INTERSTATE BAKERIES CORP/DE/, S-3, 1997-05-29

INTERSTATE BAKERIES CORP/DE/
S-3, 1997-05-29
BAKERY PRODUCTS

Previous: HIGH YIELD PLUS FUND INC, NSAR-B, 1997-05-29

Next: PIONEER COMPANIES INC, 8-K, 1997-05-29

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1997

REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------

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
---------------

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. [_]

CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value $400,000,000 *
- -----------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
* Pursuant to Rule 457(i) of the Securities Act, no additional fee is payable
as a fee was carried forward by Ralston Purina Company from a previously
filed Registration Statement (Registration No. 333-2069).

---------------

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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 MAY 29, 1997

LOGO
Shares
INTERSTATE BAKERIES CORPORATION
Common Stock
(par value $.01 per share)

--------

This Prospectus relates to 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 July , 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 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 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 May 28, 1997, the last reported sale price of Common
Stock on the NYSE Composite Tape was $53.50 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 June , 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
<PAGE>

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.

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 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 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 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 March 8, 1997.

RISK FACTORS

See "Risk Factors" for a discussion of certain factors that should be
considered carefully by prospective investors.

5
<PAGE>

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
-------- -------- -------- -------- -------- -------- --------
(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>
- --------
(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

PRICES AND AVAILABILITY 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.

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>

AVAILABILITY AND 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.

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."

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.

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.

8
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Under the Shareholder Agreement, Ralston agreed not to own more than 14.9%
of the Company's voting securities as of July 22, 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 July 22, 2000 is the same as the number
of such outstanding shares at March 8, 1997, under the Shareholder Agreement,
Ralston would be required to dispose of an additional shares of
Common Stock prior to July 22, 2000 ( 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
July 22, 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 delivered by Ralston upon
maturity of the SAILS. As of March 8, 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 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 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 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 March 8, 1997.

Ralston acquired its shares of Common Stock subject to the terms of a
Shareholder Agreement dated July 22, 1995 (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 July 22, 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 July 22, 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 July 22, 2000 and July 22,
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).

9
<PAGE>

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.

Assuming the Company's purchase of 1,000,000 shares of Common Stock from
Ralston in the Repurchase Transaction had been completed as of March 8, 1997,
Ralston would have owned 43.5% 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
July 22, 2000 remains the same as the number of outstanding shares at March 8,
1997, under the Shareholder Agreement Ralston would be required to dispose of
an additional shares of Common Stock prior to July 22, 2000 (
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.

10
<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 $51.90 per share (based on the last reported sales price of the
Common Stock on the NYSE Composite Tape on May 28, 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 $290.9
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) (77.5)
------ ------
Total stockholders' equity............................ $514.0 $462.1
------ ------
Total capitalization...................................... $753.0 $753.0
====== ======
Long-term debt as a percentage of total capitalization.... 31.7% 38.6%
</TABLE>
- --------
(1) Consisting of 1,537,000 shares actual and 2,537,000 shares pro forma for
the Repurchase Transaction.

11
<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 1997, 1996 and 1995:

<TABLE>
<CAPTION>
FISCAL 1997 CASH
QUARTER HIGH LOW DIVIDEND
- ----------- ------- ------- --------
<S> <C> <C> <C>
First.................................................. $30.125 $25.500 $.125
Second................................................. 45.250 29.625 .135
Third.................................................. 51.000 42.250 .135
Fourth(1).............................................. 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 May 28, 1997

On May 28, 1997, the last reported sale price of the Common Stock on the
NYSE Composite Tape was $53.50 per share. On May 28, 1997, the Common Stock
was held by 5,933 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.

12
<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.

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

13
<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

14
<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.

15
<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. 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.

17
<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.

18
<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

19
<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

20
<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.

21
<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.

22
<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 and Bylaws 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

23
<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 66 2/3% 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,

24
<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

25
<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 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 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.

26
<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.

27
<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....................................................... 9
Use of Proceeds........................................................... 10
Capitalization............................................................ 11
Price Range of Common Stock and Dividends................................. 12
Business.................................................................. 13
Management Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 19
Management................................................................ 22
Description of Capital Stock.............................................. 23
Underwriting.............................................................. 25
Legal Matters............................................................. 27
Experts................................................................... 27
</TABLE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

LOGO

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................... $ 0
Legal Fees....................................................... *
Auditor's Fees................................................... *
NYSE Listing Fees................................................ 0
Printing and Engraving Fees...................................... *
Transfer Agent & Registrar....................................... *
Miscellaneous.................................................... *
-------
Total........................................................ $ *
=======
</TABLE>

The Company will bear all its legal fees, auditors' fees, transfer agent and
registrar fees and travel expenses and will be responsible for half of the
printing fees. In addition, the Company will reimburse Ralston for half of the
filing fees previously paid. Ralston will bear all other expenses in
connection with the sale and distribution of the SAILS.
- --------
*To be filed by amendment.

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.
</TABLE>
- --------
*To be filed by amendment.

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 MAY 29, 1997.

Interstate Bakeries Corporation

/s/ Charles A. Sullivan
By: _________________________________
Name: Charles A. Sullivan
Title: Chairman of the Board
and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RAY SANDY SUTTON HIS TRUE AND LAWFUL ATTORNEY-
IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR THEM
AND IN THEIR NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT AND TO FILE THE SAME WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS
IN CONNECTION THEREWITH, WITH THE COMMISSION, GRANTING UNTO SAID ATTORNEY-IN-
FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT
AND THING REQUISITE AND NECESSARY TO BE DONE, AS FULLY TO ALL INTENTS AND
PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL
THAT SAID ATTORNEY-IN-FACT AND AGENT, OR HIS SUBSTITUTE OR SUBSTITUTES, MAY
LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.

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>
/s/ Charles A. Sullivan Chairman of the Board and May 29, 1997
____________________________________ Chief Executive Officer
Charles A. Sullivan (Principal Executive
Officer)

/s/ G. Kenneth Baum Director May 29, 1997
____________________________________
G. Kenneth Baum

/s/ Leo Benatar Director May 29, 1997
____________________________________
Leo Benatar

Director
____________________________________
E. Garrett Bewkes, Jr.

Director
____________________________________
Philip Briggs

/s/ Robert B. Calhoun, Jr. Director May 29, 1997
____________________________________
Robert B. Calhoun, Jr.

Director
____________________________________
Frank E. Horton

</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ William P. Stiritz Director May 29, 1997
____________________________________
William P. Stiritz

/s/ James R. Elsesser Director May 29, 1997
____________________________________
James R. Elsesser

/s/ Paul E. Yarick Vice President and Treasurer May 29, 1997
____________________________________ (Principal Financial
Paul E. Yarick Officer)
/s/ John F. McKenny Vice President and Corporate May 29, 1997
____________________________________ Controller (Principal
John F. McKenny Accounting Officer)
</TABLE>

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.
</TABLE>
- --------
*To be filed by amendment.

II-7

<PAGE>

Exhibit 5.1

May 29, 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 (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
May 29, 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 Registration Statement
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
May 28, 1997

<PAGE>

EXHIBIT 99.4

================================================================================

SHAREHOLDER AGREEMENT

by and among

INTERSTATE BAKERIES CORPORATION,

RALSTON PURINA COMPANY

and

VCS HOLDING COMPANY

Dated July 22, 1995

================================================================================
<PAGE>

TABLE OF CONTENTS

Page
<S> <C>
ARTICLE 1 - DEFINITIONS..................................................... 1
Section 1.1 Affiliate................................................ 1
Section 1.2 Applicable Acceptance Period............................. 1
Section 1.3 Associate................................................ 1
Section 1.4 Business Day............................................. 1
Section 1.5 CBC...................................................... 2
Section 1.6 Closing.................................................. 2
Section 1.7 Control.................................................. 2
Section 1.8 Demand Notice............................................ 2
Section 1.9 Demand Registration...................................... 2
Section 1.10 Exchange Act............................................. 2
Section 1.11 First Offer.............................................. 2
Section 1.12 First Registration Rights Agreement...................... 2
Section 1.13 Group.................................................... 2
Section 1.14 IBC...................................................... 2
Section 1.15 IBC Call................................................. 2
Section 1.16 IBC Equity............................................... 2
Section 1.17 IBC Indemnified Party.................................... 2
Section 1.18 IBC Market Price......................................... 3
Section 1.19 IBC Stock................................................ 3
Section 1.20 IBC Securities........................................... 3
Section 1.21 Incidental Notice........................................ 3
Section 1.22 Loss..................................................... 3
Section 1.23 Marketable Number........................................ 3
Section 1.24 Notice of Exercise....................................... 3
Section 1.25 Notice of Intention...................................... 3
Section 1.26 Offered Shares........................................... 3
Section 1.27 Person................................................... 3
Section 1.28 Purchase Agreement....................................... 4
Section 1.29 RAL Stock................................................ 4
Section 1.30 Ralston.................................................. 4
Section 1.31 Ralston Indemnified Party................................ 4
Section 1.32 Registration Statement................................... 4
Section 1.33 RPC...................................................... 4
Section 1.34 SEC...................................................... 4
Section 1.35 Securities Act........................................... 4
Section 1.36 Securities Exchange Act.................................. 4
Section 1.37 Transfer................................................. 4
Section 1.38 VCS...................................................... 4

ARTICLE II - STANDSTILL AND VOTING PROVISIONS............................... 4
Section 2.1 Standstill Covenants..................................... 4
</TABLE>
<PAGE>

Section 2.2 Issuance of IBC Securities............................. 6
Section 2.3 Voting of IBC Equity................................... 6

ARTICLE III - TRANSFERS OF IBC EQUITY.................................... 6
Section 3.1 Restrictions on Transfer............................... 6
Section 3.2 Exceptions to Restrictions............................. 7
Section 3.3 Other Transfers........................................ 7
Section 3.4 Improper Transfer...................................... 7
Section 3.5 Restrictive Legend..................................... 7

ARTICLE IV - RIGHT OF FIRST OFFER....................................... 9
Section 4.1 Sales by Ralston....................................... 9
Section 4.2 Purchase of the Offered Shares......................... 9
Section 4.3 Waiting Period with Respect to Subsequent Transfers.... 10

ARTICLE V - REGISTRATION............................................... 10
Section 5.1 Demand Registration.................................... 10
Section 5.2 Delay of Demand Registration........................... 11
Section 5.3 Incidental Registration................................ 12
Section 5.4 Delay of Incidental Registration....................... 13
Section 5.5 Third Party Registration Rights........................ 13

ARTICLE VI - REGISTRATION EXPENSES...................................... 13
Section 6.1 Registration Expenses.................................. 13

ARTICLE VII - REGISTRATION PROCEDURE..................................... 14
Section 7.1 Ralston Information.................................... 14
Section 7.2 Compliance............................................. 15
Section 7.3 Provision of Prospectuses.............................. 15
Section 7.4 Blue Sky Compliance.................................... 15
Section 7.5 Maintenance of Effectiveness........................... 15
Section 7.6 Listing of IBC Equity.................................. 16
Section 7.7 Stop-Orders............................................ 16

ARTICLE VIII - INDEMNIFICATION AND CONTRIBUTION........................... 16
Section 8.1 Indemnification........................................ 16
Section 8.2 Contribution........................................... 19

ARTICLE IX - CALL RIGHTS................................................ 19
Section 9.1 IBC Call............................................... 19

ARTICLE X - ADDITIONAL COVENANTS....................................... 20
Section 10.1 Maintain Listing or Quotation.......................... 20
Section 10.2 Board of Directors..................................... 20
Section 10.3 No Inconsistent Agreements............................. 20
Section 10.4 Preferred Stock........................................ 21
Section 10.5 Rule 144 and 144A...................................... 21

-ii-

<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 10.6 Maximum Allowed Ownership of IBC Securities............................. 21

ARTICLE XI - MISCELLANEOUS................................................................. 21
Section 11.1 Entire Agreement........................................................ 21
Section 11.2 Headings and Captions................................................... 21
Section 11.3 Choice of Law........................................................... 21
Section 11.4 Venue................................................................... 21
Section 11.5 Notices................................................................. 21
Section 11.6 Amendments.............................................................. 22
Section 11.7 Extended Meanings....................................................... 22
Section 11.8 Assignments............................................................. 22
Section 11.9 Severability............................................................ 23
Section 11.10 Counterparts............................................................ 23
Section 11.11 Remedies Cumulative..................................................... 23
Section 11.12 Binding Agreement....................................................... 23
Section 11.13 Recapitalizations, Exchanges, Etc., Affecting IBC Securities............ 23
Section 11.14 Other Agreements........................................................ 23
Section 11.15 Term; Effectiveness..................................................... 23
Section 11.16 Enforcement............................................................. 24
Section 11.17 Confidentiality......................................................... 24
Section 11.18 Fiduciary Accounts...................................................... 24
</TABLE>

-iii-
<PAGE>

SHAREHOLDER AGREEMENT

THIS SHAREHOLDER AGREEMENT dated July 22, 1995 (the "Agreement"), is made
by and among INTERSTATE BAKERIES CORPORATION, a Delaware corporation ("IBC"),
RALSTON PURINA COMPANY, a Missouri corporation ("RPC") and VCS HOLDING COMPANY,
a Delaware corporation and a wholly-owned subsidiary of RPC ("VCS") (RPC, VCS
and any of their Affiliates (as defined below) which own IBC Equity (as defined
below) are collectively referred to as "Ralston").

WHEREAS, pursuant to that certain Sale and Purchase Agreement dated as of
April 12, 1995 (the "Purchase Agreement") by and among IBC, RPC, VCS and
CONTINENTAL BAKING COMPANY, a Delaware corporation and wholly-owned subsidiary
of VCS ("CBC"), IBC acquired all of the outstanding shares of capital stock of
CBC, par value $100 per share, from VCS in exchange for cash in the amount of
$220,000,000 and 16,923,077 shares of IBC Stock (as defined below); and

WHEREAS, the parties hereto desire to enter into this Agreement to provide
for certain rights and restrictions with respect to the shares of IBC Equity.

NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth herein, each of IBC and Ralston agree as follows:

ARTICLE I
DEFINITIONS

As used in this Agreement, and unless the context requires a different meaning,
the following terms (whether used in the singular or plural) have the meanings
indicated. Any term used and not defined herein has the meaning set forth in
the Purchase Agreement.

Section 1.1 Affiliate. An "Affiliate" of a Person, means any other
Person that directly or indirectly through one or more intermediaries Controls,
is controlled by or is under common control with such Person. When used in this
Agreement with respect to IBC, the term applies only to other Persons that are
Affiliates, as so defined, as of the date of this Agreement.

Section 1.2 Applicable Acceptance Period. "Applicable Acceptance Period"
has the meaning set forth in Section 4.1(c) of this Agreement.

Section 1.3 Associate. An "Associate" of a Person, means any of such
Person's directors, officers, shareholders, representatives, trustees,
employees, attorneys, advisors, or agents.

Section 1.4 Business Day. "Business Day" means any day other than a
Saturday, Sunday or legal holiday for commercial banks in Kansas City, Missouri.
<PAGE>

Section 1.5 CBC. "CBC" has the meaning set forth above in the recitals
to this Agreement.

Section 1.6 Closing. "Closing" means the closing of the transactions
contemplated by the Purchase Agreement.

Section 1.7 Control. "Control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession of the
power, directly or indirectly, (a) to elect a majority of the board of directors
(or equivalent governing body) of the entity in question; or (b) to direct or
cause the direction of the management and policies of or with respect to the
entity or assets in question, whether through ownership of securities, by
contract or otherwise.

Section 1.8 Demand Notice. "Demand Notice" has the meaning set forth in
Section 5.1 of this Agreement.

Section 1.9 Demand Registration. "Demand Registration" has the meaning
set forth in Section 5.1 of this Agreement.

Section 1.10 Exchange Act. "Exchange Act" means the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder.

Section 1.11 First Offer. "First Offer" has the meaning set forth in
Section 4.1(a) of this Agreement.

Section 1.12 First Registration Rights Agreement. "First Registration
Rights Agreement" has the meaning set forth in Section 5.5 of this Agreement.

Section 1.13 Group. "Group" means any group of Persons within the meaning
of Section 13(d)(3) of the Exchange Act.

Section 1.14 IBC. "IBC" has the meaning set forth above in the recitals
to this Agreement.

Section 1.15 IBC Call. "IBC Call" means the right of IBC to acquire
certain IBC Equity pursuant to Section 9.1(a) of this Agreement.

Section 1.16 IBC Equity. "IBC Equity" means shares of IBC Stock acquired
by Ralston at the Closing and any other IBC Securities owned, beneficially or of
record, by Ralston at any time during the term of this Agreement.

Section 1.17 IBC Indemnified Party. "IBC Indemnified Party" has the
meaning set forth in Section 8.1(a) of this Agreement.

Section 1.18 IBC Market Price. "IBC Market Price" means the average of
the closing sale prices of the class of IBC Securities being valued on the New
York Stock Exchange or if
<PAGE>

such IBC Securities are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
of the principal national securities exchange on which the security is listed or
admitted to trading, for the twenty (20) trading days which end on the day
immediately prior to the date of the (i) Notice of Exercise delivered pursuant
to an IBC Call; (ii) Notice of Intention; (iii) Demand Notice; or (iv)
Incidental Notice, as the case may be. If the IBC Securities are not listed or
admitted to trading on any national securities exchange, the IBC Market Price
means the last quoted sale price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System or
such other system then in use, for the twenty (20) trading days which end on the
day immediately prior to such date, or, if on any such trading day such IBC
Securities are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by two professional market makers making a
market in such securities, one selected in good faith by the board of directors
of IBC and the other selected in good faith by Ralston. If the IBC Securities
are not publicly held or so listed or publicly traded, IBC Market Price means
the cash price at which a willing seller would sell and a willing buyer would
buy such securities in an arm's-length negotiated transaction without undue time
restraints, as determined in good faith by, an investment banking firm selected
by agreement between IBC and Ralston.

Section 1.19 IBC Stock. "IBC Stock" means the $.01 par value common stock
of IBC.

Section 1.20 IBC Securities. "IBC Securities" means any voting securities
of IBC or its affiliates, including any securities convertible into or
exercisable or exchangeable for any voting securities of IBC.

Section 1.21 Incidental Notice. "Incidental Notice" has the meaning set
forth in Section 5.3(a) of this Agreement.

Section 1.22 Loss. "Loss" has the meaning set forth in Section 8.1(a)(i)
of this Agreement.

Section 1.23 Marketable Number. "Marketable Number" has the meaning set
forth in Section 5.3(b) of this Agreement.

Section 1.24 Notice of Exercise. "Notice of Exercise" has the meaning set
forth in Section 4.1(c) of this Agreement.

Section 1.25 Notice of Intention. "Notice of Intention" has the meaning
set forth in Section 4.1(b) of this Agreement.

Section 1.26 Offered Shares. "Offered Shares" has the meaning set forth
in Section 4.1(b) of this Agreement.
<PAGE>

Section 1.27 Person. "Person" means an individual, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, limited liability company, government (or an agency or
political subdivision thereof) or other entity of any kind.

Section 1.28 Purchase Agreement. "Purchase Agreement" has the meaning set
forth above in the recitals to this Agreement.

Section 1.29 RAL Stock. "RAL Stock" means RPC's Ralston-Ralston Purina
Group Common Stock, $.10 par value per share, or any such other class of common
stock of RPC at any time outstanding.

Section 1.30 Ralston. "Ralston" has the meaning set forth above in the
recitals to this Agreement.

Section 1.31 Ralston Indemnified Party. "Ralston Indemnified Party" has
the meaning set forth in Section 8.1(b) of this Agreement.

Section 1.32 Registration Statement. "Registration Statement" means any
registration statement or comparable document under Section 5 of the Securities
Act through which a public sale or disposition of IBC Securities may be
registered other than a registration statement (a) relating to an Employee
Benefit Plan or similar plan, or a business combination; or (b) on any form that
is not available for a secondary offering.

Section 1.33 RPC. "RPC" has the meaning set forth above in the recitals
to this Agreement.

Section 1.34 SEC. "SEC" means the Securities and Exchange Commission or
other federal agency at the time administering the Securities Act, the Exchange
Act or any successor acts thereto.

Section 1.35 Securities Act. "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations thereunder.

Section 1.36 Securities Exchange Act. "Securities Exchange Act" means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.

Section 1.37 Transfer. "Transfer" with respect to all or any part of the
IBC Equity means to directly or indirectly (whether or not through an
underwriter) offer, sell, convey, distribute, transfer (by merger or otherwise),
assign, devise, exchange, encumber, gift, pledge, hypothecate or otherwise
dispose of such IBC Equity.

Section 1.38 VCS. "VCS" has the meaning set forth above in the recitals
to this Agreement.

ARTICLE II STANDSTILL AND VOTING PROVISIONS
<PAGE>

Section 2.1 Standstill Covenants. Unless specifically requested or
permitted in writing in advance by the Chairman of the Board of IBC or unless
otherwise permitted in this Agreement, Ralston agrees that until the sixth
anniversary date of this Agreement, it will not, directly or indirectly:

(a) acquire, offer to acquire, or agree to acquire by purchase or
otherwise, any IBC Securities except as a result of a stock split, stock
dividend or similar recapitalization by IBC;

(b) except in the ordinary course of business, acquire, offer to
acquire, or agree to acquire by purchase or otherwise, any assets of IBC;

(c) initiate, solicit, propose, seek to effect or negotiate, alone or
with any other Person, (i) any form of business combination transaction
involving IBC or any Affiliate thereof, or (ii) any restructuring,
recapitalization or similar transaction with respect to IBC or any
Affiliate thereof;

(d) initiate, solicit, propose, seek to effect, negotiate, or
announce an intent to make, alone or with any other Person, any tender
offer, exchange offer, merger, consolidation or share exchange for any IBC
Securities, or disclose an intent, purpose, plan or proposal with respect
to IBC, any of its Affiliates or any IBC Securities inconsistent with the
provisions of this Agreement;

(e) make, or in any way participate in, any "solicitation" of
"proxies" (as such terms are defined or used in Regulation 14A under the
Exchange Act) with respect to IBC or any of its Affiliates or become a
"participant" in any "election contest" (as such terms are defined or used
in Rule 14a-11 under the Exchange Act) involving IBC or any of its
Affiliates;

(f) initiate, solicit, or propose the approval of one or more
shareholder proposals with respect to IBC or any of its Affiliates or
induce or attempt to induce any other Person to initiate any such
shareholder proposal;

(g) form, join or in any way participate in a Group with respect to
the IBC Securities;

(h) except as expressly provided herein, seek election to or seek to
place a representative on the board of directors of IBC or any of its
affiliates or seek the removal of any member of the board of directors of
IBC or any of its Affiliates;

(i) except for participation on the board of directors of IBC, act in
concert with any other Person to seek to affect the management or board of
directors of IBC or any of its Affiliates or the business, operations or
affairs of IBC or any of its Affiliates;
<PAGE>

(j) call or seek to have called any meeting of the shareholders of
IBC or any of its Affiliates;

(k) disclose to any third party or in any filing with any
governmental authority any intention, plan or arrangement inconsistent with
any of the foregoing or with the restrictions on transfer set forth in this
Agreement; or

(l) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing,
or advise, assist, encourage or influence any other Person to take any
action with respect to any of the foregoing.

Section 2.2 Issuance of IBC Securities. Notwithstanding anything in
Section 2.1 herein, during the term of this Agreement, if IBC issues any IBC
Securities in a public offering (other than a public offering of Ralston's IBC
Equity) or as consideration in an acquisition, Ralston may purchase in one or
more open market transactions or otherwise that number of shares necessary to
bring its percentage of ownership in IBC to the same level as immediately prior
to such offering or acquisition; provided, however, that Ralston must still
comply with the provisions of Section 10.6.

Section 2.3 Voting of IBC Equity. Ralston agrees that during the term of
this Agreement, with respect to the election of directors of IBC, each class of
IBC Equity owned by Ralston shall be voted (i) "for" the nominees recommended by
the Board of Directors of IBC, provided IBC is in compliance with the terms of
Section 10.2 of this Agreement, (ii) in accordance with the recommendation of
the Board of Directors of IBC on each proposal of a security holder pursuant to
Rule 14a-8 under the Securities Exchange Act, so long as the subject matter of
such proposal does not fall within the proviso hereto, and, (iii) with respect
to all other matters requiring a vote of the IBC Equity, "for" any proposal in
the same proportion as the votes cast "for" such proposal by the holders of the
IBC Securities of the same class (excluding the IBC Equity owned by Ralston),
and "against" any proposal in the same proportion as the votes cast "against"
such proposal by the holders of each such class of IBC Securities (excluding the
IBC Equity owned by Ralston) and that with respect to broker non-votes and
abstentions, each class of IBC Equity owned by Ralston will be voted in the same
proportion as votes deemed "for," "against" or "abstain," giving the effect to
broker non-votes and abstentions as required under the laws and rules then
applicable; provided, however, that Ralston shall retain the right to vote its
IBC Equity in any manner it sees fit with respect to any proposals for (1) the
merger of IBC or any subsidiary of IBC with or into any other corporation, (2)
the sale, lease, exchange, transfer or other disposition of all or substantially
all of the assets of IBC and all of its subsidiaries taken together as a single
business, or (3) the creation of any other class of stock with voting rights.
The provisions of this Section 2.3 shall apply to both the casting of votes at
meetings of shareholders and execution of actions by written consent.

ARTICLE III TRANSFERS OF IBC EQUITY
<PAGE>

Section 3.1 Restrictions on Transfer. During the term of this Agreement,
Ralston agrees that it will not, and it will cause each of its Affiliates who
acquire IBC Equity pursuant to Sections 3.2(c) or 3.3(c) of this Agreement not
to, Transfer any IBC Equity, except as permitted by or in accordance with this
Agreement.

Section 3.2 Exceptions to Restrictions. Subject to all applicable laws,
the restrictions on Transfer set forth in Section 3.1 hereof shall not apply to
any of the following:

(a) a Transfer of some or all of the IBC Equity pro rata to all of
the holders of the RAL Stock as a dividend or distribution or similar
transaction;

(b) a Transfer of some or all of the IBC Equity to an Affiliate of
Ralston, provided that such Affiliate shall agree to the provisions of this
Agreement and Ralston will remain liable for the performance by such
Affiliate of its obligations under this Agreement;

(d) a Transfer of some or all of the IBC Equity in any tender offer,
self-tender, exchange offer, going private transaction or other transaction
involving a Transfer which is recommended to shareholders of IBC by the
board of directors of IBC;

(e) a Transfer of some or all of the IBC Equity in accordance with
Section 5.1 of this Agreement; and

(f) a Transfer of some or all of the IBC Equity allowed under Rule
144 of the Securities Act.

Section 3.3 Other Transfers. In the event Ralston desires to Transfer
the IBC Equity in a manner not specifically permitted under Sections 3.2 of this
Agreement, Ralston may submit a written Notice of Intention (as defined in
Section 4.1 hereof) to IBC. In the event IBC declines to purchase the IBC Equity
described in the Notice of Intention, and if, in the sole and absolute
discretion of IBC, the Chairman of the Board of IBC notifies Ralston in writing
that such Transfer may occur, the Transfer may proceed strictly in accordance
with Ralston's Notice of Intention and with any terms and conditions imposed by
IBC on such Transfer and the transferee.

Section 3.4 Improper Transfer. Any attempt to Transfer any shares of IBC
Equity during the term of this Agreement not in accordance with this Agreement
will be null and void and IBC will not give nor permit the transfer agent of IBC
to give any effect to such attempted Transfer in its stock records.

Section 3.5 Restrictive Legend.
<PAGE>

(a) A copy of this Agreement will be filed with the Secretary of IBC
and kept with the records of IBC. All certificates representing shares of
IBC Equity hereafter issued to or acquired by Ralston, if applicable, (or,
if applicable, its successors in a Transfer pursuant to Section 3.3) will
bear the following legend noted conspicuously on such certificates:

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT ONLY, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED (BY MERGER
OR OTHERWISE) ASSIGNED, DEVISED, EXCHANGED, GIFTED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS SUCH TRANSFER IS EXEMPT
FROM REGISTRATION, AND AN ACCEPTABLE OPINION OF COUNSEL IS DELIVERED
TO IBC WITH REGARD TO SUCH EXEMPTION, OR IS OTHERWISE IN COMPLIANCE
WITH THE ACT AND SUCH STATE SECURITIES LAWS.

THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE SHAREHOLDER AGREEMENT,
DATED JULY 22, 1995. NO TRANSFER OF THESE SHARES WILL BE EFFECTIVE
UNLESS AND UNTIL THE TERMS AND CONDITIONS OF SUCH SHAREHOLDER
AGREEMENT HAVE BEEN COMPLIED WITH IN FULL AND NO PERSON MAY REQUEST
INTERSTATE BAKERIES CORPORATION TO RECORD THE TRANSFER OF ANY SHARES
IF SUCH TRANSFER IS IN VIOLATION OF SUCH SHAREHOLDER AGREEMENT. A COPY
OF THE SHAREHOLDER AGREEMENT IS ON FILE AT THE EXECUTIVE OFFICES OF
INTERSTATE BAKERIES CORPORATION AND WILL BE FURNISHED WITHOUT CHARGE
TO THE HOLDER OF SUCH SHARES UPON WRITTEN REQUEST. THE SHARES
EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON VOTING
PROVIDED FOR IN THE SHAREHOLDER AGREEMENT AND NO VOTE OF SUCH SHARES
THAT CONTRAVENES THE SHAREHOLDER AGREEMENT SHALL BE EFFECTIVE.

(b) Until such time as the IBC Equity has been registered pursuant to
a registration statement under the Securities Act or sold pursuant to Rule
144 of the Securities Act, the certificates representing IBC Equity
(including, without limitation, all certificates issued upon Transfer or in
exchange thereof or substitution therefor) will also bear any legend
required under any other applicable laws, including state securities or
blue sky laws.
<PAGE>

(c) IBC may make a notation on its records or give stop-transfer
instructions to any transfer agents or registrars for the IBC Equity in
order to implement the restrictions set forth in this Article III hereof.

(d) In the event Ralston acquires any other or additional IBC
Securities, Ralston will submit all certificates representing such IBC
Securities to IBC so that the legend or legends required by this Section
3.5 may be placed thereon.

ARTICLE IV RIGHT OF FIRST OFFER

Section 4.1 Sales by Ralston.

(a) Except for Transfers permitted by Section 3.2 (a), (b) or (e),
during the term of this Agreement, Ralston shall not sell any shares of IBC
Equity to any Person unless it has first made an offer (the "First Offer")
to sell such shares to IBC in accordance with this Article IV and such
First Offer shall have been rejected or not accepted within the Applicable
Acceptance Period (as hereinafter defined).

(b) The First Offer to IBC s hall be set forth in the form of a
notice made in writing (the "Notice of Intention") to IBC setting forth (i)
Ralston's desire to make a sale; and (ii) the number of shares of IBC
Equity proposed to be sold (the "Offered Shares").

(c) Upon receipt of the Notice of Intention, IBC will have the right
to purchase the Offered Shares at the IBC Market Price, exercisable by the
delivery of an acceptance in the form of a notice in writing to Ralston by
IBC (the "Notice of Exercise") at any time within twenty (20) calendar days
from the date of receipt of the Notice of Intention (the "Applicable
Acceptance Period"). The right of IBC to purchase IBC Equity will terminate
if such Notice of Exercise is not delivered within Applicable Acceptance
Period. IBC may assign its right to purchase the Offered Shares pursuant to
a specific Notice of Intention, once received by IBC, to any Person, but
may not otherwise assign its rights under this Article IV.

(d) In the event that IBC exercises its right to purchase the Offered
Shares in accordance with Section 4.1(c) hereof, then Ralston must sell the
Offered Shares to IBC at the IBC Market Price within twenty (20) days from
the date of receipt of the Notice of Exercise delivered by IBC, subject to
receipt of any required material third-party or governmental approvals,
compliance with applicable laws and the absence of any injunction or
similar legal order preventing such transaction.

Section 4.2 Purchase of the Offered Shares. In the event IBC rejects the
First Offer or fails to deliver a Notice of Exercise within the Applicable
Acceptance Period, then Ralston may (a) proceed with the Transfer pursuant to
Articles V, VI, VII and VIII hereof, if applicable, or (b) otherwise sell such
Offered Shares to transferees who agree to be bound by the terms and conditions
of this Agreement, in the case of a rejection, within ninety (90) days after the
delivery
<PAGE>

of such rejection or, in the case of a failure to deliver a Notice of Exercise,
within ninety (90) days after the expiration of the Applicable Acceptance
Period, subject to the other terms and conditions of this Agreement.

Section 4.3 Waiting Period with Respect to Subsequent Transfers. In the
event that IBC does not deliver a Notice of Exercise within the Applicable
Acceptance Period and Ralston does not sell the Offered Shares, then Ralston may
not offer to sell any additional IBC Equity (other than the Offered Shares) for
a period of ninety (90) days from the expiration of the Applicable Acceptance
Period.

ARTICLE V REGISTRATION

Section 5.1 Demand Registration.

(a) During the term of this Agreement, upon Ralston's written request
specifying the intended manner of disposition (a "Demand Notice"), IBC will
use its best efforts to prepare and file with the SEC, as expeditiously as
possible, a Registration Statement on an available form for which IBC then
qualifies and which legal counsel for IBC deems appropriate and which form
is available for the sale of IBC Equity in accordance with the intended
method of distribution thereof to permit an offering of some or all of the
shares of IBC Equity then held by Ralston and use its best efforts to cause
such registration statement to become effective (a "Demand Registration");
provided, however, that with respect to proposed dispositions of IBC Equity
to shareholders of Ralston, Ralston and IBC will cooperate and use their
respective reasonable best efforts to obtain a "no-action letter" from the
SEC allowing such dispositions without registration.

(b) A Demand Registration will not be deemed to have occurred until
it has become effective under the Securities Act (unless Ralston delivers a
Demand Notice and subsequently withdraws the Demand Notice, in which case
such a Demand Registration will be deemed to have occurred unless Ralston
agrees to pay all reasonable out-of-pocket expenses associated with such
registration actually incurred by IBC); provided, however, that if, after a
Demand Registration has become effective, the offering of IBC Equity
pursuant to such Demand Registration is prohibited by any stop-order,
injunction or other order or requirement of the SEC or other governmental
agency or court, such Demand Registration will be deemed not to have
occurred (unless such prohibition on the sale of the IBC Equity is based on
actions or omissions of Ralston, in which case such a Demand Registration
will be deemed to have occurred unless Ralston agrees to pay all reasonable
out-of-pocket expenses associated with such registration actually incurred
by IBC).

(c) IBC will only be obligated to effect a total of five (5) Demand
Registrations under Section 5.1 hereof and shall not be obligated under
Section 5.1 hereof to effect more than one (1) Demand Registration in any
twelve-month period (except that
<PAGE>

during each of the twelve-month periods commencing on the date hereof and
on the fourth anniversary of this Agreement, Ralston shall be entitled to
request up to two (2) Demand Registrations); provided, however, that IBC
will not be required to register the IBC Equity pursuant to a Demand Notice
under Section 5.1 hereof if at such time (i) the shares of IBC Equity which
Ralston is requesting to be registered pursuant to Section 5.1 hereof
constitute less than five percent (5%) of such class or series of the
outstanding IBC Securities so requested to be registered or (ii) such
Demand Notice is given within six (6) months after the effective date of
any other registration of any IBC Securities under the Securities Act.

(d) If any Demand Registration involves an underwritten offering, the
first lead underwriter, and, subject to the last sentence of this Section
5.1(d), any other underwriter that will administer the offering will be
selected by Ralston; provided, however, that such underwriter(s) shall be
subject to the approval of IBC which approval shall not be unreasonably
withheld. In the event there is one or more co-managers, the first such co-
manager shall be selected by IBC, provided that such co-manager shall be
subject to the approval of Ralston, which approval shall not be
unreasonably withheld.

(e) If any Demand Registration involves an underwritten offering,
then as many shares of IBC Securities that IBC elects may be included in
such offering on the same terms and conditions as the IBC Equity; provided,
however, that if the managing underwriter(s) advises Ralston and IBC that,
in its judgment, the number of shares proposed to be included in such
offering should be limited, then the total number of shares to be included
in such offering will be determined by the managing underwriter(s) and IBC
shall include in such offering (i) first, all the shares of IBC Equity that
Ralston proposes to sell and (ii) second all the shares of IBC Securities
that IBC proposes to sell. Except as otherwise provided for in this
Agreement or the First Registration Rights Agreement (as hereinafter
defined), no person other than Ralston shall be permitted to offer any IBC
Securities under any Demand Registration pursuant to this Section 5.1
without the prior written consent of Ralston.

Section 5.2 Delay of Demand Registration.

(a) Notwithstanding anything to the contrary in Article V hereof, in
the event that IBC determines in its reasonable judgment that it may be
advisable to delay filing a Registration Statement described in Section 5.1
hereof or, to withdraw such Registration Statement if such Registration
Statement has already been filed, IBC may delay filing such, or withdraw
such previously filed, Registration Statement for a period of not more than
ninety (90) days from the date of receipt of the request for the Demand
Registration if IBC furnishes to Ralston a certificate signed by the
Chairman of the Board of IBC stating that IBC has reasonably determined
that (i) such a filing would adversely affect any proposed financing or
acquisition by IBC or (ii) such a filing would otherwise represent an undue
hardship for IBC; provided, however, that IBC will be responsible for any
reasonable out of pocket costs (excluding any decline in the IBC Market
Price) which arise out of such delay and IBC will, at the request of
Ralston, file or refile, as the case
<PAGE>

may be, such Registration Statement promptly after IBC, in its judgment,
determines that it is no longer advisable to delay filing or to continue
the withdrawal of such Registration Statement.

(b) IBC may not delay filing or refiling, as the case may be, a
Registration Statement pursuant to Section 5.2(a) hereof, if following the
delay IBC would be required to file audited financial statements other than
audited financial statements included in IBC's annual report on Form 10-K,
unless IBC agrees to provide such audited financial statements.

Section 5.3 Incidental Registration.

(a) Right To Include IBC Equity.

(i) If IBC or any other Person at any time proposes to register
any IBC Securities under the Securities Act (other than a registration of
securities in connection with a merger, an acquisition, an exchange offer,
or an Employee Benefit Plan maintained by IBC or its Affiliates or on Form
S-4 or S-8 or any successor or similar form), whether or not for sale for
its own account, in a manner which would permit registration of the IBC
Equity for sale to the public under the Securities Act, it will give
written notice to Ralston (to the extent permitted by such other Person's
current contractual registration rights, if any) of its intention to do so
and of Ralston's rights under this Section 5.3(a)(i), at least thirty (30)
calendar days prior to the anticipated filing date of a Registration
Statement relating to such registration (an "Incidental Notice"). Such
Incidental Notice will offer Ralston the opportunity to include in such
Registration Statement that number of shares of IBC Equity as Ralston may
request. Upon the written request (which request will specify the number of
shares of IBC Equity intended to be disposed of by Ralston pursuant to such
Registration Statement) of Ralston made within ten (10) calendar days after
the receipt of the Incidental Notice, IBC will use its best efforts to
effect the registration under the Securities Act of all shares of IBC
Equity which IBC has been so requested to register; provided, however, that
(A) if such registration involves an underwritten offering, Ralston must
sell its IBC Equity requested to be included in such registration to the
underwriter(s) selected by IBC on the same terms and conditions as apply to
other Persons, including IBC, and (B) if, at any time after receiving a
reply from Ralston to an Incidental Notice, and prior to the effective date
of the Registration Statement filed in connection with such registration,
IBC decides for any reason not to register any shares of IBC Securities,
IBC will notify Ralston and thereupon be relieved of its obligation to
register any IBC Equity in connection with such registration.

(ii) No registration, whether or not effected under Section
5.3(a) hereof will relieve IBC of its obligations to effect Demand
Registrations under Section 5.1 hereof.

(b) Priority in Incidental Registrations. If a registration pursuant
to Section 5.3(a) hereof involves an underwritten offering and the managing
underwriter advises
<PAGE>

IBC in writing, that, in its opinion, the number of IBC Securities intended
to be included in such Registration Statement exceeds the largest number of
IBC Securities which can be sold without having an adverse effect on such
offering, including the price at which such securities can be sold or, if
in a non-underwritten offering, IBC determines, in its reasonable
discretion, to limit the number of securities to be sold, (in either case,
the "Marketable Number"), IBC will include in such Registration Statement
(i) first, all of the IBC Securities IBC or the Person referred to in the
first sentence of Section 5.3(a)(i) proposes to sell for its own account,
(ii) second, all of the IBC Securities requested to be included by holders
of IBC Securities pursuant to Section 3 of the First Registration Rights
Agreement, (iii) third, the IBC Securities requested to be included by
Ralston pursuant to Section 5.3(a) hereof and (iv) fourth, the securities
requested to be included by other Persons (but if the number of securities
to be registered pursuant to clause (iv) together with the number of
securities to be included in such registration pursuant to clauses (i),
(ii) and (iii) of this Section 5.3(b) exceeds the Marketable Number, the
number of securities of Persons to be registered pursuant to clause (iv)
shall be allocated pro rata among such Persons on the basis of the relative
number of IBC Securities each such Person has requested to be included in
such registration).

Section 5.4 Delay of Incidental Registration. Notwithstanding anything
to the contrary in this Article V, in the event that IBC determines in its
reasonable judgment that it may be advisable to delay filing a Registration
Statement described in Section 5.3 hereof or, to withdraw such Registration
Statement if such Registration Statement has already been filed, IBC may delay
filing such, or withdraw such previously filed, Registration Statement in
accordance with the provisions of Section 5.3(a)(i) hereof.

Section 5.5 Third Party Registration Rights. The provisions of this
Article V are in all cases subject to the contractual registration rights
granted by that certain Registration Rights Agreement dated July 23, 1991 (the
"First Registration Rights Agreement") by and among IBC, Mezzanine Investment
Limited Partnership-8, 1987 Merchant Investment Partnership, Merchant LBO Inc.
and GKB IX, L.P. IBC hereby represents and warrants that the First Registration
Rights Agreement is the only agreement entered into by IBC or any of its
Associates or Affiliates governing the registration of shares of IBC Securities.
IBC will not extend, amend or waive any provisions of the First Registration
Rights Agreement and will not grant any additional registration rights to any
other Person which could limit or restrict the registration rights granted
Ralston pursuant to this Agreement.

ARTICLE VI REGISTRATION EXPENSES

Section 6.1 Registration Expenses.

(a) Subject to Section 5.1(b) of this Agreement, all expenses
incident to IBC's performance of or compliance with Articles V and VII of
this Agreement to effect five (5) Demand Registrations will be borne by
IBC, including, without limitation:
<PAGE>

(i) all federal registration and filing fees;

(ii) subject to Section 7.4, fees and expenses of compliance
with securities or blue sky laws; provided, however, that IBC will in no
event be obligated to pay the fees and disbursements of counsel for the
underwriters or Ralston in connection with blue sky qualifications of the
IBC Equity under the laws of such jurisdictions as the managing
underwriter(s) may designate;

(iii) printing, messenger, telephone and delivery expenses;

(iv) fees and disbursements of legal counsel for IBC;

(v) fees and disbursements of all independent certified public
accountants of IBC;

(vi) NASD fees and disbursements of the underwriters; provided,
however, that in all cases Ralston will pay all costs of discounts,
commissions, spreads or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to the
distribution of the IBC Equity being sold by Ralston;

(vii) fees and expenses of other Persons retained by IBC; and

(viii) listing or quotation fees and expenses required to be made
pursuant to Section 7.6 hereof in connection with the Registration
Statement.

(b) Each of IBC and Ralston will pay its own internal expenses
(including, without limitation, all salaries and expenses of its officers
and employees performing legal or accounting duties), the expenses of its
annual audit, rating agency fees and fees and expenses of any Person,
including special experts retained by IBC or Ralston, respectively.

ARTICLE VII REGISTRATION PROCEDURE

Section 7.1 Ralston Information. Ralston will provide IBC with such
information about Ralston and the intended manner of distribution of IBC Equity
and otherwise cooperate with IBC and the underwriter(s) as may be necessary in
the reasonable opinion of IBC to satisfy any obligation of IBC under this
Agreement to register the IBC Equity under federal or state securities laws and
otherwise take actions related thereto. In the event of the failure of Ralston
to comply with the requirements of the preceding sentence IBC may delay filing
such, and withdraw such previously filed, Registration Statement. IBC will file
or refile, as the case may be, such Registration Statement promptly following
compliance with such requirements by Ralston; provided, however, that Ralston
will be responsible for any reasonable out of pocket costs which arise out of
such non-compliance. Ralston will immediately notify IBC upon discovery that
any information provided by Ralston which is included in the prospectus that is
<PAGE>

included in a Registration Statement, as then in effect, is untrue in any
material respect, or omits to state any material fact required to be stated
therein or to make the information stated therein not misleading in the light of
the circumstances under which it is presented.

Section 7.2 Compliance. Each of Ralston and IBC will comply with all
rules and regulations of the SEC and applicable state securities or blue sky
laws governing the manner of sale of securities in connection with its Transfer
of any of the IBC Equity pursuant to any Registration Statement.

Section 7.3 Provision of Prospectuses.

(a) IBC will furnish to Ralston such number of copies of a summary
prospectus or other prospectus, including a prospectus subject to
completion in conformity with the requirements of the Securities Act, and
such other documents as Ralston may reasonably request in writing, in order
to facilitate the public sale or other disposition of the IBC Equity
included in a Registration Statement.

(b) At any time when a sale or other disposition of IBC Equity
pursuant to a Registration Statement is subject to a prospectus delivery
requirement, IBC will notify Ralston of the occurrence of any event that
causes the prospectus included in such Registration Statement, as then in
effect, to include an untrue statement of a material fact or to omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing and IBC will use its best efforts, as expeditiously as
possible, to either amend the prospectus or otherwise take any actions so
that use of the previous prospectus may be legally resumed. Upon receipt of
such a notice, Ralston will immediately discontinue all sales or other
dispositions of IBC Equity pursuant to the Registration Statement. Ralston
may resume such sales or dispositions only upon receipt of an amended
prospectus or after Ralston is advised by IBC that the use of the previous
prospectus may be legally resumed.

Section 7.4 Blue Sky Compliance. IBC will use its best efforts to (a)
register or qualify the IBC Equity included in a Registration Statement under
the securities or blue sky laws of such jurisdictions within the United States
as Ralston reasonably requests and (b) do any and all other acts that may be
reasonably necessary or advisable to enable Ralston to consummate the public
sale or disposition of such securities in such jurisdictions; provided, however,
that IBC is not required to consent to, or take any action that would subject it
to, general service of process or taxation in any jurisdiction where it is not
then so subject, nor qualify to do business in any jurisdiction where it is not
then so qualified.

Section 7.5 Maintenance of Effectiveness. IBC will use its best efforts
to prepare and file promptly with the SEC such amendments and supplements to any
Registration Statement, and the prospectus used in connection therewith, as may
be necessary to keep such Registration Statement continuously effective and in
compliance with the Securities Act until the one hundred twentieth (120th) day
following the date on which such Registration Statement becomes effective, or
until all IBC Equity included in such Registration Statement has been sold,
<PAGE>

whichever is earlier; provided, however, that IBC will have no obligation under
this Section 7.5 to keep effective any Registration Statement during the period
following any date on which IBC would be required to file audited financial
statements other than the date by which IBC is required to file its next annual
report on Form 10-K containing such required audited financial statements.

Section 7.6 Listing of IBC Equity. IBC will use its best efforts to
cause the IBC Equity when issued to be listed on all securities exchanges on
which any securities issued by IBC are then listed, or quoted on all automated
quotation systems on which any such securities of IBC are then quoted,
including, without limitation, entering into appropriate customary agreements
(including a listing application and indemnification agreement in customary
form).

Section 7.7 Stop-Orders. IBC will promptly notify Ralston of (a) the
receipt by IBC of any notification with respect to the issuance by the SEC of
any stop-order or order suspending the effectiveness of any Registration
Statement covering any IBC Equity or the initiation of any proceedings for that
purpose, or (b) the receipt by IBC of any notification with respect to the
limitation, restriction or suspension of the offer or sale of IBC Equity in any
jurisdiction in which the IBC Equity was qualified to be sold, or the initiation
of any proceedings for such purpose. In the event that IBC notifies Ralston of
any such event, Ralston will immediately discontinue all sales or other
dispositions of IBC Equity pursuant to the Registration Statement until such
time that IBC notifies Ralston of the lifting of such stop-order or similar
order; provided, however, that such a stop-order or similar order issued by a
state securities or blue sky administrator will apply only to offers and sales
in such state, unless Ralston is advised otherwise by IBC. IBC, with the
cooperation of Ralston, will use its best efforts to contest any such
proceedings and to obtain the withdrawal of any such order at the earliest
possible date.

ARTICLE VIII INDEMNIFICATION AND CONTRIBUTION

Section 8.1 Indemnification.

(a) Indemnification by Ralston.

(i) Ralston agrees to indemnify and hold harmless IBC, its
Affiliates and Associates (each such Person being hereinafter referred to
as an "IBC Indemnified Party") from and against all losses, claims,
damages, liabilities and expenses (including reasonable costs of
investigation and legal expenses) (each a "Loss") arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or preliminary, final or summary
prospectus covering any IBC Equity, or in any amendment or supplement
thereto, or in any document incorporated by reference into any of the
foregoing or arising out of or based upon any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only if, and only to the
extent, such statement or alleged statement or omission or alleged omission
was made in reliance upon and in conformity with written information
furnished to IBC or its
<PAGE>

representatives by or on behalf of Ralston for use in the preparation of
such Registration Statement, preliminary, final or summary prospectus or
such amendment or supplement thereto, or such document incorporated by
reference. This indemnity will be in addition to any liability which
Ralston may otherwise have. Ralston will also indemnify the underwriter(s),
selling broker(s), dealer manager(s) and similar securities industry
professionals participating in the distribution, their officers and
directors and each Person who Controls such Persons, to the same extent as
provided above with respect to the indemnification of the IBC Indemnified
Party.

(ii) Ralston also agrees to indemnify and hold harmless any IBC
Indemnified Party from and against all Losses arising out of any action or
proceeding brought against any IBC Indemnified Party in connection with the
distribution or proposed distribution of IBC Equity to the holders of RAL
Stock; provided, however, that this Section 8.1(a)(ii) shall not apply to
any Losses for which IBC is responsible as provided in Section 8.1(b) of
this Agreement.

(iii) If any action or proceeding (including any governmental
investigation or inquiry) is brought or asserted against an IBC Indemnified
Party in respect of which indemnity may be sought from Ralston, such IBC
Indemnified Party will promptly notify Ralston in writing of the
commencement of such action and Ralston shall assume the defense thereof
and have primary control over any related suit or proceeding, including the
employment of legal counsel and the payment of all expenses in connection
therewith; provided, however, that the failure of any IBC Indemnified Party
to give notice as provided herein shall not relieve Ralston of its
obligations under this Section 8.1(a) except to the extent that Ralston is
actually materially prejudiced by such failure to give notice. An IBC
Indemnified Party shall have the right to participate in and jointly with
Ralston, to the extent that it may wish, and employ separate counsel
reasonably satisfactory to such IBC Indemnified Party, provided, however,
that Ralston will not be liable to such IBC Indemnified Party for any legal
or other expenses subsequently incurred by such IBC Indemnified Party in
connection therewith, unless such IBC Indemnified Party shall have been
advised by counsel that a conflict of interest between such IBC Indemnified
Party and Ralston is likely to exist in respect of such claim.

(b) Indemnification by IBC.

(i) IBC agrees to indemnify and hold harmless Ralston and its
Affiliates and Associates (each such person being hereinafter referred to
as a "Ralston Indemnified Party") from and against all Losses arising out
of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, preliminary, final
or summary prospectus covering any IBC Equity, or in any amendment or
supplement thereto, or in any document incorporated by reference into any
of the foregoing or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, except insofar as
such Losses arise out of or are based solely upon
<PAGE>

any such untrue statement or omission or allegation thereof based upon
written information provided by or on behalf of Ralston for inclusion in
such Registration Statement, preliminary, final or summary prospectus, or
such amendment or supplement thereto, or such document incorporated by
reference; provided, however, that IBC will not be liable in any such case
to the extent that any such Loss arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in any preliminary prospectus if (A) Ralston failed to send or deliver a
copy of the final prospectus with or prior to the delivery of written
confirmation of the sale of the IBC Equity covered by the Registration
Statement to the Person asserting such Loss, and (B) the final prospectus
would have corrected such untrue statement or omission and provided,
further, that IBC will not be liable in any such case to the extent that
any such Loss arises out of or is based upon an untrue statement or
omission in the final prospectus, if such untrue statement or omission is
corrected in an amendment or supplement to the final prospectus and if,
having previously been furnished by or on behalf of IBC with copies of the
final prospectus as so amended or supplemented, Ralston thereafter fails to
deliver such prospectus as so amended or supplemented, prior to or
concurrently with the sale of the IBC Equity to the Person asserting such
Loss who purchased such IBC Equity which is the subject thereof. This
indemnity will be in addition to any liability which IBC may otherwise
have. IBC will also indemnify the underwriter(s), selling broker(s), dealer
manager(s) and similar securities industry professionals participating in
the distribution, their officers and directors and each Person who Controls
such Persons, to the same extent as provided above with respect to the
indemnification of the Ralston Indemnified Party.

(ii) If any action or proceeding is brought against a Ralston
Indemnified Party in respect of which indemnity may be sought against such
Ralston Indemnified Party, Ralston will promptly notify IBC in writing of
the commencement of such action and IBC will assume the defense thereof and
have primary control over any related suit or proceeding, including the
employment of legal counsel and the payment of all expenses in connection
therewith; provided, however, that the failure of any Ralston Indemnified
Party to give notice as provided herein shall not relieve IBC of its
obligations under this Section 8.1(b) except to the extent that IBC is
actually materially prejudiced by such failure to give notice. A Ralston
Indemnified Party shall have the right to participate in and jointly with
IBC, to the extent that it may wish, and employ separate counsel reasonably
satisfactory to such Ralston Indemnified Party, provided, however, that IBC
will not be liable to such Ralston Indemnified Party for any legal or other
expenses subsequently incurred by such Ralston Indemnified Party in
connection therewith, unless such Ralston Indemnified Party shall have been
advised by counsel that a conflict of interest between such Ralston
Indemnified and IBC is likely to exist in respect of such claim.

Section 8.2 Contribution.

(a) If the indemnification provided for in Section 8.1 hereof is
unavailable to an IBC Indemnified Party or Ralston Indemnified Party under
Section 8.1(a) or Section
<PAGE>

8.1(b) hereof (other than by reason of the exceptions provided in Sections
8.1(a) and 8.1(b)) in respect of any Losses referred to therein, then such
indemnifying party, in lieu of indemnifying such indemnified party, will
contribute to the amount paid or payable by such indemnified party as a
result of such Losses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and the
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party, on
the one hand, and the indemnified party, on the other hand, shall be
determined by reference to, among other things, whether the untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied
by such indemnified party and each parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The amount paid or payable by each party as a result of the
Losses referred to above will be deemed to include, subject to the
limitations set forth in Section 8.1(b) hereof, any legal or other fees or
expenses reasonably incurred by such party in connection with investigating
or defending any action or claim.

(b) Notwithstanding the provisions of Section 8.2(a) hereof, no
Person found to be guilty of fraudulent misrepresentation shall be entitled
to contribution from any Person who is not found to be guilty of such
fraudulent misrepresentation.

ARTICLE IX CALL RIGHTS

Section 9.1 IBC Call.

(a) At any time during the one-year period commencing on the fifth
anniversary date of this Agreement, IBC shall have the right to acquire
all, but not less than all of the IBC Equity then owned by Ralston at a
purchase price equal to one-hundred and ten percent (110%) of the IBC
Market Price of the IBC Equity then owned by Ralston (such right to acquire
the IBC Equity is referred to as the "IBC Call"). IBC will notify Ralston
of its election to exercise the IBC Call (a "Call Notice"), which Call
Notice will contain IBC's notice of election to purchase such shares
subject to the IBC Call, the purchase price of the shares subject to the
IBC Call calculated in accordance with this Section 9.1(a), and the date
estimated for consummation of the purchase and sale (not more than thirty
(30) days after the date of the Call Notice). The consummation of the
purchase and sale pursuant to this Section 9.1(a) will take place no later
than thirty (30) days after the date specified in the Call Notice, subject
to the provisions of Section 9.1(b) hereof and subject to any and all
waiting periods required under any applicable laws or regulations. IBC may
assign the right to purchase such shares subject to the IBC Call to any
Person. Any rights to IBC Equity arising pursuant to an IBC Call shall
continue in effect during the term hereof unless extinguished by IBC
pursuant to a written notice to Ralston affirmatively relinquishing such
rights. IBC shall be permitted to relinquish rights to acquire all of the
IBC Equity subject to an IBC Call.
<PAGE>

(b) Upon the consummation of a purchase and sale pursuant to Section
9.1(a) hereof:

(i) Ralston will transfer and deliver to IBC, all of its right,
title and interest in and to the IBC Equity then owned by Ralston, free and
clear of all liens and encumbrances and will deliver to IBC a
certificate(s) evidencing the shares sold duly endorsed, or accompanied by
written instruments of transfer in form satisfactory to IBC, duly executed,
with evidence of payment of any applicable stock transfer taxes.

(ii) IBC or its assignee will deliver to Ralston an amount in
cash equal to the purchase price of the IBC Equity then owned by Ralston as
set forth in the IBC Call.

(c) The IBC Call shall be exercised within one (1) year following the
expiration of the fifth anniversary date of this Agreement, and shall
expire if not exercised by such date.

ARTICLE X ADDITIONAL COVENANTS

Section 10.1 Maintain Listing or Quotation. IBC hereby covenants and
agrees that it shall use its best efforts to maintain its listing of IBC
Securities on any securities exchanges on which its IBC Securities are currently
listed or on which they are listed in the future pursuant to Section 7.6 hereof
and to maintain its quotation of IBC Securities on an any automated quotation
systems on which its IBC Securities are currently quoted or on which they are
quoted in the future pursuant to Section 7.6 hereto.

Section 10.2 Board of Directors. IBC hereby covenants and agrees that (a)
effective as of the Closing, IBC shall nominate and appoint William P. Stiritz
and Mr. James R. Elsesser to the board of directors of IBC, one to hold office
until the 1996 annual meeting of IBC shareholders and one to hold office until
the 1997 annual meeting of IBC shareholders, and (b) the nominee chosen by
Ralston to serve in the 1996 class shall be nominated and elected to an
additional term of not less than two years at the 1996 annual meeting of IBC
shareholders. There will be no obligation of IBC under the terms of this
Agreement to nominate any Ralston representatives after such terms expire.

Section 10.3 No Inconsistent Agreements. IBC hereby covenants and agrees
that it shall not enter into any agreements governing the transfer or
registration of shares of IBC Securities which would adversely effect Ralston's
rights under this Agreement, without Ralston's prior written consent.

Section 10.4 Preferred Stock. IBC hereby covenants and agrees that during
the term of this Agreement, so long as Ralston owns at least 15% of the IBC
Securities, IBC shall not issue to any Person any shares of preferred stock of
IBC which possess voting rights which are greater than the equity interest
represented by such shares of preferred stock of IBC.
<PAGE>

Section 10.5 Rule 144 and 144A. IBC hereby covenants and agrees that it
will use its reasonable best efforts to file any reports required to be filed by
it under the Securities Act and Exchange Act and that it will take such further
action as Ralston may reasonably request, all to the extent required from time
to time to enable Ralston to sell its IBC Equity (subject to the terms hereof)
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 or 144A under the Securities Act, as such
Rules may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the Commission.

Section 10.6 Maximum Allowed Ownership of IBC Securities. Ralston hereby
covenants and agrees that on the fifth anniversary of the date of this Agreement
its ownership of IBC Securities shall be no more than 14.9% of the total
outstanding IBC Securities.

ARTICLE XI MISCELLANEOUS

Section 11.1 Entire Agreement. This Agreement, constitutes the entire
agreement between the parties hereto relative to the subject matter hereof, and
supersedes all prior written or oral understandings, agreements, conditions or
representations.

Section 11.2 Headings and Captions. All headings and captions used in
this Agreement are for convenience only, and will not be construed to either
limit or broaden the language of this Agreement or any particular section.

Section 11.3 Choice of Law. This Agreement will be governed by and
construed under and in accordance with the laws of the State of Missouri,
without giving effect to the conflict of laws provisions thereof, except that
all matters relating to the internal affairs of IBC shall be governed by and
construed under and in accordance with the General Corporation Law of Delaware.

Section 11.4 Venue. Any action or legal proceedings to enforce this
Agreement or any of its terms, or for indemnification and the recovery of losses
as provided for in this Agreement by a party, may be brought and prosecuted in
such court or courts located in the Eastern or Western District of Missouri as
provided by law, and the parties to this Agreement consent to the jurisdiction
of said court or courts and to service of process by registered mail, return
receipt requested, or by any other manner provided by Missouri law.

Section 11.5 Notices. Any notice or other communication required or
permitted hereunder is deemed delivered when delivered in person, when
transmitted by telecopier (which will also be sent concurrently by certified or
registered mail), on the next Business Day when sent by Federal Express or a
similar overnight delivery service, or on the third Business Day when sent by
registered or certified U.S. mail service as follows:

If to Ralston or VCS: Office of the Chief Executive Officer
<PAGE>

Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164

With a Copy to: Office of the General Counsel
Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164
Attn: James M. Neville, Esq.

If to IBC: Office of the Chief Executive Officer
Interstate Bakeries Company
12 East Armour Boulevard
Kansas City, MO 64111

With Copies to: Office of the General Counsel
Interstate Bakeries Company
12 East Armour Boulevard
Kansas City, MO 64111
Attn: Ray Sandy Sutton, Esq.

Shook, Hardy & Bacon P.C.
One Kansas City Place
1200 Main Street, Suite 3100
Kansas City, MO 64105
Attn: Jennings J. Newcom, Esq.

The parties to this Agreement will promptly notify each other in the manner
provided in this Section 11.5 of any change in their respective addresses. A
notice of change of address will not be deemed to have been given until received
by the addressee.

Section 11.6 Amendments. No changes, modifications, amendments or
additions will be valid unless such be made in writing and signed by or on
behalf of each party.

Section 11.7 Extended Meanings. Words importing the singular number
include the plural and vice versa, and words importing the masculine gender
include the feminine and neuter genders.

Section 11.8 Assignments. In addition to the specific assignment rights
set forth herein, IBC has the right to assign any and all of its rights or
obligations under this Agreement to the surviving entity in a merger,
consolidation, combination or other corporate transaction involving IBC which
agrees in writing with Ralston to be bound by the terms hereof. Except as
otherwise provided herein, Ralston may not assign any of its rights or
obligations hereunder to any Person.
<PAGE>

Section 11.9 Severability. The invalidity or unenforceability of any
provision hereof in any jurisdiction will not affect the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction. To the extent permitted by applicable law, each party waives any
provision of law that renders any provision hereof prohibited or unenforceable
in any respect. If any term, provision, covenant or restriction in this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the parties hereto will use their best efforts to find and employ
an alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction and the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect, in order to achieve the intent of the
parties to the extent possible.

Section 11.10 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which is deemed an original, but all of
which together constitutes a single agreement, and it is not necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.

Section 11.11 Remedies Cumulative. Except as otherwise expressly limited
herein, the remedies given to any party by this Agreement are in addition to all
remedies under any statute or rule of law. Any forbearance or failure or delay
in exercising any remedy hereunder is not deemed to be a waiver of any other
remedy a party may have under this Agreement.

Section 11.12 Binding Agreement. This Agreement will be deemed effective
and legally binding upon the parties when it has been executed and delivered by
all parties hereto. This Agreement will inure to the benefit of the parties
hereto and their permitted successors and assignees.

Section 11.13 Recapitalizations, Exchanges, Etc., Affecting IBC Securities.
The provisions of this Agreement apply to the full extent set forth herein with
respect to the IBC Equity, to any and all shares of capital stock of IBC or any
successor or assign of IBC (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of, IBC Equity and will be appropriately adjusted for any stock
dividends, splits, reverse splits, combinations, recapitalizations and the like
occurring after the date hereof.

Section 11.14 Other Agreements. Nothing contained in this Agreement will
be deemed to be a waiver of, or release from, any obligations any party hereto
may have under any other agreement, including, without limitation, the Purchase
Agreement.

Section 11.15 Term; Effectiveness. The term of this Agreement will begin
(and this Agreement will become effective) upon the date hereof and will
continue until the date which is five (5) years from the date hereof; provided,
however, that Article IX and Section 2.1 shall survive until the date which is
six (6) years from the date hereof. The provisions of Articles VI and VIII
hereof shall survive the termination of this Agreement.
<PAGE>

Section 11.16 Enforcement. Each of IBC and Ralston agrees that any breach
of the provisions contained in this Agreement by IBC and/or Ralston would cause
irreparable harm to the other and its Affiliates and, therefore, notwithstanding
any right of IBC and/or Ralston to recover monetary damages with respect to any
such breach as set forth in (a) this Agreement or (b) at law, IBC and Ralston
will each be entitled to equitable relief to enjoin any threatened or continuing
breach of the other hereof and, in the event of any action for specific
performance, each party shall waive the defense that a remedy at law would be
adequate. If the scope of any restriction contained in this Agreement is too
broad to permit enforcement to its full extent, then such restriction will be
enforced to the maximum extent permitted by law in the manner provided in
Section 11.9 hereof. Nothing herein stated will be construed as prohibiting any
party from pursuing any other remedies available to that party for a breach
hereunder, including recovery of damages.

Section 11.17 Confidentiality. Each of Ralston and IBC acknowledges that
the other would be irreparably damaged if confidential knowledge of its business
and affairs were disclosed or utilized on behalf of any Person. Each of IBC and
Ralston covenants and agrees not to disclose or use any such confidential
information of the other unless such information has been made available to the
public generally (other than in violation of this Section 11.17) or IBC and/or
Ralston is required to disclose such information by a governmental body or
regulatory agency or by law in connection with a transaction that is not
otherwise prohibited hereby. Performance by IBC and Ralston of their respective
obligations under this Section 11.17 shall be in accordance with the provisions
set forth on Exhibit A attached hereto, which Exhibit is incorporated herein and
made a part hereof.

Section 11.18 Fiduciary Accounts. IBC and Ralston each acknowledge and
agree that this Agreement shall apply only to the IBC Securities owned by
Ralston for its own account and does not apply to any IBC Securities which may
be deemed to be beneficially owned or controlled by Ralston or its Affiliates
and which shares are held in fiduciary accounts in connection with any pension
plans, profit sharing plans or other employee benefit plans or held in any other
fiduciary accounts.

IN WITNESS WHEREOF, the parties have executed this Agreement by an
officer thereunto duly authorized, all as of the day and year first above
written.

ATTEST: INTERSTATE BAKERIES
CORPORATION

/s/ R. S. Sutton /s/ P. E. Yarick
___________________________ _________________________________
By: R. S. Sutton By: P. E. Yarick
Its Secretary Its Vice President
<PAGE>

ATTEST: RALSTON PURINA COMPANY, on its
behalf and on behalf of its Affiliates

/s/ N. E. Hamilton /s/ J. M. Neville
_____________________________ _______________________________
By: N. E. Hamilton By: J. M. Neville
Its Assistant Secretary Its Vice President

ATTEST: VCS HOLDING COMPANY

/s/ N. E. Hamilton /s/ T. L. Grosch
_____________________________ _______________________________
By: N. E. Hamilton By: T. L. Grosch
Its Assistant Secretary Its Secretary

EXHIBIT A

For purposes of Section 11.17 of the Shareholder Agreement by and among
Interstate Bakeries Corporation, Ralston Purina Company and VCS Holding Company,
the following provisions shall apply:

1. "Confidential Information" shall include all information provided
heretofore or hereafter by either Ralston or IBC (individually, a "Company" and
collectively, the "Companies") or their representatives, Affiliates, advisors,
officers, directors, employees or agents ("Representatives"), to the other. The
term "Confidential Information" also will include any analyses, studies or other
documents prepared by Representatives of a Company containing or based in whole
or in part on any information furnished to the other. Confidential Information
shall not include information which (i) becomes generally available to the
public other than as a result of a disclosure in violation hereof by a Company
or its Representatives, (ii) was in the possession of a Company on a non-
confidential basis prior to its disclosure or (iii) becomes available to a
Company on a non-confidential basis from a source other than the other Company,
which source is entitled to make the disclosure without violation of any
obligation of confidentiality to a Company or other party.

2. Each Company recognizes and acknowledges the competitive value and the
confidential and proprietary nature of the Confidential Information and the
damage that could result to the other Company if information contained therein
is disclosed to any third party. Each Company agrees that it will not use the
Confidential Information in any manner that is competitive with or detrimental
to the business or operations of the other Company. Each Company further agrees
that it will not disclose any of the Confidential Information to any
<PAGE>

person or entity without the prior written consent of the other Company;
provided, however, that there may be a disclosure of such information to such of
its Representatives that need to know such information in connection with any
transactions between the Companies or for valid business reasons which do not
otherwise violate the provisions of this agreement. Each Company acknowledges
that its Representatives are bound hereto to the same extent as each Company as
if there were parties hereto, and each Company shall be responsible for any
breach hereof by any of its Representatives.

3. Each Company agrees that a breach of the provisions hereof may give
rise to irreparable injury to the other Company that cannot be compensated for
adequately by monetary damages. Consequently, each Company shall be entitled
from the other Company, in addition to all other remedies available, to
injunctive and other equitable relief to prevent a breach hereof and to secure
the enforcement hereof in any court of competent jurisdiction in the United
States or any state thereof.

4. Each Company hereby acknowledges that it is aware, and will advise its
Representatives and financing sources who are informed as to the matters which
are the subject hereof, that the federal and state securities law prohibit any
person who has received material, non-public information concerning the matters
that are related hereto from purchasing or selling securities of the Companies
or from communicating such information to any other person under circumstances
in which it is reasonably foreseeable that such person is likely to purchase or
sell such securities.

5. If either Company is requested or becomes legally compelled to disclose
any of the Confidential Information, such Company agrees that it will provide
the other Company with prompt written notice of such request so that the other
Company may seek a protective order. In the event that such protective order or
other remedy is not obtained, the Company agrees to furnish only that portion of
the Confidential Information and other information that it is legally obligated
to disclose.

6. At either Company's request, the other agrees to promptly return or, at
such Company's option, to destroy the Confidential Information and all copies
thereof. All copies, extracts or other reproductions in whole or in part
thereof shall be destroyed and not retained by the other Company or its
representatives in any form or for any reason, and such destruction shall be
certified in writing to the requesting Company by an authorized officer
supervising such destruction. All documents, pleadings, court filings,
memoranda, notes and other writings whatsoever prepared by the other Company or
its representatives based on the Confidential Information (except, in the case
of pleadings and court filings, to the extent reasonably required for proper
record keeping purposes) shall be destroyed, and such destruction shall be
certified in writing to the requesting Company by an authorized officer
supervising such destruction.

7. If any provision hereof or the application of any such provision to any
person or circumstance is held invalid, illegal or unenforceable for any reason
whatsoever, the remaining provisions and the application of such provision to
other persons or circumstances shall not be affected thereby. To the fullest
extent possible the court finding such provision invalid, illegal or
<PAGE>

unenforceable shall modify and construe the provisions as to render it valid and
enforceable as against all persons or entities and to give the maximum possible
protection to each of the Companies and their Representatives within the bounds
of validity, legality and enforceability.

8. The provisions hereof shall continue in effect throughout the term of
the Shareholder Agreement.

<PAGE>

EXHIBIT 99.5

================================================================================

STOCK REPURCHASE AGREEMENT

by and among

RALSTON PURINA COMPANY,

VCS HOLDING COMPANY,

and

INTERSTATE BAKERIES CORPORATION

dated

April 29, 1997

================================================================================
<PAGE>

STOCK REPURCHASE AGREEMENT

THIS STOCK REPURCHASE AGREEMENT ("Repurchase Agreement") is dated as
of April 29, 1997, by and among RALSTON PURINA COMPANY, a Missouri corporation
("RPC"), VCS HOLDING COMPANY, a Delaware corporation ("VCS") (RPC and VCS being
collectively referred to as "Ralston"), and INTERSTATE BAKERIES CORPORATION, a
Delaware corporation ("IBC"). Capitalized terms not defined herein shall have
the meanings set forth in the Ralston and IBC Shareholders Agreement dated July
22, 1995 (the "Agreement"), as modified herein.

WHEREAS, the Agreement related to the acquisition by Ralston of
16,923,077 shares of common stock of IBC (referred to as the "IBC Equity" in
Section 11.13 of the Agreement) pursuant to the acquisition of Continental
Baking Company ("CBC");

WHEREAS, Ralston desires to exercise one of its Demand Registrations
to register a certain number of shares of the IBC Equity (the "Offered Shares")
in conjunction with Ralston's offering of between $360,000,000 and $400,000,000
of exchangeable notes (the "Notes"), which will be exchangeable at maturity
three years after issuance for the Offered Shares or cash (the "Notes
Transaction");

WHEREAS, pursuant to the Agreement, IBC has a right of First Offer
with respect to all, but not less than all, of the Offered Shares but has
notified Ralston of its waiver of such right with respect to the Offered Shares
that are transferred in exchange for the Notes; and

WHEREAS, notwithstanding IBC's waiver of its right to acquire all of
the Offered Shares, IBC desires to acquire from Ralston, and Ralston desires to
sell to IBC certain of the IBC Equity (not part of the Offered Shares) on the
terms and subject to the conditions as more fully set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows.

ARTICLE I
STOCK REPURCHASE OBLIGATION
---------------------------

Section 1.1 The Stock Repurchase Obligation. Subject to any
restrictions contained in applicable laws, Ralston and IBC hereby agree that in
connection with the closing of

-1-
<PAGE>

the Notes Transaction, Ralston shall sell to IBC and IBC shall repurchase from
Ralston, 1,000,000 shares (the "Repurchase Shares") of the IBC Equity (other
than the Offered Shares) pursuant to the terms and conditions hereof (the
"Repurchase Obligation").

Section 1.2 Purchase Price. The aggregate purchase price (the "Purchase
Price") to be paid for all of the Repurchase Shares shall be (a) 1,000,000
multiplied by the initial price per share of the IBC Equity used to set the
exchange rate for the Notes; (b) such aggregate amount in (a) multiplied by .97;
(c) plus an amount equal to dividends declared on the Repurchase Shares but not
paid prior to the Closing Date.

Section 1.3 Closing of the Purchase. The closing of the purchase of the
Repurchase Shares shall occur at 10:00 a.m. central time at the offices of
Shook, Hardy & Bacon L.L.P., 1200 Main Street, Suite 3100, Kansas City, Missouri
64105, immediately following the closing of the Notes Transaction (which will
occur in New York City) or at such other place and time as the parties mutually
agree (the "Closing Date"). The parties agree that they shall negotiate in good
faith the rescheduling of the Closing Date (which in no event shall be later
than sixty days after the closing of the Notes Transaction), if necessary to
comply with Regulation M issued pursuant to the Securities Exchange Act of 1934,
as amended. If the Closing Date is more than five days after the closing of the
Notes Transaction, then IBC shall pay to RPC interest on the Purchase Price
equal to the rate of interest then paid by IBC on its principal bank
indebtedness.

Section 1.4 Payment. On the Closing Date, Ralston shall surrender to IBC
its duly endorsed stock certificates representing the Repurchase Shares, free
and clear of all liens and encumbrances whatsoever, and IBC shall pay to Ralston
the Purchase Price in immediately available funds by wire transfer to an account
designated in writing by Ralston to IBC. Ralston shall deliver the wire
transfer instructions to IBC at least three business days prior to the Closing
Date.

Section 1.5 Transfer of Title. Transfer of title to the Repurchase
Shares shall be deemed to occur automatically on the Closing Date, subject to
payment by IBC on such date of the Purchase Price.

ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------

Section 2.1 Representations and Warranties of Ralston. Ralston hereby
represents and warrants to IBC as follows:

-2-
<PAGE>

(a) Ralston has all requisite legal and corporate power to
execute and deliver this Repurchase Agreement and to carry out and perform
its obligations under the terms of this Repurchase Agreement.

(b) The execution and delivery of this Repurchase Agreement and
the consummation of the transactions herein do not and will not violate any
agreement binding upon Ralston; and this Repurchase Agreement is the valid
and binding agreement of Ralston, enforceable against Ralston in accordance
with its terms subject to laws of general application relating to
bankruptcy, insolvency, the relief of debtors, general equity principles
and limitations upon rights to indemnity.

(c) Ralston has good and marketable title to at least 1,000,000
shares of the IBC Equity, free and clear of any liens, encumbrances,
restrictions on transfer or rights of others and shall keep such shares
free and clear of any liens, encumbrances, restrictions on transfer or
rights of others.

Section 2.2 Representations and Warranties of IBC. IBC hereby
represents and warrants to Ralston as follows:

(a) IBC has all requisite legal and corporate power to execute
and deliver this Repurchase Agreement and to carry out and perform its
obligations under the terms of this Repurchase Agreement.

(b) The execution and delivery of this Repurchase Agreement, and
the consummation of the transactions herein provided, do not and will not
violate any agreement binding upon IBC, and this Agreement is the valid and
binding agreement of IBC, enforceable against IBC in accordance with its
terms subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors, general equity principles and
limitations on rights to indemnity.

ARTICLE III
GENERAL PROVISIONS
------------------

Section 3.1 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Repurchase
Agreement was not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.

-3-
<PAGE>

Section 3.2 Expenses. Except as otherwise provided in this
Repurchase Agreement, each party shall bear its own expenses and costs in
connection with this Repurchase Agreement.

Section 3.3 Amendment. This Repurchase Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.

Section 3.4 Successors and Assigns. No party to this Repurchase
Agreement may assign any of its rights or obligations under this Repurchase
Agreement without the prior written consent of the other parties.

Section 3.5 Notices. All notices, requests, claims, demands and
other communications hereunder, unless this Repurchase Agreement expressly
provides otherwise, shall be in writing and shall be given (and shall be deemed
to have been duly given upon receipt) by delivery in person, by facsimile or by
registered or certified mail (postage prepaid, return receipt requested), to the
other party to the addresses set forth in Section 11.5 of the Agreement.

Section 3.6 Governing Law. This Repurchase Agreement shall be
governed by and construed in accordance with the laws of Missouri without giving
effect to the provisions thereof relating to conflicts of laws.

Section 3.7 Termination. This Repurchase Agreement and the rights
and obligations hereunder shall terminate (if not consummated) upon the written
notification by Ralston of its decision not to consummate the Notes Transaction
or upon the mutual agreement of the parties. In addition, IBC shall have the
right to terminate this Repurchase Agreement if the Notes Transaction has not
been consummated by August 15, 1997. No such termination shall relieve any
party from liability for any breach of this Repurchase Agreement.

Section 3.8 Severability. The provisions of this Repurchase
Agreement shall be deemed severable and the invalidity or unenforceability of
any provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Repurchase Agreement, or the
application thereof to any person or entity or any circumstance, is invalid or
unenforceable, (i) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid and unenforceable provision and (ii) the
remainder of this Repurchase Agreement and the application of such provision to
other persons, entities or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.

-4-
<PAGE>

Section 3.9 Entire Agreement. This Repurchase Agreement and the
other documents delivered pursuant hereto and thereto, constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.

Section 3.10 Descriptive Headings. The descriptive 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 Repurchase Agreement.

Section 3.11 Counterparts. This Repurchase Agreement may be
executed in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.

-5-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Repurchase
Agreement as of the day and year first above written.

RALSTON PURINA COMPANY

By: /s/ James R. Elsesser
----------------------------------------------
Name: James R. Elsesser
Title: Vice President and Chief Financial Officer

VCS HOLDING COMPANY

By: /s/ Timothy L. Grosch
---------------------------------------------
Name: Timothy L. Grosch
Title: Secretary

INTERSTATE BAKERIES CORPORATION

By: /s/ Ray Sandy Sutton
----------------------------------------------
Name: Ray Sandy Sutton
Title: Vice President, Corporate Secretary and
General Counsel

-6-