AMERICAN ITALIAN PASTA CO, S-1/A, 1997-09-12

AMERICAN ITALIAN PASTA CO
S-1/A, 1997-09-12
MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1997

REGISTRATION NO. 333-32827
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

AMERICAN ITALIAN PASTA COMPANY
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 2099 84-1032638
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>

1000 ITALIAN WAY
EXCELSIOR SPRINGS, MISSOURI 64024
(816) 502-6000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

TIMOTHY S. WEBSTER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AMERICAN ITALIAN PASTA COMPANY
1000 ITALIAN WAY
EXCELSIOR SPRINGS, MISSOURI 64024
(816) 502-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------

Copies to:

<TABLE>
<S> <C>
JAMES A. HEETER, ESQ. JOHN J. MCCARTHY, JR., ESQ.
SONNENSCHEIN NATH & ROSENTHAL DAVIS POLK & WARDWELL
4520 MAIN STREET, SUITE 1100 450 LEXINGTON AVENUE
KANSAS CITY, MISSOURI 64111 NEW YORK, NEW YORK 10017
(816) 932-4400 (212) 450-4000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________

If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
==============================================================================================================
PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Convertible Common Stock, $.001 par value........... $115,000,000 $34,848.49
==============================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
(2) Previously paid.

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> 2

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: one to be
used in connection with a United States and Canadian offering of the
registrant's Class A Common Stock (the "U.S. Prospectus") and one to be used in
connection with a concurrent international offering of the Class A Common Stock
(the "International Prospectus" and, together with the U.S. Prospectus, the
"Prospectuses"). The International Prospectus will be identical to the U.S.
Prospectus except that it will have a different front cover page. The U.S.
Prospectus is included herein and is followed by the front cover page to be used
in the International Prospectus. The front cover page for the International
Prospectus included herein has been labeled "Alternate International Cover
Page."

<PAGE> 3

PROSPECTUS (Subject to Completion)

Issued September , 1997

Shares
AIPC LOGO
American Italian Pasta Company
CLASS A COMMON STOCK
------------------------

OF THE SHARES OF CLASS A COMMON STOCK BEING OFFERED HEREBY, SHARES
ARE BEING SOLD BY THE COMPANY AND SHARES ARE BEING SOLD BY THE SELLING
STOCKHOLDER. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL NOT
RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES OF CLASS A COMMON STOCK BY
THE SELLING STOCKHOLDER. OF THE SHARES OF CLASS A COMMON STOCK BEING
OFFERED HEREBY, SHARES ARE BEING OFFERED INITIALLY IN THE UNITED STATES
AND CANADA BY THE U.S. UNDERWRITERS AND SHARES ARE BEING OFFERED INITIALLY
OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE
"UNDERWRITERS." PRIOR TO THE OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE
CLASS A COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL
PUBLIC OFFERING PRICE PER SHARE WILL BE BETWEEN $ AND $ . SEE
"UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS TO BE CONSIDERED IN DETERMINING
THE INITIAL PUBLIC OFFERING PRICE.
------------------------
THE COMPANY HAS TWO CLASSES OF AUTHORIZED COMMON STOCK CONSISTING OF THE CLASS A
COMMON STOCK OFFERED HEREBY AND CLASS B COMMON STOCK. SEE "DESCRIPTION OF
CAPITAL STOCK." HOLDERS OF CLASS A COMMON STOCK ARE ENTITLED TO ONE VOTE PER
SHARE ON EACH MATTER SUBMITTED TO A VOTE OF STOCKHOLDERS. THE CLASS B COMMON
STOCK IS NON-VOTING EXCEPT UNDER CERTAIN LIMITED CIRCUMSTANCES AND AS REQUIRED
BY LAW. ALL HOLDERS OF COMMON STOCK ARE ENTITLED TO RECEIVE SUCH DIVIDENDS AND
DISTRIBUTIONS, IF ANY, AS MAY BE DECLARED FROM TIME TO TIME BY THE BOARD OF
DIRECTORS.
------------------------
APPLICATION HAS BEEN MADE FOR LISTING OF THE CLASS A COMMON STOCK ON THE NEW
YORK STOCK EXCHANGE UNDER THE SYMBOL "PLB."
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------

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.

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

PRICE $ A SHARE
------------------------

<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to Proceeds to Selling
Public Commissions(1) Company(2) Stockholder
-------- -------------- ----------- -------------------
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total(3)................ $ $ $ $
</TABLE>

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

(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company and the Selling Stockholder have granted to the U.S.
Underwriters an option, exercisable within 30 days of the date hereof, to
purchase up to an aggregate of additional Shares of Class A Common
Stock at the Price to Public less Underwriting Discounts and Commissions,
for the purpose of covering over-allotments, if any. If the U.S.
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discounts and Commissions, Proceeds to Company and Proceeds to
Selling Stockholder will be $ , $ , $ , and $ ,
respectively. See "Underwriters."

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

The Shares of Class A Common Stock are offered, subject to prior sale,
when, as and if accepted by the Underwriters named herein and subject to
approval of certain legal matters by Davis Polk & Wardwell, counsel for the
Underwriters. It is expected that delivery of the Shares of Class A Common Stock
will be made on or about , 1997 at the office of Morgan Stanley & Co.
Incorporated, New York, N.Y., against payment therefor in immediately available
funds.
------------------------

MORGAN STANLEY DEAN WITTER
ALEX. BROWN & SONS
INCORPORATED
GOLDMAN, SACHS & CO.
GEORGE K. BAUM & COMPANY

, 1997

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.
<PAGE> 4

[Picture of Branded Pasta Products]

AIPC'S PASTA LABELLA(R) BRANDED PASTA

[Picture of Private Label and Branded Pasta Products]

AIPC'S PRIVATE LABEL AND BRANDED PASTA

[Picture of CPC Products to be produced by AIPC]

MUELLER'S(R) IS A REGISTERED TRADEMARK OF CPC INTERNATIONAL INC.

PRODUCTS TO BE PRODUCED BY AIPC
FOR CPC INTERNATIONAL INC.

2
<PAGE> 5

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION 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, BY THE SELLING STOCKHOLDER OR BY
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE CLASS A COMMON STOCK
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY
SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------

FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE
TAKEN IN ANY JURISDICTION BY THE COMPANY, BY THE SELLING STOCKHOLDER OR BY ANY
UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE CLASS A COMMON STOCK OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO
WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY, THE SELLING
STOCKHOLDER AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY
RESTRICTIONS AS TO THE OFFERING OF THE CLASS A COMMON STOCK AND THE DISTRIBUTION
OF THIS PROSPECTUS.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 4
Risk Factors........................... 10
Use of Proceeds........................ 17
Dividend Policy........................ 17
Capitalization......................... 18
Dilution............................... 19
Selected Financial and Other Data...... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 22
Business............................... 32
Management............................. 43
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Relationships and Related
Transactions......................... 50
Principal and Selling Stockholders..... 53
Description of Capital Stock........... 55
Shares Eligible for Future Sale........ 58
Certain United States Federal Income
Tax Considerations for Non-U.S.
Holders.............................. 60
Underwriters........................... 63
Legal Matters.......................... 66
Experts................................ 67
Additional Information................. 67
Index to Audited Financial
Statements........................... F-1
</TABLE>

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

This Prospectus contains forward-looking statements and information based
on management's beliefs or assumptions made by and information currently
available to management that involve risks and uncertainties. If one or more of
these risks or uncertainties materialize, or should such assumptions prove
incorrect, the Company's actual results may be materially different from those
anticipated. Factors that may cause such differences include, but are not
limited to, those discussed under "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The Company
undertakes no obligation to update any such forward-looking statements to
reflect future events or developments.
------------------------

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS
OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF THE CLASS A COMMON STOCK IN
THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."

3
<PAGE> 6

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and Financial Statements,
including the Notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated, all references in this Prospectus to (i) the "Company" and
"AIPC" shall mean American Italian Pasta Company, a Delaware corporation, and
its predecessor unless the context otherwise requires; and (ii) "pasta" shall
mean dry pasta, including dry pasta used in shelf-stable, frozen and canned
pasta products. Unless otherwise indicated, all information in this Prospectus
has been adjusted to give effect to the Recapitalization (as defined herein) and
assumes the U.S. Underwriters' over-allotment option is not exercised.

THE COMPANY

OVERVIEW

AIPC is the third largest and one of the fastest-growing producers and
marketers of pasta in North America. The Company commenced operations in 1988
with the North American introduction of new, highly-efficient durum wheat
milling and pasta production technology. Management believes that the Company's
singular focus on pasta, vertically-integrated facilities, continued technology
leadership and development of a highly-skilled workforce enable AIPC to produce
high-quality pasta at costs significantly below those of most of its
competitors. Management believes that the combination of the Company's favorable
cost structure, the higher average age of its competitors' North American pasta
production equipment and the growing pasta consumption in North America creates
significant opportunities for continued growth. The Company's revenue and
operating income excluding product introduction costs were $121.6 million and
$16.7 million, respectively, for the calendar year ended December 31, 1996, and
grew at compound annual growth rates ("CAGR") of 33% and 33%, respectively, over
the five-year period ended December 31, 1996. During the nine-month period ended
June 30, 1997, the Company had revenue of $93.6 million and an operating margin
excluding product introduction costs of 15.9%.

The Company has rapidly established a significant market presence in North
America by developing strategic customer relationships with food industry
leaders that have substantial pasta requirements. North American pasta
consumption exceeded 5.0 billion pounds in 1995 and is projected to grow to
approximately 5.8 billion pounds by 2002 based on industry and trade sources and
the Company's own analysis. The Company has a long-term supply agreement with
Sysco Corporation ("Sysco"), the nation's largest marketer and distributor of
foodservice products. In 1998, AIPC will become the exclusive producer of
Mueller's(R), the largest pasta brand in the United States, pursuant to a recent
long-term manufacturing and distribution agreement with CPC International Inc.
("CPC"). CPC has announced its intention to close its current pasta production
facility by December 1997. AIPC is also the primary supplier of pasta to Sam's
Wholesale Club ("Sam's Club"), the largest club store chain in the United
States, and supplies private label and branded pasta to six of the 10 largest
grocery retailers in the United States, including Wal*Mart, A&P, Publix,
Albertsons, American Stores and Winn-Dixie. In addition, AIPC has developed
supply relationships with leading food processors, such as Pillsbury, General
Mills and Kraft, which use the Company's pasta as an ingredient in branded food
products.

The Company produces more than 80 dry pasta shapes in two
vertically-integrated production and distribution facilities, strategically
located in Excelsior Springs, Missouri and Columbia, South Carolina. The
construction of the Missouri plant in 1988 represented the first use in North
America of a vertically-integrated, high-capacity pasta plant using Italian
pasta production technology. Management believes that this plant continues to be
among the most efficient and highly-automated pasta facilities in North America.
The South Carolina plant, which commenced operations in 1995, produces only
pasta shapes conducive to high-volume production and employs a highly-skilled,
self-managed workforce. Management believes that the South Carolina plant is the
most efficient pasta facility in North America in terms of productivity and
conversion cost per pound. To meet the significant volume requirements of the
CPC agreement and support future growth, the Company commenced a capital
expenditure program in 1997 to nearly double the
4
<PAGE> 7

Company's annual pasta production capacity and add a highly-automated durum
wheat mill to its South Carolina plant, with completion scheduled for 1998.

OPERATING STRATEGY

The Company's operating strategy is to grow revenues and profitability by
offering customers the highest quality pasta products at competitive prices with
superior customer service. Key elements of the Company's operating strategy are:

- Continue to Lead the Industry as the Lowest Cost Producer of High
Quality Pasta. AIPC has successfully implemented production and capital
investment strategies designed to achieve low-cost production of
high-quality products. AIPC has distinguished itself from most major pasta
producers by vertically integrating the durum wheat milling function with
the production process and strategically locating its distribution centers.
Management believes that its facilities are among the most efficient pasta
production facilities in North America in terms of productivity and
conversion cost per pound, and that its vertically-integrated processes
produce pasta of superior color, texture, flavor and consistency. The
Company expects to realize additional operating efficiencies through the
completion of the current expansion program at its South Carolina and
Missouri facilities and ongoing improvement programs.

- Provide Superior Customer Service. The Company develops and enhances
customer relationships by providing superior service and technical support
to its customers. The Company has invested heavily in the development of a
broad range of customer service programs, including electronic data
interchange ("EDI") and efficient consumer response ("ECR") which
streamline the order, invoicing and inventory management functions. The
Company provides marketing, technical and service support to its customers
by assisting customers with supply and category management decisions,
producing pasta to its customers' specifications and making operational
recommendations to its customers using pasta as an ingredient in their food
products.

GROWTH STRATEGY

The Company continues to implement its growth strategy, which builds on the
Company's operating strategy and industry trends. Key elements of the Company's
growth strategy are:

- Successfully Implement CPC Business Expansion. The Company was
recently selected to be the exclusive producer of CPC's Mueller's brand
pasta, the largest pasta brand in North America. Upon completion of AIPC's
capacity expansion in 1998, management anticipates CPC's annual volume
requirements will represent an approximately 60% increase over the
Company's fiscal 1997 production run rate. Management believes that the
Company's experience in servicing large pasta supply agreements and its
current capacity expansion program will enable AIPC to meet the current CPC
volume requirements and support potential future growth.

- Pursue Strategic Alliances. The Company believes that commercial
users and marketers of pasta will continue to require increasing quantities
of pasta and that a greater portion of these requirements will be
outsourced to more efficient producers of high-quality pasta, such as AIPC.
Management has identified additional strategic opportunities with
commercial users and marketers of pasta which may result in incremental
growth, new product development and cost savings opportunities in the
future.
5
<PAGE> 8

- Secure Additional Private Label Customers. The Company intends to
continue to grow its private label customer base and secure additional
private label customers by continuing to offer quality products,
competitive pricing, category management and superior customer service.
Management believes that AIPC's prospects for growth in the private label
market have been enhanced since Borden Foods Holdings Corporation
("Borden"), historically the largest private label supplier in North
America, announced its intention to exit the private label pasta business
in 1997.

- Continue Product Innovation. In 1995, the Company introduced Pasta
LaBella(R) flavored pasta, a line of all natural, full-flavored pasta
products utilizing patented flavoring technology and AIPC's proprietary
production process. In addition to pursuing increased sales with
institutional customers, the Company is exploring potential sales and
marketing alliances to expand retail distribution of Pasta LaBella flavored
pasta. AIPC also intends to continue assisting its customers with
innovative products and packaging, and the development of additional
value-added products intended to generate higher margins than traditional
pasta products.

The Company was incorporated under the laws of the State of Delaware in
1991, and is the successor by merger of a Colorado corporation incorporated in
1986. The Company's executive offices are located at 1000 Italian Way, Excelsior
Springs, Missouri 64024, and its telephone number is (816) 502-6000. The
Company's home page on the World Wide Web is located at
http://www.pastalabella.com. Information contained in the Company's home page
shall not be deemed to be a part of this Prospectus.

RECAPITALIZATION

On September , 1997, the Company amended and restated its Certificate of
Incorporation (as so amended, the "Charter") and effected a recapitalization
(the "Recapitalization"), pursuant to which each share of common stock and Class
A common stock of the Company outstanding immediately prior to the
Recapitalization was converted into shares of Class A Convertible Common
Stock, par value $.001 per share, of the Company ("Class A Common Stock"). Upon
the consummation of the Offering, certain of the shares of Class A Common Stock
held by the Morgan Stanley Stockholders (as defined herein) will be converted
into Class B Convertible Non-Voting Common Stock, par value $.001 per share, of
the Company ("Class B Common Stock"). Shares of Class A Common Stock held by the
Morgan Stanley Stockholders and certain related persons are, in certain
circumstances, convertible into Class B Common Stock and vice versa. The Morgan
Stanley Stockholders have informed the Company that upon the consummation of the
Offering they intend to convert such number of their shares of Class A Common
Stock into Class B Common Stock so that, following such conversion, the Morgan
Stanley Stockholders will own, in the aggregate, 49% of the outstanding Class A
Common Stock. Shares of Class A Common Stock held by persons other than the
Morgan Stanley Stockholders and such related persons are not convertible into
Class B Common Stock. Unless otherwise indicated, all references in this
Prospectus to "Common Stock" shall mean, collectively, the Class A Common Stock
and the Class B Common Stock. See "Description of Capital Stock -- General."

OWNERSHIP

As of the date of this Prospectus, The Morgan Stanley Leveraged Equity Fund
II, L.P. ("MSLEF"), Morgan Stanley Capital Partners III, L.P. and certain
affiliated funds (the "MSCP Funds" and with MSLEF, the "Morgan Stanley
Stockholders") own approximately % of the outstanding Common Stock. Upon
consummation of the Offering, the Morgan Stanley Stockholders will own
approximately % of the outstanding Common Stock (approximately % of the
outstanding Common Stock if the U.S. Underwriters' over-allotment option is
exercised in full). The Morgan Stanley Stockholders may sell up to shares
of Class A Common Stock in connection with the Offering, but only to the extent
that the Underwriters exercise their overallotment option. See "Principal and
Selling Stockholders" and "Underwriters."

6
<PAGE> 9

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered by:
The Company........................................ Shares
The Selling Stockholder............................ Shares
--------
Total......................................... Shares
========
Class A Common Stock offered in:
U.S. Offering...................................... Shares
International Offering............................. Shares
--------
Total......................................... Shares
========
Common Stock outstanding after the Offering.......... Shares(1)
Use of proceeds...................................... The net proceeds to the Company from the
Offering will be used to repay existing
indebtedness, fund expansion of the Company's
facilities and for general corporate purposes.
The Company will not receive any proceeds from
the sale of Class A Common Stock by the
Selling Stockholder. See "Use of Proceeds."
Proposed New York Stock Exchange Symbol.............. PLB
</TABLE>

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

(1) Does not include the U.S. Underwriters' over-allotment option. Includes
shares of Class B Common Stock. Excludes (i) shares,
shares and shares, respectively, of Class A Common Stock
reserved for issuance upon the exercise of outstanding stock options under
the Company's 1992 Non-Statutory Stock Option Plan (the "1992 Plan") and
1993 Non-Qualified Stock Option Plan (the "1993 Plan") and 1997 Equity
Incentive Plan (the "1997 Plan"); and (ii) shares, shares and
shares, respectively, of Class A Common Stock available for future
grants under the 1992 Plan, the 1993 Plan and the 1997 Plan, respectively.
See "Management -- Stock Option Plans."

RISK FACTORS

See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Class A Common Stock.
7
<PAGE> 10

SUMMARY FINANCIAL AND OPERATING DATA

The following summary financial and operating data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the Financial Statements of the Company,
including the Notes thereto, appearing elsewhere in this Prospectus. In 1996,
the Company changed its fiscal year end from December 31 to the last Friday of
September. This change resulted in a nine-month fiscal period ended September
30, 1996, and will result in a 53-week year for fiscal 1997, and a 52-or 53-week
year for all subsequent fiscal years. The Company's first three fiscal quarters
end on the Friday last preceding December 31, March 31, and June 30 of each
year. For purposes of this Prospectus, the 1996 fiscal year is described as the
nine-month fiscal period ended September 30, 1996, and the nine-month 1996 and
1997 interim periods are described as having ended June 30. The statement of
operations data of the Company for the calendar year ended December 31, 1996 and
the nine-month period ended June 30, 1996 are included herein only for
comparison purposes.

<TABLE>
<CAPTION>
NINE-MONTH NINE-MONTH
CALENDAR FISCAL PERIOD PERIOD ENDED
FISCAL YEAR ENDED DECEMBER 31, YEAR ENDED ENDED JUNE 30,
------------------------------------- DECEMBER 31, SEPTEMBER 30, ----------------------
1992 1993 1994 1995 1996 1996 1996 1997
---- ---- ---- ---- ------------ ------------- ---- ----
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................... $39,049 $47,872 $69,465 $92,903 $121,621 $92,074 $86,514 $ 93,616
Cost of goods sold............. 28,750 35,081 54,393 73,851 89,704 68,555 65,697 67,821
Plant expansion costs(1)....... -- 1,171 484 2,065 -- -- 425 --
------- ------- ------- ------- -------- ------- ------- --------
Gross profit................... 10,299 11,620 14,588 16,987 31,917 23,519 20,392 25,795
Selling and marketing expense,
excluding product
introduction costs........... 2,888 2,883 3,792 5,303 11,682 8,676 6,625 8,078
General and administrative
expense...................... 2,077 2,049 1,951 2,930 3,498 2,805 2,741 2,855
Product introduction
costs(2)..................... -- -- -- -- 9,568 8,122 4,611 2,134
------- ------- ------- ------- -------- ------- ------- --------
Operating profit............... 5,334 6,688 8,845 8,754 7,169 3,916 6,415 12,728
Interest expense, net.......... 5,396 3,210 4,975 8,008 10,575 8,023 8,030 7,800
------- ------- ------- ------- -------- ------- ------- --------
Income (loss) before income tax
and extraordinary loss....... (62) 3,478 3,870 746 (3,406) (4,107) (1,615) 4,928
Income tax..................... -- (3,221) 1,484 270 (1,288) (1,556) (642) 1,878
Extraordinary loss, net of
income tax(3)................ 2,639 -- 204 -- 1,647 1,647 1,647 --
------- ------- ------- ------- -------- ------- ------- --------
Net income (loss).............. $(2,701) $ 6,699 $ 2,182 $ 476 $ (3,765) $(4,198) $(2,620) $ 3,050
======= ======= ======= ======= ======== ======= ======= ========
Pro forma net income (loss) per
common share(4)..............
Pro forma weighted average
common shares
outstanding(4)...............
OTHER DATA:
EBITDA(5)...................... $ 7,993 $ 9,495 $12,408 $13,836 $ 12,460 $ 8,994 $11,395 $ 18,037
EBITDA as a percent of
revenues(5).................. 20.5% 19.8% 17.9% 14.9% 10.2% 9.8% 13.2% 19.3%
Revenue per employee
(end of period).............. $ 209 $ 244 $ 288 $ 361 $ 437 NM NM NM
Working capital excluding
current maturities of
long-term debt (average for
the period) as a percent of
revenues..................... 17.3% 14.2% 12.0% 4.6% 6.5% NM NM NM
Cash flows provided by (used
in):
Operating activities......... $ 966 $ 4,787 $ 3,690 $ 5,730 $ (5,013) $(7,477) $(4,155) $ 14,076
Investing activities......... (1,000) (15,139) (25,431) (38,789) (3,870) (3,041) (6,084) (11,464)
Financing activities......... 2,142 10,382 19,603 33,066 10,543 12,318 11,722 (1,818)
Earnings to fixed charges...... 0.50 1.87 1.48 0.92 0.52 0.28 0.59 1.60
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-------------------------
ACTUAL AS ADJUSTED(6)
------ --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 2,612 $
Working capital............................................. 13,276
Total assets................................................ 145,462
Long-term debt, less current maturities..................... 89,500
Stockholders' equity........................................ 40,977
</TABLE>

(footnotes appear on following page)
8
<PAGE> 11

(footnotes from previous page)
- -------------------------
(1) Plant expansion costs include incremental direct and indirect manufacturing
and distribution costs which are incurred as a result of construction,
commissioning and start-up of new capital assets. These costs are expensed
as incurred but are unrelated to current production and, therefore, are
reported as a separate line item in the statement of operations.

(2) Product introduction costs include the incremental selling and marketing
expenses, including payment of product placement or "slotting" fees, related
to the Company's launch of its Pasta LaBella flavored pasta products into
the U.S. retail grocery market.

(3) Represents losses due to early extinguishment of long-term debt, net of
income taxes.

(4) Earnings per share is presented on a pro forma basis giving effect to the
consummation of the Recapitalization in connection with the Offering.

(5) EBITDA represents earnings before interest, income taxes, depreciation and
amortization, thereby removing the effect of certain non-cash charges on
income. Management believes that EBITDA is a meaningful measure of operating
performance, each generation and ability to service debt. However, EBITDA
should not be considered as an alternative either to: (i) net earnings
(determined in accordance with U.S. generally accepted accounting principles
("GAAP")); (ii) operating cash flow (determined in accordance with GAAP); or
(iii) liquidity. There can be no assurance that the Company's calculation of
EBITDA is comparable to similarly-titled items reported by other companies.

(6) Adjusted to give effect to the Offering of shares of Class A Common
Stock at an assumed initial public offering price per share of $ and
the application of the net proceeds to the Company therefrom. See "Use of
Proceeds" and "Capitalization."
9
<PAGE> 12

RISK FACTORS

In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors in evaluating an
investment in the shares of Class A Common Stock offered hereby.

DEPENDENCE ON MAJOR CUSTOMERS

Historically, a limited number of customers have accounted for a
substantial portion of the Company's revenues. During 1994, 1995, the nine-month
fiscal period ended September 30, 1996, and the nine-month period ended June 30,
1997, Sysco accounted for approximately 38%, 33%, 27% and 27%, respectively, and
sales to Sam's Club accounted for approximately 12%, 23%, 20% and 21%,
respectively, of the Company's revenues. The Company expects it will continue to
rely on a limited number of major customers for a substantial portion of its
revenues in the future. Management believes that a majority of the Company's
fiscal 1998 revenues will be derived from combined sales to Sysco, Sam's Club
and CPC. The Company has an exclusive supply contract with Sysco (the "Sysco
Agreement") through June 2000, subject to renewal by Sysco for two additional
three-year periods. The Company recently entered into a long-term manufacturing
and distribution agreement with CPC (the "CPC Agreement") to supply it with a
minimum of 175 million pounds of pasta annually for nine years. The Company does
not have supply contracts with a substantial number of its customers, including
Sam's Club. Accordingly, the Company is dependent upon its customers to sell the
Company's products and to assist the Company in promoting market acceptance of,
and creating demand for, the Company's products. An adverse change in, or
termination or expiration without renewal of, the Company's relationships with
or the financial viability of one or more of its major customers could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, certain exclusivity provisions of the Sysco
Agreement and CPC Agreement prevent AIPC from producing and supplying
competitors of Sysco and CPC with certain pasta products. Under the Sysco
Agreement, the Company is restricted from supplying pasta products to
foodservice businesses other than Sysco. Without CPC's consent, AIPC may not
produce branded retail pasta for Borden, Hershey Foods Corporation ("Hershey")
or Barilla Alimentare S.p.A. ("Barilla"), and is limited to the production of an
aggregate of 12 million pounds of branded pasta products annually for other
producers. See "Business -- Production and Supply Agreements."

MANAGEMENT OF GROWTH AND IMPLEMENTATION OF CPC BUSINESS

The Company has experienced rapid growth and management expects significant
additional growth in the future. Successful management of any such future growth
will require the Company to continue to invest in and enhance its operational,
financial and management information resources and systems, attract and retain
management personnel to manage such resources and systems, accurately forecast
sales demand and meet such demand, accurately forecast retail sales, control its
overhead, and attract, train, motivate and manage its employees effectively.
There can be no assurance that the Company will continue to grow, or that it
will be effective in managing its future growth. Any failure to effectively
manage growth could have a material adverse effect on the Company's business,
financial condition and results of operations.

During 1998, the Company will be required to produce substantially all of
CPC's Mueller's brand pasta, which has averaged approximately 200 million pounds
of pasta annually over the last five years. To meet its obligations under the
CPC Agreement and provide for future growth, the Company must successfully
complete its 1997-1998 capital expansion program to increase its overall
milling, production and distribution capacity by approximately 100%.
Implementation of the CPC Agreement may also adversely affect the Company's
financial, operational and human resources. There can be no assurance that the
Company's planned expansion of its production facilities will be completed in a
timely and cost-effective manner or at all, or that such expanded facilities
will be adequate to meet the CPC volume requirements and any future growth.
Failure to complete the Company's planned capital expansion in a timely and
cost-effective manner and implement the CPC Agreement could have a material
adverse effect on the Company's business, financial condition and results of
operations.

10
<PAGE> 13

SUBSTANTIAL PLANNED INVESTMENTS IN MILLING AND PRODUCTION FACILITIES

The Company has begun a major expansion of its durum wheat milling and
pasta production and distribution facilities, budgeted to cost approximately $86
million during the 1997 and 1998 fiscal years, which is planned to increase
AIPC's overall milling, production and distribution capacity by approximately
100%. There can be no assurance that the Company will be able to complete this
expansion on schedule, within budget or at all, that the expanded facilities
will result in the anticipated increase in production capacity or that future
revenues from products produced at the expanded facilities will be sufficient to
recover the Company's investment in the expansion. In addition, there can be no
assurance that the Company will be able to calibrate its production capacity to
future changes in demand for its products or that any future additions to, or
expansions of, its facilities will be completed on schedule and within budget.
Any significant delay or cost overrun in the construction or acquisition of new
or expanded facilities could have a material adverse effect on the Company's
business, financial condition and results of operations.

RAW MATERIALS

The principal raw material in the Company's products is durum wheat. Durum
wheat is used almost exclusively in pasta production and is a narrowly traded,
cash only commodity crop. The Company attempts to minimize the effects of durum
wheat cost fluctuations through forward purchase contracts and raw material
cost-based pricing agreements with many of its customers. The Company's
commodity procurement and pricing practices are intended to reduce the risk of
durum wheat cost increases on profitability, but also may temporarily affect the
Company's ability to benefit from possible durum wheat cost decreases. The
supply and price of durum wheat is subject to market conditions and is
influenced by numerous factors beyond the control of the Company, including
general economic conditions, natural disasters and weather conditions,
competition, and governmental programs and regulations. The supply and cost of
durum wheat may also be adversely affected by insects, plant diseases and
funguses, including the karnal bunt fungus which infected a portion of the durum
wheat produced in the southwestern United States in 1996. The Company also
relies on the supply of plastic, corrugated and other packaging materials. The
costs of durum wheat and packaging materials have varied widely in recent years
and future changes in such costs may cause the Company's results of operations
and margins to fluctuate significantly. A large, rapid increase in the cost of
raw materials could have a material adverse effect on the Company's operating
profit and margins unless and until the increased cost can be passed along to
customers. Historically, changes in prices of the Company's pasta products have
lagged changes in the Company's materials costs. Competitive pressures may also
limit the ability of the Company to raise prices in response to increased raw
material costs in the future. Accordingly, there can be no assurance as to
whether, or the extent to which, the Company will be able to offset raw material
cost increases with increased product prices in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Raw Materials and Supplies."

COMPETITION

The Company operates in a highly-competitive environment against numerous
well-established national, regional and foreign companies, and many smaller
companies in the procurement of raw materials, the development of new pasta
products and product lines, the improvement and expansion of previously
introduced pasta products and product lines and the production, marketing and
distribution of pasta products. Several of these companies have longer operating
histories, broader product lines, significantly greater brand recognition and
greater production capacity and financial and other resources than the Company.
The Company's direct competitors include large multi-national companies such as
food industry leader Hershey with brands such as San Giorgio(R) and Ronzoni(R),
and Borden with brands such as Prince(R) and Creamette(R), regional U.S.
producers of retail and institutional pasta such as Dakota Growers Pasta Company
("Dakota Growers"), a farmer-owned cooperative in North Dakota, Philadelphia
Macaroni Co. Inc. ("Philadelphia Macaroni") and A. Zerega's Sons, Inc.
("Zerega's"), each an independent producer, and foreign companies such as
Italian pasta producers De Cecco ("De Cecco") and Barilla.

The Company's competitive environment depends to a significant extent on
the aggregate industry capacity relative to aggregate demand for pasta products.
Several domestic pasta producers have recently

11
<PAGE> 14

completed production facility additions or announced their intention to increase
domestic production capacity. In addition to AIPC's planned capital expansion,
management believes that these capacity additions represent more than 200
million pounds in aggregate. Dakota Growers recently increased the capacity of
its durum wheat mill and has announced plans to complete a pasta production
capacity expansion in excess of 100 million pounds by the end of 1997. Hershey
recently added approximately 50 million pounds of pasta capacity to its facility
in Winchester, Virginia. Two major pasta producers have also recently announced
planned reductions in pasta production capacity. Borden announced that it will
close or sell five of its ten North American pasta plants by the end of 1997,
and CPC intends to eliminate its capacity of approximately 180 million pounds by
the end of 1997. Increases in industry capacity levels above demand for pasta
products could have a material adverse effect on the Company's business,
financial condition and results of operations.

Several foreign producers, based principally in Italy and Turkey, have
aggressively targeted the U.S. pasta market in recent years. In 1996, a U.S.
Department of Commerce investigation revealed that several Italian and Turkish
producers were engaging in unfair trade practices by selling pasta at less than
fair value in the U.S. markets and benefitting from subsidies from their
respective governments. Effective July 1996, the U.S. International Trade
Commission ("ITC"), imposed anti-dumping and countervailing duties on Italian
and Turkish imports. While such duties may enable the Company and its domestic
competitors to compete more favorably against Italian and Turkish producers in
the U.S. pasta market, there can be no assurance that the duties will be
maintained for any length of time, or that these or other foreign producers will
not sell competing products in the United States at prices less than those of
the Company. Such practices, if continued or increased, could have a material
adverse effect on the Company's business, financial condition and results of
operations. Bulk imported pasta is not subject to such anti-dumping and
countervailing duties. A leading branded Italian producer, Barilla, opened a
repackaging and distribution facility in Syracuse, New York in 1996 for bulk
imported pasta. In addition, on August 28, 1997, the Department of Commerce
announced that it is conducting an administrative review of its anti-dumping and
countervailing duty orders of July 1996 relating to three Turkish and 16 Italian
pasta producers, including Barilla and De Cecco. The Department of Commerce
indicated that it intends to complete its review not later than July 31, 1998.
The Company cannot predict the outcome of the Department of Commerce's review.
See "Business -- Pasta Industry -- Pasta Production Capacity" and "--
Competition."

RELIANCE ON PASTA; PRODUCT LINE CONCENTRATION

Since commencing operations in 1988, the Company has focused exclusively on
the dry pasta industry. For the foreseeable future, AIPC expects to continue to
receive substantially all of its revenues from the sale of pasta and
pasta-related products. Because of this product concentration, any decline in
the demand or pricing for dry pasta, any shift in consumer preferences away from
dry pasta, or any other factor that adversely affects the pasta market, could
have a more significant adverse effect on the Company's business, financial
condition and results of operations than on pasta producers which also produce
other products. In addition, the Company's pasta production equipment is highly
specialized and is not adaptable to the production of non-pasta food products.

RELIANCE ON KEY PERSONNEL

The Company's operations and prospects depend in large part on the
performance of its senior management team, including Horst W. Schroeder,
Chairman of the Board, Timothy S. Webster, President and Chief Executive
Officer, David E. Watson, Executive Vice President and Chief Financial Officer,
Norman F. Abreo, Executive Vice President of Operations and David B. Potter,
Senior Vice President of Procurement. No assurance can be given that the Company
would be able to find qualified replacements for any of these individuals if
their services were no longer available. The loss of the services of one or more
members of the Company's senior management team could have a material adverse
effect on the Company's business, financial condition and results of operations.
Messrs. Schroeder and Webster currently have employment agreements with the
Company, which agreements will be amended or replaced prior to consummation of
the Offering. The Company does not maintain key person life insurance on any of
its key employees. The Company intends to enter into employment agreements with
Messrs. Watson and Abreo in August 1997. See "Management."

12
<PAGE> 15

TRANSPORTATION

Durum wheat is shipped to the Company's production facility in Missouri
directly from North Dakota, Montana and Canada under a long-term rail contract
with its most significant rail carrier, the Canadian Pacific Rail System. Under
such agreement, the Company is obligated to transport specified wheat volumes
and, in the event such volumes are not met, the Company must reimburse the
carrier for certain of its costs. The Company currently is in compliance with
such volume obligations. The Company also has a rail contract to ship semolina,
milled and processed at the Missouri facility, to the South Carolina facility.
An extended interruption in the Company's ability to ship durum wheat by
railroad to the Missouri plant, or semolina to the Company's South Carolina
facility, could have a material adverse affect on the Company's business,
financial condition and results of operations. The Company experienced a
significant interruption in railroad shipments in 1994 due to a railroad strike.
While the Company would attempt to transport such materials by alternative means
if it were to experience another interruption due to strike, natural disasters
or otherwise, there can be no assurance that the Company would be able to do so
or be successful in doing so in a timely and cost-effective manner. See
"Business -- Milling and Production Processes" and "-- Raw Materials and
Supplies."

PRODUCTION AND INVENTORY MANAGEMENT

Most of the Company's customers use, to some extent, inventory management
systems which track sales of particular products and rely on reorders being
rapidly filled by suppliers to meet consumer demand rather than on large
inventories being maintained by retailers. Although these systems reduce a
retailer's investment in inventory, they increase pressure on suppliers like the
Company to fill orders promptly and thereby shift a portion of the retailer's
inventory management cost to the supplier. The Company's production of excess
inventory to meet anticipated retailer demand could result in markdowns and
increased inventory carrying costs for the Company. In addition, if the Company
underestimates the demand for its products, it may be unable to provide adequate
supplies of pasta products to retailers in a timely fashion, and may
consequently lose sales.

POTENTIAL VOLATILITY OF FUTURE QUARTERLY OPERATING RESULTS

The Company's results of operations may fluctuate on a quarterly basis as a
result of a number of factors, including total sales volumes, the timing and
scope of new customer volumes, the timing and amounts of price adjustments due
to durum wheat and other cost changes, the cost of raw materials, including
durum wheat, plant expansion costs and interest expenses. In addition,
fluctuations in quarterly results could affect the market price of the Class A
Common Stock in a manner unrelated to the longer term operating performance of
the Company.

RISK OF PRODUCT LIABILITY

Although the Company has never been involved in a product liability
lawsuit, the sale of food products for human consumption involves the risk of
injury to consumers as a result of tampering by unauthorized third parties,
product contamination or spoilage, including the presence of foreign objects,
substances, chemicals, aflatoxin and other agents, or residues introduced during
the growing, storage, handling or transportation phases. While the Company is
subject to U.S. Food & Drug Administration inspection and regulations and
believes its facilities comply in all material respects with all applicable laws
and regulations, there can be no assurance that consumption of the Company's
products will not cause a health-related illness in the future or that the
Company will not be subject to claims or lawsuits relating to such matters. The
Company maintains product liability insurance in an amount which the Company
believes to be adequate. However, there can be no assurance that the Company
will not incur claims or liabilities for which it is not insured or that exceed
the amount of its insurance coverage.

SUBSTANTIAL INFLUENCE OF CURRENT PRINCIPAL STOCKHOLDER

Upon consummation of the Offering, the Morgan Stanley Stockholders will own
approximately % of the outstanding Common Stock (approximately % of the
outstanding Common Stock if the U.S.

13
<PAGE> 16

Underwriters' over-allotment option is exercised in full). The Morgan Stanley
Stockholders have informed the Company that they intend to convert, from time to
time, such number of their shares of Class B Common Stock into shares of Class A
Common Stock (or vice versa) so that, following any such conversion, the Morgan
Stanley Stockholders and certain related persons will own, in the aggregate, 49%
of the outstanding Class A Common Stock (which is voting common stock) of the
Company. The Morgan Stanley Stockholders are affiliates of Morgan Stanley, Dean
Witter, Discover & Co. ("MSDWD"), an affiliate of Morgan Stanley & Co.
Incorporated, a representative of the U.S. Underwriters, and Morgan Stanley &
Co. International Limited, a representative of the International Underwriters.
Upon consummation of the Offering, three of nine directors of the Company will
be employees of a wholly-owned subsidiary of MSDWD. Pursuant to the Stockholders
Agreement (as amended and restated effective upon the consummation of the
Offering) among the Morgan Stanley Stockholders, the Company, and certain other
stockholders of the Company, one of the Morgan Stanley Stockholders, The Morgan
Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"), has the right to designate
two director nominees so long as it owns at least 25% of the outstanding Common
Stock or one director nominee so long as it owns at least 5% but less than 25%
of the outstanding Common Stock. In addition, another Morgan Stanley
Stockholder, Morgan Stanley Capital Partners III, L.P. ("MSCP"), has the right
to designate two director nominees so long as it owns at least 35% of the
outstanding Common Stock or one director nominee so long as it owns at least 5%
but less than 35% of the outstanding Common Stock. Whenever MSLEF II and MSCP
individually own less than 5% of the outstanding Common Stock, they shall
jointly be entitled to designate one director nominee as long as the Morgan
Stanley Stockholders beneficially own, in the aggregate, at least 5% of the
outstanding Common Stock. The number of directors designated by the Morgan
Stanley Stockholders will increase proportionately if the size of the Board of
Directors is increased in the future. In addition, so long as the Morgan Stanley
Stockholders own at least 25% of the outstanding shares of Common Stock, certain
significant corporate actions are subject to the approval of the Board of
Directors and the Morgan Stanley Stockholders. As a result of their ownership
interest in the Company and their rights under the Stockholders Agreement, the
Morgan Stanley Stockholders will continue to have a substantial influence over
the affairs of the Company following the consummation of the Offering, including
with respect to mergers or other business combinations involving the Company and
the acquisition or disposition of assets by the Company. Similarly, the Morgan
Stanley Stockholders will have the power to prevent or cause a change of control
of the Company and could take other actions that might be favorable to the
Morgan Stanley Stockholders. In such instances or otherwise, various conflicts
of interest between the Company and the Morgan Stanley Stockholders could arise.
Stockholders may be prevented from receiving a premium for their shares if the
Morgan Stanley Stockholders were to act in concert to oppose any takeover
attempt. See "Principal and Selling Stockholders," "Anti-takeover Effect of
Certain Charter, By-Law and Statutory Provisions" and "Certain Relationships and
Related Transactions -- Stockholders Agreement."

FINANCIAL LEVERAGE; SENSITIVITY TO INTEREST RATE FLUCTUATIONS; COVENANT
RESTRICTIONS

The Company will use the net proceeds to the Company from the Offering to
reduce its outstanding bank indebtedness as of June 30, 1997 from approximately
$86 million to $ million upon application of the net proceeds of the Offering,
after which such debt will represent approximately % of the Company's total
capitalization. However, the Company intends to substantially increase such
indebtedness in the future to finance its capital expenditure plan. The degree
to which the Company is financially leveraged following such borrowings and the
terms of the Company's indebtedness could have important consequences to
stockholders, including: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, and general
corporate purposes may be impaired; (ii) a substantial portion of the Company's
cash flow from operations may have to be dedicated to the payment of the
principal of and interest on its indebtedness; (iii) the terms of such
indebtedness may restrict the Company's ability to pay dividends; and (iv) the
Company may be more highly leveraged than many of its competitors, which may
place the Company at a competitive disadvantage. As of June 30, 1997, the
outstanding indebtedness under the Company's $162.6 million credit facility (the
"Credit Facility") was $85.9 million. See "Use of Proceeds."

As of June 30, 1997, the Company's indebtedness had a weighted average
interest rate of 9.3% and approximately 92%, or $85.9 million, of the Company's
indebtedness bore interest at variable rates. Although

14
<PAGE> 17

the Company will use the net proceeds of the Offering to substantially reduce
the amount of such variable-rate indebtedness, the Company may incur additional
amounts of variable-rate indebtedness in the future. If this were to occur, and
if interest rates were to significantly increase thereafter, the Company's
operating results and its ability to satisfy its debt service obligations may be
materially and adversely affected. Previously, the Company had relied on an
interest rate cap to effectively limit the Company's exposure to variable rates
with respect to a portion of the Company's debt. Under the Credit Facility, the
Company is required to obtain an interest rate protection agreement by November
15, 1997. There can be no assurance the Company will be able to obtain such
interest rate protection agreement on favorable terms.

The limitations contained in the agreements relating to the Company's
existing Credit Facility, together with the leveraged position of the Company,
restrict the Company from paying dividends and could limit the ability of the
Company to effect future debt or equity financings and may otherwise restrict
corporate activities, including the ability to avoid defaults and to respond to
competitive market conditions, to provide for capital expenditures beyond those
permitted or to take advantage of business opportunities. See "Capitalization"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS

Charter and Bylaws. Certain provisions of the Company's Charter and By-laws
(the "By-laws") could delay or frustrate the removal of incumbent directors and
could make more difficult a merger, tender offer or proxy contest involving the
Company, even if such events could be beneficial, in the short term, to the
interests of the stockholders. For example, the Charter and By-laws allow the
Company to issue preferred stock with rights senior to those of the Class A
Common Stock without stockholder action, require the Board of Directors to be
divided into three classes serving three-year staggered terms, require
stockholder actions to be effected only at annual or special stockholder
meetings (unless the action is effected by written consent of stockholders and
the taking of such action by written consent has been approved in advance by the
Board of Directors), require the affirmative vote of holders of two-thirds of
the outstanding shares entitled to vote to remove directors (unless the removal
of a director has been requested by a shareholder who designated such director
as a nominee for election pursuant to the Stockholders Agreement, in which case
holders of a simple majority of the outstanding shares of Class A Common Stock
can remove such director), require the affirmative vote of holders of at least
80% of the outstanding shares to amend certain provisions of the Charter or to
repeal or amend the Company's By-laws and impose various other procedural
requirements on the taking of certain actions.

Pursuant to the Charter, shares of preferred stock and Class A Common Stock
may be issued in the future without further stockholder approval and upon such
terms and conditions, and having such rights, privileges and preferences, as the
Board of Directors may determine. The issuance of preferred stock and Class A
Common Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate transactions, could have the effect of making
it more difficult for a third party to acquire, or effectively preventing a
third party from acquiring, a majority of the outstanding Common Stock of the
Company. See "Description of Capital Stock -- Delaware Law and Certain Charter
and By-Law Provisions."

Delaware Corporation Law. The Company also is subject to provisions of the
General Corporation Law of the State of Delaware, as amended (the "DGCL"), that
prohibit a publicly-held Delaware corporation from engaging in a broad range of
business combinations with a person who, together with affiliates and
associates, owns 15% of more of the corporation's common stock (an "Interested
Stockholder") for three years after the person became an Interested Stockholder,
unless the business combination is approved in a prescribed manner. Those
provisions could discourage or make more difficult a merger, tender offer or
similar transaction, even if favorable to the Company's stockholders. See
"Description of Capital Stock -- Delaware Law and Certain Charter and By-Law
Provisions."

Amended Stockholders Agreement. In addition, the amended Stockholders
Agreement will grant the Morgan Stanley Stockholders the right, depending on
their respective ownership percentages, to designate nominees to the Board and
to have the right to approve certain significant corporate actions including,
but not limited to, mergers, consolidations or other similar transactions. The
substantial ownership position of the

15
<PAGE> 18

Morgan Stanley Stockholders could make it more difficult for a third party to
acquire, or effectively prevent a third party from acquiring, a majority of the
outstanding Common Stock.

Dual Class Structure. Tender offers or other non-open market acquisitions
of stock are usually made at prices above the prevailing market price of a
company's stock. In addition, acquisitions of stock by persons attempting to
acquire control through market purchases may cause the market price of the stock
to reach levels which are higher than would otherwise prevail. While the Class B
Common Stock is non-voting, the ability of the Morgan Stanley Stockholders to
convert that stock into Class A Common Stock (so long as such conversion does
not increase their aggregate ownership of Class A Common Stock above 49% of the
then-outstanding Class A Common Stock) may discourage such acquisitions,
particularly those of less than all of the Company's stock, and may thereby
deprive shareholders of an opportunity to sell their shares at a premium price.

ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Class A
Common Stock. Even if the Class A Common Stock is listed on the New York Stock
Exchange, there can be no assurance that an active trading market for the Class
A Common Stock will develop or be sustained after the Offering, or that
purchasers of Class A Common Stock will be able to resell their Class A Common
Stock at prices equal to or greater than the initial public offering price. The
initial public offering price was determined by negotiations between the Company
and the U.S. Representatives based on the factors described in "Underwriters."

The trading price of the Class A Common Stock could be subject to wide
fluctuations in response to announcements of increases in the cost of raw
materials, new products introduced by the Company or its competitors, variations
in the Company's quarterly results of operations, or changes in financial
estimates by securities analysts and other events or factors. The stock market
has experienced extreme price and volume fluctuations in recent years. Stock
market volatility unrelated to the operating performance of the Company may
adversely affect the market price of the Class A Common Stock.

DILUTION OF VOTING POWER UPON CONVERSION OF CLASS B COMMON STOCK INTO CLASS A
COMMON STOCK

After giving effect to the Offering and the Morgan Stanley Stockholders'
intended conversion of shares of Class A Common Stock into Class B Common Stock
such that, following such conversion, the Morgan Stanley Stockholders will own,
in the aggregate, 49% of the outstanding voting Class A Common Stock of the
Company, there will be shares of Class B Common Stock outstanding,
representing, in the aggregate, approximately % of the total outstanding
Common Stock ( shares of Class B Common Stock, representing, in the aggregate,
approximately % of the total outstanding Common Stock if the U.S.
Underwriters' over-allotment option is exercised in full). Conversion of shares
of Class B Common Stock into shares of Class A Common Stock would result in a
decrease in the aggregate voting power of the holders in the Class A Common
Stock offered hereby. Upon any disposition by the Morgan Stanley Stockholders of
any of their Class B Common Stock, such shares of Class B Common Stock will be
automatically converted into shares of Class A Common Stock. According to the
terms of the Charter, the Morgan Stanley Stockholders and certain related
persons may not, in the aggregate, own more than 49% of the outstanding shares
of Class A Common Stock after consummation of the Offering. See "Principal and
Selling Stockholders" and "Description of Capital Stock."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Upon consummation of the Offering (based on shares outstanding at
, 1997), the Company will have outstanding an aggregate of
shares of Common Stock, assuming no exercise of the U.S. Underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
all of the shares sold in the Offering will be freely tradeable without
restriction or further registration under the Securities Act, unless such shares
are purchased by "affiliates" of the Company as that term is defined in Rule 144
under the Securities Act ("Affiliates"). The remaining shares of Common
Stock held by existing stockholders are "restricted securities" as that term is
defined in Rule 144 under the Securities Act

16
<PAGE> 19

("Restricted Shares"). Restricted Shares may be sold in the public market only
if registered or if they qualify for an exemption from registration under Rule
144, 144(k) or 701 promulgated under the Securities Act. As a result of the
contractual restrictions described below and the provisions of Rules 144, 144(k)
and 701, the Restricted Shares will be available for sale in the public market
as follows: (i) shares will be eligible for immediate sale on the date of this
Prospectus; and (ii) shares will be eligible for sale upon expiration of the
lock-up agreements at least 180 days after the date of this Prospectus. All
officers, directors and option holders and substantially all stockholders of the
Company have agreed not to sell or otherwise transfer any shares of Common Stock
or any other securities of the Company for a period of at least 180 days after
the date of this Prospectus. Sales, or the possibility of sales, of Common Stock
by the Company's existing stockholders, whether in connection with the exercise
of registration rights or otherwise, could adversely affect the market price of
the Company's Class A Common Stock. The Stockholders Agreement will be amended
to provide that the Company will grant the stockholders who are parties to such
agreement, including the Morgan Stanley Stockholders, certain "demand" and
"piggyback" registration rights with respect to the Common Stock owned by such
stockholders. See "Certain Relationships and Related Transactions --
Stockholders Agreement" and "Shares Eligible for Future Sale."

ABSENCE OF DIVIDENDS

The Company has never declared or paid cash dividends on its Common Stock
and currently intends to retain all available funds for use in the operation and
expansion of its business. The Company does not anticipate that any cash
dividends on the Common Stock will be declared or paid in the foreseeable
future. See "Dividend Policy."

SUBSTANTIAL AND IMMEDIATE DILUTION

Investors in the Offering will incur immediate dilution of $ per share in
the pro forma net tangible book value per share of Class A Common Stock (based
upon an assumed initial public offering price of $ per share) as of June 30,
1997. See "Dilution."

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of shares
of Class A Common Stock in the Offering are estimated to be approximately $
million (approximately $ million if the U.S. Underwriters' over-allotment
option is exercised in full), assuming an initial public offering price of $
per share. The Company will use approximately $ million of the net proceeds
from the Offering to repay bank indebtedness (with stated maturities from 2000
through 2004 and bearing interest at a weighted-average interest rate of 9.3%
per annum as of June 30, 1997) incurred under the Company's Credit Facility and
the balance will be used to fund the expansion of the Company's facilities and
for general corporate purposes. The Company will not receive any of the proceeds
from the sale of Class A Common Stock by the Selling Stockholder. See
"Underwriters."

DIVIDEND POLICY

The Company has not declared or paid any dividends on its Common Stock to
date and does not anticipate paying any such dividends in the foreseeable
future. After consummation of the Offering, the Company intends to retain
earnings for the foreseeable future to provide funds for the operation and
expansion of its business and for the repayment of indebtedness. The borrowing
agreements relating to the Company's Credit Facility contain certain provisions
which effectively prohibit the payment of dividends. Future borrowing agreements
of the Company may also contain limitations on the payment of dividends. Any
determination to pay dividends in the future will be at the discretion of the
Company's Board of Directors and will depend upon the Company's financial
condition, capital requirements, results of operations and other factors,
including any contractual or statutory restrictions on the Company's ability to
pay dividends.

17
<PAGE> 20

CAPITALIZATION

The following table sets forth information regarding the short-term debt
and capitalization of the Company on a pro forma basis to give effect to the
Recapitalization as if it had occurred as of June 30, 1997 and on a pro forma as
adjusted basis which reflects (i) the issuance and sale of shares of
Class A Common Stock offered hereby by the Company at an assumed initial public
offering price of $ per share and the application of the estimated net
proceeds therefrom and (ii) the Morgan Stanley Stockholders' intended conversion
of shares of Class B Common Stock into Class A Common Stock following the
consummation of the Offering. See "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Description
of Capital Stock -- General." The following table should be read in conjunction
with the Financial Statements, including the Notes thereto, appearing elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt and capital lease obligations, current
portion................................................... $ 3,685 $
======== ========
Long-term debt and capital lease obligations, less current
portion:
Long-term debt............................................ $ 83,063 $
Capital lease obligations................................. 6,437
-------- --------
Total long-term debt and capital lease obligations,
less current portion.................................. 93,185
-------- --------
Stockholders' equity:
Preferred stock, $.001 par value, shares
authorized, no shares issued and outstanding, pro forma
and pro forma as adjusted.............................. --
Class A Common Stock, $.001 par value, shares
authorized, shares issued and outstanding pro
forma and shares issued and outstanding pro
forma as adjusted(1)...................................
Class B Common Stock, $.001 par value, shares
authorized, shares issued and outstanding pro
forma and shares issued and outstanding pro
forma as adjusted......................................
Additional paid-in capital................................
Accumulated deficit....................................... (14,060)
-------- --------
Total stockholders' equity...........................
-------- --------
Total capitalization........................................ $ $
======== ========
</TABLE>

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

(1) Excludes (i) shares, shares and shares, respectively, of
Class A Common Stock reserved for issuance upon the exercise of outstanding
stock options under the Company's 1992 Plan, 1993 Plan and 1997 Plan,
respectively; and (ii) shares, shares and shares,
respectively, of Class A Common Stock available for future grants under the
1992 Plan, the 1993 Plan and the 1997 Plan, respectively. See "Management --
Stock Option Plans."

18
<PAGE> 21

DILUTION

The pro forma net tangible book value of the Company at June 30, 1997 was
$34.0 million, or $ per share of Common Stock. Pro forma net tangible book
value per share is equal to the Company's total assets less total liabilities,
divided by the pro forma total number of shares outstanding. The Company had a
pro forma total of shares of Common Stock outstanding as of June 30,
1997, assuming the Recapitalization had occurred as of that date. After giving
effect to the sale by the Company of shares of Class A Common Stock in
the Offering at an assumed initial public offering price of $ per share and
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company, the pro forma as adjusted net tangible book value of the
Company as of such date would have been approximately $ , or $ per
share, based on shares of Common Stock to be outstanding after the
Offering. This represents an immediate increase in net tangible book value of
$ per share to the current holders of the Common Stock and an immediate
dilution of $ per share to new investors purchasing shares of Common Stock in
the Offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price...................... $
-------
Pro forma net tangible book value per share before the
Offering.................................................
-------
Increase per share attributable to new investors...........
-------
Pro forma as adjusted net tangible book value per share
after the Offering.......................................
-------
Dilution per share to new investors(2)..................... $
=======
</TABLE>

The following table summarizes as of June 30, 1997, on a pro forma basis
after giving effect to the Offering, the differences in the total consideration
paid and the average price per share paid by the existing stockholders with
respect to the outstanding Common Stock and by the purchasers of the shares of
Common Stock offered by the Company in the Offering (at an assumed initial
public offering price of $ per share and before deducting underwriting
discounts and commissions and estimated offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).................... $55,335,000 $
New investors(2)............................
----------- -------
Total.................................. $ $
=========== =======
</TABLE>

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

(1) Includes shares of Class B Common Stock. Excludes (i)
shares, shares and shares, respectively, of Class A Common Stock
reserved for issuance upon the exercise of outstanding stock options under
the Company's 1992 Plan, the 1993 Plan and the 1997 Plan; and (ii)
shares, shares and shares, respectively, of Class A Common Stock
available for future grants under the 1992 Plan, the 1993 Plan and the 1997
Plan. See "Management -- Stock Option Plans."

(2) Sales of Class A Common Stock by the Selling Stockholder in the Offering
will reduce the number of shares of Common Stock held by existing
stockholders to , or approximately % of the total shares of
Common Stock outstanding after the Offering ( shares, or
approximately % if the U.S. Underwriters' over-allotment option is
exercised in full), and will increase the number of shares held by new
investors to , or approximately % of the total shares of Common
Stock outstanding after the Offering ( shares, or approximately
% if the U.S. Underwriters' over-allotment option is exercised in full).
See "Principal and Selling Stockholders."

19
<PAGE> 22

SELECTED FINANCIAL AND OTHER DATA

The selected statement of operations data for the years ended December 31,
1994 and 1995, the nine-month fiscal period ended September 30, 1996, and the
nine-month period ended June 30, 1997 and the selected balance sheet data as of
December 31, 1995, September 30, 1996 and June 30, 1997 are derived from, and
are qualified by reference to, the Financial Statements of the Company audited
by Ernst & Young LLP, independent auditors, appearing elsewhere in this
Prospectus. The selected statement of operations data for the years ended
December 31, 1992 and 1993 and the selected balance sheet data as of December
31, 1992, 1993 and 1994 have been derived from audited financial statements of
the Company not included herein. The selected statement of operations data for
the calendar year ended December 31, 1996 and the nine-month period ended June
30, 1996, and the balance sheet data as of December 31, 1996 and June 30, 1996
have been derived from the Company's unaudited internal financial statements,
which in the opinion of management, have been prepared on the same basis as the
audited financial statements and reflect all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the results of
operations and financial position of the Company. The statement of operations
data of the Company for the calendar year ended December 31, 1996 and the
nine-month period ended June 30, 1996 are included herein only for comparison
purposes. The Company's results of operations for the nine-month period ended
June 30, 1997 are not necessarily indicative of its results for the full fiscal
year. The selected other data has been derived from the accounting records of
the Company and have not been audited. The selected financial and other data set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Financial Statements, including the Notes thereto, appearing elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
NINE-MONTH NINE-MONTH
CALENDAR FISCAL PERIOD PERIOD ENDED
FISCAL YEAR ENDED DECEMBER 31, YEAR ENDED ENDED JUNE 30,
-------------------------------------- DECEMBER 31, SEPTEMBER 30, ----------------------
1992 1993 1994 1995 1996(1) 1996(1) 1996 1997(1)
---- ---- ---- ---- ------------ ------------- ---- -------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... $39,049 $47,872 $69,465 $ 92,903 $121,621 $ 92,074 $ 86,514 $ 93,616
Cost of goods sold............... 28,750 35,081 54,393 73,851 89,704 68,555 65,697 67,821
Plant expansion costs(2)......... -- 1,171 484 2,065 -- -- 425 --
------- ------- ------- -------- -------- -------- -------- --------
Gross profit..................... 10,299 11,620 14,588 16,987 31,917 23,519 20,392 25,795
Selling and marketing expense,
excluding product introduction
costs.......................... 2,888 2,883 3,792 5,303 11,682 8,676 6,625 8,078
General and administrative
expense........................ 2,077 2,049 1,951 2,930 3,498 2,805 2,741 2,855
Product introduction costs(3).... -- -- -- -- 9,568 8,122 4,611 2,134
------- ------- ------- -------- -------- -------- -------- --------
Operating profit................. 5,334 6,688 8,845 8,754 7,169 3,916 6,415 12,728
Interest expense, net............ 5,396 3,210 4,975 8,008 10,575 8,023 8,030 7,800
------- ------- ------- -------- -------- -------- -------- --------
Income (loss) before income tax
and extraordinary loss......... (62) 3,478 3,870 746 (3,406) (4,107) (1,615) 4,928
Income tax....................... -- (3,221) 1,484 270 (1,288) (1,556) (642) 1,878
Extraordinary loss, net of income
tax(4)......................... 2,639 -- 204 -- 1,647 1,647 1,647 --
------- ------- ------- -------- -------- -------- -------- --------
Net income (loss)................ $(2,701) $ 6,699 $ 2,182 $ 476 $ (3,765) $ (4,198) $ (2,620) $ 3,050
Pro forma net income (loss) per
common share(5)................
Pro forma weighted average common
shares outstanding(5)..........
OTHER DATA:
EBITDA(5)........................ $ 7,993 $ 9,495 $12,408 $ 13,836 $ 12,460 $ 8,994 $ 11,395 $ 18,037
EBITDA as a percent of
revenues(5).................... 20.5% 19.8% 17.9% 14.9% 10.2% 9.8% 13.2% 19.3%
Revenue per employee
(end of period)................ $ 209 $ 244 $ 288 $ 361 $ 437 NM NM NM
Working capital excluding current
maturities of long-term debt
(average for the period) as a
percent of revenues............ 17.3% 14.2% 12.0% 4.6% 6.5% NM NM NM
Cash flows provided by (used in):
Operating activities........... $ 966 $ 4,787 $ 3,690 $ 5,730 $ (5,013) $ (7,477) $ (4,155) $ 14,076
Investing activities........... (1,000) (15,139) (25,431) (38,789) (3,870) (3,041) (6,084) (11,464)
Financing activities........... 2,142 10,382 19,603 33,066 10,543 12,318 11,722 (1,818)
Earnings to fixed charges........ 0.50 1.87 1.48 0.92 0.52 0.28 0.59 1.60
BALANCE SHEET DATA
(AT END OF PERIOD):
Cash and cash equivalents........ $ 2,119 $ 2,149 $ 11 $ 18 $ 1,678 $ 1,818 $ 707 $ 2,612
Working capital.................. 2,900 3,077 4,830 6,632 (1,965) (1,601) 1,667 13,276
Total assets..................... 48,803 66,337 93,629 135,424 137,974 141,688 141,293 145,462
Long-term debt, less current
maturities..................... 31,509 40,024 62,375 97,452 92,143 93,284 94,884 89,500
Stockholders' equity............. 9,994 16,973 19,401 20,067 16,402 15,969 16,716 40,977
</TABLE>

(footnotes appear on following page)

20
<PAGE> 23

(footnotes from previous page)
- -------------------------
(1) The Company adopted a fiscal year ending on the last Friday of September,
effective beginning with the nine-month fiscal period ended September 27,
1996 and for all subsequent fiscal periods. For purposes of this Prospectus,
the 1996 fiscal year and 1997 interim period are shown as having ended on
September 30 and June 30, respectively.

(2) Plant expansion costs include incremental direct and indirect manufacturing
and distribution costs which are incurred as a result of construction,
commissioning and start-up of new capital assets. These costs are expensed
as incurred but are unrelated to current production and, therefore, are
reported as a separate line item in the statement of operations.

(3) Product introduction costs include the incremental selling and marketing
expenses, including payment of product placement or "slotting" fees, related
to the Company's launch of its Pasta LaBella flavored pasta products into
the U.S. retail grocery market.

(4) Represents losses due to early extinguishment of long-term debt, net of
income tax.

(5) Earnings per share is presented on a pro forma basis giving effect to the
consummation of the Recapitalization in connection with the Offering.

(6) EBITDA represents earnings before interest, income taxes, depreciation and
amortization, thereby removing the effect of certain non-cash charges on
income. Management believes that EBITDA is a meaningful measure of operating
performance, cash generation and ability to service debt. However, EBITDA
should not be considered as an alternative either to: (i) net earnings
(determined in accordance with GAAP); (ii) operating cash flow (determined
in accordance with GAAP); or (iii) liquidity. There can be no assurance that
the Company's calculation of EBITDA is comparable to similarly-titled items
reported by other companies.

21
<PAGE> 24

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following should be read in conjunction with the Financial Statements
of the Company and the Notes thereto included elsewhere in this Prospectus. For
a discussion of important factors that could cause actual results to differ
materially from the forward-looking statements, see "Risk Factors."

The Company changed its fiscal year end from December 31 to the last Friday
in September. This change resulted in a nine-month fiscal year for 1996, and
will result in a 53-week year for fiscal 1997, and a 52- or 53-week year for all
subsequent fiscal years. The Company's first three fiscal quarters end on the
Friday last preceding December 31, March 31, and June 30. For purposes of this
Prospectus, the 1996 fiscal year is described as the nine-month fiscal period
ended September 30, 1996, and the nine-month 1996 and 1997 interim periods are
described as having ended June 30. The statement of operations data of the
Company for the nine-month periods ended September 30, 1995 and June 30, 1996,
and the calendar year ended December 31, 1996 are included herein only for
comparison purposes.

OVERVIEW

The Company generates its revenues in two customer markets: Retail and
Institutional. The Retail market revenues include the revenues from sales of the
Company's pasta products to customers who resell the Company's pasta in retail
channels. These revenues include sales to club stores and grocery retailers,
encompass sales of the Company's private label and branded products, and will
include sales to CPC. The Institutional market revenues include the revenues
from product sales to Company customers who use the Company's pasta as an
ingredient in food products or customers who resell the Company's pasta in the
foodservice market such as Sysco. The Institutional market also includes
revenues from opportunistic sales to government agencies and other customers
which the Company pursues periodically when capacity is available ("Contract
Sales") to increase production volumes and thereby lower average unit costs.
Average sales prices in the Retail and Institutional markets differ depending on
customer-specific packaging and raw material requirements, product manufacturing
complexity and other service requirements. Generally, average retail sales
prices are higher than institutional sales prices. Average retail and
institutional prices vary due to changes in the relative share of customer
revenues and item specific sales volumes (i.e., product sales mix). Revenues are
reported net of cash discounts, pricing allowances and product returns.

The Company seeks to develop strategic customer relationships with food
industry leaders that have substantial pasta requirements. The Company has
long-term supply agreements with Sysco and CPC and other arrangements with food
industry leaders, such as Sam's Club, that provide for the "pass-through" of
direct material cost changes as pricing adjustments. The pass-throughs are
generally limited to actual changes in cost and, as a result, impact marginal
profitability in periods of changing costs and prices. The pass-throughs are
generally effective 30 to 90 days following such costs changes and thereby
significantly reduce the long-term exposure of the Company's operating results
to the volatility of raw material costs. Management estimates that approximately
60% of the Company's revenues in fiscal 1997 will be pursuant to long-term
supply agreements and other non-contractual customer arrangements which provide
for the pass-through of changes in durum wheat costs. Management believes that
this percentage will increase as the Company begins to generate revenue from
CPC.

The Company's Pasta LaBella flavored pasta products are sold at prices
which are significantly higher than the Company's non-flavored products as a
result of higher product and distribution costs and its premium

22
<PAGE> 25

brand position. In the second quarter of calendar 1996, the Company began
distribution of Pasta LaBella flavored pasta into the U.S. Retail grocery
market. This initiative was supported by a comprehensive trade and consumer
product introduction program, including the payment of product placement or
"slotting" fees to retailers, and an on-going selling and marketing program
required to support branded retail sales. The Company achieved distribution in
approximately 40% of the U.S. Retail grocery market and ceased to incur
additional product introduction costs in the first quarter of fiscal 1997.
Product introduction costs totalled $8.1 million for the nine-month fiscal
period ended September 30, 1996 and $2.1 million for the nine-month period ended
June 30, 1997.

The Company's cost of goods sold consist primarily of raw materials,
packaging, manufacturing (including depreciation) and distribution costs. A
significant portion of the Company's cost of goods sold is durum wheat. The
Company purchases durum wheat on the open market and, consequently, is subject
to fluctuations in cost. The Company manages its durum cost risk through
long-term contracts and other arrangements with its customers and advance
purchase contracts for durum wheat which are generally less than six months'
duration. The price of durum wheat was volatile during the period between
January 1, 1994 and June 30, 1997 and the published average monthly market price
per bushel fluctuated from $5.18 to $7.49 over this period. The durum cost
volatility and the timing and amount of sales price adjustments impacted profit
and margins over the 1994-1997 periods.

The Company's capital asset strategy is to achieve low-cost production
through vertical integration and investment in the most current pasta-making
assets and technologies. The manufacturing- and distribution-related capital
assets which have been or will be acquired to support this strategy are
depreciated over their respective economic lives. Because of the capital
intensive nature of the Company's business and its current and future facilities
expansion plans, management believes its depreciation expense for production and
distribution assets may be higher than that of many of its competitors.
Depreciation expense is a component of inventory cost and cost of goods sold.
Plant expansion costs include incremental direct and indirect manufacturing and
distribution costs which are incurred as a result of construction, commissioning
and start-up of new capital assets. These costs are expensed as incurred but are
unrelated to current production and, therefore, reported as a separate line item
in the statement of operations.

The Company has commenced an $86 million capital expansion of its durum
wheat milling and pasta production and distribution facilities in Missouri and
South Carolina. The capital expansion will increase the Company's overall
milling, production and distribution capacity by approximately 100% to meet the
significant volume requirements of the CPC agreement. The expansion will be
financed with borrowings under the Company's current Credit Facility and a new
$150 million revolving credit facility to be entered into with the Company's
lenders shortly following the Offering. The Company will use a majority of the
net proceeds to the Company from the Offering to repay the outstanding
indebtedness under the current Credit Facility. The Company has signed
commitments with respect to the construction of the expanded facilities and
purchase of Italian pasta production equipment totaling approximately $47
million. The expansion construction is currently on schedule and is planned to
be completed in early 1998 in time to implement the CPC agreement and support
future growth opportunities.

Selling and marketing expense incurred to support retail sales are higher
than those for institutional sales, as the Company incurs external broker
commissions, and promotional and other marketing expenses in addition to the
costs incurred by its internal retail sales force. The Company is not
responsible for selling and marketing expense related to the CPC Agreement.
Consequently, the Company expects prospective selling and marketing expense as a
percentage of revenues to decrease relative to historical levels as the Company
begins to generate CPC revenues in 1998.

At June 30, 1997, the Company had a net operating loss carryforward of
approximately $26.6 million for federal income tax purposes. The net operating
loss carryforward resulted principally from the Company's significant tax
depreciation deductions related to its capital assets. Subject to certain
limitations, the Company expects this net operating loss carryforward will be
available to offset future taxable income.

23
<PAGE> 26

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data of the
Company, expressed as a percentage of revenues, for each of the periods
presented. This table should be read in conjunction with the Financial
Statements and related Notes thereto appearing elsewhere in this Prospectus:

<TABLE>
<CAPTION>
NINE-MONTH NINE-MONTH
FISCAL YEAR ENDED CALENDAR FISCAL PERIOD PERIODS ENDED
DECEMBER 31, YEAR ENDED ENDED JUNE 30,
----------------- DECEMBER 31, SEPTEMBER 30, -----------------
1994 1995 1996 1996 1996 1997
---- ---- ------------ ------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Retail........................... 44.6% 53.1% 59.6% 60.7% 57.5% 56.3%
Institutional.................... 55.4 46.9 40.4 39.3 42.5 43.7
----- ----- ----- ----- ----- -----
Total revenues..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- ----- -----
Cost of goods sold................. 78.3 79.5 73.8 74.5 75.9 72.4
Gross profit before plant expansion
costs............................ 21.7 20.5 26.2 25.5 24.1 27.6
Plant expansion costs.............. 0.7 2.2 -- -- 0.5 --
----- ----- ----- ----- ----- -----
Gross profit....................... 21.0 18.3 26.2 25.5 23.6 27.6
Selling and marketing expense...... 5.5 5.7 9.6 9.4 7.7 8.6
General and administrative
expense.......................... 2.8 3.2 2.9 3.0 3.2 3.0
Product introduction costs......... -- -- 7.9 8.8 5.3 2.3
----- ----- ----- ----- ----- -----
Operating profit................... 12.7 9.4 5.8 4.3 7.4 13.6
Interest expense, net.............. 7.2 8.6 8.7 8.7 9.3 8.3
Income tax......................... 2.1 0.3 (1.1) (1.7) (0.7) 2.0
Extraordinary loss, net of income
tax.............................. 0.3 -- 1.4 1.8 1.9 --
----- ----- ----- ----- ----- -----
Net income (loss).................. 3.1% 0.5% (3.2)% (4.6)% (3.0)% 3.3%
===== ===== ===== ===== ===== =====
</TABLE>

NINE-MONTH PERIOD ENDED JUNE 30, 1997 COMPARED TO THE NINE-MONTH PERIOD
ENDED JUNE 30, 1996

Revenues. Revenues increased $7.1 million, or 8.2%, to $93.6 million for
the nine-month period ended June 30, 1997, from $86.5 million for the nine-month
period ended June 30, 1996. The increase for the nine-month period ended June
30, 1997 was primarily due to higher unit volume which was partially offset by
lower net revenues on Pasta LaBella flavored pasta retail sales and price
reductions as a result of the pass-through of lower durum wheat costs. The
increase was lower than historical periods as the Company planned for and
achieved higher than historical capacity utilization levels which precluded more
significant unit production and sales growth. The Company believes the scheduled
1998 increases in production capacities and the start of CPC sales will result
in increased revenue growth in 1998.

Revenues for the Retail market increased $3.0 million, or 6.0%, to $52.7
million for the nine-month period ended June 30, 1997, from $49.7 million for
the nine-month period ended June 30, 1996. This increase was due to higher unit
volume, primarily from the private label category. This revenue increase was
partially offset by a lower average retail unit price primarily resulting from
volume-based price incentives on Pasta LaBella flavored pasta. The lower Pasta
LaBella flavored pasta unit price was mitigated by product sales mix
improvements in the private label and club store customers.

Revenues for the Institutional market increased $4.1 million, or 11.1%, to
$40.9 million for the nine-month period ended June 30, 1997, from $36.8 million
for the nine-month period ended June 30, 1996. This was primarily the result of
volume gains in ingredient and foodservice markets and Contract Sales which were
partially offset by price reductions as a result of decreases in durum wheat
costs.

Gross Profit. Gross profit increased $5.4 million, or 26.5%, to $25.8
million for the nine-month period ended June 30, 1997, from $20.4 million for
the nine-month period ended June 30, 1996. Gross profit as a

24
<PAGE> 27

percentage of revenues increased to 27.6% for the nine-month period ended June
30, 1997 from 23.6% for the nine-month period ended June 30, 1996. These
increases were the result of (i) increases in unit volumes; (ii) lower durum
wheat and packaging material costs; and (iii) product sales mix improvements.

Selling and Marketing Expense. Selling and marketing expense increased $1.5
million, or 22.7%, to $8.1 million for the nine-month period ended June 30,
1997, from $6.6 million for the nine-month period ended June 30, 1996. Selling
and marketing expense as a percentage of revenues increased to 8.6% for the
nine-month period ended June 30, 1997, from 7.7% for the nine-month period ended
June 30, 1996. These increases were due to selling and marketing expense
incurred to support incremental retail Pasta LaBella flavored pasta volume and
increases in private label revenue growth.

Product Introduction Costs. The Company incurred $2.1 million of product
introduction costs for the nine-month period ended June 30, 1997, as compared to
$4.6 million for the nine-month period ended June 30, 1996. These costs were
primarily related to the payment of product placement fees or "slotting,"
introductory consumer sampling, couponing, advertising and trade promotions. The
decrease was due to decreased product placement fees and lower introductory
selling and marketing expense.

General and Administrative Expense. General and administrative expense
increased $0.2 million, or 7.4%, to $2.9 million for the nine-month period ended
June 30, 1997, from $2.7 million for the nine-month period ended June 30, 1996,
but decreased as a percentage of revenues from 3.2% to 3.0%. The increase in
general and administrative expense was primarily due to higher MIS expenses and
communication costs needed to support sales growth.

Operating Profit. Operating profit increased $6.3 million, or 98.4%, to
$12.7 million for the nine-month period ended June 30, 1997, from $6.4 million
for the nine-month period ended June 30, 1996. Excluding product introduction
costs, operating profit increased $3.9 million, or 35.5%, to $14.9 million for
the nine-month period ended June 30, 1997, from $11.0 million for the nine-month
period ended June 30, 1996, and increased as a percentage of revenues to 16.0%
for the nine-month period ended June 30, 1997, from 12.7% for the nine-month
period ended June 30, 1996.

Interest Expense. Interest expense decreased $0.2 million, or 2.5%, to $7.8
million for the nine-month period ended June 30, 1997, from $8.0 million for the
nine-month period ended June 30, 1996. The decrease was primarily the result of
reduced borrowings under the Company's term and revolving credit facilities
resulting from the $22.3 million in proceeds realized from the April 1997
private equity financing (the "1997 Private Equity Financing"). See "--
Liquidity and Capital Resources" and "Certain Relationships and Related
Transactions."

Income Tax. Income tax increased $2.5 million for the nine-month period
ended June 30, 1997 to $1.9 million, from $(0.6) for the nine-month period ended
June 30, 1996, and reflects an effective income tax rate of approximately 38%.

Extraordinary Item. During the nine-month period ended June 30, 1996, the
Company incurred a $1.6 million (net of tax) extraordinary loss due to the
write-off of deferred debt issuance costs in conjunction with a partial
extinguishment and restructuring of the Company's principal bank credit
agreement. There was no such item for the nine-month period ended June 30, 1997.

Net Income. Net income increased $5.7 million to $3.1 million for the
nine-month period ended June 30, 1997, from $(2.6) million for the nine-month
period ended June 30, 1996.

NINE-MONTH FISCAL PERIOD ENDED SEPTEMBER 30, 1996 COMPARED TO THE
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1995

Revenues. Revenues increased $28.3 million, or 44.4%, to $92.1 million for
the nine-month fiscal period ended September 30, 1996, from $63.8 million for
the nine-month period ended September 30, 1995. This increase was primarily due
to higher unit volume, favorable changes in product sales mix and higher average
prices resulting from the introduction of the Company's new, higher-priced Pasta
LaBella flavored pasta.

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<PAGE> 28

Revenues for the Retail market increased $23.1 million, or 70.4%, to $55.9
million for the nine-month fiscal period ended September 30, 1996, from $32.8
million for the nine-month period ended September 30, 1995. This increase was
due to (i) higher sales volume, with the largest increases coming from private
label and club stores customers; (ii) higher average unit prices due to the
introduction of the Company's new, higher-priced Pasta LaBella flavored pasta
into the U.S. retail grocery market; (iii) improved product sales mix in the
club store category; and (iv) the pass-through of higher durum wheat costs.

Revenues for the Institutional market increased $5.2 million, or 16.8%, to
$36.2 million for the nine-month fiscal period ended September 30, 1996, from
$31.0 million for the nine-month period ended September 30, 1995. The volume
gains in ingredient and foodservice categories were partially offset by lower
Contract Sales volumes as available production capacity was utilized by retail
sales growth. The average 1996 institutional unit price also increased due to
the pass-through of higher durum wheat costs.

Gross Profit. Gross profit increased $12.9 million, or 121.7%, to $23.5
million for the nine-month fiscal period ended September 30, 1996, from $10.6
million for the nine-month period ended September 30, 1995. Gross profit as a
percentage of revenues increased to 25.5% for the nine-month fiscal period ended
September 30, 1996, from 16.6% for the nine-month period ended September 30,
1995. These increases were primarily the result of (i) higher sales volumes;
(ii) higher average unit prices, primarily as a result of Pasta LaBella flavored
pasta sales; (iii) the absence of plant expansion costs; (iv) lower per unit
warehousing and distribution costs resulting from outsourcing logistics
functions through a new strategic alliance with Lanter Company; and (v) improved
plant efficiencies and capacity utilization, including the impact of the new
South Carolina production and distribution facilities.

Selling and Marketing Expense. Selling and marketing expense increased $5.0
million, or 135.1%, to $8.7 million for the nine-month fiscal period ended
September 30, 1996, from $3.7 million for the nine-month period ended September
30, 1995. Selling and marketing expense as a percentage of revenues increased to
9.4% for the nine-month fiscal period ended September 30, 1996 from 5.7% for the
nine-month period ended September 30, 1995. These increases in selling and
marketing expense were primarily due to Pasta LaBella flavored pasta sales and
increases in club store and private label revenues.

Product Introduction Costs. The Company incurred $8.1 million of product
introduction costs during the nine-month fiscal period ended September 30, 1996
related to the retail introduction of the Company's Pasta LaBella flavored pasta
products. These costs included payment of product placement fees or "slotting,"
introductory consumer sampling, couponing, advertising and trade promotions.
There were no comparable 1995 expenditures.

General and Administrative Expense. General and administrative expense
increased $0.8 million, or 40.0%, to $2.8 million for the nine-month fiscal
period ended September 30, 1996, from $2.0 million for the nine-month period
ended September 30, 1995, but decreased as a percentage of revenues from 3.2%
for the nine-month period ended September 30, 1995 to 3.0% for the nine-month
fiscal period ended September 30, 1996. The increase in general and
administrative expense was primarily due to increases in MIS expenses and
communication costs incurred to support sales growth and the commencement of
operations in South Carolina.

Operating Profit. Operating profit decreased $1.0 million, or 20.4% to $3.9
million for the nine-month fiscal period ended September 30, 1996 from $4.9
million for the nine-month period ended September 30, 1995. Excluding product
introduction costs, operating profit increased to $12.0 million, or 144.9%, from
$4.9 million and increased as a percentage of revenue to 13.1% for the
nine-month fiscal period ended September 30, 1996 from 7.7% for the nine-month
period ended September 30, 1995.

Interest Expense. Interest expense increased $2.7 million, or 50.9%, to
$8.0 million for the nine-month fiscal period ended September 30, 1996 from $5.3
million for the nine-month period ended September 30, 1995, due to higher
borrowing levels to finance the Company's South Carolina and Missouri capital
assets expansion and increases in working capital.

26
<PAGE> 29

Income Tax. Income tax decreased to $(1.6) million for the nine-month
fiscal period ended September 30, 1996, from $(0.6) million for the nine-month
period ended September 30, 1995 and reflect an effective income tax rate of
approximately 38% in both periods.

Extraordinary Item. During the nine-month fiscal period ended September 30,
1996, the Company incurred a $1.6 million (net of tax) extraordinary loss due to
the write-off of deferred debt issuance costs in conjunction with a partial
extinguishment and restructuring of the Company's principal bank credit
agreement. There was no such item for the nine-month period ended September 30,
1995.

Net Income. Net income decreased $4.0 million to $(4.2) million for the
nine-month fiscal period ended September 30, 1996, from $(0.2) million for the
nine-month period ended September 30, 1995.

CALENDAR YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1995

The calendar year ended December 31, 1996 does not conform to the Company's
fiscal year and is discussed below only for purposes of comparison with the
Company's fiscal year ended December 31, 1995.

Revenues. Revenues increased $28.7 million, or 30.9%, to $121.6 million for
the calendar year ended December 31, 1996, from $92.9 million for the fiscal
year ended December 31, 1995. This increase was due to higher unit volume,
higher average unit price from the mid-1996 introduction of the Company's new
higher-priced Pasta LaBella flavored pasta into the U.S. Retail grocery market
and improvements in product sales mix.

Revenues for the Retail market increased $23.1 million, or 46.9%, to $72.4
million for the calendar year ended December 31, 1996, from $49.3 million for
the fiscal year ended December 31, 1995. This increase was due to (i) higher
average unit prices associated with the introduction of the Company's new,
higher-priced Pasta LaBella flavored pasta into the U.S. retail grocery market
in mid-1996; (ii) higher unit volume, with the largest increases coming from the
private label and club store customers; (iii) improved product sales mix; and
(iv) the pass-through of higher durum wheat costs.

Revenues for the Institutional market increased $5.6 million, or 12.8% to
$49.2 million for the calendar year ended December 31, 1996 from $43.6 million
for the fiscal year ended December 31, 1995. The ingredient and foodservice
volume gains were partially offset by lower Contract Sales volumes as available
capacities were utilized by retail unit growth. The average 1996 institutional
unit price increased due to the pass-through of higher durum wheat costs.

Gross Profit. Gross profit increased $14.9 million, or 87.6%, to $31.9
million for the calendar year ended December 31, 1996, from $17.0 million for
the fiscal year ended December 31, 1995. Gross profit as a percentage of
revenues increased to 26.2% for the calendar year ended December 31, 1996, from
18.3% for the fiscal year ended December 31, 1995. These increases were
primarily the result of (i) higher unit volumes; (ii) higher average unit
prices, primarily due to Pasta LaBella flavored pasta sales; (iii) lower durum
wheat costs; (iv) the absence of plant expansion costs; and (v) lower per unit
warehousing and distribution costs resulting from outsourcing logistics
functions through a new strategic alliance with Lanter Company.

Selling and Marketing Expense. Selling and marketing expense increased $6.4
million, or 120.8%, to $11.7 million for the calendar year ended December 31,
1996, from $5.3 million for the fiscal year ended December 31, 1995. Selling and
marketing expense, excluding product introduction costs, grew as a percentage of
revenue to 9.6% for the calendar year ended December 31, 1996, from 5.7% for the
fiscal year ended December 31, 1995. The increase in selling and marketing
expense was due primarily to larger retail revenues associated with Pasta
LaBella flavored pasta and increases in club store and private label sales.

Product Introduction Cost. The Company incurred $9.6 million of product
introduction costs during the calendar year ended December 31, 1996 related to
the retail introduction of the Company's Pasta LaBella flavored pasta products.
These costs included payment of fees paid for product placement or "slotting,"
introductory consumer sampling, couponing, advertising and trade promotions.
There were no comparable 1995 expenditures.

27
<PAGE> 30

General and Administrative Expense. General and administrative expense
increased $0.6 million, or 20.7%, to $3.5 million for the calendar year ended
December 31, 1996 from $2.9 million for the fiscal year ended December 31, 1995,
but decreased as a percentage of revenues from 3.1% to 2.9% over the same
period. The increase in general and administrative expense was primarily due to
increases in MIS expenses and communication costs incurred to support sales
growth and the operations in South Carolina.

Operating Profit. Operating profit decreased $1.6 million, or 18.2%, to
$7.2 million for the calendar year ended December 31, 1996, from $8.8 million
for fiscal year ended December 31, 1995 and decreased as a percentage of revenue
to 5.8% for the calendar year ended December 31, 1996, from 9.4% for the fiscal
year ended December 31, 1995. Excluding product introduction costs, operating
profit increased by $8.0 million, or 90.9%, to $16.8 million for the calendar
year ended December 31, 1996, from $8.8 million for the fiscal year ended
December 31, 1995 and increased as a percentage of revenue to 13.7% for the
calendar year ended December 31, 1996 from 9.4% for the fiscal year ended
December 31, 1995.

Interest Expense. Interest expense increased $2.6 million, or 32.5% to
$10.6 million for the calendar year ended December 31, 1996 from $8.0 million
for fiscal year ended December 31, 1995, due to higher debt levels resulting
from the incremental borrowings required to finance the Company's South Carolina
and Missouri capital asset expansion and increases in working capital.

Income Tax. Income tax decreased to $(1.3) million for the calendar year
ended 1996 from $0.3 million for the fiscal year ended 1995, and reflects an
effective income tax rate of approximately 38% in both periods.

Extraordinary Item. During calendar year ended December 31, 1996, the
Company incurred a $1.6 million (net of tax) extraordinary loss due to the
write-off of deferred debt issuance costs in conjunction with a partial
extinguishment and restructuring of the Company's principal bank credit
agreement.

Net Income. Net income decreased $4.3 million to $(3.8) million for the
calendar year ended December 31, 1996, from $0.5 million for the fiscal year
ended 1995.

FISCAL YEAR ENDED DECEMBER 1995 COMPARED TO THE FISCAL YEAR ENDED DECEMBER
1994

Revenues. Revenues increased $23.4 million, or 33.7%, to $92.9 million for
the fiscal year ended December 31, 1995, from $69.5 million for the fiscal year
ended December 31, 1994. This increase was due primarily to higher unit volume
and higher average unit prices resulting from a favorable product sales mix and
price increases as a result of increases in durum wheat costs.

Revenues for the Retail market increased $18.1 million, or 58.0%, to $49.3
million for the fiscal year ended December 31, 1995, from $31.2 million for the
fiscal year ended December 31, 1994. The growth in Retail revenues was primarily
due to significant volume increases from the mid-1994 commencement of sales to
club stores and private label growth. The average 1995 retail unit price also
increased due to price increases as a result of the pass-through of higher durum
wheat costs and improved product sales mix.

Revenues for the Institutional market increased $5.3 million, or 13.8%, to
$43.6 million for the fiscal year ended December 31, 1995, from $38.3 million
for the fiscal year ended December 31, 1994. The increased net revenue resulted
primarily from (i) increased foodservice unit volume; (ii) an increase in
Contract Sales volumes; (iii) price increases made as a result of the
pass-through of higher durum wheat costs; and (iv) sales from the foodservice
introduction of higher-priced Pasta LaBella flavored pasta in the second half of
1995.

Gross Profit. Gross profit increased $2.4 million, or 16.4%, to $17.0
million for the fiscal year ended December 31, 1995, from $14.6 million for the
fiscal year ended December 31, 1994. This increase resulted primarily from
higher unit volumes. Gross profit as a percentage of revenues decreased to 18.3%
for the fiscal year ended December 31, 1995 from 21.0% for the fiscal year ended
December 31, 1994. Approximately two-thirds of the gross margin decrease was due
to incremental plant expansion costs related to the 1995 construction,
commissioning and start-up of the South Carolina production and distribution
facilities and the Missouri distribution facility. The balance of the gross
margin decrease was a result of (i) planned short-term increases in average unit
manufacturing and logistics costs due to temporarily lower overall capacity and

28
<PAGE> 31

higher production cost due to the opening of the South Carolina plant, and (ii)
increases in average unit packaging material costs.

Selling and Marketing Expense. Selling and marketing expense increased $1.5
million, or 39.5%, to $5.3 million for the fiscal year ended December 31, 1995,
from $3.8 million for the fiscal year ended December 31, 1994. Selling and
marketing expense as a percentage of revenues increased from 5.5% in fiscal 1994
to 5.7% in fiscal 1995, primarily as a result of retail revenue growth.

General and Administrative Expense. General and administrative expense
increased $0.9 million, or 45.0%, to $2.9 million for the fiscal year ended
December 31, 1995, from $2.0 million for the fiscal year ended December 31,
1994. General and administrative expense as a percentage of revenues increased
from 2.8% in fiscal 1994 to 3.2% in fiscal 1995, primarily due to increases in
MIS, communications, travel and other general expenses related to the
commencement of operations in South Carolina.

Operating Profit. Operating profit was $8.8 million for the fiscal year
ended December 31, 1995, unchanged from the prior fiscal year ended December 31,
1994. Excluding plant expansion costs in 1995 and 1994, operating profit
increased $1.5 million, or 16.1%, to $10.8 million for the fiscal year ended
December 31, 1995, from $9.3 million for fiscal year ended December 31, 1994,
and decreased as a percentage of revenue to 11.6% for the fiscal year ended
December 31, 1995 from 13.4% for the fiscal year ended December 31, 1994.

Interest Expense. Interest expense increased $3.0 million, or 60.0%, to
$8.0 million for the fiscal year ended December 31, 1995 from $5.0 million for
the fiscal year ended December 31, 1994, primarily due to higher debt levels
resulting from increased working capital and the financing of the Company's
South Carolina and Missouri capital asset expansion.

Income Tax. Income tax decreased $1.2 million to $0.3 million for the
fiscal year ended December 31, 1995 from $1.5 million for the fiscal year ended
December 31, 1994 and reflects an effective income tax rate of approximately 38%
in both periods.

Extraordinary Item. During the fiscal year ended December 31, 1994, the
Company incurred a $0.2 million (net of tax) extraordinary loss due to the write
off of deferred debt issuance costs in connection with a partial extinguishment
and restructuring of the Company's principal bank credit agreement. There was no
such item in 1995.

Net Income. Net income decreased $1.7 million to $0.5 million for the
fiscal year ended December 31, 1995 from $2.2 million for the fiscal year ended
December 31, 1994.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $2.6 million and working capital totaled
$13.3 million at June 30, 1997. At September 30, 1996, cash and cash equivalents
totaled $1.8 million and working capital totaled $(1.6) million. The $14.9
million increase in working capital resulted primarily from the $22.3 million
April 15, 1997 private equity financing (the "1997 Private Equity Financing")
and improvements in the Company's operating results.

The Company's net cash provided by operating activities totaled $14.1
million for the nine-month period ended June 30, 1997 compared to $(7.5) million
for the nine-month fiscal period ended September 30, 1996. This increase of
$21.6 million was primarily due to higher net income, reductions in net working
capital investment and reduced product introduction costs. Net cash provided by
operating activities was $5.7 million and $3.7 million for the fiscal years
ending December 31, 1995 and 1994, respectively. The $2.0 million increase in
net cash provided by operating activities in the fiscal year ending December 31,
1995 was primarily due to lower investment in net working capital.

Cash flow used in investing activities principally relates to the Company's
investments in manufacturing, distribution, milling and MIS assets. Capital
expenditures were $11.5 million and $3.0 million for the nine-month periods
ending June 30, 1997 and September 30, 1996, respectively, and were $38.8
million and $25.4 million for the fiscal years ended December 31, 1995 and 1994,
respectively. The increase in spending for the nine-month period ending June 30,
1997 was a result of the Company's initial expenditures in the $86.0 million
capital expansion program targeted for 1998 completion. This expansion is
designed to meet the volume requirements of the CPC agreement and planned future
growth opportunities. The increased spending

29
<PAGE> 32

in 1994 and 1995 was primarily the result of the construction of the Company's
South Carolina manufacturing and distribution facilities and the Missouri
distribution center.

Net cash provided by financing activities was $(1.8) million for the nine
months ended June 30, 1997 compared to $12.3 million for the nine-month fiscal
period ended September 30, 1996. The $14.1 million change is primarily a result
of the $22.3 million in net proceeds from the 1997 Private Equity Financing
offset by the $25.2 million repayment of short-term and long-term borrowings.
Net cash provided by financing activities was $33.1 million and $19.6 million
for the fiscal years ending December 31, 1995 and 1994, respectively, as a
result of borrowings required to fund the Company's capital asset expansion
programs and working capital.

In April 1997, the Company entered into an amended and restated credit
agreement with Bankers Trust Company, Morgan Stanley Senior Funding, Inc. and
various banks named therein (the "Credit Agreement"). The Credit Agreement
provides for (i) an $18.0 million term loan maturing on February 26, 2000; (ii)
a $19.9 million term loan maturing on February 26, 2002; (iii) a $54.7 million
term loan maturing on February 27, 2004; (iv) a $45.0 million term loan maturing
on February 27, 2004 to finance a portion of the Company's 1997-1998 capital
assets expansion; and (v) a $25.0 million revolving loan maturing on February
29, 2000. At June 30, 1997, $85.9 million was outstanding under the Credit
Agreement, and the Company had $45.0 million available to borrow under the $45.0
million term credit facility and $24.5 million available to borrow under the
$25.0 million revolving credit facility (subject to borrowing base limitations).
As of July 31, 1997, $87.9 million was outstanding under the Credit Agreement.
Interest on borrowings is based on the London Interbank Offer Rate (LIBOR), plus
a credit margin of 300 to 375 basis points. At June 30, 1997, the three-month
LIBOR rate was 5.8%, and the Company's aggregate, weighted average bank debt
borrowing rate was 9.3%. The current Credit Agreement contains restrictive
covenants that, among other things, limit the Company's ability to incur debt,
sell assets, make capital expenditures and pay dividends. Management does not
expect these limitations to have a material effect on the Company's business or
results of operations. The Company is in compliance with all financial covenants
contained in the Credit Agreement and believes it will continue to be in
compliance during fiscal 1997.

The Company plans to use a majority of its net proceeds from the Offering
to repay outstanding indebtedness incurred under the Company's Credit Facility.
The balance of such proceeds will be used to fund a portion of the Company's
planned $86 million capital expansion of its milling and production facilities
designed to meet the significant volume requirements of the CPC agreement and
planned future growth opportunities. The Company intends to finance the
remainder of its capital expansion program and fund future working capital needs
principally with borrowings under an amended Credit Agreement with its lenders
(the "Amended Credit Agreement") to be entered into following the closing of the
Offering. The Company has received from its lenders a commitment letter for a
new $150 million unsecured revolving credit facility.

Management anticipates the Company's creditworthiness and interest rate
level of debt outstanding will be significantly improved upon receipt of the net
proceeds from the Offering. The Company will incur an extraordinary charge
related to the write-off of deferred debt issuance costs relating to the
extinguishment and restructuring of the existing credit facility.

The commitment letter contemplates that the Amended Credit Agreement will
contain restrictive covenants similar to those in the current Credit Agreement
with respect to limits on the Company's ability to incur debt, sell assets, make
capital expenditures and pay dividends. Management does not expect these
limitations to have a material effect on the Company's business or results of
operations. The Company is in compliance with all financial covenants contained
in the current Credit Agreement.

The Company expects that future cash requirements will principally be for
capital expenditures, repayments of indebtedness under the Credit Agreement and
working capital requirements. As of June 30, 1997, the Company had commitments
to purchase Italian pasta production equipment and expand the milling,
production and distribution facilities totaling approximately $47.2 million and
durum wheat purchase commitments totaling approximately $6.3 million. Management
believes that net cash provided by operating activities, net cash provided by
refinancing activities and the net proceeds of the Offering will be sufficient
to meet the Company's expected capital and liquidity needs for the foreseeable
future.

30
<PAGE> 33

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which is required to be adopted by the Company on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. If SFAS No. 128 had been
implemented by the Company at June 30, 1997, the impact on the calculation of
earnings per share would not have been material.

EFFECT OF INFLATION AND INTEREST RATE FLUCTUATIONS

Historically, inflation has not had a material effect on the Company, other
than to increase its cost of borrowing. In general, the Company has been able to
increase the majority of customer sales prices to recover significant increases
in the prices of raw materials. However, changes in prices of the Company's
pasta products and the pass-through of higher durum wheat costs to certain
customers historically have lagged price increases in the Company's raw material
costs.

31
<PAGE> 34

BUSINESS

OVERVIEW

AIPC is the third largest and one of the fastest-growing producers and
marketers of pasta in North America. The Company commenced operations in 1988
with the North American introduction of new, highly-efficient durum wheat
milling and pasta production technology. Management believes that the Company's
singular focus on pasta, vertically-integrated facilities, continued technology
leadership and development of a highly-skilled workforce enable AIPC to produce
high-quality pasta at costs significantly below those of most of its
competitors. Management believes that the combination of the Company's favorable
cost structure, the higher average age of its competitors' North American pasta
production equipment and the growing pasta consumption in North America creates
significant opportunities for continued growth. The Company's revenue and
operating income excluding product introduction costs were $121.6 million and
$16.7 million, respectively, for the calendar year ended December 31, 1996, and
grew at CAGRs of 33% and 33%, respectively, over the five-year period ended
December 31, 1996. During the nine-month period ended June 30, 1997, the Company
had revenue of $93.6 million and an operating margin excluding product
introduction costs of 15.9%.

The Company has rapidly established a significant market presence in North
America by developing strategic customer relationships with food industry
leaders that have substantial pasta requirements. The Company has a long-term
supply agreement with Sysco, the nation's largest marketer and distributor of
foodservice products. In 1998, AIPC will become the exclusive producer of
Mueller's, the largest pasta brand in the United States, pursuant to a recent
long-term manufacturing and distribution agreement with CPC. CPC has announced
its intention to close its current pasta production facility by December 1997.
AIPC is also the primary supplier of pasta to Sam's Club, the largest club store
chain in the United States, and supplies private label and branded pasta to six
of the 10 largest grocery retailers in the United States, including Wal*Mart,
A&P, Publix, Albertsons, American Stores and Winn-Dixie. In addition, AIPC has
developed supply relationships with leading food processors, such as Pillsbury,
General Mills and Kraft, which use the Company's pasta as an ingredient in
branded food products.

The Company produces more than 80 dry pasta shapes in two
vertically-integrated production and distribution facilities, strategically
located in Excelsior Springs, Missouri and Columbia, South Carolina. The
construction of the Missouri plant in 1988 represented the first use in North
America of a vertically-integrated, high-capacity pasta plant using Italian
pasta production technology. Management believes that this plant continues to be
among the most efficient and highly-automated pasta facilities in North America.
The South Carolina plant, which commenced operations in 1995, produces only
pasta shapes conducive to high-volume production and employs a highly-skilled,
self-managed workforce. Management believes that the South Carolina plant is the
most efficient pasta facility in North America in terms of productivity and
conversion cost per pound. To meet the significant volume requirements of the
CPC Agreement and support future growth, the Company commenced a capital
expenditure program in 1997 to nearly double the Company's annual pasta
production capacity and add a highly-automated durum wheat mill to its South
Carolina plant, with completion scheduled for 1998.

OPERATING STRATEGY

- Continue to Lead the Industry as the Lowest Cost Producer of High
Quality Pasta. AIPC has successfully implemented production and capital
investment strategies designed to achieve low-cost production of
high-quality products. AIPC has distinguished itself from most major pasta
producers by vertically integrating the durum wheat milling function with
the production process, thereby allowing the Company to manage the grain
procurement process and better control the consistency, quality and cost of
its raw materials. The Company has invested in new pasta making technology,
process controls and the development of a largely self-managed work force.
Management believes that its facilities are among the

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most efficient pasta production facilities in North America in terms of
productivity and conversion cost per pound. AIPC actively manages plant
capacity utilization to optimize its fixed asset base and profitability
through Contract Sales to government agencies and other customers. The
Company believes that its vertically-integrated processes and pasta
production equipment produces pasta of superior color, texture, flavor and
consistency. AIPC's logistics strategy enables the Company to realize
significant distribution cost savings through its strategically-located
distribution centers. The Company expects to realize additional operating
efficiencies through the completion of the current expansion program at its
South Carolina and Missouri facilities and ongoing improvement programs.
See "-- Facilities and Expansion."

- Expand Customer-Driven Strategy. The Company is committed to
developing and maintaining strategic relationships with customers who (i)
are food industry leaders requiring a significant volume of high-quality
pasta; (ii) have committed marketing and sales resources to growing their
pasta business; and (iii) pursue long-term supply arrangements. The Company
has pursued this strategy since commencing operations in 1988, beginning
with an agreement with Sysco. For almost a decade, the Company has been
Sysco's primary pasta supplier. In addition, since 1994, the Company has
been the primary pasta supplier to Sam's Club. AIPC currently supplies
private-label and branded products to over 20 retail grocery customers,
including many of the largest U.S. grocery retailers. AIPC also supplies
pasta to leading food processors such as Pillsbury, General Mills and Kraft
for use as a food ingredient. Starting in 1998, the Company will become the
sole producer of Mueller's, the largest pasta brand in the United States,
under the CPC Agreement. Management believes that these strategic
relationships increase operating efficiencies, enhance AIPC's investment in
new technology, create distribution synergies, and enable closer
involvement in its customers' pasta businesses.

- Provide Superior Customer Service. The Company develops and enhances
customer relationships by providing superior service and technical support
for its customers. The Company has invested heavily in the development of a
broad range of customer service programs, including electronic data
interchange (EDI) and efficient consumer response (ECR) programs which
streamline the order, invoicing and inventory management functions. AIPC
uses its customer response services and category management expertise,
based in part on data supplied by A.C. Nielsen Co. ("Nielsen"), to assist
customers in their supply management and merchandising decisions. AIPC's
inventory management system is designed to optimize customer lead time,
order fill rate and inventory turnover. To provide its customers with
benefits in both transportation cost and delivery time, the Company has
strategically located its distribution centers in Missouri, South Carolina
and California. The Company provides marketing, technical and service
support to its customers by assisting customers with supply and category
management decisions, producing pasta to its customers' specifications and
making operational recommendations to its customers using pasta as an
ingredient in their food products. AIPC is the only pasta producer to
sponsor an annual durum milling and pasta production technology forum, at
which industry experts conduct a training and development program for the
manufacturing and research and development personnel of food companies.

GROWTH STRATEGY

The Company continues to implement its growth strategy, which builds on the
Company's operating strategy and industry trends. Key elements of the Company's
growth strategy are:

- Successfully Implement CPC Business Expansion. The Company was
recently selected to be the exclusive producer of CPC's Mueller's brand
pasta, the largest pasta brand in North America. Upon completion of AIPC's
planned capacity expansion in 1998, management anticipates CPC's annual
volume requirements will represent an approximately 60% increase over the
Company's fiscal 1997 production run rate. Management believes that the
Company's experience in servicing large pasta supply agreements and its
current capacity expansion program will enable AIPC to meet the current CPC
volume requirements and support potential future growth.

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be outsourced to more efficient producers of high-quality pasta, such as
AIPC. Management has identified additional strategic opportunities with
commercial users and marketers of pasta which may result in incremental
growth, new product development and cost savings opportunities in the
future.

- Secure Additional Private Label Customers. The Company intends to
continue to grow its private label customer base and secure additional
private label customers by continuing to offer quality products,
competitive pricing, category management and superior customer service.
Management believes that AIPC's prospects for growth in the private label
market have been enhanced since Borden, historically the largest private
label supplier in North America, publicly announced its intention to exit
the private label pasta business in 1997.

- Continue Product Innovation. In 1995, the Company introduced Pasta
LaBella flavored pasta, a line of all natural, full-flavored pasta products
utilizing patented flavoring technology and AIPC's proprietary production
process. In addition to pursuing increased sales with institutional
customers, the Company is exploring potential sales and marketing alliances
to expand retail distribution of Pasta LaBella flavored pasta. AIPC also
intends to continue assisting its customers with innovative products and
packaging, and the development of additional value-added products intended
to generate higher margins than traditional pasta products.

PASTA INDUSTRY

North American pasta consumption exceeded 5.0 billion pounds in 1995 and is
projected to grow to approximately 5.8 billion pounds by 2002 based on industry
and trade sources and the Company's own analysis. The pasta industry consists of
two primary customer markets: (i) Retail, which includes grocery stores, club
stores and mass merchants that sell branded and private label pasta to
consumers; and (ii) Institutional, which includes both foodservice distributors
that supply restaurants, hotels, schools and hospitals, as well as food
processors that use pasta as a food ingredient. In 1996, the Retail market
accounted for approximately 1.3 billion pounds, of which branded and private
label pasta accounted for 1.0 billion and 0.3 billion pounds, respectively.
Foodservice distributors, food processors and the U.S. government in the
Institutional market accounted for the remainder of the volume, approximately
3.7 billion pounds, in 1996.

The expected increase in North American consumption is primarily
attributable to the widespread recognition that pasta is an inexpensive,
convenient and nutritious food. The U.S. Department of Agriculture places pasta
on the foundation level of its pyramid of recommended food groups. Products such
as flavored pasta, prepared sauces, boxed pasta dinners, and both frozen and
shelf-stable prepared pasta entrees support consumers' lifestyle demands for
convenient at-home meals. Pasta continues to grow in popularity in restaurants
as Americans continue to dine away from home more frequently.

Customer Markets

Retail. Hershey, Borden and CPC together represent a majority of the
branded Retail market. Hershey, which primarily competes in the branded Retail
market and whose retail brands include Ronzoni, San Giorgio, Skinner and
American Beauty, is the industry leader and produced 24.5% of the total pounds
sold in the branded Retail market for the 52 weeks ended June 30, 1997. Borden,
which produced 21.5% of the total pounds sold in the Retail market for the 52
weeks ended June 30, 1997, has announced its intention to shift its strategy to
focus on its branded pasta and sauce products, which include Creamette, Prince,
Catelli, Merlino's and Anthony's, and to exit private label pasta production and
sales. CPC participates in the Retail market with Mueller's, the oldest and
largest pasta brand in the United States. AIPC directly participates in the
branded Retail market by producing and distributing Pasta LaBella flavored pasta
and will indirectly participate in such market by processing and distributing
Mueller's brand pasta for CPC. During 1998, CPC will transfer substantially all
of its Mueller's brand pasta production to AIPC. See "-- Production and Supply
Agreements."

Between the first quarter of 1994 and the second quarter of 1997, sales of
private label pasta products increased from 18.6% to 21.5% of the total pounds
of pasta sold in the Retail market. Management believes that sales of private
label pasta products will continue to grow at a rate in excess of the overall
Retail pasta

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market. After Borden's departure from the private label market, AIPC will be one
of the leading suppliers in the remaining fragmented market. Management believes
that the private label category offers significant growth and profit
opportunities to retailers and efficient producers. Retailers often prefer
high-quality private label products to branded products because private label
products typically enable retailers to generate higher margins and maintain
greater control of in-store merchandising. While consumers traditionally have
viewed private label products as having lower quality than branded products,
management believes that new high-quality private label products have begun to
change this perception. Management attributes some of this change in the private
label market to the increasingly upscale image, improved packaging, higher
product quality and competitive prices of private label products.

Institutional. The Institutional market includes both foodservice
distributors that supply restaurants, hotels, schools and hospitals, as well as
food processors that use pasta as a food ingredient. Traditional foodservice
customers include businesses and organizations, such as Sysco and JP
Foodservice, Inc., that sell products to restaurants, healthcare facilities,
schools, hotels and industrial caterers. Most foodservice distributors obtain
their supply of pasta from third party producers such as AIPC. The foodservice
market is highly-fragmented and is served by numerous regional and local food
distributors, including both "traditional" foodservice customers and chain
restaurant customers. Sysco, the nation's largest foodservice marketer and
distributor of foodservice products and one of the nation's largest commercial
purchasers of pasta products, serves approximately 10% of the foodservice
customers in the United States and has more than double the revenues of the next
largest foodservice distributor.

The Institutional market also includes sales to food processors who use
pasta as an ingredient in their food products such as frozen dinner entrees and
side dishes, dry side dish mixes, canned soups and single-serve meals. Large
food processors that use pasta as a food ingredient include Kraft, American Home
Food Products Corporation, Stouffers Corp., Campbell Soup Company, ConAgra,
Inc., Pillsbury and General Mills. The consistency and quality of the color,
starch release, texture, cooking consistency, and gluten and protein content of
pasta produced for food processors is crucial to their products' success. As a
result, food processors have stringent specifications for these attributes.

The size of the Institutional market is affected by the number of food
processors that elect to produce pasta internally rather than outsourcing their
production. Historically, most pasta used by food processors was manufactured
internally for use in food processors' own products. Management believes,
however, that an increasing number of food processors may discontinue the
internal production of their own pasta and outsource their production to more
efficient producers such as AIPC.

Pasta Production Capacity

Management believes that pasta producers have historically rationalized
their existing production facilities. Within the past several years, however,
there has been an increase in some pasta producers' capital reinvestment. Upon
completion of the planned expansion, AIPC will have increased its production
capacity to 620 million pounds since commencing operations in 1988. Several
domestic pasta producers have recently completed production facility additions
or announced their intention to increase domestic production capacity. In
addition to AIPC's planned capital expansion, management believes that these
capacity additions represent more than 200 million pounds in aggregate. Dakota
Growers recently increased the capacity of its durum wheat mill and has
announced plans to complete a pasta production capacity expansion in excess of
100 million pounds by the end of 1997. Hershey recently added approximately 50
million pounds of pasta capacity to its facility in Winchester, Virginia. Two
major pasta producers have also recently announced planned reductions in pasta
production capacity. Borden announced that it will close or sell five of its ten
North American pasta plants by the end of 1997, and CPC intends to eliminate its
capacity of approximately 180 million pounds by the end of 1997. AIPC and Dakota
Growers are currently the only major pasta producers that own
vertically-integrated milling and production facilities.

Management estimates pasta imported from foreign producers during 1996
represented approximately 17% of the U.S. dry pasta market, and that of this
amount, approximately two-thirds originates from producers in Italy and Turkey.
The primary foreign suppliers of pasta with which the Company competes are
Barilla and De Cecco.

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Pricing pressures from Turkish and Italian pasta producers aggressively
targeting the U.S. markets have adversely affected returns and earnings of some
U.S. producers in recent years. In 1996, pasta imported from Italy accounted for
approximately $140 million in sales, or around 8.0% of the U.S. pasta market. In
1996, a U.S. Department of Commerce investigation revealed that several Italian
and Turkish producers were engaging in unfair trade practices by selling pasta
at less than fair value in the U.S. markets and benefitting from subsidies from
their respective governments. Effective July 1996, the U.S. International Trade
Commission imposed anti-dumping duties ranging from 2.8% to 46.7% on Italian
imports and from 56.8% to 63.3% on Turkish imports, as well as countervailing
duties ranging from 1.2% to 11.2% on Italian imports and from 3.9% to 15.8% on
Turkish imports. Although Turkish and Italian importers still participate in the
major U.S. customer markets, management believes that these duties have
significantly reduced the volume of low-priced pasta from Italy and Turkey. See
"Risk Factors -- Competition."

Raw Materials

Pasta's primary ingredient is semolina, which is extracted from durum wheat
through a milling process. Almost all domestic pasta producers purchase semolina
from third party milling companies. Durum wheat is used exclusively for pasta.
Each variety of durum wheat has its own unique set of protein, gluten content,
moisture, density, color and other attributes which affect the quality and other
characteristics of the semolina. The Company blends semolina from different
wheat varieties as needed to meet customer specifications.

Durum wheat used in United States pasta production generally originates
from Canada, North Dakota, Montana, Arizona and California. Although durum wheat
can be purchased directly from farmers or grower-owned cooperatives, most
milling companies purchase durum wheat on a commodity exchange. AIPC and Dakota
Growers are the only major producers of pasta in North America that have
vertically integrated milling and production facilities. See "Raw Materials and
Supplies."

PRODUCTS

AIPC's product line, comprising over 1,000 stock-keeping units ("SKUs"),
includes long goods such as spaghetti, linguine, fettuccine, angel hair and
lasagna, and short goods such as elbow macaroni, mostaccioli, rigatoni, rotini,
ziti and egg noodles. In many instances, the Company produces pasta to its
customers' specifications. AIPC makes over 80 different shapes and sizes of
pasta products in over 160 package configurations, including bulk packages for
institutional customers and small individually-wrapped packages for retail sale
to individual consumers. AIPC contracts with third parties for the production of
certain pasta shapes, such as retail lasagna and canneloni, which are
specialized products, but which are necessary to offer customers a full range of
pasta products. Purchased pasta represented less than 2% of AIPC's total unit
volume in fiscal 1996.

In fiscal 1995, AIPC introduced a product line of all natural,
full-flavored pasta marketed under the Pasta LaBella brand. Pasta LaBella
flavored pasta is principally marketed as a branded product to grocery retailers
and to Sysco. AIPC's all-natural, full-flavored dry pasta is available in a
variety of flavors including tomato basil, lemon pepper, pesto, roasted garlic
and herb, roasted bell pepper/roasted garlic, and cracked black pepper.
Management believes that AIPC's use of patented flavoring ingredients under an
exclusive license and a proprietary manufacturing process allows the Company to
provide superior product quality and flavor delivery compared to competitive
flavored pasta products. Pasta LaBella flavored pasta was recognized as one of
the top 10 new products in the United States in 1996 by Food Processing
Magazine.

QUALITY

The Company believes that its state-of-the-art, Italian pasta production
equipment is capable of producing the highest quality pasta. AIPC's products are
produced to satisfy the specifications of the Company's customers as well as its
own product specifications, which management believes are among the highest in
the industry. The Company's pasta is distinguished by a rich, natural "wheaty"
taste and a consistently smooth and firm ("al dente") texture with a minimum
amount of white spots or dark specks. AIPC evaluates the quality of its products
through: (i) internal laboratory evaluation of AIPC products

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against competitive products on physical characteristics, including color, speck
count, shape and consistency, and cooking performance, including starch release,
protein content and bite; and (ii) competitive product comparisons that AIPC's
customers perform on a regular basis.

The Company submits its production facilities to semi-annual inspections by
the American Institute of Baking ("AIB"), the leading United States baking, food
processing and allied industries evaluation agency for sanitation and food
safety. The Company consistently has achieved the AIB's highest "Superior"
rating. The Company also implemented a comprehensive Hazard Analysis Critical
Control Point ("HAACP") program five years ago to continuously monitor and
improve the safety, quality and cost-effectiveness of the Company's facilities
and products. The Company believes that having an AIB rating of "Superior" and
meeting HAACP standards have helped the Company attract new business and
strengthen existing customer relationships.

PRODUCTION AND SUPPLY AGREEMENTS

The Company has established itself as one of the largest producers of dry
pasta in North America by establishing strategic production, supply and
distribution arrangements with several food industry leaders, including CPC and
Sysco.

Under the CPC Agreement, CPC will close its current facilities dedicated to
the production of Mueller's brand pasta and, beginning in 1998, AIPC will become
the exclusive producer of Mueller's, with the exception of two specialty items
which CPC currently purchases from another supplier. CPC is a global food
company, and its Mueller's pasta line is the oldest and largest pasta brand in
the United States with an annual sales volume averaging approximately 200
million pounds over the last five years. AIPC will be paid on a "cost plus"
basis in an amount equal to total actual cost of production plus a guaranteed
profit per pound of pasta produced. CPC has guaranteed minimum purchase volumes
of 175 million pounds annually for nine years. AIPC may also benefit from
additional cost savings resulting from improved productivity. The term of the
contract is through December 31, 2006 with a three-year renewal term at the
option of CPC. Without CPC's consent, AIPC may not produce branded retail pasta
for Borden, Hershey or Barilla, and is limited to the production of an aggregate
of 12 million pounds of branded pasta products annually for other producers.

Pursuant to the Sysco Agreement, AIPC is the primary supplier of pasta for
Sysco and has the exclusive right to supply pasta to Sysco for sale under
Sysco's name. Sysco, which operates from approximately 65 operations and
distribution facilities nationwide, provides products and services to
approximately 230,000 restaurants, hotels, schools, hospitals, and other
institutions, as well as the U.S. government. For the nine-month fiscal year
ended September 30, 1996, sales attributed to Sysco represented approximately
27% of the Company's net revenues. Sysco recently exercised its option to renew
its agreement with AIPC for an additional three years through June 30, 2000, and
has options to renew the agreement for additional three-year periods through
June 30, 2006. AIPC products are sold to Sysco on a cost-plus basis, with annual
adjustments based on the prior year's costs. Under the Sysco Agreement, AIPC may
not supply pasta products to any business other than Sysco in the United States,
Mexico or Canada that operates as, or sells to, institutions and businesses
which provide food for consumption away from home (i.e. foodservice businesses)
without Sysco's prior consent. In 1996, Sysco honored the Company as one of the
10 best of its 1,300 suppliers.

RAW MATERIALS AND SUPPLIES

AIPC's ability to produce high-quality pasta generally begins with its
purchasing durum wheat directly from farmers and grower-owned cooperatives in
Canada, North Dakota, Montana, Arizona and California, rather than from grain
exchanges. This direct purchasing method ensures that the extracted semolina
meets AIPC's specifications since each variety of durum wheat has its own unique
set of milling and pasta making characteristics. The Company has several sources
for durum wheat and is not dependent on any one supplier. As a result, the
Company believes that it has adequate sources of supply for durum wheat. The
Company occasionally buys and sells semolina to balance its milling and
production requirements.

Durum wheat is a cash crop whose average monthly market price has
fluctuated from a low of $5.18 per bushel to a high of $7.49 per bushel in the
last four years. Durum wheat does not have a related futures market to hedge
against such price fluctuations. The Company manages its durum wheat cost risk
through long-term

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contracts and other arrangements with its customers and advance purchase
contracts for durum wheat which are generally less than six months' duration.
Long-term supply agreements and other customer arrangements which allow for the
pass-through of durum wheat cost changes in certain circumstances represented
approximately 60% of AIPC's total revenue for the nine-month period ended June
30, 1997. Management believes that the Company will significantly increase the
percentage of revenues pursuant to contracts which include provisions for sales
price adjustments as it begins to generate CPC revenues in 1998. See "Risk
Factors -- Raw Materials."

AIPC purchases its packaging supplies, including poly-cellophane,
paperboard cartons, boxes and totes from third parties. Management believes the
Company has adequate sources of packaging supplies.

FACILITIES AND EXPANSION

Production Facilities. AIPC's pasta production plants are located near
Kansas City in Excelsior Springs, Missouri, and in Columbia, South Carolina. The
Company's facilities are strategically located to support North American
distribution of AIPC's products and benefit from the rail and interstate highway
infrastructure. At June 30, 1997, the Company's facilities had combined annual
milling and production capacity of approximately 300 million pounds of durum
semolina and 330 million pounds of pasta.

The Company has pursued a capacity expansion strategy over the past several
years. During 1994, the Company completed a $30.0 million expansion of the
Missouri plant, increasing production capacity more than 70% to 230 million
pounds per year and, at the same time, increased its durum wheat milling
capacity over 100% to support pasta production of approximately 300 million
pounds per year. In 1995, the Company added approximately 100 million pounds of
pasta capacity by constructing its South Carolina plant.

AIPC has commenced an $86.0 million capital expenditure program to increase
its current pasta production capacity by 90% from 330 million pounds per year to
620 million pounds per year in 1998. The additional capacity at the Missouri
facility will combine high-speed, high-output pasta production lines with the
ability to produce a full range of products, and will include a distribution
center expansion. The capital expenditures program also includes the
construction of a durum wheat mill in South Carolina which adjoins the existing
plant facility, a 200% increase in the facility's pasta production capacity, and
a doubling of the capacity of the South Carolina distribution facility. See "Use
of Proceeds" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" and "Risk
Factors -- Substantial Planned Investment in Milling and Production Facilities."

The additional capacity will be used to produce Mueller's brand pasta and
take advantage of other market opportunities. By the second quarter of fiscal
1998, AIPC will assume production of substantially all of CPC's Mueller's pasta,
which management estimates will require a minimum production capacity of 200
million pounds a year. CPC's guaranteed annual minimum purchases of 175 million
pounds pursuant to the CPC Agreement will utilize approximately 60% of the
Company's newly-added capacity.

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The following chart illustrates the historical and budgeted growth of
AIPC's milling and pasta production capacity:

Performance Graph

Each of the Company's major capacity expansion programs has been completed on
schedule and within budget, and has delivered the targeted levels of output and
efficiency. See "Risk Factors -- Substantial Planned Investments in Milling and
Production Facilities" and "Management of Growth and Implementation of CPC
Business."

Milling and Pasta Production Processes. Durum wheat is currently delivered
to AIPC's mill in Missouri by railcar directly from the durum wheat elevators in
the northern United States and Canada under a long-term rail contract. The wheat
is then unloaded, blended and pre-cleaned. Next, the moisture content of the
wheat is raised to the optimal level required for milling (the "tempering
process"). The cleaned and tempered wheat is then conveyed to the mill where
grinding, sifting, and purifying processes extract the purest possible semolina.
The semolina milling is controlled from a central control room located in the
mill where a single AIPC team member monitors and directs the mill's entire
milling, cleaning and storage process. Semolina is then pneumatically
distributed from the mill to AIPC's pasta production facility in Missouri and,
through the use of a leased fleet of 33 dedicated railcars, transferred to South
Carolina.

After being mixed with water, the semolina is extruded into the desired
shapes and travels through computer-controlled high-temperature dryers and
stabilized at room temperature. The Company's entire pasta production process is
controlled by programmable logic controllers which enable all of the production
lines to be operated and monitored by minimal staff. The pasta is then packaged
in a wide variety of packaging configurations on highly-automated film, carton
and bulk packaging systems and forwarded through automated conveyors to the
distribution center to be palletized and stored prior to shipment.

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The Company's vertically-integrated milling and pasta production process is
depicted in the following chart:

MILLING AND PASTA PRODUCTION PROCESS

MILLING AND PASTA PRODUCTION PROCESS GRAPH

Distribution. The Company's three distribution centers are strategically
located in South Carolina, Missouri and Southern California to serve a national
market. The Company currently owns the distribution center adjoining its
Missouri plant and leases its distribution center in South Carolina as well as
space in a public warehouse in Pomona, California. The Company completed
construction of the integrated warehousing and distribution facilities at its
Missouri and South Carolina facilities during 1995. The warehousing and
distribution facilities are integrated with the Company's production facilities
which allows cased, finished products to be automatically conveyed via enclosed
case conveying systems from the production facilities to the distribution
centers for automated palletization and storage until shipping. The combination
of integrated facilities and multiple distribution centers enables AIPC to
realize significant distribution cost savings and provides lead time, fill rate
and inventory management advantages to its customers. The operation of the
Missouri and South Carolina distribution centers is outsourced under a long-term
agreement with Lanter Company, a firm specializing in warehouse and logistics
management services.

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SALES AND MARKETING

AIPC actively markets its products through approximately 15 internal sales
and marketing staff and approximately 30 independent food brokers and
distributors throughout the United States. AIPC's senior management is directly
involved in the selling process in all customer markets. The Company's sales and
marketing strategy is to provide superior quality, complete product offering,
distinctive packaging specifically tailored to customers' needs, competitive
pricing and superior customer service to attract new customers and grow existing
customers' pasta sales.

One of the Company's core strengths has been the development of strong
customer relationships and the establishment of a reputation as a technical and
service expert in the pasta field. As part of its overall customer service
strategy, AIPC uses its category management expertise to assist customers in
their supply management decisions regarding pasta and new products. The
Company's category management experts use on-line Nielsen's supermarket data to
drive pasta category growth by recommending pricing, SKU sets and shelf spacing
to both private label and branded customers. AIPC representatives also assist
food processors in incorporating AIPC's pasta as an ingredient in its customers'
food products. The Company sponsors an annual "Pasta Technology Forum" which is
a training and development program for its customers' production and new product
personnel. AIPC also produces and distributes a quarterly newsletter, the Pasta
Advisor, to its institutional customers which contains recommendations regarding
storage, conveying, cooking and ingredient combination. In addition to technical
education, the Company provides dedicated technical support to its customers by
making recommendations regarding the processing of pasta in their facilities.
AIPC believes that these value-added activities provide customers with a better
appreciation and awareness of the Company and its products.

The Company consistently demonstrates its commitment to customer service
through the development of enhanced customer service programs. Examples of these
programs include the creation by AIPC of an ECR model which uses EDI and vendor
replenishment programs to assist its key retail customers, and category
management services for its private label and branded customers. These programs
also enable the Company to more accurately forecast production and sales demand,
enabling higher utilization of production capacities and lower average unit
costs. AIPC has also created a dedicated sales force for Sysco, its largest
customer, to provide regional sales support.

MANAGEMENT INFORMATION SYSTEMS

The Company's production, distribution, sales and marketing operations are
supported by an IBM AS400-based computer system. The system utilizes licensed
BPCS manufacturing software which has been tailored to the Company's management
processes and integrates its production, purchasing, order entry, inventory
management, distribution and accounting systems. The Company's MIS were recently
upgraded in anticipation of the Company's growth and desire to continue to offer
its customers value-added, efficient services. The Company has invested
substantial amounts in EDI and ECR to streamline the order, invoicing and
inventory management functions. The Company believes that its recent hardware
and software upgrades have adequately addressed the systems operations issues
relating to the year 2000.

COMPETITION

The Company operates in a highly competitive environment against numerous
well-established national, regional and foreign companies, and many smaller
companies. The Company's competitors include both independent pasta producers
and pasta divisions and subsidiaries of large food products companies. The
Company competes in the procurement of raw materials, the development of new
products and product lines, the improvement and expansion of previously
introduced products and product lines and the production, marketing and
distribution of its products. AIPC's products compete with a broad range of food
products, both in the retail and institutional customer markets. Competition in
these markets generally is based on product quality and taste, pricing,
packaging and customer service and logistics capabilities. The Company believes
that it currently competes favorably with respect to these factors. See "Risk
Factors -- Competition" and "Industry."

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AIPC's direct competitors include large multi-national companies such as
Hershey and Borden and other competitors such as Dakota Growers, Philadelphia
Macaroni and Zerega's. The Company also competes against foreign companies such
as Italian pasta producers De Cecco and Barilla and competes, indirectly,
against food processors such as Kraft, General Foods, Inc., American Home Food
Products Corporation, Campbell Soup Company and Stouffers Corp., that produce
pasta internally as an ingredient for use in their food products. See "--
Industry."

TRADEMARKS AND PATENTS

The Company holds a number of federally registered and common law
trademarks which it considers to be of considerable value and importance to its
business including: AIPC American Italian Pasta Company, American Italian, and
Pasta LaBella. The Company has registered the AIPC American Italian Pasta
Company(R), Pasta LaBella(R), Montalcino(R) and other trademarks with the U.S.
Patent and Trademark Office. AIPC has filed a registration application with the
U.S. Patent and Trademark Office for the Calabria(TM) and Heartland(TM)
trademarks. A patent application is currently pending with respect to the
proprietary flavoring process for Pasta LaBella flavored pasta.

REGULATION

The Company is subject to various laws and regulations relating to the
operation of its production facilities, the production, packaging, labeling and
marketing of its products and pollution control, including air emissions, which
are administered by federal, state, and other governmental agencies. The
Company's production facilities are subject to inspection by the U.S. Food and
Drug Administration and Occupational Safety and Health Administration, the
Missouri Department of Natural Resources and the South Carolina Department of
Health and Environmental Control. The Company believes that the cost of its
compliance with existing laws and regulations will not have a material effect on
its results of operations or financial condition.

EMPLOYEES

As of June 30, 1997, the Company employed 287 full-time persons, of whom
134 were salaried employees and 153 were hourly employees. The Company's
employees are not represented by any labor unions. AIPC considers its employee
relations to be good.

LEGAL PROCEEDINGS

The Company currently is not a party to any material litigation nor is it
aware of any litigation threatened against it which, if commenced and adversely
determined, would likely have a material adverse effect upon the business or
financial condition of the Company.

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<PAGE> 45

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning each of the
directors and executive officers of the Company as of the date of this
Prospectus:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Horst W. Schroeder........................ 56 Chairman of the Board of Directors
Timothy S. Webster........................ 35 President and Chief Executive Officer;
Director
Norman F. Abreo........................... 47 Executive Vice President -- Operations
David E. Watson........................... 41 Executive Vice President and Chief
Financial Officer
David B. Potter........................... 38 Senior Vice President -- Procurement
Jonathan E. Baum.......................... 36 Director
David Y. Howe............................. 33 Director
Robert H. Niehaus......................... 41 Director
Amy S. Rosen.............................. 27 Director
James A. Schlindwein...................... 68 Director
Lawrence B. Sorrel........................ 38 Director
Richard C. Thompson....................... 46 Director
</TABLE>

Horst W. Schroeder has served as Chairman of the Board of Directors of the
Company since June 1991, and as a Director of the Company since August 1990.
Since 1990, Mr. Schroeder has been President of HWS & Associates, Inc., a Hilton
Head, South Carolina management consulting firm owned by Mr. Schroeder. Prior to
founding HWS & Associates, Mr. Schroeder served the Kellogg Company, a
manufacturer and marketer of ready-to-eat and other convenience food products,
in various capacities for more than 20 years, most recently as President and
Chief Operating Officer. He is a manager of PSF Holdings, L.L.C. and has served
as Chairman of the Board of its wholly-owned subsidiary, Premium Standard Farms,
Inc., a vertically-integrated pork producer, since 1996.

Timothy S. Webster has served as President of the Company since June 1991,
as President and Chief Executive Officer of the Company since May 1992, and as a
Director since June 1989. Mr. Webster joined the Company in April 1989, and
served as Chief Financial Officer from May 1989 to December 1990 and as Chief
Operating Officer from December 1990 to June 1991. Prior to joining the Company,
Mr. Webster was a manager with the Entrepreneurial Services Group of Arthur
Young and Company (a predecessor firm to Ernst & Young LLP) from April 1987 to
April 1989.

Norman F. Abreo joined the Company in December 1991, serving initially as
the Company's Vice President -- Manufacturing. He became Senior Vice President
- -- Operations in June 1995, and Executive Vice President -- Operations in June
1997. Prior to joining the Company, he was Plant Manager for the Coca-Cola
Enterprises, Inc. plant in New Orleans, Louisiana, from December 1987 to
December 1991; Director of Operations for Borden Pasta Group from December 1985
to December 1987; and Plant Manager of the Borden Pasta Group's New Orleans
facility from March 1979 to December 1985.

David E. Watson joined the Company in June 1994 as its Senior Vice
President and Chief Financial Officer. He was promoted to Executive Vice
President and Chief Financial Officer in June, 1997. Prior to joining AIPC, Mr.
Watson spent 18 years with the accounting firm of Arthur Andersen & Co., most
recently as partner-in-charge of its Kansas City and Omaha Business Consulting
Group practice. Mr. Watson is a certified public accountant.

David B. Potter joined the Company in 1993 as its Director of Procurement.
He was named Vice President in 1994 and Senior Vice President -- Procurement in
June 1997. Before joining the Company, Mr. Potter had worked in numerous areas
of Hallmark Cards and its subsidiary, Graphics International Trading Company,
from 1991 to 1993, most recently as Business Logistics Manager.

43
<PAGE> 46

Jonathan E. Baum has served as a Director of the Company since 1994. He has
been the Chairman and Chief Executive Officer of George K. Baum & Company, an
investment banking firm, since 1994. Previously, he had been a Vice President
with Salomon Brothers Inc.

David Y. Howe has served as a Director of the Company since 1995. He is a
Vice President of Citicorp Venture Capital, Ltd., a venture capital firm, where
he has been employed since 1993. From 1990 to 1993, he had been employed by
Butler Capital, a private investment company. He is also a director of Aetna
Industries, Inc., Brake-Pro, Inc., Cable Systems International, Inc.,
Copes-Vulcan, Inc., Pen-Tab Industries, Inc., Milk Specialties Company and
LifeStyle Furnishings, Ltd.

Robert H. Niehaus has served as a Director of the Company since 1992. He
has been a Managing Director of Morgan Stanley & Co. Incorporated since 1990. He
is also Managing Director and a Director of The Morgan Stanley Leveraged Equity
Fund II, Inc., the general partner of MSLEF, and Morgan Stanley Capital Partners
III, Inc., the general partner of the general partner of the MSCP Funds. He is
also a director of Fort Howard Corporation, Silgan Corporation, Silgan Holdings
Inc., Waterford Wedgewood UK, plc, of which he is the Chairman, and Waterford
Crystal Ltd.

Amy S. Rosen has served as a Director of the Company since April, 1997. She
is an Associate of Morgan Stanley & Co. Incorporated, where she has been
employed since 1994. Ms. Rosen also is an Associate of Morgan Stanley Capital
Partners III, Inc., the general partner of the general partner of the MSCP
Funds. Previously, she was employed by The Blackstone Group for two years.

James A. Schlindwein has served as a Director of the Company since 1995.
Prior to his retirement in September 1994, Mr. Schlindwein served as Executive
Vice President-Merchandising Services and Director of Sysco Corporation, a
national institutional foodservice distributor, where he had served since 1980.
He is also a director of Riser Foods, Inc.

Lawrence B. Sorrel has served as a Director of the Company since 1992. He
is a Managing Director of Morgan Stanley & Co. Incorporated where he has been
employed since 1986. He is also Managing Director and a Director of Morgan
Stanley Capital Partners III, Inc., the general partner of the general partner
of the MSCP Funds, and The Morgan Stanley Leveraged Equity Fund II, Inc., the
general partner of MSLEF. He is also a director of Emmis Broadcasting
Corporation, Vanguard Health Systems, Inc., LifeTrust America, Inc., and The
Compucare Company.

Richard C. Thompson has served as a Director of the Company since 1986. Mr.
Thompson is an experienced entrepreneur and, since 1993, has been President and
Chief Executive Officer of Thompson's Pet Pasta Products, Inc., a pet food
producer. He is the founder of the Company and served as its President from May
1986 to June 1991.

The Company is currently seeking a vice president of sales and marketing.

COMPOSITION OF BOARD OF DIRECTORS

Upon consummation of the Offering, it is anticipated that the Company's
Board of Directors will consist of nine directors, divided into three classes,
with the members of each class to serve for staggered three-year terms. The
initial term of the first class will expire at the annual meeting of
stockholders to be held in 1998, the initial term of the second class will
expire in 1999 and the initial term of the third class will expire in 2000.
Messrs. , and will be included in the first
class, Messrs. , and will be included in the
second class and Messrs. Webster, Schroeder and will be included in
the third class. Directors will hold office for a term of three years and will
serve until their successors are elected and qualified. Officers are elected
annually by the Board of Directors and serve until their successors are duly
elected and qualified. The Company intends to increase the size of the Board by
adding two additional independent directors in the future.

44
<PAGE> 47

COMPENSATION OF DIRECTORS

Messrs. Schlindwein and Thompson currently are the only directors who
receive fees for serving as directors of the Company. Messrs. Schlindwein and
Thompson each receive a fee of $3,000 for attendance at each meeting of the
Board of Directors, with no additional amounts payable with respect to separate
committee meetings. None of the other directors of the Company is paid
directors' fees for serving on the Board of Directors or its committees. All
directors are reimbursed for out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors and meetings of Board
committees.

COMMITTEES OF THE BOARD

Under the Company's By-laws, the Board of Directors may establish one or
more committees, appoint one or more members of the Board of Directors to serve
on each committee, fix the exact number of committee members, fill vacancies,
change the composition of the committee, impose or change the duties of the
committee and terminate the committee. The Board of Directors has established an
Audit Committee and a Compensation Committee. Each such committee has two or
more members who serve at the pleasure of the Board of Directors.

The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors with respect to the salaries, bonuses,
and other compensation paid to key employees and officers of the Company,
including the terms and conditions of their employment, and administers all
stock option and other benefit plans (except with respect to participation by
executive officers in stock option and other equity incentive plans of the
Company which will be made by the Board of Directors or a committee comprised
solely of outside directors, unless otherwise specified in the applicable plan
documents) affecting key employees' and officers' direct and indirect
remuneration. Currently, Messrs. Niehaus, Schroeder and Sorrel serve on the
Compensation Committee.

The Audit Committee is responsible for reviewing the Company's financial
statements, audit reports, internal financial controls and the services
performed by the Company's independent public accountants, and for making
recommendations with respect to those matters to the Board of Directors. Messrs.
Schlindwein and Baum serve on the Audit Committee.

45
<PAGE> 48

EXECUTIVE COMPENSATION

The following table summarizes compensation information with respect to the
President and Chief Executive Officer ("CEO") of the Company and each of the
Company's most highly-compensated executive officers for services rendered
during the nine-month fiscal year ended September 30, 1996 (collectively, with
the CEO, the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
FISCAL PERIOD COMPENSATION
COMPENSATION AWARDS
-------------------- ------------
FISCAL SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION PERIOD(1) SALARY($) BONUS($) UNDERLYING OPTIONS(#) COMPENSATION
--------------------------- --------- --------- -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Timothy S. Webster................. 1996 $185,615 $125,000 -- $ 4,967(2)
President and Chief Executive
Officer
Horst W. Schroeder................. 1996 98,047 40,000 -- 330,000(3)
Chairman of the Board
David E. Watson.................... 1996 119,510 37,500 -- 4,484(4)
Executive Vice President and
Chief Financial Officer
Norman F. Abreo.................... 1996 99,856 37,500 -- 1,226(4)
Executive Vice
President--Operations
David B. Potter.................... 1996 78,000 29,000 -- 2,777(4)
Senior Vice
President--Procurement
</TABLE>

- -------------------------
(1) The Company's 1996 fiscal year extended from January 1, 1996 until September
30, 1996. Subsequent fiscal years will cover a 52- or 53-week period ending
on the last Friday of September.

(2) Includes payments in the amount of $4,449 under the American Italian Pasta
Company Retirement Savings Plan and premiums in the amount of $518 paid by
the Company on a split-dollar life insurance policy.

(3) Represents a bonus which Mr. Schroeder is required to repay to the extent
that he provides less than 30 days of service during any calendar year
ending on or prior to December 31, 1998. Mr. Schroeder's service during the
1996 fiscal year resulted in $82,000 of such bonus being no longer subject
to such contingent repayment obligation.

(4) Represents payments under the American Italian Pasta Company Retirement
Savings Plan.

No stock options were granted to any of the Named Executive Officers during
the nine-month fiscal year ended September 30, 1996. The following table sets
forth certain information with respect to stock options granted to each of the
Named Executive Officers that were outstanding at September 30, 1996:

AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
---------------------------------------------------------
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME UPON EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy S. Webster...... -- --
Horst W. Schroeder...... -- --
David E. Watson......... -- --
Norman F. Abreo......... -- --
David B. Potter......... -- --
</TABLE>

- -------------------------
(1) Based on the assumed initial public offering price of $ per share.

46
<PAGE> 49

EMPLOYMENT AGREEMENTS

Each of Horst W. Schroeder and Timothy S. Webster currently has an
employment agreement with the Company. Such agreements will be amended or
replaced prior to consummation of the Offering. The Company intends to enter
into employment agreements with Messrs. Watson and Abreo in August 1997.

MANAGEMENT BONUS PLAN

The Company maintains a management bonus plan for certain salaried
employees of the Company, including the Named Executive Officers. The plan
permits these employees to earn cash performance bonus awards of up to a
percentage of their respective salaries as determined by the Board of Directors,
or by management on the Board's behalf. The amount of any bonus is based upon
the Company's performance and the individual performance of such participant.
See "Management--Executive Compensation."

STOCK OPTION PLANS

1992 NON-STATUTORY STOCK OPTION PLAN

On October 29, 1992, the Company's Board of Directors and stockholders
adopted the American Italian Pasta Company Non-Statutory Stock Option Plan (the
"1992 Plan"). The purpose of the 1992 Plan is to secure for the Company and its
stockholders the benefits of the incentive inherent in stock ownership by
officers and other key employees of the Company.

The 1992 Plan is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee has the power and sole discretion to
determine the persons to whom options are granted and the number of shares
covered by those options, subject in each case to the limitations set forth in
the 1992 Plan. Options may be granted under the 1992 Plan only to officers and
key employees of the Company. The period during which an option may be exercised
(not to exceed 13 years), and the time at which it becomes exercisable, is fixed
by the Compensation Committee at the time the option is granted. Options granted
under the 1992 Plan are not transferable by the holder other than by will or the
laws of descent and distribution.

The number of shares which may be issued and sold pursuant to options
granted under the 1992 Plan may not exceed shares (subject to adjustment
for stock dividends, stock splits, combinations or reclassifications of shares,
or similar transactions). No consideration is paid to the Company by any
optionee in exchange for the grant of an option. The per share exercise price
for an option granted under the 1992 Plan is determined by the Compensation
Committee.

Certain provisions of the 1992 Plan may have the effect of discouraging or
delaying possible takeover bids. In the event of a "Change of Control," all of
the outstanding options automatically become immediately exercisable in full. A
"Change of Control" is generally defined to take place when disclosure of such a
change would be required by the proxy rules promulgated by the Securities and
Exchange Commission or when (i) certain persons acquire beneficial ownership of
25% or more of the combined voting power of the Company's voting securities,
(ii) less than a majority of the directors are persons who were either nominated
or selected by the Board of Directors, (iii) a merger involving the Company in
which the Company's stockholders own less than 80% of the voting stock of the
surviving corporation; or (iv) a liquidation of the Company or sale of
substantially all the assets of the Company occurs. In the event that the
Company is not the surviving corporation of any merger, consolidation,
reorganization or acquisition by another corporation, outstanding options under
the 1992 Plan may be assumed, or replaced with new options of comparable value,
by the surviving corporation. If the surviving corporation does not assume or
replace outstanding options, or in the event the Company is liquidated or
dissolved, then subject to certain limitations, each holder of outstanding
options may exercise all or part of such options (even if the options would not
otherwise have been exercisable in full) during the period beginning 30 days
before the event triggering the acceleration, and ending on the day before such
event.

Generally, the exercise price of an option is at least equal to the fair
market value of the Common Stock on the date of grant. As of the date of this
Prospectus, options to purchase shares of Common Stock at

47
<PAGE> 50

exercise prices ranging from $ to $ per share (with a weighted average
exercise price of $ per stock) were issued and outstanding under the 1992
Plan. The outstanding options under the 1992 Plan expire at dates ranging from
October 2002 to April 2007. None of the executive officers of the Company have
exercised any options prior to the date of this Prospectus.

1993 NON-QUALIFIED STOCK OPTION PLAN

The American Italian Pasta Company 1993 Non-Qualified Stock Option Plan
(the "1993 Plan") was adopted by the Board of Directors and approved by the
stockholders of the Company effective December 8, 1993. The 1993 Plan was
adopted to compensate and provide incentives for mid-level managers of the
Company.

The 1993 Plan is also administered by the Compensation Committee. The
Compensation Committee has full and final authority in its discretion, subject
to the provisions of the 1993 Plan and applicable law, to determine the
individuals to whom and the time or times at which options shall be granted and
the number of shares of Common Stock covered by each option. Options may be
granted under the 1993 Plan to mid-level management. The period during which an
option may be exercised (not to exceed ten years), and the time at which it
becomes exercisable is fixed by the Compensation Committee at the time the
option is granted. Options granted under the 1993 Plan are not transferrable by
the holder other than by will or the laws of dissent and distribution.

The number of shares which may be issued and sold pursuant to options
granted under the 1993 Plan may not exceed shares (subject to adjustment
for stock dividends, stock splits, combinations or reclassifications of shares
or similar transactions). No consideration is paid to the Company by any
optionee in exchange for the grant of an option. The per share exercise price
for an option granted under the 1993 Plan is determined by the Compensation
Committee.

In the event of any merger, recapitalization, consolidation, split-up,
spin-off, repurchase, distribution or similar transaction effecting the Common
Stock, the Compensation Committee may take such action as in its sole discretion
that deems appropriate. The Compensation Committee may authorize the issuance or
assumption of options or similar rights in connection with any such transaction
whether or not the Company is a surviving or continuing corporation, and upon
such terms and conditions as it may deem appropriate.

The exercise price of an option is generally at least equal to the fair
market value of the Common Stock on the date of grant. As of the date of this
Prospectus, options to purchase shares of Common Stock at exercise prices
ranging from $ to $ per share (with a weighted average exercise price of
$ per share) were issued and outstanding under the 1993 Plan. The
outstanding options under the 1993 Plan expire at dates ranging from December
2003 to December 2006.

1997 EQUITY INCENTIVE PLAN

The Company has adopted and the stockholders of the Company have approved,
the American Italian Pasta Company 1997 Equity Incentive Plan (the "Equity
Incentive Plan" or "Plan"), effective as of September , 1997. Under the Plan,
the Board or a committee designated by the Board (the "Committee") is authorized
to grant nonqualified stock options, incentive stock options, reload options,
stock appreciation rights ("SARs"), shares of restricted Common Stock
("restricted shares"), performance shares, performance units and shares of
Common Stock awarded as a bonus ("bonus shares") (all of the foregoing
collectively, "Awards"). There are shares of Common Stock reserved for
issuance under the Equity Incentive Plan.

Eligibility and Conditions of Grants. All employees (including officers),
directors and consultants of the Company or any subsidiary are eligible to
receive Awards at the discretion of the Committee. The Committee is authorized,
subject to certain limits specified in the Equity Incentive Plan, to determine
to whom and on what terms and conditions Awards shall be made including, but not
limited to, the vesting and term of options.

Stock Options. The option exercise price must be determined by the
Committee at the time of grant and set forth in the award agreement, but such
exercise price must be at least 100% of the fair market value of a

48
<PAGE> 51

share of Common Stock on the date of grant. (In the case of options to be
granted in connection with the Offering, such fair market value will equal the
price at which the Class A Common Stock is offered to the public.) The option
exercise price may be paid by any one or more of the following in the discretion
of the Committee: (i) cash, (ii) check, (iii) wire transfer, (iv) shares of
Common Stock that have been held for at least 6 months or that were purchased on
the open market, or (v) a "cashless" exercise pursuant to a sale through a
broker of all or a portion of the shares. The Committee also has discretion to
have the Company make or guarantee loans to the grantees for the exercise price.
The Committee will determine the term and vesting schedule for options at the
time of grant. Options can be granted as either nonstatutory options (pursuant
to which grantees would receive taxable income, and the Company would receive a
compensation expense deduction, when options are exercised) or as incentive
stock options (ISOs) (which, subject to certain conditions, would offer more
favorable tax consequences to grantees, but not the Company). The Plan also
allows for "reload" options.

Stock Appreciation Rights. Upon exercise of a stock appreciation right, the
grantee shall receive a payment equal to the appreciation in value of the Common
Stock between the grant date and the exercise date. The benefit will be payable
in cash or Common Stock.

Restricted Shares. Restricted shares will be forfeited unless the
conditions set by the Committee at the time of grant are satisfied or are
waived. The Committee will determine whether or not a grantee shall be required
to pay for such restricted shares and, if so, what such price shall be.

Performance Shares/Performance Units. To the extent that the performance
goals specified by the Committee in a grant of performance shares or performance
units have been achieved, then a benefit shall be paid after the end of the
performance-measuring period specified by the Committee. The amount of the
benefit of performance shares is based on the percentage attainment of the
performance goals multiplied by the value of a share of Common Stock at the end
of the performance period. The value of performance units is based on the
achievement of performance goals multiplied by the unit value stabilized by the
Committee at the time of grant. No benefit is payable on either performance
shares or performance units if the minimum performance goals have not been met.
The benefit will be payable in cash or Common Stock.

Bonus Shares. Bonus shares can be granted without cost and without
restriction in amounts and subject to such terms and conditions as the Committee
may in its discretion determine.

Other. Options and stock appreciation rights may have a maximum term of 10
years. The effect of a change of control, the termination of a grantee's
employment or the death or permanent disability of a grantee will be determined
by the Committee at the time of grant and be set forth in the award agreement.
The Plan may be amended by the Board without stockholder approval except in the
event of an increase in the number of shares available for Awards or as
otherwise may be required under stock exchange listing requirements. The Equity
Incentive Plan will terminate when shares available for grant under the plan
have been exhausted, except in no event will incentive stock options be granted
on or after the 10th anniversary of the earlier of (i) the date the Equity
Incentive Plan was adopted; and (ii) the date the Equity Incentive Plan was
approved by the Stockholders of the Company.

401(K) PROFIT SHARING PLAN

The Company adopted the American Italian Pasta Company Retirement Savings
Plan (the "401(k) Plan") effective January 1, 1992. In general, employees of the
Company who have completed one year of service (as defined in the 401(k) Plan)
are eligible to participate in the 401(k) Plan. Participants may make
contributions to the 401(k) Plan by voluntarily reducing their salary from the
Company up to a maximum of 12% of total compensation or $9,500 (or such higher
amount as is prescribed by the Secretary of the Treasury for cost of living
adjustments), whichever is less, and the Company matches such contributions to
the extent of 50% of the first 6% of a participant's salary reduction. The
Company's matching contributions vest 25% per year and are 100% vested after 4
years of service. In addition to matching contributions, the Company may
contribute additional amounts determined by it in its sole discretion which are
allocated to a participant's account in the proportion that such participant's
compensation bears to the total compensation of all participants for the plan
year. These additional contributions vest in the same manner as the matching

49
<PAGE> 52

contributions. Subject to certain conditions and limitations, participants of
the 401(k) Plan may elect to invest up to 50% of their matching contribution
accounts into shares of Common Stock of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

All compensation decisions during the fiscal period ended September 30,
1996 for each of the Named Executive Officers were made by the Compensation
Committee of the Board of Directors. Mr. Schroeder, Chairman of the Board, is a
member of the Compensation Committee. See "Certain Relationships and Related
Transactions."

Following the consummation of the Offering, decisions with respect to the
base salary and cash bonuses paid to executive officers will be made by the
Compensation Committee and decisions with respect to the participation of
executive officers in stock option and other equity incentive plans of the
Company will be made by the Board of Directors or a committee comprised solely
of outside directors.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

STOCKHOLDERS AGREEMENT

Effective upon the consummation of the Offering, the Company, the Morgan
Stanley Stockholders, Citicorp Venture Capital, Ltd. and CCI Partners III, L.P.
(collectively "Citicorp"), affiliated entities of George K. Baum & Company
("GKB"), and Messrs. Schroeder, Schlindwein, Thompson, Webster, Watson, Abreo
and Potter and certain other existing stockholders of the Company (collectively,
the "Existing Stockholders") have amended their existing Stockholders Agreement,
which sets forth certain rights and obligations of such Existing Stockholders.
The amended Stockholders Agreement provides that until December 31, 1998
Existing Stockholders (other than the Morgan Stanley Stockholders and certain
management stockholders) may not sell or pledge any shares of Common Stock
except through the exercise of their "piggyback" registration rights, to certain
permitted transferees, or concurrently with certain private sales of Common
Stock by the Morgan Stanley Stockholders. After December 31, 1998, the Existing
Stockholders (other than the Morgan Stanley Stockholders) will also be entitled
to sell their shares in market transactions and through the exercise of their
"demand" registration rights and Citicorp and Mr. Thompson will also be
permitted to sell shares of Common Stock in private transactions, subject to the
Company's right of first refusal. The amended Stockholders Agreement will not
limit sales by the Morgan Stanley Stockholders.

The amended Stockholders Agreement will grant the Existing Stockholders
certain demand registration rights. In addition, the Existing Stockholders will
be entitled, subject to certain limitations, to register shares of Common Stock
in connection with certain registration statements filed by the Company for its
own account or the account of its stockholders. The amended Stockholders
Agreement will contain customary terms and provisions with respect to, among
other things, registration procedures and certain rights to indemnification
granted by the parties thereunder in connection with any such registration.

Pursuant to the Stockholders Agreement (as amended and restated effective
upon the consummation of the Offering), MSLEF II has the right to designate two
director nominees so long as its owns at least 25% of the outstanding Common
Stock or one director nominee so long as it owns at least 5% but less than 25%
of the outstanding Common Stock. In addition, MSCP has the right to designate
two director nominees so long as it owns at least 35% of the outstanding Common
Stock or one director nominee so long as it owns at least 5% but less than 35%
of the outstanding Common Stock. Whenever MSLEF II and MSCP individually own
less than 5% of the outstanding Common Stock, they will jointly be entitled to
designate one director nominee so long as the Morgan Stanley Stockholders
beneficially own, in the aggregate, at least 5% of the outstanding Common Stock.
The number of directors designated by the Morgan Stanley Stockholders will
increase proportionately if the size of the Board of Directors is increased in
the future. In addition, the Stockholders Agreement will provide that the
Chairman of the Board and the President and Chief Executive Officer shall also
be designated as director nominees. The Existing Stockholders will agree to vote
all of their shares of Class A Common Stock in favor of the director nominees
designated pursuant to the Stockholders Agreement. At least two members of the
Board of Directors will be independent directors. So long as the

50
<PAGE> 53

Morgan Stanley Stockholders own 10% of the outstanding shares of Common Stock,
the Morgan Stanley Stockholders may designate one member of each Board
committee.

The amended Stockholders Agreement provides that so long as the Morgan
Stanley Stockholders own at least 25% of the outstanding shares of Common Stock,
neither the Company nor its subsidiaries (if any) will take any of the following
significant actions without the approval of the Board of Directors and the
Morgan Stanley Stockholders: (i) the appointment or removal of the Chairman of
the Board; (ii) any merger, consolidation or other similar business combination
(except for certain subsidiary-level mergers involving acquisitions valued below
$30 million); (iii) any disposition of a majority of the Company's tangible
assets; (iv) subject to certain exceptions, any change in the authorized capital
or recapitalization, or the creation of any new classes of capital stock, or the
sale, distribution, exchange, redemption of capital stock or capital stock
equivalents; (v) any amendment to the charter or by-laws or any change in
jurisdiction of incorporation; (vi) the approval of any dissolution or plan of
liquidation; (vii) any general assignment for the benefit of creditors or the
institution of any bankruptcy or insolvency proceeding; (viii) the declaration
of any dividend or any redemption or repurchase of any such capital stock
(except dividends paid-in-kind and repurchases made pursuant to employee benefit
plans or employment agreements); (ix) in certain circumstances, the creation,
issuance, assumption, guarantee or incurrence of indebtedness that increases the
aggregate amount of indebtedness existing on the date of the amended
Stockholders Agreement by at least $30 million; (x) the termination of Ernst &
Young LLP or the selection of another auditor; (xi) any strategic acquisition
of, or investment in the assets or a business of, a third party with a fair
market value of $30 million or more; (xii) acquisition or construction of new
pasta production facilities with a cost in excess of $30 million; (xiii) any
adoption of a shareholder rights plan; or (xiv) any commitment to do any of the
foregoing actions. In addition, as long as the Morgan Stanley Stockholders own
at least 25% of the outstanding Common Stock, at least one of the directors
designated by the Morgan Stanley Stockholders must approve the appointment of
the Chief Executive Officer or the Chief Financial Officer.

The amended Stockholders Agreement provides that certain transfers of
shares by the Existing Stockholders (other than the Morgan Stanley Stockholders)
are subject to the approval of the Board of Directors and, for so long as the
Morgan Stanley Stockholders own at least 10% of the shares of Common Stock, the
Morgan Stanley Stockholders.

After giving effect to the Offering, the Morgan Stanley Stockholders will
own approximately % of the Common Stock of the Company ( % if the U.S.
Underwriters' over-allotment option is exercised in full). The Morgan Stanley
Stockholders have informed the Company that they intend, following the
consummation of the Offering, to convert such number of their shares of Class A
Common Stock into nonvoting Class B Common Stock so that, following such
conversion, the Morgan Stanley Stockholders will own, in the aggregate, 49% of
the outstanding voting Class A Common Stock of the Company.

1997 PRIVATE EQUITY FINANCING

In April 1997, the Company sold an aggregate of 517,695 shares of Old Class
A Common Stock (as defined in "Description of Capital Stock -- General") to
current stockholders of the Company for an aggregate purchase price of
$22,291,947, or $43.06 per share, determined by an independent valuation firm to
be fair value for the shares. The MSCP Funds purchased a total of 418,021 shares
for $18,000,000. Affiliated entities of GKB, including Excelsior Investors, LLC
("Excelsior") in which Mr. Thompson has a minority interest, purchased 69,670
shares for $2,999,861. These shares include 53,971 shares purchased by
Excelsior. Mr. Schroeder, a Director of the Company, purchased 8,000 shares for
$344,480. Mr. Schlindwein, also a Director of the Company, and his wife
purchased 4,645 shares for $200,000, individually and indirectly through JSS
Management Company, Ltd., of which each of Mr. and Mrs. Schlindwein are general
partners. In addition, a group of executive officers of the Company contributed
an aggregate of $729,996 to the Company for 16,953 shares, including $142,159 by
Mr. Webster, $298,535 by Mr. Watson, $36,472 by Mr. Abreo and $91,472 by Mr.
Potter. In connection with these sales and purchases, the Company loaned an
aggregate of $297,513 to these executive officers to finance their stock
purchases, including $112,159 to

51
<PAGE> 54

Mr. Webster, $48,535 to Mr. Watson, $36,472 to Mr. Abreo and $21,472 to Mr.
Potter. Each of these loans are evidenced by a promissory note made payable to
the Company and secured by shares of Old Class A Common Stock. Such loans are to
be repaid over a period of three years from the effective date of the loan and
bear interest at the applicable federal rate.

FINANCIAL ADVISORY SERVICES

Messrs. Niehaus and Sorrel and Ms. Rosen, all Directors of the Company, are
employed by Morgan Stanley & Co. Incorporated. In 1997, Morgan Stanley Senior
Funding, Inc., an affiliate of Morgan Stanley & Co. Incorporated, one of the
U.S. Underwriters, served as the documentation agent under the agreements
relating to the Company's Credit Facility, and acted as an arranger for the
Credit Facility for which it received a fee in the amount of $311,875.

Since 1994, the Company has paid fees to George K. Baum & Company's
Investment Banking Division for investment banking and financial advisory
services and has paid George K. Baum & Company Professional Investment Advisors
Division fees for investment advice provided with respect to the 401(k) Plan.
Jonathan E. Baum, a Director of the Company, owns all voting shares of George K.
Baum Holdings, Inc., which owns 100% of George K. Baum & Company, one of the
U.S. and International Underwriters.

MANAGEMENT INDEBTEDNESS

In April 1995 and April 1997, the Company loaned funds to Messrs. Webster,
Watson, Abreo and Potter to purchase shares of Old Common Stock and Old Class A
Common Stock at prices ranging between $30.17 and $43.06 per share,
respectively. Each loan was evidenced by a promissory note bearing interest at
the then applicable federal rate and payable in equal installments over three
years. The table below sets forth the aggregate number of shares purchased with
funds loaned by the Company, the original aggregate loan amounts, and the
aggregate loan balances as of June 30, 1997.

<TABLE>
<CAPTION>
NUMBER OF ORIGINAL LOAN LOAN BALANCE AT
EXECUTIVE OFFICER SHARES BALANCE JUNE 30, 1997
----------------- --------- ------------- ---------------
<S> <C> <C> <C>
Timothy S. Webster...................................... 3,480 $138,559 $120,959
David E. Watson......................................... 2,327 84,735 60,602
Norman F. Abreo......................................... 1,177 46,422 39,789
David B. Potter......................................... 829 31,422 24,789
</TABLE>

CONSULTING AGREEMENT WITH HWS & ASSOCIATES, INC.

Pursuant to a consulting agreement between the Company and HWS &
Associates, Inc. ("HWS"), a management consulting firm of which Mr. Schroeder,
Chairman of the Board of Directors, is the sole owner, the Company paid to HWS
$301,197 during fiscal 1994, and $133,359 during fiscal 1995, respectively for
management consulting services performed and travel expenses incurred on behalf
of the Company. The consulting arrangement terminated January 1, 1996 upon Mr.
Schroeder's execution of his employment agreement with the Company.

The Company's policy is that all transactions between the Company and its
executive officers, directors and principal stockholders be on terms no less
favorable than could be obtained from unaffiliated third parties or are subject
to the approval of the Company's disinterested directors.

PRODUCT SALES

The Company sells milling by-products to Thompson's Pet Pasta Products,
Inc., of which Richard C. Thompson, a director of the Company, is the President
and Chief Executive Officer. Such sales were $357,000 and $292,000 for the
nine-month fiscal period ended September 30, 1996 and the nine-month period
ended June 30, 1997, respectively. Such sales were on substantially the same
terms as the Company sells such products to unaffiliated third parties.

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<PAGE> 55

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of July 31, 1997, before and after
giving effect to the sale of the shares of Class A Common Stock offered hereby,
by (i) each person who is known by the Company to own beneficially more than 5%
of the outstanding shares of Common Stock, (ii) the Selling Stockholder, (iii)
each director of the Company, (iv) each of the Named Executive Officers and (v)
all directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
------------------------------------------- -------------------------------------------
CLASS A TOTAL
CLASS A CLASS B CLASS A COMMON COMMON
COMMON STOCK(1) COMMON STOCK(1) SHARES STOCK(1)(2) STOCK(1)(6)
-------------------- -------------------- BEING -------------------- --------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT(3) NUMBER PERCENT(4) OFFERED NUMBER PERCENT(5) NUMBER PERCENT(6)
------------------------ ------ ---------- ------ ---------- ------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Morgan Stanley Leveraged
Equity Fund II, L.P.(7)... 34.4% 70.2% -- % %
1221 Avenue of the
Americas
New York, NY 10020
Morgan Stanley Capital
Partners III, L.P.(7)..... 14.6 29.8 --
1221 Avenue of the
Americas
New York, NY 10020
Citicorp Venture
Capital, Ltd.(8).......... 18.6 -- -- --
399 Park Avenue
New York, NY 10043
Richard C. Thompson(9)...... 17.1 -- --
16 Kansas Avenue
Kansas City, KS 66105
Horst W.
Schroeder(10)(11)......... 7.5 -- -- --
Jonathan E. Baum(12)........ 9.1 -- -- --
David Y. Howe............... -- -- -- -- -- -- -- -- --
Robert H. Niehaus........... -- -- -- -- -- -- -- -- --
Amy S. Rosen................ -- -- -- -- -- -- -- -- --
James A. Schlindwein(13).... * -- -- -- * *
Lawrence B. Sorrel.......... -- -- -- -- -- -- -- -- --
Timothy S.
Webster(11)(14)........... 5.8 -- -- --
David E. Watson(11)......... 1.5 -- -- --
Norman F. Abreo(11)......... 1.2 -- -- --
David B. Potter(11)......... * -- -- -- * *
All directors and executive
officers as a group (13
persons)(11).............. 31.6 -- -- --
</TABLE>

- -------------------------
* Less than 1%.

(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options and warrants held by that person that are currently
exercisable or will become exercisable within 60 days of the date of this
Prospectus are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of any
other person. Except as otherwise indicated in a footnote to this table or
as to be provided in the Stockholders Agreement (see "Certain Relationships
and Related Transactions -- Stockholders Agreement"), the persons in this
table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them.

53
<PAGE> 56

(2) The Company and the Selling Stockholder have granted an option to the U.S.
Underwriters to purchase shares of Common Stock to cover over-allotments,
if any. Such shares will not be sold unless the U.S. Underwriters exercise
the over-allotment option, and the above table assumes that such
over-allotment option will not be exercised. If the over-allotment option
is exercised in full, the Company and Mr. Thompson will sell and
, respectively, additional shares of Common Stock.

(3) Based upon shares of Class A Common Stock outstanding, plus shares
of Class A Common Stock issuable upon exercise of options, warrants and
convertible securities which are included in the number of shares
beneficially owned by such person.

(4) Based upon shares of Class B Common Stock outstanding, plus shares
of Class B Common Stock issuable upon exercise of options, warrants and
convertible securities which are included in the number of shares
beneficially owned by such person.

(5) Based upon shares of Class A Common Stock to be outstanding upon
the consummation of the Offering, plus shares of Class A Common Stock
issuable upon exercise of options, warrants and convertible securities
which are included in the number of shares beneficially owned by such
person.

(6) Based upon shares of Class A Common Stock to be outstanding upon
the consummation of the Offering and shares of Class B Common
Stock outstanding, plus shares of Common Stock issuable upon exercise of
options, warrants and convertible securities which are included in the
number of shares beneficially owned by such person.

(7) The general partner of MSLEF and the general partner of the general partner
of the MSCP Funds are wholly owned subsidiaries of MSDWD, the parent of
Morgan Stanley & Co. Incorporated.

(8) The shares beneficially owned by Citicorp Venture Capital, Ltd. include
shares held by certain affiliates of Citicorp.

(9) All of such shares are held by a limited partnership of which Mr. Thompson
is the only limited partner and the president of the corporation which is
the general partner of the limited partnership.

(10) The shares beneficially owned by Mr. Schroeder include shares held
by The Living Trust of Horst W. Schroeder and shares held by The
Living Trust of Gisela I. Schroeder for the benefit of Mr. and Ms.
Schroeder, respectively, and members of their family, as well as
shares held by each of Bernd Schroeder and Isabel Lange, children of Mr.
and Ms. Schroeder. Mr. Schroeder has voting power, but not investment
power, with respect to all of these shares.

(11) Includes options that are currently exercisable or will become exercisable
within 60 days of the date of this Prospectus to purchase shares of Class A
Common Stock as follows: Mr. Schroeder ( shares), Mr. Webster
( shares), Mr. Watson ( shares), Mr. Abreo ( shares), Mr.
Potter ( shares), and all executive officers and directors as a group
( shares).

(12) Includes shares held by George K. Baum Group, Inc., shares
held by George K. Baum Capital Partners, L.P., shares held by George
K. Baum Employee Equity Fund, L.P. and shares held by Excelsior
Investors, LLC, the managing member of which is George K. Baum Merchant
Banc, LLC. As an officer and/or equity owner of the entities holding such
shares, Mr. Baum has voting power with respect to such shares. Except to
the extent of his equity interest in the entities holding such shares, Mr.
Baum disclaims beneficial ownership of such shares.

(13) Includes shares held by JSS Management Company, Ltd. of which Mr.
Schlindwein is an officer and equity owner and has voting power with
respect to such shares.

(14) Includes of the shares beneficially owned by Mr. Webster are held in
various trusts for the benefit of Mr. Webster's family members, as well as
by certain members of Mr. Webster's extended family. Mr. Webster has voting
power, but not investment power, with respect to all of such shares.

54
<PAGE> 57

DESCRIPTION OF CAPITAL STOCK

GENERAL

Prior to the Recapitalization, the Company's authorized capital stock
consisted of 1,600,000 shares of Class A common stock, par value $.01 per share
(the "Old Class A Common Stock"), and 2,100,000 shares of common stock, without
par value (the "Old Common Stock"). The Old Class A Common Stock had a
liquidation preference over the Old Common Stock equal to the greater of the per
share purchase price of the Old Class A Common Stock or the amount holders of
Old Common Stock are entitled to upon the liquidation.

After giving effect to the Company's amendment and restatement of the
Charter prior to this Offering, the authorized capital stock of the Company
consists of shares of Class A Common Stock, shares of Class
B Common Stock, and shares of preferred stock, par value $.001 per
share, issuable in series (the "Preferred Stock"). In connection with such
amendment and restatement of the Charter, the Company effected the
Recapitalization pursuant to which each outstanding share of Old Common Stock
and Old Class A Common Stock outstanding immediately prior to the
Recapitalization has been converted into shares of Class A Common
Stock. The Morgan Stanley Stockholders have informed the Company that following
the issuance of shares of Class A Common Stock in connection with the
consummation of the Offering, they intend to convert such number of their shares
of Class A Common Stock into Class B Common Stock so that, following such
conversion, the Morgan Stanley Stockholders will own, in the aggregate, 49% of
the outstanding Class A Common Stock. From time to time thereafter, shares of
Class A Common Stock held by the Morgan Stanley Stockholders and certain related
persons will automatically be converted pursuant to the amended Charter into
shares of Class B Common Stock, pro rata in proportion to the number of shares
of Class A Common Stock held by all Morgan Stanley Stockholders and such related
persons, to the extent necessary so that the Morgan Stanley Stockholders and
such related persons do not in the aggregate own more than 49% of the
then-outstanding shares of Class A Common Stock.

The following discussion is a summary of the more detailed provisions of
the Charter and By-Laws of the Company, forms of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part, and
of the applicable provisions of the DGCL.

COMMON STOCK

Class A Common Stock. Holders of Class A Common Stock are entitled to one
vote for each share of Class A Common Stock on each matter submitted to a vote
of stockholders, including the election of directors. See "Certain Relationships
and Related Transactions -- Stockholders Agreement." Holders of Class A Common
Stock are not entitled to cumulative voting. Shares of Class A Common Stock have
no preemptive or other subscription rights. Shares of Class A Common Stock are
convertible only by the Morgan Stanley Stockholders and certain related persons
into an equal number of shares of Class B Common Stock; they are not convertible
by any other holders. After the consummation of the Offering, Shares of Class A
Common Stock held by the Morgan Stanley Stockholders and certain related persons
will from time to time be converted automatically into shares of Class B Common
Stock, pro rata in proportion to the number of shares of Class A Common Stock
held by all Morgan Stanley Stockholders and such related persons, to the extent
necessary so that the Morgan Stanley Stockholders and such related persons do
not own more than 49% of the outstanding shares of Class A Common Stock. In
addition, shares of Class A Common Stock held by the Morgan Stanley Stockholders
and certain related persons are convertible into an equal number of shares of
Class B Common Stock, at the option of the holder.

55
<PAGE> 58

Class B Common Stock. Under the Charter, as amended, Class B Common Stock
may be held only by Morgan Stanley Stockholders and certain related persons.
Holders of Class B Common Stock have no right to vote on matters submitted to a
vote of stockholders, except (i) as otherwise required by law and (ii) that the
holders of Class B Common Stock shall have the right to vote as a class on any
amendment, repeal or modification to the Charter that adversely affects the
powers, preferences or special rights of the holders of the Class B Common
Stock. Shares of Class B Common Stock have no preemptive or other subscription
rights and are convertible into an equal number of shares of Class A Common
Stock (x) at the option of the holder thereof (but, after the consummation of
the Offering, only to the extent that, following such conversion, the Morgan
Stanley Stockholders and certain related persons will not, in the aggregate, own
more than 49% of the outstanding shares of Class A Common Stock) and (y)
automatically upon the transfer of such shares by any Morgan Stanley Stockholder
or related person to a person that is not a Morgan Stanley Stockholder or a
related person.

Dividends. All holders of Common Stock are entitled to receive such
dividends or other distributions, if any, as may be declared from time to time
by the Board of Directors in its discretion out of funds legally available
therefor, subject to the prior rights of any Preferred Stock then outstanding,
and to share equally, share for share, in such dividends or other distributions
as if all shares of Common Stock were a single class. Dividends or other
distributions declared or paid in shares of Common Stock, or options, warrants
or rights to acquire such stock or securities convertible into or exchangeable
for shares of such stock, are payable to all of the holders of Common Stock
ratably according to the number of shares held by them, in shares of Class A
Common Stock to holders of that class of stock and in shares of Class B Common
Stock to holders of that class of stock. Delaware law generally requires that
dividends be paid only out of the Company's surplus or current net profits in
accordance with the DGCL. See "Dividend Policy."

Liquidation. Subject to the rights of any holders of Preferred Stock
outstanding, upon the dissolution, liquidation or winding up of the Company, the
holders of Common Stock are entitled to share equally and ratably in the assets
available for distribution after payments are made to the Company's creditors.

Other. Holders of Common Stock have no preemptive, subscription or
redemption rights. The outstanding shares of Common Stock are, and the shares of
Class A Common Stock offered by the Company hereby will be, when issued and paid
for, fully paid and nonassessable.

PREFERRED STOCK

The Company's Charter provides that the Board of Directors is authorized,
subject to certain limitations prescribed by law, without further stockholder
approval, to issue from time to time up to an aggregate of shares of
Preferred Stock in one or more series and to fix or alter the designations,
preferences, rights and any qualifications, limitations or restrictions of the
shares of each such series thereof, including the dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption (including sinking
fund provisions), redemption price or prices, liquidation preferences and the
number of shares constituting any series or designations of such series. The
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future. The Company has
no present plans to issue any shares of Preferred Stock.

DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS

The provisions of the Company's Charter, By-Laws and Delaware statutory law
described in this section may delay or make more difficult acquisitions or
changes in control of the Company that are not approved by the Board of
Directors. See "Risk Factors -- Possible Anti-takeover Effect of Certain
Charter, By-law and Statutory Provisions."

The Company is subject to the provisions of Section 203 of the DGCL.
Subject to certain exceptions, Section 203 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

56
<PAGE> 59

became an interested stockholder, unless the interested stockholder attained
such status with the approval of the Board of Directors or unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.

The Charter provides for the division of the Board of Directors into three
classes as nearly equal in size as possible with staggered three-year terms. See
"Management." Except as may be provided in any class or series of Preferred
Stock with respect to any directors elected by the holders of such class or
series, any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause and only by the affirmative vote of the
holders of at least two-thirds of the voting power of all of the shares of
capital stock of the corporation then entitled to vote generally in the election
of directors, voting together as a single class, unless the removal of a
director has been requested by a shareholder who designated such director as a
nominee for election pursuant to the Stockholders Agreement, in which such
director can be removed with or without cause by the affirmative vote of holders
of a simple majority of such shares.

The Company's Charter provides that special meetings of the stockholders
may be called at any time by resolution of the Board of Directors, the Chairman
of the Board, or the Chief Executive Officer, but may not be called by other
persons. The Charter also provides that any stockholder action may not be taken
by written consent of stockholders without a meeting, unless the action to be
effected by written consent of stockholders and the taking of such action by
written consent have been approved in advance by the Board of Directors or
unless the shareholder action involves the removal of a director nominated
pursuant to the Shareholders Agreement and the person who nominated such
director pursuant to the Shareholders Agreement votes in favor of the removal of
such director pursuant to such written consent.

The Charter further provides that stockholders may make, alter, amend, add
to or repeal the By-laws only if, in addition to any vote of the holders of any
class or series of capital stock of the Corporation required by law or the
Charter, such action is approved by the affirmative vote of the holders of at
least 80% of the voting power of all of the then outstanding shares of capital
stock of the Company entitled to vote generally in the election of directors,
voting together as a single class. The affirmative approval of at least 80% of
the voting power of all of the then outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors, voting
together as a single class, is also required to reduce or eliminate the number
of authorized shares of any capital stock set forth in the Charter or to amend,
repeal or adopt any provision inconsistent with specified provisions of the
Charter.

As permitted by DGCL, the Charter provides that directors of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director by reason of any act or
omission, except for liability (i) for any breach of the director's duty of
loyalty to the Company 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, (iv) for any transaction from which
the director shall derive an improper personal benefit or (v) to any extent that
such liability shall not be limited or eliminated by virtue of the provisions of
Section 102(b)(7) of the DGCL or any successor thereof. In addition, the Charter
provides that the Company shall, to the fullest extent authorized by the DGCL,
as amended from time to time, indemnify and hold harmless all directors and
officers against all expense, liability and loss reasonably incurred or suffered
by such indemnitee in connection therewith. Such indemnification shall continue
as to an indemnitee who has ceased to be a director or officer and shall inure
to the benefit of the indemnitee's heirs, executors and administrators. The
right to indemnification includes the right to be advanced funds from the
Company for expenses incurred in defending any proceeding for which a right to
indemnification is applicable.

STOCKHOLDERS AGREEMENT

Pursuant to the amended Stockholders Agreement, one of the Morgan Stanley
Stockholders, MSLEF II, has the right to designate two director nominees so long
as it owns at least 25% of the outstanding Common

57
<PAGE> 60

Stock or one director nominee so long as it owns at least 5% but less than 25%
of the outstanding Common Stock. In addition, another Morgan Stanley
Stockholder, MSCP, has the right to designate two director nominees so long as
it owns at least 35% of the outstanding Common Stock or one director nominee so
long as it owns at least 5% but less than 35% of the outstanding Common Stock.
Whenever MSLEF II and MSCP individually own less than 5% of the outstanding
Common Stock, they shall jointly be entitled to designate one director nominee
as long as the Morgan Stanley Shareholders beneficially own, in the aggregate,
at least 5% of the outstanding Common Stock. The number of directors designated
by the Morgan Stanley Stockholders will increase proportionately if the size of
the Board of Directors is increased in the future. In addition, the amended
Stockholders Agreement provides that so long as the Morgan Stanley Stockholders
own at least 25% of the outstanding shares of Common Stock, certain significant
corporate actions will be subject to their approval in addition to that of the
Company's Board of Directors. See "Certain Relationships and Related
Transactions -- Stockholders Agreement."

LISTING

Application has been made to have the Class A Common Stock listed on the
New York Stock Exchange.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is UMB Bank, N.A.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no public market for the Common Stock
of the Company. Sales of substantial numbers of shares of Common Stock into the
public market after the Offering, or the perception that such sales could occur,
could materially and adversely affect the market price of the Common Stock
prevailing from time to time or could impair the Company's future ability to
obtain capital through an offering of equity securities. The Company cannot
predict the effect, if any, that sales of shares of Common Stock, or the
availability of such shares for future sales, will have on future market prices
of the Common Stock. Such sales also may make it more difficult for the Company
to sell equity securities in the future at the time and price it deems
appropriate.

Upon consummation of the Offering, the Company will have outstanding an
aggregate of shares of Common Stock assuming no exercise of the U.S.
Underwriters' over-allotment option and no exercise of outstanding stock
options. Of these shares, all of the shares of Common Stock sold in the
Offering will be freely tradable without restriction or further registration
under the Securities Act by persons other than "affiliates" of the Company as
that term is defined in Rule 144 under the Securities Act (the "Affiliates").
The remaining shares of Common Stock held by existing stockholders are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act (the "Restricted Shares"). These Restricted Shares were acquired in
transactions exempt from registration under the Securities Act and may not be
resold unless they are registered under the Securities Act or are sold pursuant
to an applicable exemption from registration, such as Rule 144, Rule 144(k) or
Rule 701 promulgated under the Securities Act.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated in accordance with the Rule) who has beneficially
owned Restricted Shares for at least one year or any person who may be deemed an
affiliate of the Company is entitled, subject to certain conditions, to sell
within any three-month period a number of shares of which does not exceed the
greater of (i) one percent of the Company's then outstanding shares of Common
Stock (approximately shares immediately after the Offering, assuming
no exercise of the U.S. Underwriters' over-allotment option and no exercise of
outstanding stock options) or (ii) the average weekly trading volume of the
Common Stock during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain manner-of-sale and notice requirements and
the availability of current public information about the Company. A person (or
persons whose shares are aggregated in accordance with the Rule) who is not an
"affiliate" of the Company at any time during the 90 days preceding a sale and
who beneficially owns shares that were not acquired from the Company or an
affiliate of the Company within the past two years is entitled to sell such
shares under

58
<PAGE> 61

Rule 144(k) without regard to volume limitations, manner of sale provisions,
notice requirements or the availability of current public information on the
Company. In general, under Rule 701 as currently in effect, any employee,
consultant or advisor of the Company who purchased shares from the Company in
connection with a compensatory stock or option plan or other written agreement
is eligible to resell such shares 90 days after the effective date of this
Offering in reliance on Rule 144, but without compliance with certain
restrictions, including the holding period, contained in Rule 144. The
Commission has proposed an amendment to Rule 144 which may further liberalize
the provisions of Rule 144.

Beginning 90 days after the date of this Prospectus, of the Restricted
Shares will be eligible for sale on the public market under Rule 144, provided
the conditions of that rule have been met. A total of of the Restricted
Shares are subject to lock-up agreements with the Underwriters that prohibit
their sale or other disposition for 180 days from the date of this Prospectus
without the prior written consent of Morgan Stanley & Co. Incorporated on behalf
of the Underwriters (except with respect to shares of Common Stock held by the
Morgan Stanley Stockholders, for which prior written consent of all the U.S.
Representatives is required). Of these Restricted Shares, shares will
become eligible for sale under Rule 144 after expiration of the 180-day period.

Pursuant to the Stockholders Agreement, the Company has granted the
Existing Stockholders certain "demand" registration rights with respect to the
shares of Common Stock held by the Existing Stockholders. In addition to such
demand rights, the Existing Stockholders will be entitled, subject to certain
limitations, to register shares of Common Stock in connection with a
registration statement prepared by the Company. See "Certain Relationships and
Related Transactions -- Stockholders Agreement." Each of the Existing
Stockholders has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters (except with respect to
shares of Common Stock held by the Morgan Stanley Stockholders, without the
prior written consent of all the U.S. Representatives), it will not, during the
period ending 180 days after the date of this Prospectus, make any demand for,
or exercise any right with respect to, the registration of any shares of Class A
Common Stock or any security convertible into or exercisable or exchangeable for
Class A Common Stock.

Existing Stockholders other than the Morgan Stanley Stockholders may not
sell or pledge any shares of Common Stock except in the circumstances permitted
by the Stockholders Agreement. See "Certain Relationships and Related
Transactions." Subject to the lock-up period describe above, the Morgan Stanley
Stockholders may choose to dispose of the Common Stock owned by them. The timing
of such sales or other dispositions by such stockholders (which could include
distributions to the Morgan Stanley Stockholders' limited partners) will depend
on market and other conditions, but could occur relatively soon after the
lock-up period, including pursuant to the exercise of their registration rights.
The Morgan Stanley Stockholders are unable to predict the timing of sales by any
of their limited partners in the event of a distribution to them. Such
dispositions could be privately negotiated transactions or public sales.

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CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS FOR NON-U.S. HOLDERS

In the opinion of Sonnenschein Nath & Rosenthal, the following is a summary
of certain of the material United States federal income and estate tax
consequences of the ownership and disposition of Class A Common Stock applicable
to "Non-United States Holders." A "Non-United States Holder" is any beneficial
owner of Class A Common Stock that, for United States federal income or estate
tax purposes, as the case may be, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a foreign estate or trust as such terms
are defined in the Internal Revenue Code of 1986, as amended (the "Code"). This
summary is based on the Code and administrative and judicial interpretations as
of the date hereof, all of which are subject to change either retroactively or
prospectively. This summary does not address all aspects of United States
federal income and estate taxation that may be relevant to Non-United States
Holders in light of their particular circumstances (such as certain tax
consequences applicable to United States expatriates and pass-through entities)
and does not address any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction or the application of a particular tax
treaty. Prospective investors are urged to consult their tax advisors regarding
the United States federal, state and local income and other tax consequences,
and the non-United States tax consequences, of owning and disposing of Class A
Common Stock.

Proposed United States Treasury Regulations were issued on April 15, 1996
(the "Proposed Regulations") which, if adopted in their present form, could
revise in certain respects the rules applicable to Non-United States Holders of
Class A Common Stock. The Proposed Regulations are generally proposed to be
effective with respect to payments made after December 31, 1997, subject to
certain transition rules. It cannot be predicted at this time whether the
Proposed Regulations will be adopted as proposed or what modifications, if any,
may be made to them. The summary below is not intended to include a complete
discussion of the provisions of the Proposed Regulations, and prospective
investors are urged to consult their tax advisors with respect to the effect the
Proposed Regulations may have if adopted.

DIVIDENDS

Subject to the discussion below, any dividend paid to a Non-United States
Holder generally will be subject to United States withholding tax either at a
rate of 30% of the gross amount of the dividend or such lower rate as may be
specified by an applicable tax treaty. For purposes of determining whether tax
is to be withheld at a 30% rate, or at a reduced rate as specified by an
applicable tax treaty, under current United States Treasury Regulations the
Company ordinarily will presume that dividends paid to a holder with an address
in a foreign country are paid to a resident of such country absent knowledge
that such presumption is not warranted. Under such Regulations, dividends paid
to a holder with an address within the United States generally will be presumed
to be paid to a holder who is not a Non-United States Holder and will not be
subject to the 30% withholding tax, unless the Company has actual knowledge that
the holder is a Non-United States Holder.

The Proposed Regulations would provide for certain presumptions (which
differ from those described above) upon which the Company may generally rely to
determine whether, in the absence of certain documentation, a holder should be
treated as a Non-United States Holder for purposes of the 30% withholding tax
described above. The presumptions would not apply for purposes of granting a
reduced rate of withholding under a treaty. Under the Proposed Regulations, to
obtain a reduced rate of withholding under a treaty a Non-United States Holder
would be required either (i) to provide an Internal Revenue Service Form W-8
certifying such Non-United States Holder's entitlement to benefits under a
treaty together with, in certain circumstances, additional information or (ii)
satisfy certain other applicable certification requirements. The Proposed
Regulations also would provide special rules to determine whether, for purposes
of determining the applicability of a tax treaty and for purposes of the 30%
withholding tax described above, dividends paid to a Non-United States Holder
that is an entity should be treated as paid to the entity or those holding an
interest in that entity.

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<PAGE> 63

Dividends received by a Non-United States Holder that are effectively
connected with a United States trade or business conducted by such Non-United
States Holder are exempt from withholding tax. However, such effectively
connected dividends are subject to regular United States income tax in the same
manner as if the Non-United States Holder were a United States person for
federal income tax purposes. Effectively connected dividends may be subject to a
different treatment under an applicable tax treaty depending on whether such
dividends are attributable to a permanent establishment of the Non-United States
Holder in the United States. A Non-United States Holder may claim exemption from
withholding under the effectively connected income exception by filing Internal
Revenue Service Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected With the Conduct of a Trade or Business in the United
States) each year with the Company or its paying agent prior to the payment of
the dividends for such year. The Proposed Regulations would replace Form 4224
with Form W-8 and certain additional information. Effectively connected
dividends received by a corporate Non-United States Holder may be subject to an
additional "branch profits tax" at a rate of 30% (or such lower rate as may be
specified by an applicable tax treaty) of such corporate Non-United States
Holder's effectively connected earnings and profits, subject to certain
adjustments.

A Non-United States Holder eligible for a reduced rate of United States
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts currently withheld by filing an appropriate claim for refund with the
United States Internal Revenue Service ("IRS").

GAIN ON DISPOSITION OF CLASS A COMMON STOCK

A Non-United States Holder generally will not be subject to United States
federal income tax with respect to gain realized upon the sale or other
disposition of Class A Common Stock unless (i) such gain is effectively
connected with a United States trade or business of the Non-United States
Holder; (ii) the Non-United States Holder is a non-resident alien individual who
holds the Class A Common Stock as a capital asset, is present in the United
States for a period or periods aggregating 183 days or more during the calendar
year in which such sale or disposition occurs, and either the non-resident alien
individual has a "tax home" in the United States or the sale is attributable to
an office or other fixed place of business maintained by the non-resident alien
individual in the United States; or (iii) the Company is or has been a "United
States real property holding corporation" for federal income tax purposes at any
time within the shorter of the five-year period ending on the date of the
disposition or such holder's holding period (the "determination period"). The
Company has determined that it is not, and does not anticipate becoming a
"United States real property holding corporation" for federal income tax
purposes. Even if the Company is a United States real property holding
corporation for federal income tax purposes at any time during the determination
period, the disposition of Class A Common Stock by a Non-United States Holder
that did not own more than five percent of the Class A Common Stock during the
determination period will not be treated as a disposition of an interest in a
United States real property holding corporation if the Class A Common Stock is
treated as "regularly traded on an established securities market" during the
calendar year. Non-United States Holders should consult applicable tax treaties,
which might result in a United States federal income tax treatment on the sale
or other disposition of Class A Common Stock different than as described above.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient, and the amount, if any, of tax withheld.
The information reporting requirements apply regardless of whether withholding
was reduced by an applicable tax treaty or if withholding was not required
because the dividends were effectively connected with a trade or business in the
United States of the Non-United States Holder. A similar report is sent to the
holder. Pursuant to tax treaties or other agreements, the IRS may make its
reports available to tax authorities in the recipient's country of residence.

Under current United States Treasury Regulations, unless the Company has
actual knowledge that a holder is a Non-United States Holder, dividends paid to
a holder at an address within the United States may be subject to backup
withholding at a rate of 31% and additional information reporting if the holder
is not an "exempt recipient" as defined in Treasury Regulations (which includes
corporations) and fails to provide a

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correct taxpayer identification number and other information to the Company.
Backup withholding and such additional information reporting will generally not
apply to dividends paid to holders at an address outside the United States
(unless the Company has knowledge that the holder is a United States person) or
to dividends paid to Non-United States Holders that are either subject to the
United States withholding tax (whether at 30% or a reduced rate) or that are
exempt from such withholding because such dividends constitute effectively
connected income.

Under current United States Treasury Regulations, proceeds from the
disposition of Class A Common Stock by a Non-United States Holder effected by or
through a United States office of a broker will be subject to information
reporting and to backup withholding at a rate of 31% of the gross proceeds
unless such Non-United States Holder certifies under penalties of perjury as to
its name, address and status as a Non-United States Holder or otherwise
establishes an exemption. Generally, United States information reporting and
backup withholding will not apply to a payment of disposition proceeds if the
transaction is effected outside the United States by or through a non-United
States office of a broker. However, United States information reporting
requirements (but not backup withholding) will apply to a payment of disposition
proceeds where the transaction is effected outside the United States if (a) the
disposition is made through an office outside the United States of a broker that
is either (i) a United States person for United States federal income tax
purposes, (ii) a "controlled foreign corporation" for United States federal
income tax purposes or (iii) a foreign person which derives 50% or more of its
gross income for certain periods from the conduct of a United States trade or
business and (b) the broker fails to maintain documentary evidence in its files
that the holder is a Non-United States Holder and that certain conditions are
met or that the holder otherwise is entitled to an exemption.

The Proposed Regulations would, if adopted, alter the foregoing rules
applicable to proceeds from Class A Common Stock in certain respects. Among
other things, the Proposed Regulations would provide certain presumptions and
other rules under which Non-United States Holders may be subject to backup
withholding and related information reporting in the absence of required
certifications.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of United States
income taxes, a refund may be obtained, provided that the required documents are
filed with the IRS.

ESTATE TAX

An individual Non-United States Holder who is treated as the owner of Class
A Common Stock at the time of such individual's death or has made certain
lifetime transfers of an interest in Class A Common Stock will be required to
include the value of such Class A Common Stock in such individual's gross estate
for United States federal estate tax purposes and may be subject to United
States federal estate tax, unless an applicable tax treaty provides otherwise.

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UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below for whom Morgan Stanley & Co. Incorporated, Alex. Brown & Sons
Incorporated, Goldman, Sachs & Co. and George K. Baum & Company are acting as
U.S. Representatives, and the International Underwriters named below for whom
Morgan Stanley & Co. International Limited, Alex. Brown & Sons Incorporated,
Goldman Sachs International and George K. Baum & Company are acting as
International Representatives, have severally agreed to purchase, and the
Company has agreed to sell to them, severally, the respective numbers of shares
of Class A Common Stock set forth opposite the names of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.........................
Alex. Brown & Sons Incorporated...........................
Goldman, Sachs & Co. .....................................
George K. Baum & Company..................................
----------
Subtotal...............................................
----------
International Underwriters:
Morgan Stanley & Co. International Limited................
Alex. Brown & Sons Incorporated...........................
Goldman Sachs International...............................
George K. Baum & Company..................................
----------
Subtotal...............................................
----------
Total..................................................
==========
</TABLE>

The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Class A Common Stock offered
hereby are subject to the approval of certain legal matters by their counsel and
to certain other conditions. The Underwriters are obligated to take and pay for
all of the shares of Class A Common Stock offered hereby (other than those
covered by the U.S. Underwriters' over-allotment option described below) if any
such shares are taken.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus relating to the Shares outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold, and will not
offer or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States or
Canadian Person. With respect to any Underwriter that is a U.S. Underwriter and
an International Underwriter, the foregoing representations and agreements (i)
made by it in its capacity as a U.S. Underwriter apply only to it in its
capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter apply only to it in its capacity as an International
Underwriter. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement between
U.S. and International Underwriters. As used herein, "United States or Canadian
Person" means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or of any

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<PAGE> 66

political subdivision thereof (other than a branch located outside the United
States and Canada of any United States or Canadian Person), and includes any
United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person. All shares of Class A Common Stock to be purchased by
the Underwriters under the Underwriting Agreement are referred to herein as the
"Shares".

Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares so sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per share
amount of the concession to dealers set forth below.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the offering of the Shares to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any of such Shares, directly or indirectly, in Japan or
to or for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other dealer to whom it sells any of such Shares a
notice containing substantially the same statement as is contained in this
sentence.

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<PAGE> 67

The Underwriters initially propose to offer part of the shares of Class A
Common Stock directly to the public at the public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $ a share to other Underwriters or to certain other dealers. After the
initial offering of the shares of Class A Common Stock, the offering price and
other selling terms may from time to time be varied by the Representatives.

The Company and the Selling Stockholder have granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of additional shares of Class
A Common Stock at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The U.S. Underwriters may exercise
such option solely for the purpose of covering over-allotments, if any, made in
connection with the offering of the shares of Class A Common Stock offered
hereby. To the extent such option is exercised, each U.S. Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares of Class A Common Stock as the number
set forth next to such U.S. Underwriter's name in the preceding table bears to
the total number of shares of Class A Common Stock set forth next to the names
of all U.S. Underwriters in the preceding table.

The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Class A Common Stock offered by them.

Each of the Company and the directors, executive officers and certain other
stockholders of the Company has agreed that, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the Underwriters (except with
respect to shares of Common Stock held by the Morgan Stanley Stockholders, for
which prior written consent of all the U.S. Representatives is required), it
will not, during the period ending 180 days after the date of this Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Class A Common Stock or any securities convertible
into or exercisable or exchangeable for Class A Common Stock (provided that such
shares or securities are either owned on the date of this Prospectus or are
hereinafter acquired prior to the Offering) or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Class A Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Class A Common Stock or such other securities, in cash or otherwise. The
restrictions described in this paragraph do not apply to (x) the sale of the
Shares to the Underwriters, (y) the issuance by the Company of shares of Common
Stock upon the exercise of an option or a warrant or the conversion of a
security outstanding on the date of this Prospectus or (z) transactions by any
person other than the Company relating to shares of Class A Common Stock or
other securities acquired in open market transactions after the consummation of
the offering of the Shares.

In order to facilitate the offering of the Class A Common Stock, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Class A Common Stock. Specifically, the Underwriters may
over-allot in connection with the Offering, creating a short position in the
Class A Common Stock for their own account. In addition, to cover
over-allotments or to stabilize the price of the Class A Common Stock, the
Underwriters may bid for, and purchase, shares of Class A Common Stock in the
open market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an Underwriter or a dealer for distributing the Class A Common Stock
in the Offering, if the syndicate repurchases previously distributed Class A
Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Class A Common Stock above independent
market levels. The Underwriters are not required to engage in these activities,
and may end any of these activities at any time.

The Company, the Selling Stockholder and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

Upon consummation of the Offering, affiliates of Morgan Stanley & Co.
Incorporated and Morgan Stanley & Co. International Limited will own % of
the Common Stock ( % if the Underwriters'

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<PAGE> 68

over-allotment option is exercised in full). No affiliates of Morgan Stanley &
Co. Incorporated and Morgan Stanley & Co. International Limited will be selling
shares of Class A Common Stock in the Offering. Currently, affiliates of Morgan
Stanley & Co. Incorporated and Morgan Stanley & Co. International Limited have
designated three members to the Board of Directors (Messrs. Niehaus and Sorrel
and Ms. Rosen). Messrs. Niehaus and Sorrel and Ms. Rosen are employees of Morgan
Stanley & Co. Incorporated. See "Management." From time to time, Morgan Stanley
& Co. Incorporated and its affiliates have provided, and continue to provide,
investment banking and financial advisory services to the Company for which they
have received customary fees and commissions.

Morgan Stanley Senior Funding, Inc., an affiliate of Morgan Stanley & Co.
Incorporated, one of the U.S. Underwriters, is the documentation agent under the
agreements relating to the Company's Credit facility, and acted as arranger for
the Credit Facility for which it received a customary fee. Morgan Stanley Senior
Funding, Inc. also provides other general financing and banking services to the
Company and its affiliates from time to time.

Application has been made to list the Class A Common Stock on the New York
Stock Exchange under the symbol "PLB."

Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price will be determined by
negotiations between the Company and the U.S. Representatives. Among the factors
to be considered in determining the initial public offering price will be the
future prospects of the Company and its industry in general, sales, earnings and
certain other financial and operating information of the Company in recent
periods, and the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies engaged
in activities similar to those of the Company. The estimated initial public
offering price range set forth on the cover page of this Preliminary Prospectus
is subject to change as a result of market conditions and other factors.

Because the partial repayment of the Credit Facility will cause a
substantial portion of the proceeds from the Offering to be paid to affiliates
of members of the National Association of Securities Dealers, Inc. ("NASD")
which members may participate in the U.S. Offering, the U.S. Offering is being
conducted in accordance with the requirements of Rule 2710(c)(8) of the NASD
Conduct Rules. The initial public offering price can be no higher than that
recommended by a "qualified independent underwriter" meeting certain standards.
Accordingly, Goldman, Sachs & Co. will serve in such role and will receive
compensation from the Company in the amount of $ for serving in such
capacity. In connection with the U.S. Offering, Goldman, Sachs & Co. in its role
as qualified independent underwriter has performed due diligence investigations
and reviewed and participated in the preparation of this Prospectus and the
Registration Statement of which this Prospectus forms a part.

From time to time, George K. Baum & Company has provided, and continues to
provide, investment banking and financial advisory services to the Company for
which it has received customary fees and commissions. Upon consummation of the
Offering, one of the Company's seven directors will be a director of George K.
Baum & Company.

LEGAL MATTERS

The validity of the shares of Class A Common Stock offered hereby and
certain other matters will be passed upon for the Company by Sonnenschein Nath &
Rosenthal, Kansas City, Missouri. Certain legal matters will be passed upon for
the Underwriters by Davis Polk & Wardwell, New York, New York. Davis Polk &
Wardwell has performed, and will continue to perform, legal services for the
Morgan Stanley Stockholders and has acted as counsel to the Morgan Stanley
Stockholders in connection with their investments in the Company.

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<PAGE> 69

EXPERTS

The financial statements of the Company at December 31, 1995, September 30,
1996, and June 30, 1997, and for each of the two years in the period ended
December 31, 1995, for the nine-month fiscal period ended September 30, 1996 and
the nine-month period ended June 30, 1997 appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed a Registration Statement with the Securities and
Exchange Commission (the "Commission") on Form S-1 under the Securities Act with
respect to the shares of Class A Common Stock offered hereby. This Prospectus,
which constitutes a part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement, certain items of which
are contained in schedules and exhibits to the Registration Statement as
permitted by rules of the Commission. For further information with respect to
the Company and the Class A Common Stock offered hereby, reference is made to
such Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete. With respect to each such
contract or other document filed as a part of or otherwise incorporated in the
Registration Statement, reference is made to the exhibit for a more complete
description of the matters involved, and each such statement shall be deemed
qualified in its entirety by such reference.

Following the consummation of this Offering, the Company will be subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended, and in accordance therewith will file reports, proxy statements and
other information with the Commission. The Registration Statement, including the
schedules and exhibits thereto, as well as such reports, proxy statements and
other information filed by the Company can be inspected, without charge, 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
regional offices maintained by the Commission at Suite 1400, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661 and Seven World Trade Center,
13th Floor, New York, New York 10048. Copies of such materials can also be
obtained from the Public Reference Section of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, registration statements and certain other filings made with
the Commission through its Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system are publicly available through the Commission's site on the
Internet's World Wide Web, located at http://www.sec.gov. The Registration
Statement, including all exhibits thereto and amendments thereof, has been filed
with the Commission through EDGAR.

Following the consummation of this Offering, the Company intends to furnish
to its stockholders annual reports containing financial statements audited by an
independent certified public accounting firm and quarterly reports for each of
the first three quarters of each fiscal year containing unaudited financial
information.

67
<PAGE> 70

AMERICAN ITALIAN PASTA COMPANY

INDEX TO AUDITED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Balance Sheets at December 31, 1995, September 30, 1996 and
June 30, 1997............................................. F-3
Statements of Operations for the years ended December 31,
1994 and 1995, the fiscal nine-months ended September 30,
1996 and the nine-months ended June 30, 1997.............. F-4
Statements of Stockholders' Equity for the years ended
December 31, 1994 and 1995, the fiscal nine-months ended
September 30, 1996 and the nine-months ended June 30,
1997...................................................... F-5
Statements of Cash Flows for the years ended December 31,
1994 and 1995, the fiscal nine-months ended September 30,
1996 and the nine-months ended June 30, 1997.............. F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE> 71

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
American Italian Pasta Company

We have audited the accompanying balance sheets of American Italian Pasta
Company (the Company) as of December 31, 1995, September 30, 1996 and June 30,
1997, and the related statements of operations, stockholders' equity and cash
flows for each of the two years in the period ended December 31, 1995, the nine-
month fiscal period ended September 30, 1996 and the nine-month period ended
June 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Italian Pasta
Company at December 31, 1995, September 30, 1996 and June 30, 1997, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1995, the nine-month fiscal period ended September 30,
1996 and the nine-month period ended June 30, 1997 in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Kansas City, Missouri
July 25, 1997 except
Note 12, as to which
the date is , 1997
- --------------------------------------------------------------------------------

The foregoing report is in the form that will be signed upon the completion
of the recapitalization and restatement of capital accounts and the calculation
of earnings per share amounts as described in Note 12 to the financial
statements.

/s/ ERNST & YOUNG LLP

Kansas City, Missouri

September 10, 1997

F-2
<PAGE> 72

AMERICAN ITALIAN PASTA COMPANY

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS (Note 2)
Current assets:
Cash and temporary investments.......................... $ 18 $ 1,818 $ 2,612
Trade and other receivables............................. 10,709 12,494 11,616
Prepaid expenses and deposits........................... 927 1,879 2,201
Inventory............................................... 12,544 14,374 11,619
Deferred income taxes (Note 3).......................... 339 269 213
-------- -------- --------
Total current assets...................................... 24,537 30,834 28,261
Property, plant and equipment:
Land and improvements................................... 4,379 4,413 4,540
Buildings............................................... 37,382 37,491 37,491
Plant and mill equipment................................ 78,850 81,461 83,702
Furniture, fixtures and equipment....................... 3,348 3,635 4,477
-------- -------- --------
123,959 127,000 130,210
Accumulated depreciation................................ (18,580) (23,247) (27,790)
-------- -------- --------
105,379 103,753 102,420
Construction in progress................................ -- -- 7,839
-------- -------- --------
Total property, plant and equipment....................... 105,379 103,753 110,259
Deferred income taxes (Note 3)............................ 1,821 4,479 2,730
Other assets.............................................. 3,687 2,622 4,212
-------- -------- --------
Total assets.............................................. $135,424 $141,688 $145,462
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 12,102 $ 7,193 $ 6,550
Accrued expenses........................................ 2,694 3,664 4,750
Current maturities of long-term debt (Note 2)........... 3,109 8,078 3,685
Revolving line of credit facility (Note 2).............. -- 13,500 --
-------- -------- --------
Total current liabilities................................. 17,905 32,435 14,985
Long-term debt (Note 2)................................... 97,452 93,284 89,500
Commitments and contingencies (Note 4)
Stockholders' equity:
Common stock, no par value:
Authorized shares 2,100,000.......................... -- -- --
Class A common stock, $.01 par value:
Authorized shares -- 1,600,000....................... 10 10 15
Additional paid-in capital.............................. 32,969 33,069 55,320
Notes receivable from officers.......................... -- -- (298)
Accumulated deficit..................................... (12,912) (17,110) (14,060)
-------- -------- --------
Total stockholders' equity................................ 20,067 15,969 40,977
-------- -------- --------
Total liabilities and stockholders' equity................ $135,424 $141,688 $145,462
======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE> 73

AMERICAN ITALIAN PASTA COMPANY

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED ----------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30,
---------------------- -------------------------- ----------------------
1994 1995 1995 1996 1996 1997
---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenues (Note 5)................. $69,465 $92,903 $63,828 $92,074 $86,514 $93,616
Cost of goods sold................ 54,393 73,851 51,601 68,555 65,697 67,821
Plant expansion costs (Note 8).... 484 2,065 1,640 -- 425 --
------- ------- ------- ------- ------- -------
Gross profit...................... 14,588 16,987 10,587 23,519 20,392 25,795
Selling and marketing expense,
excluding product introduction
costs........................... 3,792 5,303 3,656 8,676 6,625 8,078
Product introduction costs (Note
10)............................. -- -- -- 8,122 4,611 2,134
General and administrative
expense......................... 1,951 2,930 2,048 2,805 2,741 2,855
------- ------- ------- ------- ------- -------
Operating profit.................. 8,845 8,754 4,883 3,916 6,415 12,728
Interest expense, net............. 4,975 8,008 5,261 8,023 8,030 7,800
------- ------- ------- ------- ------- -------
Income (loss) before income tax
expense (benefit) and
extraordinary item.............. 3,870 746 (378) (4,107) (1,615) 4,928
Income tax expense (benefit) (Note
3).............................. 1,484 270 (147) (1,556) (642) 1,878
------- ------- ------- ------- ------- -------
Income (loss) before extraordinary
item............................ 2,386 476 (231) (2,551) (973) 3,050
Extraordinary item:
Loss due to early extinguishment
of long-term debt, net of
income taxes (Note 2)........ (204) -- -- (1,647) (1,647) --
------- ------- ------- ------- ------- -------
Net income (loss)................. $ 2,182 $ 476 $ (231) $(4,198) $(2,620) $ 3,050
======= ======= ======= ======= ======= =======
Net income (loss) per common
share:
Before extraordinary item......... $ $ $ $
Extraordinary item................
------- ------- ------- -------
Total............................. $ $ $ $
======= ======= ======= =======
Weighted-average common shares
outstanding.....................
======= ======= ======= =======
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE> 74

AMERICAN ITALIAN PASTA COMPANY

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
NOTES
CLASS A CLASS A ADDITIONAL RECEIVABLE TOTAL
COMMON COMMON COMMON PAID-IN FROM DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES SHARES STOCK CAPITAL OFFICERS COMPENSATION DEFICIT EQUITY
------ ------- ------- ---------- ---------- ------------ ----------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993.................. 301,221 1,032,728 $10 $32,677 $ -- $(144) $(15,570) $16,973
Compensation related
to stock options
vesting in 1994..... -- -- -- -- -- 144 -- 144
Issuance of 3,490
shares of no par
Common stock........ 3,490 -- -- 102 -- -- -- 102
Net income............ -- -- -- -- -- -- 2,182 2,182
------- --------- --- ------- ----- ----- -------- -------
Balance at December 31,
1994.................. 304,711 1,032,728 10 32,779 -- -- (13,388) 19,401
Issuance of 3,008
shares of no par
Common stock and
3,314 shares of
Class A Common
stock............... 3,008 3,314 -- 190 -- -- -- 190
Net income............ -- -- -- -- -- -- 476 476
------- --------- --- ------- ----- ----- -------- -------
Balance at December 31,
1995.................. 307,719 1,036,042 10 32,969 -- -- (12,912) 20,067
Issuance of 3,315
shares of no par
Common stock........ 3,315 -- -- 100 -- -- -- 100
Net loss.............. -- -- -- -- -- -- (4,198) (4,198)
Balance at September 30,
1996.................. 311,034 1,036,042 10 33,069 -- -- (17,110) 15,969
Issuance of 517,695
shares of Class A
Common stock, net of
issuance costs...... -- 517,695 5 22,037 -- -- -- 22,042
Notes received from
officers in exchange
for stock........... -- -- -- -- (298) -- -- (298)
Issuance of 5,088
shares of Class A
Common stock to
employee benefit
plan................ -- 5,088 -- 214 -- -- -- 214
Net income............ -- -- -- -- -- -- 3,050 3,050
------- --------- --- ------- ----- ----- -------- -------
Balance at June 30,
1997.................. 311,034 1,558,825 $15 $55,320 $(298) $ -- $(14,060) $40,977
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 75

AMERICAN ITALIAN PASTA COMPANY

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED --------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30
-------------------- ----------------------- -----------------------
1994 1995 1995 1996 1996 1997
---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss).................... $ 2,182 $ 476 $ (231) $ (4,198) $ (2,620) $ 3,050
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operations:
Depreciation and amortization.... 4,573 6,279 4,485 5,434 5,607 5,784
Deferred income tax expense
(benefit)..................... 1,168 264 (147) (1,556) (642) 1,878
Extraordinary loss due to early
extinguishment of long-term
debt.......................... 204 -- -- 1,647 1,647 --
Compensation related to stock
options....................... 144 -- -- -- -- --
Loss on disposal of property,
plant and equipment........... -- 439 275 -- 163 --
Changes in operating assets and
liabilities:
Trade and other receivables... (1,900) (4,586) (1,512) (1,785) (2,898) 942
Prepaid expenses and
deposits.................... (317) (364) (1,241) (952) (220) (396)
Inventory..................... (4,293) (2,814) (1,889) (1,830) (5,377) 2,755
Accounts payable and accrued
expenses.................... 2,167 6,610 3,435 (3,961) 519 443
Other......................... (238) (574) (500) (276) (334) (380)
-------- -------- -------- -------- -------- --------
Net cash provided by (used in)
operating activities............... 3,690 5,730 2,675 (7,477) (4,155) 14,076

Investing activities:
Additions to property, plant and
equipment.......................... (25,431) (38,789) (31,365) (3,041) (6,084) (11,464)
-------- -------- -------- -------- -------- --------
Net cash used in investing
activities......................... (25,431) (38,789) (31,365) (3,041) (6,084) (11,464)

Financing activities:
Additions to deferred debt issuance
costs.............................. (2,004) (71) (71) (2,083) (2,064) (2,099)
Proceeds from issuance of debt....... 58,330 40,795 22,274 86,470 106,025 3,543
Net borrowings under revolving line
of credit facility................. -- -- 9,408 13,500 -- (13,500)
Principal payments on debt and
capital lease obligations.......... (36,825) (7,848) (3,875) (85,669) (92,239) (11,720)
Proceeds from issuance of common
stock, net of issuance costs....... 102 190 167 100 -- 21,958
-------- -------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities............... 19,603 33,066 27,903 12,318 11,722 (1,818)
-------- -------- -------- -------- -------- --------

Net increase (decrease) in cash and
temporary investments.............. (2,138) 7 (787) 1,800 1,483 794
Cash and temporary investments at
beginning of period................ 2,149 11 11 18 (776) 1,818
-------- -------- -------- -------- -------- --------
Cash and temporary investments at end
of period.......................... $ 11 $ 18 $ (776) $ 1,818 $ 707 $ 2,612
======== ======== ======== ======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE> 76

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

American Italian Pasta Company (the Company) is a Delaware Corporation
which began operations in 1988. The Company is the third largest producer and
marketer of pasta products in the United States with manufacturing and
distribution facilities located in Excelsior Springs, Missouri and Columbia,
South Carolina.

CHANGE IN FISCAL YEAR

Effective for its 1996 fiscal year, the Company changed its fiscal year end
from December 31 to the Friday last preceding September 30, resulting in a
nine-month fiscal year for 1996, a 53-week year for fiscal 1997, and a 52- or
53-week year for all subsequent fiscal years. The Company's other fiscal
quarters end on the Friday last preceding December 31, March 31 and June 30 of
each year. For purposes of the financial statements and notes thereto, the 1996
fiscal year is described as having ended on September 30, 1996, and the
nine-month 1997 and 1996 interim periods are described as having ended on June
30.

INTERIM FINANCIAL STATEMENTS

The Company's balance sheet at June 30, 1997 and the statements of
operations and stockholders' equity and cash flows for the nine months ended
September 30, 1995, June 30, 1996 and June 30, 1997 have been prepared in
accordance with generally accepted accounting principles for interim financial
statements.

The Company has included information for the nine months ended September
30, 1995 and June 30, 1996 in the statements of operations and statements of
cash flows for comparative purposes. This information is unaudited.

REVENUE RECOGNITION

Sales of the Company's products, including pricing terms, are final upon
shipment of the goods. Accordingly, revenue is recognized at such time.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

RISKS AND UNCERTAINTIES

The Company grants credit to certain customers who meet the Company's
preestablished credit requirements. Generally, the Company does not require
collateral security when trade credit is granted to customers. Credit losses are
provided for in the financial statements and consistently have been within
management's expectations. The allowance for doubtful accounts at December 31,
1995, September 30, 1996 and June 30, 1997 was $59,000, $60,000 and $198,000,
respectively. At December 31, 1995, September 30, 1996 and June 30, 1997,
approximately 30%, 34% and 41%, respectively, of accounts receivable were due
from two customers.

Pasta is made from semolina milled from durum wheat, a class of hard amber
wheat grown in certain parts of the world and purchased by the Company from
United States and Canadian sources. The Company mills the wheat into semolina at
its Excelsior Springs plant. Durum wheat is a narrowly traded, cash only
commodity crop. The Company attempts to minimize the effect of durum wheat cost
fluctuations through

F-7
<PAGE> 77

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
forward purchase contracts and raw material cost-based pricing agreements with
many of its customers. The Company's commodity procurement and pricing practices
are intended to reduce the risk of durum wheat cost increases on profitability,
but also may temporarily affect the timing of the Company's ability to benefit
from possible durum wheat cost decreases for such contracted quantities.

FINANCIAL INSTRUMENTS

The carrying value of the Company's financial instruments, including cash
and temporary investments, accounts receivable, accounts payable and long-term
debt, as reported in the accompanying balance sheet at June 30, 1997,
approximates fair value.

ADVERTISING COSTS

The Company amortizes direct response advertising costs over the period in
which the future benefits are expected (generally six months or less).
Production costs for television advertisement are expensed upon the first
showing. Other costs of advertising and promotions are expensed as incurred.

CASH AND TEMPORARY INVESTMENTS

Cash and temporary investments include cash on hand, amounts due from banks
and highly liquid marketable securities with maturities of three months or less
at the date of purchase.

INVENTORIES

Inventories are stated using product specific standard costs which
approximate the lower of cost or market determined on a first-in, first-out
(FIFO) basis. Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Finished goods............................... $ 8,625 $10,809 $ 7,505
Raw materials, packaging materials and
work-in-process............................ 3,919 3,565 4,114
------- ------- -------
$12,544 $14,374 $11,619
======= ======= =======
</TABLE>

PROPERTY, PLANT AND EQUIPMENT

Capital additions, improvements and major renewals are classified as
property, plant and equipment and are recorded at cost. Depreciation is
calculated for financial statement purposes using the straight-line method over
the estimated useful life of the related asset for each year as follows:

<TABLE>
<CAPTION>
NUMBER OF
YEARS
---------
<S> <C>
Land improvements........................................... 40
Buildings................................................... 30
Plant and mill equipment.................................... 20
Packaging equipment......................................... 10
Furniture, fixtures and equipment........................... 5
</TABLE>

F-8
<PAGE> 78

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The Company capitalizes interest costs associated with the construction and
installation of plant and equipment. During the fiscal years ended December 31,
1994 and 1995, approximately $871,000 and $1,559,000 of interest cost was
capitalized, respectively. There was no interest cost capitalized in fiscal
1996. During the nine months ended June 30, 1997, approximately $136,000 of
interest cost was capitalized.

OTHER ASSETS

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Debt issuance costs (Note 2)............................... $ 5,071 $ 2,143 $ 4,242
Package design costs....................................... 1,274 1,456 1,492
Other...................................................... 1,151 1,150 1,099
------- ------- -------
7,496 4,749 6,833
Accumulated amortization................................... (3,809) (2,127) (2,621)
------- ------- -------
$ 3,687 $ 2,622 $ 4,212
======= ======= =======
</TABLE>

Debt issuance costs relate to expenditures incurred in connection with
obtaining long-term debt. These costs are being amortized over the life of the
related debt using the effective interest rate method. Debt issuance costs, net
of accumulated amortization, were $3,597,000 at June 30, 1997.

Package design costs relate to certain incremental third party costs to
design artwork and produce die plates and negatives necessary to manufacture and
print packaging materials according to the Company's and customer's
specification. These costs are amortized ratably over a two-year period. In the
event that product packaging is discontinued prior to the end of the
amortization period, the respective package design costs are written off.
Package design costs, net of accumulated amortization, were $449,000 at June 30,
1997.

CHANGE IN ACCOUNTING POLICIES

In conjunction with its planned initial public offering, the Company
elected to expense all start up costs incurred related to the 1995/1996 plant
expansion. In addition, the Company has elected to expense all product placement
fees incurred related to the 1996/1997 introduction of flavored pasta. The
related financial statements have been restated retroactively.

INCOME TAXES

The Company accounts for income taxes in accordance with the method
prescribed by Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." Under this method, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax bases of assets and liabilities, and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.

STOCK OPTIONS

The Company has elected to follow Accounting Principles Board Opinion (APB)
No. 25, "Accounting for Stock Issued to Employees," and related Interpretations
in accounting for its employee stock options and have adopted the pro forma
disclosure requirements under SFAS No. 123 "Accounting for Stock-Based
Compensation." Under APB No. 25, because the exercise price of the Company's
employee stock options is

F-9
<PAGE> 79

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

equal to or greater than the market price of the underlying stock on the date of
grant, no compensation expense is recognized.

NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per common share is calculated using the weighted-average
number of common shares and common equivalent shares, to the extent dilutive,
outstanding during the periods. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83, stock issued and common stock options granted
by the Company during the 12 months preceding the filing date for its planned
initial public offering have been included in the calculation of
weighted-average common and common equivalent shares outstanding, using the
treasury stock method based on the assumed initial public offering price of
$ , as if the stock and options were outstanding for all periods presented.

2. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Term loans................................................. $ 93,750 $ 94,813 $85,938
Capital lease, 15-year term with three, five-year renewal
options, at an imputed interest rate of 12.5%............ 3,657 3,586 3,509
Capital lease, eight-year term at an imputed interest rate
of 8.5%.................................................. 2,210 2,260 2,124
Other...................................................... 944 703 1,614
-------- -------- -------
100,561 101,362 93,185
Less current portion....................................... 3,109 8,078 3,685
-------- -------- -------
$ 97,452 $ 93,284 $89,500
======== ======== =======
</TABLE>

In April 1997, the Company amended and restated its principal credit
agreement in conjunction with a sale of $22.3 million of the Company's common
stock to existing stockholders. With the net proceeds from the common stock
sale, the Company repaid then outstanding borrowings under the revolving credit
agreement and prepaid scheduled long-term debt payments due through December 31,
1997.

The amended and restated credit agreement (i) created a $45 million D term
loan which will be used in combination with the proceeds from the common stock
sale to finance the Company's expansion of capital assets; (ii) increased the
Company's revolving credit facility from $17.5 million to $25 million and (iii)
modified certain covenant provisions. At June 30, 1997, the Company had $45
million available to borrow under the D term credit facility.

Debt issuance costs of approximately $2.1 million related to the April
refinancing were capitalized as deferred debt issuance costs during 1997.

In July 1994 and February 1996, the Company refinanced certain of its
credit facilities. The unamortized balance of debt issuance costs which related
to the previous debt were written off, net of related tax benefits, as an
extraordinary loss on debt extinguishment as required by generally accepted
accounting principles. These amounts were $329,000 ($204,000 net of taxes) in
fiscal 1994 and $2.6 million ($1.6 million net of taxes) in fiscal 1996.

F-10
<PAGE> 80

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

2. LONG-TERM DEBT -- (CONTINUED)

The interest rates and principal maturity terms of the credit facility are
as follows:

<TABLE>
<CAPTION>
FINAL
FACILITY AMOUNT INTEREST RATE MATURITY DATE
-------- ------ ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Term Loan A................ $ 18,000 LIBOR + 3.00% or prime + 2.00% February 2000
Term Loan B................ 19,900 LIBOR + 3.25% or prime + 2.25% February 2002
Term Loan C................ 54,700 LIBOR + 3.75% or prime + 2.75% February 2004
Term Loan D................ 45,000 LIBOR + 3.75% or prime + 2.75% February 2004
--------
137,600
Maximum Revolving Credit
Facility................. 25,000 LIBOR + 3.00% or prime + 2.00% February 2000
--------
$162,600
========
</TABLE>

Debt principal is to be repaid in varying quarterly installments with
interest over the terms shown above.

The borrowing under the Revolving Credit Facility is limited to the lesser
of $25 million or available collateral as defined in the amended credit
agreement. At June 30, 1997, the revolving credit line had approximately $24.5
million available for future borrowings, subject to borrowing base limitations
and outstanding letters of credit.

The following information related to the revolving credit facility is
presented for the years ended December 31, 1994 and 1995, the nine-month fiscal
period ended September 30, 1996 and the nine months ended June 30, 1997.

<TABLE>
<CAPTION>
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted-average interest rate.................. 7.9% 9.0% 8.4% 8.6%
</TABLE>

Annual maturities of long-term debt and capital lease obligations for each
of the next five years ended June 30, are as follows:

<TABLE>
<CAPTION>
LONG-TERM CAPITAL
YEAR DEBT LEASES TOTAL
---- --------- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
1998............................................. $ 2,875 $ 1,558
1999............................................. 6,000 1,521
2000............................................. 7,300 1,335
2001............................................. 10,150 994
2002............................................. 13,750 994
Thereafter....................................... 45,863 5,460
------- -------
85,938 11,862 $97,800
Less imputed interest............................ -- 4,615 4,615
------- ------- -------
Present value of net minimum payments............ 85,938 7,247 93,185
Less current portion............................. 2,875 810 3,685
------- ------- -------
Long-term obligations............................ $83,063 $ 6,437 $89,500
======= ======= =======
</TABLE>

The term loans and revolving credit agreement contain various restrictive
covenants which include, among other things, financial covenants requiring
minimum and cumulative earnings levels and limitations on

F-11
<PAGE> 81

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

2. LONG-TERM DEBT -- (CONTINUED)
the payment of dividends, stock purchases, and capital spending, and the
Company's ability to enter into certain contractual arrangements. In addition to
the above scheduled principal maturities, the credit agreement also provides
that excess cash flow (as annually defined) will be used to fund future
principal maturities. The facilities are secured by substantially all assets of
the Company.

The Company leases certain assets under capital lease agreements. At
December 31, 1995, September 30, 1996 and June 30, 1997, the cost of these
assets was $6,987,000, $7,128,000 and $7,949,000, respectively, and related
accumulated amortization was $155,000, $642,000 and $556,000, respectively.

3. INCOME TAXES

At June 30, 1997, the Company has net operating loss carryforwards of $26.6
million for federal income tax purposes that expire in varying amounts through
the year 2010. The Company also has state income enterprise zone credits of
approximately $1 million that expire in 1997.

The Company has established a valuation allowance of $1,031,000 for state
enterprise zone credits that are available but are not expected to be realized.
Management believes it is more likely than not that remaining deferred tax
assets will be realized through the generation of future taxable income and
available tax planning strategies.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforward.......................... $ 5,012 $ 9,730 $10,573
State enterprise zone credits............................ 1,031 1,031 1,031
AMT credit carryforward.................................. 561 561 515
Other.................................................... 1,064 1,888 1,084
------- ------- -------
Total deferred tax assets.................................. 7,668 13,210 13,203
Deferred tax liabilities:
Book basis of tangible assets greater than tax........... 4,311 6,721 8,756
Other.................................................... 166 710 473
------- ------- -------
Total deferred tax liabilities............................. 4,477 7,431 9,229
------- ------- -------
Net deferred tax assets before allowance................... 3,191 5,779 3,974
Valuation allowance for deferred tax assets................ (1,031) (1,031) (1,031)
------- ------- -------
Net deferred tax assets.................................... $ 2,160 $ 4,748 $ 2,943
======= ======= =======
</TABLE>

F-12
<PAGE> 82

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

3. INCOME TAXES -- (CONTINUED)
Significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS NINE MONTHS
DECEMBER 31 ENDED ENDED
-------------- SEPTEMBER 30, JUNE 30,
1994 1995 1996 1997
---- ---- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current income tax expense............................ $ 316 $ 6 $ -- $ --
Deferred tax expense (benefit)........................ 1,134 264 (1,556) 1,878
Change in valuation allowance......................... 34 -- -- --
------ ---- ------- ------
Net income tax expense (benefit)...................... $1,484 $270 $(1,556) $1,878
====== ==== ======= ======
</TABLE>

The reconciliation of income tax computed at the U.S. statutory tax rate to
income tax expense is as follows:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS NINE MONTHS
DECEMBER 31 ENDED ENDED
-------------- SEPTEMBER 30, JUNE 30,
1994 1995 1996 1997
---- ---- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Income (loss) before income taxes..................... $3,870 $746 $(4,107) $4,928
U.S. statutory tax rate............................... x34% x34% x34% x34%
------ ---- ------- ------
Federal income tax expense (benefit) at U.S. statutory
rate................................................ 1,316 254 (1,396) 1,676
State income tax expense (benefit), net of federal tax
effect.............................................. 155 30 (165) 196
Change in valuation allowance......................... 34 -- -- --
Other, net............................................ (21) (14) 5 6
------ ---- ------- ------
Net income tax expense (benefit)...................... $1,484 $270 $(1,556) $1,878
====== ==== ======= ======
</TABLE>

4. COMMITMENTS AND CONTINGENCIES

In April 1997, the Company entered into a long-term supply arrangement in
which the Company is obligated to produce and the customer is obligated to
purchase certain minimum annual volumes of pasta products beginning in fiscal
1998. In order to fulfill its obligations under the contract, the Company will
be required to expand significantly its available production capacity.

The Company has committed approximately $86 million to expand significantly
its existing manufacturing, milling and distribution facilities. The expansion
assets are anticipated to be placed in service during fiscal 1998. As of June
30, 1997, cumulative expansion expenditures are $7,839,000, including
capitalized interest of $136,000. The remaining expansion costs will be funded
from a portion of the proceeds from the Company's common stock sale (see Note
12), available bank debt credit facilities and cash provided by operations.

The Company had durum wheat purchase commitments totaling approximately
$7.9 million, $8.0 million and $6.3 million at December 31, 1995, September 30,
1996 and June 30, 1997, respectively.

Under an agreement with its predominant rail carrier, the Company is
obligated to transport specified wheat volumes. In the event the specified
transportation volumes are not met, the Company is required to reimburse certain
rail carrier costs. The Company is in compliance with the volume obligations at
June 30, 1997.

F-13
<PAGE> 83

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

5. MAJOR CUSTOMERS

Sales to a certain customer during the years ended December 31, 1994 and
1995, the fiscal nine-months ended September 30, 1996 and the nine-months ended
June 30, 1997 represented 38%, 33%, 27% and 27% of revenues, respectively. Sales
to a second customer during the years ended December 31, 1994 and 1995, the
fiscal nine-months ended September 30, 1996 and the nine-months ended June 30,
1997 represented 12%, 23%, 19% and 21% of revenues, respectively.

6. STOCK OPTION PLAN

In October 1992, a stock option plan was established that authorizes the
granting of options to purchase up to 196,000 shares of the Company's no par
common stock by certain officers and key employees. In October 1993, an
additional plan was established that authorizes the granting of options to
purchase up to 13,500 shares of the Company's no par common stock. The stock
options expire 10 years from the date of grant and become exercisable over the
next five years in varying amounts depending on the terms of the individual
option agreements.

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF OPTION PRICE EXERCISE
SHARES PER SHARE PRICE EXERCISABLE
--------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1993................. 92,292 $14.27-$30.17 $23.89 45,432
Exercised...................................... --
Granted........................................ 19,030 $30.17 $30.17
Canceled/Expired............................... (1,500) $30.17 $30.17
-------
Outstanding at December 31, 1994................. 109,822 $14.27-$30.17 $24.89 61,064
Exercised...................................... --
Granted........................................ 55,375 $75.00 $75.00
Canceled/Expired............................... --
-------
Outstanding at December 31, 1995................. 165,197 $14.27-$75.00 $41.64 74,354
Exercised...................................... --
Granted........................................ 200 $75.00 $75.00
Canceled/Expired............................... (100) $75.00 $75.00
-------
Outstanding at September 30, 1996................ 165,297 $14.27-$75.00 $41.71 88,302
Exercised...................................... --
Granted........................................ 42,135 $43.06-$75.00 $54.08
Canceled/Expired............................... (7,930) $30.17-$75.00 $73.30
-------
Outstanding at June 30, 1997..................... 199,502 $14.27-$75.00 $43.06 108,068
=======
</TABLE>

The following table summarizes outstanding and exercisable options at June
30, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------ ------------------------------
NUMBER WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
$14.27-$14.61............................. 36,930 $14.47 36,930 $14.47
$30.17.................................... 72,592 30.17 52,738 30.17
$43.06.................................... 27,600 43.06 9,200 43.06
$75.00.................................... 62,380 75.00 9,200 75.00
</TABLE>

Compensation expense totaling $144,000 was recorded during the year ended
December 31, 1994 related to the vesting of compensatory stock options.

F-14
<PAGE> 84

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

6. STOCK OPTION PLAN -- (CONTINUED)

SFAS No. 123 requires the disclosure of pro forma net income and earnings
per share for stock-based awards as if the Company had used the fair value
method of accounting for such awards. Under SFAS No. 123, the fair value is
calculated through the use of option pricing models. These models require
subjective assumptions, including future stock price volatility and expected
time to exercise, which greatly affect the calculated values. The Company's
calculations were made using the minimum value method with the following
weighted-average assumptions: expected life, 18 months following vesting; no
stock volatility; risk free interest rate of 6% and no dividends during the
expected term. Based on these calculations, the effect of applying SFAS No.
123's fair value method to the Company's stock-based awards granted subsequent
to December 15, 1994 results in pro forma net income of $3,027,000 and earnings
per share of $ for the nine months ended June 30, 1997, which are not
materially different from amounts reported.

7. EMPLOYEE BENEFIT PLAN

The Company has a defined contribution plan organized under Section 401(k)
of the Internal Revenue Code covering substantially all employees. The plan
allows all qualifying employees to contribute up to the tax deferred
contribution limit allowable by the Internal Revenue Service. The Company will
match 50% of the employee contributions up to a maximum employee contribution of
6% of the employee's salary and may contribute additional amounts to the plan as
determined annually by the Board of Directors. Employer contributions related to
the plan totaled $133,000, $139,000, $124,000 and $140,000 for the years ended
December 31, 1994 and 1995, the fiscal nine-months ended September 30, 1996 and
the nine-months ended June 30, 1997, respectively.

8. PLANT EXPANSION COSTS

Plant expansion costs include incremental direct and indirect manufacturing
and distribution costs which are incurred as a result of construction,
commissioning and start-up of new capital assets. These costs are expensed as
incurred but are unrelated to current production and, therefore, reported as a
separate line item in the statement of operations. Plant expansion costs
amounted to $484,000 and $2,065,000 for the years ended December 31, 1994 and
1995, respectively.

9. SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
1994 1995 1996 1997
------------ ------------ ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Supplemental disclosure of cash flow
information:
Cash paid for interest..................... $5,110 $9,675 $8,101 $7,520
====== ====== ====== ======
Cash paid for income taxes................... $ 250 $ 100 $ 50 $ 2
====== ====== ====== ======
</TABLE>

F-15
<PAGE> 85

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

10. PRODUCT INTRODUCTION COSTS

During 1996, the Company began distribution of its Pasta LaBella flavored
pasta products into the United States' retail grocery trade. Introduction of
these products was supported by significant advertising, promotions and other
initiatives. The Company's results include the following product introduction
expenses for the following periods:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, JUNE 30,
1996 1997
------------- -----------
(IN THOUSANDS)
<S> <C> <C>
Introductory advertising.............................. $3,587 $ 137
In-store product demonstrations....................... 692 307
Direct response advertising amortization.............. 166 200
Product placement fees paid........................... 3,113 1,333
Introductory trade incentives......................... 268 --
Other................................................. 296 157
------ ------
Total product introduction costs...................... $8,122 $2,134
====== ======
</TABLE>

11. NOTES RECEIVABLE FROM OFFICERS

In April 1997, certain officers of the Company acquired 6,909 shares of
common stock. At the same time, the Company loaned these officers $298,000, all
of which remains outstanding at June 30, 1997. The loans which were evidenced by
promissory notes are due in three equal installments with the final payment due
April 2000. The notes are collateralized by the pledge of shares of common stock
of the Company, may be prepaid in part or in full without notice or penalty and
bear interest at the applicable federal rate in effect on the first day of each
quarter. These loans, evidenced by promissory notes, are classified as a
reduction to stockholders equity in the accompanying balance sheet at June 30,
1997.

12. SUBSEQUENT EVENTS

Prior to the consummation of the Company's initial public offering, the
Company will amend and restate its certificate of incorporation and effect a
recapitalization, pursuant to which each share of common stock and Class A
common stock of the Company outstanding immediately prior to the
recapitalization will be converted into shares of Class A common stock.

In connection with the proposed initial public offering, the Company has
received from its lender a commitment letter for a new $150 million unsecured
revolving credit facility pending successful completion of the public offering.

F-16
<PAGE> 86

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table sets forth certain financial data of the Company for
each thirteen week period. The financial data for each of these quarters is
unaudited but includes all adjustments, consisting of only normal recurring
adjustments, which the Company believes to be necessary for a fair presentation.
These operating results, however, are not necessarily indicative of results for
any future period.

<TABLE>
<CAPTION>
NINE-MONTH
PERIOD ENDED
DECEMBER 31, MARCH 31, JUNE 30, JUNE 30,
1996 1997 1997 1997
------------ --------- -------- ------------
(000'S OMITTED EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues.......................................... $29,547 $32,117 $31,952 $93,616
Gross profit...................................... 8,398 8,388 9,009 25,795
Operating profit.................................. 3,252 4,376 5,100 12,728
Income (loss) before income tax and extraordinary
loss............................................ 700 1,620 2,608 4,928
Net income (loss)................................. 432 1,005 1,613 3,050
Earnings per share................................
</TABLE>

<TABLE>
<CAPTION>
NINE-MONTH
FISCAL PERIOD
ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1996 1996
--------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues......................................... $24,975 $32,464 $34,635 $92,074
Gross profit..................................... 5,518 8,474 9,527 23,519
Operating profit................................. 1,754 789 1,373 3,916
Income (loss) before income tax and extraordinary
loss........................................... (867) (1,873) (1,367) (4,107)
Net income (loss)................................ (2,177) (1,150) (871) (4,198)
Earnings per share...............................
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues.......................... $18,718 $21,676 $23,434 $29,075 $92,903
Gross profit...................... 2,953 4,216 3,418 6,400 16,987
Operating profit.................. 1,200 2,384 1,299 3,871 8,754
Income (loss) before income tax
and extraordinary loss.......... (544) 597 (431) 1,124 746
Net income (loss)................. (337) 373 (267) 707 476
Earnings per share................
</TABLE>

F-17
<PAGE> 87

AIPC PASTA PRODUCTION FACILITIES

[Photographs of the equipment contained in the Company's pasta production
facilities.]

<PAGE> 88

AIPC LOGO
<PAGE> 89
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.

AIPC LOGO
[ALTERNATE INTERNATIONAL COVER PAGE]
PROSPECTUS (Subject to Completion)

Issued September , 1997

American Italian Pasta Company

CLASS A COMMON STOCK
------------------------

THE COMPANY HAS TWO CLASSES OF AUTHORIZED COMMON STOCK CONSISTING OF THE CLASS A
COMMON STOCK OFFERED HEREBY AND CLASS B COMMON STOCK. SEE "DESCRIPTION OF
CAPITAL STOCK." HOLDERS OF CLASS A COMMON STOCK ARE ENTITLED TO ONE VOTE PER
SHARE ON EACH MATTER SUBMITTED TO A VOTE OF STOCKHOLDERS. THE CLASS B COMMON
STOCK IS NON-VOTING EXCEPT UNDER CERTAIN LIMITED CIRCUMSTANCES AND AS REQUIRED
BY LAW. ALL HOLDERS OF COMMON STOCK ARE ENTITLED TO RECEIVE SUCH DIVIDENDS AND
DISTRIBUTIONS, IF ANY, AS MAY BE DECLARED FROM TIME TO TIME BY THE BOARD OF
DIRECTORS.
------------------------

APPLICATION HAS BEEN MADE FOR LISTING OF THE CLASS A COMMON STOCK ON THE NEW
YORK STOCK EXCHANGE UNDER THE SYMBOL "PLB."
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------

PRICE $ A SHARE
------------------------

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2) SELLING STOCKHOLDER
-------- -------------- ----------- -------------------
<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
Total(3)....................... $ $ $ $
</TABLE>

- ------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company and the Selling Stockholder have granted to the U.S.
Underwriters an option, exercisable within 30 days of the date hereof, to
purchase up to an aggregate of additional Shares of Class A Common
Stock at the Price to Public less Underwriting Discounts and Commissions,
for the purpose of covering over-allotments, if any. If the U.S.
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discounts and Commissions, Proceeds to Company and Proceeds
to Selling Stockholder will be $ , $ , $ , and
$ , respectively. See "Underwriters."
------------------------

MORGAN STANLEY DEAN WITTER
ALEX. BROWN & SONS
INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
GEORGE K. BAUM & COMPANY

, 1997

<PAGE> 90

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses (other than underwriting
discounts and commissions) expected to be incurred in connection with the
Offering described in this Amendment to Registration Statement.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 34,849
NASD Examination Fee........................................ 12,000
New York Stock Exchange Listing Fee......................... *
Accounting Fees and Expenses................................ *
Printing and Engraving Expenses............................. *
Legal Fees and Expenses..................................... *
Blue Sky Fees and Expenses.................................. *
Transfer Agent and Registrar Fees and Expenses.............. *
Miscellaneous............................................... *
----------
Total.................................................. $ *
==========
</TABLE>

- -------------------------
* To be completed by amendment.

The foregoing items, except for the Securities and Exchange Commission,
NASD and New York Stock Exchange fees, are estimated. All expenses will be borne
by the Company.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law ("DGCL"), empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
other enterprise, 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. Similar indemnity is
authorized for such persons against expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement of
any such threatened, pending or completed action or suit by or in the right of
the corporation if such person 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
provided further that (unless a court of competent jurisdiction otherwise
provides) such person shall not have been adjudged liable to the corporation.
Any such indemnification may be made only as authorized in each specific case
upon a determination by the stockholders or disinterested directors or by
independent legal counsel in a written opinion that indemnification is proper
because the indemnitee has met the applicable standard of conduct. The Charter
and By-laws of the Company provide that directors and officers shall be
indemnified as described above in this paragraph to the fullest extent permitted
by the DGCL; provided, however, that any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person shall be
indemnified only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Company. The Charter and By-laws will permit the board
of directors to authorize the Company to purchase and obtain insurance against
any liability asserted against any director, officer, employee or agent of the
Company arising out of his or her capacity as such. Reference is made to Article
V of the Company's Charter filed as Exhibit 3.1 hereto and to Article VI of the
Company's By-laws filed as Exhibit 3.2 hereto.

II-1
<PAGE> 91

As permitted by the DGCL, 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 as a director, except (i) for a
breach of the director's duty of loyalty to the Company 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
(relating to the declaration of dividends and purchase or redemption of shares
in violation of the DGCL), or (iv) for any transaction from which the director
derived an improper personal benefit.

The Underwriting Agreement, filed as Exhibit 1.1 to this Registration
Statement, provides for indemnification by the Underwriters of the Registrant's
directors, its officers who signed the Registration Statement and its
controlling persons and by the Registrant of the Underwriters, directors and
their controlling persons against certain liabilities, including liabilities
under the Securities Act, under certain circumstances. Reference is also made to
the Amended and Restated Stockholders Agreement filed as Exhibit 10.9 hereto,
for a description of certain other indemnification arrangements relating to
directors and officers of the Company.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In the three years preceding the filing of this Registration Statement, the
Company has issued the following securities that were not registered under the
Securities Act:

(a) On January 14, 1994, the Company issued to Horst W. Schroeder 505
Shares of Old Common Stock (as defined under "Description of Capital
Stock -- General" in the Prospectus) for an aggregate purchase price of
$15,236, or $30.17 per share, in lieu of cash compensation under a
consulting agreement between HWS Associates, Inc., an entity owned by
Mr. Schroeder, and the Company (the "Schroeder Consulting Agreement").

(b) On March 8, 1995, the Company issued to Mr. Schroeder 3,490 shares of
Old Common Stock for an aggregate purchase price of $105,293, or $30.17
per share, in lieu of cash compensation under the Schroeder Consulting
Agreement.

(c) On December 28, 1995, the Company issued to Mr. Schroeder 1,910 shares
of Old Common Stock for a purchase price of $57,625, or $30.17 per
share, in lieu of cash compensation under the Schroeder Consulting
Agreement.

(d) On April 4, 1996, the Company issued to Mr. Schroeder 1,098 shares of
Old Common Stock for a purchase price of $33,127, or $30.17 per share,
in lieu of cash compensation under the Schroeder Consulting Agreement.

Each of the sales of securities referenced in paragraphs (a)-(d) above were
made to Mr. Schroeder, Chairman of the Board of Directors, for investment
purposes, a restrictive legend was included on the stock certificates, and no
underwriters were involved. All of such sales were made in reliance upon an
exemption from the registration requirements of the Securities Act set forth in
Section 4(2) thereof.

(e) On April 13, 1995 the Company issued an aggregate of 3,315 shares of
Old Common Stock to certain of the Company's then-executive officers,
including Timothy S. Webster, David E. Watson, Norman F. Abreo, David
B. Potter and Darrel Bailey, for an aggregate purchase price of
$100,014, or $30.17 per share. These shares were purchased with funds
loaned by the Company evidenced by promissory notes made payable to the
Company over a three year period with interest at the then applicable
federal rate.

(f) On July 7, 1995, the Company issued to JSS Management Co. Ltd., of
which Mr. Schlindwein, a director of the Company, and his wife are the
general partner and limited partner, respectively, 3,314 shares of Old
Class A Common Stock (as defined under "Description of Capital Stock --
General" in the Prospectus) for a purchase price of $99,983, or $30.17
per share.

(g) On April 15, 1997, the Company issued an aggregate of 517,695 shares of
Old Class A Common Stock at a purchase price of $43.06 per share,
aggregating $22,291,947, to all but one of the then-current
stockholders of the Company and several members of the Company's
management team

II-2
<PAGE> 92

(the "1997 Private Equity Financing"), all of whom are officers, directors and
senior managers or a spouse thereof. In particular, the Company issued 418,021
shares to the MSCP Funds (as defined in the Prospectus), 69,670 shares to
affiliated investment funds of George K. Baum & Company, an aggregate of
8,000 shares to a trust of which Mr. Schroeder is the trustee and
members of his family are the beneficiaries, an aggregate of 4,645
shares to Mr. Schlindwein, his wife and JSS Management Co. Ltd., an
aggregate of 3,301 shares to Mr. Webster and trusts for the benefit of
members of his family, 6,933 shares to David E. Watson, 847 shares to
Norman F. Abreo and 2,124 shares to David P. Potter.

In each of the sales of securities referenced in paragraphs (e)-(g) above,
the purchasers made representations as to their investment intent, a restrictive
legend was included on the stock certificates, and no underwriters were
involved. All of such sales were made in reliance upon an exemption from the
registration requirements of the Securities Act set forth in Section 4(2)
thereof.

(h) On June 24, 1997, the Company issued 5,088 shares of Old Class A Common
Stock to the American Italian Pasta Company Retirement Savings Plan
pursuant to an exemption from registration requirements set forth in
Section 3(a)(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBIT INDEX

The exhibit index is set forth on page II-5 of this Amendment to
Registration Statement and is hereby incorporated herein by reference.

(B) FINANCIAL STATEMENT SCHEDULES

No financial statement schedules are filed as part of this Amendment to
Registration Statement for the reason that they are not required or are not
applicable, or the required information is shown in the Financial Statements or
Notes thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, 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, 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.

(3) It will provide to the Underwriters at the closing specified in
the underwriting agreements certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.

II-3
<PAGE> 93

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Excelsior
Springs, State of Missouri, as of the 12th day of September, 1997.

AMERICAN ITALIAN PASTA COMPANY

By: /s/ TIMOTHY S. WEBSTER
------------------------------------
Timothy S. Webster
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<C> <S> <C>
* Chairman of the Board of Directors September 12, 1997
- ---------------------------------------
Horst W. Schroeder

/s/ TIMOTHY S. WEBSTER President, Chief Executive Officer and September 12, 1997
- --------------------------------------- Director (Principal Executive Officer)
Timothy S. Webster

* Executive Vice President and Chief September 12, 1997
- --------------------------------------- Financial Officer, Treasurer and
David E. Watson Secretary (Principal Financial and
Accounting Officer)

* Director September 12, 1997
- ---------------------------------------
Jonathan E. Baum

* Director September 12, 1997
- ---------------------------------------
David Y. Howe

* Director September 12, 1997
- ---------------------------------------
Robert H. Niehaus

* Director September 12, 1997
- ---------------------------------------
Amy S. Rosen

* Director September 12, 1997
- ---------------------------------------
James A. Schlindwein

* Director September 12, 1997
- ---------------------------------------
Lawrence B. Sorrel

* Director September 12, 1997
- ---------------------------------------
Richard C. Thompson
</TABLE>

*By: /s/ TIMOTHY S. WEBSTER
---------------------------------
Timothy S. Webster
Attorney-in-Fact

II-4
<PAGE> 94

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>

1.1* Form of Underwriting Agreement
3.1** Form of Amended and Restated Certificate of Incorporation of
the Company
3.2** Form of Amended and Restated By-Laws of the Company
4.1* Form of specimen certificate representing the Company's
Class A Common Stock
4.2* Form of specimen certificate representing the Company's
Class B Common Stock
5.1* Opinion of Sonnenschein Nath & Rosenthal
8.1 Opinion of Sonnenschein Nath & Rosenthal with respect to
certain tax matters
10.1** Credit Agreement among the Company, various banks named
therein, Bankers Trust Company and Morgan Stanley Senior
Funding, Inc. dated as of October 30, 1992, as amended and
restated as of April 11, 1997
10.2**+ Manufacturing and Distribution Agreement dated as of April
15, 1997 between CPC International Inc. and the Company
10.3**+ Amended and Restated Supply Agreement dated October 29,
1992, as amended July 1, 1997, between the Company and Sysco
Corporation
10.4** Warehouse Lease dated May 23, 1995 between the Company and
Lanter Company
10.5* Employment Agreement dated , 1997 between the
Company and Timothy S. Webster
10.6* Employment Agreement dated , 1997 between the
Company and Horst W. Schroeder
10.7* Employment Agreement dated , 1997 between the
Company and David E. Watson
10.8* Employment Agreement dated , 1997 between the
Company and Norman F. Abreo
10.9 Form of Amended and Restated Stockholders Agreement dated
, 1997
10.10** American Italian Pasta Company 1992 Stock Option Plan
10.11** American Italian Pasta Company 1993 Non-Qualified Stock
Option Plan
10.12 1996 Salaried Bonus Plan
10.13* 1997 Equity Incentive Plan
23.1 Consent of Ernst & Young LLP
23.2* Consent of Sonnenschein Nath & Rosenthal (to be included in
Exhibit 5.1 and Exhibit 8.1)
24.1** Powers of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>

- -------------------------
* To be filed by amendment
** Previously filed
+ Confidential treatment has been requested for portions of this document. The
redacted material has been filed separately with the Commission pursuant to a
pending application for confidential treatment.

II-5

<PAGE> 1

EXHIBIT 8.1
-----------

September ___, 1997

American Italian Pasta Company
1000 Italian Way
Excelsior Springs, Missouri 64024

Ladies and Gentlemen:

We have acted as special counsel for American Italian Pasta Company, a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-1 (the "Registration Statement") filed by the Company with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the issuance by the
Company of shares of Class A Convertible Common Stock, $.001 par value per
share.

We have examined the Registration Statement which has been filed with the
Commission. In addition, we have examined, and have relied as to matters of
fact upon, the originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements, documents and other
instruments and such certificates or comparable documents of public officials
and of officers and representatives of the Company, and have made such other
and further investigations, as we have deemed relevant and necessary as a basis
for the opinion hereinafter set forth.

In addition, we have assumed the genuineness of all signatures, the legal
capacity of natural persons, the authenticity of all documents submitted to us
as originals and the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such latter documents.

Based upon the foregoing, and subject to the qualifications and limitations
stated herein, we are of the opinion that the statements made in the
Registration Statement under the caption "Certain United States Federal Income
Tax Considerations For Non-U.S. Holders" insofar as they purport to constitute
summaries of matters of United States federal income tax law and regulations or
legal conclusions with respect thereto, constitute accurate summaries of the
matters described therein in all material respects.

We do not express any opinion herein concerning any law other than the
federal law of the United States. This opinion is rendered to you solely in
connection with the above-described transaction and may not be relied upon for
any other purpose without our prior written consent.

<PAGE> 2

American Italian Pasta Company
September ___, 1997
Page 2

We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus included therein.

Very truly yours,

SONNENSCHEIN NATH & ROSENTHAL

<PAGE> 1
EXHIBIT 10.9

AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT

September __, 1997

among

American Italian Pasta Company

and

Certain of its Shareholders
<PAGE> 2

THIS AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT dated as of
September __, 1997 ("Agreement") is by and among American Italian Pasta
Company, a Delaware corporation (the "Company"), and each of the other
signatories listed on the signature pages hereof.

W I T N E S S E T H:

WHEREAS, the Company, The Morgan Stanley Leveraged Equity Fund II,
L.P., a Delaware limited partnership ("MSLEF II"), Morgan Stanley Capital
Partners III, L.P. ("MSCP"), Morgan Stanley Capital Investors, L.P. and MSCP
III 892 Investors, L.P., each a Delaware limited partnership (collectively, the
"MSCP Funds" and, together with MSLEF II, collectively, the "MS Shareholders"),
and each of the other signatories hereto are parties to a Shareholders
Agreement dated as of October 30, 1992 (the "Original Agreement"), as amended
by Amendment No. 1 to Shareholders Agreement dated as of March 8, 1995,
Amendment No. 2 to Shareholders Agreement dated as of April 13, 1995, and
Amendment No. 3 to Shareholders Agreement dated as of April 15, 1997 (as so
amended, the "Amended Original Agreement");

WHEREAS, the Shareholders (as defined below) presently own the number
of shares of Class A common stock, par value $.01 per share (the "Old Class A
Common Stock"), and/or shares of common stock, no par value per share (the "Old
Common Stock" and with the Old Class A Common Stock collectively, the "Old
Stock"), of the Company set forth opposite their respective names on Exhibit A
attached to this Agreement;

WHEREAS, the Company expects to consummate its IPO (as defined herein)
shortly following the date hereof;

WHEREAS, in connection with its IPO, the Company will amend and
restate its Certificate of Incorporation and effect a recapitalization pursuant
to which (i) each outstanding share of Old Class A Common Stock and Old Common
Stock will be converted into one share of the Class A Convertible Common Stock,
par value $.001 per share, of the Company (the "Class A Common Stock"); (ii)
the MS Shareholders will convert certain of their shares of Class A Common
Stock into shares of the Class B Convertible Non-Voting Common Stock, par value
$.001 per share, of the Company (the "Class B Common Stock" and, together with
the Class A Common Stock, the "Common Stock"); and (iii) each outstanding share
of Common Stock will be split into ___ shares;

WHEREAS, in connection with the IPO, the Company and the Shareholders
wish to further amend and restate in its entirety the Amended Original
Agreement; and

WHEREAS, the execution of this Agreement constitutes the consent of
the Company and each of the Shareholders to the amendment and restatement of
the Amended Original Agreement effective immediately after the IPO Closing (as
defined below), thereby binding all the Shareholders to this Agreement in
accordance with Section 7.4 of the Amended Original Agreement;

<PAGE> 3

NOW, THEREFORE, in consideration of the mutual agreements and
covenants hereinafter set forth, the parties hereto hereby agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Definitions. (a) The following terms, as used in this
Agreement, have the following meanings:

"Adverse Person" means, as determined in the sole discretion of the
Board, (i) any transferee that intends to cause, or is reasonably likely to
cause, or whose ownership of Common Stock would cause an adverse impact on the
business, interests or prospects of the Company or any Shareholder or (ii) any
transferee that is a competitor or supplier of the Company or an Affiliate of
any such competitor or supplier.

"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person, provided that no shareholder of the Company shall be deemed an
Affiliate of any other shareholder solely by reason of any investment in the
Company. For the purpose of this definition, the term "control" (including
with correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.

"Affiliated Employee Benefit Trust" means any trust that is a
successor to the assets held by a trust established under an employee benefit
plan subject to ERISA or any other trust established directly or indirectly
under such plan or any other such plan having the same sponsor.

"Allotment" means (i) with respect to calendar year 1997, 28,323
shares of Common Stock; (ii) with respect to calendar year 1998, 35,000 shares
of Common Stock minus the number of shares of Common Stock transferred by
Schroeder in 1997; (iii) with respect to calendar year 1999, 58,494 shares of
Common Stock minus the aggregate number of shares of Common Stock transferred
by Schroeder in 1997 and 1998 and (iv) with respect to the calendar year 2000,
79,544 shares of Common Stock, minus the aggregate number of shares of Common
Stock transferred by Schroeder in 1997, 1998 and 1999.

"Baum" means George K. Baum Group, Inc, George K. Baum Capital
Partners, L.P., George K. Baum Employee Equity Fund, L.P., or Excelsior
Investors, L.L.C.

"Baum Affiliate" means any Person included within the definition of
"Baum", or any Affiliate of such Person.

"Board" means the board of directors of the Company.

-2-
<PAGE> 4

"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.

"Business Plan" has the meaning specified in Section 2.5(b) of this
Agreement.

"Bylaws" means the bylaws of the Company, as amended from time to
time.

"Certificate of Incorporation" means the Certificate of Incorporation
of the Company, as amended from time to time.

"Chairman" means the chairman of the board of directors of the
Company.

"Chief Executive Officer" means the chief executive officer of the
Company.

"Citicorp" means Citicorp Venture Capital, Ltd. or CCT Partners III,
L.P.

"Class A Common Stock" has the meaning specified in the recitals to
this Agreement.

"Class B Common Stock" has the meaning specified in the recitals to
this Agreement.

"Code" means the Internal Revenue Code of 1986, as amended.

"Common Stock" has the meaning specified in the recitals to this
Agreement.

"Confidential Information" has the meaning specified in Section 6.1(b)
of this Agreement.

"Director" means any member of the Board.

"Disadvantageous Condition" has the meaning specified in Section
5.1(a) of this Agreement.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Existing Shareholders" means Thompson and Citicorp.

"Fully Diluted" means, with respect to Common Stock, all outstanding
shares of Common Stock, shares of Common Stock issuable in respect of
securities convertible into or exchangeable for Common Stock, and shares of
Common Stock issuable upon exercise of stock appreciation rights or options,
warrants and other rights to purchase or subscribe for Common Stock or
securities convertible into or exchangeable for Common Stock.

"IPO" means the Company's first Underwritten Offering.

-3-
<PAGE> 5

"IPO Closing" means the consummation of the IPO.

"IPO Closing Date" means the date of the IPO Closing.

"Losses" means any losses, claims, damages, liabilities or expenses.

"Major Acquisition" means strategic acquisition of, or investment in
the assets or a business of, another Person, which acquisition or investment
has a fair market value of at least $30 million.

"Maximum Offering Size" has the meaning specified in Section 5.1(f) of
this Agreement.

"Minority Selling Shareholders" means, with respect to any
registration of Registrable Stock under the Securities Act, the Minority
Shareholders who exercise their rights under Sections 5.1(a), 5.1(b) or 5.2 of
this Agreement to have Registrable Stock included in such registration.

"Minority Shareholders" means the Shareholders and their Permitted
Transferees, other than the MS Shareholders and the Permitted Transferees of
the MS Shareholders.

"MS Percentage" means, as of any date, a fraction, the numerator of
which equals the aggregate number of shares of Common Stock transferred prior
to such date by the MS Shareholders and their Permitted Transferees and the
denominator of which equals the number of shares of Common Stock owned on the
date hereof by the MS Shareholders and their Permitted Transferees.

"MS Selling Shareholders" means, with respect to any registration of
Registrable Stock under the Securities Act, the MS Shareholders who exercise
their rights under Sections 5.1(a), 5.1(b) or 5.2 of this Agreement to have
Registrable Stock included in such registration.

"MS Shareholder" has the meaning specified in the recitals to this
Agreement.

"Old Stock" has the meaning specified in the recitals to this
Agreement.

"Partial Subsidiary" means any Subsidiary of the Company of which less
than 100% of the capital stock is directly or indirectly owned by the Company.

"Permitted Transferee" means:

(i) in the case of any MS Shareholder, (w) any general or
limited partner of any MS Shareholder (a "MS Partner"), and any
corporation, partnership, Affiliated Employee Benefit Trust or other
entity which is an Affiliate of any MS Partner (collectively, the "MS
Affiliates"), (x) any managing director, general partner, director,
limited partner, officer or employee of a MS Shareholder or a MS
Affiliate (collectively, "MS Associates"), (y) the heirs, executors,
administrators, testamentary trustees, legatees or

-4-
<PAGE> 6

beneficiaries of any MS Associate and (z) a trust, the
beneficiaries of which, or a corporation, limited liability company or
partnership, the shareholders, members or general or limited partners
of which, include only MS Shareholders, MS Affiliates, MS Associates,
their spouses or their lineal descendants;

(ii) in the case of any Minority Shareholder who is a natural
person, (x) a Person to whom Shares are transferred from such Minority
Shareholder (A) by will or the laws of descent and distribution or (B)
by gift without consideration of any kind; provided that such
transferee is the lineal descendant or spouse of a Person who is a
signatory to this Agreement, or (y) a trust, each primary beneficiary
of which is the spouse or lineal descendant of such Minority
Shareholder or his Permitted Transferees under clause (x) above;

(iii) in the case of any Shareholder, the Company;

(iv) in the case of Baum, [any Baum Affiliate, and, effective
after December 31, 1998, (x) any partner or member of such Baum
Affiliate; provided that at no time shall the number of Shares
transferred pursuant to this clause (x), when added to the aggregate
number of Shares transferred pursuant to this clause (x) or sold by
such Baum Affiliate during the preceding 90 days, exceed the maximum
number of shares of Common Stock that could then be sold by such Baum
Affiliate in accordance with thevolume limitations of Rule 144(e) (or
any successor provision) under the Securities Act, or (y) any partner
or member any Baum Affiliate in connection with any distribution of
all or substantially all of the net assets such Baum Affiliate to its
partners or members, as applicable];

(v) in the case of Excelsior Investors, L.L.C., any Person
who is a member thereof on the date of this Agreement;

(vi) in the case of Citicorp, a Person that is an Affiliate
of Citicorp, it being understood that for purposes of this provision,
in the case of Citicorp or its Permitted Transferees, a trust
established under ERISA which is an Affiliate of Citicorp or an
Affiliated Employee Benefit Trust shall be deemed an Affiliate of
Citicorp or its Permitted Transferees;

(vii) any Person with respect to which the Board, in its sole
discretion, shall have adopted a resolution (whether before or after
the date of this Agreement) stating that the Board has no objection if
a transfer of Shares is made to such Person; provided that, if the MS
Shareholders shall at the time of the proposed transfer beneficially
own, in the aggregate, shares of Common Stock representing at least
10% of the shares of Common Stock then outstanding (on a Fully Diluted
basis), the MS Shareholders shall in their sole discretion have
approved such resolution; or

(viii) in the case of JSS Management Company, Ltd., (x) James
A. Schlindwein, or (y) any general or limited partner of JSS who is a
spouse or lineal descendant of James A. Schlindwein.

-5-
<PAGE> 7

"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

"Principal Subsidiary" has the meaning specified in Section 2.1(a) of
this Agreement.

"Registrable Stock" means any Shares until the first to occur of (i) a
registration statement covering such Shares has been declared effective by the
SEC and such Shares have been disposed of pursuant to such effective
registration statement, (ii) such Shares have been sold in compliance with all
of the applicable conditions of Rule 144, (iii) such shares are eligible to be
sold pursuant to Rule 144(k), or (iv) such Shares have otherwise been
transferred, the Company has delivered a new certificate or certificates for
such Shares not bearing the legend required pursuant to this Agreement and such
Shares may be resold without registration under the Securities Act.

"Registration Expenses" means (i) all SEC, stock exchange or NASDAQ
registration and filing fees, (ii) fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Shares), (iii)
printing expenses, (iv) internal expenses of the Company (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), (v) reasonable fees and disbursements of counsel
for the Company and customary fees and expenses for independent certified
public accountants retained by the Company (including any costs associated with
the delivery by independent certified public accountants of a comfort letter or
letters requested pursuant to Section 5.4(h) hereof), (vi) the reasonable fees
and expenses of any special experts retained by the Company in connection with
such registration, (vii) reasonable fees and expenses of no more than one
counsel for all of the Selling Shareholders, (viii) fees payable to the
National Association of Securities Dealers, Inc and (ix) fees and disbursements
of underwriters customarily paid by issuers or sellers of securities in
firm-commitment underwritings; provided, however, that the term "Registration
Expenses" shall not include any (w) underwriting or brokerage fees, discounts
or commissions, (x) transfer taxes, (y) out-of-pocket expenses of the Selling
Shareholders (or of the agents who manage their accounts) or (z) any fees and
expenses of underwriters' counsel (other than pursuant to clause (ii) of this
paragraph); provided, further, that the counsel for the Selling Shareholders
contemplated by clause (vii) of this definition shall be selected by the
Selling Shareholders beneficially owning a majority of the Shares to be sold
for the account of all Selling Shareholders, but in any event shall be
reasonably acceptable to the Company.

"registration statement" means a registration statement under the
Securities Act.

"Representatives" has the meaning specified in Section 6.1(b) of this
Agreement.

"Rule 144" means Rule 144 (or any successor provision) under the
Securities Act.

"SEC" means the Securities and Exchange Commission.

-6-
<PAGE> 8

"Securities Act" means the Securities Act of 1933, as amended.

"Selling Shareholders" means the Minority Selling Shareholders and the
MS Selling Shareholders.

"Schroeder" means Horst W. Schroeder and each of his Permitted
Transferees in respect of Shares transferred before or after the date hereof.

"Schroeder Percentage" means, as of any date, a fraction, the
numerator of which shall equal the aggregate number of shares of Common Stock
transferred prior to such date by Schroeder and the denominator of which shall
equal the number of shares of Common Stock owned on the date hereof by
Schroeder.

"Shareholder" means each Person (other than the Company) who shall be
a party to this Agreement, whether in connection with the execution and
delivery hereof as of the date hereof, pursuant to Section 7.3 or otherwise, so
long as such Person shall beneficially own any Shares.

"Shares" means, with respect to a Shareholder, all shares of Common
Stock issued upon the conversion of shares of Old Stock owned by such
Shareholder on the date hereof.

"Significant Action" means:

(i) the appointment or removal, with or without cause, of the
Chairman of the Board;

(ii) any merger, consolidation or other similar business
combination to which the Company or any of its Subsidiaries is a
party; except for any such merger, consolidation or business
combination which both (x) involves a Subsidiary of the Company as a
party and (y) would be a Major Acquisition but for the failure of such
merger, consolidation or business combination, as applicable, to equal
or exceed the monetary threshold specified in the definition of "Major
Acquisition".

(iii) any sale, lease, exchange, transfer or other
disposition, directly or indirectly, in a single transaction or series
of related transactions, of a majority of the tangible assets of the
Company and its Subsidiaries taken as a whole;

(iv) except for (A) the exercise or grant of stock options,
restricted stock, phantom stock, stock appreciation rights or similar
rights or interests pursuant to employee or director benefit plans of
the Company or any of its Subsidiaries or (B) the conversion, exchange
or exercise of any securities outstanding on the date hereof that are
convertible into, exchangeable for or exercisable for capital stock of
the Company, any increase or reduction in the authorized capital of
the Company or any Partial Subsidiary, or any recapitalization of the
Company or any Partial Subsidiary, or the creation of any additional
class of capital stock of the Company or any Partial Subsidiary, or
the sale, issuance, distribution, exchange, purchase or redemption of
shares of capital stock of the

-7-
<PAGE> 9

Company or any Partial Subsidiary, or phantom equity, stock
appreciation and similar interests and rights (or any securities
convertible into or exchangeable for capital stock of the Company or
any Partial Subsidiary or phantom equity, stock appreciation and
similar interests and rights) or any rights, warrants or options to
purchase, subscribe for or acquire any such capital stock or
convertible or exchangeable securities or phantom equity, stock
appreciation and similar interests and rights of the Company or any
Partial Subsidiary;

(v) any amendment, modification or repeal of any provision
of the certificate of incorporation or bylaws of the Company or any of
its Subsidiaries or any change in the jurisdiction of incorporation of
the Company or any of its Subsidiaries;

(vi) the approval of any dissolution or plan of liquidation
of the Company or any of its Subsidiaries;

(vii) the authorization of any general assignment by the
Company or any of its Subsidiaries for the benefit of creditors or of
the institution by the Company or any of its Subsidiaries of any
proceeding to adjudicate it as bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
dissolution, protection, relief, or composition of the Company or any
of its Subsidiaries or their respective debts under any existing or
future law of any jurisdiction relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee, or other similar
official for the Company, any of its Subsidiaries or for any
substantial part of their respective properties;

(viii) the declaration or making of any provision for payment
of, or the setting aside of assets with respect to, any dividend or
other distribution (in cash, securities or other property) by the
Company or any Partial Subsidiary with respect to any capital stock of
the Company or Partial Subsidiary or any redemption or repurchase of
any such capital stock, except for (A) dividends on Common Stock
payable in the form of Common Stock and (B) repurchases of capital
stock of the Company or any Partial Subsidiary pursuant to the terms
of employee or director benefit plans or employment agreements;

(ix) the creation, issuance, assumption, guarantee or
incurrence by the Company in any one transaction or series of related
transactions of any indebtedness or the making of any advance or loan
to any Person, that increases the aggregate amount of indebtedness,
loans, advances and guarantees of the Company to an amount that is at
least $30 million greater than the sum of (A) aggregate amount of such
indebtedness, loans, advances and guarantees outstanding on the date
of this Agreement and (B) the aggregate amount of availability
remaining under all credit facilities of the Company as of the date of
this Agreement;

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<PAGE> 10

(x) the termination of the engagement of Ernst & Young LLP as
the independent auditors for the Company and its Subsidiaries or the
selection of any other public accounting firm as the independent
auditors for the Company and its Subsidiaries;

(xi) any Major Acquisition;

(xii) any acquisition or construction of a new pasta
production facility by the Company or any of its Subsidiaries with an
aggregate cost of at least $30 million;

(xiii) any grant or award to any one Person under any stock
option, equity incentive or other benefit plan of the Company that
involves or relates to more than [5,000] shares of Common
Stock[confirm that 5,000 share amount reflects a pre-split concept];

(xiv) any adoption of a shareholder rights plan; or

(xv) any commitment to do any of the foregoing actions.

"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions are at the time
directly or indirectly owned by a company.

"Subsidiary Board" means the board of directors of any Principal
Subsidiary.

"Subsidiary Director" shall have the meaning set forth in Section
2.1(a) of this Agreement.

"Third Party" means a prospective purchaser of Shares in an
arm's-length transaction from a Shareholder where such purchaser is not a
Permitted Transferee of such Shareholder.

"Thompson" means Richard S. Thompson, Thompson Holdings, Inc.,
Thompson Holdings, L.P., and each of their respective Permitted Transferees in
respect of Shares transferred before or after the date hereof.

"transfer" has the meaning set forth in Section 3.1(a) of this
Agreement.

"Underwritten Offering" means a firm-commitment underwritten public
offering of Registrable Stock pursuant to an effective registration statement.

"Webster Allotment" means (i) with respect to fiscal year 1998, no
shares of Common Stock, (ii) with respect to fiscal year 1999, 15,000 shares of
Common Stock, (iii) with respect to fiscal year 2000, 30,000 shares of Common
Stock, minus the aggregate number of shares of Common Stock transferred by
Webster in fiscal year 1999, (iv) with respect to fiscal year 2001, 45,000
shares of Common stock, minus the aggregate number of shares of Common Stock
transferred by Webster in fiscal years 1999 and 2000 and (v) with respect to
fiscal year 2002,

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<PAGE> 11

60,000 shares of Common Stock, minus the aggregate number of shares of Common
Stock transferred by Webster in fiscal years 1999, 2000 and 2001.

(b) The term "MS Shareholder", to the extent an MS Shareholder
shall have transferred any of its Shares to one or more Permitted Transferees,
shall mean such MS Shareholder and such Permitted Transferees, taken together
and any right or action that may be taken at the election of such MS
Shareholder may be taken at the election of such MS Shareholder and all such
Permitted Transferees.

ARTICLE 2
CORPORATE GOVERNANCE

2.1 Composition of the Board. (a) The Board shall initially consist
of nine directors, to be nominated to the Board as follows:

(i) one Director nominee shall be the Chairman of the Board
(initially Horst W. Schroeder);

(ii) one Director nominee shall be the Chief Executive
Officer (initially Timothy S. Webster);

(iii) MSLEF II shall be entitled to designate (a) two
Director nominees for so long as it owns at least 25% of the
outstanding Common Stock (one of whom initially shall be Richard S.
Thompson) or (b) one Director nominee for so long as it owns at least
5% but less than 25% of the outstanding Shares;

(iv) MSCP shall be entitled to designate (a) two Director
nominees for so long as it owns at least 35% of the outstanding Common
Stock or (b) one Director nominee for so long as it owns at least 5%
but less than 35% of the outstanding Shares;

(v) If neither MSLEF II nor MSCP shall beneficially own at
least 5% of the outstanding Common Stock, then one of MSLEF II or MSCP
(as shall be determined by MSLEF II and MSCP in their sole discretion)
shall be entitled to designate one Director nominee for as long as the
MS Shareholders shall beneficially own, in the aggregate, at least 5%
of the outstanding Common Stock;

(vi) Citicorp shall be entitled to designate one Director
nominee for so long as it shall beneficially own at least 6.4% of the
outstanding Common Stock (on a Fully Diluted basis); and

(vii) The remaining Directors shall be nominated in the
manner provided for in the Bylaws; provided that at least two of such
Directors shall be independent Directors within the meaning of the
rules promulgated by the national securities exchange or national
market system on which the Common Stock is then listed or traded.

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<PAGE> 12

At their request, each of MSLEF and MSCP shall be entitled to
designate the same number of nominees to be elected as directors ("Subsidiary
Directors") of any Subsidiary or Subsidiaries of the Company (any such
Subsidiary so long as such a designation is effect, a "Principal Subsidiary")
as shall from time to time be applicable pursuant to clauses (iii) through (v)
above. So long as Subsidiary Directors designated by MSLEF or MSCP shall
continue to serve on a Subsidiary Board pursuant to such designation, such
Subsidiary Board shall consist of nine directors, subject to adjustment from
time to time pursuant to Section 2.1(b).

If and for so long as MSLEF or MSCP shall have exercised their right
pursuant to this Section 2.1 to designate one or more Subsidiary Director
nominees, the Chairman of the Board and the Chief Executive Officer shall each
have the right to designate one Subsidiary Director nominee.

(b) The size of the Board and any Subsidiary Board may not be
decreased, but may be increased in the manner set forth in the Bylaws or in the
bylaws of such Principal Subsidiary, as applicable. In the event of any such
increase, each of MSCP and MSLEF II shall have the right to designate an
additional number of Director nominees or Subsidiary Director nominees, as
applicable, pursuant to Section 2.1(a) hereof, so that the total number of
Director nominees or Subsidiary Director nominees, as applicable, permitted to
be designated by MSCP and MSLEF II shall represent the same percentages, as
nearly as may be, of the increased Board or the increased Subsidiary Board, as
applicable as may be designated by them pursuant to Section 2.1(a) hereof in
the case of a Board or a Subsidiary Board, as applicable, consisting of nine
members.

(c) In the event that the Board is classified such that Directors
serve staggered terms, then (i) the Director nominees designated by the MS
Shareholders shall be allocated among such classes of Directors in as equal
proportions as is practicable and (ii) at any meeting of the Company's
shareholders at which Directors are elected, the MS Shareholders shall have the
right to designate nominees for election at such meeting such that the number
of nominees so designated which, together with incumbent Directors who had
previously been nominated by the MS Shareholders, does not exceed the maximum
number of nominees for Director that the MS Shareholders may designate pursuant
to Section 2.1(a) or (b) hereof, as applicable.

(d) Each Shareholder then entitled to vote for the election of
Directors agrees (i) to vote at any special or annual meeting of the
shareholders of the Company at which Directors are to be elected or (ii) to
execute a written consent, as the case may be, so as to ensure that the Board
consists of the Director nominees designated in accordance with this Section
2.1. The Company agrees to vote, or execute a written consent, as applicable,
so as to ensure that each Subsidiary Board includes the Subsidiary Director
nominees designated in accordance with this Section 2.1.

(e) The Shareholders shall take all actions necessary so that,
notwithstanding any other provision of this Agreement, at no time persons who
are nominees of the MS Shareholders shall constitute more than one-half of the
Directors. The Company shall take all actions necessary so that,
notwithstanding any other provision of this Agreement, at no time persons who
are

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<PAGE> 13

nominees of the MS Shareholders shall constitute more than one-half of the
directors of any Principal Subsidiary.

2.2 Removal. Each Shareholder agrees that, if, at any time, it is
then entitled to vote for the removal of Directors, it (a) will not vote any of
its Shares in favor of the removal of any Director who shall have been
designated or nominated pursuant to Section 2.1 unless such removal shall be
for Cause or the Persons entitled to designate or nominate such Director shall
have consented to such removal in writing and (b) will, upon the written
request of an Person entitled to designate a Director pursuant to Section 2.1
hereof, take such action by vote or consent as may be necessary to remove or
replace such Director. The Company (i) will not vote any of its shares of the
capital stock of any Principal Subsidiary in favor of the removal of any
Subsidiary Director who shall have been designated or nominated pursuant to
Section 2.1 unless such removal shall be for Cause or the MS Shareholder
entitled to designate or nominate such Subsidiary Director shall have consented
to such removal in writing and (ii) will, upon the written request of the MS
Shareholder entitled to designate a Subsidiary Director pursuant to Section 2.1
hereof, take such action by vote or consent as may be necessary to remove or
replace such Subsidiary Director. Removal for "Cause" shall mean removal of a
Director or a Subsidiary Director, as applicable, because of such Director's or
Subsidiary Director's, as applicable, (v) willful and continued failure to
substantially perform his duties with the Company or Principal Subsidiary, as
applicable, in his position as a director, (w) willful conduct which is
significantly injurious to the Company and its Subsidiaries taken as a whole,
monetarily or otherwise, (x) conviction for, or guilty plea to, a felony or a
crime involving moral turpitude, (y) abuse of illegal drugs or other controlled
substances or habitual intoxication, or (z) willful breach of this Agreement.
Upon the written request of any Person entitled to designate a Director nominee
pursuant to Section 2.1 hereof, each Shareholder shall vote, or execute a
written consent, to remove or replace such Director. Upon the written request
of any MS Shareholder entitled to designate a Subsidiary Director nominee
pursuant to Section 2.1 hereof, the Company shall vote, or execute a written
consent, to remove or replace such Subsidiary Director nominee.

2.3 Vacancies. (a) If, as a result of death, disability,
retirement, resignation, removal (with or without Cause) or otherwise, there
shall exist or occur any vacancy of the Board or a Subsidiary Board:

(i) the Person entitled to designate the nomination of such
Director or Subsidiary Director, as applicable, whose death,
disability, retirement, resignation or removal resulted in such
vacancy may designate another individual nominee (the "Nominee") to be
appointed by the Board or such Subsidiary Board, as applicable, to
fill such capacity and serve as a Director or Subsidiary Director, as
applicable;

(ii) in the case of a vacancy on the Board, each Shareholder
then entitled to vote for the election of the Nominee as a Director
agrees that it will vote its shares, or execute a written consent, as
the case may be, in order to ensure that the Nominee be elected to the
Board; and

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<PAGE> 14

(iii) in the case of a vacancy on a Subsidiary Board, the
Company agrees that it will vote, or execute a written consent in
respect of, its shares of the capital stock of such Principal
Subsidiary in order to ensure that the Nominee be elected to such
Subsidiary Board.

(b) Any vacancy on the Board or any Subsidiary Board resulting from
the termination of the right of a Shareholder to designate a Director nominee
or Subsidiary Director nominee, as applicable, pursuant to Section 2.1 hereof
shall be filled in the manner set forth in the Bylaws or the bylaws of the
applicable Principal Subsidiary.

2.4 Meeting . The Board and any Subsidiary Board shall hold a
regularly scheduled meeting at least once every calendar quarter.

2.5 Action by Board. (a) A quorum of the Board or any Subsidiary
Board shall consist of a majority of the Directors or the Subsidiary Directors,
as applicable. All actions of the Board and any Subsidiary Board shall require
the affirmative vote of at least a majority of the Directors or the Subsidiary
Directors, as applicable, at a duly convened meeting of the Board or such
Subsidiary Board, as applicable, at which a quorum is present or the unanimous
written consent of the Board or such Subsidiary Board, as applicable; provided
that, in the event there is a vacancy on the Board or such Subsidiary Board, as
applicable and an individual has been nominated to fill such vacancy, the first
order of business shall be to fill such vacancy.

(b) The Chief Executive Officer shall submit to the Board, and obtain
its approval of, prior to the start of each fiscal year of the Company, a
business plan (the "Business Plan") setting forth the annual budget and
operating plan of the Company and its Subsidiaries for such fiscal year. The
Board shall receive monthly, quarterly and annual financial statements and
other appropriate reports concerning operations of the Company and its
Subsidiaries and other matters submitted to the Board.

(c) So long as the MS Shareholders shall beneficially own, in the
aggregate, shares of Common Stock representing at least 10% of the
then-outstanding shares of Common Stock, the Board and each Subsidiary Board
shall appoint to each committee of the Board or such Subsidiary Board, as
applicable, one Director or Subsidiary Director, as applicable, who has been
designated for service on such committee by the MS Shareholders. Each such
committee of the Board or such Subsidiary Board, as applicable, shall be
comprised of at least two Directors or Subsidiary Directors, as applicable,
except that the audit committee of the Board shall be comprised of at least
three Directors.

(d) So long as the MS Shareholders shall hold, in the aggregate,
shares of Common Stock representing at least 25% of the Common Stock then
outstanding on a Fully Diluted basis, the Company shall not, and shall cause
its Subsidiaries not to:

(i) take any Significant Action or any other action that
would constitute or result in the creation of any obligation
(contingent or otherwise) on the part of the Company

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<PAGE> 15

with respect to a Significant Action without the prior written
approval of such Significant Action or other action by the Board and
the MS Shareholders, or

(ii) appoint a new Chief Executive Officer or a new chief
financial officer of the Company, without the prior approval of Board,
which approval shall reflect the affirmative vote of at least one of
the directors designated by the MSLEF or MSCAP pursuant to Section 2.1
hereof.

2.6 Conflicting Charter or Bylaw Provisions. Each Shareholder
shall vote its Shares, and shall take all other actions necessary, to ensure
that the Company's Certificate of Incorporation and Bylaws facilitate and do
not at any time conflict with any provision of this Agreement.

ARTICLE 3
RESTRICTIONS ON TRANSFER

3.1 General. (a) Except as otherwise provided in Section 3.1(c) or
(d) below, no Minority Shareholder will before December 31, 1998, directly or
indirectly, offer, sell, assign, transfer, grant a participation in, pledge or
otherwise dispose of ("transfer") any Shares (or solicit any offers to buy or
otherwise acquire, or to take a pledge of any Shares), except as permitted by
Sections 3.3, 4.2 or 5.2(a) of this Agreement and in compliance with the
Securities Act.

(b) Thereafter, and subject to Section 3.1(c), the Minority
Shareholders may transfer Shares (i) in compliance with the Securities Act and
as permitted by Section 3.3 or 4.2 of this Agreement, (ii) in an Underwritten
Offering pursuant to Section 5.1 or 5.2, or in an open market sale pursuant to
Rule 144(f) or (iii) in the case of Thompson or Citicorp, in a private
transaction for cash subject to Section 4.1; provided that no transfer may be
made to an Adverse Person or to any Person that, together with its Affiliates,
would beneficially own in excess of 10% of the outstanding Common Stock as a
result of such transfer.

(c) Notwithstanding anything herein to the contrary, the aggregate
number of shares of Common Stock transferred by Schroeder during any calendar
year pursuant to Section 3.1(a) or 3.1(b) may not exceed the greater of (i) the
Allotment applicable to such calendar year and (ii) the number of shares of
Common Stock owned by Schroeder that, when added to the aggregate number of
shares of Common Stock previously transferred by Schroeder to other Persons,
would cause the Schroeder Percentage to equal the MS Percentage. The
provisions of this Section 3.1(c) will terminate on the earlier to occur of (i)
January 1, 2001, (ii) the date on which the MS Shareholders cease to own at
least 5% of the outstanding shares of Common Stock (calculated on a Fully
Diluted basis) or (iii) the termination of Horst W. Schroeder's employment by
the Company by reason of the Disability (as defined in the employment agreement
between Horst W. Schroeder and the Company as in effect from time to time) or
death of Horst W. Schroeder.

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<PAGE> 16

(d) Notwithstanding anything herein to the contrary, the aggregate
number of shares of Common Stock transferred by Webster during any fiscal year
pursuant to Section 3.1(b) (other than shares of Common Stock (i) transferred
to Permitted Transferees of Webster or (ii) that are transferred to the extent
that all of the proceeds of such transfer are used to purchase shares of Common
Stock upon the exercise of stock options granted to Webster) may not exceed the
Webster Allotment for such fiscal year. The provisions of this Section 3.1(d)
shall terminate on the earliest to occur of (i) the date prior to the third
anniversary of the IPO Closing Date on which the MS Shareholders cease to own
at least 5% of the outstanding shares of Common Stock (calculated on a Fully
Diluted basis), (ii) the date on or after the third anniversary of the IPO
Closing Date on which the MS Shareholders cease to own at least 10% of the
outstanding shares of Common Stock (calculated on a Fully Diluted basis), (iii)
the second anniversary of (x) the termination of employment of Timothy S.
Webster by the Company for Cause or (y) his resignation other than for Good
Reason (each, as defined in the Employment Agreement between Timothy S. Webster
and the Company), (iv) the first anniversary of (x) the termination of
employment of Timothy S. Webster by the Company other than for Cause or (y) his
resignation for Good Reason, (v) the Disability of Timothy S. Webster (as
defined in the Employment Agreement between Timothy S. Webster and the Company)
or the death of Timothy S. Webster or (vi) the first day of the Company's 2003
fiscal year.

(e) Notwithstanding anything herein to the contrary [(other than
clause (ii) of the definition of "Permitted Transferee"], and except as may be
permitted on a case-by-case basis by the compensation (or equivalent) committee
of the Board in its absolute discretion, no individual (other than Horst W.
Schroeder or Timothy S. Webster) who is, or on the date of his acquisition of
shares of Old Stock was, an officer or employee of the Company may transfer any
of his Shares before the second anniversary of this Agreement.

(f) Notwithstanding anything herein to the contrary, but subject to
the approval of managing underwriters of the IPO and of the Company in their
discretion, Thompson may sell up to 50% of his Shares in the IPO. This Section
3.1(f) shall be effective from and after the date of this Agreement.

3.2 Legend on Share Certificates. (a) In addition to any other
legend that may be required, each certificate for Shares that is issued to any
Shareholder shall bear a legend in substantially the following form:

"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY
IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE AMENDED AND RESTATED SHAREHOLDERS AGREEMENT DATED
AS OF SEPTEMBER __, 1997, COPIES OF WHICH MAY BE OBTAINED UPON
REQUEST FROM AMERICAN ITALIAN PASTA COMPANY OR ANY SUCCESSOR
THERETO."

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<PAGE> 17

(b) If any shares of Common Stock shall cease to be Registrable
Stock, the Company shall, upon the written request of the holder thereof, issue
to such holder a new certificate evidencing such shares without the first
sentence of the legend required by Section 3.2(a) endorsed thereon. If any
shares of Common Stock cease to be subject to any restrictions on transfer set
forth in this Agreement, the Company shall, upon the written request of the
holder thereof, issue to such holder a new certificate evidencing such shares
without the second sentence of the legend required by Section 3.2(a) endorsed
thereon.

3.3 Permitted Transferees. Notwithstanding anything in this
Agreement to the contrary, any Shareholder may at any time transfer any or all
of its Shares to any one or more of its Permitted Transferees without the
consent of the Board or any other Shareholder or group of Shareholders (except
as provided in clause (v) of the definition of "Permitted Transferee") so long
as (a) such Permitted Transferee shall have agreed in writing to be bound by
the terms of this Agreement and (b) the transfer to such Permitted Transferee
is not in violation of the applicable federal or state or foreign securities
laws; provided, however, any transferee of Shares approved by the Board, in its
sole discretion, shall be deemed a "Permitted Transferee" for all purposes of
this Agreement.

ARTICLE 4
RIGHTS OF FIRST REFUSAL;
RIGHTS TO PARTICIPATE IN A SALE

4.1 Right of First Refusal. (a) If any Existing Shareholder
receives from or otherwise negotiates with a Third Party in a private
transaction a bona fide offer to purchase any or all of the Shares beneficially
owned by such Existing Shareholder for cash (a "Section 4.1 Offer") and such
Shareholder intends to pursue a transfer of such Shares to such Third Party,
such Shareholder shall provide the Company written notice of such Section 4.1
Offer (a "Section 4.1 Offer Notice"). The Section 4.1 Offer Notice shall
identify the Third Party making the Section 4.1 Offer, the number and class (or
classes) of Shares subject to the Offer, the cash price per share of Shares at
which a sale is proposed to be made (the "Section 4.1 Offer Price") and all
other material terms and conditions of the Section 4.1 Offer. Each Existing
Shareholder agrees that it will not enter into any discussions or negotiations
with any Third Party concerning a transaction that might constitute or result
in a Section 4.1 Offer, except (i) with the prior written consent of the Board,
following a Board determination that such Third Party is not an Adverse Person,
and (ii) in full compliance with Sections 3.1 and 6.1.

(b) The receipt of a Section 4.1 Offer Notice by the Company from an
Existing Shareholder shall constitute an offer by such Existing Shareholder to
sell to the Company for cash the Shares subject to the Section 4.1 Offer at the
Section 4.1 Offer Price. Such offer shall be irrevocable for [30] days after
receipt of such Section 4.1 Offer Notice by the Company. During such [30]-day
period, the Company shall have the right to accept such offer as to all [(but
not less than all)] of such Shares by giving a written notice of acceptance to
the Existing Shareholder prior to the expiration of such [30]-day period.

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<PAGE> 18

(c) The Company shall purchase and pay for all Shares it accepts
within a 60-day period of its acceptance of the offer; provided that if the
purchase and sale of such Shares is subject to any prior regulatory approval,
the time period during which such purchase and sale of accepted Shares must be
consummated shall be extended until the expiration of five Business Days after
all such approvals shall have been received.

(d) Upon the full or partial rejection or deemed rejection of the
Section 4.1 Offer by the Company or the failure to obtain any consent required
of the Company for the purchase of the Shares subject thereto within 120 days
after receipt of such Section 4.1 Offer Notice by the Company, there shall
commence a 30-day period during which the Existing Shareholder shall have the
right to enter into an agreement with the Third Party making the Section 4.1
Offer for the sale of any or all of the Shares subject to the Section 4.1 Offer
at a price in cash not less than the price indicated in the Section 4.1 Offer;
provided that such Third Party shall have agreed in writing to be bound by the
terms of this Agreement and the transfer to such Third Party is not in
violation of applicable federal or state or foreign securities laws. The
Existing Shareholder shall have 60 days from the execution of such agreement to
consummate the sale; provided that if the purchase and sale of such Shares is
subject to any prior regulatory approval, the time period during which such
purchase and sale may be consummated shall be extended until the expiration of
five Business Days after all such approvals shall have been received; provided,
further, that such time period shall not exceed 120 days without the consent of
the Company. If the Existing Shareholder does not consummate the sale of any
Shares subject to the Section 4.1 Offer in accordance with the foregoing time
limitations, the Existing Shareholder may not sell such Shares during the 12-
month period immediately following the expiration of the foregoing time
limitations and thereafter may not sell any Shares without repeating the
foregoing procedures.

(e) Notwithstanding anything in this Section to the contrary, the
provisions of this Section will not be applicable to transfers made pursuant to
and in compliance with Sections 3.3 or 4.2.

4.2 Right to Participate in a Sale. (a) If at any time after the
MS Shareholders have sold (other than to their respective Permitted
Transferees), in one or more transactions, an aggregate of 25% of the shares of
Common Stock beneficially owned by them on the date hereof (taking into account
any stock dividend, stock split or reverse stock split), the MS Shareholders
propose to transfer any of their respective Shares to a Third Party other than
in an Underwritten Offering or an open market sale pursuant to Rule 144 (a
"Section 4.2 Sale"), the MS Shareholders shall provide written notice of such
proposed Section 4.2 Sale to the Minority Shareholders ("Section 4.2 Notice").
The Section 4.2 Notice shall identify the number and class (or classes) of
Shares subject to the Section 4.2 Sale (the "Number of Shares"), the per Share
consideration for which a sale is proposed to be made (the "Section 4.2 Sale
Price) and all other material terms and conditions of the proposed Section 4.2
Sale. Each Minority Shareholder shall, as to Shares beneficially owned by it,
have the right and option, exercisable as set forth below, to participate in
the Section 4.2 Sale for up to the number of Shares as constitutes its Section
4.2 Pro Rata Portion of the Number of Shares, and the amount of Shares to be
sold by the MS Shareholders in the Section 4.2 Sale shall be reduced to the
extent the Minority

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<PAGE> 19

Shareholders elect to participate. "Section 4.2 Pro Rata Portion" means, with
respect to each Minority Shareholder at the time of the Section 4.2 Sale, the
proportion (expressed as a percentage) that its beneficial ownership of Shares
bears to all outstanding Shares at such time. Each Minority Shareholder that
desires to exercise such option shall, within five Business Days after the date
the Section 4.2 Notice is given (the Section 4.2 Notice Period"), deliver to
the MS Shareholders (i) written irrevocable notice of such exercise, (ii) the
certificate or certificates representing the Shares to be sold or otherwise
disposed of pursuant to such sale by such Minority Shareholder, and (iii) a
limited power-of-attorney authorizing the MS Shareholders to sell or otherwise
dispose of such Shares pursuant to the terms of the Section 4.2 Sale. Delivery
to the MS Shareholders of such notice, certificate or certificates, and the
limited power-of-attorney shall constitute an irrevocable acceptance of the
Section 4.2 Sale by the Minority Shareholder. Such Minority Shareholder shall
simultaneously provide a copy of such notice to the Company and the other
Minority Shareholders.

(b) The per share consideration to be paid to the MS
Shareholders and each Minority Shareholder participating in the Section 4.2
Sale shall be the Section 4.2 Sale Price, as reduced by the per share amount of
expenses reasonably incurred by the MS Shareholders in connection with the
Section 4.2 Sale.

(c) Promptly after the consummation of the sale or other
disposition of the Shares of the MS Shareholders and the Minority Shareholders
pursuant to the Section 4.2 Sale, the MS Shareholders shall notify the Minority
Shareholders thereof, shall remit to each of the Minority Shareholders the
total consideration for the Shares of such Minority Shareholder sold or
otherwise disposed of pursuant thereto as computed pursuant to Section 4.2(b)
hereof, and shall furnish such other evidence of the completion and time of
completion of such sale or other disposition and the terms and expenses thereof
as may be reasonably requested by the Minority Shareholders.

(d) If at the termination of the Section 4.2 Notice
Period any Minority Shareholder shall not have elected to participate in the
Section 4.2 Sale, such Minority Shareholder will be deemed to have waived any
of and all of its rights under this Section 4.2 with respect to the sale or
other disposition of its Shares pursuant to such Section 4.2 Sale. The MS
Shareholders shall have 90 days in which to sell the applicable Shares at a
price not higher than that contained in the Section 4.2 Notice and on terms not
more favorable to the MS Shareholders than were contained in the Section 4.2
Notice; provided that if such Section 4.2 Sale is subject to any prior
regulatory approval, the time period during which such Section 4.2 Sale may be
consummated shall be extended until the expiration of five Business Days after
all such approvals shall have been received. Promptly after any sale pursuant
to this Section 4.2, the MS Shareholders shall notify the Company of the
consummation thereof and shall furnish such evidence of the completion thereof
(including time of completion) of such sale and of the terms thereof as the
Company may request. If, at the end of such 90-day period, the MS Shareholders
have not completed the sale of all such Shares, the MS Shareholders shall
return to such Minority Shareholders all certificates representing the Shares
which such Minority Shareholders delivered for sale or other disposition
pursuant to this Section 4.2, and all the

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<PAGE> 20

restrictions on sale or other disposition contained in this Agreement with
respect to Shares beneficially owned by the Minority Shareholders shall again
be in effect.

(e) Notwithstanding anything contained in this Section
4.2, there shall be no liability on the part of the MS Shareholders to any
Minority Shareholder if the sale of Shares pursuant to this Section 4.2 is not
consummated for whatever reason. Any decision as to whether to sell Shares
shall be at the MS Shareholders' sole and absolute discretion.

4.3 Improper Transfer. Any attempt to sell, assign,
transfer, grant a participation in, pledge or otherwise dispose of any Shares
not in compliance with this Agreement shall be null and void and neither the
Company nor any transfer agent shall give any effect in the Company's stock
records to such attempted sale, assignment, transfer, grant of a participation
in, pledge or other disposition.

ARTICLE 5
REGISTRATION RIGHTS

5.1 Demand Registration. (a) At any time after December
31, 1998, upon the written request of Minority Shareholders owning not less
than 60% of the Registrable Stock then owned by the Minority Shareholders to
the effect that the Company effect the registration under the Securities Act of
such Registrable Stock, and specifying the intended method of disposition
thereof, the Company will promptly give written notice of such requested
registration to all other Shareholders, and thereupon will use all commercially
reasonable efforts to effect, as expeditiously as possible, the registration
under the Securities Act of:

(i) the Registrable Stock which the Company has been
so requested to register by the Minority Selling Shareholders,
and

(ii) all other Registrable Stock which the Company
has been requested to register by any other Shareholder by
written request received by the Company within 10 Business
Days after the giving of such written notice by the Company
(which request shall specify the intended method of
disposition of such Registrable Stock),

all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Stock so to be
registered; provided that

(x) the Company shall not be obligated to file a
registration statement relating to a registration request
under this Section 5.1(a): (A) within a period of six months
after the effective date of any other registration statement
filed pursuant to Section 5.1(a) or (b) hereof, or in
connection with an acquisition by the Company of another
company (or the financing thereof) and (B) unless the
aggregate fair market value of the Registrable Stock which the
Company has been so requested to register by the Selling
Shareholders constitutes, as of the date of

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<PAGE> 21

the Company's receipt of the last of such timely requests, at
least [$25] million (based on the closing price of the Class A
Common Stock on such date);

(y) with respect to any registration statement
filed, or to be filed, pursuant to this Section 5.1(a), if the
Company shall furnish to the Selling Shareholders a certified
resolution of the Board stating that in the Board's good faith
judgment it would (because of the existence of, or in
anticipation of, any acquisition or financing activity, or the
unavailability for reasons beyond the Company's control of any
required financial statements, or any other event or condition
of similar significance to the Company) be significantly
disadvantageous (a "Disadvantageous Condition") to the Company
or its shareholders for such a registration statement to be
maintained effective, or to be filed and become effective, and
setting forth the general reasons for such judgment, the
Company shall be entitled to cause the Selling Shareholders to
discontinue the use of such registration statement or, in the
event no registration statement has yet been filed, shall be
entitled not to file any such registration statement, until
such Disadvantageous Condition no longer exists (notice of
which the Company shall promptly deliver to the Selling
Shareholders) and upon receipt of any such notice of a
Disadvantageous Condition such Selling Shareholders will
forthwith discontinue use of the prospectus contained in such
registration statement and, if so directed by the Company,
each such Selling Shareholder will deliver to the Company all
copies, other than permanent file copies then in such Selling
Shareholder's possession, of the prospectus then covering such
Registrable Stock current at the time of receipt of such
notice, and, in the event no registration statement has yet
been filed, all drafts of the prospectus covering such
Registrable Stock; provided, however, that the Company shall
not be entitled to invoke a Disadvantageous Condition pursuant
to this Section 5.1(a) more than twice during any calendar
year; the duration of any single Disadvantageous Condition
shall not exceed 90 days; the aggregate duration of all such
Disadvantageous Conditions shall not exceed 180 days during
any calendar year; and at least 90 days shall elapse between
the termination of a Disadvantageous Condition and the
invocation of a subsequent Disadvantageous Condition by the
Company; and

(z) subject to Section 5.1(g) hereof, the Company
shall not be obligated to effect more than one registration
pursuant to this Section 5.1(a).

Promptly after the expiration of the 10-Business Day period referred to in
Section 5.1(a)(ii) hereof, the Company will notify all the Selling Shareholders
to be included in the registration of the other Selling Shareholders and the
number of shares of Registrable Stock requested to be included therein. The
Minority Selling Shareholders owning a majority of the Registrable Stock
requested to be registered by all Minority Selling Shareholders pursuant to
this Section 5.1(a) may, at any time (A) prior to the filing the registration
statement relating to such registration, or (B) after filing but prior to the
effective date of such registration statement, revoke such request, without
liability to the Company or any of the other Selling Shareholders, by providing
a written notice to the Company revoking such request, provided that the
Company shall be

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<PAGE> 22

deemed to have satisfied its obligations in respect of one registration for
purposes of clause (z) above. In the event that the Company shall give any
notice of the withdrawal of a registration statement contemplated by clause (y)
above, the Company shall at such time as it in good faith deems appropriate
file a new registration statement covering the Registrable Stock that was
covered by such withdrawn registration statement, and such registration
statement shall be maintained effective for such time as may be necessary so
that the period of effectiveness of such new registration statement, when
aggregated with the period during which such initial registration statement was
effective, shall be such time as may be otherwise required by Section 5.1(d) or
5.5 of this Agreement. Notwithstanding anything contained in this Agreement to
the contrary, nothing herein shall be construed as requiring the Company to
register any of its securities other than Common Stock.

(b) At any time following the IPO Closing Date
(subject to any restrictions imposed by any underwriting agreement executed in
connection therewith), upon the written request of MS Shareholders owning not
less than 60% of the Registrable Stock then owned by the MS Shareholders to the
effect that the Company effect the registration under the Securities Act of
such Registrable Stock, and specifying the intended method of disposition
thereof, the Company will promptly give written notice of such requested
registration to all other Shareholders, and thereupon will use all commercially
reasonable efforts to effect, as expeditiously as possible, the registration
under the Securities Act of:

(i) the Registrable Stock which the Company has
been so requested to register by the MS Selling Shareholders;
and

all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Stock so to be
registered; provided that

(x) the Company shall not be obligated to file a
registration statement relating to a registration request
under this Section 5.1(b): (A) within a period of six months
after the effective date of any other registration statement
filed pursuant to Section 5.1(a) or (b) hereof and (B) unless
the Registrable Stock which the Company has been so requested
to register by the MS Selling Shareholders constitutes at such
time at least 15% (on a Fully Diluted basis) of the
Registrable Stock owned by all of the MS Shareholders;

(y) with respect to any registration statement
filed, or to be filed, pursuant to this Section 5.1(b), if the
Company shall furnish to the MS Selling Shareholders a
certified resolution of the Board stating that in the Board's
good faith judgment it would result in a Disadvantageous
Condition to the Company or

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<PAGE> 23

its shareholders for such a registration statement to be
maintained effective, or to be filed and become effective, and
setting forth the general reasons for such judgment, the
Company shall be entitled to cause the Selling Shareholders to
discontinue the use of such registration statement, or, in the
event no registration statement has yet been filed, shall be
entitled not to file any such registration statement, until
such Disadvantageous Condition no longer exists (notice of
which the Company shall promptly deliver to the Selling
Shareholders) and upon receipt of any such notice of a
Disadvantageous Condition such Selling Shareholders will
forthwith discontinue use of the prospectus contained in such
registration statement and, if so directed by the Company,
each such Selling Shareholder will deliver to the Company all
copies, other than permanent file copies then in such Selling
Shareholder's possession, of the prospectus then covering such
Registrable Stock current at the time of receipt of such
notice, and, in the event no registration statement has yet
been filed, all drafts of the prospectus covering such
Registrable Stock; provided, however, that the Company shall
not be entitled to invoke declare a Disadvantageous Condition
pursuant to this Section 5.1(b) more than twice during any
calendar year; the duration of any single Disadvantageous
Condition shall not exceed 90 days; the aggregate duration of
all such Disadvantageous Conditions shall not exceed 180 days
during any calendar year; and at least 90 days shall elapse
between the termination of a Disadvantageous Condition and the
invocation of a subsequent Disadvantageous Condition by the
Company; and

(z) subject to Section 5.1(h) hereof, the Company
shall not be obligated to effect more than three registrations
pursuant to this Section 5.1(b) and shall not be obliged to
effect more than one of such three registrations prior to the
first anniversary of the IPO Closing Date.

Promptly after the expiration of the 10-Business Day period referred to in
Section 5.1(b)(ii) hereof, the Company will notify all the Selling Shareholders
to be included in the registration of the other Selling Shareholders and the
number of shares of Registrable Stock requested to be included therein. The MS
Selling Shareholders owning a majority of the Registrable Stock requested to be
registered by all MS Selling Shareholders pursuant to this Section 5.1(b) may,
at any time prior to the filing of, or after the filing but prior to the
effective date of, the registration statement relating to such registration,
revoke such request, without liability to the Company or any of the other
Selling Shareholders, by providing a written notice to the Company revoking
such request, but the Company shall be deemed to have satisfied its obligations
in respect of one registration for purposes of clause (z) above. In the event
that the Company shall give any notice of the withdrawal of a registration
statement contemplated by clause (y) above, the Company shall at such time as
it in good faith deems appropriate file a new registration statement covering
the Registrable Stock that was covered by such withdrawn registration
statement, and such registration statement shall be maintained effective for
such time as may be necessary so that the period of effectiveness of such new
registration statement, when aggregated with the period during which such
initial registration statement was effective, shall be such time as may be
otherwise required by Section 5.1(d) or 5.5 of this Agreement. Notwithstanding

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<PAGE> 24

anything contained in this Agreement to the contrary, nothing herein shall be
construed as requiring the Company to register any of its securities other than
Common Stock.

(c) The Company will pay all Registration Expenses
in connection with any registration which is requested pursuant to this Section
5.1.

(d) A registration requested pursuant to this
Section 5.1 shall not be deemed to have been effected unless the registration
statement relating thereto (i) has become effective under the Securities Act
and (ii) has remained effective for a period of at least 90 days (if declared
effective before the first anniversary of the IPO Closing Date), 180 days (if
declared effective on or after such first anniversary), or such shorter period
in which all Registrable Stock of the Selling Shareholders and their respective
Permitted Transferees included in such registration have actually been sold
thereunder; provided that if any effective registration statement requested
pursuant to this Section 5.1 is discontinued in connection with a
Disadvantageous Condition, such registration statement shall not be counted as
a registration requested for purposes of Section 5.1 hereof; and provided,
further, that if after any registration statement requested pursuant to this
Section 5.1 becomes effective both (i) such registration statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court solely due to the actions or
omissions to act of the Company and (ii) less than 75% of the Registrable Stock
included in such registration has been sold thereunder, such shall not be
counted as a registration requested pursuant to Section 5.1 hereof.

(e) If any requested registration pursuant to this
Section 5.1 is in the form of an Underwritten Offering, the Selling
Shareholders owning a majority of the Registrable Stock included in such
registration shall have the right to select the managing underwriter or
underwriters of such Underwritten Offering; provided that (i) any such managing
underwriter may be an Affiliate of a Shareholder and (ii) such managing
underwriter or underwriters shall be reasonably acceptable to the Company. The
Company may require the offering pursuant to any registration requested
pursuant to Section 5.1 to be in the form of an Underwritten Offering. In that
event, all Registrable Stock to be registered in such registration shall be
registered for sale only in such Underwritten Offering.

(f) If the managing underwriter of an Underwritten
Offering requested pursuant to Section 5.1(a) or (b) shall advise the Company
that, in its view, the number of shares of Common Stock requested to be
included in such registration (including shares requested to be included
pursuant to clause (i) or (ii) of Section 5.1(a) or (b) and shares which the
Company requests to be included which are not Registrable Stock) exceeds the
largest number of shares of Common Stock which can be sold without having an
adverse effect on such Underwritten Offering, including the price at which such
shares can be sold (the "Maximum Offering Size"), the Company will include in
such registration, in the priority listed below, up to the Maximum Offering
Size:

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<PAGE> 25

(i) first, all Registrable Stock requested to be
included in such registration pursuant to Section 5.1, pro
rata among the Selling Shareholders requesting such inclusion
on the basis of the relative number of Shares owned by them,
and

(ii) second, any Common Stock proposed to be
registered by the Company for its own account, and

(iii) third, any other Common Stock.

(g) If Registrable Stock representing at least [50%]
of the number of Shares requested to be registered by the Minority Selling
Shareholders is not included in any registration requested pursuant to Section
5.1(a) (other than by reason of a cancellation of such request), then the
Minority Selling Shareholders may request that the Company effect an additional
registration under the Securities Act of all or part of the Minority Selling
Shareholders' Registrable Stock in accordance with the provisions of this
Section 5.1 and the Company shall pay the Registration Expenses in connection
with such additional registration.

(h) If Registrable Stock representing at least 50%
of the number of Shares requested to be registered by the MS Selling
Shareholders is not included in any registration requested pursuant to Section
5.1(b) (other than by reason of a cancellation of such request), then the MS
Selling Shareholders may request that the Company effect an additional
registration under the Securities Act of all or part of the MS Selling
Shareholders' Registrable Stock in accordance with the provisions of this
Section 5.1 and the Company shall pay the Registration Expenses in connection
with such additional registration.

5.2 Incidental Registration. (a) If the Company proposes
to register any of its Common Stock under the Securities Act (other than a
registration (A) on Form S-8 or S-4 or any successor or similar forms, (B)
relating to Common Stock issuable upon exercise of employee or director stock
options or in connection with any employee or director benefit or similar plan
of the Company, (C) in connection with a direct or indirect acquisition by the
Company of another company or the financing of such acquisition, or (D)
pursuant to Section 5.1 hereof), whether or not for sale for its own account,
in a manner which would permit registration of Registrable Stock for sale to
the public under the Securities Act it will each such time, subject to the
provisions of Section 5.2(b) hereof, give prompt written notice to the
Shareholders of its intention to do so and of such Shareholders' rights under
this Section 5.2, at least 20 days prior to the anticipated filing date of the
registration statement relating to such registration. Any such notice shall
offer each Shareholder the opportunity to include in such registration
statement such number of shares of Registrable Stock as each such Shareholder
may request (an "Incidental Registration"). Upon the written request of any
such Shareholder made within ten days after the receipt of notice from the
Company (which request shall specify the number of shares of Registrable Stock
intended to be disposed of by such Shareholder), the Company will use all
commercially reasonable efforts to effect the registration under the Securities
Act of all Registrable Stock which the Company has been so requested to
register by the Shareholders, to the extent requisite to permit the disposition
of the Registrable Stock so to be registered; provided that (i) if such
registration involves an Underwritten Offering, all

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<PAGE> 26

Shareholders requesting to be included in the Company's registration must sell
their Registrable Stock to the underwriters selected by the Company on the same
terms and conditions as apply to the Company and (ii) if, at any time after
giving written notice of its intention to register any stock pursuant to this
Section 5.2(a) and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to register such stock, the Company shall give written notice to all
Shareholders and, thereupon, shall be relieved of its obligation to register
any Registrable Stock in connection with such registration (without prejudice,
however, to rights of Shareholders under Section 5.1 hereof). No registration
effected under this Section 5.2 shall relieve the Company of its obligations to
effect a registration upon request to the extent required by Section 5.1
hereof. The Company will pay all Registration Expenses in connection with each
registration of Registrable Stock requested pursuant to this Section 5.2.

(b) If a registration pursuant to this Section 5.2
involves an Underwritten Offering and the managing underwriter advises the
Company that, in its view, the number of shares of Common Stock which the
Company, the Shareholders and any other Persons intend to include in such
registration exceeds the Maximum Offering Size, the Company will include in
such registration, in the following priority, up to the Maximum Offering Size:

(i) first, if the registration was initiated by the
Company for the sale of Common Stock for its own account, any
such Common Stock,

(ii) second, all (x) Registrable Stock requested to
be included in such registration by any Shareholders that have
rights pursuant to Section 5.2 hereof and (y) all Common Stock
requested to be included in such registration by any other
shareholders that hold demand registration rights, pro rata
among such Shareholders and other shareholders on the basis of
the relative number of shares of Registrable Stock or Common
Stock, respectively, owned by them,

(iii) third, all Common Stock held by other
shareholders of the Company who exercise "piggyback"
registration rights in connection with such registration, pro
rata among such shareholders on the basis of the relative
number of shares of Common Stock owned by them, and

(iv) fourth, any other Common Stock.

5.3 Holdback Agreements. Upon the request of the
underwriters of any Underwritten Offering, each Shareholder agrees not to
effect any public sale or distribution, including any sale pursuant to Rule
144, or any successor provision, under the Securities Act, of any Registrable
Stock, and not to effect any such public sale or distribution of any other
Common Stock of the Company or of any security convertible into or exchangeable
or exercisable for any Common Stock of the Company (in each case, other than as
part of such Underwritten Offering) during the seven-day period prior to, and
during the 180-day period which begins on, the effective date of such
registration statement (except as part of such registration), provided that
this Section 5.3 shall not be applicable to any Shareholder until two

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<PAGE> 27

Business Days after such Shareholder has received written notice of the
anticipated or actual beginning of the seven-day period referred to above.

(b) The Company agrees, if so requested by the managing
underwriters of an Underwritten Offering of Registrable Stock pursuant to
Section 5.1, not to effect any public sale or distribution of any Common Stock
or securities convertible into or exchangeable or exercisable for Common Stock
during the seven-day period prior to and the 180-day period after the effective
date of any registration statement with respect to such Underwritten Offering,
except as part of such Underwritten Offering or except in connection with any
dividend reinvestment, stock option, stock purchase or other benefit plan, or
an acquisition, merger or exchange offer (or the financing thereof).

5.4 Registration Procedures--General. Whenever
Shareholders request that any Registrable Stock be registered pursuant to
Section 5.1 or 5.2 hereof, the Company will do each of the following:

(a) The Company will, if requested, prior to filing
a registration statement or prospectus or any amendment or supplement thereto,
furnish to each Selling Shareholder and each underwriter, if any, of the
Registrable Stock covered by such registration statement copies of such
registration statement as proposed to be filed, and thereafter the Company will
furnish to such Selling Shareholder and underwriter, if any, such number of
copies of such registration statement, each amendment and supplement thereto
(in each case including all exhibits thereto and documents incorporated by
reference in this Agreement), the prospectus included in such registration
statement (including each preliminary prospectus) and such other documents as
such Selling Shareholder or underwriter may reasonably request in order to
facilitate the disposition of the Registrable Stock owned by such Selling
Shareholder.

(b) The Company will promptly notify each Selling
Shareholder of any stop order issued or threatened by the SEC and take all
reasonable actions required to prevent the entry of such stop order or to
remove it if entered.

(c) The Company will use all commercially reasonable
efforts to (i) register or qualify the Registrable Stock under such other
securities or blue sky laws of such jurisdictions in the United States as any
Selling Shareholder reasonably (in light of such Selling Shareholder's intended
plan of distribution) requests and (ii) cause such Registrable Stock to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company and
do any and all other acts and things that may be reasonably necessary or
advisable to enable such Selling Shareholder to consummate the disposition of
the Registrable Stock owned by such Selling Shareholder; provided that the
Company will not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (c), (B) subject itself to taxation in any such jurisdiction or (C)
consent to general service of process in any such jurisdiction.

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<PAGE> 28

(d) The Company will immediately notify each Selling
Shareholder, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Stock, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and promptly prepare and make available to
each Selling Shareholder any such supplement or amendment.

(e) Upon the execution of confidentiality agreements
in form and substance satisfactory to the Company, the Company will make
available for inspection by any Selling Shareholder, any managing underwriter
participating in any Underwritten Offering and any attorney, accountant or
other professional retained by any such Selling Shareholder or managing
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers, Directors and
employees to supply all information reasonably requested by any Inspectors in
connection with such registration statement. Records which the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in such registration statement or (ii) the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction. Each Selling Shareholder agrees that information obtained by it
as a result of such inspections shall be deemed confidential and shall not be
used by it as the basis for any market transactions in the securities of the
Company or its Affiliates unless and until such is made generally available to
the public. Each Selling Shareholder further agrees that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of the Records deemed
confidential.

(f) The Company will otherwise use all commercially
reasonable efforts to comply with all applicable rules and regulations of the
SEC, and make available to its securityholders, as soon as reasonably
practicable, an earnings statement covering a period of 12 months, beginning
within three months after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.

(g) The Company will use its best efforts to list
such shares of Registrable Stock on each securities exchange on which the
Common Stock is then listed, if such shares of Registrable Stock are not
already so listed and if such listing is then permitted under the rules of such
exchange, and will provide a transfer agent and registrar for such Registrable
Securities not later than the effective date of such registration statement.

(h) The Company will, in connection with any
Underwritten Offering, furnish to each Selling Shareholder and to each
underwriter, if any, a signed counterpart, addressed to such underwriter, of
(i) an opinion or opinions of counsel to the Company and (ii)

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<PAGE> 29

a comfort letter or comfort letters from the Company's independent public
accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as the
Selling Shareholders owning a majority of the Registrable Stock to be included
in such registration or the managing underwriter therefor reasonably requests.

(i) The Company will prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Stock covered by such registration statement until the end of the
period specified in Section 5.1(d) or 5.5 hereof, as applicable.

The Company may require each Selling Shareholder to
promptly furnish in writing to the Company such information regarding the
distribution of the Registrable Stock as the Company may from time to time
reasonably request and such other information as may be required by law or rule
or regulation of the SEC in connection with such registration.

Each Selling Shareholder agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 5.4(d) hereof, such Selling Shareholder will forthwith discontinue
disposition of Registrable Stock pursuant to the registration statement
covering such Registrable Stock until such Selling Shareholder's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 5.4(d)
hereof, and, if so directed by the Company, such Selling Shareholder will
deliver to the Company all copies, other than any permanent file copies then in
such Selling Shareholder's possession, of the most recent prospectus covering
such Registrable Stock at the time of receipt of such notice. In the event
that the Company shall give such notice, the Company shall extend the period
during which such registration statement shall be maintained effective by the
number of days during the period from and including the date of the giving of
notice pursuant to Section 5.4(d) hereof to the date when the Company shall
make available to the Selling Shareholders a prospectus supplemented or amended
to conform with the requirements of Section 5.4(d) hereof.

5.5 Registration Procedures--Demand. Whenever
Shareholders request that any Registrable Stock be registered pursuant to
Section 5.1 hereof, the Company will, subject to the provisions of such
Section, use all commercially reasonable efforts to effect the registration of
such Registrable Stock in accordance with the intended method of disposition
thereof as quickly as practicable, and in connection with any such request, as
expeditiously as possible, prepare and file with the SEC a registration
statement on any form for which the Company then qualifies or which counsel for
the Company shall deem appropriate and which form shall be available for the
sale of the Registrable Stock to be registered thereunder in accordance with
the intended method of distribution thereof, and use all commercially
reasonable efforts to cause such filed registration statement to become and
remain effective for a period of not less than 90 days (if declared effective
before the first anniversary of the IPO Closing Date) or 180 days (if declared
effective on or after such first anniversary).

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<PAGE> 30

5.6 Indemnification by the Company. The Company agrees
to indemnify and hold harmless each Selling Shareholder, each officer,
director, limited or general partner (together with each officer, director or
partner thereof), agent or investment adviser of such Selling Shareholder, and
each Person, if any, who controls such Selling Shareholder within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all Losses caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Stock (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by 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, except insofar as such Losses are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information furnished in writing to the Company by such Selling
Shareholder or on such Selling Shareholder's behalf expressly for use therein;
provided that with respect to any untrue statement or omission or alleged
untrue statement or omission made in any preliminary prospectus, or in any
prospectus, as the case may be, the indemnity agreement contained in this
paragraph shall not apply to the extent that any such Loss results from the
fact that a current copy of the prospectus (if amended or supplemented, as so
amended or supplemented) was not sent or given to the Person asserting any such
Loss at or prior to the written confirmation of the sale of the Registrable
Stock to such Person if it is determined that the Company has provided such
prospectus to such Selling Shareholder and it was the responsibility of such
Selling Shareholder to provide such Person with a current copy of the
prospectus (or such amended or supplemented prospectus, as the case may be) and
such current copy of the prospectus (or such amended or supplemented
prospectus, as the case may be) would have cured the defect giving rise to such
Loss. The Company also agrees to indemnify each underwriter of the Registrable
Stock, its officers, directors and partners and each Person who controls such
underwriter on substantially the same basis as that of the indemnification of
the Selling Shareholders provided in this Section 5.6.

5.7 Indemnification by Selling Shareholders. Each
Selling Shareholder owning Registrable Stock included in any registration
statement agrees, severally but not jointly, to indemnify and hold harmless the
Company, its officers, Directors and agents and each Person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Shareholder, but only (i) with respect to
information furnished in writing by such Shareholder or on such Shareholder's
behalf expressly for use in any registration statement or prospectus relating
to the Registrable Stock, or any amendment or supplement thereto, or any
preliminary prospectus or (ii) to the extent that any Loss described in Section
5.6 results from the fact that a current copy of the prospectus (if amended or
supplemented, as so amended or supplemented) was not sent or given to the
Person asserting any such Loss at or prior to the written confirmation of the
sale of the Registrable Stock concerned to such Person if it is determined that
it was the responsibility of such Shareholder to provide such Person with a
current copy of the prospectus (or such amended or supplemented prospectus, as
the case may be) and such current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) would have cured the defect giving
rise to such Loss. Each such Selling Shareholder also agrees to indemnify and
hold harmless each underwriter of the Registrable

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<PAGE> 31

Stock, each of their respective officers, directors and partners and each
Person who controls any such underwriter on substantially the same basis as
that of the indemnification of the Company provided in this Section 5.7. As a
condition to including Registrable Stock in any registration statement filed in
accordance with Article 5 hereof, the Company may require that it shall have
received an undertaking reasonably satisfactory to it from any underwriter to
indemnify and hold it harmless to the extent customarily provided by
underwriters with respect to similar securities.

5.8 Conduct of Indemnification Proceedings. In case any
action or proceeding (including any governmental investigation) shall be
instituted involving any Person in respect of which indemnity may be sought
pursuant to Section 5.6 or 5.7, such Person (an "Indemnified Party") shall
promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party, and shall assume the payment of all fees and expenses;
provided that the failure of any Indemnified Party so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
hereunder except to the extent that the Indemnifying Party is materially
prejudiced by such failure to notify. In any such action or proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
such Indemnified Party representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
It is understood that the Indemnifying Party shall not, in connection with any
action or proceeding or related actions or proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the
Indemnified Parties. The Indemnifying Party shall not be liable for any
settlement of any action proceeding effected without its written consent, but
if settled with such consent, or if there be a final judgment for the
plaintiff, the Indemnifying Party shall indemnify and hold harmless such
Indemnified Parties from and against any Loss (to the extent stated above) by
reason of such settlement or judgment. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of
any pending or threatened action or proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such action or proceeding.

5.9 Contribution. If the indemnification provided for in
this Article 5 is unavailable to the Indemnified Parties in respect of any
Losses referred to in this Agreement, then each such Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, (i) as
between the Company and the Selling Shareholders owning Registrable Stock
covered by a registration statement on the one hand and the underwriters on the
other, in such proportion as is appropriate to reflect the relative benefits
received by the Company and such Shareholders

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<PAGE> 32

on the one hand and the underwriters on the other, from the offering of the
Registrable Stock, or if such allocation is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits but
also the relative fault of the Company and such Shareholders on the one hand
and of the underwriters on the other in connection with the statements or
omissions which resulted in such Losses, as well as any other relevant
equitable considerations and (ii) as between the Company on the one hand and
each such Shareholder on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of each such Shareholder in
connection with such statements or omissions, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
such Shareholders on the one hand and the underwriters on the other shall be
deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Company and such Shareholders bear to the total underwriting
discounts and commissions received by the underwriters, in each case as set
forth in the table on the cover page of the prospectus. The relative fault of
the Company and each such Selling Shareholders, on the one hand, and of the
underwriters, on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company and such Selling Shareholder or by the
underwriters. The relative fault of the Company on the one hand and of each
such Shareholder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

The Company and the Shareholders agree that it would
not be just and equitable if contribution pursuant to this Section 5.9 were
determined by pro rata allocation (even if the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the Losses referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5.9, no underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Stock underwritten by it and distributed to the public were offered
to the public exceeds the amount of any damages which such underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no Shareholder shall be required
to contribute any amount in excess of the amount by which the total price at
which the Registrable Stock of such Shareholder were offered to the public
exceeds the amount of any damages which such Shareholder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any Person who was not guilty of such fraudulent
misrepresentation. Each Shareholder's obligation to contribute pursuant to
this Section 5.9, if

-31-
<PAGE> 33

any, is several in the proportion that the proceeds of the offering received by
such Shareholder bears to the total proceeds of the offering received by all
the Shareholders and not joint.

5.10 Participation in Underwritten Offering. No Person
may participate in any Underwritten Offering hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and this Agreement.

5.11 No Inconsistent Agreements. From and after the date
of this Agreement, the Company will not enter into, or cause or permit any of
its Subsidiaries to enter into, any agreement which is inconsistent with the
rights granted to the Shareholders in this Agreement or otherwise conflicts
with the provisions hereof.

ARTICLE 6
CONFIDENTIALITY

6.1 Confidentiality. (a) Each Shareholder hereby agrees
that the Confidential Information (as defined below) that has been furnished to
it or him was made available in connection with such Shareholder's investment
in the Company. Each Shareholder agrees that he or it will not use any
Confidential Information, including without limitation any Confidential
Information that may be received after the date hereof, in any way to the
competitive disadvantage of the Company or in violation of any applicable
Federal or state securities laws. Each Shareholder further acknowledges and
agrees that he or it will not disclose any Confidential Information to any
Person; provided that Confidential Information may be disclosed as follows:

(i) to such Shareholder's Representatives (as
defined below) in the normal course of the performance of
their duties, provided that such Representatives have been
advised of the confidential nature of such information,

(ii) to the extent required by applicable law, rule
or regulation (including complying with any oral or written
questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar
process to which a Shareholder is subject),

(iii) to any Person to whom such Shareholder is
contemplating a transfer of his or its Shares, provided that
(x) such transfer would not be in violation of the provisions
hereof or any applicable federal or state securities laws and
(y) such Person is advised of the confidential nature of such
information and agrees to be bound by a confidentiality
agreement in form and substance satisfactory to the Company
and by the provisions of this Agreement, and

-32-
<PAGE> 34

(iv) to any Person, if the prior written consent of
the Board shall have been obtained.

Nothing contained herein shall prevent the use of Confidential Information in
connection with the assertion or defense of any claim by or against the Company
or any Shareholder.

(b) "Confidential Information" means any information
concerning the Company, its financial condition, business, operations or
prospects in the possession of or to be furnished to any Shareholder in his or
its capacity as a shareholder of the Company or by virtue of his or its present
or former position as, or right to designate, a Director; provided that the
term "Confidential Information" does not include information which (i) was or
becomes generally available publicly other than as a result of a disclosure by
a Shareholder or his or its partners, directors, officers, employees, agents,
counsel, investment advisers or representatives (all such Persons being
collectively referred to as "Representatives") in violation of this Agreement
or any confidentiality agreement executed in accordance with Section 4.1,
Section 5.4(e) or Section 6.1(a) or (ii) becomes available to a Shareholder on
a nonconfidential basis from a source other than the Company or another
Shareholder or his or its Representatives, provided that such source is not, to
the best of such Shareholder's knowledge, bound by a confidentiality agreement
with the Company or another Person.

ARTICLE 7
MISCELLANEOUS

7.1 Entire Agreement. This Agreement constitutes the
entire agreement among the parties hereto and supersedes all prior agreements
and understandings, oral and written, among the parties hereto with respect to
the subject matter hereof.

7.2 Binding Effect; Benefit. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
heirs, successors, legal representatives and permitted assigns. Nothing in
this Agreement, expressed or implied, is intended to confer on any Person other
than the parties hereto, and their respective heirs, successors, legal
representatives and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.

7.3 Assignability. This Agreement shall not be
assignable by any party hereto, except that any Person acquiring Shares who is
required by the terms of this Agreement to become a party hereto shall execute
and deliver to the Company an agreement to be bound hereby and shall
thenceforth be a Shareholder, and any Shareholder who ceases to own, directly
or indirectly, beneficially or of record, any Shares shall cease to be bound by
the terms hereof.

7.4 Amendment; Waiver. (a) No provision of this
Agreement may be waived except by an instrument in writing executed by the
party against whom the waiver is to be effective. No provision of Article 5
may be amended or otherwise modified except by an instrument in writing
executed by the Company with the approval of the Board and Shareholders

-33-
<PAGE> 35

who own at least 80% of the Registrable Stock then outstanding. No other
provision of this Agreement may be amended or otherwise modified except by an
instrument in writing executed by the Company with the approval of the Board
and Shareholders who own at least 80% of the Shares then outstanding.

(b) In addition, no provision of this Agreement that
is specifically applicable to any MS Shareholder may be amended or otherwise
modified or terminated except with the consent of such MS Shareholder.

7.5 Notices. All notices and other communications given
or made pursuant hereto or pursuant to any other agreement among the parties,
unless otherwise specified, shall be in writing and shall be deemed to have
been duly given or made if (i) sent by fax, (ii) delivered personally, (iii)
sent by registered or certified mail (postage prepaid, return receipt
requested) or (iv) sent by nationally- recognized courier service guaranteeing
overnight delivery to the parties at the fax number or address set forth on
Exhibit B hereto or at such other addresses as shall be furnished by the
parties by like notice, and such notice or communication shall be deemed to
have been given or made upon receipt. Any Person who becomes a Shareholder
shall provide its address and fax number to the Company, which shall promptly
provide such information to each other Shareholder.

7.6 Headings. The headings contained in this Agreement
are for convenience only and shall not affect the meaning or interpretation of
this Agreement.

7.7 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.

7.8 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO THE CONFLICTS OF LAW RULES OF SUCH STATE.

7.9 Specific Enforcement. Each of the Company and the
Shareholders agrees that money damages would not be a sufficient remedy for any
breach of this Agreement by the Company or such Shareholder, as applicable, and
that, in addition to all other remedies which may be available, the
Shareholders (in the event of a breach by the Company) or the Company (in the
event of a breach by a Shareholder) shall be entitled to specific performance
and injunctive or other equitable relief as a remedy for any such breach.

7.10 No Waiver. No failure or delay by the Company or any
Shareholder in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any right, power or
privilege hereunder.

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<PAGE> 36

7.11 Consent to Jurisdiction. Each party hereto
irrevocably submits to the non- exclusive jurisdiction of any State or Federal
court sitting in Delaware over any suit, action or proceeding arising out of or
relating to this Agreement and waives, to the fullest extent permitted by law,
any objection it may now or hereafter have to the laying of venue of any such
suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in such a court has been brought in any
inconvenient forum.

7.12 Effective Date. Except as otherwise expressly
provided herein, this Agreement shall become effective immediately after the
IPO Closing and the Amended Original Agreement shall continue in full force and
effect until the IPO Closing.

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement in their individual capacity or caused it to be duly executed by
their respective authorized signatories thereunto duly authorized as of the day
and year first above written.

AMERICAN ITALIAN PASTA COMPANY

By:_________________________________________
Timothy S. Webster,
President and Chief Executive Officer

-35-
<PAGE> 37

THE MORGAN STANLEY LEVERAGED EQUITY FUND
II, L.P.

BY: MORGAN STANLEY LEVERAGED EQUITY FUND
II, INC., AS GENERAL PARTNER

By:________________________________________
Its:_______________________________________

MORGAN STANLEY CAPITAL PARTNERS III, L.P.

BY: MSCP III, L.P., AS GENERAL PARTNER

BY: MORGAN STANLEY CAPITAL PARTNERS III, INC.,
AS GENERAL PARTNER

By:________________________________________
Its:_______________________________________

MSCP III 892 INVESTORS, L.P.

BY: MSCP III, L.P., AS GENERAL PARTNER

BY: MORGAN STANLEY CAPITAL PARTNERS III, INC.
AS GENERAL PARTNER

By:________________________________________
Its:_______________________________________

MORGAN STANLEY CAPITAL INVESTORS, L.P.

BY: MSCP III, L.P., AS GENERAL PARTNER

BY: MORGAN STANLEY CAPITAL PARTNERS III,
INC.,
AS GENERAL PARTNER

By:________________________________________
Its:_______________________________________

-36-

<PAGE> 38

GEORGE K. BAUM GROUP, INC.

By:_________________________________________________
Its:________________________________________________

AMERICAN ITALIAN PASTA COMPANY
RETIREMENT SAVINGS PLAN
GEORGE K. BAUM TRUST COMPANY, AS TRUSTEE

By:_________________________________________________
Its:________________________________________________

GKB PRIVATE INVESTMENT PARTNERS, L.L.C.,
AS NOMINEE FOR:
GEORGE K. BAUM CAPITAL PARTNERS, L.P.

By:________________________________________________
Ben D. Trevathan, Managing Director

GKB PRIVATE INVESTMENT PARTNERS, L.L.C.,
AS NOMINEE FOR:
GEORGE K. BAUM EMPLOYEE EQUITY FUND, L.P.

By:________________________________________________
Ben D. Trevathan, Managing Director

EXCELSIOR INVESTORS, L.L.C.

BY: GEORGE K. BAUM MERCHANT BANC, LLC,
ITS MANAGER

By:________________________________________________
Ben D. Trevathan, Managing Director

-37-
<PAGE> 39

CITICORP VENTURE CAPITAL, LTD.

By:_________________________________________
Its:________________________________________

CCT PARTNERS III, L.P.

By:_________________________________________
as General Partner

By:_________________________________________
Its:________________________________________

____________________________________________
Horst W. Schroeder

HORST W. SCHROEDER, TRUSTEE OF THE LIVING
TRUST OF HORST W. SCHROEDER, DATED MAY 24,
1985, OR SUCCESSOR TRUSTEE

By:_________________________________________
Horst W. Schroeder, Trustee

____________________________________________
Isabel A. Lange

____________________________________________
Bernd H. Schroeder

____________________________________________
Gisela I. Schroeder, Trustee of the Living Trust
of Gisela I. Schroeder U/T/I Dated May 24, 1985

-38-
<PAGE> 40

WILLIAM T. WEBSTER, AS CUSTODIAN FOR WILLIAM
T. WEBSTER, JR. UNDER THE MISSOURI UNIFORM TRANSFERS
TO MINORS LAW

By:____________________________________________________
Timothy S. Webster, Attorney-in-Fact

WILLIAM T. WEBSTER, AS CUSTODIAN FOR AUBREY A. WEBSTER,
JR. UNDER THE MISSOURI UNIFORM TRANSFERS TO MINORS LAW

By:____________________________________________________
Timothy S. Webster, Attorney-in-Fact

KIRSTIN D. WEBSTER AND JAMES A. HEETER, CO-TRUSTEES
UNDER THE TIMOTHY S. WEBSTER FAMILY GIFT TRUST OF 1996,
DATED SEPTEMBER 27, 1996

By:____________________________________________________
Timothy S. Webster, Attorney-in-Fact

WILLIAM T. WEBSTER

By:____________________________________________________
Timothy S. Webster, Attorney-in-Fact

JULIE D. WEBSTER

By:____________________________________________________
Timothy S. Webster, Attorney-in-Fact

-39-

<PAGE> 41

ANNA CATHERINE WEBSTER

By:____________________________________________________
Timothy S. Webster, Attorney-in-Fact

ERNEST JACK WEBSTER, JR.

By:____________________________________________________
Timothy S. Webster, Attorney-in-Fact

_______________________________________________________
Timothy S. Webster

THOMPSON HOLDINGS, INC.

By:____________________________________________________
Richard C. Thompson

THOMPSON HOLDINGS, L.P.

By:____________________________________________________
Richard C. Thompson

JSS MANAGEMENT COMPANY LTD.

By:____________________________________________________

Its:___________________________________________________

_______________________________________________________
James A. Schlindwein

_______________________________________________________
Suzanne S. Schlindwein

-40-
<PAGE> 42

____________________________________________
Jerry Dear

____________________________________________
Daniel Keller

____________________________________________
Mike Willhoite

____________________________________________
David E. Watson

____________________________________________
Darrel Bailey

____________________________________________
Norman F. Abreo

____________________________________________
David B. Potter

-41-
<PAGE> 43

EXHIBIT A

CURRENT SHAREHOLDERS

<TABLE>
<CAPTION>
Class A
Common Common
Shareholder Stock Stock Total
---------------------------------------- --------- --------- -------
<S> <C> <C> <C>
Morgan Stanley Leveraged Equity Fund II, L.P. . . . . . . 984,668 0 984,668

Morgan Stanley Capital Partners III, L.P. . . . . . . . . 369,765 0 369,765
MSCP III 892 Investors, L.P. . . . . . . . . . . . . . . 37,857 0 37,857

Morgan Stanley Capital Investors, L.P. . . . . . . . . . 10,399 0 10,399

Horst W. Schroeder . . . . . . . . . . . . . . . . . . . 3,314 7,369 10,683
George K. Baum Group, Inc. . . . . . . . . . . . . . . . 13,258 0 13,258

George K. Baum Capital Partners, L.P. . . . . . . . . . . 14,799 0 14,799

George K. Baum Employee Equity Fund, L.P. . . . . . . . . 900 0 900
Excelsior Investors, L.L.C. . . . . . . . . . . . . . . . 53,971 0 53,971

Citicorp Venture Capital, Ltd. . . . . . . . . . . . . . 25,355 119,816 145,171

CCT Partners III, L.P. . . . . . . . . . . . . . . . . . 4,476 21,144 25,620

JSS Management Company, Ltd. . . . . . . . . . . . . . . 4,475 0 4,475
James A. Schlindwein . . . . . . . . . . . . . . . . . . 2,323 0 2,323

Suzanne S. Schlindwein . . . . . . . . . . . . . . . . . 1,161 0 1,161

Jerry Dear . . . . . . . . . . . . . . . . . . . . . . . 174 0 174
Daniel Keller . . . . . . . . . . . . . . . . . . . . . . 581 0 581

Mike Willhoite . . . . . . . . . . . . . . . . . . . . . 232 0 232

Timothy S. Webster . . . . . . . . . . . . . . . . . . . 2,604 875 3,479

William Thomas Webster, as Guardian for Samuel Timothy
Webster under the Missouri Uniform Transfers to
Minors Law . . . . . . . . . . . . . . . . . . . . . 50 0 50

Anna Catherine Webster . . . . . . . . . . . . . . . . . 50 0 50

Phillip A. Dibble . . . . . . . . . . . . . . . . . . . . 50 0 50
Phyllis Kruse Dibble . . . . . . . . . . . . . . . . . . 50 0 50
</TABLE>

A-1
<PAGE> 44

<TABLE>
<CAPTION>
Class A
Common Common
Shareholder Stock Stock Total
---------------------------------------- --------- --------- -------
<S> <C> <C> <C>
Ernest Jack Webster, Jr. . . . . . . . . . . . . . . . . 50 0 50

David E. Watson . . . . . . . . . . . . . . . . . . . . . 6,933 1,200 8,133
Darrel Bailey . . . . . . . . . . . . . . . . . . . . . 3,167 580 3,747

Norman F. Abreo . . . . . . . . . . . . . . . . . . . . . 847 330 1,177

David B. Potter . . . . . . . . . . . . . . . . . . . . . 2,124 330 2,454
Isabel A. Lange . . . . . . . . . . . . . . . . . . . . . 0 500 500

Bernd H. Schroeder . . . . . . . . . . . . . . . . . . . 0 500 500

William T. Webster, as Custodian for William T. Webster,
Jr. under the Missouri Uniform Transfers to Minors
Law . . . . . . . . . . . . . . . . . . . . . . . . . 50 0 50

William T. Webster, as Custodian for Aubrey A. Webster
under the Missouri Uniform Transfers to Minors Law . 50 0 50

Kristen D. Webster and James A. Heeter, Co-Trustees under
the Timothy S. Webster Family Gift Trust of 1996,
Dated September 17, 1996 . . . . . . . . . . . . . . 1,904 0 1,904

William T. Webster . . . . . . . . . . . . . . . . . . . 50 0 50

Julie D. Webster . . . . . . . . . . . . . . . . . . . . 50 0 50
Thompson Holdings, L.P. . . . . . . . . . . . . . . . . . 0 156,530 156,530

Horst W. Schroeder, Trustee of the Living Trust of Horst
W. Schroeder, Dated May 24, 1985 . . . . . . . . . . 8,000 0 8,000

Gisela I. Schroeder, Trustee of the Living Trust of
Gisela J. Schroeder U/T/I Dated May 24, 1985 . . . . 0 1,860 1,860
American Italian Pasta Company Retirement Savings Plan . 5,088 0 5,088
--------- ------- ---------

1,558,825 311,034 1,869,859
========= ======= =========
</TABLE>

A-2
<PAGE> 45

EXHIBIT B

American Italian Pasta Company
1000 Italian Way
Excelsior Springs, Missouri 64024
Attention: Timothy S. Webster
Fax: (816) 637-8358

with a copy to:

Sonnenschein Nath & Rosenthal
4520 Main Street, Suite 1100
Kansas City, Missouri 64111
Attention: James A. Heeter
Fax: (816) 932-4452

The Morgan Stanley Leveraged Equity Fund II, L.P.
Morgan Stanley Capital Partners III, L.P.
MSCP III 892 Investors, L.P.
Morgan Stanley Capital Investors, L.P.
c/o Morgan Stanley Capital Partners
Attention: Lawrence B. Sorrel
1221 Avenue of the Americas
New York, New York 10020
Facsimile No. (212) 762-7951

with a copy to:

Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Carole Schiffman
Fax: (212) 450-4800

B-1
<PAGE> 46

Thompson Holdings, Inc.
Thompson Holdings, L.P.
Richard C. Thompson
c/o Thompson's Pet Pasta Products, Inc.
16 Kansas Avenue
Kansas City, Kansas 66105
Fax: (954) 767-6046

with a copy to:

Welborn, Dufford, Brown & Tooley, P.C.
1700 Broadway
Suite 1700
Denver, Colorado 80290-1701
Attn: Thomas G. Brown, Esq.
Fax: (303) 832-3804

Citicorp Venture Capital, Ltd.
CCT Partners III, L.P.
399 Park Avenue - 14th Floor
New York, New York 10043
Attention: David Y. Howe
Fax: (212) 888-2940

Norman F. Abreo
Darrel Bailey
Jerry Dear
Daniel Keller
David B. Potter
David E. Watson
Mike Willhoite
c/o American Italian Pasta Company
1000 Italian Way
Excelsior Springs, Missouri 64024
Facsimile No. (816) 502-6090

Horst W. Schroeder, Trustee of the Living Trust of Horst W. Schroeder, U/T/A
5/24/85
Bernd H. Schroeder
Isabel A. Lange
c/o Horst W. Schroeder
31 Battery Road
Hilton Head, South Carolina 29928
Facsimile No. (803) 671-4832

B-2
<PAGE> 47

Timothy S. Webster
William T. Webster, as Custodian for William T. Webster, Jr.
William T. Webster, as Custodian for Aubrey A. Webster, Jr.
Kirstin D. Webster and James A. Heeter, Co-Trustees Under the Timothy S.
Webster Family Gift Trust of 1996, Dated September 27, 1996
William T. Webster
Julie D. Webster
Anna Catherine Webster
Ernest Jack Webster, Jr.
c/o Timothy S. Webster
American Italian Pasta Company
1000 Italian Way
Excelsior Springs, Missouri 64024
Facsimile No. (816) 502-6090

with a copy to:

James M. Ash
Blackwell Sanders Weary Matheny & Lombardi L.C.
Suite 1100
Two Pershing Square, 2300 Main Street
Kansas City, Missouri 64108
Facsimile No. (816) 983-8080

James A. Schlindwein
9165 Briar Forest
Houston, Texas 77024
Facsimile No. (713) 789-1557

B-3
<PAGE> 48

Suzanne S. Schlindwein
JSS Management Company, Ltd.
c/o James A. Schlindwein
9165 Briar Forest
Houston, Texas 77024-7222
Facsimile No. (713) 789-1557

George K. Baum Group, Inc.
George K. Baum Capital Partners, L.P.
George K. Baum Employee Equity Fund, L.P.
Excelsior Investors, L.L.C.
c/o Mr. Jonathan Baum
George K. Baum Merchant Banc, LLC
120 West 12th Street
Suite 800
Kansas City, Missouri 64105

The American Italian Pasta Company Retirement Savings Plan
c/o George K. Baum Trust Company
Attn: David Black
120 West 12th Street
Suite 800
Kansas City, Missouri 64105

B-4

<PAGE> 1
EXHIBIT 10.12

AMERICAN ITALIAN PASTA COMPANY
1996 SALARIED BONUS PLAN*

Consistent with the AIPC philosophy of pay for performance, an annual cash bonus
program has been established. Provisions of the plan include the following:

1. The basic bonus opportunity, "Norm Bonus," reflects the degree of
potential contribution by specific levels of salaried Team Members to
the overall performance of the company.

2. The actual amount of bonus awarded will depend on the personal
performance of the incumbent and the overall company performance. The
"Norm Bonus" will be weighted for personal performance as follows:

Outstanding Performance 110 - 150% of Norm Bonus
Above Average Performance 80 - 110% of Norm Bonus
Average Performance 0 - 80% of Norm Bonus
Unsatisfactory Performance 0% of Norm Bonus

The performance rating must be documented on a written performance
review which appraises achievements against specific targets and
accountabilities as established by the Board approved business plan and
the incumbent's job description, goals and objectives. Performance
ratings include the following categories:

1) Outstanding Performance Substantially exceeds key
results as determined from job
description accountabilities and
mutually agreed-upon goals.

2) Above-Average Performance Exceeds key results as
determined from job description
accountabilities and mutually
agreed-upon goals.

3) Average Performance Minimally meets key results as
determined from job description
accountabilities and mutually
agreed-upon goals. (An overall
3 job rating is acceptable for
employees learning a new job).

4) Unsatisfactory Performance Does not achieve key results as
determined from job description
accountabilities and mutually
agreed-upon goals. (An overall
4 job rating requires immediate
improvement or employees will be
terminated).

<PAGE> 2
American Italian Pasta Company
1996 Salaried Bonus Plan
Page 2

The level of company performance versus approved business plan and established
targets will generate a Corporate Performance Multiplier. The multiplier
ranges from 0% to 100% with 100% representing substantial accomplishment of the
established targets/business plan and is assessed by the Board of Directors in
the year-end Board meeting.

Bonus structure and payments are at the sole discretion of the Board of
Directors and will be determined on an annual basis.

As a result of the transition from a calendar year fiscal year to an October 1
through September 30 fiscal year, the 1996 bonus plan is a nine month (January
1 to September 30). As a result, the Corporate Performance Multiplier will be
prorated by 75%.

1996 Formula:

Base Salary (X) Norm Bonus Potential (X) Personal Performance Rating (X)
Corporate Performance Multiplier x 75% (9 month plan year) equals Bonus
Payment.

Example:

The bonus for a salaried Team Member with a $20,000 base salary as of December,
a performance rating of 2 and a 6% Norm Bonus potential would be calculated as
follows when the Corporate Performance Multiplier is approved at 100%.

$20,000 Annual Salary
X 6% Norm Bonus Potential
----------

$1,200 Norm Bonus Dollars
X 100% Personal performance rated Above Average (2) with 100%
---------- weighting (80% - 110% eligibility)

$1,200
X 100% Corporate Multiplier (Company objectives met)
----------

$1,200 Annualized Payout
X 75% Prorated 9 Month Plan Year
----------
$ 900 1996 Payout

/s/ Horst W. Schroeder
- ---------------------------------------
Horst W. Schroeder
Chairman

<PAGE> 3
AMERICAN ITALIAN PASTA COMPANY
1996-1997 SALARIED TEAM MEMBER BONUS RANGES

MAXIMUM
TARGET BONUS %
JOB CATEGORY BONUS % (150% OF TARGET)
- ------------ ------- ----------------

CEO 50% 75%

SENIOR MANAGEMENT 20 - 40% 30 - 60%

UPPER/MIDDLE MANAGEMENT 12.5 - 25% 18.75 - 37.5%

MIDDLE MANAGEMENT 7.5% - 18% 11.25 - 27%

SUPERVISORY & EXEMPT 5 - 10% 7.5 - 15%

NON-EXEMPT 3 - 5% 4.5 - 7.5%

<PAGE> 1

EXHIBIT 23.1

We consent to the references to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our report dated July 25, 1997, in
Amendment No. 2 to the Registration Statement (Form S-1 No. 333- ) and
related Prospectus of American Italian Pasta Company for the registration of
shares of its common stock.

Ernst & Young LLP

Kansas City, Missouri

______________________________________________________________________________

The foregoing consent is in the form that will be signed upon the completion of
the recapitalization and restatement of capital accounts and the calculation of
earnings per share amounts as described in Note 12 to the financial statements.

/s/ Ernst & Young LLP

Kansas City, Missouri

Septemeber 10, 1997

<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the balance sheet and
statement of operations and is qualified in its entirety by reference to such
financial statements.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1996 JUN-30-1997
<PERIOD-END> SEP-30-1996 JUN-30-1997
<CASH> 1,818 2,612
<SECURITIES> 0 0
<RECEIVABLES> 12,494 11,616
<ALLOWANCES> 0 0
<INVENTORY> 14,374 11,619
<CURRENT-ASSETS> 30,834 28,261
<PP&E> 127,000 138,049
<DEPRECIATION> 23,247 27,790
<TOTAL-ASSETS> 141,688 145,461
<CURRENT-LIABILITIES> 32,435 14,985
<BONDS> 0 0
0 0
0 0
<COMMON> 10 15
<OTHER-SE> 15,959 40,961
<TOTAL-LIABILITY-AND-EQUITY> 141,688 145,461
<SALES> 92,074 93,616
<TOTAL-REVENUES> 92,074 93,616
<CGS> 68,555 67,821
<TOTAL-COSTS> 85,353 78,033
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,023 7,800
<INCOME-PRETAX> (4,107) 4,928
<INCOME-TAX> (1,556) 1,878
<INCOME-CONTINUING> (2,551) 3,050
<DISCONTINUED> 0 0
<EXTRAORDINARY> (1,647) 0
<CHANGES> 0 0
<NET-INCOME> (4,198) 3,050
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>