day next following the record date for the determination of holders
of IBC Common Stock entitled to receive such rights or warrants.
Notwithstanding (v) above, however, the Exchange Rate will not be subject to
adjustment in the event that IBC shall (1) issue rights to purchase shares of
IBC Common Stock pursuant to a plan for the reinvestment of dividends or (2)
distribute rights or warrants to all holders of IBC Common Stock which, upon
the occurrence of a specified event or events, entitle the holders thereof to
subscribe for or purchase shares of IBC's Common Stock at a price per share
less than the Market Price of the IBC Common Stock at the time of such
occurrence; provided, however, in the case of rights or warrants described in
clause (2), the Exchange Rate will be so adjusted at the time that any of such
rights or warrants actually become exercisable at such lower price, and the
calculation of the adjustment of the Exchange Rate will be made with respect
to the Business Day next following the occurrence of the specified event or
events instead of the record date for the determination of holders of IBC
Common Stock entitled to receive such rights or warrants.
In the case of the events referred to in clauses (i), (ii), (iii) and (iv)
above, the Exchange Rate shall be adjusted by adjusting each of the Share
Components of the Exchange Rate in effect immediately prior to such event so
that a Holder of any SAILS shall be entitled to receive, upon mandatory
exchange of the principal amount of such SAILS at Maturity, the number of
shares of IBC Common Stock (or, in the case of a reclassification referred to
in clause (iv) above, the number of other shares of common stock of IBC issued
pursuant thereto) which such Holder of such SAILS would have owned or been
entitled to receive immediately following such event had such SAILS been
exchanged immediately prior to such event or any record date with respect
thereto.
In the case of any event referred to in clause (v) above, the Exchange Rate
shall be adjusted by multiplying each of the Share Components of the Exchange
Rate in effect on the record date for the issuance of the rights or warrants
referred to in clause (v) above, by a fraction, of which the numerator shall
be (A) the number of shares of IBC Common Stock outstanding on the record date
for the issuance of such rights or warrants, plus (B) the number of additional
shares of IBC Common Stock offered for subscription or purchase pursuant to
such rights or warrants, and of which the denominator shall be (x) the number
of shares of IBC Common Stock outstanding on the record date for the issuance
of such rights or warrants, plus (y) the number of additional shares of IBC
Common Stock which the aggregate offering price of the total number of shares
of IBC Common Stock so offered for subscription or purchase pursuant to such
rights or warrants would purchase at the Market Price of the IBC Common Stock
on the Business Day next following the record date for the determination of
holders of IBC Common Stock entitled to receive such rights or warrants, which
number of additional shares shall be determined by multiplying such total
number of shares by the exercise price of such rights or warrants and dividing
the product so obtained by such Market Price. To the extent that such rights
or warrants expire prior to the Maturity of the SAILS and shares of IBC Common
Stock are not delivered pursuant to such rights or warrants prior to such
expiration, the Exchange Rate shall be readjusted to the Exchange Rate which
would then be in effect had such adjustments for the issuance of such rights
or warrants been made upon the basis of delivery of only the number of shares
of IBC Common Stock actually delivered pursuant to such rights or warrants.
Any shares of IBC Common Stock issuable in payment of a dividend shall be
deemed to have been issued immediately prior to the close of business on the
record date for such dividend for purposes of calculating the number of
outstanding shares of IBC Common Stock under this paragraph.
16
<PAGE>
"Market Price" means, as of any date of determination, the average Closing
Price per share of IBC Common Stock for the 20 Trading Days immediately prior
to the date of determination; provided, however, that if there are not 20
Trading Days for IBC Common Stock occurring later than the 60th calendar day
immediately prior to, but not including, such date, the Market Price shall be
determined as the market value per share of IBC Common Stock as of such date
as determined by a nationally recognized investment banking firm retained for
such purpose by Ralston.
All adjustments to the Exchange Rate will be calculated to the nearest
1/10,000th of a share of IBC Common Stock (or, if there is not a nearest
1/10,000th of a share, to the next lower 1/10,000th of a share). No adjustment
in the Exchange Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however, that
any adjustments which by reason of the foregoing are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
If an adjustment is made to the Exchange Rate pursuant to clauses (i), (ii),
(iii), (iv) or (v) above, an adjustment shall also be made to the Maturity
Market Price as such term is used to determine which of clauses (a), (b) or
(c) of the Exchange Rate definition will apply at Maturity and for purposes of
calculating the fraction in sub-clause (b)(i) of the definition of Exchange
Rate. The required adjustment to the Maturity Market Price shall be made at
Maturity by multiplying the Maturity Market Price by the cumulative number or
fraction determined pursuant to the Share Component adjustment procedure
described above. In the case of the reclassification of any shares of IBC
Common Stock into any common stock of IBC other than IBC Common Stock, such
common stock shall be deemed to be shares of IBC Common Stock solely to
determine the Maturity Market Price and to apply the Exchange Rate at
Maturity. Each such adjustment to the Exchange Rate and the Maturity Market
Price shall be made successively.
In the event of (i) any dividend or distribution by IBC to all holders of
IBC Common Stock of evidences of its indebtedness or other assets (other than
1) dividends or distributions referred to in clause (i) of the first paragraph
under this caption "Dilution Adjustments; Other Adjustment Events," 2) any
common shares issued pursuant to a reclassification referred to in clause (iv)
of such paragraph and 3) Ordinary Cash Dividends (as defined below)) or any
issuance by IBC to all holders of IBC Common Stock of rights or warrants
(other than rights or warrants for which adjustment is required, as referred
to in clause (v) of the first paragraph under this caption "Dilution
Adjustments; Other Adjustment Events" or for which an adjustment is then or
may be later required as set forth in the last sentence of such first
paragraph), (ii) any consolidation or merger of IBC with or into another
entity (other than a merger or consolidation in which IBC is the continuing
corporation and in which the shares of IBC Common Stock outstanding
immediately prior to the merger or consolidation are not exchanged for cash,
securities or other property of IBC or another corporation), (iii) any sale,
transfer, lease or conveyance to another corporation of the property of IBC as
an entirety or substantially as an entirety, (iv) any statutory exchange of
securities of IBC with another corporation (other than in connection with a
merger or acquisition) or (v) any liquidation, dissolution or winding up of
IBC (any such event, an "Adjustment Event"), each Holder of a SAILS will
receive at Maturity, in lieu of or (in the case of an Adjustment Event
described in clause (i) above) in addition to, shares of IBC Common Stock as
described above (calculated using the formula set forth in "General" and the
Maturity Market Price set forth in the last sentence of this paragraph), cash
in an amount equal to (A) if the Maturity Market Price is greater than or
equal to the Threshold Appreciation Price, . multiplied by the Transaction
Value (as defined below), (B) if the Maturity Market Price is less than the
Threshold Appreciation Price but is greater than the Initial Price, the
product of (x) the Initial Price divided by the Maturity Market Price
multiplied by (y) the Transaction Value and (C) if the Maturity Market Price
is less than or equal to the Initial Price, the Transaction Value. Following
an Adjustment Event, the Maturity Market Price, as such term is used in this
paragraph and throughout the definition of Exchange Rate, shall be deemed to
equal (A) the Maturity Market Price of the shares of IBC Common Stock, as
adjusted pursuant to the method set forth in the preceding paragraph, plus (B)
the Transaction Value.
Notwithstanding the foregoing, with respect to any securities received in an
Adjustment Event (A) that are (i) listed on a United States national
securities exchange, (ii) that are reported on a United States national
securities system subject to last sale reporting, (iii) that are traded in the
over-the-counter market and reported on the National Quotation Bureau or
similar organization or (iv) for which bid and ask prices are available from
17
<PAGE>
at least three nationally recognized investment banking firms and (B) that are
either (x) perpetual equity securities or (y) non-perpetual equity or debt
securities with a stated maturity after the Stated Maturity of the SAILS
("Reported Securities"), Ralston may, at its option, in lieu of delivering the
amount of cash deliverable in respect of Reported Securities received in an
Adjustment Event, as determined in accordance with the previous paragraph,
deliver a number of such Reported Securities with a value equal to such cash
amount, as determined in accordance with clause (ii) of the definition of
Transaction Value, as applicable; provided, however, that (i) if such option
is exercised, Ralston shall deliver Reported Securities in respect of all, but
not less than all, cash amounts that would otherwise be deliverable in respect
of Reported Securities received in an Adjustment Event, (ii) Ralston may not
exercise such option if Ralston has elected to deliver cash in lieu of shares
of IBC Common Stock, if any, deliverable upon Maturity or if such Reported
Securities have not yet been delivered to the holders entitled thereto
following such Adjustment Event or any record date with respect thereto, and
(iii) subject to Ralston's obligation to deliver cash with respect to any
Reported Security that had not yet been delivered to holders entitled thereto,
Ralston must exercise such option if Ralston does not elect to deliver cash in
lieu of shares of IBC Common Stock, if any, deliverable upon Maturity. If
Ralston elects to deliver Reported Securities, each Holder of a SAILS will be
responsible for the payment of any and all brokerage and other transaction
costs upon the sale of such Reported Securities. If, following any Adjustment
Event, any Reported Security ceases to qualify as a Reported Security, then
(x) Ralston may no longer elect to deliver such Reported Security in lieu of
an equivalent amount of cash and (y) notwithstanding clause (ii) of the
definition of Transaction Value, the Transaction Value of such Reported
Security shall mean the fair market value of such Reported Security on the
date such security ceases to qualify as a Reported Security, as determined by
a nationally recognized investment banking firm retained for this purpose by
Ralston.
The amount of cash and/or the kind and amount of securities into which the
SAILS shall be exchangeable after an Adjustment Event shall be subject to
adjustment following such Adjustment Event in the same manner and upon the
occurrence of the same type of events as described under this caption
"Dilution Adjustments; Other Adjustment Events" with respect to IBC Common
Stock and IBC.
For purposes of the foregoing, the term "Ordinary Cash Dividend" means, with
respect to any consecutive 365-day period, any dividend with respect to IBC
Common Stock paid in cash to the extent that the amount of such dividend,
together with the aggregate amount of all other dividends on IBC Common Stock
paid in cash during such 365-day period, does not exceed on a per share basis
10% of the average of the Closing Prices per share of IBC Common Stock over
such 365-day period.
The term "Transaction Value" means (i) for any cash received in any
Adjustment Event, the amount of cash received per share of IBC Common Stock,
(ii) for any Reported Securities received in any Adjustment Event, an amount
equal to (x) the average Closing Price per security of such Reported
Securities for the 20 Trading Days immediately prior to Maturity multiplied by
(y) the number of such Reported Securities (as adjusted pursuant to the second
preceding paragraph) received for each share of IBC Common Stock and (iii) for
any property received in any Adjustment Event other than cash or such Reported
Securities, an amount equal to the fair market value of the property received
per share of IBC Common Stock on the date such property is received, as
determined by a nationally recognized investment banking firm retained for
this purpose by Ralston; provided, however, that in the case of clause (ii),
(x) with respect to securities that are Reported Securities by virtue of only
clause (A)(iv) of the definition of Reported Securities in the third preceding
paragraph, Transaction Value with respect to any such Reported Security means
the average of the mid-point of the last bid and ask prices for such Reported
Security as of Maturity from each of at least three nationally recognized
investment banking firms retained for such purpose by Ralston multiplied by
the number of such Reported Securities (as adjusted pursuant to the method set
forth in the second preceding paragraph) received for each share of IBC Common
Stock and (y) with respect to all other Reported Securities, if there are not
20 Trading Days for any particular Reported Security occurring later than the
60th calendar day immediately prior to, but not including, the date of
Maturity, Transaction Value with respect to such Reported Security means the
market value per security of such Reported Security as of Maturity as
determined by a nationally recognized investment banking firm retained for
such purpose by Ralston multiplied by the number of such Reported Securities
(as adjusted pursuant to the method set forth in the second preceding
paragraph) received for each share of IBC Common Stock. For purposes of
calculating the Transaction Value, any cash, Reported Securities or other
property
18
<PAGE>
receivable in any Adjustment Event shall be deemed to have been received
immediately prior to the close of business on the record date for such
Adjustment Event or, if there is no record date for such Adjustment Event,
immediately prior to the close of business on the effective date of such
Adjustment Event.
No adjustments will be made for certain other events, such as employee stock
option grants or offerings of IBC Common Stock by IBC for cash or in
connection with acquisitions.
Ralston is required, within ten Business Days following the occurrence of an
event that requires an adjustment to the Exchange Rate or the occurrence of an
Adjustment Event (or, in either case, if Ralston is not aware of such
occurrence, as soon as practicable after becoming so aware), to provide
written notice to the Trustee and to each Holder of SAILS of the occurrence of
such event, including a statement in reasonable detail setting forth the
method by which the adjustment to the Exchange Rate or change in the
consideration to be received by Holders of SAILS following the Adjustment
Event was determined and setting forth the revised Exchange Rate or
consideration, as the case may be; provided, however that, in respect of any
adjustment to the Maturity Market Price, such notice will only disclose the
factor by which the Maturity Market Price is to be multiplied in order to
determine which clause of the Exchange Rate definition will apply at Maturity.
FRACTIONAL SHARES
No fractional shares of IBC Common Stock or Reported Securities will be
issued if Ralston exchanges the SAILS for shares of IBC Common Stock or
Reported Securities. If more than one SAILS is surrendered for exchange at one
time by the same Holder, the number of full shares of IBC Common Stock or
Reported Securities which shall be delivered upon exchange, in whole or in
part, as the case may be, shall be computed on the basis of the aggregate
number of SAILS so surrendered at Maturity. In lieu of any fractional share or
other security otherwise issuable in respect of all SAILS of any holder which
are exchanged at Maturity, such holder shall be entitled to receive an amount
in cash equal to the value of such fractional share or security at the
Maturity Market Price.
DELIVERY OF SECURITIES UPON MATURITY
All shares of IBC Common Stock and Reported Securities deliverable to
holders of the SAILS upon Maturity will be delivered to such holders, whenever
practicable, in such manner (such as by book-entry transfer) so as to assure
same-day transfer of such securities to such holders and otherwise in the
manner customary at such time for delivery of such securities and securities
of the same type. Notwithstanding the foregoing, it may not be possible under
market practices prevailing at the Maturity of the SAILS to transfer IBC
Common Stock and/or Reported Securities so as to assure same-day transfer of
such securities to Holders of the SAILS. Accordingly, such Holders of the
SAILS may receive all or a portion of the IBC Common Stock and/or Reported
Securities into which such SAILS are exchangeable after the date of Maturity.
REDEMPTION
The SAILS are not subject to redemption prior to Maturity and do not contain
sinking fund or other mandatory redemption provisions. The SAILS are not
subject to payment at the option of the Holder prior to Maturity.
BOOK-ENTRY SYSTEM
It is expected that the SAILS will be issued in the form of one or more
global securities (the "Global Securities") deposited with The Depository
Trust Company (the "Depositary") and registered in the name of a nominee of
the Depositary.
The Depositary has advised Ralston and the Underwriters as follows: the
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a
19
<PAGE>
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to Section 17A of the
Exchange Act. The Depositary was created to hold securities of persons who
have accounts with the Depositary ("Participants") and to facilitate the
clearance and settlement of securities transactions among its Participants in
such securities through electronic book-entry changes in accounts of the
Participants, thereby eliminating the need for physical movement of
certificates. Such Participants include securities brokers and dealers, banks,
trust companies and other clearing corporations. Indirect access to the
Depositary's book-entry system also is available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective SAILS represented by such Global Security to the
accounts of Participants. The accounts to be credited shall be designated by
the Underwriters. Ownership of beneficial interests in the Global Securities
will be limited to Participants or persons that may hold interests through
Participants.
So long as the Depositary or its nominee, is the registered owner of the
SAILS, the Depositary or such nominee, as the case may be, will be considered
the sole owner or holder of the SAILS represented by such Global Security for
the purposes of receiving payment on the SAILS, receiving notices and for all
other purposes under the Indenture. Except as provided below, owners of
beneficial interests in a Global Security will not be entitled to have SAILS
represented by such Global Security registered in their names and will not
receive or be entitled to receive physical delivery of SAILS in definitive
form and will not be considered the owners or holders thereof under the
Indenture.
Any payment of principal, premium or interest on SAILS registered in the
name of the Depositary or its nominee represented by any such Global Security
will be made to the Depositary or its nominee, as the case may be, as the sole
registered owner of the Global Security representing the SAILS. None of
Ralston, the Trustee, any agent of Ralston or the Trustee or any Underwriter
will have any responsibility or liability for any aspect of the Depositary's
records relating to or payments made on account of beneficial ownership
interests in a Global Security representing any SAILS or for maintaining,
supervising or reviewing any of the Depositary's records relating to such
beneficial ownership interests.
Ralston expects that the Depositary or its nominee, upon receipt of any
payment of principal, premium or interest, will credit immediately
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global
Security as shown on the records of the Depositary or its nominee. Ralston
also expects that payments by participants to owners of beneficial interests
in a Global Security held through such participants will be governed by
standing instructions and customary practices as is now the case with
securities held for customer accounts registered in "street name", and will be
the sole responsibility of such participants.
A Global Security may not be transferred except as a whole by the Depositary
to a nominee of the Depositary, except as otherwise provided in the Indenture.
A Global Security representing SAILS is exchangeable only if (x) the
Depositary notifies Ralston that it is unwilling or unable to continue as
Depositary for such Global Security or if at any time the Depositary ceases to
be a clearing agency registered under the Exchange Act and Ralston fails to
appoint a successor Depositary within 90 days or (y) Ralston in its sole
discretion determines that such Global Security shall be exchangeable or (z)
there shall have occurred and be continuing an Event of Default or an event
which with the giving of notice or lapse of time or both would constitute an
Event of Default with respect to the SAILS. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
certificates in definitive form representing SAILS issuable in such
denominations and in such names as the Depositary holding such Global Security
shall direct. Subject to the foregoing, the Global Security is not
exchangeable, except for a Global Security of like denomination to be
registered in the name of the Depositary or its nominee.
20
<PAGE>
CERTAIN COVENANTS
Limitations on Liens. Ralston covenants that it will not have, nor will it
permit any Domestic Subsidiary (defined as a Subsidiary the majority of the
operating assets of which are located within, and the principal business of
which is carried on in, the United States of America, other than a subsidiary
engaged primarily in
the business of purchasing accounts receivable, making loans and advances
against accounts receivable and chattels and related types of financing or
engaged primarily in the business of owning, developing or leasing real
property) to have, any lien on its properties or assets or upon any income or
profits therefrom without equally and ratably securing the SAILS. This
restriction does not apply to certain permitted liens, including (a) liens on
property existing at the time of acquisition thereof and certain purchase
money mortgages; (b) liens on property of any corporation existing at the time
such corporation becomes a Domestic Subsidiary; (c) liens existing as of the
date of the Indenture; (d) liens which secure debt owing to Ralston or a
Domestic Subsidiary by a Domestic Subsidiary; (e) liens arising from
assignments of moneys due under contracts within the United States; (f) liens
on property created in contemplation of the sale or disposition of such
property provided that after 120 days from the creator such lien such property
shall not be owned by Ralston or any Domestic Subsidiary and any indebtedness
secured by such mortgage shall be without recourse to Ralston or any Domestic
Subsidiary; (g) liens arising from judgments being appealed and from certain
pledges and deposits; and (h) any extension, renewal or replacement of any
lien referred to in the foregoing clauses (a) through (g), inclusive.
Limitations on Sale and Lease-back Transactions. Ralston covenants that it
will not enter, nor will it permit any Domestic Subsidiary to enter, into any
sale and lease-back transactions involving any Principal Property (as
defined), other than a sale by a Domestic Subsidiary to Ralston and other than
transactions for temporary periods not exceeding five years by the end of
which period it is intended that the use of the leased property by the lessee
will be discontinued, unless Ralston, within 120 days after the transfer of
title to such Principal Property, applies to the redemption of indebtedness
which is pari passu with the SAILS maturing more than 12 months after its
creation an amount equal to the net proceeds received by Ralston or such
Domestic Subsidiary upon such sale. Under the Indenture, a Principal Property
is defined as a battery, protein or pet food manufacturing plant owned by
Ralston or a Subsidiary as of May 26, 1995, (and any future additions or
improvements thereto) and located within the United States of America.
Exempted Transactions. Notwithstanding the foregoing provisions, Ralston or
any Domestic Subsidiary may create liens on its property or assets without
equally and ratably securing the SAILS or enter into sale and lease-back
transactions involving a Principal Property without redeeming indebtedness if,
after giving effect thereto, the aggregate amount of indebtedness of Ralston
and its Domestic Subsidiaries secured by liens otherwise prohibited plus the
aggregate amount of Attributable Debt (defined as the present value, computed
by discounting at the rate of interest per annum borne by the SAILS, of the
obligation of a lessee for net rental payments during the remaining term of
any lease) in respect of such sale and lease-back transactions does not exceed
5% of the Consolidated Net Tangible Assets (defined as total assets less (a)
all liabilities except (i) notes payable; (ii) current maturities of long-term
debt; (iii) current maturities of obligations under capital leases; (iv) long-
term debt and long-term obligations under capital leases; and (b) goodwill and
intangible assets) of Ralston and its Domestic Subsidiaries.
EVENTS OF DEFAULT
An Event of Default with respect to the SAILS is defined in the Indenture as
being: (a) default for 30 days in payment of any installment of interest on
the SAILS; (b) default in the payment of any principal on the SAILS; (c)
default by Ralston in performance of any of the covenants or warranties in the
Indenture contained therein for the benefit of the SAILS which shall not have
been remedied for a period of 90 days after written notice to Ralston by the
Trustee or to Ralston and the Trustee by the Holders of not less than 25% in
principal amount of the SAILS then outstanding; and (d) certain events of
bankruptcy, insolvency or reorganization of Ralston.
The Indenture provides that if an Event of Default shall have occurred and
be continuing with respect to the SAILS, either the Trustee or the Holders of
not less than 25% in aggregate principal amount of the then
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outstanding SAILS may declare the principal of all the SAILS, together with
accrued interest, to be due and payable immediately. Upon certain conditions
such declaration (including a declaration caused by a default in the payment
of principal or interest, the payment for which has subsequently been
provided) may be annulled by the Holders of a majority in principal amount of
the SAILS then outstanding. In addition, past defaults may be waived by the
Holders of a majority in principal amount of the SAILS then outstanding as
were entitled to declare such default, except a default in the payment of the
principal of or interest on the SAILS or in respect of a covenant or provision
of the Indenture which cannot be modified or amended without the approval of
the Holder of each SAILS so affected.
The Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during default to act with the required standard of care,
to be indemnified by the Holders of SAILS before proceeding to exercise any
right or power under the Indenture at the request of the Holders of the SAILS.
The Indenture also provides that the Holders of a majority in principal amount
of the outstanding SAILS may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred on the Trustee, with respect to the SAILS.
The Indenture contains a covenant that the Company will file annually with
the Trustee a certificate as to the absence of any default or specifying any
default that exists.
SATISFACTION AND DISCHARGE
The Indenture shall be satisfied and discharged with respect to the SAILS
when: (1) either (A) all SAILS theretofore authenticated and delivered have
been delivered to the Trustee canceled or for cancellation; or (B) all SAILS
not theretofore delivered to the Trustee canceled or for cancellation (i) have
become due and payable or (ii) will become due and payable at their Maturity
within one year and Ralston, in the case of (i) or (ii) above, has deposited
or caused to be deposited with the Trustee an amount sufficient to pay and
discharge the entire indebtedness of the SAILS for principal and interest to
the date of such deposit (in the case of the SAILS which have become due and
payable), or to the Maturity Date, as the case may be; (2) Ralston has paid or
caused to be paid all other sums payable under the Indenture by Ralston with
respect to the SAILS; and (3) Ralston has delivered to the Trustee an
officer's certificate and an Opinion of Counsel each stating that all
conditions precedent provided in the Indenture relating to the satisfaction
and discharge thereof with respect to the SAILS have been complied with.
MODIFICATION, WAIVER AND MEETINGS
The Indenture contains provisions permitting Ralston and the Trustee, with
the consent of the Holders of not less than 50% in principal amount of the
SAILS then outstanding, to execute supplemental indentures adding any
provisions to or changing or eliminating any of the provisions of the
Indenture or modifying the rights of the Holders of SAILS, except that no such
supplemental indenture may, without the consent of the Holders of all
outstanding SAILS (i) change the final maturity of the principal of, or
installment of interest, if any, on, any SAILS, or reduce the principal amount
thereof or the interest thereon, or change the maturity of or reduce the
amount of any payment to be made with respect thereto, or change the currency
in which the principal of or interest on the SAILS is denominated or payable,
or impair the right to institute suits for the enforcement of any payment on
or after the Maturity thereof; or (ii) reduce the percentage in principal
amount of the outstanding SAILS, the consent of the Holders of which is
required for any supplemental indenture, or the consent of the Holders of
which is required for any waiver of compliance with certain provisions of the
Indenture or certain defaults thereunder and their consequences provided for
in the Indenture.
The Holders of a majority in aggregate principal amount of the outstanding
SAILS may on behalf of all Holders of the SAILS (i) waive any past default
under the Indenture with respect to the SAILS, except a default
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<PAGE>
in the payment of principal or interest or a covenant or provision that cannot
be modified or amended without the consent of the Holders of each outstanding
SAILS, and (ii) waive compliance by Ralston with certain provisions of the
Indenture, including the provisions concerning limitations upon liens and sale
and lease-back transactions.
The Indenture contains provisions for convening meetings of the Holders of
the SAILS. A meeting may be called at any time by the Trustee, and also, upon
request, by Ralston or the Holders of at least 25% in aggregate principal
amount of the outstanding SAILS. Any resolution passed or decision taken at
any meeting of Holders of the SAILS duly held in accordance with the Indenture
will be binding on all Holders of the SAILS.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Ralston covenants that it will not merge or consolidate or sell or convey
all or substantially all of its assets unless the successor corporation is
Ralston or is a domestic corporation which assumes Ralston's obligations on
the SAILS and under the Indenture, and after giving effect to such transaction
Ralston or the successor corporation would not be in default under the
Indenture.
CONCERNING THE TRUSTEE
The First National Bank of Chicago is the trustee under the Indenture with
regard to Ralston's 7 7/8% Debentures due 2025 and the 7 3/4% Debentures due
2015 previously issued, and also an Indenture dated as of January 31, 1992,
with Ralston, with regard to the following securities previously issued: (i) 8
5/8% Debentures due 2022 and (ii) 8 1/8% Debentures due 2023. Ralston
maintains a deposit account and conducts other banking transactions with the
Trustee in the ordinary course of business.
GOVERNING LAW
The Indenture and each SAILS shall be deemed to be contracts under the law
of the State of New York and for all purposes shall be construed in accordance
with the law of such state.
SAME-DAY FUNDS SETTLEMENT SYSTEM AND PAYMENT
Settlement for the SAILS will be made by the Underwriters in immediately
available funds. All payments of principal and interest on the Global
Securities will be made by Ralston in immediately available funds.
The SAILS will trade in the Depositary's Same-Day Funds Settlement System
until Maturity, and secondary market trading activity in the SAILS will
therefore be required by the Depositary to settle in immediately available
funds.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain of the material U.S. federal income
tax consequences that may be relevant to a citizen or resident of the United
States, a corporation or partnership created or organized under the laws of
the United States, an estate the income of which is subject to U.S. federal
income taxation regardless of its source, or a trust which is subject to the
supervision of a court within the United States and the control of a United
States fiduciary as described in Section 7701(a)(30) of the Internal Revenue
Code of 1986, as amended (the "Code") (any of the foregoing, a "U.S. Person")
who is the beneficial owner of a SAILS (a "U.S. Holder"), Bryan Cave LLP,
special tax counsel to Ralston, has advised Ralston that the conclusions of
law expressed in the following summary represent the opinion of Bryan Cave
LLP. All references to "Holders" (including U.S. Holders) are to beneficial
owners of the SAILS. This summary is based on U.S. federal income tax laws,
regulations, rulings and decisions in effect as of the date of this Prospectus
(or, in the case of certain Treasury regulations in proposed form, as of such
date), all of which are subject to change at any time (possibly with
retroactive effect). Because such laws, regulations, rulings and decisions are
technical and complex, the discussion below necessarily represents only a
general summary.
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<PAGE>
This summary addresses the U.S. federal income tax consequences to U.S.
Holders who are initial Holders of the SAILS, who purchase the SAILS at the
offering price set forth on the cover page of this Prospectus and who will
hold the SAILS and, if applicable, the IBC Common Stock and Reported
Securities as capital assets. This summary does not address all aspects of
federal income taxation that may be relevant to a particular U.S. Holder in
light of the holder's individual investment circumstances or to certain types
of U.S. Holders subject to special treatment under the U.S. federal income tax
laws, such as dealers in securities or foreign currency, financial
institutions, insurance companies, tax-exempt organizations and taxpayers
holding the SAILS as part of a "straddle," "hedge," "conversion transaction,"
"synthetic security," or other integrated investment. Moreover, the effect of
any applicable state, local or foreign tax laws is not discussed.
No statutory, judicial or administrative authority directly addresses the
characterization of the SAILS or instruments similar to the SAILS for U.S.
federal income tax purposes. As a result, significant aspects of the U.S.
federal income tax consequences of an investment in the SAILS are not certain.
No ruling is being requested from the IRS with respect to the SAILS and no
assurance can be given that the IRS will agree with the conclusions expressed
herein. In addition, although Bryan Cave LLP has given its opinion confirming
the conclusions of law expressed in this summary, Bryan Cave LLP has stated it
could give no opinion with respect to the specific tax consequences of owning
or disposing of SAILS, including the characterization of SAILS for U.S.
federal income tax purposes. ACCORDINGLY, A PROSPECTIVE INVESTOR (INCLUDING A
TAX-EXEMPT INVESTOR) IN THE SAILS SHOULD CONSULT ITS OWN TAX ADVISOR IN
DETERMINING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE SAILS, INCLUDING THE
APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN FEDERAL OR OTHER TAX LAWS.
Pursuant to the terms of the Indenture, Ralston and every Holder of a SAILS
will be obligated (in the absence of an administrative determination or
judicial ruling to the contrary) to characterize a SAILS for all tax purposes
as a forward purchase contract to purchase IBC Common Stock and Reported
Securities at Maturity (including as a result of acceleration or otherwise).
Under the terms of the forward contract: (a) at the time of issuance of the
SAILS the Holder deposits irrevocably with Ralston a fixed amount of cash
equal to the Initial Price of the SAILS to assure the fulfillment of the
holder's purchase obligation described in clause (c) below, (b) until Maturity
Ralston will be obligated to pay interest on the deposit at a rate equal to
the stated rate of interest on the SAILS as compensation to the holder for
Ralston's use of the cash deposit during the term of the SAILS, and (c) at
Maturity the cash deposit unconditionally and irrevocably will be applied by
Ralston in full satisfaction of the holder's obligation under the forward
purchase contract, and Ralston will deliver to the holder the number of shares
of IBC Common Stock and Reported Securities that the holder is entitled to
receive at the time pursuant to the terms of the SAILS (subject to Ralston's
right to deliver cash in lieu of shares of IBC Common Stock and Reported
Securities). Consistent with the above characterization, (i) amounts paid to
Ralston in respect of the original issue of a SAILS will be treated as
allocable in their entirety to the amount of the cash deposit attributable to
such SAILS, and (ii) amounts denominated as interest that are payable with
respect to the SAILS will be characterized as interest payable on the amount
of such deposit, includible annually in the income of a U.S. Holder as
interest income in accordance with the Holder's method of accounting.
(Prospective investors should note that cash proceeds of this offering will
not be segregated by Ralston during the term of the SAILS, but instead will be
commingled with Ralston's other assets and applied in a manner consistent with
the "Use of Proceeds" discussion above.)
Under the above characterization of the SAILS, a U.S. Holder's tax basis in
a SAILS generally will equal the Holder's cost for that SAILS. Upon the sale
or other taxable disposition of a SAILS, a U.S. Holder generally will
recognize gain or loss equal to the difference between the amount realized on
the sale or other taxable disposition and the U.S. Holder's tax basis in the
SAILS. Such gain or loss generally will be long-term capital gain or loss if
the U.S. Holder has held the SAILS for more than one year at the time of
disposition.
Under the above characterization of the SAILS, if Ralston delivers IBC
Common Stock and Reported Securities at Maturity, a U.S. Holder will recognize
no gain or loss on the purchase of IBC Common Stock and Reported Securities
against application of the monies received by Ralston in respect of the SAILS.
A U.S. Holder will have a tax basis in such stock equal to the U.S. Holder's
tax basis in the SAILS (less the portion of the tax basis of the SAILS
allocable to any fractional share, as described in the next sentence). A U.S.
Holder will
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<PAGE>
recognize gain or loss (which will be short-term capital gain or loss) with
respect to cash received in lieu of fractional shares, in an amount equal to
the difference between the cash received and the portion of the basis of the
SAILS allocable to fractional shares (based on the relative number of
fractional shares and full shares delivered to the holder). If at Maturity
Ralston pays the SAILS in cash, a U.S. Holder will recognize gain or loss
equal to any difference between the amount of cash received from Ralston and
the U.S. Holder's tax basis in the SAILS at that time.
Due to the absence of authority as to the proper characterization of the
SAILS, no assurance can be given that the IRS will accept, or that a court
will uphold, the characterization and tax treatment described above. In
particular, the IRS could seek to analyze the federal income tax consequences
of owning a SAILS under Treasury regulations promulgated in June 1996
governing contingent payment debt instruments (the "Contingent Payment
Regulations"). The Contingent Payment Regulations apply to debt instruments
issued on or after August 13, 1996. The Contingent Payment Regulations are
complex, but very generally apply the original issue discount rules of the
Code to a contingent payment debt instrument by requiring that original issue
discount be accrued every year at a "comparable yield" for the issuer of the
instrument, determined at the time of issuance of the obligation. In addition,
the Contingent Payment Regulations require that a projected payment schedule,
which results in such a "comparable yield", be determined, and that
adjustments to income accruals be made to account for differences between
actual payments and projected amounts. To the extent that the comparable yield
as so determined exceeds the interest actually paid on a contingent debt
instrument, the owner of that instrument recognizes ordinary interest income
in excess of the cash the owner receives. In addition, any gain realized on
the sale, exchange or redemption of a contingent payment debt instrument is
treated as ordinary income. Any loss realized on such sale, exchange or
redemption is treated as an ordinary loss to the extent the U.S. Holder's
original issue discount inclusions with respect to the obligation exceed prior
reversals of such inclusions required by the adjustment mechanism described
above. Any loss realized in excess of such amount generally is treated as a
capital loss.
The Contingent Payment Regulations should not apply to the SAILS, because
those Regulations apply only to debt instruments that provide for contingent
payments. The SAILS are payable by the delivery of shares of IBC Common Stock
and Reported Securities (unless Ralston exercises its option to deliver cash
at Maturity) and provide economic returns that are indexed to the performance
of IBC Common Stock and Reported Securities. The SAILS therefore offer no
assurance that a U.S. Holder's investment will be returned to the Holder at
Maturity. Accordingly, the SAILS should be characterized for tax purposes, not
as debt instruments, but as forward purchase contracts in respect of which
holders have deposited a fixed amount of cash with Ralston, on which interest
is payable at a fixed rate. If, however, the IRS argued successfully that the
Contingent Payment Regulations applied to the SAILS, then, among other
matters, (i) gain realized by a U.S. Holder on the sale or other taxable
disposition of a SAILS (including as a result of payments made at Maturity)
generally would be characterized as ordinary income, rather than as short- or
long-term capital gain (depending on whether the SAILS had been held for more
than one year at the time of such disposition), and (ii) a U.S. Holder would
recognize ordinary income, or ordinary or capital loss (as the case may be,
under the rules summarized above) on the receipt of shares of IBC Common Stock
and Reported Securities, rather than capital gain or loss upon the ultimate
sale of such stock.
Even if the Contingent Payment Regulations do not apply to the SAILS, it is
possible that the IRS could seek to characterize the SAILS in a manner that
results in tax consequences to initial U.S. Holders of the SAILS different
from those reflected in the Indenture and described above.
NON-UNITED STATES PERSONS
In the case of a Holder of the SAILS that is not a U.S. Person, payments
made with respect to the SAILS should not be subject to U.S. withholding tax,
provided that such Holder complies with applicable certification requirements.
Any capital gain realized upon the sale or other disposition of the SAILS by a
Holder that is not a U.S. Person will generally not be subject to U.S. federal
income tax if (i) such gain is not effectively connected with a U.S. trade or
business of such Holder and (ii) in the case of an individual, such individual
is not present in the United States for 183 days or more in the taxable year
of the sale or other disposition of the SAILS or the gain is not attributable
to a fixed place of business maintained by such individual in the United
States.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
A Holder of the SAILS may be subject to information reporting and to backup
withholding at a rate of 31% of certain amounts paid to the Holder unless such
Holder provides proof of an applicable exemption or a correct taxpayer
identification number, and otherwise complies with applicable requirements of
the backup withholding rules of the IRS. Any amounts withheld under the backup
withholding rules are not an additional tax and may be refunded or credited
against the U.S. Holder's U.S. federal income tax liability, provided the
required information is furnished to the IRS.
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1997 (the "Underwriting Agreement") the underwriters
named below (the "Underwriters") for whom Credit Suisse First Boston
Corporation, Bear, Stearns & Co. Inc., Lehman Brothers Inc., J.P. Morgan
Securities Inc. and Salomon Brothers Inc are acting as representatives (the
"Representatives"), have severally but not jointly agreed to purchase from
Ralston the following respective numbers of SAILS:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SAILS
----------- ---------------
<S> <C>
Credit Suisse First Boston Corporation...................
Bear, Stearns & Co. Inc..................................
Lehman Brothers Inc. ....................................
J.P. Morgan Securities Inc...............................
Salomon Brothers Inc.....................................
---------
Total.................................................. 5,697,329
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the SAILS offered hereby (other than those shares
covered by the over-allotment option described below), if any are purchased.
The Underwriting Agreement provides that, in the event of a default by an
Underwriter, in certain circumstances the purchase commitments of the non-
defaulting Underwriters may be increased or the Underwriting Agreement may be
terminated.
Ralston has granted to the Underwriters an option, expiring on the close of
business on the 30th day after the date of this Prospectus, to purchase up to
633,036 additional SAILS at the initial public offering price, less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. Such option may be exercised only to cover over-allotments in
the sale of the SAILS. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of the additional SAILS as it was obligated
to purchase pursuant to the Underwriting Agreement.
Ralston has been advised by the Representatives that the Underwriters
propose to offer the SAILS offered hereby to the public initially at the
public offering price set forth on the cover page of this Prospectus and
through the Representatives to certain dealers at such price less a concession
of $ per share, and the Underwriters and such dealers may allow a discount
of $ per share on sales to certain other dealers. After the initial public
offering, the public offering price and concession and discount to dealers may
be changed by the Representatives.
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Ralston, IBC and IBC's officers and directors, including Mr. Stiritz and Mr.
Elsesser, have agreed that they will not issue, sell, offer, agree to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Commission a registration statement under the Securities Act relating to any
additional SAILS or shares of IBC Common Stock, any options, warrants or other
rights to purchase any shares of IBC Common Stock, or securities convertible
into, exercisable or exchangeable for any shares of IBC Common Stock without
the prior written consent of Credit Suisse First Boston Corporation for a
period of 90 days from the date of this Prospectus, except (i) sales of IBC
Common Stock by Ralston to IBC or (ii) options granted and IBC Common Stock
issued pursuant to employee benefit plans and stock option plans existing on
the date of this Prospectus.
Ralston and IBC have agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriters may be required to make in
respect thereof.
The Representatives, on behalf of the Underwriters, may engage in over-
allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act. Over-
allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed
a specified maximum. Syndicate covering transactions involve purchases of
SAILS in the open market after the distribution has been completed in order to
cover syndicate short positions. Penalty bids permit the Representatives to
reclaim a selling concession from a syndicate member when SAILS originally
sold by such syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions. Such stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of SAILS
to be higher than it would otherwise be in the absence of such transactions.
The SAILS will be a new issue of securities with no established trading
market. Application has been made to list the SAILS on the NYSE. The
Underwriters intend to make a market in the SAILS, subject to applicable laws
and regulations. However, the Underwriters are not obligated to do so and any
such market-making may be discontinued at any time at the sole discretion of
the Underwriters without notice. Accordingly, no assurance can be given as to
the liquidity of such market.
This offering is being made pursuant to the provisions of Section 2710(c)(8)
of the Conduct Rules of the National Association of Securities Dealers, Inc.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the SAILS in Canada is being made only on a private
placement basis exempt from the requirement that Ralston prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of SAILS are effected. Accordingly, any resale of the SAILS in Canada
must be made in accordance with applicable securities laws which will vary
depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the SAILS.
REPRESENTATIONS OF PURCHASERS
Each purchaser of SAILS in Canada who receives a purchase confirmation will
be deemed to represent to Ralston and the dealer from whom such purchase
confirmation is received that (i) such purchaser is entitled under applicable
provincial securities laws to purchase such SAILS without the benefit of a
prospectus qualified under such securities laws, (ii) where required by law,
that such purchaser is purchasing as principal and not as agent, and (iii)
such purchaser has reviewed the text above under "Resale Restrictions."
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RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such
persons in Canada or to enforce a judgment obtained in Canadian courts against
such issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of SAILS to whom the Securities Act (British Columbia) applies
is advised that such purchaser is required to file with the British Columbia
Securities Commission a report within ten days of the sale of any SAILS
acquired by such purchaser pursuant to this offering. Such report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from Ralston. Only one such report
must be filed in respect of SAILS acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of SAILS should consult their own legal and tax advisers
with respect to the tax consequences of an investment in the SAILS in their
particular circumstances and with respect to the eligibility of the SAILS for
investment by the purchaser under relevant Canadian legislation.
LEGAL OPINIONS
The validity of the SAILS will be passed upon for Ralston by James M.
Neville, Vice President, General Counsel and Assistant Secretary of Ralston.
At June 30, 1997, Mr. Neville was the beneficial owner of 26,485 shares of
Common Stock of Ralston. Additionally, as of June 30, 1997, 439 shares of
Common Stock, and 1,499 shares of Ralston's Series A ESOP Preferred Stock,
convertible under certain conditions into Common Stock, of Ralston were
allocated to Mr. Neville's accounts under certain of Ralston's benefit plans.
Certain tax matters with respect to the SAILS will be passed upon for Ralston
by Bryan Cave LLP, St. Louis, Missouri. Certain legal matters will be passed
upon for the Underwriters by Simpson Thacher & Bartlett (a partnership which
includes professional corporations), New York, New York. Simpson Thacher &
Bartlett will rely on the opinion of James M. Neville as to certain matters of
Missouri law.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Ralston Purina Company Annual Report on Form 10-K for the year ended September
30, 1996, have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
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- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY RALSTON OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER BY BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UN-
LAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF RALSTON SINCE SUCH DATE.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS
<S> <C>
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
Summary of the Offering.................................................. 3
Risk Factors Relating to SAILS........................................... 4
Ralston Purina Company................................................... 7
Use of Proceeds.......................................................... 7
Ratio of Earnings to Fixed Charges....................................... 7
Interstate Bakeries Corporation.......................................... 8
Relationship between Ralston Purina Company and Interstate Bakeries
Corporation............................................................. 9
Price Range of Interstate Bakeries Corporation Common Stock and
Dividends............................................................... 10
Capitalization........................................................... 11
Selected Financial Information of Ralston................................ 12
Description of the SAILS................................................. 13
Certain United States Federal Income Tax Considerations.................. 23
Underwriting............................................................. 26
Notice to Canadian Residents............................................. 27
Legal Opinions........................................................... 28
Experts.................................................................. 28
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOGO
$360,000,000
5,697,329
Stock Appreciation Income
Linked Securities (SAILS)
% Exchangeable Notes Due August 1, 2000
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
J.P. MORGAN & CO.
SALOMON BROTHERS INC
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth various expenses in connection with the sale
and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
the Commission's registration fee.
<TABLE>
<S> <C>
Rating Agency Fees.............................................. $233,655
Filing Fee--Securities and Exchange Commission.................. 0
Legal Fees...................................................... 85,000
Auditor's Fees.................................................. 30,000
NYSE Listing Fees............................................... 28,000
Printing and Engraving Fees..................................... 250,000
Trustee's Fees and Expenses..................................... 3,500
Miscellaneous................................................... 5,000
--------
Total....................................................... $635,155
========
</TABLE>
IBC will bear all of its legal and auditors' fees, transfer agent and
registrar fees and travel expenses and will be responsible for half of the
printing fees. In addition, IBC will reimburse Ralston for 50% of the filing
fees previously paid by Ralston. Ralston will bear responsibility for all
other fees in connection with the sale and distribution of the SAILS.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 351.355 of The General and Business Corporation Law of
Missouri ("GBCL") and Ralston's Restated Articles of Incorporation, Ralston
must indemnify any person (other than a party plaintiff serving on his or her
behalf or in the right of Ralston) who is or was a director, officer or
employee of Ralston, or is or was serving at the request of Ralston as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, to the maximum extent permitted by
law, against any and all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by such
person in connection with any civil, criminal, administrative or investigative
action, proceeding or claim (including an action by or in the right of
Ralston), by reason of the fact that such person is or was serving in such
capacity, provided that such person's conduct is not finally adjudged to have
been knowingly fraudulent, deliberately dishonest or willful misconduct. The
Ralston's directors and executive officers also have indemnification
agreements with Ralston pursuant to which Ralston agrees to indemnify such
persons to the full extent authorized or permitted by the GBCL. The agreements
also provide for indemnification to the extent not covered by the GBCL or
insurance policies purchased and maintained by Ralston (e.g. if the GBCL is
amended to change the scope of indemnification). Such indemnification would be
co-extensive with the indemnification currently permitted by the GBCL as
described above, but no indemnity would be paid (i) in respect to remuneration
paid to such person if it shall be finally adjudged that such remuneration was
in violation of law; (ii) on account of any suit for an accounting of profits
made from the purchase or sale by such person of securities of Ralston
pursuant to the provision of Section 16(b) of the Exchange Act or similar
provision of any state or local statutory law; (iii) on account of such
person's conduct which is finally judicially adjudged to have been knowingly
fraudulent, deliberately dishonest or willful misconduct; or (iv) if a final
decision by a court having jurisdiction in the matter (all appeals having been
denied or none having been taken) shall determine that such indemnification is
not lawful.
Ralston has directors' and officers' insurance which protects each director
or officer from liability for actions taken in their capacity as directors or
officers. This insurance may provide broader coverage for such individuals
than may be required by the provisions of Ralston's Restated Articles of
Incorporation.
II-1
<PAGE>
The foregoing represents a summary of the general effect of Missouri law and
Ralston's Restated Articles of Incorporation for purposes of general
description only. Additional information regarding indemnification of
directors and officers can be found in the Missouri statutes, Ralston's
Restated Articles of Incorporation and its pertinent insurance contracts.
The Underwriting Agreement General Terms and Provisions filed as Exhibit 1
hereto provides for indemnification of Ralston's directors and officers
against civil liabilities, including liabilities under the Securities Act of
1933.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1 Form of Underwriting Agreement.
4(a) Indenture, dated as of May 26, 1995, between Ralston and the Trustee,
incorporated herein by reference to Exhibit 4(a) to Ralston's Form S-3
Registration Statement No. 33-59663.
4(b) Form of supplemental indenture.*
4(c) Form of SAILS (included in Exhibit 4(b)).
5 Opinion of James M. Neville, Vice President and General Counsel.
8 Opinion of Bryan Cave LLP as to certain tax matters (revised).
12 Statement and Computation Showing the Ratio of Earnings to Fixed
Charges.*
23(a) Consent of Price Waterhouse LLP.
23(b) Consent of James M. Neville, Vice President and General Counsel (in-
cluded in Exhibit 5 above).
23(c) Consent of Bryan Cave LLP (included in Exhibit 8).
24 Powers of Attorney (included on signature page on II-5).
25 Form T-1, Statement of Eligibility under the Trust Indenture Act of 1939
of The First National Bank of Chicago.*
99.1 Stock Repurchase Agreement by and among Ralston, VCS Holding Company and
IBC, dated April 29, 1997.*
99.2 Shareholder Agreement by and among Ralston, VCS Holding Company and IBC,
dated as of July 22, 1995, as supplemented July 25, 1995, incorporated
herein by reference to Exhibit 10(xx) to Ralston's Annual Report on Form
10-K for the fiscal year ended September 30, 1996, as amended May 15,
1997.
99.3 Letter Agreement between Ralston and IBC dated July 3, 1997.*
</TABLE>
- --------
*Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore, unenforceable. In the event a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or
II-2
<PAGE>
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF ST. LOUIS, STATE OF MISSOURI, ON
JULY 21, 1997.
Ralston Purina Company
/s/ William P. Stiritz
By: _________________________________
WILLIAM P. STIRITZ,
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON JULY 21, 1997 BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
* Chairman of the Board,
- ------------------------------------- Chief Executive
WILLIAM P. STIRITZ Officer, and Director
* Vice President and Chief
- ------------------------------------- Financial Officer
JAMES R. ELSESSER
* Vice President and
- ------------------------------------- Controller
ANITA M. WRAY
* Director
- -------------------------------------
DAVID R. BANKS
* Director
- -------------------------------------
JOHN H. BIGGS
* Director
- -------------------------------------
DONALD DANFORTH, JR.
* Director
- -------------------------------------
WILLIAM H. DANFORTH
* Director
- -------------------------------------
DAVID C. FARRELL
II-4
<PAGE>
SIGNATURE TITLE
* Director
- -------------------------------------
M. DARRELL INGRAM
* Director
- -------------------------------------
RICHARD A. LIDDY
* Director
- -------------------------------------
JOHN F. MCDONNELL
* Director
- -------------------------------------
W. PATRICK MCGINNIS
* Director
- -------------------------------------
J. PATRICK MULCAHY
* Director
- -------------------------------------
KATHERINE D. ORTEGA
*James M. Neville
- -------------------------------------
(ATTORNEY-IN-FACT)
II-5
<PAGE>
FORM OF
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
1 Form of Underwriting Agreement.
4(a) Indenture, dated as of May 26, 1995, between Ralston and the Trustee,
incorporated herein by reference to Exhibit 4(a) to Ralston's Form S-3
Registration Statement No. 33-59663.
4(b) Form of supplemental indenture.*
4(c) Form of SAILS (included in Exhibit 4(b)).
5 Opinion of James M. Neville, Vice President and General Counsel.
8 Opinion of Bryan Cave LLP as to certain tax matters (revised).
12 Statement and Computation Showing the Ratio of Earnings to Fixed
Charges.*
23(a) Consent of Price Waterhouse LLP.
23(b) Consent of James M. Neville, Vice President and General Counsel (in-
cluded in Exhibit 5 above).
23(c) Consent of Bryan Cave LLP (included in Exhibit 8).
24 Powers of Attorney (included on signature page on page II-5).
25 Form T-1, Statement of Eligibility under the Trust Indenture Act of
1939 of The First National Bank of Chicago.*
99.1 Stock Repurchase Agreement by and among Ralston, VCS Holding Company
and IBC, dated April 29, 1997.*
99.2 Shareholder Agreement by and among Ralston, VCS Holding Company and
IBC, dated as of July 22, 1995, as supplemented July 25, 1995, incor-
porated herein by reference to Exhibit 10(xx) to Ralston's Annual Re-
port on Form 10-K for the fiscal year ended September 30, 1996, as
amended May 15, 1997.
99.3 Letter Agreement between Ralston and IBC dated July 3, 1997.*
</TABLE>
- --------
* Previously filed.
<PAGE>
Exhibit 1
RALSTON PURINA COMPANY
$360,000,000
____,000,000 STOCK APPRECIATION INCOME LINKED SECURITIES (SM)
___% EXCHANGEABLE NOTES DUE 2000
(SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE, OF INTERSTATE BAKERIES CORPORATION)
UNDERWRITING AGREEMENT
July 23, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
SALOMON BROTHERS INC
As Representatives of the Several
Underwriters,
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Ladies and Gentlemen:
1. Introductory. Ralston Purina Company, a Missouri corporation (the
"Company"), proposes to issue and sell to you (the "Underwriters"), an aggregate
amount of SAILS (Stock Appreciation Income Linked Securities)
consisting of its __% Exchangeable Notes Due 2000, which are registered under
the registration statement referred to in Section 3(a) (referred to herein as
the "Firm SAILS"), in such amounts to each of the Underwriters as set forth in
Schedule A hereto. The SAILS will be issued under an Indenture, dated as of May
26, 1995, between the Company and The First National Bank of Chicago, as trustee
("Trustee"), as supplemented by a First Supplemental Indenture, dated as of
___________, 1997, between the Company and the Trustee (as supplemented from
time to time, the "Indenture"). In addition, the Underwriters will have the
option to purchase from the Company up to an additional SAILS (the "Option
SAILS"). The Firm SAILS and the Option SAILS, if purchased, are hereinafter
collectively referred to as the "SAILS."
In connection with the foregoing Interstate Bakeries Corporation, a
Delaware corporation ("IBC"), has filed with the Securities and Exchange
Commission (the "Commission") a Form S-3 registration statement with respect
to shares (the "IBC Firm Shares") of common stock of IBC, par value
$.01 per share ("IBC Common Stock"), plus an additional shares of IBC
Common Stock (the "IBC Option Shares") to the extent the Underwriters exercise
their over-allotment option with respect to
- --------------------
<PAGE>
2
the SAILS, for sale by the Company as a selling stockholder (to the extent it
shall so elect to deliver IBC Common Stock to holders of the SAILS at maturity
thereof pursuant to the terms of the SAILS), which registration statement is
referred to in Section 2(a). The IBC Firm Shares and the IBC Option Shares, if
the Options SAILS are purchased, are hereinafter collectively referred to as the
"IBC Shares."
2. Representations and Warranties of IBC. IBC represents and
warrants to, and agrees with, the Underwriters and the Company that:
(a) IBC meets the requirements for the use of a Form S-3 under the
Securities Act of 1933, as amended (the "Act"). A registration statement on
Form S-3 (File No. 333-27961), including a preliminary form of prospectus,
relating to the IBC Shares has been filed with the Commission and either
(i) has been declared effective under the Act, and is not proposed to be
amended or (ii) is proposed to be amended by amendment or post-effective
amendment. If IBC does not propose to amend such registration statement and
if any post-effective amendment to such registration statement has been
filed with the Commission prior to the execution and delivery of this
Underwriting Agreement ("Agreement"), the most recent such amendment has
been declared effective by the Commission. For purposes of this Agreement,
"IBC Effective Time" means (i) if IBC has advised the Underwriters that it
does not propose to amend such registration statement, the date and time as
of which such registration statement or the most recent post-effective
amendment thereto (if any) filed prior to the execution and delivery of
this Agreement, was declared effective by the Commission, or (ii) if IBC
has advised the Underwriters that it proposes to file an amendment or post-
effective amendment to such registration statement, the date and time as of
which such registration statement, as amended by such amendment or post-
effective amendment, as the case may be, is declared effective by
Commission. "IBC Effective Date" means the date of the IBC Effective Time.
Such registration statement, as amended at the Effective Time (including
all material incorporated by reference therein and including all
information (if any) deemed to be a part of such registration statement as
of the IBC Effective Time pursuant to Rule 430A(b) under the Act), is
hereinafter referred to as the "IBC Registration Statement" and the form of
prospectus relating to the IBC Shares attached to the Company Prospectus
(as hereinafter defined), as first filed with the Commission pursuant to
and in accordance with Rule 424(b) under the Act ("Rule 424(b)") or (if no
such filing is required) as included in the IBC Registration Statement,
including all material
<PAGE>
3
incorporated by reference in such prospectus, is hereinafter referred to as
the "IBC Prospectus." Copies of such registration statement and amendments
and of each related preliminary prospectus ("Preliminary IBC Prospectuses")
have been delivered to the Underwriters.
(b) If the IBC Effective Time is prior to the execution and delivery
of this Agreement: (i) on the IBC Effective Date, the IBC Registration
Statement conformed in all material respects to the requirements of the Act
and the rules and regulations of the Commission promulgated thereunder
("Rules and Regulations") and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (ii)
on the date of this Agreement, the IBC Registration Statement conforms, and
at the time of filing of the IBC Prospectus pursuant to Rule 424(b) and at
all times subsequent thereto up to and at the First Closing Date (as
defined below) or any Option Closing Date (as defined below), as the case
may be, the IBC Registration Statement and the IBC Prospectus and any
amendment or supplements thereto will conform in all material respects to
the requirements of the Act and the Rules and Regulations, and neither of
such documents includes, or will include any untrue statement of a material
fact or omits, or will omit, to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
If the IBC Effective Time is subsequent to the execution and delivery of
this Agreement: on the IBC Effective Date and at all times subsequent
thereto up to and at the First Closing Date or any Option Closing Date, as
the case may be, the IBC Registration Statement and the IBC Prospectus and
any amendments or supplements thereto will conform in all material respects
to the requirements of the Act and the Rules and Regulations, and neither
of such documents will include any untrue statement of a material fact or
will omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The two preceding
sentences do not apply to statements in or omissions from the IBC
Registration Statement or the IBC Prospectus based upon written information
furnished to IBC by any Underwriter through Credit Suisse First Boston
Corporation ("CSFBC") or the Company specifically for use therein, it being
understood and agreed that the only such information is that described as
such in Section 10. The IBC Information (as defined herein) provided to the
Company for use in the Company Registration Statement (as defined herein)
and any amendments or supplements
<PAGE>
4
thereto, and the Company Prospectus (as defined herein) and any amendments
or supplements thereto does not include, or will not include, any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading. The Commission has not issued any order preventing or
suspending the use of any Preliminary IBC Prospectus or the IBC Prospectus.
(c) The documents incorporated by reference in the IBC Registration
Statement or the IBC Prospectus, when they became effective or were filed
with the Commission, as the case may be, under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), conformed, and any documents so
filed and incorporated before the First Closing Date, will, when they are
filed with the Commission, conform, in all material respects to the
requirements of the Act and the Exchange Act, as applicable, the Rules and
Regulations and the rules and regulations of the Commission under the
Exchange Act (the "Exchange Act Rules and Regulations").
(d) IBC and Interstate Brands Corporation ("Brands") have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation with full
corporate power and corporate authority to own, lease and operate their
respective properties and conduct their respective businesses as described
in the IBC Registration Statement, and IBC and Brands are duly qualified to
do business as foreign corporations and are in good standing in each
jurisdiction in which their respective ownership or lease of property or
the conduct of their respective businesses requires such qualification,
except where the failure to be so qualified would not have a material
adverse effect on the condition (financial or otherwise), earnings,
prospects or results of operations or business of IBC and Brands taken as a
whole (an "IBC Material Adverse Effect").
(e) The capital stock of IBC conforms in all material respects to the
statements relating thereto contained in the IBC Registration Statement and
the IBC Prospectus (and such statements correctly state the substance of
the instruments defining the capitalization of IBC in all material
respects); the IBC Shares and all of the issued shares of capital stock of
IBC have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description thereof contained in the IBC
Prospectus; the form of certificate used to evidence
<PAGE>
5
IBC Common Stock is in due and proper form and otherwise complies with all
statutory requirements under the laws of the State of Delaware; except as
described in or contemplated by the IBC Prospectus, there are no
outstanding options, warrants or other rights for the issuance of, and
there are no commitments, plans or arrangements to issue any shares of
capital stock of IBC or any security convertible into, exercisable for or
exchangeable for any shares of capital stock of IBC; and, except as
described in or contemplated by the IBC Prospectus, all of the issued
shares of capital stock of each subsidiary of IBC have been duly and
validly authorized and issued and are fully paid, non-assessable and are
owned directly or indirectly by IBC, free and clear of all liens,
encumbrances, equities or claims.
(f) Except as set forth in or incorporated by reference in the IBC
Prospectus, there is not any pending or, to IBC's knowledge, any threatened
action, suit, claim or proceeding by or before any court or governmental
agency, authority or body or otherwise against IBC or any of its
subsidiaries or any of their respective officers or any of their respective
properties, assets or rights which would or could reasonably be expected to
have an IBC Material Adverse Effect or prevent consummation of the
transactions contemplated herein.
(g) No consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required for the execution,
delivery and performance of IBC of this Agreement or the consummation by
IBC of the transactions contemplated by this Agreement, except such as may
be required under the Act, the Rules and Regulations, the Exchange Act, the
Exchange Act Rules and Regulations or under state or other securities or
Blue Sky laws, rules or regulations.
(h) IBC has full legal right, corporate power and corporate authority
to enter into this Agreement and perform the transactions contemplated
hereby; this Agreement has been duly authorized, executed and delivered by
IBC and is a valid and binding agreement of IBC, enforceable against IBC in
accordance with its terms, except as the indemnification and contribution
provisions hereunder may be limited by applicable law and except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
relating to or affecting creditors' rights generally or by general
equitable principles.
<PAGE>
6
(i) The execution, delivery and performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
breach or violation of any of the terms and provision of, or constitute a
default under, (i) the charter or by-laws of IBC or any subsidiary of IBC;
(ii) any material indenture, mortgage, deed of trust, loan agreement, bond,
debenture, note or other evidence of indebtedness or any material lease,
contract or other agreement or instrument to which IBC or any subsidiary of
IBC is a party or by which it or any such subsidiary or any of their
respective properties may be bound; or (iii) any law or any order, rule or
regulation of any governmental agency or body or any court having
jurisdiction over IBC or any subsidiary of IBC or over the properties of
IBC or any such subsidiary.
(j) Except as described in the IBC Prospectus, there are no
contracts, agreements or understandings between IBC and any person granting
such person any preemptive right, co-sale right, right of first refusal or
right to require IBC to file a registration statement under the Act with
respect to any securities of IBC owned or to be owned by such person or to
require IBC to include such securities in the securities registered
pursuant to the IBC Registration Statement or in any securities being
registered pursuant to any other registration statement filed by IBC under
the Act.
(k) Deloitte & Touche LLP, who have audited the annual consolidated
financial statements, together with the related schedules and notes, of IBC
incorporated by reference as a part of the IBC Registration Statement, some
of which are included in the IBC Prospectus, are independent accountants
within the meaning of the Act and the Rules and Regulations; the audited
consolidated financial statements of IBC, together with the related notes,
forming part of the IBC Registration Statement and IBC Prospectus, fairly
present in all material respects the consolidated financial position and
the results of operations of IBC at the dates and for the periods to which
they apply; all audited consolidated financial statements of IBC, together
with the related schedules and notes, and all interim unaudited
consolidated financial information of IBC incorporated by reference as part
of the IBC Registration Statement have been prepared in accordance with
generally accepted accounting principles consistently applied through the
period involved, except as may be otherwise stated therein; the financial
data included in the IBC Registration Statement present fairly the
information shown therein and the historical financial information included
in such data has been compiled on a basis
<PAGE>
7
substantially consistent with the financial statements incorporated by
reference therein; and no other financial statements or schedules or notes
are required to be included in the IBC Registration Statement.
(l) Subsequent to the respective dates as of which information is
given in the IBC Registration Statement and the IBC Prospectus, except as
described in or contemplated by the IBC Prospectus, there has not been or
occurred (i) any change in the business, property or assets described or
referred to in the IBC Registration Statement or the condition (financial
or otherwise), earnings, prospects or results of operations or business of
IBC which could have an IBC Material Adverse Effect, (ii) any transaction
which is material to IBC and its subsidiaries taken as a whole, except
transactions in the ordinary course of business, (iii) any obligation,
direct or contingent, incurred by IBC which is material to IBC and its
subsidiaries taken as a whole, except obligations incurred in the ordinary
course of business, (iv) any change in the capital stock or outstanding
indebtedness of IBC which is material to IBC and its subsidiaries taken as
a whole or (v) any issuance or granting of any right to acquire any
securities of IBC (other than grants of stock options to directors or
employees in the ordinary course).
(m) Neither IBC nor any of its subsidiaries (i) is in violation of
their respective charter or by-laws, (ii) is in default, and no event has
occurred which, with notice or lapse of time or both, would constitute a
breach or default, in the due performance or observance of any term,
covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which they are parties
or by which they are bound or to which any of their respective properties
or assets are subject, (iii) is in violation of any law, ordinance,
governmental rule, regulation or court decree to which it or its property
or assets may be subject or have failed to obtain, comply with or maintain
the effectiveness of any license, permit, certificate, franchise or other
governmental authorization or permit necessary to the ownership of their
respective property or to the conduct of their respective business except,
in the case of clauses (ii) and (iii), for those defaults, violations or
failures which, either individually or in the aggregate, would not or could
not reasonably be expected to have an IBC Material Adverse Effect.
(n) IBC is not required to be registered, and is not regulated, as an
"investment company" as such term
<PAGE>
8
is defined under the Investment Company Act of 1940, as amended (the "1940
Act").
(o) IBC and its subsidiaries own or possess adequate rights to use
all material patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names and copyrights described or referred
to in the IBC Prospectus as owned or used by it or which are necessary for
the conduct of its business as described in the IBC Prospectus. IBC has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any patents, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have an IBC Material Adverse Effect.
(p) IBC Common Stock is listed on the New York Stock Exchange
("NYSE"), and IBC has received no notice of any proceeding having the
purpose or effect of discontinuing such listing.
(q) IBC has not taken and will not take, directly or indirectly, any
action designed to, or which might reasonably be expected to, cause or
result in stabilization or manipulation of the price of the shares of IBC
Common Stock to facilitate the sale or resale of the SAILS (it being
understood that the parties hereto agree that the Repurchase Transaction
(as defined in the IBC Prospectus) shall not for purposes of this Agreement
be deemed to have such effect).
(r) IBC has not distributed and will not distribute any prospectus or
other offering materials in connection with the offering and sale of the
SAILS other than the IBC Preliminary Prospectus and the IBC Prospectus or
other material permitted by the Act.
3. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with the Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-27959) has
been filed with the Commission and has been declared effective under the
Act and either (i) is not proposed to be amended or (ii) is proposed to be
amended by a post-effective amendment. If the Company does not propose to
amend such registration statement and if any post-effective amendment to
such registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent such amendment
has been
<PAGE>
9
declared effective by the Commission. For purposes of this Agreement,
"Company Effective Time" means (i) if the Company has advised you that it
does not propose to amend such registration statement, the date and time as
of which such registration statement, or the most recent post-effective
amendment thereto (if any) filed prior to the execution and delivery of
this Agreement, was declared effective by the Commission, or (ii) if the
Company has advised you that it proposes to file a post-effective amendment
to such registration statement, the date and time as of which such
registration statement, as amended by such post-effective amendment is
declared effective by the Commission. "Company Effective Date" means the
date of the Company Effective Time. Such registration statement, as
amended at the Company Effective Time, including all material incorporated
by reference therein and including all information (if any) deemed to be a
part of such registration statement as of the Effective Time pursuant to
Rule 430A(b) under the Act, is hereinafter referred to as the "Company
Registration Statement" and the form of prospectus, including the
prospectus supplement, relating to the SAILS, as first filed with the
Commission pursuant to and in accordance with Rule 424(b) under the Act,
including all material incorporated by reference in such prospectus, is
hereinafter referred to as the "Company Prospectus". Copies of such
registration statement and amendments and of each related preliminary
prospectus and prospectus supplement ("Preliminary Company Prospectuses")
have been delivered to the Underwriters.
(b) If the Company Effective Time is prior to the execution and
delivery of this Agreement: (i) on the Company Effective Date, the Company
Registration Statement conformed in all material respects to the
requirements of the Act, the Rules and Regulations and the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), and did not include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and (ii) on the date of this Agreement, the Company
Registration Statement conforms, and at the time of filing of the Company
Prospectus pursuant to Rule 424(b) and at all times subsequent thereto up
to and at the First Closing Date or any Option Closing Date, as the case
may be, the Company Registration Statement and the Company Prospectus and
any amendments or supplements thereto will conform, in all material
respects to the requirements of the Act, the Rules and Regulations and the
Trust Indenture Act, and neither of such documents includes, or will
include, any untrue statement of a material fact or omits, or will omit, to
<PAGE>
10
state any material fact required to be stated therein or necessary to make
the statements therein not misleading. If the Company Effective Time is
subsequent to the execution and delivery of this Agreement, on the Company
Effective Date and at all times subsequent thereto up to and at the First
Closing Date or any Option Closing Date, as the case may be, the Company
Registration Statement and the Company Prospectus and any amendments or
supplements thereto will conform in all material respects to the
requirements of the Act, the Rules and Regulations and the Trust Indenture
Act, and neither of such documents will include any untrue statement of a
material fact or will omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. The
two preceding sentences do not apply to statements in or omissions from the
Company Registration Statement or the Company Prospectus based upon written
information furnished to the Company by IBC or any Underwriter through
CSFBC for use therein, it being understood and agreed that the only such
information is that described as such in Section 10. The Company
Information (as defined herein) provided to IBC for use in the IBC
Registration Statement and any amendments or supplements thereto and the
IBC Prospectus and any amendments or supplements thereto, does not include,
or will not include, any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading. The Commission has not issued any
order preventing or suspending the use of any Preliminary Company
Prospectus or the Company Prospectus.
(c) The Company and each of the Company's Significant Subsidiaries
(as hereinafter defined) have been duly incorporated and are validly
existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation with full corporate power and
corporate authority to own, lease and operate their respective properties
and conduct then respective businesses as described in the Company
Registration Statement; and the Company and each of the Company's
Significant Subsidiaries are duly qualified to do business as foreign
corporations and are in good standing in each jurisdiction in which their
respective ownership or lease of property or the conduct of then respective
businesses requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the condition
(financial or otherwise), earnings, prospects or results of operations or
business of the Company and the Company's Significant Subsidiaries taken as
a whole (a "Company Material Adverse Effect").
<PAGE>
11
(d) The documents incorporated by reference in the Company
Registration Statement or the Company Prospectus, when they became
effective or were filed with the Commission, as the case may be, under the
Exchange Act, conformed, and any documents so filed and incorporated before
the First Closing Date will, when they are filed with the Commission,
conform, in all material respects to the requirements of the Act and the
Exchange Act, as applicable, the Rules and Regulations and the Exchange Act
Rules and Regulations.
(e) The SAILS conform in all material respects to the statements
relating thereto contained in the Company Registration Statement and the
Company Prospectus (and such statements correctly state the substance of
the instruments defining the obligations of the Company in all material
respects).
(f) The Indenture has been duly authorized by the Company and the
SAILS to be purchased from the Company hereunder have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement; the
Indenture has been duly qualified under the Trust Indenture Act; and the
Indenture, when the First Supplemental Indenture is duly executed and
delivered, and the SAILS, when they are duly executed, authenticated and
issued as contemplated hereby and by the Indenture and delivered against
payment therefor in accordance with the terms of this Agreement, will
constitute valid and legally binding obligations of the Company enforceable
in accordance with their respective terms subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
similar laws affecting creditors' rights generally or by general equitable
principles.
(g) Except as set forth in or incorporated by reference in the Company
Prospectus, there is not any pending or, to the Company's knowledge any
threatened action, suit, claim or proceeding by or before any court or
governmental agency, authority or body or otherwise against the Company or
any of its subsidiaries or any of their respective officers or any of their
respective properties, assets or rights which would or could reasonably be
expected to have a Company Material Adverse Effect or prevent consummation
of the transactions contemplated herein.
(h) No consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required for the execution,
delivery and performance of this Agreement and the Indenture in connection
with the issuance or sale of the SAILS by the Company or the consummation
by the Company of the
<PAGE>
12
transactions contemplated by this Agreement, except such as may be required
under the Act, the Rules and Regulations, the Exchange Act, the Exchange
Act Rules and Regulations, the Trust Indenture Act or under state or other
securities or Blue Sky laws, rules and regulations.
(i) The Company has full legal right, corporate power and corporate
authority to enter into this Agreement and perform the transactions
contemplated hereby; this Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as the indemnification and contribution provisions hereunder may be
limited by applicable law and except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles.
(j) The execution, delivery and performance of this Agreement and the
Indenture by the Company and the consummation of the transactions herein
and therein contemplated, including without limitation the issuance and
sale of the SAILS, will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, (i) the charter or
by-laws of the Company or any subsidiary of the Company; (ii) any material
indenture, mortgage, deed of trust, loan agreement, bond, debenture, note
or other evidence of indebtedness or any material lease, contract, or other
agreement or instrument to which the Company or any subsidiary of the
Company is a party or by which it or any such subsidiary or any of their
respective properties may be bound; or (iii) any law or any order, rule or
regulation of any governmental agency to body or any court having
jurisdiction over the Company or any subsidiary of the Company or over the
properties of the Company or any such subsidiary.
(k) Except as described in the Company Prospectus, there are no
contracts, agreements or understandings between the Company and any person
granting such person any preemptive right, co-sale right, right of first
refusal or right to require the Company to file a registration statement
under the Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such securities
in the securities registered pursuant to the Company Registration Statement
or in any securities being registered pursuant to any other
<PAGE>
13
registration statement filed by the Company under the Act.
(l) Price Waterhouse LLP, who have audited the annual consolidated
financial statements, together with the related schedules and notes, of the
Company incorporated by reference as a part of the Company Registration
Statement, are independent accountants within the meaning of the Act and
the Rules and Regulations; the audited consolidated financial statements of
the Company, together with the related notes, forming part of the Company
Registration Statement and the Company Prospectus, fairly present the
consolidated financial position and the results of operations of the
Company at the respective dates and for the respective periods to which
they apply; all audited consolidated financial statements of the Company,
together with the related schedules and notes, and all interim unaudited
consolidated financial information of the Company incorporated by reference
as part of the Company Registration Statement have been prepared in
accordance with generally accepted accounting principals consistently
applied throughout the periods involved, except as may be otherwise stated
therein; the financial data included in the Company Registration Statement
present fairly the information shown therein and have been compiled on a
basis substantially consistent with the financial statements incorporated
by reference therein; and no other financial statements or schedules or
notes are required to be included in the Company Registration Statement.
(m) Subsequent to the respective dates as of which information is
given in the Company Registration Statement and the Company Prospectus,
there has not been or occurred (i) any change, nor any development or event
involving a prospective material adverse change in the business, property
or assets described or referred to in the Company Registration Statement,
or the condition (financial or otherwise), earnings, prospects or results
of operations or business of the Company which could have a Company
Material Adverse Effect, (ii) any transaction which is material to the
Company and its subsidiaries taken as a whole, except transactions in the
ordinary course of business, (iii) any obligation, direct or contingent,
incurred by the Company which is material to the Company and its
subsidiaries taken as a whole, except obligations incurred in the ordinary
course of business or (iv) any change in the capital stock or outstanding
indebtedness of the Company which is material to the Company and its
subsidiaries taken as a whole.
<PAGE>
14
(n) Neither the Company nor any of its subsidiaries (i) is in
violation of their respective charter or by-laws, (ii) is in default, and
no event has occurred which, with notice or lapse of time or both, would
constitute a breach or default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which they are
parties or by which they are bound or to which any of their respective
properties or assets are subject or (ii) is in violation of any law,
ordinance, governmental rule, regulation or court decree to which they or
their respective property or assets may be subject or have failed to
obtain, comply with or maintain the effectiveness of any license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the ownership of their respective property or to the conduct
of their respect businesses except, in the case of clauses (ii) and (iii),
for those defaults, violations or failures which, either individually or in
the aggregate, would not or could not reasonably be expected to have a
Company Material Adverse Effect.
(o) The Company is not regulated, and after giving effect to the
offering and sale of the SAILS and the application of the proceeds as
described in the Company Prospectus, will not be required to be registered,
as an "investment company" as such term is defined under the 1940 Act.
(p) The Company and its subsidiaries own or possess adequate rights
to use all material trademarks, service marks, trade names and copyrights
described or referred to in the Company Prospectus as owned or used by it
or which are necessary for the conduct of its business as described in the
Company Prospectus; the Company has not received any notice of infringement
of or conflict with asserted rights of others with respect to any patents,
patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names or copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Company
Material Adverse Effect.
(q) The Company has not taken and will not take, directly or
indirectly, any action which is designed to or which has constituted or
which might reasonably be expected to cause or result in the stabilization
or manipulation of the price of any security of the Company to facilitate
the sale or resale of the SAILS.
(r) The Company has not distributed and will not distribute any
prospectus or other offering materials
<PAGE>
15
in connection with the offering and sale of SAILS other than the Company
Preliminary Prospectus and the Company Prospectus or other material
permitted by the Act.
4. Purchase, Sale and Delivery of SAILS. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters and the Underwriters agree, severally and not jointly, to purchase
from the Company, at a purchase price of $[ ] per SAILS, the respective
number of Firm SAILS set forth opposite the names of the Underwriters on
Schedule A hereto.
The Company shall deliver against payment of the purchase price the
Firm SAILS in the form of one or more permanent global SAILS in definitive form
(the "Firm Global SAILS") deposited with the Trustee as custodian for The
Depository Trust Company ("DTC") and registered in the name of Cede & Co., as
nominee for DTC. Interests in any permanent global SAILS will be held only in
book-entry form through DTC, except in the limited circumstances described in
the Company Prospectus. Payment for the Firm SAILS shall be made by the
Underwriters by wire transfer of same-day funds at a bank acceptable to CSFBC at
the New York City offices of Simpson Thacher & Bartlett (or at such other place
as may be agreed upon among the Underwriters and the Company), at 9:00 A.M., New
York time, on _____, 1997, or at such other time not later than seven full
business days thereafter as CSFBC and the Company determine, such time being
herein referred to as the "First Closing Date," against delivery to the Trustee
as custodian for DTC of the Firm Global SAILS representing all of the Firm
SAILS. The Firm SAILS will be made available for checking at the office of
CSFBC or such other location as CSFBC may reasonably request at least 24 hours
prior to the First Closing Date.
In addition, upon written notice from CSFBC to the Company from time
to time not more than 30 days subsequent to the date of the Company Prospectus
(or, if such 30th day shall be a Saturday, Sunday or holiday, on the next
business day thereafter when the NYSE is open for trading), the Underwriters may
purchase all or less than all of the Option SAILS at the purchase price per SAIL
to be paid for the Firm SAILS. The Company agrees to sell to the Underwriters
and the Underwriters agree, severally and not jointly, to purchase from the
Company, the number of Option SAILS specified in such notice to the Company.
Such Option SAILS shall be purchased by the Underwriters only for the purpose of
covering over-allotments made in connection with the sale of the Firm SAILS.
The number of Option SAILS to be so purchased by each of the Underwriters upon
exercise of such option shall be the same proportion to the total number of
Option SAILS being purchased by each Underwriter pursuant to the exercise of
such option as the number of Firm SAILS purchased by such Underwriter (set forth
in Schedule A hereto) bears to the total number of Firm SAILS purchased by the
Underwriters,
<PAGE>
16
adjusted by CSFBC in such a manner as to avoid fractional SAILS. No Option
SAILS shall be sold or delivered unless the Firm SAILS have been simultaneously
or were previously sold and delivered. The right to purchase the Option SAILS
or any portion thereof may be surrendered and terminated at any time upon notice
by CSFBC to the Company.
Each time for the delivery of and payment for the Option SAILS (each
such time herein referred to as an "Option Closing Date"), which may be the
First Closing Date (the First Closing Date and each Option Closing Date, if any,
being some times referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than seven full business days after written notice of
election to purchase Option SAILS is given. The Company will deliver, against
payment of the purchase price, the Option SAILS being purchased on each Option
Closing Date in the form of one or more permanent global SAILS in definitive
form (each, an "Option Global SAILS") deposited with the Trustee as custodian
for DTC and registered in the name of Cede & Co., as nominee for DTC. Payment
for such Option SAILS shall be made by the Underwriters by wire transfer of
same-day funds at a bank acceptable to CSFBC drawn to the order of the Company
at the above office of Simpson Thacher & Bartlett against delivery to the
Trustee as custodian for DTC of the Option Global SAILS representing all of the
Option SAILS being purchased on such Option Closing Date.
5. Offering by Underwriters. It is understood that the Underwriters
propose to offer the SAILS for sale to the public as set forth in the Company
Prospectus.
6. Certain Additional Agreements of IBC. IBC agrees with the
Underwriters or the Company, if applicable, that:
(a) If the IBC Effective Time is prior to the execution and delivery
of this Agreement, IBC will file the IBC Prospectus with the Commission
pursuant to and in accordance with subparagraph (1) (or, if applicable and
if consented to by CSFBC, subparagraph (4)) of Rule 424(b) not later than
the earlier of (A) the second business day following the execution and
delivery of this Agreement or (B) the _______ business day after the IBC
Effective Date. IBC will advise the Underwriters and the Company promptly
of any such filing pursuant to Rule 424(b);
(b) IBC will advise the Underwriters and the Company promptly of any
proposal to amend or supplement the registration statement as filed or the
related prospectus or the IBC Registration Statement or the IBC Prospectus
(including any amendment to a document required to be filed under the
Exchange Act which, upon filing, is deemed to be incorporated by reference
therein) and will not effect such amendment or
<PAGE>
17
supplementation without (i) the consent of CSFBC, which will not be
unreasonably withheld, in the case of an amendment to the registration
statement as filed or the related prospectus or the IBC Registration
Statement or the IBC Prospectus and (ii) giving CSFBC a reasonable
opportunity to review and comment on such amendment or supplementation in
the case of an amendment or supplement to a document incorporated by
reference; and IBC will also advise CSFBC and the Company promptly of the
effectiveness of the IBC Registration Statement (if the IBC Effective Time
is subsequent to the execution and delivery of this Agreement) and of any
amendment or supplementation of the IBC Registration Statement or the IBC
Prospectus and of the institution by the Commission of any stop order
proceedings in respect of the IBC Registration Statement and will use all
reasonable efforts to prevent the issuance of any such stop order and to
obtain as soon as possible its lifting, if issued;
(c) If, at any time when a prospectus relating to the IBC Shares is
required to be delivered under the Act in connection with sales by any
Underwriter or dealer, any event occurs as a result of which the IBC
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any such
time to amend the IBC Prospectus to comply with the Act, IBC will promptly
amend the IBC Prospectus to comply with the Act, IBC will promptly notify
CSFBC and the Company of such event and will promptly prepare and file with
the Commission, at its own expense (unless such amendment relates to
information provided by the Company or the terms of the SAILS, in which
case it shall be at the Company's expense), an amendment or supplement
which will correct such statement or omission or an amendment which will
effect such compliance. Neither CSFBC's consent to, nor the Underwrites'
delivery of, any such amendment or supplement shall constitute a waiver of
any of the conditions set forth in Section 9;
(d) IBC will furnish to the Underwriters copies of the IBC
Registration Statement (six of which will be signed and will include all
exhibits), each related IBC Preliminary Prospectus, and, so long as
delivery of a prospectus relating to the IBC Shares is required to be
delivered under the Act in connection with sales by any Underwriters or
dealer, the IBC Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC requests. The IBC
Prospectus shall be so furnished on or prior to 3:00
<PAGE>
18
P.M. New York time, on the business day following the later of the
execution and delivery of this Agreement or the Effective Time of the
Registration Statement. All other documents shall be so furnished as soon
as available. IBC and the Company will pay the expenses of printing and
distributing to the Underwriters all such documents as agreed between them;
(e) IBC will arrange for the qualification of the IBC Shares for sale
under the laws of such jurisdictions as CSFBC may designate and will
continue such qualifications in effect so long as required for the
distribution, except that IBC shall not be required in connection therewith
or as a condition thereof to qualify as a foreign corporation or to execute
a general consent to service of process in any jurisdiction or to make any
undertaking with respect to the conduct of its business. In each
jurisdiction in which the IBC Shares shall have been qualified as above
provided, IBC will file such statements and reports in each year as are or
may be reasonably required by the laws of such jurisdiction;
(f) During the period of three years after the date of this
Agreement, IBC will furnish to CSFBC, (i) concurrently with furnishing such
reports, if any, to its stockholders, quarterly reports of operations of
IBC for each of the first three quarters in the form furnished to IBC's
stockholders; (ii) concurrently with furnishing such reports to its
stockholders, annual reports of IBC as of the end of each fiscal year
(including financial statements audited by independent public accountants);
(iii) as soon as they are available, copies of all other reports (financial
or other) furnished to stockholders; (iv) as soon as they are available,
copies of all reports and financial statements furnished to or filed with
the Commission, any securities exchange or the National Association of
Securities Dealers, Inc. ("NASD"); and (v) any additional information of a
public nature concerning IBC or its business which CSFBC may reasonably
request. During such three-year period, if IBC shall have active
subsidiaries, the foregoing financial statements shall be on a consolidated
basis to the extent that the accounts of IBC and its subsidiaries are
consolidated and shall be accompanied by similar financial statements for
any significant subsidiary which is not so consolidated;
(g) So long as the SAILS are Outstanding (as defined in the
Indenture), and at the Company's expense, IBC will furnish to the Trustee
and the Company in sufficient quantity, copies of all annual
<PAGE>
19
reports and proxy statements provided by IBC to its stockholders generally
(the "IBC Reports");
(h) During a period of 90 days after the date of the initial public
offering of the SAILS, IBC will not, and will cause its directors and
officers not to, without the prior written consent of CSFBC, issue, sell,
offer, agree to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under the
Act relating to any additional shares of IBC Common Stock, any options,
warrants or other rights to purchase any shares of IBC Common Stock, or any
securities convertible into, exercisable for or exchangeable for shares of
IBC Common Stock, other than (i) sales of IBC Common Stock by the Company
to IBC and (ii) options granted and IBC Common Stock issued pursuant to
employee benefit and stock option plans existing on the date hereof; and
(i) IBC shall take such action as may be reasonably necessary to
comply with the rules and regulations of the NASD in respect of IBC Common
Stock to be registered in connection with the offering by the Company of
the SAILS.
7. Further Agreements of the Company. The Company covenants and
agrees with the Underwriters that:
(a) If the Company Effective Time is prior to the execution and
delivery of this Agreement, the Company will file the Company Prospectus
with the Commission pursuant to and in accordance with subparagraph (1)
(as, if applicable and if consented to by CSFBC, subparagraph (4)) of Rule
424(b) not later than the earlier of (A) the second business day following
the execution and delivery of this Agreement or (B) the fourth business day
after the Company Effective Date. The Company will advise the Underwriters
and IBC promptly of any such filing pursuant to Rule 424(b);
(b) The Company will advise the Underwriters and IBC promptly of any
proposal to amend or supplement the registration statement as filed or the
related prospectus to the Company Registration Statement or the Company
Prospectus (including any amendment to a document required to be filed
under the Exchange Act which, upon filing, is deemed to be incorporated by
reference therein) and will not effect such amendment or supplementation
without CSFBC's consent, which consent will not be unreasonably withheld;
and the Company will also advise CSFBC and IBC promptly of the
effectiveness of the Company Registration Statement (if the Company
Effective Time is subsequent to the execution and delivery of this
Agreement) and of any
<PAGE>
20
amendment or supplementation of the Company Registration Statement or the
Company Prospectus and of the institution by the Commission of any stop
order proceedings in respect of the Company Registration Statement and will
use all reasonable efforts to prevent the issuance of any such stop order
and to obtain as soon as possible its lifting, if issued;
(c) If, at any time when a prospectus relating to the SAILS is
required to be delivered under the Act in connection with sales by any
Underwriter or dealer, any event occurs as a result of which the Company
Prospectus as then amended or supplemented which would include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any such
time to amend the Company Prospectus to comply with the Act, the Company
will promptly notify CSFBC of such event and will promptly prepare and file
with the Commission, at its own expense (unless such amendment relates to
information provided by IBC in which case it shall be at IBC's expense), an
amendment or supplement which will correct such statement or omission or an
amendment, which will effect such compliance. Neither CSFBC's consent to,
not the Underwriters' delivery of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 9;
(d) The Company will furnish to the Underwriters copies of the
Company Registration Statement (six of which will be signed and will
include all exhibits), each related Company Preliminary Prospectus, and, so
long as delivery of a prospectus relating to the SAILS is required to be
delivered under the Act in connection with sales by any Underwriter or
dealer, the Company Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC requests. The Company
Prospectus shall be so furnished on or prior to 3:00 P.M. New York time, on
the business day following the later of the execution and delivery of this
Agreement or the Effective Time of the Registration Statement. All other
documents shall be so furnished as soon as available. IBC and the Company
will pay the expenses of printing and distributing to the Underwriters all
such documents as agreed between them;
(e) The Company will arrange for the qualification of the SAILS for
sale under the laws of such jurisdictions as CSFBC may designate and will
continue such qualifications in effect so long as required for the
distribution of the SAILS contemplated
<PAGE>
21
by this Agreement, except that the Company shall not be required in
connection therewith or as a condition thereof to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction or to make any undertaking with respect to the conduct of its
business. In each jurisdiction in which the SAILS shall have been
qualified as above provided, the Company will file such statements and
reports in each year as are or may be reasonably required by the laws of
such jurisdiction;
(f) During the period of three years after the date of this
Agreement, the Company will furnish to CSFBC, (i) concurrently with
furnishing such reports, if any, to its stockholders, quarterly reports of
operations of the Company for each of the first three quarters in the form
furnished to the Company's stockholders; (ii) concurrently with furnishing
such reports to its stockholders, annual reports of the Company as of the
end of each fiscal year (including financial statements audited by
independent public accountants; (iii) as soon as they are available, copies
of all other reports (financial or other) furnished to stockholders; (iv)
as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, any securities
exchange or the NASD; and (v) any additional information of a public nature
concerning the Company or its business which CSFBC may reasonably request.
During such three-year period, if the Company shall have active
subsidiaries, the foregoing financial statements shall be on a consolidated
basis to the effect that the accounts of the Company and its subsidiaries
are consolidated and shall be accompanied by similar financial statements
for any significant subsidiary which is not so consolidated;
(g) The Company will apply the net proceeds from the sale of the
SAILS being sold by it hereunder substantially in the manner set forth
under the caption "Use of Proceeds" in the Company Prospectus;
(h) During a period of 90 days after the date of the initial public
offering of the SAILS, the Company will not, without the prior written
consent of CSFBC, issue, sell, offer, agree to sell, pledge, or otherwise
dispose of, directly or indirectly, or file with the Commission a
registration statement under the Act relating to any additional SAILS or
shares of IBC Common Stock, any options, warrants or other rights to
purchase any shares of IBC Common Stock, or any securities convertible
into, exercisable for or exchangeable for shares of IBC Common Stock (other
than the IBC Common Stock offered pursuant to the Company
<PAGE>
22
Prospectus and IBC Prospectus or sales by the Company to IBC of IBC Common
Stock); and
(i) The Company will not, without the Underwriters' consent, offer or
sell, or publicly announce its intention to sell, any debt securities
having a maturity of more than one year covered by any registration
statement filed under the Act (except under prior contractual commitments
or pursuant to bank credit agreements) during the period beginning on the
date of this Agreement and ending 30 days following the First Closing Date.
8. Expenses. The Company and IBC further agree with the Underwriters
that:
(a) The Company and IBC will pay all (i) expenses incident to the
performance of the Company's and IBC's obligations under this Agreement
(such expenses to be allocated between them as the Company and IBC may
agree) and will reimburse the Underwriters for any reasonable expenses,
including fees, charges and disbursements of Simpson Thacher & Bartlett,
counsel for the Underwriters ("Underwriters' Counsel"), reasonably incurred
in connection with qualification of each of the SAILS and IBC Common Stock
for sale and determination of their eligibility for investment under the
laws of such jurisdictions as CSFBC designates and the printing of
memoranda relating thereto, (ii) fees charged by investment rating agencies
for the rating of the SAILS, (iii) travel expenses of the Company's and
IBC's officers and employees and any other expenses of the Company and IBC
in connection with attending or hosting meetings with prospective
purchasers of the SAILS and (iv) expenses incurred in distributing any
Preliminary Company Prospectus, Preliminary IBC Prospectus, the Company
Prospectus and the IBC Prospectus (including any amendments and supplements
thereto) to the Underwriters; and
(b) If the transactions contemplated hereby are not consummated by
reason of any failure, refusals or inability on the part of the Company or
IBC, as the case may be, to perform any agreement on their respective parts
to be performed hereunder or to fulfill any condition of the Underwriters'
obligations hereunder, the Company and IBC will reimburse the Underwriters
for all out-of-pocket expenses (including reasonable fees, charges and
disbursements of Underwriters' Counsel) reasonably incurred by the
Underwriters in investigating, preparing to market or marketing the SAILS.
<PAGE>
23
9. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm SAILS
on the First Closing Date and the Option SAILS to be purchased on each Option
Closing Date will be subject to the accuracy of the representations and
warranties of IBC and the Company herein, to the accuracy of the statements of
Company officers or IBC officers made pursuant to the provisions hereof, to the
performance by IBC and the Company of their respective obligations hereunder,
and to each of the following additional conditions precedent:
(a) The Underwriters shall have received a letter, dated the date of
delivery thereof (which, if the IBC Effective Time is prior to the
execution and delivery of this Agreement, shall be on or prior to the date
of this Agreement or, if the IBC Effective Time is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing of
the amendment or post-effective amendment to the IBC Registration Statement
to be filed shortly prior to the IBC Effective Time), of Deloitte & Touche
LLP confirming that they are independent public accountants within the
meaning of the Act and the Rules and Regulations and stating in effect
that:
(i) in their opinion the financial statements and schedules
examined by them and included in the IBC Registration Statement
or incorporated by reference therein comply in form in all
material respects with the applicable accounting requirements of
the Act and the related published Rules and Regulations;
(ii) on the basis of a reading of the latest available interim
financial statements of IBC, inquiries of officials of IBC who
have responsibility for financial and accounting matters and
other specified procedures, nothing came to their attention that
caused them to believe that:
(A) at the date of the latest available balance sheet read by
Deloitte & Touche LLP, or at a subsequent specified date not
more than three business days prior to the date of this
Agreement, there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt of IBC
or, at the date of the latest available
<PAGE>
24
balance sheet read by such accountants, there was any decrease
in net assets, as compared with amounts shown on the latest
balance sheet included in the IBC Prospectus; or
(B) for the period from the closing date of the latest income
statement included in the IBC Prospectus to the closing date of
the latest available income statement read by such accountants,
there were any decreases, as compared with the corresponding
period of the previous year, in the net sales or total amount
of net income;
except in all cases set forth in clauses (A) and (B) above for
changes, increases or decreases which the IBC Prospectus discloses
have occurred or may occur or which are described in such letter;
and
(iii) they have compared specified dollar amounts (or percentages derived
from such dollar amounts) and other financial information contained
in the IBC Registration Statement or incorporated by reference
therein (in each case to the extent that such dollar amounts,
percentages and other financial information are derived from the
general accounting records of IBC and its subsidiaries subject to
the internal controls of IBC's accounting system or are derived
directly form such records by analysis or computation) with the
results obtained from inquiries, a reading of such general
accounting records and other procedures specified in such letter and
have found such dollar amounts, percentages and other financial
information to be in agreement with such results, except as
otherwise specified in such letter.
For purposes of this Section 9(a), if the IBC Effective Time is subsequent
to the execution and delivery of this Agreement, "IBC Registration
Statement" shall mean the registration statement as proposed to be amended
by the amendment or post-effective amendment to be filed shortly prior to
the IBC Effective Time, and "IBC
<PAGE>
25
Prospectus" shall mean the prospectus included in the IBC Registration
Statement.
(b) The Underwriters shall have received a letter, dated the date of
delivery thereof (which, if the Company Effective Time is prior to the
execution and delivery of this Agreement, shall be on or prior to the date
of this Agreement or, if the Company Effective Time is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing of
the amendment or post-effective amendment to the Company Registration
Statement to be filed shortly prior to the Company Effective Time), of
Price Waterhouse LLP confirming that they are independent public
accountants within the meaning of the Act and the Rules and Regulations and
stating in effect that:
(i) in their opinion the financial statements and schedules
audited by them and included in the Company Registration
Statement or incorporated by reference therein comply in
form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations;
(ii) on the basis of a reading of the latest available interim
financial statements of the Company, inquiries of officials
of the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing
came to their attention that caused them to believe that:
(A) at the date of the latest available balance sheet read
by Price Waterhouse LLP, or at a subsequent specified
date not more than three business days prior to the
date of this Agreement, there was any change in the
common stock of the Company, any increase in short-term
indebtedness or long-term debt of the Company or any
decrease in current net assets or shareholders' equity
of the Company and its subsidiaries as compared with
amounts shown on the latest balance sheet included in
the Company Prospectus; or
(B) for the period from the closing date of the latest
income statement included in the Company Prospectus to
the closing date of the latest
<PAGE>
26
available income statement read by such accountants
there were any decreases, as compared with the
corresponding period of the previous year, in the
consolidated net sales, earnings before equity
earnings or net earnings;
except in all cases set forth in clauses (A) and (B)
above for changes, increases or decreases which the
Company Prospectus discloses have occurred or may occur
or which are described in such letter; and
(iii) they have compared certain specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Company
Registration Statement or incorporated by reference
therein, as described in such letter (in each case to
the extent that such dollar amounts, percentages and
other financial information are derived from the general
accounting records of the Company and its subsidiaries
subject to the internal controls of the Company's
accounting system or are derived directly from such
records by analysis or computation) with the results
obtained from inquiries, a reading of such general
accounting records and other procedures specified in
such letter and have found such dollar amounts,
percentages and other financial information to be in
agreement with such results, except as otherwise
specified in such letter.
For purposes of this Section 9(b), if the Company Effective Time is
subsequent to the execution and delivery of this Agreement, the "Company
Registration Statement" shall mean the registration statement as proposed
to be amended by the amendment or post-effective amendment to be filed
shortly prior to the Company Effective Time, and the "Company Prospectus"
shall mean the prospectus included in the Company Registration Statement.
(c) If the IBC Effective Time is not prior to the execution and
delivery of this Agreement, the IBC Effective Time shall have occurred not
later than 10:00 P.M., New York time, on the date of this Agreement or such
later date as shall have been consented to by CSFBC. If the IBC Effective
Time is prior to the execution and delivery of this Agreement, the IBC
Prospectus shall have been filed with the Commission in accordance with the
Rules and Regulations and Section
<PAGE>
27
6(a) of this Agreement. Prior to the Closing Date, no stop order suspending
the effectiveness of the IBC Registration Statement shall have been issued
and no proceedings for that purpose shall have been instituted or, to the
knowledge of IBC or the Underwriters, shall be contemplated by the
Commission.
(d) If the Company Effective Time is not prior to the execution and
delivery of this Agreement, the Company Effective Time shall have occurred
no later than 10:00 P.M., New York time, on the date of this Agreement of
such later date as shall have been consented to by CSFBC. If the Company
Effective Time is prior to the execution and delivery of this Agreement,
the Company Prospectus shall have been filed with the Commission in
accordance with the Rules and Regulations and Section 7(a) of this
Agreement. Prior to the Closing Date, no stop order suspending the
effectiveness of the Company Registration Statement shall have been issued
and no proceedings for that purpose shall have been instituted or, to the
knowledge of the Company or the Underwriters, shall be contemplated by the
Commission.
(e) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event
involving a prospective change, in or affecting particularly the condition
(financial or other), business, properties or results of operations of the
Company, IBC or their respective subsidiaries which, in the judgment of a
majority in interest of the Underwriters, including CSFBC, is material and
adverse and makes it impractical or inadvisable to proceed with completion
of the public offering or sale of and payment for the SAILS; (ii) any
downgrading in the rating of any debt securities of the Company by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act), or any public announcement that any
such organization has under surveillance or review its rating of any debt
securities of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any suspension or limitation of trading
in securities generally on the NYSE, or any setting of minimum prices for
trading on such exchange, or any suspension of trading of any securities of
IBC or the Company on any exchange or in the over-the-counter market; (iv)
any banking moratorium declared by U.S. Federal or New York authorities; or
(v) any outbreak or escalation of major hostilities in which the United
States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the
judgment of a majority in interest of the
<PAGE>
28
Underwriters, including CSFBC, the effect of any such outbreak escalation,
declaration, calamity or emergency makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and payment
for the SAILS.
(f) The Underwriters shall have received an opinion, dated such
Closing Date, of Shook, Hardy & Bacon L.L.P, counsel for IBC, and an
opinion from Ray Sandy Sutton, Vice President, Corporate Secretary and
General Counsel of IBC as to paragraphs (iv) and (v) only, to the effect
that:
(i) The documents incorporated by reference in the IBC
Registration Statement or the IBC Prospectus, when
they were filed with the Commission under the Exchange
Act, complied as to form in all material respects with
the requirements of the Exchange Act and the Exchange
Act Rules and Regulations, as applicable, except that
Shook, Hardy & Bacon L.L.P. need express no opinion
with respect to the financial statements or other
financial data contained or incorporated by reference
therein;
(ii) IBC and Brands have been duly incorporated and are
validly existing as corporations in good standing
under the laws of the State of Delaware, and have all
requisite corporate power and corporate authority to
own their respective properties and conduct their
respective businesses as described in the IBC
Prospectus; IBC and Brands are duly qualified to do
business as a foreign corporation and is in good
standing in each jurisdiction in which it owns or
leases substantial properties or the conduct of their
businesses requires such qualification, except where
the failure to be so qualified or in good standing
would not have an IBC Material Adverse Effect;
(iii) The IBC Firm Shares or the IBC Option Shares, as the
case may be, and all of the issued shares of capital
stock of IBC are duly authorized, validly issued,
fully paid and nonassessable; the capital stock of IBC
(including the IBC Shares) conforms in all material
respects to the statements relating thereto contained
in the IBC Registration Statement and the IBC
Prospectus; the form of certificate used to evidence
the IBC Common Stock is in due and proper form and
otherwise complies with all statutory requirements
under the laws of the State of Delaware; except as
described in or contemplated
<PAGE>
29
by, the IBC Prospectus (including stock option plans
described therein), there are no outstanding options,
warrants or other rights for the issuance of, and
there are not commitments, plans or arrangements to
issue, any shares of capital stock of IBC or any
security convertible into or exercisable or
exchangeable for, any shares of capital stock of IBC;
(iv) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any
court is required for the consummation of the
transactions contemplated by this Agreement, except
such as may be required under the Act, the Rules and
Regulations, the Exchange Act, the Exchange Act Rules
and Regulations or under state or other securities or
Blue Sky laws, rules and regulations;
(v) The execution, delivery and performance of this
Agreement and the consummation of the transactions
herein contemplated will not result in a breach or
violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule,
regulation or order of any governmental agency or body
or any court having jurisdiction over IBC or any
subsidiary of IBC or any of their properties or any
agreement or instrument to which IBC or Brands is a
party or by which IBC or Brands is bound or to which
any of the properties of IBC or Brands is subject, or
the charter or bylaws of any subsidiary of IBC;
(vi) Except as described in the IBC Prospectus or except as
previously waived, there are no contracts, agreements
or understandings between IBC and any person granting
such person the right to require IBC to file a
registration statement under the Act with respect to
any securities of IBC owned or to be owned by such
person or to require IBC to include such securities in
the securities registered pursuant to the IBC
Registration Statement or in any securities being
registered pursuant to any other
<PAGE>
30
registration statement filed by IBC under the Act;
(vii) The IBC Registration Statement was declared effective under
the Act as of the date and time specified in such opinion,
the IBC Prospectus either was filed with the Commission
pursuant to the subparagraph of Rule 424(b) specified in
such opinion on the date specified therein or was included
in the IBC Registration Statement (as the case may be), and,
to the knowledge of Shook, Hardy & Bacon L.L.P., no stop
order suspending the effectiveness of the IBC Registration
Statement or any part thereof has been issued and no
proceedings for that purpose have been instituted or are
pending or contemplated under the Act; and the IBC
Registration Statement and the IBC Prospectus, and each
amendment or supplement thereto, as of their respective
effective or issue dates, or at such Closing Date, as the
case may be, complied as to form in all material respects
with the requirements of the Act and the Rules and
Regulations, except that Shook, Hardy & Bacon L.L.P. need
express no opinion with respect to the financial statements
or other financial data contained or incorporated by
reference therein; no facts have come to the attention of
Shook, Hardy & Bacon L.L.P. causing it to believe that
either the IBC Registration Statement or the IBC Prospectus,
or any such amendment or supplement, as of such respective
dates or as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading; any descriptions
in the IBC Registration Statement and the IBC Prospectus of
the charter and by-laws of IBC, statutes, legal and
governmental proceedings and contracts and other documents
are accurate and fairly present the information required to
be shown; Shook, Hardy & Bacon L.L.P. does not know of any
contracts or documents required to be filed as exhibits to
the IBC Registration Statement which are not filed as
required, it being understood that Shook, Hardy & Bacon
L.L.P. need express no opinion as to the financial
statements or other financial data
<PAGE>
31
contained in the IBC Registration Statement or the IBC
Prospectus.
In rendering such opinion, Shook, Hardy & Bacon L.L.P. may rely as to the
materiality of agreements and other factual matters on one or more written
certificates of officers of IBC or public officials, as and to the extent
they deem such reliance appropriate. It is further understood that the
negative assurance to be given by Shook, Hardy & Bacon L.L.P. with respect
to material misstatements and omissions in the IBC Registration Statement,
the IBC Prospectus and each amendment or supplement thereto as set forth in
paragraph (ix) of this Section 9(f) may be set forth in a separate
statement in its opinion and need not be set forth in a numbered paragraph
therein.
(g) The Underwriters shall have received an opinion, dated such
Closing Date, from (i) Brian Cave LLP, special tax counsel for the Company,
to the effect that the discussion presented under the heading "Certain
United States Federal Income Tax Considerations" in the Company Prospectus
is an accurate summary of the material federal income tax consequences
relevant to an investment in the SAILS and (ii) from James Neville, Vice
President, General Counsel and Assistant Secretary of the Company, to the
effect that:
(i) The documents incorporated by reference in the Company
Registration Statement and the Company Prospectus, when they
were filed with the Commission under the Exchange Act,
complied as to form in all material respects to the
requirements of the Exchange Act and the Exchange Act Rules
and Regulations (except that such counsel need express no
opinion as to the financial statements and related schedules
and the other financial data contained therein);
(ii) Each of the Company and each of Eveready Battery Company
Inc., VCS Holding Company, Ralston Overseas Battery Company
and Protein Technologies International Inc. (together the
"Company Significant Subsidiaries") has been duly
incorporated and is a corporation validly existing in good
standing under the laws of the jurisdiction of its
incorporation, with corporate power and corporate authority
to own their respective properties and conduct their
respective businesses as described in the Company
Prospectus; the Company and each of the Company Significant
Subsidiaries are duly qualified to do
<PAGE>
32
business as a foreign corporation in each jurisdiction
listed as an attachment to the opinion of James M. Neville;
(iii) The Indenture has been duly authorized, executed and
delivered by the Company and has been duly qualified under
the Trust Indenture Act; the Firm SAILS have been duly
authorized by the Company; the Firm SAILS or the Option
SAILS, as the case may be, have been duly executed by the
Company; the Indenture constitutes, and the Firm SAILS and
any Option SAILS, when duly authenticated, issued and
delivered against payment therefor in accordance with the
terms of this Agreement, will constitute, valid and legally
binding obligations of the Company, enforceable in
accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization and other similar
laws of general applicability relating to or affecting
creditors' rights and general equity principles, whether
applied by a court of law or equity; the SAILS conform in
all material respects to the statements relating thereto
contained in the Company Registration Statement and the
Company Prospectus;
(iv) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is
required for the consummation by the Company of the
transactions contemplated by this Agreement in connection
with the issuance or sale of the SAILS by the Company,
except such as may be required under the Act, the Rules and
Regulations, the Exchange Act, the Exchange Act Rules and
Regulations, the Trust Indenture Act or under state or local
securities laws, rules and regulations;
(v) The execution, delivery and performance of this Agreement
and the consummation by the Company of the transactions
herein contemplated will not result in a breach or violation
of any of the terms and provisions of, or constitute a
default under, any statute, rule,
<PAGE>
33
regulation or order known to such counsel of any
governmental agency or body or any court having jurisdiction
over the Company or any Company Significant Subsidiary or
any of their respective properties, or any agreement or
instrument known to such counsel to which the Company or any
Company Significant Subsidiary is a party or by which the
Company or any Company Significant Subsidiary is bound, or
to which any of the properties of the Company or any Company
Significant Subsidiary is subject, or the charter or bylaws
of the Company or any Company Significant Subsidiary, and
the Company has full corporate power and authority to
authorize, issue and sell the SAILS as contemplated by this
Agreement;
(vi) The Company Registration Statement has become effective
under the Act and, to the best of such counsel's knowledge,
no stop order suspending the effectiveness of the Company
Registration Statement or any part thereof has been issued
and no proceedings for that purpose have been instituted or
are pending or contemplated under the Act; and the Company
Registration Statement and the Company Prospectus, and each
amendment or supplement thereto, as of their respective
effective or issue dates, or at such Closing Date, as the
case may be, complied as to form in all material respects
with the requirements of the Act, the Rules and Regulations
and the Trust Indenture Act (except that such counsel need
express no opinion as to the financial statements and
related schedules and the other financial data contained or
incorporated by reference therein or as to the Statement of
Eligibility and Qualification under the Trust Indenture Act
on Form T-1 of the Trustee (the "T-1"));
In addition, James M. Neville shall state that he has no reason
to believe that either the Company Registration Statement or the Company
Prospectus, or any amendment or supplement thereto, as of their respective
dates or as of such Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and
James M. Neville does not know of any legal or governmental proceedings
required to be described in the Company Registration Statement or the
Company Prospectus which are not
<PAGE>
34
described as required, or of any contracts or documents of a character
required to be described in the Company Registration Statement or in any
document incorporated by reference therein or in the Company Prospectus, or
to be filed as exhibits to the Company Registration Statement which are not
described and filed as required, it being understood that he need express
no opinion as to the T-1 or the financial statements and related schedules
or other financial data contained in the Company Registration Statement or
the Company Prospectus.
(h) The Underwriters shall have received from Underwriters' Counsel
such opinion or opinions with respect to the incorporation of IBC and the
Company, the validity of the Firm SAILS or the Option SAILS, as the case
may be, the IBC Registration Statement, the Company Registration Statement,
the IBC Prospectus, the Company Prospectus and other related matters as the
Underwriters may require, and the Company and IBC shall have furnished to
such counsel such documents as they request for the purpose of enabling
them to pass upon such matters. In rendering such opinion, Underwriters'
Counsel may rely as to matters of Missouri law on the opinion of James
Neville.
(i) The Underwriters shall have received a certificate, dated such
Closing Date, of the [ ] and [ ] of IBC to the effect that, and the
Underwriters shall be otherwise satisfied that: (i) the representations
and warranties of IBC in this Agreement are true and correct as if made on
and as of such Closing Date; (ii) IBC has complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied
at or prior to such Closing Date; (iii) to their knowledge no stop order
suspending the effectiveness of the IBC Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
contemplated by the Commission; and (iv) that subsequent to the date of the
most recent financial statements in the IBC Prospectus, there has been no
material adverse change, nor any development or event involving a
prospective material adverse change, which has had or could have an IBC
Material Adverse Effect except as set forth in or contemplated by the IBC
Prospectus or described in such certificate.
(j) The Underwriters shall have received a certificate, dated such
Closing Date, of the [ ] and [ ] of the Company to the effect that,
and the Underwriters shall be otherwise satisfied that: (i) the
representations and warranties of the Company in this Agreement are true
and correct as if made on and as of such Closing Date; (ii) the Company has
complied
<PAGE>
35
with all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Closing Date; (iii) to their
knowledge that no stop order suspending the effectiveness of the Company
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are contemplated by the Commission; and (iv) that
subsequent to the date of the most recent financial statements in the
Company Prospectus, there has been no material adverse change, nor any
development or event involving a prospective material adverse change, which
has had or could have a Company Material Adverse Effect except as set forth
in or contemplated by the Company Prospectus or described in such
certificate.
(k) The Underwriters shall have received letters, dated such Closing
Date, of Deloitte & Touche LLP and Price Waterhouse LLP which meet the
requirements of Sections 9(a) and 9(b) hereof, except that the specified
dates referred to in Sections 9(a) and 9(b) hereof will be a date not more
than three business days prior to the Closing Date for the purposes of this
Section 9(k).
IBC and the Company will furnish the Underwriters with such conformed
copies of such opinions, certificates, letters and documents as the Underwriters
reasonably request. CSFBC may in its sole discretion waive on behalf of the
Underwriters compliance with any conditions to the obligations of the
Underwriters hereunder, whether in respect of the First Closing Date, an Option
Closing Date or otherwise.
10. Indemnification and Contribution.
(a) IBC will indemnify and hold harmless each Underwriter and the
Company against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or the Company, as the case may be, may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any breach of any representation, warranty, agreement or
covenant of IBC herein contained or any untrue statement or alleged untrue
statement of a material fact contained in the IBC Information, the IBC
Registration Statement, any Preliminary IBC Prospectus, the IBC Prospectus
or any amendment or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Underwriter or the Company for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim,
<PAGE>
36
damage, liability or action as such expenses are incurred; provided,
however, that IBC shall not be liable in any such case (i) to any
Underwriter or the Company to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any of such
documents in reliance upon and in conformity with written information
furnished to IBC by or on behalf of any Underwriter or the Company
specifically for use therein, unless such loss, claim, damage or liability
arises out of the offer or sale of SAILS occurring after any Underwriter or
the Company, as the case may be, has notified IBC in writing that such
information should no longer be used therein, it being understood and
agreed that the only such information furnished by any Underwriter consists
of the information described in subsection (h) below and that the only such
information provided by the Company consists of information described in
subsection (j) below or (ii) to any Underwriter if (A) any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in any of such documents, (B) such untrue statement or alleged untrue
statement or omission or alleged omission is corrected in any amendment or
supplement to the IBC Registration Statement or the IBC Prospectus, (C) IBC
shall have performed each of its obligations under Section 6 in respect of
such amendment or supplement and (D) to the extent that a prospectus
relating to such SAILS was required to be delivered by such Underwriter
under the Act, such Underwriter, having been furnished by or on behalf of
IBC with copies of the IBC Prospectus as so amended or supplemented,
thereafter fails to deliver such amended or supplemented IBC Prospectus
prior to or concurrently with the sale of SAILS to the person asserting
such loss, claim, damage, or liability who purchased such SAILS from such
Underwriter. The indemnification provided for in this Section 10(a) shall
be in addition to any liabilities which IBC may otherwise have and shall
extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls any Underwriter or the
Company within the meaning of the Act.
(b) The Company will indemnify and hold harmless each Underwriter and
IBC, against any losses, claims, damages or liabilities, joint or several,
to which such Underwriter or IBC, as the case may be, may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any
<PAGE>
37
material fact contained in the Company Information, the Company
Registration Statement, the Company Prospectus or any amendment or
supplement thereto, or any Preliminary Company Prospectus, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter or
IBC for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that
the Company will not be liable in any such case (i) to any Underwriter or
IBC to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any of such documents in reliance upon
and in conformity with written information furnished to the Company by or
on behalf of any Underwriter or IBC specifically for use therein, unless
such loss, claim, damage or liability arises out of the offer or sale of
SAILS occurring after the Underwriter or IBC, as the case may be, has
notified the Company in writing that such information should no longer be
used therein, it being understood and agreed that the only such information
furnished by any Underwriter consists of the information described in
subsection (i) below and that the only such information provided by IBC
consists of information described in subsection (k) below or (ii) to any
Underwriter if (A) any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any of such documents, (B) such untrue
statement or alleged untrue statement or omission or alleged omission is
corrected in any amendment or supplement to the Company Registration
Statement or the Company Prospectus, (C) the Company shall have performed
each of its obligations under Section 6 in respect of such amendment or
supplement and (D) to the extent that a prospectus relating to such SAILS
was required to be delivered by such Underwriter under the Act, such
Underwriter, having been furnished by or on behalf of the Company with
copies of the Company Prospectus as so amended or supplemented, thereafter
fails to deliver such amended or supplemented Company Prospectus prior to
or concurrently with the sale of SAILS to the person asserting such loss,
claim, damage, or liability who purchased such SAILS from such Underwriter.
The indemnification provided for in this Section 10(b) shall be in addition
to any liabilities which the Company may otherwise have and shall extend
upon the same terms and conditions to, and inure to the benefit
<PAGE>
38
of, each person, if any, who controls any Underwriter or IBC within the
meaning of the Act.
(c) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless IBC against any losses, claims, damages or liabilities to
which IBC may also become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Company Registration
Statement, the IBC Registration Statement, the Company Prospectus, the IBC
Prospectus or any amendment or supplement thereto, or any Preliminary
Company Prospectuses or Preliminary IBC Prospectuses, or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to IBC by such Underwriter through CSFBC
specifically for use therein, and will reimburse IBC for any legal or other
expenses reasonably incurred by IBC in connection with investigating or
defending any such loss, claim, damage, liability or action as such
expenses are incurred, it being understood and agreed that the only such
information furnished by any Underwriter consists of the information
described in subsection (h) below. The indemnification provided for in this
Section 10(c) shall be in addition to any liabilities which the
Underwriters may otherwise have and shall extend upon the same terms and
conditions to, and shall inure to the benefit of, each officer and director
of IBC and each person, if any, who controls IBC within the meaning of the
Act.
(d) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company against any losses, claims, damages or
liabilities to which the Company may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Company Registration Statement, the IBC Registration Statement, the Company
Prospectus, the IBC Prospectus or any amendment or supplement thereto, or
any Preliminary Company Prospectuses or Preliminary IBC Prospectuses, or
arise out of or are based upon the omission to state therein a material
fact required to be stated therein or necessary to make the statements
<PAGE>
39
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through CSFBC
specifically for use therein, and will reimburse the Company for any legal
or other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed that
the only such information furnished by any Underwriter consists of the
information described in subsection (i) below. The indemnification provided
for in this Section 10(d) shall be in addition to any liabilities which the
Underwriters may otherwise have and shall extend upon the same terms and
conditions to, and shall inure to the benefit of, each officer and director
of the Company and each person, if any, who controls the Company within the
meaning of the Act.
(e) Promptly after receipt by an indemnified party under this Section
10 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under subsection (a), (b), (c) or (d) above, notify the indemnifying
party of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have
to any indemnified party under subsection (a), (b), (c) or (d) above except
to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, which consent shall not
unreasonably be withheld, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section 10(e) for any legal
expenses subsequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation. An
indemnifying party shall not be liable for any amounts paid in settlement
of any action or claim without its written consent, which shall not be
unreasonably withheld.
<PAGE>
40
(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject
matter of such action.
(g) If the indemnification provided for in this Section 10 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a), (b), (c) or (d) above, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of the losses, claims, damages or liabilities referred to in
subsection (a), (b), (c) or (d) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company or
IBC, as applicable, on the one hand, and the Underwriters, on the other
hand, from the offering of the SAILS or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company or IBC, as
applicable, on the one hand, and the Underwriters, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company or IBC, as
applicable, on the one hand, and the Underwriters, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received (directly or indirectly) by
the Company, bears to the total underwriting discounts and commissions
received by the Underwriters. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, IBC or the
Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of
this Section 10(g) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
Section 10(g). Notwithstanding the provisions of this Section 10(g),
<PAGE>
41
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the SAILS underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations
in this Section 10(g) to contribute are several in proportion to their
respective underwriting obligations and not joint.
(h) The Underwriters confirm that the only information furnished by
any Underwriter for the IBC Prospectus consists of the legend concerning
over allotments and stabilization on the inside front cover page, and the
concession and reallowance figures appearing in the fourth paragraph under
the caption "Underwriting", and the information contained in the sixth
paragraph under the caption "Underwriting".
(i) The Underwriters confirm that the only information furnished by
any Underwriter for the Company Prospectus consists of the last paragraph
at the bottom of the cover page concerning the terms of the offering by the
Underwriters, the legend concerning over-allotments and on the inside front
cover page, and the concession and reallowance figures appearing in the
fourth paragraph under the caption "Underwriting" and the information
contained in the seventh paragraph under the caption "Underwriting".
(j) The Company confirms that the statements with respect to the
terms of the SAILS set forth on the cover page of any Preliminary IBC
Prospectus and in the final form of IBC Prospectus filed pursuant to Rule
424(b) (the "Company Information") constitute the only information
furnished in writing to IBC by the Company specifically for inclusion in
any Preliminary IBC Prospectus, the IBC Prospectus or the IBC Registration
Statement.
(k) IBC confirms that the information set forth under "Interstate
Bakeries Corporation" in any Preliminary Company Prospectus and in the
final form of Company Prospectus filed pursuant to Rule 424(b) (the "IBC
Information") constitutes the only information furnished in writing to the
Company by IBC specifically for inclusion in any Preliminary Company
Prospectus, the Company Prospectus or the Company Registration Statement.
<PAGE>
42
(l) The agreement contained in this Section 10 and the
representations, warranties and agreements of IBC in Section 2 and 6, and
of the Company in Sections 3 and 7, shall survive the delivery of the SAILS
and shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of
any indemnified party.
11. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means any day on which commercial
banks in The City of New York are open for business and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
12. Default of Underwriters. If any Underwriter defaults in its
obligations to purchase SAILS hereunder on either the First Closing Date or any
Option Closing Date and the aggregate number of SAILS that such defaulting
Underwriters agreed but failed to purchase does not exceed 10% of the total
number of SAILS that the Underwriters are obligated to purchase on such Closing
Date, CSFBC may make arrangements satisfactory to the Company for the purchase
of such SAILS by other persons, including the non-defaulting Underwriter, but if
no such arrangements are made by such Closing Date, the non-defaulting
Underwriter shall be obligated to purchase the SAILS that such defaulting
Underwriter agreed but failed to purchase on such Closing Date. If any
Underwriter so defaults and the aggregate number of SAILS with respect to which
such default occurs exceeds 10% of the total number of SAILS that the
Underwriters are obligated to purchase on such Closing Date and arrangements
satisfactory to CSFBC and the Company for the purchase of such SAILS by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of the non-defaulting Underwriter or the
Company or IBC, except as provided in Section 13 (provided that if such default
occurs with respect to Option SAILS after the First Closing Date, this Agreement
will not terminate as to the Firm SAILS or any Option SAILS purchased prior to
such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section 12. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
13. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and IBC or their respective officers and of the
several Underwriters set forth in or made pursuant to this Agreement will remain
in full force and effect, regardless of any investigation or statement as to the
results thereof, made by or on behalf of the Company or IBC or any Underwriter
or any of their respective representatives, officers or directors or any
controlling person, and will survive delivery of and payment for the SAILS. If
this
<PAGE>
43
Agreement is terminated pursuant to Section 12 or if for any reason the purchase
of the SAILS by the Underwriters is not consummated, the Company shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to Section
8 and the respective obligations of the Company and IBC and the Underwriters
pursuant to Section 10 shall remain in effect, and if any SAILS have been
purchased hereunder the representations and warranties in Section 2 and 3, and
all obligations under Sections 6 and 7 shall also remain in effect. If the
purchase of the SAILS by the Underwriters is not consummated for any reason
other than solely because of the termination of this Agreement pursuant to
Section 12 or the occurrence of any event specified in clauses (iii), (iv) or
(v) of Section 9(e) hereof, the Company will reimburse the Underwriters for all
out-of-pocket expenses (including fees, charges and disbursements of counsel)
reasonably incurred by them in connection with the offering of the SAILS.
14. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered, telecopied or facsimile and
confirmed to the Underwriters, c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue, New York, New York 10010-3629, Attention: Investment
Banking Department - Transactions Advisory Group, or, if sent to IBC, will be
mailed, delivered or telecopied and confirmed to it at Interstate Bakeries
Corporation, 12 East Armour Boulevard, Kansas City, Missouri 64111, Attention:
Ray Sandy Sutton; or, if sent to the Company, will be mailed, delivered,
telecopied or telegraphed and confirmed to it at Ralston Purina Company,
Checkerboard Square, St. Louis, Missouri 63164, Attention: General Counsel.
15. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 10, and no other
person will have any right or obligation hereunder.
16. Representation of Underwriters. The Representatives will act for
the several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives jointly or by CSFBC will be binding
upon all the Underwriters.
17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
19. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of laws.
The Company and IBC hereby submit to the non-exclusive jurisdiction of
the Federal and state courts in the Borough of Manhattan in The City of New York
in any suit or proceeding
<PAGE>
44
arising out of or relating to this Agreement or the transactions contemplated
hereby.
<PAGE>
45
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us one of the counterparts hereof whereupon
it will become a binding agreement among the Company, IBC and the Underwriters
in accordance with its terms.
Very truly yours,
RALSTON PURINA COMPANY
By: ___________________________
Name:
Title:
INTERSTATE BAKERIES CORPORATION
By: ___________________________
Name:
Title:
The foregoing Underwriting
Agreement is hereby confirmed
and accepted as of the date
first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BEAR, STEARNS & CO., INC.
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
SALOMON BROTHERS INC
Acting on behalf of
themselves and the
several Underwriters.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: _______________________
Name:
Title:
<PAGE>
46
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Underwriter SAILS
- ----------- ---------
<S> <C>
Credit Suisse First Boston Corporation....................
Bear, Stearns, & Co.......................................
Lehman Brothers Inc.......................................
J.P. Morgan Securities Inc................................
Salomon Brothers Inc......................................
Total................................................
=========
</TABLE>
<PAGE>
EXHIBIT 5
July 11, 1997
Board of Directors
Ralston Purina Company
Checkerboard Square
St. Louis, Missouri 63102
Ladies and Gentlemen:
I am Vice President and General Counsel of Ralston Purina Company, a
Missouri corporation (the "Company"). This opinion is delivered in connection
with various legal matters relating to the filing by the Company with the
Securities and Exchange Commission (the "Commission") of a Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Act"), covering an offer of up to $400 million of Stock
Appreciation Income Linked Securities ("SAILs") described in the Preliminary
Prospectus dated July 11, 1997 included as part of the Registration Statement.
The SAILs are to be issued pursuant to an Indenture, dated as of May 26,1995, as
supplemented (the "Indenture"), between the Company the The First National Bank
of Chicago, as Trustee, which is filed as an exhibit to the Registration
Statement.
In connection herewith, I have examined and relied without independent
investigation as to matters of fact upon such certificates of public officials,
such statements and certificates of officers of the Company and originals or
copies certified to my satisfaction of the Registration Statement, the
Indenture, the Restated Articles of Incorporation and By-laws of the Company,
proceedings of the Board of Directors of the Company and such other corporate
records, documents, certificates and instruments as I have deemed necessary or
appropriate in order to enable me to render the opinions expressed below. In
rendering this opinion, I have assumed the genuineness of all signatures on all
documents examined by me, the authenticity of all documents submitted to me as
originals and the conformity to authentic originals of all documents submitted
to me as certified or photostatted copies.
I express no opinion as to the applicability or effect of (i) any
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, or (ii) general principles
of equity including, without limitation, concepts of reasonableness,
materiality, good faith and fair dealing and the possible unavailability of
specific performance, injunctive relief or other equitable remedies, regardless
of whether enforceability is considered in a proceeding in equity or at law.
Based upon the foregoing and in reliance thereon, and subject to the
qualifications and limitations stated herein, I am of the opinion that:
(1) The Company is a corporation validly existing and in good standing
under the laws of the State of Missouri; and
(2) The Registration Statement has been approved by the Board of
Directors, and the Indenture dated as of May 26, 1995 has been duly
authorized, executed and delivered and constitutes a valid and binding
obligation of the Company. Upon execution and delivery of the
Supplemental Indenture, the form of which has been filed as Exhibit
4(b) to the Registration Statement, it will also constitute a valid
and binding obligation of the Company.
(3) The SAILs will be valid and binding obligations of the Company when:
(i) the Registration Statement, including any amendments thereto,
shall have become effective under the Act;
(ii) the Indenture has been duly qualified under the Trust Indenture
Act of 1939, as amended; and
(iii) duly executed and authenticated in accordance with the
provisions of the Indenture and duly delivered upon payment
therefor as described in the Prospectus included as part of the
Registration Statement;
This opinion is not rendered with respect to any laws other than The
General and Business Corporation Law of Missouri and the federal Laws of the
United States.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Opinions" in the Prospectus included as a part thereof. I also consent to your
filing copies of this opinion as an exhibit to the Registration Statement with
agencies of such states as you deem necessary in the course of complying with
the laws of such states regarding the offering and the sale of the SAILS. In
giving this consent, I do not admit that I am in the category of persons whose
consent is required under Section 7 of the Act of the rules and regulations of
the Commission.
Very truly yours,
J. M. Neville
Vice President and General Counsel
<PAGE>
EXHIBIT 8
July 21, 1997
The Board of Directors
Ralston Purina Company
Checkerboard Square
St. Louis, Missouri 63164-0001
Ladies and Gentlemen:
We have acted as special tax counsel to Ralston Purina Company, a
Missouri corporation (the "Company"), in connection with the offering (the
"Offering") of up to $400,000,000 of Stock Appreciation Income Linked Securities
("SAILS"), exchangeable at maturity for shares of Interstate Bakeries
Corporation common stock, as described in the Prospectus (the "Prospectus")
included as a part of Amendment No. 3 to the Company's Registration Statement on
Form S-3 No. 333-27959 filed with the Securities & Exchange Commission on July
21, 1997 (the "Registration Statement"). In connection therewith, you have
requested our opinion with respect to the material federal income tax
consequences of the Offering, which are described in the Prospectus under the
caption "Certain United States Federal Income Tax Considerations".
In connection herewith, we have reviewed the Prospectus and we have
considered the applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and Treasury Regulations promulgated thereunder by the
United States Treasury Department (the "Regulations"), pertinent judicial
decisions, rulings of the Internal Revenue Service (the "Service") and such
other authorities as we have considered relevant, in each case as in effect on
the date hereof (including certain Regulations in proposed form as of the date
hereof). We have assumed that the Prospectus reflects all the facts material to
the SAILS and our opinion is expressly conditioned on, among other things, the
accuracy as of the date hereof of all of such facts. It should be noted that the
Code and Regulations and such judicial decisions, rulings and other authorities
are subject to change at any time and, in some circumstances, with retroactive
effect. A material change in any of the facts or authorities upon which the
views expressed herein are based could affect our conclusions herein.
Due to the absence of authority as to the proper characterization of
the SAILS, no assurance can be given that the Service will accept, or that a
court will uphold, the characterization and treatment of an investment in the
SAILS set forth in the Prospectus under the caption "Certain United States
Federal Income Tax Considerations." Accordingly, we can
<PAGE>
Ralston Purina Company
July 21, 1997
Page 2
give no opinion with respect to the specific tax consequences of owning or
disposing of SAILS, including the characterization of SAILS for U.S. Federal
income tax purposes. However, based solely upon and subject to the foregoing, we
are of the opinion that the conclusions of law expressed in the summary
presented in the Prospectus under the caption "Certain United States Federal
Income Tax Considerations" represent the opinion of Bryan Cave LLP.
Except as expressly set forth above, we express no other opinion. This
opinion is for your benefit and is not to be used, circulated, quoted or
otherwise referred to for any purpose except that we consent to the filing of
this opinion as Exhibit 8 of the Registration Statement and to the reference
to our firm under the caption "Legal Opinions" in the Prospectus filed as part
thereof. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
BRYAN CAVE LLP
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in Amendment No. 3 to the
Prospectus constituting part of this Registration Statement (No. 333-27959) on
Form S-3 of our report dated November 1, 1996, which appears on page 27 of the
Ralston Purina Company Annual Report to Shareholders 1996, which is incorporated
by reference in Ralston Purina Company's Annual Report on Form 10-K for the year
ended September 30, 1996. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Price Waterhouse LLP
St. Louis, Missouri
July 21, 1997
1
