<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1997
REGISTRATION NO. 333-27961
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Interstate Bakeries Corporation
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 43-1470322
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
12 EAST ARMOUR BOULEVARD
KANSAS CITY, MISSOURI 64111
(816) 502-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
RAY SANDY SUTTON, ESQ.
VICE PRESIDENT, CORPORATE SECRETARY AND GENERAL COUNSEL
12 EAST ARMOUR BOULEVARD
KANSAS CITY, MISSOURI 64111
(816) 502-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
Copies to:
JOHN P. DENNEEN, ESQ. MICHAEL G. CAMERON, ESQ. RAYMOND W. WAGNER, ESQ.
BRYAN CAVE LLP SHOOK, HARDY & BACON SIMPSON THACHER &
ONE METROPOLITAN SQUARE L.L.P. BARTLETT
211 NORTH BROADWAY ONE KANSAS CITY PLACE 425 LEXINGTON AVENUE
ST. LOUIS, MISSOURI 63102 1200 MAIN STREET NEW YORK, NEW YORK 10017
(314) 259-2265 KANSAS CITY, MISSOURI (212) 455-2568
64105-2118
(816) 474-6550
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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 being 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, check the following box. [X]
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. [_]
---------------
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 THE 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
[LOGO OF INTERSTATE BAKERIES]
5,697,329 Shares
INTERSTATE BAKERIES CORPORATION
Common Stock
(par value $.01 per share)
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This Prospectus relates to 5,697,329 shares of common stock, par value $.01
per share (the "Common Stock"), of Interstate Bakeries Corporation (the
"Company"), which may be delivered by Ralston Purina Company ("Ralston"),
at its option, pursuant to the terms of Ralston's % Exchangeable Notes
Due August 1, 2000 (the "Stock Appreciation Income Linked SecuritiesSM"
or "SAILSSM"). This Prospectus accompanies a prospectus and prospectus
supplement of Ralston (the "SAILS Prospectus") relating to the sale of
SAILS (the "SAILS Offering"). The SAILS Prospectus does not
constitute a part of this Prospectus nor is it incorporated by
reference herein.
Ralston has granted the Underwriters of the SAILS a 30-day option to purchase
up to an additional 633,036 SAILS, which may be exchanged at their maturity
for additional shares of Common Stock. Such option has been granted solely
to cover over-allotments, if any. To the extent that the over-allotment
option is not exercised by the Underwriters in full, Ralston may, at its
option, and subject to certain limitations, sell the unexercised
portion of up to 633,036 shares of Common Stock pursuant to this
Prospectus. See "Underwriting." The Company will not receive any of
the proceeds from the offering contemplated hereby.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED UNDER "RISK FACTORS" BEGINNING ON PAGE 7 HEREOF.
The Common Stock is traded on the New York Stock Exchange (the "NYSE") under
the symbol "IBC." On July 17, 1997, the last reported sale price of
Common Stock on the NYSE Composite Tape was $63.187 per share. See
"Price Range of Common Stock and Dividends."
Other than (i) the sale of shares of Common Stock by Ralston to the Company,
and (ii) options granted and Common Stock issued pursuant to the Company's
existing employee benefit and stock option plans, the Company, its directors
and executive officers, Ralston and its wholly owned subsidiaries have
agreed not to issue, sell, agree to sell or otherwise dispose of, without
the prior written consent of Credit Suisse First Boston Corporation, any
shares of Common Stock or any securities convertible into, exercisable
for or exchangeable for Common Stock for a period of 90 days after the
date of this Prospectus. See "Underwriting."
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.
"Stock Appreciation Income Linked Securities" and "SAILS" are service marks of
Credit Suisse First Boston, Inc.
Prospectus dated July , 1997
<PAGE>
THE COMPANY HAS BEEN ADVISED THAT CERTAIN PERSONS PARTICIPATING IN THE
OFFERING BY RALSTON OF THE SAILS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE,
MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SAILS OR THE COMMON STOCK,
INCLUDING OVER-ALLOTMENTS, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERAGE
TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
AVAILABLE INFORMATION
The Company 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"). Such documents may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and at Seven
World Trade Center, Suite 1200, New York, New York 10048. 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 the
Company. In addition, information concerning the Company is available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
The Company has filed with the Commission a registration statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act")
(together with any amendments thereto, the "Registration Statement") with
respect to the Common Stock offered hereby. This Prospectus, which constitutes
a part of the Registration Statement, omits certain information set forth in
the Registration Statement, as permitted by the Rules and Regulations of the
Commission. For further information pertaining to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement,
including the exhibits filed therewith, which may be obtained as provided in
the immediately preceding paragraph.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated in and made a part of this Prospectus by
reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
June 1, 1996.
2. The Company's Quarterly Reports on Form 10-Q for the periods ended
March 8, 1997, November 16, 1996 and August 24, 1996.
3. The description of the Company's Common Stock contained in the Form 8-
A registration statement filed with the Commission on May 28, 1992 pursuant
to Section 12 of the Exchange Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act, subsequent to the date of this Prospectus and prior
to the termination of the offering of the Common Stock offered hereby, shall
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the respective dates of the 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
other subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon the written or oral request of any such person, a copy of any
or all the documents that have been or may be incorporated by reference into
this Prospectus, other than exhibits to such documents (unless such exhibits
are incorporated by reference into the document). Requests for such copies
should be directed to Ray Sandy Sutton, Corporate Secretary, 12 East Armour
Boulevard, Kansas City, Missouri 64111; telephone number (816) 502-4000.
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus as well as the information
appearing in the documents incorporated by reference herein. Investors should
carefully consider the information set forth under the caption "Risk Factors."
THE COMPANY
The Company, through its wholly-owned operating subsidiary, Interstate Brands
Corporation ("Brands"), is the largest baker and distributor of fresh bakery
products in the United States. The Company 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 selling branded breads sold in the United States.
"Hostess(R)" products, including "Twinkies(R)," "CupCakes" and "Ho-Hos(R)," are
among the leading snack cake products sold in the United States.
The Company distributes its products in markets representing approximately
90% of the United States population. The Company operates 67 bakeries and more
than 1,400 thrift stores and employs over 32,000 people. The Company's driver-
salesmen deliver products directly from the Company's over 1,200 distribution
centers to more than 200,000 food outlets and stores.
The Company has grown to its present size primarily through the acquisition
of other bakery businesses. In July 1995, the Company acquired Continental
Baking Company ("CBC") from Ralston for $220,000,000 in cash and 16,923,077
shares of the Common Stock. Since the acquisition of CBC, the Company has taken
significant steps to continue to build and capitalize on the brand equity in
the "Wonder(R)" and "Hostess(R)" brands. The Company 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, the Company has significantly increased net sales and profitability.
The Company has more than doubled its net sales to $2.9 billion in fiscal 1996
from $1.2 billion in fiscal 1995. The Company's operating income as a
percentage of net sales increased to 5.5% for the forty weeks ended March 8,
1997 from 2.6% for the comparable period in fiscal 1996. Net income per share
increased to $1.78 per share for the forty week period in fiscal 1997 from $.47
per share for the comparable period in fiscal 1996. See "Recent Development"
for information regarding the Company's unaudited results of operations for the
twelve weeks ended May 31, 1997 and for fiscal 1997.
The principal executive offices of the Company are located at 12 East Armour
Boulevard, Kansas City, Missouri 64111, and its telephone number is (816) 502-
4000.
INDUSTRY OVERVIEW
Annual bread and cake sales in the United States were approximately $23
billion in 1996 according to Datamonitor. Nutritional guidelines have helped
focus consumers on the benefits of grain-based foods. The Company believes
that, through its extensive line of bread products, it is well positioned to
take advantage of this trend.
In addition to the Company, several large baking and diversified food
companies market bread and cake products under various brand names in the
United States. There are also a significant number of medium and small baking
companies that sell bread and cake products in certain regions of the United
States. The Company believes that the larger, national baking companies enjoy
significant competitive advantages over smaller operations due principally to
their economies of scale in areas such as purchasing, advertising, marketing
and distribution, as well as greater brand awareness.
3
<PAGE>
A significant trend in the bread and cake baking industry over the last
several years has been the consolidation of smaller bakeries into larger baking
businesses. Consolidation, which has reduced industry capacity, continues to be
driven by several factors including generational changes at family-owned
operations as well as capital constraints on smaller bakeries which limit their
ability to make major capital investments necessary to increase productivity
and develop new products. The Company believes the baking industry will
continue to present opportunities for strategic acquisitions that will
complement its existing business.
BUSINESS STRATEGY
The Company's strategy is to increase shareholder value by focusing on the
following elements:
DEVELOP AND SUPPORT BRANDED PRODUCTS
The Company continues to emphasize higher-margin branded products in order to
increase net sales and profitability. The Company's experience has shown that
branded products generally have a higher consumer awareness, resulting in
premium pricing and increased shelf space. The Company supports its brands
through aggressive marketing and advertising campaigns specifically tailored to
selected target markets and consumer categories. In addition, since the CBC
acquisition, the Company has implemented a new advertising campaign for its
leading national brands. The Company believes its focus on freshness and high
quality products will continue to enhance its brand-building efforts.
The Company operates a research and development facility in Kansas City,
Missouri, which engages in new product development, line extensions of existing
products and the enhancement of product graphics and packaging. For example,
the Company recently introduced fat free bread products under the "Wonder(R)"
and "Butternut(R)" brand names in certain test markets, as well as new
"Hostess(R)" packaging to enhance shelf appeal of its snack cake products.
MAINTAIN DECENTRALIZED OPERATIONS
The Company's decentralized operations and related incentive programs are key
elements of the Company's business strategy to increase net sales and improve
profitability. The Company is organized into bakery profit centers, each
operating as a stand-alone business responsible for sales, pricing,
manufacturing, distribution, accounting and data processing. The Company
compensates local bakery management under an incentive bonus program tied to
operating cash flow targets for each profit center. The corporate staff
provides direction and focus to the plants in areas such as quality and brand
building, while also providing centralized support in national advertising and
promotion, purchasing, legal and human resources.
The Company believes its presence throughout the United States helps it to
compete successfully with regionally-based competition as well as minimize
exposure to regional economic downturns. The Company's plants and distribution
depots across the United States position the Company close to major
marketplaces enabling the Company to provide efficient delivery and superior
customer service.
PURSUE STRATEGIC ACQUISITIONS
The Company believes that the size and geographic scope of its operations
position it for growth through selective acquisitions in the consolidating
baking industry. The Company pursues acquisition candidates that complement its
existing product lines and geographic presence and leverage its purchasing
power, brand management capabilities and operating efficiencies. For example,
in March 1997, the Company acquired the assets comprising the San Francisco
French Bread Company ("SFFB"), a producer and distributor of sourdough breads,
from Metz Baking Company. In addition, in April 1997, the Company acquired the
right to use the trademark "Marie Callender's(R)" in connection with the
manufacture, marketing, distribution and sale of croutons.
4
<PAGE>
COMMON STOCK PURCHASE
In connection with the SAILS transaction, the Company and Ralston have
entered into an agreement pursuant to which the Company has agreed to
repurchase, simultaneously with the closing of the SAILS transaction, 1,000,000
shares of its Common Stock from Ralston at a purchase price per share equal to
the Initial Price (as that term is defined in the SAILS Prospectus) less a 3%
discount (the "Repurchase Transaction"). See "Selling Stockholder."
THE OFFERING
Pursuant to the terms of the SAILS, Ralston may deliver 5,697,329 shares of
Common Stock to the holders of the SAILS at the maturity thereof on August 1,
2000. This Prospectus relates to the delivery by Ralston of such shares of
Common Stock, and up to 633,036 additional shares of Common Stock with respect
to the SAILS that are subject to an over-allotment option granted by Ralston to
the Underwriters in the SAILS offering solely to cover over-allotments. The
SAILS are being offered by Ralston pursuant to the SAILS Prospectus. To the
extent the over-allotment option is not exercised by the Underwriters in full,
Ralston may, at its option, but not sooner than 90 days from the date of this
Prospectus, sell the unexercised portion of up to 633,036 shares of Common
Stock pursuant to this Prospectus. Ralston owns 16,923,077 shares of Common
Stock, constituting approximately 45% of the Company's outstanding Common
Stock, as of May 30, 1997.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered carefully by prospective investors.
RECENT DEVELOPMENT
On June 26, 1997, the Company announced its earnings for the fourth quarter
of fiscal 1997 which ended May 31, 1997. Earnings per share for the fourth
quarter were $0.77 per share compared to $0.23 a year earlier. For the full
1997 fiscal year, the Company reported earnings per share of $2.55, a 264%
increase over the prior year's $0.70. The prior year's fourth quarter and full
year results included a one-time charge of $0.15 per share.
Specifically, for the twelve weeks ended May 31, 1997, the Company reported
net sales of $755.2 million, compared to net sales of $745.7 million for the
twelve weeks ended June 1, 1996. In addition, operating income was $55 million,
compared to the prior year's $23.8 million. However, the prior year's results
include a one-time pretax charge of $9.5 million resulting from a payment due a
union-administered, multi-employer pension plan which failed. Net income for
the twelve weeks was $29.6 million, or 3.9% of net sales, compared to the prior
year's $8.5 million, or 1.1% of net sales. Earnings per share of $0.77 were up
234% over the prior year's $0.23 ($0.38 before the one-time charge).
For the fifty-two weeks ended May 31, 1997, the Company reported net sales of
$3,212.4 million, an 11.6% increase in comparison to the prior year's net sales
of $2,878.2 million. However, fiscal 1996 included only 45 weeks of combined
operations with CBC. Operating income was $191.1 million, or nearly 6% of net
sales, compared to the prior year's $78.8 million, or 2.7% of net sales (3.1%
before the one-time charge). Net income for the fifty-two weeks was $97.2
million, or slightly more than 3% of net sales, compared to fiscal 1996's $24.5
million, or 0.8% of net sales. Earnings per share were $2.55 compared to the
prior year's $0.70 ($0.85 before the one-time charge).
5
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SUMMARY HISTORICAL FINANCIAL DATA
The following summary financial information for each of the five fiscal years
indicated below has been derived from the audited Consolidated Financial
Statements of the Company. The summary financial information for the forty week
periods ended March 8, 1997 and March 9, 1996 has been derived from the
unaudited Consolidated Financial Statements of the Company, which, in the
opinion of the Company, reflect all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation. Financial information
for the interim periods presented is not necessarily indicative of financial
information to be anticipated for the full year. The information set forth
below should be read in connection with the Consolidated Financial Statements
incorporated herein by reference and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included herein.
<TABLE>
<CAPTION>
40 WEEKS ENDED FISCAL YEAR ENDED(1)
-------------- ------------------------------------------------------
MARCH 8, MARCH 9, JUNE 1, JUNE 3, MAY 28, MAY 29, MAY 30,
1997 1996(2) 1996(3) 1995 1994 1993 1992
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(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Net sales............... $2,457.3 $2,132.5 $2,878.2 $1,222.8 $1,142.7 $1,165.6 $1,145.9
Gross profit............ 1,251.4 1,044.9 1,425.0 591.9 561.5 575.6 563.7
SDA expenses(4)......... 1,036.3 914.0 1,236.6 501.0 473.6 472.6 458.5
Operating income........ 136.1 54.9 78.8(5) 57.3 46.9(6) 71.3 73.6
Interest expense........ 18.0 22.7 29.3 17.7 14.7 17.4 25.0
Net income.............. 67.5 16.0 24.5(5) 20.7 15.8(6) 16.7(7) 15.6(8)
Per Share:
Net income.............. 1.78 0.47 0.70(5) 1.05 0.78(6) 0.79(7) 0.94(8)
Common stock dividends.. 0.395 0.375 0.50 0.50 0.495 0.47 0.33
Weighted average common
shares outstanding..... 38.0 34.2 35.0 19.7 20.3 21.1 18.7
BALANCE SHEET DATA
Total assets............ 1,437.9 1,433.8 1,486.5 598.4 574.8 586.8 573.6
Long-term debt,
excluding current
maturities............. 239.0 349.0 303.7 212.2 201.2 189.2 211.1
Stockholders' equity.... 514.0 454.9 460.2 198.0 187.4 202.3 194.6
OTHER FINANCIAL DATA
Gross profit margin..... 50.9% 49.0% 49.5% 48.4% 49.1% 49.4% 49.2%
SDA as a percentage of
net sales.............. 42.2 42.9 43.0 41.0 41.4 40.5 40.0
Operating income margin. 5.5 2.6 2.7 4.7 4.1 6.1 6.4
Long-term debt as a
percentage of total
capitalization......... 31.7 43.4 39.8 51.7 51.8 48.3 52.0
</TABLE>
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(1) 52 weeks except for the fiscal year ended June 3, 1995 which is 53 weeks.
(2) Includes the operations of CBC for 33 weeks from its acquisition on July
22, 1995.
(3) Includes the operations of CBC for 45 weeks from its acquisition on July
22, 1995.
(4) Selling, delivery and administrative expenses.
(5) Fiscal 1996 includes a charge of $9.5 million ($5.7 million and $.16 per
share on an after-tax basis) resulting from a payment due a union-
administered multi-employer pension plan which failed.
(6) Fiscal 1994 includes a charge of $9.4 million ($5.7 million and $.28 per
share on an after tax basis) related to a plant disposal and environmental
matters.
(7) Fiscal 1993 includes a charge of $14.1 million ($.67 per share) for the
cumulative effect of the change in accounting for postretirement benefits
other than pensions, from adopting Statement of Financial Accounting
Standards No. 106.
(8) Fiscal 1992 includes an extraordinary charge of $10.2 million ($.55 per
share) related to additional interest payments and the write-off of
unamortized deferred financing charges in connection with the retirement
of debt.
6
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements incorporated by reference or made in this Prospectus
under the captions "Prospectus Summary," "Risk Factors," "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and elsewhere in this Prospectus are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
and are subject to the safe harbor created by that Act. Such forward-looking
statements include, without limitation, the future availability and prices of
raw materials, the availability of capital on acceptable terms, the
competitiveness of the bread and cake industry, potential environmental
liabilities and the Company's strategies and other statements contained herein
that are not historical facts. Because such forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by such forward-
looking statements. Factors that could cause actual results to differ
materially include, but are not limited to, changes in general economic and
business conditions (including in the bread and cake markets), the Company's
ability to recover its raw material costs in the pricing of its products, the
availability of capital on acceptable terms, actions of competitors, the
extent to which the Company is able to develop new products and markets for
its products, the time required for such development, the level of demand for
such products, changes in the Company's business strategies and other factors
discussed under "Risk Factors."
RISK FACTORS
RISK OF PRICE INCREASES AND SHORTAGES OF RAW MATERIALS
The principal raw materials used in the baking business are flour, sugar and
edible oils, all of which are subject to substantial price fluctuations. Any
substantial increase in the prices of raw materials would, if not offset by
product price increases, have an adverse impact on the profitability of the
Company. Historically, the Company has been able to recover the majority of
its commodity cost increases through increasing prices, switching to a higher-
margin revenue mix and obtaining additional operating efficiencies. There can
be no assurance, however, that the Company will continue to be able to offset
raw material price increases to the same extent in the future. From time to
time the Company enters into contracts, generally not longer than one year in
duration, for the purchase of baking ingredients at fixed prices which are
designed to protect the Company against raw material price increases during
their term. These contracts could result in the Company paying higher prices
for its raw materials than would otherwise be available in the spot markets.
The bakery operations of the Company are also dependent upon natural gas and
propane as a fuel for firing ovens, and the Company's distribution operation
is dependent upon the price and availability of motor fuel, particularly
gasoline and diesel fuel. Substantial future increases in prices or shortages
of such fuels could have a material adverse effect on the Company.
ABILITY OF THE COMPANY TO COMPETE EFFECTIVELY IN THE HIGHLY COMPETITIVE BAKING
INDUSTRY
The baking industry is highly competitive. The Company faces competition in
all of its markets from large, national bakeries and smaller, regional
operators, as well as from supermarket chains with their own bakeries or
private label products and grocery stores with their own in-store bakeries.
Some of the Company's competitors, including other diversified food companies,
are larger and have greater financial resources than the Company. The Company
from time to time experiences price pressure in certain of its markets as a
result of competitors' promotional pricing practices. Competition is based on
product quality, price, brand loyalty, effective promotional activities and
the ability to identify and satisfy emerging consumer preferences. Customer
service, including frequency of deliveries and maintenance of fully stocked
shelves, is also an important competitive factor and is central to the
competition for retail shelf space among bread and cake product distributors.
See "Business--Competition."
7
<PAGE>
POSSIBLE UNAVAILABILITY AND RISK OF UNSUCCESSFUL INTEGRATION OF FUTURE
ACQUISITIONS
Historically, the Company's growth has depended, in large part, on its
ability to acquire and, thereafter, integrate and operate additional baking
businesses. The Company's strategy includes pursuing acquisition candidates
that complement its existing product lines and geographic presence and
leverage its purchasing power, brand management capabilities and operating
efficiencies. The Company presently has no acquisitions under consideration.
Potential competitors for acquisition opportunities include larger companies
with significantly greater financial resources. Competition for the
acquisition of baking businesses may result in acquisitions on terms that
prove to be less advantageous to the Company than have been attainable in the
past or may increase acquisition prices to levels beyond the Company's
financial capability. The Company's financial capability to make acquisitions
is partially a function of its ability to access the debt and equity capital
markets. In addition, there can be no assurance that the Company will find
attractive acquisition candidates in the future or succeed in reducing the
costs and increasing the profitability of any business acquired in the future.
DIFFICULTY IN EFFECTING CHANGES IN CONTROL DUE TO ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and Bylaws
and Delaware law could discourage potential acquisition proposals and could
delay or prevent a change in control of the Company. The Company is authorized
to issue up to one million shares of Preferred Stock, the relative rights and
preferences of which may be fixed by the Company's Board of Directors, without
stockholder approval. While the Company has no present plans to issue any
shares of Preferred Stock, the future issuance thereof could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, outstanding voting stock of the Company. The
Company's Certificate of Incorporation requires that any business combination
(as defined) with a stockholder who beneficially owns more than 5% or more of
the Company's outstanding voting stock be approved, subject to certain
exceptions, by a majority of stockholders not involved in the transaction. In
addition, provisions of Delaware law prohibit the Company from engaging in a
business combination (as defined) with a person who, together with affiliates
and associates own (or within three years prior to the proposed business
combination, did own) 15% or more of the Company's voting stock. The Company's
Certificate of Incorporation provides for a classified board of directors with
staggered three-year terms, a provision that increases the difficulty of
removing all of the incumbent directors at one time which, in turn, could
discourage a proxy contest. Other provisions of the Company's Certificate of
Incorporation, including removal of directors only for cause and a prohibition
on action by stockholders by consent, could have similar effects. See
"Description of Capital Stock."
LACK OF MANAGEMENT AGREEMENTS WITH AND DEPENDENCE ON KEY PERSONNEL
The operation of the Company requires managerial and operational expertise.
The Company does not have employment contracts with any members of current
management other than a contract with Charles A. Sullivan, Chairman of the
Board and Chief Executive Officer, which is automatically renewed on May 31 of
each year unless terminated by the Company and Brands or Mr. Sullivan. The
Company has no reason to believe that any of its key management personnel will
not continue to be active in the Company's operations.
IMPACT OF GOVERNMENTAL REGULATION ON THE COMPANY'S OPERATIONS
The Company's operations are subject to regulation by various federal, state
and local government entities and agencies. As a baker of goods for human
consumption, the Company's operations are subject to stringent quality and
labeling standards, including the Federal Food and Drug Act. The operations of
the Company's bakeries and its delivery fleet are subject to various federal,
state and local environmental laws and workplace regulations, including the
Occupational Safety and Health Act, the Fair Labor Standards Act, the Clean
Air Act and the Clean Water Act. Although the Company believes that its
current legal and environmental compliance programs adequately address such
concerns and that it is in substantial compliance with such applicable laws
and regulations, there can be no assurance that future regulation by various
federal, state and local government entities and agencies would not have a
material adverse effect on the Company's results of operations.
8
<PAGE>
COSTS ASSOCIATED WITH ENVIRONMENTAL REMEDIATION
The Company has underground fuel storage tanks at various locations
throughout the United States which are subject to federal and state
regulations establishing minimum standards for such tanks and where necessary,
remediation of associated contamination. The Company is presently in the
process of testing and evaluating, and, if necessary, removing, replacing or
upgrading such tanks in order to comply with such laws. In addition, the
Company has received notices from the United States Environmental Protection
Agency, state agencies, and/or private parties seeking contribution, that it
has been identified as a "potentially responsible party" under the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended. Because of these activities, the Company may be required to share in
the cost of cleanup with respect to three "Superfund" sites. The Company's
ultimate liability in connection with these sites may depend on many factors
including the volume and type of material contributed to the site, the number
of other PRPs and their financial viability and the remediation methods and
technology to be used. While it is difficult to quantify the potential
financial impact of actions involving environmental matters, particularly
remediation costs at waste disposal sites and future capital expenditures for
environmental control equipment, in the opinion of the Company's management,
the ultimate liability arising from such environmental matters, taking into
account established accruals for estimated liabilities, should not be material
to the overall financial position of the Company, but could be material to
results of operations or cash flows for a particular quarter or annual period.
POSSIBLE CONFLICTS OF INTEREST BETWEEN THE COMPANY AND THE RALSTON
REPRESENTATIVES ON THE BOARD OF DIRECTORS
Mr. William P. Stiritz and Mr. James R. Elsesser, directors of the Company,
are also Chairman of the Board and Chief Executive Officer and Chief Financial
Officer, respectively, of Ralston and owe certain fiduciary duties to Ralston
and its stockholders which may, under certain circumstances, conflict with
their fiduciary duties to the Company and its stockholders when serving as
directors of the Company. There can be no assurance that a situation involving
conflicting interests of Ralston and the Company will not arise. If the
Company's Board of Directors is presented with a proposal putting these
directors in a conflicting situation between the interests of the Company and
the interests of Ralston, they may abstain from 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 the Company.
RISKS THAT SHARES ELIGIBLE FOR FUTURE SALE MAY DEPRESS MARKET PRICE OF COMMON
STOCK
Under the Shareholder Agreement (as defined below), Ralston agreed not to
own more than 14.9% of the Company's voting securities as of August 15, 2000
and is entitled to certain registration rights with respect to shares of
Common Stock held by it. Assuming that the Repurchase Transaction is
consummated, Ralston delivers one share of Common Stock per SAILS at their
maturity and the number of outstanding shares of Common Stock at August 15,
2000 is the same as the number of such outstanding shares at May 30, 1997,
under the Shareholder Agreement, Ralston would be required to dispose of an
additional 4,778,755 shares of Common Stock prior to August 15, 2000
(4,145,719 shares if the Underwriters' overallotment option is exercised in
full). Further, Ralston may determine to sell the remainder of its shares of
Common Stock at any time prior to or after August 15, 2000. No prediction can
be made as to the effect, if any, that future sales of shares, or the
availability of shares for future sale, will have on the market price of the
Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock, or the perception that such sales could occur, could adversely
affect prevailing market prices for the Common Stock.
IMPACT OF THE SAILS ON THE MARKET FOR THE COMMON STOCK
It is not possible to predict accurately how or whether the SAILS will trade
in the secondary market. Any market that develops for the SAILS is likely to
influence and be influenced by the market for the Common Stock. For example,
the price of the shares of Common Stock could become more volatile and could
be depressed by investors' anticipation of the potential distribution into the
market of shares of Common Stock which may be
9
<PAGE>
delivered by Ralston upon maturity of the SAILS. As of May 30, 1997, such
shares would constitute % of the outstanding Common Stock ( % if the
Underwriters' over-allotment option is exercised in full). See "Selling
Stockholder." The price of shares of Common Stock could also be affected by
possible sales of shares of Common Stock by investors who view the SAILS as a
more attractive means of equity participation in the Company and by hedging or
arbitrage trading activity that may develop involving the SAILS and the Common
Stock.
SELLING STOCKHOLDER
Pursuant to the terms of the SAILS, Ralston may deliver 5,697,329 shares of
Common Stock to the holders of the SAILS at the maturity thereof. This
Prospectus relates to the delivery by Ralston of such shares of Common Stock,
and up to 633,036 additional shares of Common Stock with respect to the SAILS
that are subject to an over-allotment option granted by Ralston to the
Underwriters in the SAILS Offering solely to cover over-allotments. The SAILS
are being offered by Ralston pursuant to the SAILS Prospectus. To the extent
the over-allotment option is not exercised by the Underwriters in full,
Ralston may, at its option and not sooner than 90 days from the date of this
Prospectus, sell the unexercised portion of up to 633,036 shares of Common
Stock pursuant to this Prospectus. Ralston owns 16,923,077 shares of Common
Stock, constituting approximately 45% of the Company's outstanding Common
Stock, as of May 30, 1997. If the over-allotment option is not exercised and
Ralston sells the unexercised portion of the shares of Common Stock pursuant
to this Prospectus, after completion of such sale Ralston would own 15,290,041
shares of the Common Stock, constituting approximately 42% of the Company's
outstanding Common Stock, as of May 30, 1997, assuming consummation of the
Repurchase Transaction. If the over-allotment option is exercised in full and
Ralston delivers one share of Common Stock per SAILS at their maturity,
assuming consummation of the Repurchase Transaction and the number of shares
outstanding remains the same, then Ralston would own 9,592,712 shares of the
Company's Common Stock, constituting approximately 26% of the Company's
outstanding Common Stock as of May 30, 1997.
Ralston acquired its shares of Common Stock subject to the terms of a
Shareholder Agreement dated July 22, 1995 (as amended, the "Shareholder
Agreement") entered into by the Company, Ralston and a subsidiary of Ralston
in connection with the acquisition of CBC. The Shareholder Agreement provides,
among other things, that, prior to August 15, 2001, Ralston, without the
consent of the Company, shall not acquire any additional shares of Common
Stock or take other specified actions with respect to the Company, commonly
the subject of standstill agreements between an issuer and a significant
stockholder. Ralston has further agreed that by August 15, 2000, its ownership
of Common Stock will be reduced to no more than 14.9% of the Company's
outstanding voting securities. Under the Shareholder Agreement, Ralston has
registration rights with respect to the shares of Common Stock owned by it,
which, however, are subject to certain transfer restrictions. Subject to
certain limited exceptions, Ralston may not sell the Common Stock owned by it
without first offering it to the Company. The Company has waived such right of
first refusal with respect to the Common Stock which may be offered pursuant
to this Prospectus. The Company also has the right between August 15, 2000 and
August 15, 2001 to acquire any Common Stock owned 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 Common
Stock owned by it in accordance with the recommendation of the Company's Board
of Directors with respect to stockholder proposals and nominations to the
Company's Board of Directors and, with respect to other proposals, in
proportion to the votes of all other stockholders; provided, however, that
Ralston may vote as it deems appropriate with respect to proposals for the
merger of the Company, the sale of all or substantially all of the Company's
assets or the issuance of any other class of voting stock of the Company. Mr.
Stiritz and Mr. Elsesser serve on the Board of Directors of the Company. Mr.
Stiritz's term expires in 1997 and Mr. Elsesser's term expires in 1999.
The Company has agreed, simultaneously with the closing of the SAILS
transaction, to purchase from Ralston 1,000,000 shares of Common Stock at a
purchase price per share equal to the Initial Price (as defined in the SAILS
Prospectus) less a 3% discount.
10
<PAGE>
Assuming the Company's purchase of 1,000,000 shares of Common Stock from
Ralston in the Repurchase Transaction had been completed as of May 30, 1997,
Ralston would have owned 43.6% of the Common Stock. Assuming, additionally the
completion of such purchase, that Ralston delivers one share of Common Stock
per SAILS at the maturity thereof and the number of shares of Common Stock at
August 15, 2000 remains the same as the number of outstanding shares at May
30, 1997, under the Shareholder Agreement Ralston would be required to dispose
of an additional 4,778,755 shares of Common Stock prior to August 15, 2000
(4,145,719 additional shares if the Underwriters' overallotment option is
exercised in full).
For the forty weeks ended March 8, 1997, Ralston or its affiliates received
approximately $0.7 million in payments from the Company, primarily in
connection with certain post-CBC acquisition transition services.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the SAILS or
delivery thereunder of Common Stock or any other sales of shares of Common
Stock by Ralston to which this Prospectus relates.
11
<PAGE>
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the
Company as of March 8, 1997 and (ii) the pro forma consolidated capitalization
of the Company as of March 8, 1997 as if the Company had purchased the
1,000,000 shares of Common Stock subject to the Repurchase Transaction as
described under "Prospectus Summary--Common Stock Purchase" at an assumed
price of $61.29 per share (based on the last reported sales price of the
Common Stock on the NYSE Composite Tape on July 17, 1997, less a 3% discount).
The data should be read in conjunction with the Consolidated Financial
Statements of the Company incorporated herein by reference and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
related thereto, included elsewhere herein.
<TABLE>
<CAPTION>
MARCH 8, 1997
-----------------
ACTUAL PRO FORMA
------ ---------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Long-term debt, excluding current maturities.............. $239.0 $300.3
Stockholders' equity:
Preferred stock, par value $.01 per share; authorized--
1,000,000 shares; issued--none......................... -- --
Common stock, par value $.01 per share; authorized--
60,000,000 shares; issued--39,067,000 shares........... 0.4 0.4
Additional paid-in capital.............................. 520.5 520.5
Retained earnings....................................... 18.7 18.7
Treasury stock, at cost (1)............................. (25.6) (86.9)
------ ------
Total stockholders' equity............................ $514.0 $452.7
------ ------
Total capitalization...................................... $753.0 $753.0
====== ======
Long-term debt as a percentage of total capitalization.... 31.7% 39.9%
</TABLE>
- --------
(1) Consisting of 1,537,000 shares actual and 2,537,000 shares pro forma for
the Repurchase Transaction.
12
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed on the NYSE and is traded under the symbol "IBC."
The table below presents, for each of the quarterly periods indicated, the
high and low sales prices for the Common Stock, as reported on the NYSE
Composite Tape, and cash dividends paid during fiscal 1998, 1997, 1996 and
1995:
<TABLE>
<CAPTION>
FISCAL 1998 CASH
QUARTER HIGH LOW DIVIDEND
- ----------- ------- ------- --------
<S> <C> <C> <C>
First (1)............................................ $63.812 $54.625 $.135(2)
<CAPTION>
FISCAL 1997
QUARTER
- -----------
<S> <C> <C> <C>
First................................................ 30.125 25.500 .125
Second............................................... 45.250 29.625 .135
Third................................................ 51.000 42.250 .135
Fourth............................................... 55.125 46.375 .135
<CAPTION>
FISCAL 1996
QUARTER
- -----------
<S> <C> <C> <C>
First................................................ 19.500 14.375 .125
Second............................................... 22.250 18.875 .125
Third................................................ 23.250 20.500 .125
Fourth............................................... 27.625 22.500 .125
<CAPTION>
FISCAL 1995
QUARTER
- -----------
<S> <C> <C> <C>
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) Through July 17, 1997.
(2) The Board of Directors of the Company has declared a dividend of $.135 to
be paid to shareholders of record as of July 15, 1997, payable August 1,
1997.
On July 17, 1997, the last reported sale price of the Common Stock on the
NYSE Composite Tape was $63.187 per share. On July 17, 1997, the Common Stock
was held by 4,740 holders of record.
The declaration of dividends is at the discretion of the Board of Directors
of the Company. The declaration and payment of future dividends and the amount
thereof will be dependent upon the Company's results of operations, financial
condition, cash requirements for its business, future prospects and other
factors deemed relevant by the Board of Directors.
The ability of the Company to pay dividends on the Common Stock depends on
the ability of Brands, the Company's principal operating subsidiary, to pay
dividends to the Company. Brands has entered into a Credit Agreement (as
described in "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources") pursuant to which
Brands may not pay dividends or make payments in respect of the purchase of
capital stock of the Company to the extent that the aggregate amount of all
such payments made after June 4, 1995 exceeds the sum of $20 million plus 75%
of consolidated net income (as defined) for the period beginning June 4, 1995
and ending on the last day of the most recent fiscal quarter. As of March 8,
1997, Brands had $53.3 million available for such purposes. The Company
believes that it will be permitted, pursuant to a waiver to be granted by its
lenders, to perform its obligations under the Repurchase Transaction without a
reduction in the amount available under the Credit Agreement for dividends and
other stock repurchases.
13
<PAGE>
BUSINESS
The following information contains forward-looking statements which involve
certain risks and uncertainties. See "Forward-Looking Statements."
THE COMPANY
The Company, through Brands, is the largest baker and distributor of fresh
bakery products in the United States. The Company 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 selling branded breads sold in the United States.
"Hostess(R)" products, including "Twinkies(R)," "CupCakes" and "Ho-Hos(R),"
are among the leading snack cake products sold in the United States.
The Company distributes its products in markets representing approximately
90% of the United States population. The Company operates 67 bakeries and more
than 1,400 thrift stores and employs over 32,000 people. Its driver-salesmen
deliver products directly from the Company's over 1,200 distribution centers
to more than 200,000 food outlets and stores.
The Company or its predecessors have baked and distributed fresh bread and
cake products since 1927. The Company has grown to its present size primarily
through acquisitions of other baking businesses. In its 1988 fiscal year, the
Company underwent a change in control through a leveraged buyout transaction
and acquired 10 bakeries in the Southeastern United States. In July 1991, the
Company returned to the public market by issuing shares of Common Stock. In
July 1995, the Company acquired CBC from Ralston for $220,000,000 in cash and
16,923,077 shares of the Common Stock. Since the acquisition of CBC, the
Company has taken significant steps to continue to build and capitalize on the
brand equity in the "Wonder(R)" and "Hostess(R)" brands. The Company has also
worked to realize cost savings from the CBC acquisition and to achieve
economies of scale in the operations of Brands and CBC.
INDUSTRY OVERVIEW
Annual bread and cake sales in the United States were approximately $23
billion in 1996 according to Datamonitor. Nutritional guidelines, such as the
Food Guide Pyramid issued by the United States Department of Agriculture, have
helped focus consumers on the benefits of grain-based foods. The Company
believes that, through its extensive line of bread products, it is well
positioned to take advantage of this trend.
In addition to the Company, several large baking and diversified food
companies market bread and cake products under various brand names in the
United States. There are also a significant number of medium and small baking
companies that sell bread and cake products in certain regions of the United
States. The Company believes that the larger, national baking companies enjoy
significant competitive advantages over smaller operations due principally to
their economies of scale in areas such as purchasing, advertising, marketing
and distribution, as well as greater brand awareness.
A significant trend in the bread and cake baking industry over the last
several years has been the consolidation of smaller bakeries into larger
baking businesses. Consolidation, which has reduced industry capacity,
continues to be driven by several factors, including generational changes at
family-owned operations as well as capital constraints on smaller bakeries
which limit their ability to make major capital investments necessary to
increase productivity and develop new products. The Company believes that
trends in the baking industry will continue to present opportunities for
strategic acquisitions that complement its existing business.
Other changes in the baking business have resulted from large conglomerates
divesting their non-core baking businesses. For example, Ralston sold CBC to
the Company in July 1995 and, in March 1996, Anheuser
14
<PAGE>
Busch Company spun-off its large baking subsidiary (which became The
Earthgrains Company) to its shareholders. These divestitures have resulted in
greater management accountability to public shareholders and a larger group of
companies whose primary business is baking.
BUSINESS STRATEGY
The Company's business strategy is to increase shareholder value by
developing and supporting branded products, maintaining decentralized
operations and pursuing strategic acquisitions.
DEVELOP AND SUPPORT BRANDED PRODUCTS
The Company continues to emphasize higher-margin branded products in order
to increase net sales and profitability. The Company's experience has shown
that branded products generally have a higher consumer awareness, resulting in
premium pricing and increased shelf space. The Company supports its brands
through aggressive marketing and advertising campaigns specifically tailored
to selected target markets and consumer categories. In addition, since the CBC
acquisition, the Company has implemented a new advertising campaign for its
leading national brands. The Company believes its focus on freshness and high
quality products will continue to enhance its brand-building efforts.
The Company operates a research and development facility in Kansas City,
Missouri, which engages in new product development, line extensions of
existing products and enhancement of product graphics and packaging. For
example, the Company recently introduced fat free bread products under the
"Wonder(R)" and "Butternut(R)" brand names in certain test markets, as well as
new "Hostess(R)" packaging to enhance shelf appeal of its snack cake products.
MAINTAIN DECENTRALIZED OPERATIONS
The Company's operations are decentralized in order to increase the net
sales and profitability of its baking plants and increase efficiencies in its
distribution systems. The Company is organized into bakery profit centers,
each operating as a stand-alone business responsible for sales, pricing,
manufacturing, distribution, accounting and data processing. The Company
compensates local bakery management under an incentive bonus program tied to
operating cash flow targets for each profit center. The corporate staff
provides direction and focus to the plants in areas such as quality and brand
building, while also providing centralized support in national advertising and
promotion, purchasing, legal and human resources.
The Company's believes its broad presence throughout the United States helps
it to compete successfully with regionally-based competition as well as
minimize exposure to regional economic downturns. The Company's plants and
distribution centers across the United States position the Company close to
major marketplaces enabling the Company to provide efficient delivery and
superior customer service.
PURSUE STRATEGIC ACQUISITIONS
The Company believes that the size and geographic scope of its operations
position it for growth through selective acquisitions in the consolidating
baking industry. The Company pursues acquisition candidates that complement
its existing product lines and geographic presence and leverage its purchasing
power, brand management capabilities and operating efficiencies. For example,
in March 1997, the Company acquired the assets of SFFB, a producer and
distributor of sourdough breads, from Metz Baking Company. In addition, in
April 1997, the Company acquired the right to use the trademark "Marie
Callender's(R)" in connection with the manufacture, marketing, distribution
and sale of croutons.
PRODUCTS AND BRANDS
The Company produces, markets, distributes and sells white breads, variety
breads, crusty breads, reduced calorie breads, English muffins, rolls and buns
under a number of well-known national brand names, including
15
<PAGE>
"Wonder(R)," "Home Pride(R)" and "Bread du Jour(R)," and regional brand names
including "Beefsteak(R)," "Buttermaid(R)," "Butternut(R)," "Colombo(R),"
"Cotton's Holsum(R)," "DiCarlo(R)," "Eddy's(R)," "Emperor Norton(R),"
"Holsum(R)," "Merita(R)," "Millbrook(R)," "Parisian(R)," "Sweetheart(R),"
"Toscano(R)," and "Weber's(R)"; bagels under the brand name "Braun's(R)"; and
croutons under the brand names "Mrs. Cubbison's(R)" and "Marie
Callender's(R)." The Company's snack cakes, donuts, sweet rolls, snack pies,
breakfast pastries, variety cakes, large cakes and shortcakes are also sold
under a number of well-known national and regional brand names, including
"Hostess(R)" and "Dolly Madison(R)." The Company is also a baker and
distributor of "Roman Meal(R)" breads, including traditional Roman Meal bread,
Roman Meal variety breads, Roman Meal light breads, Roman Meal buns, rolls and
English muffins. The Company's various brands are positioned across a wide
spectrum of consumer categories and price points.
The Company believes that its brand and product trademarks such as
"Wonder(R)," "Hostess(R)," "Home Pride(R)," "Butternut(R)" and "Dolly
Madison(R)" and product trademarks such as "Twinkies(R)," "Ho-Hos(R)" and
"Zingers(R)" are of material importance to its strategy of brand building. The
Company takes appropriate action from time to time against third parties to
prevent infringement of its trademarks and other intellectual property. The
Company also enters into confidentiality agreements from time to time with
employees and third parties as necessary to protect formulas and processes
used in producing the Company's products.
MARKETING AND DISTRIBUTION
The majority of the Company's bread sales are through supermarkets while the
Company's cake products are sold principally through supermarkets and
convenience stores. Cake sales tend to be somewhat seasonal, with a
historically weak winter period, which the Company believes is attributable to
home baking and consumption patterns during the holiday season. Spring and
early summer months are historically stronger due to increased sales of
shortcake products during the fresh strawberry season. No single customer
accounts for more than 5% of the Company's net sales.
The Company's marketing and advertising campaigns are conducted through
targeted television and radio advertising, coupons in newspapers and other
printed media.
The Company distributes its products in markets representing approximately
90% of the United States population, with its strongest presence in southern
California, the Pacific Northwest, the upper Midwest, the Northeast, the
Mountain States, the Middle Atlantic States and Florida. With plants and
distribution centers across the United States, the Company is located close to
the major marketplaces enabling efficient delivery and superior customer
service.
The Company's fresh bakery products are delivered from the Company's network
of 67 bakeries to its over 1,200 distribution centers. The products are then
delivered primarily to grocery and convenience stores by the Company's
delivery/salesman on its more than 10,000 Company-owned routes. Unsold
products are picked up by the Company's delivery/salesman and delivered to the
Company's more than 1,400 thrift stores for retail sale. Thrift store sales
represented approximately 12% of the net sales of the Company during the forty
week period ended March 8, 1997.
BAKERIES AND OTHER PROPERTIES
BAKERIES
The Company produces substantially all of its products through its national
network of 67 bakeries. The following map sets forth the locations of the
Company's bakeries, all of which are owned with the exception of a bakery in
each of San Francisco, Sacramento and San Diego and the bakeries in
Castroville and Montebello, California, which are located in leased premises.
16
<PAGE>
<TABLE>
<CAPTION>
[A map of the United States containing points indicating the locations of the
following bread and cake bakeries]
<S> <C> <C>
Wonder Peoria, Illinois Alexandria, Louisiana
Wonder Bread Bakeries Grand Rapids, Michigan Monroe, Louisiana
Anchorage, Alaska Boonville, Missouri
Pomona, California Springfield, Missouri Parisian
Sacramento, California Cincinnati, Ohio Parisian Bread Bakeries
Tampa, Florida Decatur, Illinois San Diego, California
Hodgkins, Illinois Minonk, Illinois San Francisco, California
Waterloo, Iowa
Jamaica, New York Merita Toscana
Akron, Ohio Merita Bread Bakeries Toscana Bread Bakery
Columbus, Ohio Birmingham, Alabama Castorville, California
Portland, Oregon Jacksonville, Florida
Salt Lake City, Utah Orlando, Florida Mrs. Cubbison's
Richmond, Virginia Charlotte, North Carolina Dry Products
Seattle, Washington Rocky Mount, North Carolina Montebello, California
Florence, South Carolina
Hostess Knoxville, Tennessee Sweetheart
Hostess Cake Bakeries Sweetheart Bread Bakeries
Schiller Park, Illinois Dolly Madison Bakery Billings, Montana
Detroit, Michigan Dolly Madison Cake Minot, North Dakota
Seattle, Washington Bakeries
Los Angeles, California Columbus, Georgia Braun's
Columbus, Indiana Braun's Bagel Bakery
Wonder/Hostess Bakeries Emporia, Kansas Milwaukee, Wisconsin
San Francisco, California Los Angeles, California
Denver, Colorado Rainbo
Indianapolis, Indiana Eddy's Rainbo Bread Bakery
Davenport, Iowa Eddy's Bread Bakery Roanoke, Virginia
Natick, Massachusetts Boise, Idaho
Kansas City, Missouri DiCarlo
St. Louis, Missouri Weber's DiCarlo Bread Bakery
Buffalo, New York Weber's Bread Bakeries San Pedro, California
Tulsa, Oklahoma Glendale, California
Philadelphia, Pennsylvania Los Angeles, California Colombo
Memphis, Tennessee San Diego, California Colombo Bread Bakeries
Ogden, Utah Oakland, California
Spokane, Washington Holsum Sacramento, California
Holsum Bread Bakeries
Butternut Grand Junction, Colorado
Butternut Bread Bakeries Miami, Florida
Cotton's Holsum
Cotton's Bread Bakeries
</TABLE>
<PAGE>
The Company attempts to realize operating synergies through consolidation of
redundant facilities. For example, in 1996 the Company closed its East
Brunswick, New Jersey and Utica, New York bakeries, sold its Tempe, Arizona
bakery and closed its Dallas bakery and exchanged certain of its assets for
the Roanoke, Virginia bakery of The Earthgrains Company. As a result of these
measures, the Company was able to consolidate production of certain products,
reduce costs and more efficiently utilize its remaining facilities.
The Company also makes capital investments to update or retrofit its
facilities to produce new products on existing lines and to increase line
speeds. For example, the Company retrofitted production lines in Columbus,
Georgia to produce snack cakes being produced by CBC in the Midwest and sold
in the Southeast, thereby reducing transportation costs. The Company is
completing a $20 million expansion and modernization of its Rocky Mount, North
Carolina bakery to produce bread and buns for sale in the Southeast United
States and has announced preliminary plans to build a new baking facility in
the Midwestern United States. The Company believes that its other facilities
are well maintained and does not foresee the need to make significant capital
improvements to such existing facilities in the near future.
OTHER PROPERTIES
The Company's over 1,200 distribution centers and more than 1,400 thrift
stores are located throughout the Company's distribution area. Generally, each
thrift store is between 500 and 1,600 square feet in size. Most of the stores
are located at the Company's distribution centers, with the remainder located
along the Company's distribution routes. The majority of the Company's
distribution centers and thrift stores are located in leased premises.
RAW MATERIALS
The ingredients of bread and cake products, principally flour, sugar and
edible oils, are readily available from numerous sources. The Company attempts
to lock in prices for raw materials through advance purchase contracts
generally not longer than one year in duration when prices are expected to
increase. Through its program of central purchasing of baking ingredients and
packaging materials, the Company is able to utilize its national presence to
obtain competitive prices. Historically, the Company has been able to recover
the majority of its commodity cost increases through increasing prices,
switching to a higher-margin revenue mix and obtaining additional operating
efficiencies.
EMPLOYEES
The Company employs over 32,000 people. Approximately 81% of the Company's
employees are covered by over 600 union contracts. Most of the Company's
unionized workers are members of either the International Brotherhood of
Teamsters or the Bakery, Confectionery and Tobacco Workers International
Union. None of the 600 individual collective bargaining agreements is material
to the Company's consolidated operations. The Company believes it has good
relations with its union and nonunion employees.
COMPETITION
The Company faces intense competition in all of its markets from large,
national bakeries and smaller regional operators, as well as from supermarket
chains with their own bakeries or private label products and grocery stores
with their own in-store bakeries. Competition is based on product quality,
price, brand loyalty, effective promotional activities and the ability to
identify and satisfy emerging consumer preferences. Customer service,
including frequency of deliveries and maintenance of fully stocked shelves, is
also an important competitive factor and is central to the competition for
retail shelf space among bread and cake product distributors. The Earthgrains
Company, CPC International, Inc. and Flowers Industries, Inc. are the
Company's largest bread competitors, each marketing bread products under
various brand names. McKee Foods Corp., Tasty Baking Co., Drake Bakeries and
Entenmann's are the largest competitors of the Company with respect to cake
sales. The Company from time to time experiences price pressure in certain of
its markets as a result of competitors' promotional pricing practices.
However, the Company believes that its geographic diversity helps to limit the
effect of regionally-based competition.
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<PAGE>
GOVERNMENT REGULATION; ENVIRONMENTAL MATTERS
The Company's operations are subject to regulation by various federal, state
and local governmental entities and agencies. As a baker of goods for human
consumption, the Company's operations are subject to stringent quality and
labeling standards, including the Federal Food and Drug Act. The operations of
the Company's bakeries and its delivery fleet are subject to various federal,
state and local environmental laws and workplace regulations, including the
Occupational Safety and Health Act, the Fair Labor Standards Act, the Clean
Air Act and the Clean Water Act. The Company believes that its current legal
and environmental compliance programs adequately address such concerns and
that it is in substantial compliance with such applicable laws and
regulations.
The Company has underground fuel storage tanks at various locations
throughout the United States which are subject to federal and state
regulations establishing minimum standards for such tanks and where necessary,
remediation of associated contamination. The Company is presently in the
process of testing and evaluating, and, if necessary, removing, replacing or
upgrading such tanks in order to comply with such laws. In addition, the
Company has received notices from the United States Environmental Protection
Agency, state agencies, and/or private parties seeking contribution, that it
has been identified as a "potentially responsible party" (PRP), under the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended. Because of these activities, the Company may be required to share in
the cost of cleanup with respect to three "Superfund" sites. The Company's
ultimate liability in connection with these sites may depend on many factors
including the volume and type of material contributed to the site, the number
of other PRPs and their financial viability and the remediation methods and
technology to be used. While it is difficult to quantify the potential
financial impact of actions involving environmental matters, particularly
remediation costs at waste disposal sites and future capital expenditures for
environmental control equipment, in the opinion of the Company's management,
the ultimate liability arising from such environmental matters, taking into
account established accruals for estimated liabilities, should not be material
to the overall financial position of the Company, but could be material to
results of operations or cash flows for a particular quarter or annual period.
LEGAL PROCEEDINGS
On July 20, 1995, the Company, CBC and the Antitrust Division of the United
States Department of Justice ("DOJ") signed, and filed with the United States
District Court for the Northern District of Illinois, stipulations for Final
Judgment (the "Final Judgment") and for holding separate certain assets
following the closing of the acquisition of CBC. The Final Judgment required
the divestiture of one white pan bread label in certain counties in southern
California, eastern Wisconsin, central Illinois and the Chicago area. The
Company has divested, to the satisfaction of the DOJ, certain assets in
eastern Wisconsin, central Illinois and the Chicago area, and is actively
pursuing the divestiture required in southern California pursuant to the Final
Judgment.
The Company has been named as a defendant in various other claims arising
out of its normal business operations. Based upon the facts available to date,
management believes that the Company has meritorious defenses to these actions
and that their ultimate resolution will not have a material adverse effect on
the Company's financial position.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Summary
Historical Financial Data" included herein and the Consolidated Financial
Statements and Notes thereto of the Company incorporated herein by reference.
The following information contains forward-looking statements which involve
certain risks and uncertainties. See "Forward-Looking Statements."
RESULTS OF OPERATIONS
FORTY WEEKS ENDED MARCH 8, 1997 COMPARED WITH FORTY WEEKS ENDED MARCH 9, 1996
Net sales for the forty weeks ended March 8, 1997 were $2,457.3 million, an
increase of $324.8 million, or 15.2%, over net sales of $2,132.5 million for
the forty weeks ended March 9, 1996. The substantial increase in year-to-date
net sales was attributable to the acquisition of CBC on July 22, 1995, with
the forty week period in fiscal 1996 reflecting only thirty-three weeks of
CBC's operations.
Gross profit for the forty weeks ended March 8, 1997 was $1,251.4 million,
or 50.9% of net sales, compared with gross profit of $1,044.9 million, or
49.0% of net sales, for the forty weeks ended March 9, 1996. These
improvements resulted from synergies realized through continuing integration
of existing and acquired operations and favorable mix changes to higher-margin
branded products. These factors, along with higher selling prices, more than
offset the effect of higher ingredient costs experienced in fiscal 1997.
Selling, delivery and administrative expenses were $1,036.3 million,
representing 42.2% of net sales, for the forty week period ended March 8,
1997, compared to $914.0 million, representing 42.9% of net sales, for the
prior year forty week period. Continued emphasis on cost control, integration
synergies and higher selling prices resulted in improved selling, delivery and
administrative expenses as a percent of net sales for the combined operation
for the forty week period ended March 8, 1997.
Based upon these factors, operating income for the forty week period ended
March 8, 1997 was $136.1 million, an increase of $81.2 million, or 147.8%,
from the prior year's forty week operating income of $54.9 million. Operating
income was 5.5% of net sales for the forty weeks ended March 8, 1997 compared
to 2.6% of net sales in the prior year.
Interest expense for the forty weeks ended March 8, 1997 was $18.0 million,
a $4.7 million decrease from the prior year. The lower expense reflects lower
average borrowing levels and interest rates during the period.
The effective tax rates of 43.1% and 51.4% in the forty week periods ended
March 8, 1997 and March 9, 1996, respectively, reflect the non-deductibility
of intangible asset amortization.
Reflecting the improved operations, net income for the forty week period
ended March 8, 1997 improved to $67.5 million, or $1.78 per share, from $16.0
million, or $.47 per share, for the prior year, an earnings per share
improvement of 279%.
FISCAL 1996 COMPARED WITH FISCAL 1995
Net sales for the fifty-two weeks ended June 1, 1996 were $2,878.2 million,
a $1,655.4 million increase over net sales of $1,222.8 million for the fifty-
three weeks ended June 3, 1995. This substantial increase was attributable to
the acquisition of CBC on July 22, 1995, with fiscal 1996 results reflecting
forty-five weeks of CBC's operations. Excluding the impact of the acquisition
and the additional week in fiscal 1995, net sales increased approximately 5.6%
for fiscal 1996. This increase reflects higher selling prices, offset by some
volume erosion in cake units.
Gross profit for fiscal 1996 was $1,425.0 million, or 49.5% of net sales,
compared to the prior year's gross profit of $591.9 million, or 48.4% of net
sales. This margin improvement resulted from efficiencies of the
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<PAGE>
acquired operations, as well as synergies realized through integration of
existing and acquired operations. Excluding the impact of acquired operations,
cost of products sold reflects substantially higher ingredient and packaging
costs, offset somewhat by higher selling prices.
Selling, delivery and administrative expenses for fiscal 1996 were $1,236.6
million, representing 43.0% of net sales, while the prior year's selling,
delivery and administrative expenses were $501.0 million, or 41.0% of net
sales. This unfavorable variance was attributable to the CBC acquisition, with
the new operations having higher selling and delivery labor and labor related
costs as a percentage of net sales. Selling, delivery and administrative
expenses as a percentage of net sales were consistent with the prior year,
excluding the impact of the acquisition.
Depreciation and amortization for fiscal 1996 was $100.1 million, up from
$33.6 million during fiscal 1995. Property and equipment, as well as
intangibles, obtained in the acquisition of CBC were responsible for this
increased expense.
Based upon these factors, operating income for fiscal 1996 was $78.8
million, an increase of $21.5 million, or 37.5%, from fiscal 1995's operating
income of $57.3 million. Operating income was 2.7% of net sales in fiscal 1996
compared to 4.7% of net sales in the prior year. Included in fiscal 1996
operating income were other charges of $9.5 million ($5.7 million and $.16 per
share on an after-tax basis) resulting from a payment due a union-administered
multi-employer pension plan which failed.
Interest expense was $29.3 million for fiscal 1996, up $11.6 million, or
65.2%, from the prior year's expense of $17.7 million, with the increase
attributable to higher borrowings to finance the acquisition of CBC.
The fiscal 1996 effective tax rate of 51.4%, as well as the fiscal 1995 rate
of 47.8%, reflects the nondeductibility of amortization of various
intangibles.
Net income for fiscal 1996 was $24.5 million, or $.70 per share, compared to
$20.7 million, and $1.05 per share, the prior year. The per share earnings
decline was the result of increased interest expense and the additional shares
issued in conjunction with the CBC acquisition.
FISCAL 1995 COMPARED WITH FISCAL 1994
Net sales for the fifty-three weeks ended June 3, 1995 were $1,222.8
million, an increase of $80.1 million, or 7.0%, over net sales of $1,142.7
million for the fifty-two weeks ended May 28, 1994. This increase primarily
reflects the impact of acquisitions, unit volume gains for bread and the
additional week included in fiscal 1995.
Gross profit for fiscal 1995 was $591.9 million, or 48.4% of net sales,
compared to the prior year's gross profit of $561.5 million, or 49.1% of net
sales, a $30.4 million increase but representing a lower percentage of net
sales. This margin decline was primarily attributable to higher labor and
overhead costs associated with acquisitions, as well as slightly higher
commodity costs for certain key ingredients.
Selling, delivery and administrative expenses for fiscal 1995 were $501.0
million, or 41.0% of net sales, compared with $473.6 million, or 41.4% of net
sales, in fiscal 1994. This favorable variance on a percentage of net sales
basis resulted from labor and labor related efficiencies gained during fiscal
1995. Fiscal 1994 also included higher delivery costs associated with a two-
month transport drivers strike at one bakery.
Depreciation and amortization increased $2.0 million in fiscal 1995 related
to the completion of the Jacksonville, Florida bakery and acquisitions.
Based upon these factors, operating income for fiscal 1995 was $57.3
million, an increase of $10.4 million, or 22.2%, from fiscal 1994's operating
income of $46.9 million. Fiscal 1994 reflects $9.4 million ($5.7 million after
tax, or $.28 per share) of other charges, which includes costs related to a
plant disposal of $6.7 million and
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<PAGE>
environmental matters of $2.7 million. Operating income was 4.7% of net sales
in fiscal 1995 compared to 4.1% of net sales in fiscal 1994.
Interest expense was $17.7 million in fiscal 1995, up $3.0 million, or
20.3%, over the prior year's expense of $14.7 million. This increase was
principally attributable to higher interest rates during fiscal 1995, as well
as higher debt levels resulting from an acquisition in the first quarter of
fiscal 1995.
The fiscal 1995 effective tax rate of 47.8% primarily reflects the
nondeductibility of intangibles amortization. The Company's effective tax rate
of 51.2% for fiscal 1994 reflects the passage of the Omnibus Budget
Reconciliation Act of 1993 during the first fiscal quarter. The increase in
the corporate tax rate provided for in the Act raised the fiscal 1994
provision for income taxes by approximately $.8 million, or $.04 per share,
due to the cumulative adjustment of the Company's net deferred tax liability
at May 29, 1993 and the additional current taxes attributable to the fiscal
year ended May 29, 1993. Nondeductible intangibles amortization also
contributed to the higher effective rate in fiscal 1994.
Net income for fiscal 1995 was $20.7 million, or $1.05 per share, up $4.9
million, or 31.4%, from fiscal 1994's $15.8 million, or $.78 per share.
LIQUIDITY AND CAPITAL RESOURCES
Cash generated by operating activities for the forty weeks ended March 8,
1997 was $144.3 million compared to $113.6 million for the forty weeks ended
March 9, 1996. This increase reflects the acquisition of CBC and improved
operations, offset by a net increase in working capital and some reduction in
long-term liabilities. Cash generated by operations during fiscal 1997 was
used to fund capital expenditures of $54.2 million, pay common stock dividends
of $14.8 million and reduce debt by $86.2 million.
Brands is a party to a credit agreement with certain banks (the "Credit
Agreement") which provides for borrowings of up to $350.0 million under a
revolving credit facility which matures on February 25, 2002. As of March 8,
1997, the unused borrowing capacity under the Credit Agreement was $97.0
million. The Credit Agreement contains covenants which, among other matters,
limit the payment of cash dividends on capital stock and capital stock
repurchases after June 4, 1995 to a total of $20.0 million plus 75% of
consolidated net income for the period beginning June 4, 1995 and ending on
the last day of the most recent fiscal quarter. As of March 8, 1997, the
Company had $53.3 million available to pay cash dividends and repurchase
capital stock.
On March 29, 1997, the Company acquired the assets of SFFB. SFFB, which
produces and distributes sourdough bread and rolls throughout northern
California and in the San Diego area, had net sales in calendar year 1996 of
approximately $95 million and employs 1,100 people at five bakery locations.
In addition, in April 1997, the Company acquired the right to use the
trademark "Marie Callender's(R)" in connection with the manufacture,
marketing, distribution and sale of croutons.
For fiscal 1997, the Company anticipates spending approximately $75 million
for capital expenditures, $42 million for the acquisitions described in the
preceding paragraph and $19.9 million to pay dividends on Common Stock. For
fiscal 1998, the Company anticipates cash needs of approximately $157 million,
consisting of $52 million for the Repurchase Transaction (assuming a per share
purchase price of $51.90), $85 million of planned capital expenditures and $20
million of dividends on Common Stock. The Company believes cash flows from
operations and borrowing capacity under the Credit Agreement should be
sufficient to meet all of the Company's currently anticipated cash
requirements for fiscal 1997 and fiscal 1998.
22
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their respective
ages and positions are set forth in the table below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Charles A. Sullivan.................. 62 Chairman of the Board and Chief
Executive Officer of the Company and
Brands
G. Kenneth Baum...................... 67 Director
Leo Benatar.......................... 67 Director
E. Garrett Bewkes, Jr................ 70 Director
Philip Briggs........................ 69 Director
Robert B. Calhoun, Jr................ 54 Director
James R. Elsesser.................... 53 Director
Frank E. Horton...................... 58 Director
William P. Stiritz................... 62 Director
Michael D. Kafoure................... 48 President and Chief Operating Officer
of the Company and Brands
Ray Sandy Sutton..................... 59 Vice President, Corporate Secretary
and General Counsel of the Company and
Brands
H. L. Shetler........................ 64 Executive Vice President of Brands
John F. McKenny...................... 47 Vice President and Corporate
Controller of the Company and Brands
Paul E. Yarick....................... 58 Vice President and Treasurer of the
Company and Brands
</TABLE>
Mr. Sullivan has been the Chairman of the Board and Chief Executive Officer
of the Company and Brands for more than the past five years. He was the
President of the Company and Brands until January 1995. Mr. Sullivan became a
director of the Company in August 1989. He also serves as a director of UMB
Bank, n.a., Sealright Co., Inc. and The Andersons, Inc.
Mr. Baum has been the Chairman of the Board of George K. Baum Group, Inc.
from May 1994 to present. Prior to that, he was the Chairman of the Board of
George K. Baum & Company, an investment company, from 1982 until May 1994. Mr.
Baum serves as a director of H & R Block, Inc., Sealright Co., Inc. and Unitog
Company. Mr. Baum became a director of the Company in April 1988.
Mr. Benatar has been an Associated Consultant for A. T. Kearney, Inc. and
Principal for Benatar & Associates from June 1996 to present. He is the
Chairman of the Board of Engraph, Inc. (a subsidiary of Sonoco Products
Company) and was Senior Vice President of Sonoco Products Company from October
1993 until May 1996. Prior to that, he was the Chairman and Chief Executive
Officer of Engraph, Inc. from 1981 until October 1993. Mr. Benatar serves as a
director of Sonoco Products Company, Schuller Corporation, Mohawk Industries,
Inc., PAXAR Corporation and Aaron Rents, Inc. He was Chairman and director of
the Federal Reserve Bank of Atlanta until January 1996. Mr. Benatar became a
director of the Company in August 1991.
Mr. Bewkes has been a Consultant and Chairman for a number of PaineWebber
mutual funds for more than the past five years. He formerly was the Chairman
of American Bakeries Company. Mr. Bewkes serves as a director of PaineWebber
Group, Inc. and Napro BioPharmaceutical, Inc. Mr. Bewkes became a director of
the Company in August 1991.
Mr. Briggs has been the Chairman of the Board of Empire Blue Cross Blue
Shield since July 1993. For more than two years prior to that, he was Vice-
Chairman and director of Metropolitan Life Insurance Company. Mr. Briggs
became a director of the Company in August 1991.
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<PAGE>
Mr. Calhoun has been the President of the Clipper Capital Corporation since
January 1994. Prior to that, he was the Chief Executive Officer of the Clipper
Group, L.P., from January 1991 to December 1993. Mr. Calhoun serves as a
director of Avondale Mills, Inc., Sterling Chemicals, Hvide Marine and
TravelCenters of America, Inc. Mr. Calhoun became a director of the Company in
May 1991.
Mr. Elsesser has been Vice President and Chief Financial Officer of Ralston
for more than the past five years. Mr. Elsesser became a director of the
Company in July 1995.
Dr. Horton has been the President of The University of Toledo for more than
the past five years. He serves as a member of the Advisory Board of Northwest
Ohio Society Bank & Trust. Dr. Horton became a director of the Company in
September 1992.
Mr. Stiritz has been the Chairman of the Board, Chief Executive Officer and
President of Ralston for more than the past five years. He serves as a
director of Ralcorp Holdings, Inc., Angelica Corporation, Vail Resorts, Inc.,
Reinsurance Group of America, Inc., the May Department Stores Company and Ball
Corporation. Mr. Stiritz became a director of the Company in July 1995.
Mr. Kafoure has been President and Chief Operating Officer of the Company
and Brands since September 1995. Prior to that, he was Senior Vice President
of the Company's Western Division-North from July 1995 to September 1995,
President and Chief Operating Officer of Merico, Inc., a subsidiary of
Campbell-Taggert, Inc., from April 1994 to June 1995, and President and Chief
Operating Officer of the U.S. Bakery Division of Campbell-Taggert, Inc. for
more than two years prior thereto.
Mr. Sutton has been Vice President, Corporate Secretary and General Counsel
of the Company and Brands for more than the past five years.
Mr. Shetler has been Executive Vice President of Brands for more than the
past five years.
Mr. McKenny has been Vice President and Corporate Controller of the Company
and Brands for more than the past five years.
Mr. Yarick has been Vice President and Treasurer of the Company and Brands
for more than the past five years.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, each consisting of
three directors. All directors hold office for a term of three years. Class I
directors hold office until the Annual Meeting of stockholders in 1997, Class
II directors hold office until the Annual Meeting of stockholders in 1998 and
Class III directors hold office until the Annual Meeting of stockholders in
1999, and, in each case, until their successors are duly elected and
qualified. Of the current members of the Company's Board of Directors, two
were nominated by Ralston pursuant to the Shareholder Agreement: Mr. Stiritz
(whose current term expires in 1997) and Mr. Elsesser. In 1996, Mr. Elsesser
was re-elected by the stockholders to serve until 1999.
DESCRIPTION OF CAPITAL STOCK
The following discussion of the Company's Certificate of Incorporation,
Bylaws and Delaware law is qualified in its entirety by the actual terms of
such documents and Delaware law. Copies of the Company's Certificate of
Incorporation, Bylaws and Section 203 of the Delaware General Corporation Law
have been filed with the Commission as exhibits to the Registration Statement.
GENERAL
The Company has the authority to issue 60,000,000 shares of Common Stock of
$.01 par value and 1,000,000 shares of Preferred Stock of $.01 par value (the
"Preferred Stock"). The Company's Board of Directors has authority (without
action by the Company's stockholders) to issue the authorized and unissued
shares of Preferred Stock in one or more series and, within certain
limitations, to determine the voting rights
24
<PAGE>
(including the right to vote as a series on particular matters), preference as
to dividends and in liquidation, conversion, redemption and other rights of
each such series. The ability of the Board of Directors to issue Preferred
Stock, while providing flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring, a majority of the outstanding voting stock of the Company. There
are no shares of Preferred Stock issued or outstanding and the Company has no
present plans to issue any of the Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters to
be voted on by stockholders, including the election of directors. Stockholders
are not entitled to cumulative voting rights, and accordingly, the holders of
a majority of the shares voting for the election of directors can elect the
entire Board if they choose to do so and, in that event the holders of the
remaining shares of Common Stock will not be able to elect any person to the
Board of Directors. Shares of Common Stock held by Ralston are subject to
certain voting restrictions as set forth in the Shareholder Agreement, which,
among other things, requires Ralston to vote its shares of Common Stock in
accordance with the recommendation of the Company's Board of Directors with
respect to the election of Directors. See "Selling Stockholder." Pursuant to
the Company's Bylaws, the number of directors of the Company may be not less
than five nor more than nine, as determined from time to time by the
directors. The number of directors is currently nine. The Company's
Certificate of Incorporation provides that the Board of Directors be divided
into three classes in respect of term of office, each class to contain as near
as may be one-third of the whole number of the Board. At each Annual Meeting
of stockholders, one class of directors is elected to serve until the Annual
Meeting of stockholders held three years next following and until their
successors are elected and qualified. See "Management--Election of Directors."
In the event any vacancy occurs on the Board of Directors, the Bylaws give the
remaining directors the power to fill the vacancy for the balance of the term
of office.
The holders of shares of Common Stock are entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors, in its discretion, from funds legally available therefor and
subject to the prior dividend rights of holders of any shares of Preferred
Stock which may be outstanding. Upon liquidation or dissolution of the
Company, subject to prior liquidation rights of holders of Preferred Stock, if
any, the holders of shares of Common Stock are entitled to receive on a pro
rata basis the remaining assets of the Company available for distribution.
Holders of shares of Common Stock have no preemptive or other subscription
rights, and there are no conversion rights or redemption or sinking fund
provisions with respect to such shares.
APPROVAL OF BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
Generally, pursuant to the Company's Certificate of Incorporation, any
business combination between the Company and a stockholder who beneficially
owns 5% or more of the Company's outstanding voting stock (an "Interested
Stockholder"), which would include Ralston, must be approved by the
affirmative vote of not less than a majority of the Company's outstanding
voting stock held by the stockholders who are not involved in the transaction.
Exceptions to this rule exist for: (1) a business combination that is solely
between the Company and another corporation whose voting stock is 100% owned,
directly or indirectly, by the Company, and (2) a business combination that is
a merger or consolidation and the value of the consideration to be received
per share by holders of Common Stock is not less than the highest per-share
price (with appropriate adjustments for recapitalizations and for stock
splits, stock dividends and like distributions), paid by the Interested
Stockholder in acquiring any of its holdings of Common Stock. Further, the
conditions of the provision may be waived by the Company's Board of Directors
in appropriate circumstances as set forth in the Certificate of Incorporation.
The term "business combination" generally includes: (1) a merger or
consolidation of the Company or a subsidiary with or into an Interested
Stockholder; (2) a sale, lease, exchange, transfer or other disposition to an
Interested Stockholder of all or any substantial part of the assets either of
the Company or of a subsidiary; (3) any merger or consolidation of an
Interested Stockholder with or into the Company or a subsidiary; (4) any sale,
25
<PAGE>
lease, exchange, transfer or other disposition of all or any substantial part
of the assets of an Interested Stockholder to the Company or a subsidiary; (5)
except in certain circumstances, the issuance of any securities of the Company
or a subsidiary to an Interested Stockholder; (6) any recapitalization that
would have the effect of increasing the voting power of an Interested
Stockholder by more than 10%; and (7) any agreement, contract or other
arrangement providing for any of the transactions described above.
In addition, the Company is subject to the provisions of Section 203 of the
Delaware General Corporation Law (the "DGCL"), an anti-takeover law. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner. A "business combination" includes a merger, asset sale
or other transaction resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, own (or within three years prior to the proposed business
combination, did own) 15% or more of the corporations voting stock. The
Company has not opted to elect out of Section 203 of the DGCL.
OTHER PROVISIONS OF THE CERTIFICATE OF INCORPORATION
Any Director of the Company, or the entire Board of Directors, may be
removed from office only for "cause" (as such term is defined in the Company's
Certificate of Incorporation) and only by the affirmative vote of the holders
of a majority of the voting power of all of the shares of the Company entitled
to vote for the election of Directors, voting together as a single class. The
size of the Board of Directors may generally only be increased by majority
vote of the Directors then in office. Newly created directorships resulting
from any such increase in the authorized number of Directors and any vacancies
in the Board of Directors may be filled only by majority vote of the Directors
then in office, even though less than a quorum, or by a sole remaining
Director, and Directors so chosen shall hold office for a term expiring at the
Annual Meeting of stockholders at which the term of the class or classes to
which they have been elected expires.
The Company's Certificate of Incorporation provides that special meetings of
the Company's stockholders may be called only by the Board of Directors, and
the power of the stockholders, or any of them, to call special meetings of the
stockholders is specifically denied. No action required to be taken or which
may be taken at any Annual Meeting or Special Meeting of the stockholders of
the Company may be taken without a meeting, and the power of the stockholders
to consent in writing to the taking of any action is specifically denied.
The affirmative vote of at least 66 2/3% of the shares of the Company then
entitled to be voted in an election of Directors is required to amend or
repeal, or to adopt any provision inconsistent with, the provisions of the
Company's Certificate of Incorporation relating to a classified board as
described under "Common Stock" above or as described in the above two
paragraphs.
TRANSFER AGENT AND REGISTRAR
UMB Bank, n.a., Kansas City, Missouri, is the co-transfer agent and co-
registrar with the Company for the Company's Common Stock.
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1997, by and among the Underwriters named below
for whom Credit Suisse First Boston Corporation, Bear, Stearns & Co. Inc.,
J.P. Morgan Securities Inc., Lehman Brothers Inc. and Salomon Brothers Inc.
are acting as representatives (the "Representatives"), the Company and Ralston
(the "Underwriting
26
<PAGE>
Agreement"), the Underwriters have agreed to purchase from Ralston the
aggregate number of SAILS set forth opposite their names:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SAILS
----------- ---------------
<S> <C>
Credit Suisse First Boston Corporation...................
Bear, Stearns & Co. Inc..................................
J.P. Morgan Securities Inc...............................
Lehman Brothers Inc......................................
Salomon Brothers Inc.....................................
-----------
Total................................................
===========
</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 (other than those SAILS covered by the
overallotment 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 non-defaulting Underwriters
may be increased or the Underwriting Agreement may be terminated.
Ralston has granted to the Underwriters an option, expiring at the close of
business on the 30th day after the date of the SAILS 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 of the
SAILS 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 such additional SAILS as it was obligated
to purchase pursuant to the Underwriting Agreement. To the extent such option
is not exercised in full, subject to the second paragraph below, Ralston may
sell the unexercised portion of up to 633,036 shares of Common Stock pursuant
to this Prospectus.
The Company has been advised by the Underwriters that they propose to offer
the SAILS to the public initially at the offering price set forth on the cover
of the SAILS Prospectus and to certain dealers at such price less a concession
of $ per SAILS, and the Underwriters and such dealers may allow a
discount of $ per SAILS on sales to other dealers. After the initial
public offering, the public offering price and concession and discount may be
changed by the Representatives.
Except as otherwise described herein, the Company, its directors and
officers and Ralston and its wholly owned subsidiaries have agreed not to
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 shares of Common Stock, any options,
warrants or other rights to purchase any Common Stock, or any securities
convertible into or exercisable or exchangeable for shares of Common Stock,
other than (i) the sale of shares of Common Stock by Ralston to the Company
and (ii) options granted and Common Stock issued pursuant to the Company's
existing employee benefit and stock option plans, without the prior written
consent of Credit Suisse First Boston Corporation, for a period of 90 days
after the date of this Prospectus.
27
<PAGE>
The SAILS will be a new issue of securities with no established trading
market. The Underwriters have advised the Company that one or more of them
intends to act as a market maker for the SAILS. However, the Underwriters are
not obligated to do so and may discontinue any market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the SAILS.
Upon the maturity of the SAILS, Ralston has the option to pay cash or
deliver shares of Common Stock pursuant to the terms of the SAILS. For a
description of the terms of such exchange, see the SAILS Prospectus.
The Company and Ralston 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.
In the Shareholder Agreement, the Company agreed, subject to certain
limitations, that it would indemnify Ralston against certain liabilities,
including those under the Securities Act, for any untrue statement of a
material fact or omission or alleged omission of a material fact required to
be made so as to make the statements not misleading, in connection with the
delivery of this Prospectus.
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 the
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 the 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 the
SAILS to be higher than it would otherwise be in the absence of such
transactions.
Certain of the Underwriters and their respective affiliates engage in
transactions with, and perform services for, the Company and Ralston in the
ordinary course of business, including various investment banking services.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Shook, Hardy &
Bacon L.L.P., Kansas City, Missouri.
EXPERTS
The annual consolidated financial statements incorporated by reference in
this Prospectus have been audited by Deloitte & Touche LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon such report given upon the authority of said
firm as experts in accounting and auditing.
28
<PAGE>
- -------------------------------------------------------------------------------
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 THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO 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 THE COMPANY SINCE SUCH DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents
By Reference............................................................. 2
Prospectus Summary........................................................ 3
Summary Historical Financial Data......................................... 6
Forward-Looking Statements................................................ 7
Risk Factors.............................................................. 7
Selling Stockholder....................................................... 10
Use of Proceeds........................................................... 11
Capitalization............................................................ 12
Price Range of Common Stock and Dividends................................. 13
Business.................................................................. 14
Management Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 20
Management................................................................ 23
Description of Capital Stock.............................................. 24
Underwriting.............................................................. 26
Legal Matters............................................................. 28
Experts................................................................... 28
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF INTERSTATE BAKERIES CORPORATION]
5,697,329 Shares
INTERSTATE BAKERIES CORPORATION
Common Stock
(par value $.01 per share)
PROSPECTUS
- -------------------------------------------------------------------------------
<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>
Filing Fee--Securities and Exchange Commission.................. $121,212
Legal Fees...................................................... 100,000
Auditor's Fees.................................................. 27,500
NYSE Listing Fees............................................... 0
Printing and Engraving Fees..................................... 250,000
Transfer Agent & Registrar...................................... 0
Miscellaneous................................................... 5,000
--------
Total....................................................... $503,712
========
</TABLE>
The Company will bear all its filing fees, legal fees, auditors' fees,
transfer agent and registrar fees and travel expenses and will be responsible
for half of the printing fees. Ralston will bear all other expenses in
connection with the sale and distribution of the SAILS.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative, other than by or in
the right of the corporation, by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was serving
at its request in such capacity in another corporation or business
association, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Article Seventh of the Company's Charter provides that the Company shall, to
the fullest extent permitted by Section 145 of the DGCL, indemnify all persons
whom it may indemnify pursuant thereto and shall advance expenses of
litigation to directors and officers in accordance with the procedures and
limitations set forth in the Company's bylaws (the "Bylaws").
The Bylaws generally provide that in any threatened, pending, or completed
actions, suits or proceedings, whether civil, criminal administrative or
investigative (collectively, the "Actions"), other than by or in the right of
the Company, the Company must indemnify any person who is a party or is
threatened to be made a party by reason of the fact that he or she is or was
or has agreed to become a director, officer, employee or agent of the Company,
or is or was serving or has agreed to serve at the request of the Company as a
director, officer, employee or agent of another entity, or by reason of any
action alleged to have been taken or omitted in such capacity (the
"Indemnified Party") against costs, charges and expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such Actions and any appeal therefrom, if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal Action, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any Action by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not meet the required
standard of conduct.
II-1
<PAGE>
The Bylaws further generally provide that in an Action by or in the right of
the Company, the Company must indemnify an Indemnified Party against costs,
charges and expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such Action and any
appeal therefrom, if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification shall be made in respect of any claim
as to which the Indemnified Party shall have been adjudged to be liable to the
Company for gross negligence or misconduct in the performance of his or her
duty to the Company unless and only to the extent that the Court of Chancery
of Delaware or the court in which such action was brought shall determine
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such costs, charges and expenses which the court shall deem
proper.
The Bylaws contain other specific provisions regarding matters such as the
avoidance by the Company of the indemnification obligations if the applicable
standards of conduct are not met, the advancement of expenses to an
Indemnified Party and the inability of the Company to amend or repeal the
Bylaws to adversely affect or deny to an Indemnified Party any rights he or
she may be entitled to under the Bylaws.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit.
As permitted by Section 102(b)(7) of the DGCL, the Company's Charter
includes a provision that limits a director's personal liability to the
Company or its stockholders for monetary damages for breaches of his or her
fiduciary duty as a director. Article Eighth of the Company's Charter provides
that no director of the Company shall be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty to the
fullest extent permitted by the DGCL.
The Company maintains insurance policies under which its directors and
officers are insured, within the limits and subject to the limitations of the
policies, against expenses in connection with the defense of actions, suits or
proceedings, and certain liabilities that might be imposed as a result of such
actions, suits or proceedings, to which they are parties by reason of being or
having been directors or officers of the Company.
In the Underwriting Agreement, the Underwriters have agreed to indemnify the
Company and its officers, directors and controlling persons against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of Interstate Bakeries
Corporation, as amended (incorporated herein by reference to
Exhibit 3.1 to the Annual Report on Form 10-K of Interstate
Bakeries Corporation filed on August 30, 1995 (the "1995 10-K").
3.2 Restated Bylaws of Interstate Bakeries Corporation (incorporated
herein by reference to Exhibit 3.2 to the Annual Report on Form
10-K of Interstate Bakeries Corporation filed on August 30, 1991
(the "1991 10-K")).
5.1 Opinion of Shook, Hardy & Bacon L.L.P.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Shook, Hardy & Bacon L.L.P. (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature pages hereto).*
99.1 Employment Agreement, dated as of March 1, 1989, by and among
Interstate Bakeries Corporation, Interstate Brands Corporation and
Charles A. Sullivan (incorporated herein by reference to Exhibit
10.2 to the Registration Statement on Form S-1 of Interstate
Bakeries Corporation, File No. 33-40830 (the "Form S-1")).
99.2 Memorandum of Agreement, dated as of May 16, 1991, by and among
Interstate Bakeries Corporation, Interstate Brands Corporation and
Charles A. Sullivan (incorporated herein by reference to Exhibit
10.4 to the Form S-1).
99.3 Restated Memorandum of Agreement dated as of July 22, 1992 by and
among Interstate Bakeries Corporation, Interstate Brands
Corporation and Charles A. Sullivan (incorporated herein by
reference to Exhibit 10.5 to the Annual Report on Form 10-K of
Interstate Bakeries Corporation filed on August 20, 1992).
99.4 Shareholder Agreement by and among Interstate Bakeries
Corporation, Ralston Purina Company and VCS Holding Company dated
July 22, 1995.*
99.5 Stock Repurchase Agreement by and among Ralston Purina Company,
VCS Holding Company and Interstate Bakeries Corporation dated
April 29, 1997.*
99.6 Form of Letter Agreement between Interstate Bakeries Corporation
and Ralston Purina Company.*
99.7 Section 203 of the Delaware General Corporation Law.*
</TABLE>
- --------
* Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
herein or therein. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or
II-3
<PAGE>
furnished to the Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The Company hereby undertakes that, for purposes of determining any
liability under the Act, each filing of the Company's annual report pursuant
to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Exchange Act) that is incorporated by reference in this
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.
(c) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company 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 Company 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.
(d) The Company 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-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE ACT, THE COMPANY 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 REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
KANSAS CITY, STATE OF MISSOURI, ON JULY 21, 1997.
Interstate Bakeries Corporation
/s/ Charles A. Sullivan
By: _________________________________
Name: Charles A. Sullivan
Title: Chairman of the Board
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and July 21, 1997
____________________________________ Chief Executive Officer
Charles A. Sullivan (Principal Executive
Officer)
* Director July 21, 1997
____________________________________
G. Kenneth Baum
* Director July 21, 1997
____________________________________
Leo Benatar
** Director July 21, 1997
____________________________________
E. Garrett Bewkes, Jr.
** Director July 21, 1997
____________________________________
Philip Briggs
* Director July 21, 1997
____________________________________
Robert B. Calhoun, Jr.
** Director July 21, 1997
____________________________________
Frank E. Horton
* Director July 21, 1997
____________________________________
William P. Stiritz
* Director July 21, 1997
____________________________________
James R. Elsesser
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Vice President and Treasurer July 21, 1997
____________________________________ (Principal Financial
Paul E. Yarick Officer)
* Vice President and Corporate July 21, 1997
____________________________________ Controller (Principal
John F. McKenny Accounting Officer)
</TABLE>
- --------
*Executed by Ray Sandy Sutton as attorney-in-fact for the named individuals
pursuant to a power of attorney dated May 29, 1997 and filed with the
Securities and Exchange Commission with the initial filing of this
Registration Statement on May 29, 1997.
**Executed by Ray Sandy Sutton as attorney-in-fact for the named individuals
pursuant to a power of attorney dated July 3, 1997 and filed with the
Securities and Exchange Commission with the filing of Amendment No. 1 to
this Registration Statement on July 3, 1997.
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of Interstate Bakeries
Corporation, as amended (incorporated herein by reference to
Exhibit 3.1 to the Annual Report on Form 10-K of Interstate
Bakeries Corporation filed on August 30, 1995). n/a
3.2 Restated Bylaws of Interstate Bakeries Corporation
(incorporated herein by reference to Exhibit 3.2 to the 1991
10-K). n/a
5.1 Opinion of Shook, Hardy & Bacon L.L.P.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Shook, Hardy & Bacon L.L.P. (included in Exhibit
5.1). n/a
24.1 Power of Attorney (included on signature pages hereto). n/a
99.1 Employment Agreement, dated as of March 1, 1989, by and among
Interstate Bakeries Corporation, Interstate Brands Corporation
and Charles A. Sullivan (incorporated herein by reference to
Exhibit 10.2 to the Form S-1). n/a
99.2 Memorandum of Agreement, dated as of May 16, 1991, by and among
Interstate Bakeries Corporation, Interstate Brands Corporation
and Charles A. Sullivan (incorporated herein by reference to
Exhibit 10.4 to the Form S-1). n/a
99.3 Restated Memorandum of Agreement dated as of July 22, 1992 by
and among Interstate Bakeries Corporation, Interstate Brands
Corporation and Charles A. Sullivan (incorporated herein by
reference to Exhibit 10.5 to the Annual Report on Form 10-K of
Interstate Bakeries Corporation filed on August 20, 1992). n/a
99.4 Shareholder Agreement by and among Interstate Bakeries
Corporation, Ralston Purina Company and VCS Holding Company
dated July 22, 1995. *
99.5 Stock Repurchase Agreement by and among Ralston Purina Company,
VCS Holding Company and Interstate Bakeries Corporation dated
April 29, 1997. *
99.6 Form of Letter Agreement between Interstate Bakeries
Corporation and Ralston Purina Company. *
99.7 Section 203 of the Delaware General Corporation Law *
</TABLE>
- --------
*Previously filed.
II-7
<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 5.1
July 21, 1997
Interstate Bakeries Corporation
12 East Armour Boulevard
Kansas City, MO 64111
Gentlemen:
We have acted as counsel to Interstate Bakeries Corporation, a Delaware
corporation (the "Company"), in connection with the preparation of the
registration statement (as amended, the "Registration Statement") on Form S-3
under the Securities Act of 1933, as amended (the "Act"), with respect to the
registration of the shares of common stock, par value $.01 per share (the
"Shares"), that are exchangeable at the option of Ralston Purina Company, a
Missouri corporation, upon the maturity of the Exchangeable Notes due 2000
offered by Ralston pursuant to Ralston's registration statement on Form S-3
under the Act.
For purposes of this opinion, we have examined and are familiar with
originals (or copies certified or otherwise identified to our satisfaction as
being true reproductions of originals) of (i) the Registration Statement; (ii)
the Company's Certificate of Incorporation, as amended; (iii) the Bylaws of the
Company, as amended; and (iv) such other documents, corporate records and
instruments as we have considered necessary or appropriate for purposes of this
opinion.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies. As to any facts material to this
opinion which we did not independently establish or verify, we have relied upon
oral or written statements and representation of officers and other
representatives of the Company and others.
Based on and subject to the foregoing and the qualifications and
limitations set forth below, we are of the opinion that the Shares have been
duly authorized by the Company and are legally issued, fully paid and
nonassessable.
We express no opinion as to the laws of any jurisdiction other than the
General Corporation Law of the State of Delaware. The opinion set forth in this
letter is effective as of the date hereof. No expansion of our opinion may be
made by implication or otherwise. We express no opinions other than as herein
expressly set forth.
<PAGE>
Interstate Bakeries Corporation
July 21, 1997
Page 2
We hereby consent to the reference to the undersigned under the
heading "Legal Matters" in the Prospectus included in the Registration
Statement, and in all amendments thereto, and to the filing of this opinion by
the Company as Exhibit 5.1 to the Registration Statement.
Very truly yours,
/s/ Shook, Hardy & Bacon L.L.P.
SHOOK, HARDY & BACON L.L.P.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 2
Registration Statement No. 333-27961 of Interstate Bakeries Corporation on
Form S-3 of our report dated July 19, 1996, incorporated by reference in the
Annual Report on Form 10-K of Interstate Bakeries Corporation for the year
ended June 1, 1996 and to the reference to Deloitte & Touche LLP under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
Deloitte & Touche LLP
Kansas City, Missouri
July 21, 1997
