AMERICAN ITALIAN PASTA CO, S-1, 1997-08-05

AMERICAN ITALIAN PASTA CO
S-1, 1997-08-05

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1997

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

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

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
- --------------------------------------------------------------------------------------------------------------
<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.

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 August 5, 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........................ 16
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............................... 31
Management............................. 42
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Relationships and Related
Transactions......................... 48
Principal and Selling Stockholders..... 51
Description of Capital Stock........... 53
Shares Eligible for Future Sale........ 56
Certain United States Federal Income
Tax Considerations for Non-U.S.
Holders.............................. 58
Underwriters........................... 61
Legal Matters.......................... 64
Experts................................ 65
Additional Information................. 65
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 before 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
before 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

Prior to the consummation of the Offering, the Company will amend and
restate its Certificate of Incorporation (the "Charter") and effect 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 will be converted into shares of Class A
Convertible Common Stock, par value $.001 per share, of the Company ("Class A
Common Stock"), and 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 following the consummation of the
Offering they intend to convert such number of their shares of Class B Common
Stock into Class A 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 are not selling any Common
Stock in connection with the Offering. 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 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 (ii) shares and shares,
respectively, of Class A Common Stock available for future grants under the
1992 Plan and the 1993 Plan. 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.................... 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
------- ------- ------- ------- -------- ------- ------- -------
Operating profit before
product introduction
costs...................... 5,334 6,688 8,845 8,754 16,737 12,038 11,026 14,862
Product introduction
costs(2)................... -- -- -- -- 6,986 5,753 3,150 3,458
------- ------- ------- ------- -------- ------- ------- -------
Operating profit............. 5,334 6,688 8,845 8,754 9,751 6,285 7,876 11,404
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 (824) (1,738) (154) 3,604
Income tax................... -- (3,221) 1,484 270 (307) (656) (87) 1,375
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 $ (2,164) $(2,729) $(1,714) $ 2,229
======= ======= ======= ======= ======== ======= ======= =======
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 $ 16,853 $12,369 $13,212 $19,465
EBITDA as a percent of
revenues(5)................ 20.5% 19.8% 17.9% 14.9% 13.9% 13.4% 15.3% 20.8%
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
</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................................................ 146,110
Long-term debt, less current maturities..................... 89,500
Stockholders' equity........................................ 41,625
</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 amortization 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, 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 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 purchased in a
highly-competitive, price-sensitive market. 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 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

11
<PAGE> 14

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. 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 intends to enter into employment agreements with
Messrs. Watson and Abreo in August 1997. See "Management."

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.
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

12
<PAGE> 15

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. 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 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, two of
seven directors of the Company will be employees of a wholly-owned subsidiary of
MSDWD. Pursuant to the terms of the Stockholders Agreement, to be amended and
restated prior to the consummation of the Offering, among the Morgan Stanley
Stockholders, the Company and certain other stockholders of the Company, the
Morgan Stanley Stockholders will have the right to designate three members of
the Board of Directors so long as the

13
<PAGE> 16

total number of shares of Common Stock of the Company owned by the Morgan
Stanley Stockholders constitutes at least 35% of the outstanding Common Stock
and there are seven directors on the Board. In addition, the Morgan Stanley
Stockholders will have the right to designate two nominees for election to the
Board of Directors for so long as their ownership interest falls below 35% but
equals or exceeds 25% of the outstanding Common Stock and one nominee for
election to the Board for so long as their ownership interest falls below 25%
but equals or exceeds 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 will state that 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 pursuant to 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. See "Principal and Selling Stockholders" 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 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

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

14
<PAGE> 17

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 two-thirds of the
stockholders entitled to vote to remove directors, require the affirmative vote
of 80% of the stockholders entitled to vote 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. 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% or 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.

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, and the substantial ownership
position of the Morgan Stanley Stockholders, 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.
In addition, the amended Stockholders Agreement will grant the Morgan Stanley
Stockholders the right, depending on their ownership percentage, 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. See "Description of Capital Stock -- Delaware Law
and Certain Charter and By-Law Provisions."

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 B Common Stock into Class A 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 voting power of the investors 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

15
<PAGE> 18

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. 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 ("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."

16
<PAGE> 19

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....................................... (13,412)
-------- --------
Total stockholders' equity...........................
-------- --------
Total capitalization........................................ $ $
======== ========
</TABLE>

- -------------------------
(1) Excludes (i) 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 and 1993 Plan; and (ii) shares and
shares, respectively, of Class A Common Stock available for future grants
under the 1992 Plan and the 1993 Plan. 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 and shares, respectively, of Class A Common Stock reserved for
issuance upon the exercise of outstanding stock options under the Company's
1992 Plan and 1993 Plan; and (ii) shares and shares, respectively,
of Class A Common Stock available for future grants under the 1992 Plan and
the 1993 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.... 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
------- ------- ------- -------- -------- -------- -------- --------
Operating profit before product
introduction costs............. 5,334 6,688 8,845 8,754 16,737 12,038 11,026 14,862
Product introduction costs(3).... -- -- -- -- 6,986 5,753 3,150 3,458
------- ------- ------- -------- -------- -------- -------- --------
Operating profit................. 5,334 6,688 8,845 8,754 9,751 6,285 7,876 11,404
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 (824) (1,738) (154) 3,604
Income tax....................... -- (3,221) 1,484 270 (307) (656) (87) 1,375
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 $ (2,164) $ (2,729) $ (1,714) $ 2,229
======= ======= ======= ======== ======== ======== ======== ========
Pro forma net income (loss) per
common share(5)................
Pro forma weighted average common
shares outstanding(5)..........
OTHER DATA:
EBITDA(6)........................ $ 7,993 $ 9,495 $12,408 $ 13,836 $ 16,853 $ 12,369 $ 13,212 $ 19,465
EBITDA as a percent of
revenues(6).................... 20.5% 19.8% 17.9% 14.9% 13.9% 13.4% 15.3% 20.8%
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
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 93,629 135,424 139,576 143,157 142,199 146,110
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 18,004 17,438 17,622 41,625
</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 amortization 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. The
following discussion includes certain forward-looking statements regarding the
Company's expected results of operations, cost savings and future liquidity. 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 customer arrangements which have provisions 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.

22
<PAGE> 25

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 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 $5.8 million
for the nine-month fiscal period ended September 30, 1996 and $3.5 million for
the nine-month period ended June 30, 1997. Substantially all product
introduction costs associated with the Pasta LaBella flavored pasta retail
distribution initiative will be charged to product introduction costs by the end
of fiscal 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.

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
----- ----- ----- ----- ----- -----
Operating profit before product
introduction costs............... 12.7 9.4 13.7 13.1 12.7 16.0
Product introduction costs......... -- -- 5.7 6.2 3.6 3.7
----- ----- ----- ----- ----- -----
Operating profit................... 12.7 9.4 8.0 6.9 9.1 12.3
Interest expense, net.............. 7.2 8.6 8.7 8.7 9.3 8.3
Income tax......................... 2.1 0.3 (0.3) (0.7) (0.1) 1.5
Extraordinary loss, net of income
tax.............................. 0.3 -- 1.4 1.8 1.9 --
----- ----- ----- ----- ----- -----
Net income (loss).................. 3.1% 0.5% (1.8)% (2.9)% (2.0)% 2.5%
===== ===== ===== ===== ===== =====
</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.

24
<PAGE> 27

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 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 $3.5 million of product
introduction costs for the nine-month period ended June 30, 1997, as compared to
$3.2 million for the nine-month period ended June 30, 1996. These costs were
primarily related to amortization of product placement fees or "slotting,"
introductory consumer sampling, couponing, advertising and trade promotions. The
increase was due to increased product placement fee amortization offset by 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 $3.5 million, or 44.3%, to
$11.4 million for the nine-month period ended June 30, 1997, from $7.9 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 $1.5 million for the nine-month period
ended June 30, 1997 to $1.4 million, from $(0.1) 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 $3.9 million to $2.2 million for the
nine-month period ended June 30, 1997, from $(1.7) 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 $5.8 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 amortization 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 increased $1.4 million, or 28.6% to $6.3
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.

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<PAGE> 29

Income Tax. Income tax decreased to $(0.7) million for the nine-month
fiscal period ended September 30, 1996, from $(0.1) 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 $2.5 million to $(2.7) 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 $7.0 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 amortization of fees paid for product placement or
"slotting," introductory consumer sampling, couponing, advertising and trade
promotions. There were no comparable 1995 expenditures.

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<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 increased $1.0 million, or 11.4%, to
$9.8 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 8.1% for the calendar year ended December 31, 1996, from 9.5% 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 13.8% for the
calendar year ended December 31, 1996 from 9.5% 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 $(0.3) 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 $2.7 million to $(2.2) 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

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<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.

Management believes that the Company's Credit Agreement may be modified or
replaced concurrently with or subsequent to the closing of the Offering. While
no commitments for this modification have been made by the current or
prospective lenders, management anticipates that the Company's creditworthiness
and interest rate level of debt outstanding will be significantly improved after
it receives the net proceeds from the Offering. The Company expects to 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 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.

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.

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<PAGE> 33

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 before 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 before 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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<PAGE> 34

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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<PAGE> 35

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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<PAGE> 36

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 currently
represents 10% to 12% of the North American dry pasta market, and that of this
amount, approximately 80% 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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<PAGE> 37

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

35
<PAGE> 38

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.

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<PAGE> 39

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 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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<PAGE> 40

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

MILLING AND PASTA PRODUCTION CAPACITY

[Line graph depicting the Company's year-end milling and pasta production
capacity from 1992 through 1998 (1997-98 data based on budgeted future
expansion)]

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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<PAGE> 41

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

[Illustration of the Company's milling and pasta production process in
sequential steps commencing with a durum wheat mill, a pasta production facility
and a warehouse and distribution center.]

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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<PAGE> 42

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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<PAGE> 43

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> 44

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
Daniel M. Keller.......................... 42 Senior Vice President -- Sales and
Marketing
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.

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<PAGE> 45

Daniel M. Keller joined the Company in 1997 and was named Senior Vice
President -- Sales and Marketing in June 1997. He was employed by
Anheuser-Busch, Inc. in its Eagle snacks subsidiary where he most recently
served as Vice President of Sales. Previously, he was employed in brand
management and business planning positions at Pepsico, Inc. in its Frito Lay
division, and BF Goodrich & Co., Inc.

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 Vice Chairman 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 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.

COMPOSITION OF BOARD OF DIRECTORS

Upon consummation of the Offering, it is anticipated that the Company's
Board of Directors will consist of seven 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 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.

43
<PAGE> 46

COMPENSATION OF DIRECTORS

Mr. Schlindwein is currently the only director who receives fees for
serving as a director of the Company. Mr. Schlindwein receives 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.

44
<PAGE> 47

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.

45
<PAGE> 48

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

46
<PAGE> 49

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.

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
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.

47
<PAGE> 50

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

Concurrently with 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,
Potter and Keller and certain other existing stockholders of the Company
(collectively, the "Existing Stockholders") will amend their existing
Stockholders Agreement, which sets forth certain rights and obligations of such
Existing Stockholders. The amended Stockholders Agreement will provide 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.

So long as the shares of Common Stock of the Company owned by the Morgan
Stanley Stockholders constitute at least 35% of the outstanding Common Stock and
there are seven directors on the Board, the Morgan Stanley Stockholders will
have the right to designate three Board nominees. If there are seven directors
on the Board and the Morgan Stanley Stockholders' ownership percentage falls
below 35% but equals or exceeds 25%, or falls below 25% but equals or exceeds
5%, then the Morgan Stanley Stockholders will have the right to designate two
director nominees or one director nominee, respectively. If the size of the
Board is increased, the Morgan Stanley Stockholders will have the right to
designate the number of director nominees which constitutes, as nearly as may
be, the same percentage representation on the Board of Directors as if the size
of the Board of Directors had remained fixed at seven. 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 Morgan Stanley Stockholders own 10% of
the outstanding shares of Common Stock, the Morgan Stanley Stockholders may
designate one member of each Board committee.

48
<PAGE> 51

The amended Stockholders Agreement will provide 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;
(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; or (xiii) any
commitment to do any of the foregoing actions. In addition, as long as the
Morgan Stanley Stockholders own at least 35% of the outstanding Common Stock, at
least one of the directors designated by the Morgan Stanley Stockholders must
approve the appointment or removal of the Chief Executive Officer or the Chief
Financial Officer.

The amended Stockholders Agreement will provide that certain transfers of
shares by the Existing Stockholders (other than the Morgan Stanley Stockholders)
will be 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
non-voting Common Stock so that, following such conversion, the Morgan Stanley
Stockholders will own, in the aggregate, 49% of the outstanding voting 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 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.

49
<PAGE> 52

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, Potter and Keller 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
Daniel M. Keller........................................ 581 25,000 25,000
</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.

50
<PAGE> 53

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.

51
<PAGE> 54

(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.

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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.

In connection with the Offering, the Company will amend and restate its
Charter and By-Laws. Upon such amendment and restatement, the authorized capital
stock of the Company will consist 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 will effect the
Recapitalization pursuant to which each outstanding share of Old Common Stock
and Old Class A Common Stock outstanding immediately prior to the
Recapitalization will be converted into shares of Class A Common
Stock, and certain of the shares of Class A Common Stock held by the Morgan
Stanley Stockholders will be converted into Class B Common Stock. The Morgan
Stanley Stockholders have informed the Company that following the consummation
of the Offering they intend to convert such number of their shares of Class B
Common Stock into Class A Common Stock so that, following such conversion, the
Morgan Stanley Stockholders will own, in the aggregate, 49% of the outstanding
Class A Common Stock.

The following summary does not purport to be complete and is subject to the
detailed provisions of, and qualified in its entirety by reference to, 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 to 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 and are convertible by the Morgan
Stanley Stockholders and certain related persons into an equal number of shares
of Class B Common Stock. Shares of Class A Common Stock held by the Morgan
Stanley Stockholders and certain related persons will 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.

Class B Common Stock. Under the Charter, 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 to the extent that, following such
conversion, the Morgan Stanley Stockholders and certain related persons will

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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 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

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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.

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.

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

The amended Stockholders Agreement will provide that so long as the total
number of shares of Common Stock of the Company owned by the Morgan Stanley
Stockholders constitutes at least 35% of the outstanding Common Stock and there
are seven directors on the Board, the Morgan Stanley Stockholders will have the
right to designate three members to the Board of Directors. In addition, the
Morgan Stanley Stockholders will have the right to designate two nominees for
election to the Board of Directors for so long as they own between 25% and 35%
of the outstanding Common Stock and one nominee for election to the Board for so
long as they own between 5% and 25% 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 will state 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.

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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 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.

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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

The following is a general discussion of certain 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 discussion 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 discussion 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 discussion 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.

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,

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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 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

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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.

60
<PAGE> 63

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

61
<PAGE> 64

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.

62
<PAGE> 65

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'

63
<PAGE> 66

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.

64
<PAGE> 67

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.

65
<PAGE> 68

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> 69

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
August 4, 1997

F-2
<PAGE> 70

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 3,579 2,334
Other assets.............................................. 3,687 4,991 5,256
-------- -------- --------
Total assets.............................................. $135,424 $143,157 $146,110
======== ======== ========
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) (15,641) (13,412)
-------- -------- --------
Total stockholders' equity................................ 20,067 17,438 41,625
-------- -------- --------
Total liabilities and stockholders' equity................ $135,424 $143,157 $146,110
======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE> 71

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..... 3,792 5,303 3,656 8,676 6,625 8,078
Product introduction costs (Note
10)............................. -- -- -- 5,753 3,150 3,458
General and administrative
expense......................... 1,951 2,930 2,048 2,805 2,741 2,855
------- ------- ------- ------- ------- -------
Operating profit.................. 8,845 8,754 4,883 6,285 7,876 11,404
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) (1,738) (154) 3,604
Income tax expense (benefit) (Note
3).............................. 1,484 270 (147) (656) (87) 1,375
------- ------- ------- ------- ------- -------
Income (loss) before extraordinary
item............................ 2,386 476 (231) (1,082) (67) 2,229
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) $(2,729) $(1,714) $ 2,229
======= ======= ======= ======= ======= =======
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> 72

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.............. -- -- -- -- -- -- (2,729) (2,729)
Balance at September 30,
------- --------- --- ------- ----- ----- -------- -------
1996.................. 311,034 1,036,042 10 33,069 -- -- (15,641) 17,438
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............ -- -- -- -- -- -- 2,229 2,229
------- --------- --- ------- ----- ----- -------- -------
Balance at June 30,
1997.................. 311,034 1,558,825 $15 $55,320 $(298) $ -- $(13,412) $41,625
======= ========= === ======= ===== ===== ======== =======
</TABLE>
See accompanying notes to financial statements.

F-5
<PAGE> 73

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) $ (2,729) $ (1,714) $ 2,229
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operations:
Depreciation and amortization.... 4,573 6,279 4,485 6,441 5,916 8,460
Deferred income tax expense
(benefit)..................... 1,168 264 (147) (656) (87) 1,375
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
Product placement fees........ -- -- (124) (3,230) (1,770) (1,352)
Other......................... (238) (574) (376) (422) (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> 74

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

Revenue from product sales is recognized at the time of shipment.

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. 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 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

F-7
<PAGE> 75

AMERICAN ITALIAN PASTA COMPANY

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

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

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

F-8
<PAGE> 76

AMERICAN ITALIAN PASTA COMPANY

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
$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>
Product placement fees..................................... $ 145 $ 3,375 $ 4,548
Debt issuance costs (Note 2)............................... 5,071 2,143 4,242
Package design costs....................................... 1,274 1,456 1,492
Other...................................................... 1,006 1,150 1,098
------- ------- -------
7,496 8,124 11,380
Accumulated amortization................................... (3,809) (3,133) (6,124)
------- ------- -------
$ 3,687 $ 4,991 $ 5,256
======= ======= =======
</TABLE>

Product placement fees (or "slotting" fees, as commonly described in the
retail grocery industry) are incurred to obtain product distribution
relationships with certain customers. The Company's policy is to capitalize such
amounts and amortize them over the specified minimum length of the contract or,
if undefined, over a 12-month period. In the event the customer relationship is
terminated prior to the end of the amortization period, the respective product
placement fees are written off. Product placement fees, net of accumulated
amortization, were $1,046,000 at June 30, 1997.

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 expenditures incurred in the development of
new or enhanced package designs. 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.

START UP COSTS

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. 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.

F-9
<PAGE> 77

AMERICAN ITALIAN PASTA COMPANY

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

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

F-10
<PAGE> 78

AMERICAN ITALIAN PASTA COMPANY

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

2. LONG-TERM DEBT -- (CONTINUED)
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.

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>

F-11
<PAGE> 79

AMERICAN ITALIAN PASTA COMPANY

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

2. LONG-TERM DEBT -- (CONTINUED)
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 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.

F-12
<PAGE> 80

AMERICAN ITALIAN PASTA COMPANY

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

3. INCOME TAXES -- (CONTINUED)
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.................................................... 1,064 988 688
------- ------- -------
Total deferred tax assets.................................. 7,668 12,310 12,807
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 4,879 3,578
Valuation allowance for deferred tax assets................ (1,031) (1,031) (1,031)
------- ------- -------
Net deferred tax assets.................................... $ 2,160 $ 3,848 $ 2,547
======= ======= =======
</TABLE>

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 (656) 1,375
Change in valuation allowance......................... 34 -- -- --
------ ---- ----- ------
Net income tax expense (benefit)...................... $1,484 $270 $(656) $1,375
====== ==== ===== ======
</TABLE>

F-13
<PAGE> 81

AMERICAN ITALIAN PASTA COMPANY

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

3. INCOME TAXES -- (CONTINUED)
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 $(1,738) $3,604
U.S. statutory tax rate............................... x34% x34% x34% x34%
------ ---- ------- ------
Federal income tax expense (benefit) at U.S. statutory
rate................................................ 1,316 254 (591) 1,225
State income tax expense (benefit), net of federal tax
effect.............................................. 155 30 (70) 144
Change in valuation allowance......................... 34 -- -- --
Other, net............................................ (21) (14) 5 6
------ ---- ------- ------
Net income tax expense (benefit)...................... $1,484 $270 $ (656) $1,375
====== ==== ======= ======
</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.

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

F-14
<PAGE> 82

AMERICAN ITALIAN PASTA COMPANY

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

6. STOCK OPTION PLAN -- (CONTINUED)
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.

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 and earnings per share that
are not materially different from amounts reported.

F-15
<PAGE> 83

AMERICAN ITALIAN PASTA COMPANY

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

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>

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 fee amortization.................... 744 2,657
Introductory trade incentives......................... 268 --
Other................................................. 296 157
------ ------
Total product introduction costs...................... $5,753 $3,458
====== ======
</TABLE>

F-16
<PAGE> 84

AMERICAN ITALIAN PASTA COMPANY

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

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. RECAPITALIZATION

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.

F-17
<PAGE> 85

AIPC PASTA PRODUCTION FACILITIES

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

<PAGE> 86

AIPC LOGO
<PAGE> 87
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 August 5, 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> 88

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 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.

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

II-1
<PAGE> 89

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, its
Chairman of the Board, 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 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.

(d) On July 7, 1995, the Company issued to JSS Management Co. Ltd., of
which Mr. Schlindwein is a general partner, 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.

(e) 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.

(f) 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.

(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 each of the then current stockholders of
the Company, other than Citicorp Venture Capital, Ltd., and several
members of the Company's management team (the "1997 Private Equity
Financing"). In particular, the Company issued 418,021 shares to the
MSCP Funds (as defined in the Prospectus), 69,670 shares to affiliated
entities of George K. Baum & Company, an aggregate of 8,000 shares to
a trust for the benefit of Mr. Schroeder and members of his family, an
aggregate of 4,645 shares to James Schlindwein, his wife and JSS
Management Co. Ltd., of which Mr. Schlindwein is a general partner, an
aggregate of 3,301 shares to Timothy S. Webster and trusts for the
benefit of members

II-2
<PAGE> 90

of his family, 6,933 shares to David E. Watson, 847 shares to Norman
F. Abreo and 2,124 shares to David B. Potter.

(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 securities laws registration
requirements set forth in Section 3(a)(2) of the Securities Act.

No underwriters were involved in the foregoing sales of securities. Except
as indicated above, all of these sales were made in reliance upon an exemption
from the registration provisions of the Securities Act set forth in Section 4(2)
thereof relating to sales by an issuer not involving any public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBIT INDEX

The exhibit index is set forth on page II-6 of this Registration Statement
and is hereby incorporated herein by reference.

(B) FINANCIAL STATEMENT SCHEDULES

No financial statement schedules are filed as part of this 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> 91

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 the Registrant
has duly caused this 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 4th day of August, 1997.

AMERICAN ITALIAN PASTA COMPANY

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

II-4
<PAGE> 92

POWER OF ATTORNEY AND SIGNATURES

Each of the undersigned hereby severally constitute and appoint Timothy S.
Webster and David E. Watson, and each of them singly, with power of substitution
and resubstitution, as his or her true and lawful attorneys, with full power to
them and each of them singly, to sign for us in our names in the capacities
indicated below, all pre-effective and post-effective amendments to this
Registration Statement, including any filings pursuant to Rule 462(b) under the
Securities Act of 1933, and generally to do all things in our names and on our
behalf in such capacities to enable American Italian Pasta Company to comply
with the provisions of the Securities Act of 1933, and all requirements of the
Securities and Exchange Commission.

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

<TABLE>
<C> <S> <C>
/s/ HORST W. SCHROEDER Chairman of the Board of Directors August 4, 1997
- ---------------------------------------
Horst W. Schroeder

/s/ TIMOTHY S. WEBSTER President, Chief Executive Officer and August 4, 1997
- --------------------------------------- Director (Principal Executive Officer)
Timothy S. Webster

/s/ DAVID E. WATSON Executive Vice President and Chief August 4, 1997
- --------------------------------------- Financial Officer, Treasurer and Secretary
David E. Watson (Principal Financial and Accounting
Officer)

/s/ JONATHAN E. BAUM Director August 4, 1997
- ---------------------------------------
Jonathan E. Baum

/s/ DAVID Y. HOWE Director August 4, 1997
- ---------------------------------------
David Y. Howe

/s/ ROBERT H. NIEHAUS Director August 4, 1997
- ---------------------------------------
Robert H. Niehaus

/s/ AMY S. ROSEN Director August 4, 1997
- ---------------------------------------
Amy S. Rosen

/s/ JAMES A. SCHLINDWEIN Director August 4, 1997
- ---------------------------------------
James A. Schlindwein

/s/ LAWRENCE B. SORREL Director August 4, 1997
- ---------------------------------------
Lawrence B. Sorrel

/s/ RICHARD C. THOMPSON Director August 4, 1997
- ---------------------------------------
Richard C. Thompson
</TABLE>

II-5
<PAGE> 93

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 as of January 1, 1996 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
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
+ Confidential treatment will be requested for portions of this document. The
redacted material will be filed separately with the Commission.

II-6

<PAGE> 1
EXHIBIT 3.1

_______________________________

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AMERICAN ITALIAN PASTA COMPANY
______________________________

American Italian Pasta Company, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:

1. The name of the Corporation is American Italian Pasta Company. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on October 9, 1991.

2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, as amended (the "DGCL"), this Amended and Restated
Certificate of Incorporation restates and further amends the provisions of the
Certificate of Incorporation of this Corporation. Pursuant to and in
accordance with the provisions of Section 228 of the DGCL, written consent
to this Amended and Restated Certificate of Incorporation has been given in
lieu of a vote of stockholders at a meeting and written notice of such written
consent has been given to all stockholders who have not consented in writing to
this Amended and Restated Certificate of Incorporation.

3. The text of the original Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:

ARTICLE I
NAME

SECTION 1.1 NAME. The name of the Corporation is American Italian Pasta
Company.

ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT

SECTION 2.1 OFFICE AND AGENT. The registered office of the Corporation
in the State of Delaware is located at 1209 Orange Street, in the City of
Wilmington, in the County of New Castle. The name of its registered agent at
that address is The Corporation Trust Company.

ARTICLE III
CORPORATE PURPOSE

SECTION 3.1 PURPOSE. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the DGCL.

<PAGE> 2

ARTICLE IV
CAPITALIZATION

SECTION 4.1 AUTHORIZED CAPITAL. SHARES. (a) The Corporation is
authorized to issue three classes of stock to be designated, respectively,
"Class A Convertible Common Stock", "Class B Convertible Non-Voting Common
Stock" (referred to herein collectively with the Class A Convertible Common
Stock as the "Common Stock") and "Preferred Stock." The total number of shares
that the Corporation is authorized to issue is _____ million shares, of which
_____ million shares shall be Class A Convertible Common Stock, par value $.001
per share, _____ million shares shall be Class B Convertible Non-Voting Common
Stock, par value $.001 per share, and _____ million shares shall be Preferred
Stock, par value $.001 per share.

(b) Concurrently with the effectiveness of this Amended and Restated
Certificate of Incorporation, each share of common stock, no par value per
share, and Class A common stock, par value $.01 per share, of the Corporation
outstanding immediately prior to the effectiveness of this Amended and Restated
Certificate of Incorporation shall be redesignated as _____ shares of Class A
Convertible Common Stock.

SECTION 4.2 COMMON STOCK. The designations and the powers, preferences
and rights of the Common Stock are as follows:

(a) VOTING RIGHTS.

(i) CLASS A CONVERTIBLE COMMON STOCK. Except as set forth herein
or as otherwise required by law, each outstanding share of Class A
Convertible Common Stock shall be entitled to vote on each matter on
which the stockholders of the Corporation shall be entitled to vote,
including the election of directors, and each holder of Class A
Convertible Common Stock shall be entitled to one vote for each share of
such stock held by such holder.

(ii) CLASS B CONVERTIBLE NON-VOTING COMMON STOCK. Except as set
forth herein or as otherwise required by law, each outstanding share of
Class B Convertible Non-Voting Common Stock shall not be entitled to vote
on any matter on which the stockholders of the Corporation shall be
entitled to vote, and shares of Class B Convertible Non-Voting Common
Stock shall not be included in determining the number of shares voting or
entitled to vote on any such matters. Notwithstanding the foregoing,
holders of shares of the Class B Convertible Non-Voting Common Stock
shall be entitled to vote as a separate class on any amendment to this
subparagraph (a)(ii) and on any amendment, repeal or modification of any
provision of this Amended and Restated Certificate of Incorporation
("Certificate of Incorporation") that adversely affects the powers,
preferences or special rights of holders of the Class B Convertible
Non-Voting Common Stock.

The number of authorized shares of Class B Convertible Non-Voting Common
Stock may be increased or decreased (but not below the number of shares thereof
then outstanding plus the

-2-

<PAGE> 3

number of shares of Class B Convertible Non-Voting Common Stock issuable
or exercisable pursuant to any security of the Corporation providing for the
issuance or delivery of Class B Convertible Non-Voting Common Stock) by the
affirmative vote of the holders of a majority of the outstanding shares of
Class A Convertible Common Stock and without any vote or consent of the holders
of shares of Class B Convertible Non-Voting Common Stock.

(b) DIVIDENDS AND DISTRIBUTIONS. Subject to the prior rights of
holders of all classes of stock at the time outstanding having prior rights as
to dividends, the Board of Directors of the Corporation (the "Board of
Directors") may cause dividends to be paid to the holders of shares of Common
Stock out of funds legally available for the payment of dividends by declaring
an amount per share as a dividend. When and as dividends or other
distributions (including without limitation any grant or distribution of rights
to subscribe for or purchase shares of capital stock or securities or
indebtedness convertible into capital stock of the Corporation) are declared,
whether payable in cash, in property or in shares of stock of the Corporation
(other than in shares of Common Stock) the holders of Common Stock shall be
entitled to share equally, share for share, in such dividends or other
distributions as if all such shares were of a single class. No dividends or
other distributions shall be 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, except dividends or other
distributions payable to all of the holders of Common Stock ratably according
to the number of shares held by them, in shares of Class A Convertible Common
Stock to holders of that class of stock, and in shares of Class B Convertible
Non-Voting Common Stock to holders of that class of stock.

(c) LIQUIDATION. Subject to the prior rights of holders of all
classes of stock outstanding having prior rights with respect to the assets of
the Corporation, in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, holders of Common
Stock shall be entitled to share ratably according to the number of shares held
by them, in all assets of the Corporation available for distribution to its
stockholders.

(d) CONVERSION.

(i) CONVERSION OF CLASS A CONVERTIBLE COMMON STOCK.

(A) OPTIONAL CONVERSION. Subject to and upon compliance with
the provisions of this subparagraph (d), each Morgan Stanley
Stockholder (as hereinafter defined) shall be entitled to convert,
at any time and from time to time, any or all of the shares of
Class A Convertible Common Stock held by such stockholder into an
equal number of shares of Class B Convertible Non-Voting Common
Stock; PROVIDED that following receipt of a Deferral Notice (as
defined in paragraph (d)(iv) below), the aggregate number of shares
of Class A Convertible Common Stock permitted to be converted at
the end of the related Deferral Period (as defined in paragraph
(d)(iv) below) by each such stockholder (other than a stockholder
that requested a conversion and thereby triggered such Deferral
Notice, which stockholder shall be entitled to convert all shares
such stockholder has requested to convert) in accordance with
paragraph (d)(iv) shall

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<PAGE> 4

be equal to the number of shares of Class A Convertible Common
Stock held by such stockholder that are required to be converted so
that such stockholder (after giving effect to the proposed
redemption, repurchase or other acquisition, if any, and to all
other conversions during or upon the expiration of such Deferral
Period) holds the same percentage of the total outstanding Class A
Convertible Common Stock as such stockholder held immediately prior
to the receipt of the relevant Deferral Notice.

(B) AUTOMATIC CONVERSION. Notwithstanding anything to the
contrary in the immediately preceding clause (A), in the case of
any such conversion (including any conversion in accordance with
paragraph (d)(iv)) or in the case of any acquisition of additional
shares of Class A Convertible Common Stock by any Morgan Stanley
Stockholder, shares of Class A Convertible Common Stock held by
Morgan Stanley Stockholders shall, pro rata in proportion to the
number of shares of Class A Convertible Common Stock held by all
Morgan Stanley Stockholders, automatically, without any action on
part of the transferor, the transferee or the Corporation, be
converted into shares of Class B Convertible Non-Voting Common
Stock to the extent necessary so that, after giving effect to all
such conversions (and to any other related redemptions, repurchases
or other acquisitions), the Morgan Stanley Stockholders shall not
own in the aggregate a number of shares of Class A Convertible
Common Stock greater than the MS Percentage (as hereinafter
defined).

(ii) CONVERSION OF CLASS B CONVERTIBLE NON-VOTING COMMON STOCK.

(A) OPTIONAL CONVERSION. Subject to and upon compliance with
the provisions of this subparagraph (d), each Morgan Stanley
Stockholder shall be entitled at any time and from time to time, if
at such time the Morgan Stanley Stockholders shall beneficially
own, in the aggregate, a number of shares of Class A Convertible
Common Stock that is less than the MS Percentage, to convert a
number of its shares of Class B Convertible Non-Voting Common Stock
held by such Morgan Stanley Stockholder, pro rata in proportion to
the number of shares of Class B Convertible Non-Voting Common Stock
held by all Morgan Stanley Stockholders, into an equal number of
shares of Class A Convertible Common Stock such that, if all Morgan
Stanley Stockholders were to concurrently exercise the right to
convert as set forth in this subparagraph (d)(ii), the Morgan
Stanley Stockholders would, immediately following such conversion,
beneficially own in the aggregate a number of shares of Class A
Convertible Common Stock no greater than the MS Percentage.

(B) AUTOMATIC CONVERSION UPON TRANSFER. Upon a Transfer (as
hereinafter defined) by any Morgan Stanley Stockholder of any
shares of Class B Convertible Non-Voting Common Stock to a person
other than any other Morgan Stanley Stockholder or any Affiliate of
any Morgan Stanley Stockholder, any shares of Class B Convertible
Non-Voting Common Stock so Transferred

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<PAGE> 5

shall automatically, without any action on part of the
transferor, the transferee or the Corporation, be converted into an
equal number of shares of Class A Convertible Common Stock upon the
consummation of such Transfer. Each such conversion shall be deemed
to have been effected immediately prior to the close of business on
the date the share is Transferred.

(iii) MECHANICS OF CONVERSION.

(A) OPTIONAL CONVERSION. Each optional conversion of shares
of any class of Common Stock of the Corporation into shares of
another class of Common Stock of the Corporation shall be effected
by the surrender of the certificate or certificates representing
the shares to be converted (the "Converting Shares") accompanied by
instruments of transfer satisfactory to the Corporation and the
payment in cash of any amount required pursuant to subparagraph
(d)(viii) below and sufficient to transfer the Converting Shares to
the Corporation free of any adverse interest, at the principal
office of the Corporation or any of the offices or agencies
maintained for such purpose by the Corporation ("Transfer Agent")
and shall give written notice (by registered or certified mail,
overnight courier or hand delivery) to the Corporation at such
Transfer Agent that such holder desires to convert the Converting
Shares, or a stated number of the shares represented by such
certificate or certificates, into an equal number of shares of the
class into which such shares may be converted (the "Converted
Shares"). Such notice shall also state the name or names (with
addresses) and denominations in which the certificate or
certificates for Converted Shares are to be issued and shall
include instructions for the delivery thereof.

The Corporation shall promptly notify each Morgan Stanley
Stockholder of its receipt of such notice. As promptly as
practicable after the surrender of such Converting Shares as
aforesaid, the Corporation will, subject to the terms of
subparagraphs (d)(i) and (d)(ii) hereof, issue and deliver in
accordance with the surrendering holder's instructions the
certificate or certificates evidencing the Converted Shares
issuable upon such conversion, and the Corporation will deliver to
the converting holder a certificate (which shall contain such
legends as were set forth on the surrendered certificate or
certificates) representing any shares which were represented by the
certificate or certificates that were delivered to the Corporation
in connection with such conversion, but which were not converted;
PROVIDED, HOWEVER, that if such conversion is subject to
subparagraph (d)(iv) below, the Corporation shall not issue such
certificate or certificates until the expiration of the Deferral
Period referred to therein.

Such conversion, to the extent permitted by law, shall be
deemed to have been effected as of the close of business on the
date on which such surrendered certificate or certificates shall
have been received by the Corporation as provided herein, and at
such time the rights of the holder of the Converting

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<PAGE> 6

Shares as such holder shall cease and the person or persons in
whose name or names the certificate or certificates for the
Converted Shares are to be issued upon such conversion shall be
deemed to have become the holder or holders of record of the
Converted Shares. Notwithstanding the foregoing, in the case of a
conversion subject to subparagraph (d)(iv) below, the conversion
shall be deemed effective upon the expiration of the Deferral
Period referred to therein.

(B) AUTOMATIC CONVERSION. Each automatic conversion of
shares of any class of Common Stock of the Corporation into shares
of another class of Common Stock of the Corporation shall be deemed
to have been effected immediately prior to the close of business on
the date the share is automatically converted in accordance with
this subparagraph (d). In each such case the person or persons in
whose name or names any certificate of certificates for Converted
Shares shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the Converted Shares
represented thereby at the effective date of such conversion,
unless the stock transfer books of the Corporation shall be closed
on such date, in which event such conversion shall be deemed to
have been effected immediately following the opening of business on
the next day on which the stock transfer books of the Corporation
shall be open. Following any such automatic conversion, the share
or shares of Common Stock so converted shall cease to be
outstanding, notwithstanding the fact that the holder or holders
may not have surrendered the certificate or certificates
representing such Converting Shares for conversion, and such
certificate or certificates shall thereafter represent solely the
right to receive a certificate or certificates for the Converted
Shares Stock issuable upon such automatic conversion, upon
surrender of such certificate or certificates to the Corporation or
its transfer agent, of the certificate or certificates representing
the Converting Shares so converted.

(iv) NOTICE OF CONVERSIONS OR OTHER TRANSFERS TO THE MORGAN STANLEY
STOCKHOLDERS. The Corporation shall not convert or directly or
indirectly redeem, repurchase or otherwise acquire any shares of Class A
Convertible Common Stock or any other class of capital stock of the
Corporation or take any other action affecting the voting rights of such
shares if such action would increase the percentage of any class of
outstanding voting securities of the Corporation beneficially owned or
controlled by any Morgan Stanley Stockholder (other than any such
stockholder which requested that the Corporation take such action, or
which otherwise waives in writing its rights under this subparagraph
(d)(iv)), unless the Corporation gives written notice (the "Deferral
Notice") of such action to each Morgan Stanley Stockholder. The
Corporation will defer making any such conversion, redemption, purchase
or other acquisition, or taking any such other action, for a period of 10
business days (the "Deferral Period") after giving the Deferral Notice in
order to allow each Morgan Stanley Stockholder to determine whether it
wishes to convert or take any other action with respect to the Common
Stock it beneficially owns, controls or has the power to vote, and if any
such Morgan Stanley Stockholder then elects to convert any shares of
Class A Convertible Common Stock it shall notify

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<PAGE> 7

the Corporation in writing within five business days of the issuance of
the Deferral Notice, in which case the Corporation shall (i) defer
taking the pending action until the end of the Deferral Period, (ii)
promptly notify from time to time each Morgan Stanley Stockholder holding
shares of each proposed conversion and the proposed transactions, and
(iii) effect the conversions requested by all Morgan Stanley Stockholders
in response to the notices issued pursuant to this subparagraph (d)(iv)
at the end of the Deferral Period.

The Corporation shall deliver notice to each Morgan Stanley
Stockholder (i) not later than 50 days after the end of each fiscal
quarter, of the number of shares of each class of stock outstanding as of
a date on or after the end of such fiscal quarter (which requirement may
be satisfied by the Corporation by delivering periodic reports under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
containing such information) and (ii) within 10 business days of the
issuance of any shares of Class A Convertible Common Stock which,
together with any other such issuances since the date of the last notice
pursuant to clause (i) of this paragraph, results in the number of
outstanding shares of Class A Convertible Common Stock increasing by
three percent or more since the date of such last prior notice.

(v) STOCK SPLITS; ADJUSTMENTS. If the Corporation shall in any
manner subdivide (by stock split, stock dividend or otherwise) or combine
(by reverse stock split or otherwise) the outstanding shares of any class
of Common Stock, the outstanding shares of each other class of Common
Stock shall be subdivided or combined, as the case may be, to the same
extent, share and share alike, and effective provision shall be made for
the protection of the conversion rights hereunder.

In case of any reorganization, reclassification or change of shares
of any class of Common Stock (other than a change in par value or from
par to no par value as a result of a subdivision or combination), or in
case of any consolidation of the Corporation with one or more
corporations or a merger of the Corporation with another corporation,
each holder of a share of Common Stock, irrespective of class, shall have
the right at any time thereafter, so long as the conversion right
hereunder with respect to such share would exist had such event not
occurred, to convert such share into the kind and amount of shares of
stock and other securities and properties (including cash) receivable
upon such reorganization, reclassification, change, consolidation,
merger, sale, lease or other disposition by a holder of the number of
shares of the class of Common Stock into which such shares of Common
Stock might have been converted immediately prior to such
reclassification, change, consolidation, merger, sale, lease or other
disposition. In the event of such a reorganization, reclassification,
change, consolidation, merger, sale, lease or other disposition,
effective provision shall be made in the certificate of incorporation of
the resulting or surviving corporation or otherwise for the protection of
the conversion rights of the shares of Common Stock of each class that
shall be applicable, as nearly as reasonably may be, to any such other
shares of stock and other securities and property deliverable upon
conversion of shares of Common Stock into which such Common Stock might
have been converted immediately prior to such event.

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<PAGE> 8

(vi) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of
each class of Common Stock or its treasury shares, solely for the
purposes of issuance upon the conversion of shares of any class of Common
Stock, such number of shares of such class as are then issuable upon the
conversion of all outstanding shares of each such class of Common Stock.

(vii) PAYMENT OF TRANSFER TAXES. The issuance of certificates for
shares of any class of Common Stock upon conversion of shares of any
other class of Common Stock shall be made without charge to the holders
of such shares for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the
related issuance of shares of Common Stock; PROVIDED, HOWEVER, that the
Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Common Stock
converted and no such issue or delivery shall be made unless and until
the person requesting such issue or delivery has paid to the Corporation
the amount of any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.

(e) NO PREEMPTIVE RIGHTS. The holders of shares of Common Stock
shall have no preemptive or preferential rights of subscription to any shares
of any class of capital stock of the Corporation or any securities convertible
into or exchangeable for shares of any class of capital stock of the
Corporation.

(f) DEFINITIONS. As used herein, the following terms shall have
meanings shown below:

(i) "AFFILIATE" means with respect to any Person, any other Person,
directly or indirectly controlling, controlled by or under common control
with such Person, whether through the ownership of voting securities, by
contract or otherwise, and shall include, in the case of any Person that
is a trust or is acting through a nominee, any successor trust or
nominee.

(ii) "MORGAN STANLEY STOCKHOLDERS" means Morgan Stanley Capital
Investors, L.P., a Delaware limited partnership, Morgan Stanley Capital
Partners III, L.P., a Delaware limited partnership, The Morgan Stanley
Leveraged Equity Fund II, L.P., a Delaware limited partnership, Morgan
Stanley, Dean Witter, Discover & Co., a Delaware corporation, Affiliates
of any of the foregoing Persons or any member of the Board of Directors
who was nominated for election to the Board of Directors by any Morgan
Stanley Stockholder.

(iii) "MS PERCENTAGE" means 49% of the outstanding shares of Class
A Convertible Common Stock.

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<PAGE> 9

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

(v) "TRANSFER" or "TRANSFERRED" means a transfer, sale, assignment,
pledge, gift or other disposition.

SECTION 4.3 PREFERRED STOCK. Shares of Preferred Stock of the
Corporation may be issued from time to time in one or more classes or series,
each of which class or series shall have such distinctive designation or title
as shall be fixed by the affirmative vote of a majority of the whole Board of
Directors prior to the issuance of any shares thereof. Each such class or
series of Preferred Stock shall have such voting powers, full or limited, or no
voting powers, and such designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions, including the dividend rate, redemption price and liquidation
preference, and may be convertible into, or exchangeable for, at the option of
either the holder or the Corporation or upon the happening of a specified
event, shares of any other class or classes or any other series of the same or
any other class or classes of capital stock, or any debt securities, of the
Corporation at such price or prices or at such rate or rates of exchange and
with such adjustments as shall be stated and expressed in this Certificate of
Incorporation or in any amendment hereto or in such resolution or resolutions
providing for the issuance of such class or series of Preferred Stock as may be
adopted from time to time by the affirmative vote of a majority of the whole
Board of Directors prior to the issuance of any shares thereof pursuant to the
authority hereby expressly vested in it, all in accordance with the DGCL. The
authority of the Board of Directors with respect to each series
shall also include, but not be limited to, the determination of restrictions,
if any, on the issue or reissue of any additional shares of Preferred Stock.

ARTICLE V
INDEMNIFICATION

SECTION 5.1 INDEMNIFICATION. (a) RIGHT TO INDEMNIFICATION. Each
director and officer of the Corporation who was or is made a party or is
threatened to be made a party to or is involved in or called as a witness in
any Proceeding (as hereinafter defined) because he or she is an Indemnified
Person (as hereinafter defined) shall, and, at the election of the Corporation
as determined by the Board of Directors, each employee and agent of the
Corporation who was or is made a party or is threatened to be made a party to
or is involved in or called as a witness in any Proceeding because he or she is
an Indemnified Person may, be indemnified and held harmless by the Corporation
to the fullest extent permitted under the DGCL, as the same now exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than the DGCL permitted the Corporation to provide prior
to such amendment). Such indemnification shall cover all expenses incurred by
an Indemnified Person (including, but not limited to, attorneys' fees and other
expenses of litigation) and all liabilities and losses (including, but not

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limited to, judgments, fines, ERISA or other excise taxes or penalties and
amounts paid or to be paid in settlement) incurred by such person in connection
therewith.

Notwithstanding the foregoing, except with respect to indemnification
specified in this Article V, the Corporation shall indemnify an Indemnified
Person in connection with a Proceeding (or part thereof) initiated by such
person only if such Proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.

For purposes of this Article V:

(i) a "Proceeding" is an action, suit or proceeding, whether civil,
criminal, administrative or investigative, and any appeal therefrom
including, without limitation, any such action, suit, proceeding or
appeal by or in the right of the Corporation;

(ii) an "Indemnified Person" is a person who is, was, or had agreed
to become a director, officer, employee, agent or a Delegate, as defined
herein, of the Corporation or the legal representative of any of the
foregoing;

(iii) a "Delegate" is (A) any employee of the Corporation or a
subsidiary of the Corporation serving as a director or officer (or in a
substantially similar capacity) of an entity or enterprise (x) in which
the Corporation and its subsidiaries collectively own a 10% or greater
equity interest or (y) the principal function of which is to service or
benefit the Corporation or a subsidiary of the Corporation; (B) any
employee of the Corporation or a subsidiary of the Corporation serving as
a trustee or fiduciary of an employee benefit plan of the Corporation or
any entity or enterprise referred to in clause (A); and (C) any person
acting at the request of the Board of Directors of the Corporation in
any capacity with any entity or enterprise other than the Corporation;
and

(iv) the "Corporation" means American Italian Pasta Company, a
Delaware corporation, and its successors, but does not include any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger within the meaning of Section
145(h) of the DGCL.

(b) EXPENSES. Expenses, including attorneys' fees, incurred by a
director or officer of the Corporation indemnified pursuant to Section 5.1(a)
in defending or otherwise being involved in a Proceeding shall be paid by the
Corporation in advance of the final disposition of such Proceeding, including
any appeal therefrom, upon receipt of an undertaking (the "Undertaking") by or
on behalf of such person to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Corporation;
provided that in connection with a Proceeding (or part thereof) initiated by
such person, except a Proceeding authorized by Section 5.1(c), the Corporation
shall pay said expenses in advance of final disposition only if such Proceeding
(or part thereof) was authorized by the Board of Directors. A person to whom
expenses are advanced pursuant hereto shall not be obligated to repay pursuant
to the Undertaking until the final determination of any pending Proceeding in a
court of competent jurisdiction concerning the right of such person to be
indemnified or the obligation of such

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<PAGE> 11

person to repay pursuant to the Undertaking. Such expenses, including
attorneys' fees, incurred by other employees and agents of the Corporation may
be so paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate.

(c) PROTECTION OF RIGHTS. If a claim under Section 5.1(a) is not
promptly paid in full by the Corporation after a written claim has been
received by the Corporation or if expenses pursuant to Section 5.1(b) of this
Article have not been promptly advanced after a written request for such
advancement accompanied by the Undertaking has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim or the advancement of
expenses. If successful, in whole or in part, in such suit, such claimant
shall also be entitled to be paid the reasonable expense thereof (including,
without limitation, attorneys' fees). It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any Proceeding in advance of its final disposition where the required
Undertaking has been tendered to the Corporation) that indemnification of the
claimant is prohibited by law, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) to have
made a determination, if required, prior to the commencement of such action
that indemnification of the claimant is proper is the circumstances, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that indemnification of the
claimant is prohibited, shall be a defense to the action or create a
presumption that indemnification of the claimant is prohibited.

(d) MISCELLANEOUS.

(i) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Article V shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, By-law, agreement, vote of stockholders or
disinterested directors or otherwise. The Board of Directors shall have
the authority, by resolution, to provide for such indemnification of
employees or agents of the Corporation or others and for such other
indemnification of directors, officers or Delegates as it shall deem
appropriate.

(ii) INSURANCE, CONTRACTS AND FUNDING. The Corporation may
maintain insurance, at its expense, to protect itself and any director,
officer, employee, or agent of, or person serving in any other capacity
with, the Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any expenses, liabilities or losses,
whether or not the Corporation would have the power to indemnify such
person against such expenses, liabilities or losses under the DGCL. The
Corporation may enter into contracts with any director, officer or
Delegate of the Corporation in furtherance of the provisions of this
Article V and may create a trust fund, grant a security interest or use
other means (including, without limitation, a letter of credit) to ensure
the payment of such amounts as may be necessary to effect the advancing
of expenses and indemnification as provided in this Article V.

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(iii) CONTRACTUAL NATURE. The provisions of this Article V shall be
applicable to all Proceedings commenced or continuing after its adoption,
whether such arise out of events, acts or omissions which occurred prior
or subsequent to such adoption, and shall continue as to a person who has
ceased to be a director, officer or Delegate and shall inure to the
benefit of the heirs, executors and administrators of such person. This
Article V shall be deemed to be a contract between the Corporation and
each person who, at any time that this Article V is in effect, serves or
agrees to serve in any capacity which entitles him to indemnification
hereafter and any repeal or other modification of this Article, the
adoption of any provision of the Corporation's Certificate of
Incorporation inconsistent with this Article V or any repeal or
modification of the DGCL or any other applicable law shall not limit any
Indemnified Person's entitlement to the advancement of expenses or
indemnification under this Article V for Proceedings then existing or
later arising out of events, acts or omissions occurring prior to such
repeal or modification, including, without limitation, the right to
indemnification for Proceedings commenced after such repeal or
modification to enforce this Article V with regard to Proceedings arising
out of acts, omissions or events occurring prior to such repeal or
modification or adoption of an inconsistent provision.

ARTICLE VI
LIABILITY OF A DIRECTOR

SECTION 6.1 DIRECTOR LIABILITY. (a) A director of the Corporation shall
not be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL, or (iv) for any transaction from which the director derived any
improper personal benefit.

(b) If the DGCL is amended hereafter to authorize the further
elimination or limitation of the liability of directors, then the liability of
a director of the Corporation shall be eliminated or limited to the fullest
extent authorized by the DGCL, as so amended, without further action by either
the Board of Directors or the stockholders of the Corporation.

(c) Neither any amendment nor repeal of this Article VI, nor the
adoption of any provision of the Corporation's Certificate of
Incorporation inconsistent with this Article VI, shall eliminate or reduce the
effect of this Article, in respect of any act or omission occurring, or any
action or proceeding accruing or arising or that, but for this Article, would
accrue or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.

ARTICLE VII
MANAGEMENT OF THE AFFAIRS OF THE CORPORATION

SECTION 7.1 MANAGEMENT OF THE AFFAIRS OF THE CORPORATION. (a) The
business and affairs of the Corporation shall be managed by the Board of
Directors, which may exercise all
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the powers of the Corporation and do all such lawful acts and things that are
not conferred upon or reserved to the stockholders by law, by this Certificate
of Incorporation or by the by-laws of the Corporation (the "By-Laws").

(b) Election of directors of the Corporation need not be by written
ballot, unless required by the By-Laws.

(c) The following provisions are inserted for the limitation and
regulation of the powers of the Corporation and of its directors and
stockholders:

(i) AMENDMENT OF BY-LAWS. The By-Laws, or any of them, may be
altered, amended or repealed, or new By-Laws may be made, but only to the
extent any such alteration, amendment, repeal or new By-Law is not
inconsistent with any provision of this Certificate of Incorporation
as it may be amended from time to time, either by a majority of the
whole Board of Directors or by the stockholders of the Corporation upon
the affirmative vote of the holders of at least a 80% of the outstanding
capital stock entitled to vote thereon.

(ii) BOARD OF DIRECTORS.

(A) The number of directors which shall constitute the whole
Board of Directors shall be determined in the manner provided in
the By-Laws of the Corporation. The Board of Directors shall be
divided into three classes, as nearly equal in number as the then
total number of directors constituting the entire Board permits,
with the term of office of one class expiring each year. The
initial division of the Board of Directors shall be made by the
decision of a majority of the entire Board of Directors. The
initial Class I directors elected by the stockholders of the
Corporation shall hold office for a term expiring at the 1998
annual meeting of stockholders and until their successors shall be
elected and qualified, subject to prior death, retirement,
resignation or removal; the initial Class II directors elected by
the stockholders of the Corporation shall hold office for a term
expiring at the 1999 annual meeting of stockholders and until their
successors shall be elected and qualified, subject to prior death,
retirement, resignation or removal; and the initial Class III
directors elected by the stockholders of the Corporation shall hold
office for a term expiring at the 2000 annual meeting of
stockholders and until their successors shall be elected and
qualified, subject to prior death, retirement, resignation or
removal. At each such annual meeting of stockholders and at each
annual meeting thereafter, successors to the class of directors
whose term expires at that meeting shall be elected for a term
expiring at the third annual meeting following their election and
until their successors shall be elected and qualified, subject to
prior death, retirement, resignation or removal.

(B) Subject to the rights of the holders of any series of
preferred stock or any other class of capital stock of the
Corporation (other than common

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stock) then outstanding, any vacancy in the Board of Directors,
arising from death, retirement, resignation, removal, an
increase in the number of directors or any other cause, may be
filled by the Board of Directors, acting by a majority of the
remaining directors then in office, although less than a quorum, or
by a sole remaining director, the stockholders acting at an annual
meeting or, if the vacancy is with respect to a director elected by
a voting group, by action of any other directors elected by such
voting group or such voting group. Each director chosen to fill a
vacancy in the Board of Directors arising from the death,
retirement, resignation, removal of a director shall be elected to
complete the term of office of the director who is being succeeded.
In the event of any increase or decrease in the authorized number
of directors, (1) each director then serving as such shall
nevertheless continue as director of the class of which he or she
is a member until the expiration of such director's current term or
his or prior death, retirement, resignation or removal and (2) the
newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors
among the three classes of directors so as to ensure that no one
class has more than one director more than any other class, and
each director so elected shall hold office for the same term as the
other members of the class to which the director is assigned. No
decrease in the number of directors constituting the whole Board of
Directors shall shorten the term of an incumbent director.

(C) Except as may be provided in a resolution or resolutions
providing for any class or series of Preferred Stock pursuant
to Section 4.3 hereof 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 (66 2/3%) 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. The
provisions of this subsection shall be the exclusive method for the
removal of directors.

Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect directors
at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships
shall be governed by the terms of this Certificate of Incorporation
or the resolution or resolutions adopted by the Board of Directors
pursuant to Section 4.3 hereof applicable thereto, and such directors so
elected shall not be divided into classes pursuant to this Section 7.1(c)
unless expressly provided by such terms.

(iii) NOMINATION OF DIRECTORS. Only persons who are selected and
recommended by the Board of Directors or the committee of the Board of
Directors designated to make nominations, or who are nominated by
stockholders in accordance with the procedures set forth in this Section
7.1(c)(iii), shall be eligible for election, or qualified to serve, as

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<PAGE> 15

directors, except as may be otherwise provided in this Certificate of
Incorporation with respect to the right of holders of Preferred Stock of
the Corporation to nominate and elect a specified number of directors in
certain circumstances. Nominations of individuals for election to the
Board of Directors of the Corporation at any annual meeting or any
special meeting of stockholders at which directors are to be elected may
be made by any stockholder of the Corporation (x) who is a stockholder of
record on the date of the giving of the notice provided for in this
Section 7.1(c)(iii) and on the record date for the determination of
stockholders entitled to vote at such meeting and (y) who complies with
the procedures and requirements set forth in Section 7.1(c)(iii)(A)
and (B) below.

(A) Nominations by stockholders shall be made by written
notice (a "Nomination Notice"), which shall set forth the following
information: (i) as to each individual nominated, (a) the name,
date of birth, business address and residence address of such
individual, (b) the business experience during the past five years
of such nominee, including his or her principal occupations and
employment during such period, the name and principal business of
any corporation or other organization in which such occupations and
employment were carried on, and such other information as to the
nature of his or her responsibilities and level of professional
competence as may be sufficient to permit assessment of his or her
prior business experience, (c) whether the nominee is or has ever
been at any time a director, officer or owner of 5% or more of any
class of capital stock, partnership interests or other equity
interest of any corporation, partnership or other entity, (d) any
directorships held by such nominee in any company with a class of
securities registered pursuant to Section 12 of the Exchange Act,
or subject to the requirements of Section 15(d) of the Exchange Act
or any company registered as an investment company under the
Investment Company Act of 1940, as amended, (e) whether, in the
last five years, such nominee has been convicted in a criminal
proceeding or has been subject to a judgment, order, finding or
decree of any federal, state or other governmental entity,
concerning any violation of federal, state or other law, or any
proceeding in bankruptcy, which conviction, order, finding, decree
or proceeding may be material to an evaluation of the ability or
integrity of the nominee and (f) any other information relating to
the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act, and the rules and regulations
promulgated thereunder; and (ii) as to the Person submitting the
Nomination Notice and any Person acting in concert with such
Person, (a) the name and business address of such Person, (b) the
name and address of such Person as they appear on the Corporation's
books, (c) the class and number of shares of the Corporation that
are beneficially owned by such Person, (d) a description of all
arrangements or understandings between such stockholder and each
proposed nominee and any other person or persons (including their
names) pursuant to which the nomination(s) are to be made by such
stockholder and (e) any other information

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<PAGE> 16

relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. A written consent to being
named in a proxy statement as a nominee, and to serve as a director
if elected, signed by the nominee, shall be filed with any
Nomination Notice.

(B) To be timely, Nomination Notices must be delivered to the
Secretary and received at the principal executive offices of the
Corporation (1) in the case of an annual meeting, not less than 60
days nor more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; PROVIDED,
HOWEVER, that in the event that the annual meeting is called for a
date that is not within 30 days before or after such anniversary
date, the Nomination Notice by the stockholder in order to be
timely must be so received not later than the close of business on
the tenth day following the day on which such notice of the date of
the annual meeting is mailed or such public disclosure of the date
of the annual meeting is made, whichever first occurs, or (2) in
the case of a special meeting of stockholders called for the
purpose of electing directors, not later than the close of business
on the 10th day following the day on which notice of the date of
the special meeting is mailed or public disclosure of the date of
the special meeting is made, whichever first occurs.

(C) No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the procedures
and requirements set forth in this Section 7.1(c)(iii). If the
chairman of the meeting determines that a nomination was not made
in accordance with the foregoing procedures and requirements, the
chairman of the meeting shall declare to the meeting that the
nomination was defective and such defective nomination shall be
disregarded.

(iv) ABILITY OF STOCKHOLDERS TO ACT BY WRITTEN CONSENT. Any action
required or permitted to be taken at any annual or special meeting of
stockholders may be taken only upon the vote of stockholders at an annual
or special meeting duly noticed and called in accordance with the DGCL
and the By-Laws of the Corporation and 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 such written consent have expressly been approved in advance by the
Board of Directors of the Corporation.

(v) SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of the
stockholders of the Corporation may be called, for any purpose or
purposes, only by (A) the Chairman of the Board of Directors, (B) the
Chief Executive Officer or (C) the Board of Directors pursuant to a
resolution adopted by a majority of the members of the Board of Directors
then in office. Special meetings of the stockholders of the Corporation
may not be called by any other person or persons. Special meetings may
be held at any place, within or without the State of Delaware, as
determined by the person or persons calling such meeting. The only
business that may be conducted at such a meeting, other than

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<PAGE> 17

procedural matters and matters relating to the conduct of the meeting,
shall matters relating to the purpose or purposes stated in the notice of
meeting.

(vi) CERTAIN BUSINESS COMBINATIONS. The Corporation has elected to
be governed by Section 203 of the DGCL.

ARTICLE VIII
AMENDMENTS

SECTION 8.1 AMENDMENTS. The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, except as otherwise provided in Section 5.1(d)(3) or Section
6.1(c) hereof, in the manner now or hereafter prescribed by the DGCL, and all
rights conferred upon stockholders herein are granted subject to this
reservation; provided, however, that in addition to any vote of the holders of
any class or series of capital stock of the Corporation required by law, this
Certificate of Incorporation or a Certificate of Designation with
respect to a series of Preferred Stock, the affirmative vote of the holders of
shares of voting stock of the Corporation representing 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, shall be required to (i) reduce or eliminate the
number of authorized shares of any capital stock set forth in Article IV, (ii)
amend, repeal or adopt any provision inconsistent with Article V or Article VI
which would diminish the rights of Indemnified Persons pursuant to Article V or
the exculpation of directors pursuant to Article VI of this Certificate of
Incorporation or (iii) amend or repeal or adopt any provision
inconsistent with Section 7.1(c) of Article VII or this Article VIII of this
Certificate of Incorporation.

ARTICLE IX
SEVERABILITY

SECTION 9.1 In the event that any of the provisions of this Certificate
of Incorporation (including any provision within a single article,
section, paragraph or sentence) is held by a court of competent jurisdiction to
be invalid, void or otherwise unenforceable, the remaining provisions are
severable and shall remain enforceable to the full extent permitted by law.

This Amended and Restated Certificate of Incorporation shall become
effective upon its filing with the Secretary of State of the State of Delaware.

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<PAGE> 18

IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation of American Italian Pasta Company is signed on behalf of
the Corporation by its Chairman of the Board of Directors and attested by its
Secretary as of the ____ day of _____________, 1997.

AMERICAN ITALIAN PASTA COMPANY

By: _________________________
Name:
Title:

ATTEST

By: _____________________
Name:
Title: Secretary

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<PAGE> 1
EXHIBIT 3.2

AMERICAN ITALIAN PASTA COMPANY
AMENDED AND RESTATED BY-LAWS

ARTICLE I
OFFICES

SECTION 1. REGISTERED OFFICE IN DELAWARE.

The registered office of American Italian Pasta Corporation (the
"Corporation") in the State of Delaware is located at 1209 Orange Street, in
the City of Wilmington, in the County of New Castle. The name of its
registered agent at that address is The Corporation Trust Company.

SECTION 2. OTHER OFFICES.

The Corporation may, in addition to its registered office, establish
and maintain such an office or offices, at such place or places within or
without the State of Delaware, as the Board of Directors may deem necessary,
desirable or expedient from time to time.

ARTICLE II
STOCKHOLDERS

SECTION 1. PLACE OF MEETINGS.

Each meeting of the stockholders shall be held at the principal office
of the Corporation or at such other place, within or without the State of
Delaware, as shall be designated by the Board of Directors in the notice of
meeting.

SECTION 2. ANNUAL MEETING.

The annual meeting of the stockholders shall be held pursuant to
notice and at such date and time as shall be designated by the Board of
Directors in the notice of meeting for the purpose of electing directors and
for the transaction of such other business as may come before the meeting.

SECTION 3. SPECIAL MEETINGS.

Special meetings of the stockholders of the Corporation may be called,
for any purpose or purposes, only by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the members of the Board of
Directors then in office. Special meetings of the stockholders of the
Corporation may not be called by any other person or persons. Special meetings
may be held at any place, within or without the State of Delaware, as
determined by the person or persons calling such meeting. The only business
that may be conducted at such a meeting, other than procedural matters and
matters relating to the conduct of the

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<PAGE> 2

meeting, shall be matters relating to the purpose or purposes stated in the
notice of meeting.

SECTION 4. NOTICE OF MEETINGS.

The Secretary or an Assistant Secretary of the Corporation shall give
written notice of every meeting of the stockholders to each stockholder of
record entitled to vote at the meeting. Such notice shall be given not less
than 10 days, nor more than 60 days, prior to the day named for the meeting,
unless a different period of notice is required by law. Such notice shall be
given either by regular mail, overnight courier, telegram or facsimile
transmission, or by any other means comparable to any of the foregoing, to each
stockholder at his address appearing on the books of the Corporation or
supplied by him to the Corporation for the purpose of notice. Such notice
shall specify the place, day and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is held. When a
meeting is adjourned to another date, hour or place in accordance with the
Delaware General Corporation Law, as amended (the "DGCL"), notice need not be
given of the adjourned meeting if the date, hour and place thereof are
announced at the meeting at which the adjournment is taken unless otherwise
required by the DGCL.

SECTION 5. WAIVER OF NOTICE.

A waiver of notice in writing signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be
deemed equivalent to the giving of such notice. Neither the business to be
transacted nor the purpose of the meeting need be specified in the waiver of
notice of such meeting. Attendance of the person either in person or by proxy
at any meeting shall constitute a waiver of notice of such meeting, except
where such person attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.

SECTION 6. RECORD DATE.

In order that the Corporation may determine the stockholders entitled
(i) to notice of or to vote at any meeting of stockholders or any adjournments
thereof, (ii) to receive payment of any dividend or other distribution, or
allotment of any rights, or (iii) to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors, in advance, may fix a date as the record date
for any such determination, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than 60 days nor less than
10 days before the date of such meeting, nor more than 60 days prior to the
date of any other action. A determination of the stockholders of record
entitled to notice of or to vote at a meeting of the stockholders shall apply
to any adjournment of the meeting taken pursuant to Article I, Section 8
hereof; provided, however, that the Board of Directors,

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<PAGE> 3

in its discretion, may fix a new record date for an adjourned meeting in
accordance with the DGCL and these By-laws. If the Board of directors fixes a
record date in accordance with the DGCL and these By-laws, only stockholders
determined to be stockholders of record on the record date so fixed shall be
entitled to notice of, or to vote at, such meeting and any adjournment thereof,
or to receive payment of such dividend or other distribution, or allotment of
rights, or to exercise such rights in respect of such change, conversion or
exchange of stock, or to participate in any such other lawful action, as the
case may be, notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as aforesaid.

SECTION 7. LIST OF STOCKHOLDERS.

At least 10 days before any meetings of the stockholders, the officer
or transfer agent in charge of the stock transfer books of the Corporation
shall prepare and make a complete alphabetical list of the stockholders
entitled to vote at such meeting, which list shall show the address of each
stockholder and the number of shares registered in the name of each
stockholder. The list so prepared shall be maintained at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held, and shall be open for inspection by any stockholder, for any
purpose germane to the meeting, during ordinary business hours during a period
of not less than 10 days prior to the meeting. The list shall also be produced
and kept open at the meeting (during the entire duration thereof) and, except
as otherwise provided by law, may be inspected by any stockholder or proxy of a
stockholder who is present at such meeting.

SECTION 8. QUORUM.

The presence in person or by proxy of the holders of a majority of the
votes represented by issued and outstanding shares entitled to vote at a
stockholders' meeting shall constitute a quorum, except that the presence in
person or by proxy of the holders of a majority of the issued and outstanding
shares of each class or series of stock which is entitled to vote as a class or
series at a stockholders' meeting shall constitute a quorum for any vote in
which a vote of such class or series is required.

When any meeting is convened the presiding officer, if directed by the
Board, may adjourn the meeting if (a) no quorum is present for the transaction
of business, or (b) the Board determines that adjournment is necessary or
appropriate to enable the stockholders (i) to consider fully information which
the Board determines has not been made sufficiently or timely available to
stockholders or (ii) otherwise to exercise effectively their voting rights. At
any such adjourned meeting at which there is a quorum, any business may be
transacted that might have been transacted at the meeting originally called.

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SECTION 9. STOCKHOLDER PROPOSALS.

Proposals for a stockholder vote for consideration at any annual
meeting or any special meeting of stockholders of the Corporation may be made
by any stockholder of the Corporation (x) who is a stockholder of record on the
date of the giving of the notice provided for in this Article II, Section 9 and
on the record date for the determination of stockholders entitled to vote at
such meeting and (y) who complies with the procedures and requirements set
forth in subparagraphs (a) and (b) of this Article II, Section 9.

(a) Condition of Submission to Stockholders. No proposal for a
stockholder vote shall be submitted by a stockholder (a "Stockholder Proposal")
to the Corporation's stockholders unless the stockholder submitting such
proposal (the "Proponent") is a stockholder of record on the date of the giving
of the notice provided for in this Article II, Section 9 and on the record date
for the determination of stockholders entitled to vote at such meeting and has
filed a written notice (a "Proposal Notice") setting forth with particularity
(i) the names and business addresses of the Proponent and all persons or
entities (collectively, the "Persons" and singularly, a "Person") acting in
concert with the Proponent; (ii) the name and address of the Proponent and the
Persons identified in clause (i), as they appear on the Corporation's books (if
they so appear); (iii) the class and number of shares of the Corporation
beneficially owned by the Proponent and the Persons identified in clause (i);
(iv) a description of the Stockholder Proposal containing all material
information relating thereto; and (v) such other information as the Board of
Directors reasonably determines is necessary or appropriate to enable the Board
of Directors and stockholders of the Corporation to consider the Stockholder
Proposal.

(b) Stockholder Proposal Notice. To be timely, Proposal Notices
must be delivered to the Secretary and received at the principal executive
offices of the Corporation (1) in the case of an annual meeting, not less than
60 days nor more than 90 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting is called for a date that is not within 30 days before
or after such anniversary date, the Proposal Notice by the stockholder in order
to be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the annual
meeting is mailed or such public disclosure of the date of the annual meeting
is made, whichever first occurs, or (2) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the 10th day following the day on which notice of the date
of the special meeting is mailed or public disclosure of the date of the
special meeting is made, whichever first occurs.

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(c) Effect of Noncompliance. The presiding officer at any
stockholders' meeting may determine that any Stockholder Proposal was not made
in accordance with the procedures prescribed in these By-laws (the "By-laws")
or is otherwise not in accordance with law, and if it is so determined, such
officer shall so declare at the meeting and the Stockholder Proposal shall be
disregarded.

SECTION 10. VOTING POWER.

Unless otherwise provided in a resolution or resolutions providing for
any class or series of Preferred Stock pursuant to Article IV of the Restated
Certificate of Incorporation (the "Certificate of Incorporation") or by the
DGCL, every stockholder of record of the Corporation (other than holders of
Class B Convertible Non-Voting Common Stock, par value $.001 per share, except
as set forth in the Certificate of Incorporation or as otherwise required by
law) shall be entitled to vote, in person or by proxy, the shares of voting
stock of every share of each class or series held of record by such
stockholder. All questions shall be decided by the vote of the majority of the
votes represented by issued and outstanding shares of capital stock present in
person or represented by proxy and entitled to vote at any meeting, or if the
voting is by class or series, a majority of the votes of each class or series
of capital stock present in person or represented by proxy and entitled to vote
at any meeting, unless otherwise specially provided by law or by the
Certificate of Incorporation or these By-laws. Abstentions shall not be
considered to be votes cast.

SECTION 11. PROXIES.

Every stockholder may vote either in person or by proxy. Every proxy
shall be executed in writing by the stockholder or by his duly authorized
attorney-in-fact and filed with the Secretary of the Corporation. A proxy,
unless coupled with an interest, shall be revocable at will, notwithstanding
any other agreement or any provision in the proxy to the contrary, but the
revocation of a proxy shall not be effective until notice thereof has been
given to the Secretary of the Corporation. No proxy shall be valid after
eleven months from the date of its execution unless a longer time is expressly
provided therein, but in no event shall a proxy, unless coupled with an
interest, be voted on after three years from the date of its execution. A
proxy shall not be revoked by the death or incapacity of the maker unless
before the vote is counted or the authority is exercised, written notice of
such death or incapacity is given to the Secretary of the Corporation.

SECTION 12. INSPECTORS.

Elections for directors need not be by ballot, except upon demand made
by a stockholder at the election and before the voting begins. In advance of
any meeting of stockholders, the Board of Directors shall appoint inspectors,
who need not be stockholders, to act at such meeting and make a written report
thereof. Such inspectors may include individuals who serve the Corporation in

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other capacities, including, without limitation, as officers, employees, agents
or representatives of the Corporation. The number of inspectors shall be one
or three. One or more persons may be designated by the Board of Directors as
alternate inspectors to replace any inspector who fails to act. In case any
person appointed as inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment made by the Board of Directors in advance
of the convening of the meeting, or at the meeting by the person or officer
acting as chairman. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspectors shall have the duties prescribed by the DGCL.

SECTION 13. PRESIDING OFFICERS AND ORDER OF BUSINESS.

All meetings of stockholders shall be called to order and presided
over by the Chairman of the Board, or in his absence, by the Chief Executive
Officer, President or highest ranking Vice President, or in the absence of all
of them, by the Chief Financial Officer, or if none of these be present by a
chairman designated by the Board of Directors. The Secretary of the
Corporation shall act as secretary, but in the absence of the Secretary, the
presiding officer may appoint a secretary.

SECTION 14. PROCEDURAL MATTERS.

At each meeting of stockholders, the chairman of the meeting shall fix
and announce the date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at the meeting and shall
determine the order of business and all other matters of procedure. Except to
the extent inconsistent with any such rules and regulations as adopted by the
Board of Directors, the chairman of the meeting may establish rules, which need
not be in writing, to maintain order for the conduct of the meeting, including,
without limitation, restricting attendance to bona fide stockholders of record
and their proxies and other persons in attendance at the invitation of the
chairman and making rules governing speeches and debates. The chairman of the
meeting acts in his or her absolute discretion and his or her rulings are not
subject to appeal.

SECTION 15. ABILITY OF STOCKHOLDERS TO ACT BY WRITTEN CONSENT.

Any action required or permitted to be taken at any annual or special
meeting of stockholders may be taken only upon the vote of stockholders at an
annual or special meeting duly noticed and called in accordance with the DGCL
and these By-Laws of the Corporation and 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 such written consent
have expressly been approved in advance by the Board of Directors of the
Corporation.

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ARTICLE III
BOARD OF DIRECTORS

SECTION 1. POWERS; QUALIFICATIONS; NUMBER AND TERM.

The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors of the Corporation. A director
need not be a stockholder, a citizen of the United States, or a resident of the
State of Delaware. The Board of Directors shall initially consist of [seven]
persons; provided, however, that such number of directors may from time to time
be increased and decreased by a duly adopted resolution of the Board of
Directors but shall in no event be reduced to less than three. The Board of
Directors shall be divided into three classes, as nearly equal in number as the
then total number of directors constituting the entire Board permits, with the
term of office of one class expiring each year. The initial division of the
Board of Directors shall be made by the decision of a majority of the entire
Board of Directors. The initial Class I directors elected by the stockholders
of the Corporation shall hold office for a term expiring at the 1998 annual
meeting of stockholders and until their successors shall be elected and
qualified, subject to prior death, retirement, resignation or removal; the
initial Class II directors elected by the stockholders of the Corporation shall
hold office for a term expiring at the 1999 annual meeting of stockholders and
until their successors shall be elected and qualified, subject to prior death,
retirement, resignation or removal; and the initial Class III directors elected
by the stockholders of the Corporation shall hold office for a term expiring at
the 2000 annual meeting of stockholders and until their successors shall be
elected and qualified, subject to prior death, retirement, resignation or
removal. At each such annual meeting of stockholders and at each annual
meeting thereafter, successors to the class of directors whose term expires at
that meeting shall be elected for a term expiring at the third annual meeting
following their election and until their successors shall be elected and
qualified, subject to prior death, retirement, resignation or removal.

Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of the Certificate of Incorporation or the resolution or resolutions
adopted by the Board of Directors pursuant to Section 4.3 of the Certificate of
Incorporation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Section unless expressly provided by such
terms.

<PAGE> 8

SECTION 2. VACANCIES.

Subject to the rights of the holders of any series of preferred stock
or any other class of capital stock of the Corporation (other than common
stock) then outstanding, any vacancy in the Board of Directors, arising from
death, retirement, resignation, removal, an increase in the number of directors
or any other cause, may be filled by the Board of Directors (excluding for this
purpose directors designated by affiliates of Morgan Stanley Dean Witter
Discover & Co. pursuant to the Amended and Restated Shareholders' Agreement
dated as of ____________, 1997 to the extent, but only to the extent, that such
directors would constitute a majority of such remaining directors) acting by a
majority of the remaining directors then in office, although less than a
quorum, or by a sole remaining director, the stockholders acting at an annual
meeting or, if the vacancy is with respect to a director elected by a voting
group, by action of any other directors elected by such voting group or such
voting group.

Each director chosen to fill a vacancy in the Board of Directors shall
be elected to complete the term of office of the director who is being
succeeded. In the event of any increase or decrease in the authorized number
of directors, (a) each director then serving as such shall nevertheless
continue as director of the class of which he or she is a member until the
expiration of such director's current term or his or prior death, retirement,
resignation or removal and (b) the newly created or eliminated directorships
resulting from such increase or decrease shall be apportioned by the Board of
Directors among the three classes of directors so as to ensure that no one
class has more than one director more than any other class, and each director
so elected shall hold office for the same term as the other members of the
class to which the director is assigned. No decrease in the number of
directors constituting the whole Board of Directors shall shorten the term of
an incumbent director.

SECTION 3. REMOVAL OF DIRECTORS.

Except as may be provided in a resolution or resolutions providing for
any class or series of Preferred Stock pursuant to Article IV of the
Certificate of Incorporation 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 66 2/3% 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. The
provisions of this subsection shall be the exclusive method for the removal of
directors.

SECTION 4. NOMINATION OF DIRECTORS. Only persons who are selected and
recommended by the Board of Directors or the committee of the Board of
Directors designated to make nominations, or who are nominated by stockholders
in accordance with the procedures set

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forth in this Article III, Section 4, shall be eligible for election, or
qualified to serve, as directors, except as may be otherwise provided in the
Certificate of Incorporation with respect to the right of holders of Preferred
Stock of the Corporation to nominate and elect a specified number of directors
in certain circumstances. Nominations of individuals for election to the Board
of Directors of the Corporation at any annual meeting or any special meeting of
stockholders at which directors are to be elected may be made by any
stockholder of the Corporation (x) who is a stockholder of record on the date
of the giving of the notice provided for in this Section 4 and on the record
date for the determination of stockholders entitled to vote at such meeting and
(y) who complies with the procedures and requirements set forth in
subparagraphs (a) and (b) this Article III, Section 4.

(a) Nominations by stockholders shall be made by written notice (a
"Nomination Notice"), which shall set forth the following information: (i) as
to each individual nominated, (a) the name, date of birth, business address and
residence address of such individual, (b) the business experience during the
past five years of such nominee, including his or her principal occupations and
employment during such period, the name and principal business of any
corporation or other organization in which such occupations and employment were
carried on, and such other information as to the nature of his or her
responsibilities and level of professional competence as may be sufficient to
permit assessment of his or her prior business experience, (c) whether the
nominee is or has ever been at any time a director, officer or owner of 5% or
more of any class of capital stock, partnership interests or other equity
interest of any corporation, partnership or other entity, (d) any directorships
held by such nominee in any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or subject to the requirements of Section 15(d) of the
Exchange Act or any company registered as an investment company under the
Investment Company Act of 1940, as amended, (e) whether, in the last five
years, such nominee has been convicted in a criminal proceeding or has been
subject to a judgment, order, finding or decree of any federal, state or other
governmental entity, concerning any violation of federal, state or other law,
or any proceeding in bankruptcy, which conviction, order, finding, decree or
proceeding may be material to an evaluation of the ability or integrity of the
nominee and (f) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act, and the rules and regulations
promulgated thereunder; and (ii) as to the Person submitting the Nomination
Notice and any Person acting in concert with such Person, (a) the name and
business address of such Person, (b) the name and address of such Person as
they appear on the Corporation's books, (c) the class and number of shares of
the Corporation that are beneficially owned by such Person, (d) a description
of all arrangements or understandings between such stockholder and each
proposed nominee and any other person or persons (including their names)
pursuant to

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which the nomination(s) are to be made by such stockholder and (e) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of
the Exchange Act and the rules and regulations promulgated thereunder. A
written consent to being named in a proxy statement as a nominee, and to serve
as a director if elected, signed by the nominee, shall be filed with any
Nomination Notice.

(b) To be timely, Nomination Notices must be delivered to the
Secretary and received at the principal executive offices of the Corporation
(1) in the case of an annual meeting, not less than 60 days nor more than 90
days prior to the anniversary date of the immediately preceding annual meeting
of stockholders; provided, however, that in the event that the annual meeting
is called for a date that is not within 30 days before or after such
anniversary date, the Nomination Notice by the stockholder in order to be
timely must be so received not later than the close of business on the tenth
day following the day on which such notice of the date of the annual meeting is
mailed or such public disclosure of the date of the annual meeting is made,
whichever first occurs, or (2) in the case of a special meeting of stockholders
called for the purpose of electing directors, not later than the close of
business on the 10th day following the day on which notice of the date of the
special meeting is mailed or public disclosure of the date of the special
meeting is made, whichever first occurs.

(c) No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures and requirements
set forth in this Section this Article III, Section 4. If the chairman of the
meeting determines that a nomination was not made in accordance with the
foregoing procedures and requirements, the chairman of the meeting shall
declare to the meeting that the nomination was defective and such defective
nomination shall be disregarded.

SECTION 5. PLACE OF MEETINGS.

The Board of Directors may hold annual, regular and special meetings,
and have an office or offices, either within or outside the State of Delaware,
at such place as the Board of Directors from time to time deems advisable.

SECTION 6. ANNUAL AND REGULAR MEETINGS.

The Board of Directors shall, without notice, hold an annual meeting
immediately after the annual meeting of the stockholders, or after the last
adjournment thereof, and shall hold other regular meetings at such time and
place as it may determine. No notice to the newly elected directors of such
annual meeting shall be necessary for such meeting to be lawful, provided a
quorum is present.

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SECTION 7. SPECIAL MEETINGS.

The Board of Directors shall hold such special meetings as shall be
called by the Chairman of the Board, Chief Executive Officer, President, or
Vice President, or Secretary, or any two directors. Each such meeting shall be
held at such time and place as shall be designated in the notice of meeting.

SECTION 8. NOTICE OF MEETINGS.

Notice of the date, time and place of each meeting, except the annual
meeting, of the Board of Directors shall be mailed by regular mail to each
director, at his address appearing on the books of the Corporation or supplied
by the director to the Corporation for the purpose of notice ("designated
address"), at least six days before the meeting; or sent by overnight courier
to each director at his designated address at least two days before the meeting
(with delivery scheduled to occur no later than the day before the meeting); or
given orally by telephone or other means, or by telegraph or facsimile
transmission, or by any other means comparable to any of the foregoing, to each
director at his designated address not later than the day before the day on
which such meeting is to be held or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances; provided, however, that if less than five days' notice is
provided and one-third of the directors then in office object in writing prior
to or at the commencement of the meeting, such meeting shall be postponed until
five days after such notice was given pursuant to this sentence (or such
shorter period to which a majority of those who objected in writing agree),
provided that notice of such postponed meeting shall be given in accordance
with this Article III, Section 8. The notice of the meeting shall state the
general purpose of the meeting, but other routine business may be conducted at
the meeting without such matter being stated in the notice.

SECTION 9. WAIVER OF NOTICE.

A waiver of written notice in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Attendance of a person at
any meeting shall constitute a waiver of notice of such meeting, except where
such person attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened, and any such person so states his purpose in attending such meeting
and refrains from participation in the business of the meeting.

SECTION 10. QUORUM.

Except as otherwise provided in the Certificate of Incorporation,
these By-laws and the DGCL, a majority of the directors in office shall be
necessary at any meeting of the Board

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in order to constitute a quorum for the transaction of business at such
meeting, and the affirmative vote of a majority of those directors present at
any such meeting at which a quorum is present shall be necessary for the
passage of any resolution or act of the Board. In the absence of a quorum for
any such meeting, a majority of the directors present thereat may adjourn such
meeting from time to time until a quorum shall be present thereat. Notice of
any adjourned meeting need not be given.

SECTION 11. PRESIDING OFFICER AND ORDER OF BUSINESS.

All meetings of the Board of Directors shall be called to order and
presided over by the Chairman of the Board, or in his absence, by a member of
the Board of Directors selected by the members present. The Secretary of the
Corporation shall act as secretary, but in the absence of the Secretary, the
presiding officer may appoint a secretary.

SECTION 12. ACTION BY BOARD WITHOUT FORMAL MEETING.

Unless otherwise restricted by the Certificate of Incorporation or
these By-laws, any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board of Directors or of such committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee, as the
case may be.

SECTION 13. COMPENSATION.

Directors, as such, shall receive such compensation and reimbursement
for expenses as the Board of Directors may by resolution allow. Directors
shall also be entitled to receive such compensation for services rendered to
the Corporation in any capacity other than as directors, as may be provided
from time to time by resolution of the Board of Directors.

SECTION 14. RESIGNATION.

Any director, member of a committee, or other officer may resign at
any time by giving written notice to the Board of Directors, the Chairman of
the Board or Secretary of the Corporation. Such resignation shall be effective
at the time specified therein, or, if no time be specified, at the time of its
receipt by the Board of Directors or such officer, and the acceptance of the
resignation shall not be necessary to make it effective. Resignations not
submitted in writing may be evidenced by a written acknowledgement of receipt
thereof signed by the receiving director or officer of the Corporation or by
acknowledgement of receipt thereof in the minutes of a subsequent stockholders'
or directors' meeting.

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SECTION 15. TELEPHONIC MEETINGS AND PARTICIPATION.

Members of the Board of Directors or any committee designated thereby
may participate in any meeting of such Board of Directors or committee by means
of conference telephone or similar communications equipment by which all
persons participating can hear each other. Participation in a meeting pursuant
to this section shall constitute presence in person at such meeting.

ARTICLE IV
COMMITTEES

SECTION 1. COMMITTEES GENERALLY.

The Board of Directors may, by resolutions passed by a majority of the
members of the Board of Directors then in office, designate members of the
Board of Directors to constitute committees that, except as otherwise provided
in Sections 2 and 3 of this Article IV, in each case, shall consist of such
number of directors, and shall have and may execute such powers, as is
permitted by law and specified in the respective resolutions appointing them.
Any such committee may fix its rules of procedure, determine its manner of
acting and the time and place, whether within or without the State of Delaware,
of its meetings and specify what notice thereof, if any, shall be given, unless
these By-laws, or the Board of Directors by resolution, shall provide
otherwise. Unless otherwise provided by the Board of Directors or such
committee, the quorum, voting and other procedures shall be the same as those
applicable to actions taken by the Board of Directors. A majority of the
members of the Board of Directors then in office shall have the power to change
the membership of any such committee at any time, to fill vacancies therein and
to discharge any such committee or to remove any member thereof, either with or
without cause, at any time.

SECTION 2. AUDIT COMMITTEE. The Audit Committee shall consist of
such number of directors, who shall not be officers or employees of the
Corporation or any of its affiliates, not less than two, as shall from time to
time be determined by the Board of Directors. The Audit Committee shall each
year make a recommendation, based on a review of qualifications, to the Board
of Directors for the appointment of independent public accountants to audit the
financial statements of the Corporation and to perform such other duties as the
Board of Directors may from time to time prescribe. As part of such review of
qualifications, the Audit Committee shall consider management's plans for
engaging the independent public accountants for management advisory services to
determine whether such services could impair the public accountants'
independence. The Audit Committee shall examine and make recommendations to
the Board of Directors with respect to the scope of audits conducted by the
Corporation's independent public accountants and internal auditors. The Audit
Committee shall review all recommendations made by the Corporation's
independent public accountants and internal auditors to the Audit Committee or

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<PAGE> 14

the Board of Directors with respect to the accounting methods and the system of
internal control used by the Corporation, and shall advise the Board of
Directors with respect thereto. The Audit Committee shall review reports from
the Corporation's independent public accountants and internal auditors
concerning compliance by management with governmental laws and regulations and
with the Corporation's policies relating to ethics, conflicts of interest and
disbursements of funds. The Audit Committee shall meet with the Corporation's
independent public accountants and/or internal auditors without management
present whenever the Audit Committee shall deem it appropriate.

SECTION 3. COMPENSATION COMMITTEE. The Compensation Committee shall
consist of such number of directors, who shall not be officers or employees of
the Corporation or any of its affiliates, not less than two, as shall from time
to time be determined by the Board of Directors. As authorized by the Board of
Directors, the Compensation Committee shall make recommendations to the Board
of Directors with respect to the administration of the salaries, bonuses, and
other compensation to be paid to key employees and officers of the Corporation,
including the terms and conditions of their employment, and shall administer
all stock option and other benefit plans (except with respect to participation
by executive officers and unless otherwise specified in plan documents)
affecting key employees' and officers' direct and indirect remuneration.

ARTICLE V
OFFICERS AND AGENTS

SECTION 1. OFFICERS.

The officers of the Corporation shall be a Chairman of the Board, a
Chief Executive Officer, a President, a Chief Financial Officer and a
Secretary, all of whom shall be elected by the Board of Directors. In
addition, the Board of Directors may elect one or more Vice Presidents,
Assistant Secretaries or Assistant Treasurers, or appoint such other additional
officers and agents as they may deem advisable. Any two or more offices may be
held by the same person except the offices of President and Secretary. The
officers shall be elected each year at the annual meeting of the Board of
Directors which shall be held each year pursuant to Article III, Section 6
hereof.

The Board of Directors may appoint, or may empower the Chief Executive
Officer to appoint, such other officers as the business of the Corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these By-laws or as the Board of
Directors may from time to time determine.

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<PAGE> 15

SECTION 2. TERM.

Each officer and each agent shall hold office until his successor is
elected or appointed and qualified or until his death, resignation or removal
by the Board of Directors.

SECTION 3. AUTHORITY, DUTIES AND COMPENSATION.

All elected or appointed officers and agents shall have such authority
and perform such duties as may be provided in the By-laws or as may be
determined by the Board of Directors or the Chairman of the Board. They shall
receive such compensation for their services as may be determined by the Board
of Directors, or by the Chairman of the Board with respect to all officers and
agents subordinate to him. Notwithstanding any other provisions of these
By-laws, the Board of Directors shall have power from time to time by
resolution to prescribe by what officers or agents particular documents or
instruments or particular classes of documents or instruments shall be signed,
countersigned, endorsed or executed, provided, however, that any person, firm
or corporation shall be entitled to accept and to act upon any document or
instrument signed, countersigned, endorsed or executed by officers or agents of
the company pursuant to the provisions of these By-laws unless prior to receipt
of such document or instrument such person, firm or corporation has been
furnished with a certified copy of a resolution of the Board of Directors
prescribing a different signature, countersignature, endorsement or execution.

SECTION 4. CHAIRMAN OF THE BOARD.

The Chairman of the Board, if such an officer be elected, shall serve
as the Corporation's general manager, and shall have general supervision,
direction and control of the Corporation's business and its officers, and, if
present, preside at meetings of the stockholders and the Board of Directors and
exercise and perform such other powers and duties as may from time to time be
assigned to him by the Board of Directors or as may be prescribed by these
By-laws. If there is no Chief Executive Officer, then the Chairman of the Board
shall also be the Chief Executive Officer of the Corporation and shall have the
powers and duties prescribed in Article V, Section 5 of these By-laws. The
Chairman of the Board shall report to the Board of Directors.

SECTION 5. CHIEF EXECUTIVE OFFICER.

Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the Chairman of the Board, if there be such an officer,
the Chief Executive Officer of the Corporation shall, subject to the control of
the Board of Directors, have general supervision, direction, and control of the
business and the officers of the Corporation. He shall preside at all meetings
of the stockholders and, in the absence or nonexistence of a Chairman of the
Board, at all meetings of the Board of Directors. He shall have the general
powers and duties of management usually vested in

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the chief executive officer of a corporation, and shall have such other powers
and duties as may be prescribed by the Board of Directors or these By-laws.

SECTION 6. PRESIDENT.

The president may assume and perform the duties of the Chief Executive
Officer in the absence or disability of the Chief Executive Officer or whenever
the office of the Chief Executive Officer is vacant. The president of the
Corporation shall exercise and perform such powers and duties as may from time
to time be assigned to him by the Board of Directors or as may be prescribed by
these By-laws. The president shall have authority to execute in the name of
the corporation bonds, contracts, deeds, leases and other written instruments
to be executed by the Corporation. In the absence or nonexistence of the
Chairman of the Board and Chief Executive Officer, he shall preside at all
meetings of the stockholders and, in the absence or nonexistence of a Chairman
of the Board and the Chief Executive Officer, at all meetings of the Board of
Directors and shall perform such other duties as the Board of Directors may
from time to time determine.

SECTION 7. CHIEF FINANCIAL OFFICER.

The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable
times be open to inspection by any director.

The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the Corporation with such depositaries as may be
designated by the Board of Directors. He or she shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, shall render to the
Chief Executive Officer and directors, whenever they request it, an account of
all of his or her transactions as chief financial officer and of the financial
condition of the Corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or these By-laws.

SECTION 8. VICE PRESIDENTS.

In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the Board of Directors or, if not
ranked, a vice president designated by the Board of Directors, shall perform
all the duties of the president and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors,
these By-laws, the Chairman of the Board or the Chief Executive Officer.

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SECTION 9. SECRETARY.

The Secretary shall give or cause to be given all required notices of
meetings of stockholders and of the Board of Directors, shall attend such
meetings when practicable, shall record and keep the minutes and all other
proceedings thereof, shall attest such records after every meeting by his
signature, shall safely keep all documents and papers which shall come into his
possession and shall truly keep the books and accounts of the Corporation
appertaining to his office. In the absence or disability of the Secretary, any
Assistant Secretary shall have authority and perform the duties of the
Secretary.

SECTION 10. RESIGNATION AND REMOVAL OF OFFICERS.

Any executive officer of the Corporation may be removed, either for
cause or without cause, by the affirmative vote of a majority of the full Board
of Directors. Other officers and agents may be removed either for cause or
without cause by the Board of Directors, the Chairman of the Board or the Chief
Executive Officer. Removal of an executive officer or other officer or agent
in accordance herewith shall be without prejudice to the contract rights, if
any, of the person so removed. Any officer may resign at any time by written
notice to the Corporation. Unless otherwise stated in such notice of
resignation, the acceptance thereof shall not be necessary to make it
effective; and such resignation shall take effect at the time specified therein
or, in the absence of such specification, it shall take effect upon the receipt
thereof.

SECTION 11. VACANCIES.

Vacancy in any office or position by reason of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
provided in Article V, Section 1 hereof for regular appointment to such office.
Unless earlier removed pursuant to Article V, Section 10, any officer appointed
by the Board to fill any such vacancy shall serve only until such time as the
unexpired term of his predecessor expires unless reappointed by the Board.

ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS

SECTION 1. RIGHT TO INDEMNIFICATION.

Each director and officer of the Corporation who was or is made a
party or is threatened to be made a party to or is involved in or called as a
witness in any Proceeding (as hereinafter defined) because he or she is an
Indemnified Person (as hereinafter defined) shall, and, at the election of the
Corporation as determined by the Board of Directors, each employee and agent of
the Corporation who was or is made a party or is threatened to be made a party
to or is involved in or called as a witness in any Proceeding because he or she
is an Indemnified Person may, be

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indemnified and held harmless by the Corporation to the fullest extent
permitted under the DGCL, as the same now exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than the DGCL
permitted the Corporation to provide prior to such amendment). Such
indemnification shall cover all expenses incurred by an Indemnified Person
(including, but not limited to, attorneys' fees and other expenses of
litigation) and all liabilities and losses (including, but not limited to,
judgments, fines, ERISA or other excise taxes or penalties and amounts paid or
to be paid in settlement) incurred by such person in connection therewith.

Notwithstanding the foregoing, except with respect to indemnification
specified in this Article VI, the Corporation shall indemnify an Indemnified
Person in connection with a Proceeding (or part thereof) initiated by such
person only if such Proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.

For purposes of this Article VI:

(i) a "Proceeding" is an action, suit or proceeding, whether
civil, criminal, administrative or investigative, and any appeal
therefrom including, without limitation, any such action, suit,
proceeding or appeal by or in the right of the Corporation;

(ii) an "Indemnified Person" is a person who is, was, or had
agreed to become a director, officer, employee, agent or a Delegate,
as defined herein, of the Corporation or the legal representative of
any of the foregoing;

(iii) a "Delegate" is (A) any employee of the Corporation or
a subsidiary of the Corporation serving as a director or officer (or
in a substantially similar capacity) of an entity or enterprise (x) in
which the Corporation and its subsidiaries collectively own a 10% or
greater equity interest or (y) the principal function of which is to
service or benefit the Corporation or a subsidiary of the Corporation;
(B) any employee of the Corporation or a subsidiary of the Corporation
serving as a trustee or fiduciary of an employee benefit plan of the
Corporation or any entity or enterprise referred to in clause (A); and
(C) any person acting at the request of the Board of Directors of the
corporation in any capacity with any entity or enterprise other than
the Corporation; and

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SECTION 2. EXPENSES.

Expenses, including attorneys' fees, incurred by a director or officer
indemnified pursuant to Article VI, Section 1 in defending or otherwise being
involved in a Proceeding shall be paid by the Corporation in advance of the
final disposition of such Proceeding, including any appeal therefrom, upon
receipt of an undertaking (the "Undertaking") by or on behalf of such person to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Corporation; provided that in connection with
a Proceeding (or part thereof) initiated by such person, except a Proceeding
authorized by Article VI, Section 3, the Corporation shall pay said expenses in
advance of final disposition only if such Proceeding (or part thereof) was
authorized by the Board of Directors. A person to whom expenses are advanced
pursuant hereto shall not be obligated to repay pursuant to the Undertaking
until the final determination of any pending Proceeding in a court of competent
jurisdiction concerning the right of such person to be indemnified or the
obligation of such person to repay pursuant to the Undertaking. Such expenses,
including attorneys' fees, incurred by other employees and agents of the
Corporation may be so paid upon such terms and conditions, if any, as the Board
of Directors deems appropriate.

SECTION 3. PROTECTION OF RIGHTS.

If a claim under Article VI, Section 1 is not promptly paid in full by
the Corporation after a written claim has been received by the Corporation or
if expenses pursuant to Article VI, Section 2 of this Article have not been
promptly advanced after a written request for such advancement accompanied by
the Undertaking has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim or the advancement of expenses. If successful, in whole or in
part, in such suit, such claimant shall also be entitled to be paid the
reasonable expense thereof (including, without limitation, attorneys' fees).
It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any Proceeding in advance of
its final disposition where the required Undertaking has been tendered to the
Corporation) that indemnification of the claimant is prohibited by law, but the
burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination, if required, prior
to the commencement of such action that indemnification of the claimant is
proper is the circumstances, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that indemnification of the claimant is prohibited, shall be a
defense to the action or create a presumption that indemnification of the
claimant is prohibited.

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SECTION 4. MISCELLANEOUS.

(a) Non-Exclusivity of Rights. The rights conferred on any person
by this Article VI shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the certificate
of incorporation, bylaw, agreement, vote of stockholders or disinterested
directors or otherwise. The Board of Directors shall have the authority, by
resolution, to provide for such indemnification of employees or agents of the
Corporation or others and for such other indemnification of directors, officers
or Delegates as it shall deem appropriate.

(b) Insurance, Contracts and Funding. The Corporation may
maintain insurance, at its expense, to protect itself and any director,
officer, employee, or agent of, or person serving in any other capacity with,
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expenses, liabilities or losses, whether or not
the Corporation would have the power to indemnify such person against such
expenses, liabilities or losses under the DGCL. The Corporation may enter into
contracts with any director, officer or Delegate of the Corporation in
furtherance of the provisions of this Article VI and may create a trust fund,
grant a security interest or use other means (including, without limitation, a
letter of credit) to ensure the payment of such amounts as may be necessary to
effect the advancing of expenses and indemnification as provided in this
Article VI.

(c) Contractual Nature. The provisions of this Article VI shall
be applicable to all Proceedings commenced or continuing after its adoption,
whether such arise out of events, acts or omissions which occurred prior or
subsequent to such adoption, and shall continue as to a person who has ceased
to be a director, officer or Delegate and shall inure to the benefit of the
heirs, executors and administrators of such person. This Article VI shall be
deemed to be a contract between the Corporation and each person who, at any
time that this Article VI is in effect, serves or agrees to serve in any
capacity which entitles him to indemnification hereafter and any repeal or
other modification of this Article or any repeal or modification of the DGCL or
any other applicable law shall not limit any Indemnified Person's entitlement
to the advancement of expenses or indemnification under this Article VI for
Proceedings then existing or later arising out of events, acts or omissions
occurring prior to such repeal or modification, including, without limitation,
the right to indemnification for Proceedings commenced after such repeal or
modification to enforce this Article VI with regard to Proceedings arising out
of acts, omissions or events occurring prior to such repeal or modification.

(d) Severability. If this Article VI or any portion hereof shall
be invalidated or held to be unenforceable on any ground by any court of
competent jurisdiction, the decision of which shall not have been reversed on
appeal, such invalidity or

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unenforceability shall not affect the other provisions hereof, and this Article
VI shall be construed in all respects as if such invalid or unenforceable
provisions had been omitted therefrom.

ARTICLE VII
SHARES OF CAPITAL STOCK

SECTION 1. SHARE CERTIFICATES.

Every holder of stock in the Corporation shall be entitled to a
certificate or certificates, to be in such form as the Board of Directors may
from time to time prescribe, signed by the President or a Vice President and by
the Secretary or Treasurer or an Assistant Secretary or Assistant Treasurer,
and where signed by a transfer agent or an assistant transfer agent by a
registrar the signature of such officers of the Corporation may be facsimile.
Each such certificate shall exhibit the name of the registered holder thereof,
the number and class of shares and the designation of the series, if any, which
the certificate represents and the number of shares represented thereby. The
Board of Directors may, if it so determines, direct that certificates for
shares of stock of the Corporation be signed by a transfer agent and/or
registered by a registrar, in which case such certificates shall not be valid
until so signed and/or registered. In case any officer of the Corporation who
shall have signed, or whose facsimile signature shall have been used on any
certificate for shares of stock of the Corporation, shall cease to be such
officer, whether because of death, resignation or otherwise, before such
certificate shall have been delivered, it may be delivered by the Corporation
as though the person who signed such certificate or whose facsimile signature
shall have been used thereon had not ceased to be such officer.

SECTION 2. TRANSFERS OF SHARES.

Transfers of shares of stock of the Corporation shall be made only on
the books of the Corporation by the registered holder thereof or by his
attorney thereunto authorized by an instrument duly executed and witnessed and
filed with the Corporation, and on surrender of the certificate or certificates
for such shares properly endorsed and evidence of the payment of all taxes
imposed upon such transfer. Every certificate surrendered for transfer shall
be cancelled and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
cancelled.

SECTION 3. TRANSFER AGENTS AND REGISTRARS.

The Board of Directors may appoint any one or more qualified banks,
trust companies or other corporations organized under any law of any state of
the United States or under the laws of the United States as agent or agents for
the Corporation in the transfer of the stock of the Corporation and likewise
may appoint any one or more qualified banks, trust companies or other
corporations as registrar or registrars of the stock of the Corporation.

21
<PAGE> 22

SECTION 4. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES.

New certificates for shares of stock may be issued to replace
certificates lost, stolen, destroyed or mutilated upon such terms and
conditions, which may but need not include the giving of a satisfactory bond of
indemnity, as the Board of Directors may from time to time determine.

SECTION 5. HOLDERS OF RECORD.

The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder and owner in fact thereof and shall not
be bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise expressly provided by the laws of the
State of Delaware.

SECTION 6. TREASURY SHARES.

Shares of the Corporation's stock held in its treasury shall not be
voted, directly or indirectly, at any meeting.

SECTION 7. STOCKHOLDER AGREEMENTS.

Shares of stock of the Corporation may be subject to one or more
agreements abridging, limiting or restricting the rights of any one or more
stockholders to sell, assign, transfer, mortgage, pledge or hypothecate any or
all of the stock of the Corporation held by them, or may be subject to one or
more agreements providing a purchase option with respect to any shares of stock
of the Corporation. If such agreements exist, all certificates evidencing
shares of stock subject to such abridgements, limitations, restrictions or
options shall have reference thereto endorsed on such certificate and such
stock shall not thereafter be transferred on the books of the Corporation
except in accordance with the terms and conditions of such agreement or
agreements. Copies of such agreement or agreements shall be maintained at the
offices of the Corporation.

ARTICLE VIII
GENERAL PROVISIONS

SECTION 1. CORPORATE SEAL.

The Board of Directors shall prescribe the form of a suitable
corporate seal, which shall contain the full name of the Corporation and the
year and state of incorporation. Such seal may be used by causing it or a
facsimile or reproduction thereof to be affixed to or placed upon the document
to be sealed.

<PAGE> 23

SECTION 2. FISCAL YEAR.

The fiscal year of the Corporation shall end on the last Friday in
September in each year or shall begin and end on such other days as shall be
fixed by resolution of the Board of Directors.

SECTION 3. CORPORATE RECORDS.

The Corporation may maintain its corporate books and records at such
place or places within or without the State of Delaware as the Board of
Directors may deem necessary, desirable or expedient from time to time.

SECTION 4. CHECKS, DRAFTS AND NOTES.

All checks, drafts and other orders for the payment of money, notes
and other evidences of indebtedness issued in the name of the Corporation shall
be signed by such officer or officers, agent or agents of the Corporation and
in such manner as shall be determined, from time to time, by resolution of the
Board.

SECTION 5. EXECUTION OF PROXIES.

The Chairman of the Board or Chief Executive Officer or, in the
absence or disability of both of them, any Vice President, may authorize, from
time to time, the execution and issuance of proxies to vote shares of stock or
other securities of other corporations held of record by the Corporation and
the execution of consents to action taken or to be taken by any such
corporation. All such proxies and consents, unless otherwise authorized by the
Board, shall be signed in the name of the Corporation by either the Chairman of
the Board, Chief Executive Officer or any Vice President.

SECTION 6. CONSTRUCTION.

Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of Delaware shall
govern the construction of these By-laws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both an entity and a
natural person.

ARTICLE IX
AMENDMENTS

SECTION 1. AMENDMENTS.

The Board of Directors shall have power without the assent or vote of
the stockholders to make, alter, amend, change, add to or repeal the By-laws of
the Corporation. The stockholders shall also have the power to make, alter,
amend, change, add to or repeal the

23
<PAGE> 24

By-laws of the Corporation; provided, however, that in addition to any vote of
the holders of any class or series of capital stock of the Corporation required
by law or by the Certificate of Incorporation, 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 Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
make, alter, amend, change, add to or repeal the By-laws of the Corporation.

<PAGE> 1
EXHIBIT 10.1

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

CREDIT AGREEMENT

among

AMERICAN ITALIAN PASTA COMPANY,

VARIOUS BANKS,

BANKERS TRUST COMPANY,

as ADMINISTRATIVE AGENT and SYNDICATION AGENT

and

MORGAN STANLEY SENIOR FUNDING, INC.,

as DOCUMENTATION AGENT

__________________________________

Dated as of October 30, 1992

and

Amended and Restated as of July 1, 1994

and

Amended and Restated as of February 26, 1996

and further

Amended and Restated as of April 11, 1997

============================================================
<PAGE> 2
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 The Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Minimum Amount of Each Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.08 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.09 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.10 Increased Costs; Illegality; etc. . . . . . . . . . . . . . . . . . . . . . . . . 12
1.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.12 Replacement of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Section 2. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.02 Minimum Stated Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.03 Letter of Credit Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.04 Letter of Credit Participations . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.05 Agreement to Repay Letter of
Credit Drawings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.06 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Section 3. Commitment Fees; Fees; Reductions
of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.02 Voluntary Termination of Unutilized
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.03 Mandatory Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . 26

Section 4. Prepayments; Payments; Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.02 Mandatory Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.04 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>

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<PAGE> 3
<TABLE>
<Captio>
Page
<S> <C> <C>
Section 5. Conditions Precedent to the Restatement
Effective Date and to All Credit
Events on the Restatement Effective
Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.01 Execution of Agreement; Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.02 Consummation of the Equity Financing . . . . . . . . . . . . . . . . . . . . . . . . 41
5.03 Repayment of Certain Existing Loans;
Payment of Fees; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.04 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.05 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.06 Corporate Documents; Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.07 Employee Benefit Plans; Shareholders'
Agreements; Collective Bargaining
Agreements; Tax Sharing Agreements;
Debt Agreements; CPC Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.08 Capital Expenditure Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.09 Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.10 Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.11 Mortgages; Title Insurance; Appraisal . . . . . . . . . . . . . . . . . . . . . . . 45
5.12 Adverse Change; Approvals; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.14 Fees; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.15 Asset Appraisal; Insurance; Solvency
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.16 Consent Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.17 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.18 Existing Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.19 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.20 Borrowing Base Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Section 5A. Conditions Precedent to the Incurrence
of D Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5A.01 Restatement Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5A.02 D Term Loan Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5A.03 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5A.04 Consummation of the Additional
Equity Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Section 6. Conditions Precedent To the Restatement
Effective Date and To All
Credit Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>

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<PAGE> 4
<TABLE>
<Captio>
Page
<S> <C> <C>
6.01 No Default; Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.02 Notice of Borrowing; Letter of
Credit Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.03 Adverse Change; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.05 Subsequent Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Section 7. Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.02 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.04 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.05 Financial Statements; Financial
Condition; Undisclosed Liabilities;
Projections; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.06 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.07 True and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.08 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . 55
7.09 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.10 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.11 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.12 Representations and Warranties in
Documents and in Existing Credit
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.13 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.14 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.15 Compliance with Statutes; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.16 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.17 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.19 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.20 Intellectual Property; Licenses;
Franchises; Formulas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.21 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.22 Restrictions on or Relating to Subsidiaries . . . . . . . . . . . . . . . . . . . . 61
7.23 Enterprise Zone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.24 Purchase or Other Commitments and
Outstanding Bids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.25 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

</TABLE>

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<PAGE> 5
<TABLE>
<Captio>
Page
<S> <C> <C>
7.26 Employment Agreements and Management
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Section 8. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.01 Information Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.02 Books, Records and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.03 Maintenance of Property, Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.04 Corporate Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.05 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.06 Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.07 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.08 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . . . . . . . . . . . . 70
8.09 Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.10 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.11 Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.13 Additional Security; Further Assurances . . . . . . . . . . . . . . . . . . . . . . 71
8.14 Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.15 Capital Expenditure Confirmation . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Section 9. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.01 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.02 Consolidation; Merger; Purchase or
Sale of Assets; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.03 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
9.04 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
9.05 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
9.06 Advances, Investments and Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 79
9.07 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
9.08 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
9.09 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.10 Cash Flow Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.11 Minimum Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
9.12 Limitation on Voluntary Payments and
Modifications of Indebtedness;
Modifications of Certificate of
Incorporation, By-Laws and
Certain Other Agreements; etc. . . . . . . . . . . . . . . . . . . . . . . . . . 83
9.13 Limitation on Certain Restrictions
on Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.14 Limitation on Issuance of Capital Stock . . . . . . . . . . . . . . . . . . . . . . 84
9.15 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
</TABLE>

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<PAGE> 6
<TABLE>
<Captio>
Page
<S> <C> <C>
9.16 Limitation on Creation of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 85

Section 10. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.02 Representations; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.04 Default Under Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.05 Bankruptcy; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.07 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.08 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.09 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Section 11. Definitions and Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.01 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Section 12. The Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
12.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
12.02 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
12.03 Lack of Reliance on the Administrative
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
12.04 Certain Rights of the Administrative
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
12.05 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
12.06 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
12.07 The Administrative Agent in Its Individual
Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
12.08 Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
12.09 Resignation by the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . 121
12.10 Documentation Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

Section 13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
13.01 Payment of Expenses; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
13.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
13.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
13.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
13.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
13.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
13.07 Calculations; Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
13.08 GOVERNING LAW; SUBMISSION TO
JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
</TABLE>

(v)

<PAGE> 7
<TABLE>
<Captio>
Page
<S> <C> <C>
13.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
13.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
13.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
13.12 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
13.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
13.14 Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
13.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
13.16 Addition of New Banks; Original Notes . . . . . . . . . . . . . . . . . . . . . . . . 133
13.17 Post Closing Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

SCHEDULE I Commitments
SCHEDULE II Existing Standby Letters of Credit
SCHEDULE III Real Property
SCHEDULE IV Material Liabilities
SCHEDULE V Properties
SCHEDULE VI Environmental Matters
SCHEDULE VII Intellectual Property Rights
SCHEDULE VIII Existing Obligations
SCHEDULE IX Insurance
SCHEDULE X Existing Liens
SCHEDULE XI Bank Addresses

EXHIBIT A Form of Notice of Borrowing
EXHIBIT B-1 Form of A Term Note
EXHIBIT B-2 Form of B Term Note
EXHIBIT B-3 Form of C Term Note
EXHIBIT B-4 Form of D Term Note
EXHIBIT B-5 Form of Revolving Note
EXHIBIT C Form of Letter of Credit Request
EXHIBIT D Form of Section 4.04(b)(ii) Certificate
EXHIBIT E Form of Opinion of Sonnenschein Nath &
Rosenthal
EXHIBIT F Form of Officers' Certificate
EXHIBIT G Form of Pledge Agreement
EXHIBIT H Form of Security Agreement
EXHIBIT I Form of Officer's Solvency Certificate
EXHIBIT J Form of Consent Letter
EXHIBIT K Form of Pro forma Balance Sheet
EXHIBIT L Projections
</TABLE>

(vi)

<PAGE> 8

EXHIBIT M Form of D Term Loan Certificate
EXHIBIT N Form of Borrowing Base Certificate
EXHIBIT O Form of Assignment and Assumption Agreement

(vii)
<PAGE> 9

CREDIT AGREEMENT, dated as of October 30, 1992, amended and
restated as of July 1, 1994, further amended and restated as of February 26,
1996 and further amended and restated as of April 11, 1997, among AMERICAN
ITALIAN PASTA COMPANY, a corporation organized and existing under the laws of
the State of Delaware (the "Company"), the Banks party hereto from time to
time, BANKERS TRUST COMPANY, as Administrative Agent and Syndication Agent and
MORGAN STANLEY SENIOR FUNDING, INC., as Documentation Agent (all capitalized
terms used herein and defined in Section 11 are used herein as therein
defined).

W I T N E S S E T H :

WHEREAS, the Company, the Existing Banks and the Existing
Agent are parties to a Credit Agreement, dated as of October 30, 1992, amended
and restated as of July 1, 1994 and further amended and restated as of February
26, 1996 (as the same has been amended, modified or supplemented to, but not
including, the Restatement Effective Date, the "Existing Credit Agreement");

WHEREAS, the Company has requested that the Existing Credit
Agreement be further amended and restated and the Banks and the Administrative
Agent are willing to amend and restate the same upon the terms and conditions
set forth below.

NOW, THEREFORE, the parties hereto agree that the Existing
Credit Agreement shall be and hereby is further amended and restated in its
entirety as follows:

Section 1. Amount and Terms of Credit.

1.01 The Commitments. (a) Subject to and upon the terms and
conditions set forth herein, each Bank with an A Term Loan Commitment severally
agrees to make, on the Original Restatement Effective Date, a term loan (each,
an "A Term Loan" and, collectively, the "A Term Loans") to the Company, which A
Term Loans (i) shall be made and initially maintained as a single Borrowing of
Base Rate Loans (subject to the option to convert such A Term Loans pursuant to
Section 1.06) and (ii) shall not exceed for any Bank, in initial aggregate
principal amount, that

<PAGE> 10

amount which equals the A Term Loan Commitment of such Bank on such date. Once
repaid, A Term Loans incurred hereunder may not be reborrowed.

(b) Subject to and upon the terms and conditions set
forth herein, each Bank with a B Term Loan Commitment severally agrees to make,
on the Original Restatement Effective Date, a term loan (each, a "B Term Loan"
and, collectively, the "B Term Loans") to the Company, which B Term Loans (i)
shall be made and initially maintained as a single Borrowing of Base Rate Loans
(subject to the option to convert such B Term Loans pursuant to Section 1.06)
and shall not exceed for any Bank, in initial aggregate principal amount, that
amount which equals the B Term Loan Commitment of such Bank on such date. Once
repaid, B Term Loans incurred hereunder may not be reborrowed.

(c) Subject to and upon the terms and conditions set
forth herein, each Bank with a C Term Loan Commitment severally agrees to make,
on the Original Restatement Effective Date, a term loan (each a "C Term Loan"
and, collectively, the "C Term Loans") to the Company, which C Term Loans (i)
shall be made and initially maintained as a single Borrowing of Base Rate Loans
(subject to the option to convert such C Term Loans pursuant to Section 1.06)
and (ii) shall not exceed for any Bank, in initial aggregate principal amount,
that amount which equals the C Term Loan Commitment of such Bank on such date.
Once repaid, C Term Loans incurred hereunder may not be reborrowed.

(d) Subject to and upon the terms and conditions set
forth herein, each Bank with a D Term Loan Commitment severally agrees to make,
at any time and from time to time after the Restatement Effective Date but on
or prior to the D Term Loan Termination Date, a loan or loans (each a "D Term
Loan" and, collectively, the "D Term Loans") to the Company, which D Term Loans
(i) shall, at the option of the Company, be Base Rate Loans or Eurodollar
Loans, provided that (A) except as otherwise specifically provided in Section
1.10(b), all D Term Loans comprising the same Borrowing shall at all times be
of the same Type and (B) prior to the Syndication Termination Date, Eurodollar
Loans may only be incurred on the Initial D Term Loan Eurodollar Loan Borrowing
Date and/or on a monthly anniversary thereof and may not have an Interest
Period in excess of one month, and (ii) shall not exceed for any Bank, in
initial aggregate principal amount, that amount which equals the D Term Loan
Commitment of such Bank at such time (before giving effect to any reductions
thereto on such date pursuant to Section 3.03(e)(i) or (ii) but after giving
effect to any reductions thereto on or prior to such date pursuant to Section
3.03(e)(iii)). Once repaid, D Term Loans incurred hereunder may not be
reborrowed.

-2-

<PAGE> 11

(e) Subject to and upon the terms and conditions set
forth herein, each Bank with a Revolving Loan Commitment severally agrees at
any time and from time to time after the Restatement Effective Date and prior
to the Revolving Loan Maturity Date, to make a revolving loan or loans (each a
"Revolving Loan" and, collectively, the "Revolving Loans") to the Company,
which Revolving Loans:

(I) shall, at the option of the Company, be Base Rate
Loans or Eurodollar Loans, provided that (A) except as otherwise
specifically provided in Section 1.10(b), all Revolving Loans
comprising the same Borrowing shall at all times be of the same Type
and (B) prior to the Syndication Termination Date, Eurodollar Loans
may only be incurred on the Initial Revolving Loan Eurodollar Loan
Borrowing Date and on a monthly anniversary thereof and may not have
an Interest Period in excess of one month, provided that, to the
extent that only one Bank has and maintains 100% of the Total
Revolving Loan Commitment during the period from the Initial Revolving
Loan Eurodollar Loan Borrowing Date to the Syndication Termination
Date and such Bank so consents, then Revolving Loans may be incurred
and maintained as Eurodollar Loans prior to the Syndication
Termination Date on the terms and conditions set forth in this
Agreement but without regard to the restrictions contained in this
clause (B);

(II) may be repaid and reborrowed in accordance with the
provisions hereof;

(III) shall not exceed for any Bank at any time outstanding
that aggregate principal amount which, when added to (A) the aggregate
amount of all other outstanding Revolving Loans made by such Bank and
(B) the product of (i) such Bank's RL Percentage and (ii) the
aggregate amount of all Letter of Credit Outstandings (exclusive of
Unpaid Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time, equals the Available Revolving Loan
Commitment of such Bank at such time; and

(IV) shall not exceed for all Banks at any time
outstanding that aggregate principal amount which, when added to the
aggregate amount of all Letter of Credit Outstandings (exclusive of
Unpaid Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time, equals an amount equal to the Borrowing
Base at such time.

-3-

<PAGE> 12

Notwithstanding anything to the contrary contained above,
Revolving Loans may not be incurred on the Restatement Effective Date.

1.02 Minimum Amount of Each Borrowing. The aggregate
principal amount of each Borrowing of Loans shall not be less than $1,000,000
and, if greater, shall be in an integral multiple of $100,000; provided,
however, the aggregate principal amount of each Borrowing of Revolving Loans
made as Base Rate Loans shall not be less than $500,000 and, if greater, shall
be in integral multiples of $100,000; provided further, that the aggregate
principal amount of each Borrowing of Revolving Loans may be in such lesser
amounts as is acceptable to all Banks with a Revolving Loan Commitment and the
Administrative Agent. More than one Borrowing may occur on the same date, but
at no time shall there be outstanding more than twenty Borrowings of Eurodollar
Loans.

1.03 Notice of Borrowing. (a) Except for any Borrowing of D
Term Loans made on the Restatement Effective Date as to which a Notice of
Borrowing shall be delivered on the Restatement Effective Date, whenever the
Company desires to make a Borrowing hereunder it shall, except as permitted
under Section 1.03(b), give the Administrative Agent at its Payment Office at
least one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) of each Borrowing of Base Rate Loans and at least three
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) of each Borrowing of Eurodollar Loans to be made hereunder, provided
that any such notice shall be deemed to have been given on a certain day only
if given before 12:00 Noon (New York time) on such day. Each such notice
(each, a "Notice of Borrowing"), except as otherwise expressly provided in
Section 1.10, shall be irrevocable and, in the case of each written notice and
each confirmation of telephonic notice, shall be given by the Company in the
form of Exhibit A, appropriately completed to specify (i) the aggregate
principal amount of the Loans to be made pursuant to such Borrowing, (ii) the
date of such Borrowing (which shall be a Business Day), (iii) whether the Loans
being made pursuant to such Borrowing shall constitute D Term Loans or
Revolving Loans and (iv) whether the Loans being made pursuant to such
Borrowing are to be initially maintained as Base Rate Loans or Eurodollar Loans
and, if Eurodollar Loans, the initial Interest Period to be applicable thereto.
The Administrative Agent shall promptly give each Bank which is required to
make Loans of the Tranche specified in the respective Notice of Borrowing
notice of such proposed Borrowing, of such Bank's proportionate share thereof
and of the other matters required by the immediately preceding sentence to be
specified in the Notice of Borrowing.

(b) (i) In the event the Company desires to make a Borrowing
of Revolving Loans hereunder which are to be maintained as Base Rate Loans on
the same

-4-

<PAGE> 13

day on which it shall give a notice of such a Borrowing, the Company shall give
each Bank with a Revolving Loan Commitment written notice or telephonic notice
confirmed in writing of each Revolving Loan to be made hereunder. Revolving
Loans will only be made on a same-day notice basis if all Banks with a
Revolving Loan Commitment agree, in their sole discretion, to make the
requested Borrowing on the same day on which the Notice of Borrowing was
provided. In the event that one or more Banks with a Revolving Loan Commitment
do not agree to make the Borrowing requested in the notice described in the
immediately preceding sentence on a same-day basis, such Notice of Borrowing
shall be automatically irrevocably deemed to become a Notice of Borrowing by
the Company to borrow Revolving Loans as specified in such notice on the
immediately succeeding Business Day. Each such notice shall be irrevocable and
specify in each case (A) the date of Borrowing (which shall be a Business Day),
(B) the aggregate principal amount of the Revolving Loans to be made pursuant
to such Borrowing and (C) that the Revolving Loans being made pursuant to such
Borrowing are to be initially maintained as Base Rate Loans.

(ii) Without in any way limiting the obligation of the Company to
confirm in writing any telephonic notice of such Borrowing of Revolving Loans,
the Bank may act without liability upon the basis of telephonic notice of such
Borrowing, believed by such Bank in good faith to be from a President, a Vice
President, a Treasurer or an Assistant Treasurer of the Company prior to
receipt of written confirmation. In each such case, the Company hereby waives
the right to dispute the Bank's record of the terms of such telephonic notice
of such Borrowing of Revolving Loans.

1.04 Disbursement of Funds. No later than 12:00 Noon (New
York time) on the date specified in each Notice of Borrowing (or in the case of
Revolving Loans to be incurred pursuant to a notice given in accordance with
Section 1.03(b)(i), at such time as all such Banks with a Revolving Loan
Commitment shall agree on the date specified in such notice or, in the event
that all Banks with a Revolving Loan Commitment have not so agreed to make a
same date Borrowing, no later than 12:00 Noon (New York time) on the Business
Day immediately following the date specified in such notice), each Bank with a
Commitment of the respective Tranche will make available its pro rata portion
of each such Borrowing requested to be made on such date. All such amounts
shall be made available in Dollars and in immediately available funds at the
Payment Office of the Administrative Agent, and the Administrative Agent will
make available to the Company at the Payment Office the aggregate of the
amounts so made available by the Banks. Unless the Administrative Agent shall
have been notified by any Bank prior to the date of Borrowing that such Bank
does not intend to make available to the Administrative Agent such Bank's
portion of any Borrowing to be made on such date, the Administrative Agent may
assume that such Bank has made such amount available to the Administrative
Agent on such date of Borrowing and the

-5-

<PAGE> 14

Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Company a
corresponding amount. If such corresponding amount is not in fact made
available to the Administrative Agent by such Bank, the Administrative Agent
shall be entitled to recover such corresponding amount on demand from such
Bank. If such Bank does not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefore, the Administrative Agent shall notify
the Company and the Company shall immediately pay such corresponding amount to
the Administrative Agent. The Administrative Agent shall also be entitled to
recover on demand from such Bank or the Company, as the case may be, interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to the
Company until the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (i) if recovered from such
Bank, the cost to the Administrative Agent of acquiring overnight Federal funds
and (ii) if recovered from the Company, the rate of interest applicable to the
respective Borrowing, as determined pursuant to Section 1.08. Nothing in this
Section 1.04 shall be deemed to relieve any Bank from its obligation to make
Loans hereunder or to prejudice any rights which the Company may have against
any Bank as a result of any failure by such Bank to make Loans hereunder.

1.05 Notes. (a) The Company's obligation to pay the
principal of, and interest on, the Loans made by each Bank shall be evidenced
(i) if A Term Loans, by a promissory note duly executed and delivered by the
Company substantially in the form of Exhibit B-1 with blanks appropriately
completed herewith (each, an "A Term Note" and, collectively, the "A Term
Notes"), (ii) if B Term Loans, by a promissory note duly executed and delivered
by the Company substantially in the form of Exhibit B-2 with blanks
appropriately completed in conformity herewith (each, a "B Term Note" and,
collectively, the "B Term Notes"), (iii) if C Term Loans, by a promissory note
duly executed and delivered by the Company substantially in the form of Exhibit
B-3 with blanks appropriately completed in conformity herewith (each, a "C Term
Note" and, collectively, the "C Term Notes"), (iv) if D Term Loans, by a
promissory note duly executed and delivered by the Company substantially in the
form of Exhibit B-4 with blanks appropriately completed in conformity herewith
(each, a "D Term Note" and, collectively, the "D Term Notes") and (v) if
Revolving Loans, by a promissory note duly executed and delivered by the
Company substantially in the form of Exhibit B-5 with blanks appropriately
completed in conformity herewith (each, a "Revolving Note" and, collectively,
the "Revolving Notes").

(b) The A Term Note issued to each Bank with an A Term
Loan Commitment shall (i) be executed by the Company, (ii) be payable to the
order of such Bank and be dated the date of issuance thereof, (iii) be in a
stated principal amount

-6-
<PAGE> 15

equal to the principal amount of the A Term Loans made by such Bank and be
payable in the principal amount of the A Term Loans evidenced thereby, (iv)
mature on the A Term Loan Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
mandatory repayment as provided in Section 4.02 and (vii) be entitled to the
benefits of this Agreement and be secured by the Security Documents.

(c) The B Term Note issued to each Bank with a B Term
Loan Commitment shall (i) be executed by the Company, (ii) be payable to the
order of such Bank and be dated the date of issuance thereof, (iii) be in a
stated principal amount equal to the principal amount of the B Term Loans made
by such Bank and be payable in the principal amount of the B Term Loans
evidenced thereby, (iv) mature on the B Term Loan Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 1.08 in respect of
the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to mandatory repayment as provided in Section 4.02 and
(vii) be entitled to the benefits of this Agreement and be secured by the
Security Documents.

(d) The C Term Note issued to each Bank with a C Term
Loan Commitment shall (i) be executed by the Company, (ii) be payable to the
order of such Bank and be dated the date of issuance thereof, (iii) be in a
stated principal amount equal to the principal amount of the C Term Loans made
by such Bank and be payable in the principal amount of the C Term Loans
evidenced thereby, (iv) mature on the C Term Loan Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 1.08 in respect of
the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to mandatory repayment as provided in Section 4.02 and
(vii) be entitled to the benefits of this Agreement and be secured by the
Security Documents.

(e) The D Term Note issued to each Bank with a D Term
Loan Commitment shall (i) be executed by the Company, (ii) be payable to the
order of such Bank and be dated the date of issuance thereof, (iii) be in a
stated principal amount equal to the principal amount of the D Term Loan
Commitment of such Bank and be payable in the principal amount of the D Term
Loans evidenced thereby from time to time, (iv) mature on the D Term Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the
case may be, evidenced thereby, (vi) be subject to mandatory repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this
Agreement and be secured by the Security Documents.

-7-

<PAGE> 16

(f) The Revolving Note issued to each Bank with a
Revolving Loan Commitment shall (i) be executed by the Company, (ii) be payable
to the order of such Bank and be dated the date of issuance thereof, (iii) be
in a stated principal amount equal to the Revolving Loan Commitment of such
Bank and be payable in the principal amount of the Revolving Loans evidenced
thereby from time to time, (iv) mature on the Revolving Loan Maturity Date, (v)
bear interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to mandatory repayment as provided in Section 4.02 and
(vii) be entitled to the benefits of this Agreement and be secured by the
Security Documents.

(g) Each Bank will note on its internal records the
amount of each Loan made by it and each payment in respect thereof and will
prior to any transfer of any of its Notes endorse on the reverse side thereof
the outstanding principal amount of Loans evidenced thereby. Failure to make
any such notation or endorsement shall not affect the Company's obligations in
respect of such Loans.

1.06 Conversions. The Company shall have the option to
convert, all or a portion equal to at least $1,000,000 in the case of a
Borrowing of Term Loans, and equal to at least $500,000 in the case of a
Borrowing of Revolving Loans, of the outstanding principal amount of the Loans
made pursuant to one or more Borrowings (so long as of the same Tranche) of one
Type of Loan into a Borrowing or Borrowings (of the same Tranche) of the other
Type of Loan, provided that (i) except as otherwise provided in Section
1.10(b), Eurodollar Loans may be converted into Base Rate Loans only on the
last day of an Interest Period applicable to the Loans being converted and no
such partial conversion of Eurodollar Loans shall reduce the outstanding
principal amount of such Eurodollar Loans made pursuant to a single Borrowing
to less than $1,000,000, (ii) Base Rate Loans may only be converted into
Eurodollar Loans if no Default or Event of Default is in existence on the date
of the conversion, (iii) no conversion pursuant to this Section 1.06 shall
result in a greater number of Borrowings than is permitted under Section 1.02
and (iv) prior to the Syndication Termination Date, no D Term Loans and no
Revolving Loans (other than Revolving Loans to the extent that only one Bank
has and maintains 100% of the Total Revolving Loan Commitment during the period
from the Initial Revolving Loan Eurodollar Loan Borrowing Date to the
Syndication Termination Date and such Bank consents to any such conversion) may
be converted into a Eurodollar Loan except (a) in the case of Revolving Loans,
on the Initial Revolving Loan Eurodollar Loan Borrowing Date or on a monthly
anniversary thereof and (b) in the case of D Term Loans, on the Initial D Term
Loan Eurodollar Loan Borrowing Date or a monthly anniversary thereof. Each
such conversion shall be effected by the Company by giving the Administrative
Agent at its Notice Office prior to 12:00 Noon (New York time) at least three
Business Days' prior written notice

-8-

<PAGE> 17

(or telephonic notice promptly confirmed in writing) (each a "Notice of
Conversion") specifying the Loans to be so converted, the Borrowing(s) pursuant
to which such Loans were made and, if to be converted into Eurodollar Loans,
the Interest Period to be initially applicable thereto. The Administrative
Agent shall give each Bank prompt notice of any such proposed conversion
affecting any of its Loans. Upon any such conversion the proceeds thereof will
be deemed to be applied directly on the day of such conversion to prepay the
outstanding principal amount of the Loans being converted.

1.07 Pro Rata Borrowings. All Borrowings of Loans under this
Agreement shall be incurred from the Banks pro rata on the basis of their
respective Commitments of the applicable Tranche. It is understood that no
Bank shall be responsible for any default by any other Bank of its obligation
to make Loans hereunder and that each Bank shall be obligated to make the Loans
provided to be made by it hereunder regardless of the failure of any other Bank
to make its Loans hereunder.

1.08 Interest. (a) The Company agrees to pay interest in
respect of the unpaid principal amount of each Base Rate Loan from the date the
proceeds thereof are made available to the Company until the maturity thereof
(whether by acceleration or otherwise) at a rate per annum which shall be equal
to the sum of the Applicable Margin plus the Base Rate in effect from time to
time.

(b) The Company agrees to pay interest in respect of the
unpaid principal amount of each Eurodollar Loan from the date the proceeds
thereof are made available to the Company until the maturity thereof (whether
by acceleration or otherwise) at a rate per annum which shall, during each
Interest Period applicable thereto, be equal to the sum of the Applicable
Margin plus the Quoted Rate for such Interest Period.

(c) Overdue principal and, to the extent permitted by
law, overdue interest in respect of each Loan and any other overdue amount
payable hereunder shall, in each case, bear interest at a rate per annum equal
to the greater of (x) 2% per annum in excess of the rate otherwise applicable
to Base Rate Loans of the respective Tranche of Loans from time to time and (y)
the rate which is 2% in excess of the rate then borne by such Loans, in each
case with such interest to be payable on demand.

(d) Accrued (and theretofore unpaid) interest shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on each
Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on the last
day of each Interest Period applicable thereto and, in the case of an Interest
Period in excess of three months, on each date occurring at three month
intervals after the first day of such Interest Period

-9-
<PAGE> 18

and (iii) in respect of each Loan, on any repayment (on the amount repaid), at
maturity (whether by acceleration or otherwise) and, after such maturity, on
demand. Notwithstanding anything to the contrary contained in this Agreement
or in the Existing Credit Agreement, all accrued (but theretofore unpaid)
interest with respect to Existing Revolving Loans and Deferred Loans which were
outstanding on the Restatement Effective Date immediately prior to giving
effect thereto shall be payable on the Restatement Effective Date.

(e) Upon each Interest Determination Date, the
Administrative Agent shall determine the Quoted Rate for each Interest Period
applicable to Eurodollar Loans and shall promptly notify the Company and the
Banks thereof. Each such determination shall, absent manifest error, be final
and conclusive and binding on all parties hereto.

1.09 Interest Periods. At the time it gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of any Eurodollar Loan (in the case of the initial Interest
Period applicable thereto) or prior to 12:00 Noon (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to such
Eurodollar Loan (in the case of any subsequent Interest Period), the Company
shall have the right to elect, by giving the Administrative Agent notice
thereof, the interest period (each an "Interest Period") applicable to such
Eurodollar Loan, which Interest Period shall, at the option of the Company, be
a one, two, three, six or, to the extent approved by each Bank, in its sole
discretion, with Commitments and/or Loans of the respective Tranche, a twelve
month period, provided that:

(i) all Eurodollar Loans comprising a single Borrowing shall
at all times have the same Interest Period;

(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Loan (including the date of
any conversion thereto from a Borrowing of Base Rate Loans) and each
Interest Period occurring thereafter in respect of such Loan shall
commence on the day on which the next preceding Interest Period
applicable thereto expires;

(iii) if any Interest Period relating to a Eurodollar Loan
begins on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period, such Interest
Period shall end on the last Business Day of such calendar month;

(iv) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding

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<PAGE> 19

Business Day; provided, however, that if any Interest Period for a
Eurodollar Loan would otherwise expire on a day which is not a
Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire
on the next preceding Business Day;

(v) no Interest Period may be selected at any time when any
Default or Event of Default is then in existence;

(vi) no Interest Period shall be selected which extends beyond
the Maturity Date which applies to the Eurodollar Loan under the
Tranche under which it has been incurred;

(vii) no Interest Period in respect of any Borrowing of A Term
Loans, B Term Loans, C Term Loans or D Term Loans, as the case may be,
shall be selected which extends beyond any date upon which a mandatory
repayment of such A Term Loans, B Term Loans, C Term Loans or D Term
Loans would be required to be made under Section 4.02(A)(d), (e), (f)
or (g), as the case may be, if, after giving effect to the selection
of such Interest Period, the aggregate principal amount of such A Term
Loans, B Term Loans, C Term Loans or D Term Loans, as the case may be,
maintained as Eurodollar Loans which have Interest Periods expiring
after such date will be in excess of the aggregate principal amount of
such A Term Loans, B Term Loans, C Term Loans or D Term Loans, as the
case may be, then outstanding less the aggregate amount of such
required prepayment; and

(viii) (I) no Interest Period shall be selected for a
Borrowing of any Eurodollar Loans consisting of D Term Loans or
Revolving Loans (other than Revolving Loans to the extent that only
one Bank has and maintains 100% of the Total Revolving Loan Commitment
during the period from the Initial Revolving Loan Eurodollar Loan
Borrowing Date to the Syndication Termination Date and such Bank
consents to such Interest Period) prior to the Initial D Term Loan
Eurodollar Loan Borrowing Date or the Initial Revolving Loan
Eurodollar Loan Borrowing Date, as applicable, and (II) prior to the
Syndication Termination Date, no Interest Period shall be selected for
a Borrowing of any Eurodollar Loans consisting of D Term Loans or
Revolving Loans (other than Revolving Loans to the extent that only
one Bank has and maintains 100% of the Total Revolving Loan Commitment
during the period from the Initial Revolving Loan Eurodollar Loan
Borrowing Date to the Syndication Termination Date and such Bank
consents to such Interest Period) which is in excess of one month.

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<PAGE> 20

If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Company has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to such Eurodollar
Loans as provided above or a Default or an Event of Default then exists, the
Company shall be deemed to have elected to convert such Eurodollar Loans into
Base Rate Loans effective as of the expiration date of such current Interest
Period.

1.10 Increased Costs; Illegality; etc. (a) In the event
that any Bank shall have determined (which determination shall, absent manifest
error, be final and conclusive and binding upon all parties hereto but, with
respect to clause (i) below, may be made only by the Administrative Agent):

(i) on any Interest Determination Date that, by reason of any
changes arising after the Original Effective Date affecting the
interbank Eurodollar market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in
the definition of Quoted Rate; or

(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loan because of (x) any change since the
Original Effective Date in any applicable law or governmental rule,
regulation, order, guideline or request (whether or not having the
force of law) or in the interpretation or administration thereof and
including the introduction of any new law or governmental rule,
regulation, order, guideline or request, such as, for example, but not
limited to: (A) a change in the basis of taxation of payments to any
Bank of the principal of or interest on the Notes or any other amounts
payable hereunder (except for (a) changes in the rate of tax on, or
determined by reference to, the net income or profits of such Bank
imposed by the jurisdiction in which its principal office or
applicable lending office is located and (b) United States withholding
taxes, which shall be governed by the provisions of Section 4.04) or
(B) a change in official reserve requirements (but, in all events,
excluding reserves required under Regulation D to the extent included
in the computation of the Quoted Rate) and/or (y) other circumstances
since the Original Effective Date affecting such Bank or the interbank
Eurodollar market or the position of such Bank in such market
(excluding, however, differences in a Bank's cost of funds from those
of the Administrative Agent which are solely the result of credit
differences between such Bank and the Administrative Agent); or

(iii) at any time, that the making or continuance of any
Eurodollar Loan has been made (x) unlawful by any law or governmental
rule, regulation or order, (y) impossible by compliance by any Bank in
good faith with any

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<PAGE> 21

governmental request (whether or not having force of law) or (z)
impracticable as a result of a contingency occurring after the
Original Effective Date which materially and adversely affects the
interbank Eurodollar market;

then, and in any such event, such Bank (or the Administrative Agent, in the
case of clause (i) above) shall promptly give notice (by telephone confirmed in
writing) to the Company and, except in the case of clause (i) above, to the
Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Banks). Thereafter (x) in
the case of clause (i) above, Eurodollar Loans shall no longer be available
until such time as the Administrative Agent notifies the Company and the Banks
that the circumstances giving rise to such notice by the Administrative Agent
no longer exist, and any Notice of Borrowing or Notice of Conversion given by
the Company with respect to Eurodollar Loans which have not yet been incurred
(including by way of conversion) shall be deemed rescinded by the Company, (y)
in the case of clause (ii) above, the Company shall pay to such Bank, upon
written demand therefore, such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Bank in its sole discretion shall determine) as shall be required to compensate
such Bank for such increased costs or reductions in amounts received or
receivable hereunder (a written notice as to the additional amounts owed to
such Bank, showing the basis for the calculation thereof, submitted to the
Company by such Bank shall, absent manifest error, be final and conclusive and
binding on all the parties hereto; however the failure to give any such notice
(unless the respective Bank has intentionally withheld or delayed such notice,
in which case the respective Bank shall not be entitled to receive additional
amounts pursuant to this Section 1.10(a)(y) for periods occurring prior to the
180th day before the giving of such notice) shall not release or diminish the
Company's obligations to pay additional amounts pursuant to this Section
1.10(a)(y)) and (z) in the case of clause (iii) above, the Company shall take
one of the actions specified in Section 1.10(b) as promptly as possible and, in
any event, within the time period required by law. In determining such
additional amounts pursuant to clause (y) of the immediately preceding
sentence, each Bank shall act reasonably and in good faith and will, to the
extent the increased costs or reductions in amounts receivable relate to such
Bank's loans in general and are not specifically attributable to a Loan
hereunder, use averaging and attribution methods which are reasonable and which
cover all loans similar to the Loans made by such Bank whether or not the loan
documentation for such other loans permits the Bank to receive increased costs
of the type described in this Section 1.10(a).

(b) At any time that any Eurodollar Loan is affected by
the circumstances described in Section 1.10(a)(ii) or (iii), the Company may
(and in the case of a Eurodollar Loan affected by the circumstances described
in Section 1.10(a)(iii) shall) either (i) if the affected Eurodollar Loan is
then being made initially or pursuant

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<PAGE> 22

to a conversion, by giving the Administrative Agent telephonic notice
(confirmed in writing) on the same date that the Company was notified by the
affected Bank or the Administrative Agent pursuant to Section 1.10(a)(ii) or
(iii), cancel the respective Borrowing, or (ii) if the affected Eurodollar Loan
is then outstanding, upon at least three Business Days' written notice to the
Administrative Agent, require the affected Bank to convert such Eurodollar Loan
into a Base Rate Loan, provided that if more than one Bank is affected at any
time, then all affected Banks must be treated the same pursuant to this Section
1.10(b).

(c) If at any time after the Original Effective Date, any
Bank determines that the introduction of or any change in any applicable law or
governmental rule, regulation, order, guideline or request (whether or not
having the force of law) concerning capital adequacy, or any change in
interpretation or administration thereof by any governmental authority, central
bank or comparable agency, will have the effect of increasing the amount of
capital required or expected to be maintained by such Bank or any corporation
controlling such Bank based on the existence of such Bank's Commitments
hereunder or its obligations hereunder, then the Company shall pay to such
Bank, upon its written demand therefor, such additional amounts as shall be
required to compensate such Bank or such other corporation for the increased
cost to such Bank or such other corporation or the reduction in the rate of
return to such Bank or such other corporation as a result of such increase of
capital. In determining such additional amounts, each Bank will act reasonably
and in good faith and will use averaging and attribution methods which are
reasonable and which will, to the extent the increased costs or reduction in
the rate of return relates to such Bank's commitments or obligations in general
and are not specifically attributable to the Commitments and obligations
hereunder, cover all commitments and obligations similar to the Commitments and
obligations of such Bank hereunder whether or not the loan documentation for
such other commitments or obligations permits the Bank to make the
determination specified in this Section 1.10(c), and such Bank's determination
of compensation owing under this Section 1.10(c) shall, absent manifest error,
be final and conclusive and binding on all the parties hereto. Each Bank, upon
determining that any additional amounts will be payable pursuant to this
Section 1.10(c), will give prompt written notice thereof to the Company, which
notice shall show the basis for calculation of such additional amounts,
although the failure to give any such notice (unless the respective Bank has
intentionally withheld or delayed such notice, in which case the respective
Bank shall not be entitled to receive additional amounts pursuant to this
Section 1.10(c) for periods occurring prior to the 180th day before the giving
of such notice) shall not release or diminish any of the Company's obligations
to pay additional amounts pursuant to this Section 1.10(c).

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<PAGE> 23

1.11 Compensation. The Company shall compensate each Bank,
upon its written request (which request shall set forth the basis for
requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other
funds required by such Bank to fund its Eurodollar Loans) which such Bank may
sustain: (i) if for any reason (other than a default by such Bank or the
Administrative Agent) a Borrowing of, or conversion from or into, Eurodollar
Loans does not occur on a date specified therefore in a Notice of Borrowing or
Notice of Conversion (whether or not withdrawn by the Company or deemed
withdrawn pursuant to Section 1.10(a)); (ii) if any repayment (including,
without limitation, any repayment made pursuant to Section 4.02 and any
repayment of Existing Loans to occur on the Restatement Effective Date pursuant
to Section 5.03) of any of its Eurodollar Loans (or, in the case of Existing
Loans, eurodollar loans under the Existing Credit Agreement) occurs on a date
which is not the last day of an Interest Period (or, in the case of Existing
Loans, an interest period under the Existing Credit Agreement) with respect
thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on
any date specified in a notice of prepayment given by the Company; or (iv) as a
consequence of (x) any other default by the Company to repay its Loans when
required by the terms of this Agreement or any Note held by such Bank or (y)
any election made pursuant to Section 1.10(b). A Bank's basis for requesting
compensation pursuant to this Section 1.11, and a Bank's calculations of the
amounts thereof, shall, absent manifest error, be final and conclusive and
binding on all parties hereto.

1.12 Replacement of Banks. If any Bank (other than the
Administrative Agent) (x) is owed increased costs under Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 2.06 or Section 4.04 materially in excess of
those of the other Banks or (y) refuses to consent to certain proposed changes,
waivers, discharges or terminations with respect to this Agreement which have
been approved by the Required Banks as provided in Section 13.12(b), the
Company shall have the right, if no Default or Event of Default then exists, to
replace such Bank (the "Replaced Bank") with one or more other Eligible
Transferee or Transferees (collectively, the "Replacement Bank") acceptable to
the Administrative Agent, provided that:

(i) at the time of any replacement pursuant to this Section
1.12, the Replacement Bank shall enter into one or more assignment
agreements, in form and substance satisfactory to the Administrative
Agent, pursuant to which the Replacement Bank shall acquire all of the
Commitments and outstanding Loans of, and participations in Letters of
Credit by, the Replaced Bank and, in connection therewith, shall pay
to (x) the Replaced Bank in respect thereof an amount equal to the sum
of (A) an amount equal to the principal of, and all accrued interest
on, all outstanding Loans of the Replaced Bank, (B) an amount

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<PAGE> 24

equal to all Unpaid Drawings that have been funded by (and not
reimbursed to) such Replaced Bank, together with all then unpaid
interest with respect thereto at such time and (C) an amount equal to
all accrued, but theretofore unpaid, Fees owing to the Replaced Bank
pursuant to Section 3.01 hereof and (y) the appropriate Issuing Bank
an amount equal to such Replaced Bank's RL Percentage of any Unpaid
Drawing (which at such time remains an Unpaid Drawing), to the extent
such amount was not theretofore funded by such Replaced Bank; and

(ii) all obligations of the Company owing to the Replaced Bank
(including, without limitation, such increased costs and excluding
those specifically described in clause (i) above in respect of which
the assignment purchase price has been, or is concurrently being,
paid) shall be paid in full to such Replaced Bank concurrently with
such replacement.

Upon the execution of the respective assignment documentation,
the payment of amounts referred to in clauses (i) and (ii) above and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Note or Notes executed by the Company, the Replacement Bank shall
become a Bank hereunder and the Replaced Bank shall cease to constitute a Bank
hereunder, except with respect to indemnification and clawback provisions under
this Agreement, which shall survive as to such Replaced Bank. Notwithstanding
anything to the contrary contained above, no Issuing Bank may be replaced
hereunder at any time while it has Letters of Credit outstanding hereunder
unless arrangements satisfactory to such Issuing Bank (including the furnishing
of a standby letter of credit in form and substance, and issued by an issuer
satisfactory to such Issuing Bank or the furnishing of cash collateral in
amounts and pursuant to arrangements satisfactory to such Issuing Bank) have
been made with respect to such outstanding Letters of Credit.

Section 2. Letters of Credit.

2.01 Letters of Credit. (a) Subject to and upon the terms
and conditions herein set forth, the Company may request any Issuing Bank at
any time and from time to time on and after the Restatement Effective Date and
prior to the Revolving Loan Maturity Date to issue, (x) for the account of the
Company and for the benefit of any holder (or any trustee, agent or other
similar representative for any such holders) of L/C Supportable Indebtedness of
the Company, an irrevocable standby letter of credit in a form customarily used
by such Issuing Bank or in such other form as has been approved by the Company
and such Issuing Bank in support of said L/C Supportable Indebtedness (each
such standby letter of credit, a "Standby Letter of Credit" and collectively,
the "Standby Letters of Credit") and (y) for the account of the

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<PAGE> 25

Company and for the benefit of any obligee of trade obligations of the Company,
an irrevocable trade letter of credit in a form customarily used by such
Issuing Bank or in such other form as has been approved by such Issuing Bank
and the Company, in support of trade obligations of the Company (each such
trade letter of credit, a "Trade Letter of Credit" and collectively, the "Trade
Letters of Credit," each Trade Letter of Credit and each Standby Letter of
Credit, a "Letter of Credit" and the Trade Letters of Credit and the Standby
Letters of Credit, collectively, the "Letters of Credit"). All Letters of
Credit shall be denominated in Dollars. It is hereby acknowledged and agreed
that the standby letters of credit which were issued by the respective Issuing
Bank under the Original Credit Agreement or the Existing Credit Agreement and
which remain outstanding on the Restatement Effective Date (the "Existing
Standby Letters of Credit") shall constitute Standby Letters of Credit for all
purposes of this Agreement and shall be deemed issued, with the same maturity
date, on the Restatement Effective Date for purposes of Sections 2.04(a) and
3.01. The Existing Standby Letters of Credit and the Stated Amounts and the
expiry dates thereof and the beneficiaries thereunder are described on Schedule
II.

(b) Each Issuing Bank hereby agrees, in its sole discretion,
that it will, and BTCo hereby agrees that, in the event a requested Letter of
Credit is not issued by any one of the other Issuing Banks, it will (subject to
the terms and conditions contained herein), at any time and from time to time
on and after the Restatement Effective Date and prior to the Revolving Loan
Maturity Date, following its receipt of the respective Letter of Credit
Request, issue for the account of the Company one or more Letters of Credit,
(x) in the case of Standby Letters of Credit, in support of such L/C
Supportable Indebtedness of the Company as is permitted to remain outstanding
without giving rise to a Default or Event of Default hereunder and (y) in the
case of Trade Letters of Credit, in support of obligees of trade obligations of
the Company as referenced in Section 2.01(a); provided that the respective
Issuing Bank shall be under no obligation to issue any Letter of Credit of the
types described above if at the time of such issuance:

(i) any order, judgment or decree of any governmental
authority or arbitrator shall purport by its terms to enjoin or
restrain such Issuing Bank from issuing such Letter of Credit or any
requirement of law applicable to such Issuing Bank or any request or
directive (whether or not having the force of law) from any
governmental authority with jurisdiction over such Issuing Bank shall
prohibit, or request that such Issuing Bank refrain from, the issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon such Issuing Bank with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which
such Issuing Bank is not otherwise compensated) not in effect on the
Original Effective Date, or any unreimbursed

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<PAGE> 26

loss, cost or expense which was not applicable, in effect or known to
such Issuing Bank as of the Original Effective Date, and which such
Issuing Bank in good faith deems material to it;

(ii) such Issuing Bank shall have received notice from any
Bank prior to the issuance of such Letter of Credit of the type
described in the penultimate sentence of Section 2.03(b); or

(iii) a Bank Default exists, unless such Issuing Bank has
entered into arrangements satisfactory to it and the Company to
eliminate such Issuing Bank's risk with respect to the Bank which is
the subject of the Bank Default including by cash collateralizing such
Bank's applicable RL Percentage of the Letter of Credit Outstandings.

(c) Notwithstanding the foregoing, (i) no Letter of
Credit shall be issued the Stated Amount of which, when added to the Letter of
Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date
of, and prior to the issuance of, the respective Letter of Credit) at such
time, would exceed (x) $2,500,000, (y) when added to the aggregate principal
amount of all Revolving Loans then outstanding, an amount equal to the Total
Available Revolving Loan Commitment then in effect or (z) when added to the
aggregate principal amount of all Revolving Loans then outstanding, an amount
equal to the Borrowing Base, (ii) each Standby Letter of Credit shall by its
terms terminate on or before the earlier of (x) the date which occurs 12 months
after the date of the issuance thereof (although any such Standby Letter of
Credit may be extendable for successive periods of up to 12 months, but not
beyond the Revolving Loan Maturity Date, on terms acceptable to the
Administrative Agent and the Issuing Bank with any such extension to be treated
as a new issuance of the Standby Letter of Credit being extended) and (y) the
Revolving Loan Maturity Date and (iii) each Trade Letter of Credit shall by its
terms terminate on or before the earlier of (x) the date which occurs 24 months
after the date of the issuance thereof and (y) the Revolving Loan Maturity
Date.

2.02 Minimum Stated Amount. The Stated Amount of each
Standby Letter of Credit shall be not less than $100,000 and the Stated Amount
of each Trade Letter of Credit shall be not less than $125,000 or, in each
case, such lesser amount as is acceptable to the Issuing Bank issuing such
Letter of Credit.

2.03 Letter of Credit Requests. (a) Whenever the Company
desires that a Letter of Credit be issued for its account, the Company shall
give the Administrative Agent and the respective Issuing Bank at least ten
Business Days' (or such shorter period as is acceptable to such Issuing Bank in
any given case) written notice prior to

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<PAGE> 27

the proposed date of issuance (which shall be a Business Day). Each notice
shall be in the form of Exhibit C (each a "Letter of Credit Request").

(b) The making of each Letter of Credit Request shall be
deemed to be a representation and warranty by the Company that such Letter of
Credit may be issued in accordance with, and will not violate the requirements
of, Section 2.01(c). Unless the respective Issuing Bank has received notice
from any Bank before it issues a Letter of Credit that one or more of the
applicable conditions specified in Section 5 or 6 are not then satisfied, or
that the issuance of such Letter of Credit would violate Section 2.01(c), then
such Issuing Bank shall issue on the date of issuance requested in the
applicable Letter of Credit Request the requested Letter of Credit for the
account of the Company in accordance with such Issuing Bank's usual and
customary practices. Upon its issuance of, or its entering into an amendment
with respect to, any Letter of Credit, the respective Issuing Bank shall
promptly notify each Bank of such issuance or amendment, which notice shall be
accompanied by a copy of the Letter of Credit actually issued or amendment
entered into, as the case may be, by such Issuing Bank.

2.04 Letter of Credit Participations. (a) Immediately upon
the issuance by the respective Issuing Bank of any Letter of Credit (and on the
Restatement Effective Date in the case of Existing Letters of Credit), such
Issuing Bank shall be deemed to have sold and transferred to each Bank with a
Revolving Loan Commitment, other than such Issuing Bank (each such Bank, in its
capacity under this Section 2.04, a "Participant"), and each such Participant
shall be deemed irrevocably and unconditionally to have purchased and received
from such Issuing Bank, without recourse or warranty, an undivided interest and
participation, to the extent of such Participant's RL Percentage in such Letter
of Credit, each substitute letter of credit, each drawing made thereunder and
the obligations of the Company under this Agreement with respect thereto, and
any security therefor or guaranty pertaining thereto. Upon any change in the
Revolving Loan Commitments of the Banks pursuant to Section 1.12 or 13.04, it
is hereby agreed that, with respect to all outstanding Letters of Credit and
Unpaid Drawings, there shall be an automatic adjustment to the participations
pursuant to this Section 2.04 to reflect the new RL Percentages of the assignor
and assignee Banks or of all Banks with Revolving Loan Commitments, as the case
may be.

(b) In determining whether to pay under any Letter of
Credit, no Issuing Bank shall have any obligation relative to the other Banks
other than to confirm that any documents required to be delivered under such
Letter of Credit appear to have been delivered and that they appear to comply
on their face with the requirements of such Letter of Credit. Any action taken
or omitted to be taken by any Issuing Bank under or in connection with any
Letter of Credit if taken or omitted in the absence of

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<PAGE> 28

gross negligence or willful misconduct, shall not create for such Issuing Bank
any resulting liability to the Company or any Bank.

(c) In the event that any Issuing Bank makes any payment
under any Letter of Credit and the Company shall not have reimbursed such
amount in full to the respective Issuing Bank pursuant to Section 2.05(a), the
respective Issuing Bank shall promptly notify the Administrative Agent, which
shall promptly notify each Participant of such failure, and each Participant
shall promptly and unconditionally pay to the Administrative Agent for the
account of such Issuing Bank the amount of such Participant's applicable RL
Percentage of such unreimbursed payment in Dollars and in same day funds. If
the Administrative Agent so notifies, prior to 11:00 A.M. (New York time) on
any Business Day, any Participant required to fund a payment under a Letter of
Credit, such Participant shall make available to the Administrative Agent at
the Payment Office of the Administrative Agent for the account of such Issuing
Bank in Dollars such Participant's applicable RL Percentage of the amount of
such payment on such Business Day in same day funds. If and to the extent such
Participant shall not have so made its applicable RL Percentage of the amount
of such payment available to the Administrative Agent for the account of such
Issuing Bank, such Participant agrees to pay to the Administrative Agent for
the account of such Issuing Bank, forthwith on demand such amount, together
with interest thereon, for each day from such date until the date such amount
is paid to the Administrative Agent for the account of such Issuing Bank at the
cost to such Issuing Bank of acquiring overnight Federal funds. The failure of
any Participant to make available to the Administrative Agent for the account
of such Issuing Bank its applicable RL Percentage of any payment under any
Letter of Credit shall not relieve any other Participant of its obligation
hereunder to make available to the Administrative Agent for the account of such
Issuing Bank its applicable RL Percentage of any Letter of Credit on the date
required, as specified above, but no Participant shall be responsible for the
failure of any other Participant to make available to the Administrative Agent
for the account of such Issuing Bank such other Participant's applicable RL
Percentage of any such payment.

(d) Whenever any Issuing Bank receives a payment of a
reimbursement obligation as to which the Administrative Agent has received for
the account of such Issuing Bank any payments from the Participants pursuant to
clause (c) above, such Issuing Bank shall pay to the Administrative Agent and
the Administrative Agent shall promptly pay each Participant which has paid its
applicable RL Percentage thereof, in Dollars and in same day funds, an amount
equal to such Participant's share (based on the proportionate aggregate amount
funded by such Participant to the aggregate amount funded by all Participants)
of the principal amount of such

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<PAGE> 29

reimbursement obligation and interest thereon accruing after the purchase of
the respective participations.

(e) Upon the request of any Participant, each Issuing
Bank shall furnish to such Participant copies of any Letter of Credit issued by
it and such other documentation as may reasonably be requested by such
Participant.

(f) The obligations of each respective Participant to
make payments to the Administrative Agent for the account of each Issuing Bank
with respect to Letters of Credit issued which such Participant has a
participation in shall be irrevocable and not subject to any qualification or
exception whatsoever and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, any of the following circumstances:

(i) any lack of validity or enforceability of this
Agreement or any of the other Credit Documents;

(ii) the existence of any claim, setoff, defense or other
right which the Company may have at any time against a beneficiary
named in a Letter of Credit, any transferee of any Letter of Credit
(or any Person for whom any such transferee may be acting), the
Administrative Agent, any Participant, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transaction between the Company and the beneficiary named
in any such Letter of Credit);

(iii) any draft, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;

(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of this Agreement or any
of the other Credit Documents; or

(v) the occurrence of any Default or Event of Default.

2.05 Agreement to Repay Letter of Credit Drawings. (a) The
Company hereby agrees to reimburse the respective Issuing Bank, by making
payment to the Administrative Agent in immediately available funds at the
Payment Office (or by making the payment directly to the respective Issuing
Bank at such location as may otherwise have been agreed upon by the Company and
the respective Issuing Bank), for

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<PAGE> 30

any payment or disbursement made by such Issuing Bank under any Letter of
Credit (each such amount so paid until reimbursed, an "Unpaid Drawing"),
immediately after, and in any event on the date of, such payment or
disbursement, if the respective Issuing Bank has given the Company notice of
such payment or disbursement prior to 2:00 p.m. (New York time) on the date of
such payment or disbursement (which notice such Issuing Bank shall be under no
obligation to give), and in any event on the Business Day immediately
succeeding such payment or disbursement, with interest on the amount so paid or
disbursed by the respective Issuing Bank, to the extent not reimbursed prior to
12:00 Noon (New York time) on the date of such payment or disbursement, from
and including the date paid or disbursed to but excluding the date such Issuing
Bank is reimbursed by the Company therefor at a rate per annum which shall be
(x) unless a Bankruptcy Default exists on the date of the respective payment or
disbursement, for the period from and including the date of the respective
payment or disbursement until the earlier to occur of a Bankruptcy Default or
the date of receipt by the Company from such Issuing Bank or the Administrative
Agent of written or telephonic notice of such payment or disbursement, the Base
Rate in effect from time to time plus the Applicable Margin for Revolving Loans
at the time of such payment or disbursement, and (y) from and including the
date of the respective payment or disbursement if a Bankruptcy Default then
exists or, if a Bankruptcy Default does not exist on the date of the respective
payment or disbursement, from and including the earlier to occur of the date
upon which a Bankruptcy Default subsequently occurs or the date of receipt by
the Company from such Issuing Bank or the Administrative Agent of written or
telephonic notice of such payment or disbursement to but excluding the date
such Issuing Bank was reimbursed by the Company therefor, the Base Rate in
effect from time to time plus 4%, in each case with such interest to be payable
on demand. Each Issuing Bank shall provide the Company and the Administrative
Agent prompt notice of any payment or disbursement made under the Letter of
Credit issued by such Issuing Bank, although the failure of, or the delay in,
giving any such notice shall not release or diminish the obligations of the
Company under this Section 2.05(a) or under any other Section of this
Agreement.

(b) The obligations of the Company under this Section
2.05 to reimburse each Issuing Bank with respect to Unpaid Drawings (including,
in each case, interest thereon) shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim or defense
to payment which the Company may have or have had against any Bank (including
in its capacity as Issuing Bank or as Participant) or any beneficiary or any
transferee of the respective Letter of Credit, including, without limitation,
any defense based upon the failure of any drawing under a Letter of Credit
(each a "Drawing") to conform to the terms of the Letter of Credit or any
nonapplication or misapplication by the beneficiary of the proceeds of such
Drawing or any draft, demand, certificate or any other document presented under
such

-22-
<PAGE> 31

Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any or all respects or any statement therein being untrue or inaccurate in any
respect; provided, however, that the Company shall not be obligated to
reimburse any Issuing Bank for any wrongful payment made by such Issuing Bank
under a Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of such Issuing Bank.

2.06 Increased Costs. If at any time after the Original
Effective Date any Issuing Bank or any Participant determines that the
introduction of or any change in any applicable law, rule, regulation, order,
guideline or request or in the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any Issuing Bank or any Participant with any request
or directive by any such authority (whether or not having the force of law),
shall either (i) impose, modify or make applicable any reserve, deposit,
capital adequacy or similar requirement against letters of credit issued by any
Issuing Bank or participated in by any Participant, or (ii) impose on any
Issuing Bank or any Participant any other conditions relating, directly or
indirectly, to this Agreement or any Letter of Credit; and the result of any of
the foregoing is to increase the cost to any Issuing Bank or any Participant of
issuing, maintaining or participating in any Letter of Credit, or reduce the
amount of any sum received or receivable by any Issuing Bank or any Participant
hereunder or reduce the rate of return on its capital with respect to Letters
of Credit, then, upon demand to the Company by any Issuing Bank or any
Participant (a copy of which demand shall be sent by such Issuing Bank or such
Participant to the Administrative Agent), the Company shall pay to such Issuing
Bank or such Participant such additional amount or amounts as will compensate
such Bank for such increased cost or reduction in the amount receivable or
reduction on the rate of return on its capital. In determining such additional
amounts pursuant to the preceding sentence, each Issuing Bank or Participant
will act reasonably and in good faith and will, to the extent the increased
costs or reductions in amounts receivable or reductions in rates of return
relate to such Issuing Bank's or Participant's letters of credit in general and
are not specifically attributable to the Letters of Credit hereunder, use
averaging and attribution methods which are reasonable and which cover all
letters of credit similar to the Letters of Credit issued by or participated in
by such Issuing Bank or Participant whether or not the documentation for such
other Letters of Credit permit such Issuing Bank or Participant to receive
amounts of the type described in this Section 2.06. Any Issuing Bank or any
Participant, upon determining that any additional amounts will be payable
pursuant to this Section 2.06, will give prompt written notice thereof to the
Company, which notice shall include a certificate submitted to the Company by
such Issuing Bank or such Participant (a copy of which certificate shall be
sent by such Issuing Bank or such Participant to the Administrative Agent),
setting forth in reasonable detail the basis for the calculation of such
additional amount or

-23-
<PAGE> 32

amounts necessary to compensate such Issuing Bank or such Participant, although
failure to give any such notice (unless the respective Issuing Bank or
Participant has intentionally withheld or delayed such notice, in which case
the respective Issuing Bank or Participant shall not be entitled to receive
additional amounts pursuant to this Section 2.06 for periods occurring prior to
the 180th day before the giving of such notice) shall not release or diminish
the Company's obligations to pay additional amounts pursuant to this Section
2.06. The certificate required to be delivered pursuant to this Section 2.06
shall, absent manifest error, be final, conclusive and binding on the Company.

Section 3. Commitment Fees; Fees; Reductions of Commitment.

3.01 Fees. (a) The Company agrees to pay to the
Administrative Agent for distribution to each Bank with a Revolving Loan
Commitment a commitment fee (the "RL Commitment Commission") for the period
from and including the Restatement Effective Date to and including the
Revolving Loan Maturity Date (or such earlier date as the Total Revolving Loan
Commitment shall have been terminated) computed at the rate for each day equal
to 1/2 of 1% per annum on the daily Unutilized Revolving Loan Commitment of
such Bank. Accrued RL Commitment Commission shall be due and payable in
immediately available funds quarterly in arrears on each Quarterly Payment Date
and on the Revolving Loan Maturity Date or such earlier date upon which the
Total Revolving Loan Commitment is terminated.

(b) The Company agrees to pay to the Administrative Agent
for distribution to each Bank with a D Term Loan Commitment a commitment fee (a
"D Term Loan Commitment Commission") for the period from and including the
Restatement Effective Date to and including the D Term Loan Termination Date
(or such earlier date as the Total D Term Loan Commitment shall have been
terminated) computed at the rate for each day equal to 1/2 of 1% per annum on
the daily D Term Loan Commitment of such Bank. Accrued D Term Loan Commitment
Commission shall be due and payable in immediately available funds quarterly in
arrears on each Quarterly Payment Date and on the D Term Loan Termination Date
or such earlier date upon which the Total D Term Loan Commitment is terminated.

(c) The Company agrees to pay to the Administrative Agent
for distribution to each Bank with a Revolving Loan Commitment a fee in respect
of each Letter of Credit issued hereunder (the "Letter of Credit Fee"), for the
period from and including the date of issuance of such Letter of Credit (or, in
the case of Existing Letters of Credit, from the Restatement Effective Date) to
and including the termination of such Letter of Credit, computed at a rate per
annum equal to 3% of the daily Stated Amount of such Letter of Credit. Letter
of Credit Fees shall be distributed by the Administrative Agent to the Banks
with Revolving Loan Commitments on the basis of

-24-
<PAGE> 33

their respective RL Percentages as in effect from time to time. Accrued Letter
of Credit Fees shall be due and payable in immediately available funds
quarterly in arrears on each Quarterly Payment Date and on the first day after
the termination of the Total Revolving Loan Commitment on which no Letters of
Credit remain outstanding.

(d) The Company agrees to pay to each Issuing Bank at all
times when there is more than one Bank with a Revolving Loan Commitment, for
its own account, a facing fee in respect of each Letter of Credit issued by
such Issuing Bank hereunder (the "Facing Fee") for the period from and
including the date of issuance (or, (x) in the case of Existing Letters of
Credit, the Restatement Effective Date or (y) in the event that on the date of
issuance (or the Restatement Effective Date in the case of Existing Letters of
Credit) there is only one Bank with a Revolving Loan Commitment on such later
date on which there is more than one Bank with a Revolving Loan Commitment) of
such Letter of Credit to and including the termination of such Letter of
Credit, equal to 1/4 of 1% per annum of the daily Stated Amount of such Letter
of Credit. Accrued Facing Fees shall be due and payable in immediately
available funds quarterly in arrears on each Quarterly Payment Date and on the
first day after the termination of the Total Revolving Loan Commitment on which
no Letters of Credit remain outstanding.

(e) The Company hereby agrees to pay in immediately
available funds directly to each Issuing Bank upon each issuance of, drawing
under, and/or amendment of, a Letter of Credit issued by such Issuing Bank such
amount as shall at the time of such issuance, drawing or amendment be the
administrative charge which such Issuing Bank is customarily charging for
issuances of, drawings under or amendments of, letters of credit issued by it
or such alternative amounts as may have been agreed upon in writing by the
Company and such Issuing Bank.

(f) Notwithstanding anything to the contrary contained in
this Agreement or in the Existing Credit Agreement, all unpaid Fees under, and
as defined in, the Existing Credit Agreement (including, without limitation,
any Commitment Commission, Letter of Credit Fees and Facing Fees (as each such
term is defined in the Existing Credit Agreement)) accrued to the Restatement
Effective Date (immediately prior to giving effect thereto) shall be payable on
the Restatement Effective Date.

(g) The Company shall pay (x) to the Administrative
Agent, for its own account, on the Restatement Effective Date, such fees of the
Administrative Agent as have heretofore been agreed to in writing by the
Company and the Agent and (y) to the Administrative Agent and each Bank, for
their respective accounts, such other fees as have been agreed to in writing
from time to time by the Company and the Administrative Agent when and as due.

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<PAGE> 34

3.02 Voluntary Termination of Unutilized Commitments. (a)
Upon at least three Business Days' prior written notice (or telephonic notice
promptly confirmed in writing) to the Administrative Agent at its Notice
Office, which notice the Administrative Agent shall promptly transmit to each
of the Banks, the Company shall have the right, without premium or penalty, to
terminate, in whole or in part, the Total Unutilized Revolving Loan Commitment,
provided that any partial reduction pursuant to this Section 3.02 (a) shall be
in integral multiples of $1,000,000.

(b) In the event of certain refusals by a Bank as
provided in Section 13.12(b) to consent to certain proposed changes, waivers,
discharges or terminations with respect to this Agreement which have been
approved by the Required Banks, the Company may, subject to its compliance with
the requirements of said Section 13.12(b), upon five Business Days' written
notice to the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the Banks) terminate
the Revolving Loan Commitment and D Term Loan Commitment of such Bank so long
as all Loans, together with accrued and unpaid interest, Fees and all other
amounts, owing to such Bank (other than amounts owing in respect of any Tranche
of Term Loans maintained by such Bank, if such Term Loans are not being repaid
pursuant to Section 13.12(b)) are repaid concurrently with the effectiveness of
such termination (at which time Schedule I shall be deemed modified to reflect
such changed amounts), and at such time, unless the respective Bank continues
to act as a Bank with respect to any Tranche of Term Loans hereunder, such Bank
shall no longer constitute a "Bank" for purposes of this Agreement, except with
respect to indemnifications under this Agreement (including, without
limitation, Sections 1.10, 1.11, 2.06, 4.04, 13.01 and 13.06), which shall
survive as to such repaid Bank.

(c) Any partial reduction to the Total Revolving Loan
Commitment pursuant to this Section 3.02 shall be applied to reduce any then
remaining commitment reduction which may be required pursuant to Section
3.03(f).

3.03 Mandatory Reduction of Commitments. (a) The Total
Commitment (and the Commitment of each Bank) shall terminate on April 30, 1997
and the Existing Credit Agreement shall continue in effect without being
amended and restated by this Agreement, unless the Restatement Effective Date
has occurred on or before such date.

(b) In addition to any other mandatory commitment
reductions pursuant to this Section 3.03, the Total A Term Loan Commitment (and
the A Term Loan Commitment of each Bank) shall terminate in its entirety on the
Original Restatement Effective Date (after giving effect to the making of the A
Term Loans on such date).

-26-
<PAGE> 35

(c) In addition to any other mandatory commitment
reductions pursuant to this Section 3.03, the Total B Term Loan Commitment (and
the B Term Loan Commitment of each Bank) shall terminate in its entirety on the
Original Restatement Effective Date (after giving effect to the making of the B
Term Loans on such date).

(d) In addition to any other mandatory commitment
reductions pursuant to this Section 3.03, the Total C Term Loan Commitment (and
the C Term Loan Commitment of each Bank) shall terminate in its entirety on the
Original Restatement Effective Date (after giving effect to the making of the C
Term Loans on such date).

(e) In addition to any other mandatory commitment
reductions pursuant to this Section 3.03, the Total D Term Loan Commitment (and
the D Term Loan Commitment of each Bank) shall (i) be reduced on each date on
which D Term Loans are incurred (after giving effect to the making of the D
Term Loans on such date), in an amount equal to the aggregate principal amount
of D Term Loans incurred on such date, (ii) terminate in its entirety on the D
Term Loan Termination Date (after giving effect to the making of D Term Loans
on such date) and (iii) prior to the termination of the Total D Term Loan
Commitment as provided in clauses (i) and (ii) above, be reduced from time to
time to the extent required by Section 4.02.

(f) In addition to any other mandatory commitment
reductions pursuant to this Section 3.03, unless the condition set forth in
Section 5A.04 shall have theretofore been satisfied, on the one month
anniversary of the Restatement Effective Date (i) the Total D Term Loan
Commitment (and the D Term Loan Commitment of each Bank) shall terminate in its
entirety and (ii) the Total Revolving Loan Commitment shall be permanently
reduced by an amount equal to $10,000,000 (or, to the extent the amount of such
required reduction (as such may be reduced pursuant to Section 3.02(c) or
3.03(j)) exceeds the Total Revolving Loan Commitment at such time, the Total
Revolving Loan Commitment (and the Revolving Loan Commitment of each Bank)
shall be terminated).

(g) In addition to any other mandatory commitment
reductions pursuant to this Section 3.03, the Total Revolving Loan Commitment
(and the Revolving Loan Commitment of each Bank) shall terminate on the
Revolving Loan Maturity Date.

(h) In addition to any other mandatory commitment
reductions pursuant to this Section 3.03, on each date after the Restatement
Effective Date upon which a mandatory prepayment of Term Loans pursuant to
Section 4.02(B)(a) is

-27-
<PAGE> 36

required (and exceeds in amount the aggregate principal amount of Term Loans
then outstanding) or would be required if Term Loans were then outstanding, (x)
first, the Total D Term Loan Commitment shall be permanently reduced by the
amount, if any, by which the amount required to be applied pursuant to said
Section (determined as if an unlimited amount of Term Loans were actually
outstanding) exceeds the aggregate principal amount of Term Loans then
outstanding and (y) second, the Total Revolving Loan Commitment shall be
permanently reduced by the amount, if any, by which the amount required to be
applied pursuant to said Section (determined as if an unlimited amount of Term
Loans were actually outstanding) exceeds the sum of (A) the amount by which the
Total D Term Loan Commitment was reduced pursuant to clause (x) above and (B)
the aggregate principal amount of Term Loans then outstanding.

(i) Each partial reduction to the Total D Term Loan
Commitment pursuant to this Section 3.03 (or pursuant to Section 4.02) shall be
applied proportionately to reduce the D Term Loan Commitment of each Bank with
such a Commitment. Each partial reduction to the Total Revolving Loan
Commitment pursuant to this Section 3.03 shall be applied proportionately to
reduce the Revolving Loan Commitment of each Bank with such a Commitment.

(j) Each partial reduction to the Total Revolving Loan
Commitment pursuant to Section 3.03(h) shall be applied to reduce any then
remaining commitment reduction which may be required pursuant to Section
3.03(f).

Section 4. Prepayments; Payments; Taxes.

4.01 Voluntary Prepayments. (a) The Company shall have the
right to prepay the Loans, without premium or penalty, in whole or in part from
time to time on the following terms and conditions:

(i) the Company shall give the Administrative Agent prior to
12:00 Noon (New York time) at its Notice Office (x) at least one
Business Day's prior written notice (or telephonic notice confirmed in
writing) of its intent to prepay Base Rate Loans (or, if agreed with
each Bank (in each such Bank's sole discretion) with a Revolving Loan
Commitment, same day notice in the case of Revolving Loans provided
such notice is given prior to 11:00 A.M. (New York time) on such
Business Day) and (y) at least three Business Days' prior written
notice (or telephonic notice confirmed in writing) of its intent to
prepay Eurodollar Loans, whether A Term Loans, B Term Loans, C Term
Loans, D Term Loans or Revolving Loans shall be prepaid, the amount of
such prepayment and the Types of Loans to be prepaid and, in the case
of Eurodollar

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<PAGE> 37

Loans, the specific Borrowing or Borrowings pursuant to which made,
which notice the Administrative Agent shall promptly transmit to each
of the Banks;

(ii) each prepayment shall be in an aggregate principal amount
of at least $500,000 and, if greater, in integral multiples of
$100,000 (or in the case of Revolving Loans, such lesser amount as may
be agreed by each Bank (in each such Bank's sole discretion) with a
Revolving Loan Commitment and the Administrative Agent), provided that
no partial prepayment of Eurodollar Loans made pursuant to any
Borrowing shall reduce the outstanding Loans made pursuant to such
Borrowing to an amount less than $1,000,000;

(iii) prepayments of Eurodollar Loans made pursuant to this
Section 4.01(a) may only be made on the last day of an Interest Period
applicable thereto;

(iv) each prepayment of Term Loans pursuant to this Section
4.01(a) shall be required to be applied to repay A Term Loans, B Term
Loans, C Term Loans and D Term Loans pro rata based on the then
applicable A Facility Percentage, B Facility Percentage, C Facility
Percentage and D Facility Percentage, provided that at the Company's
option, on the Restatement Effective Date, the Company may prepay
$4,312,500 of Term Loans, which prepayments may be applied to each
Tranche of Term Loans in an amount equal to the amount of all
remaining Scheduled Repayments for such Tranche of Term Loans during
calendar year 1997 and which prepayments shall be applied to reduce
all remaining Scheduled Repayments of each such Tranche during
calendar year 1997;

(v) each voluntary prepayment of Revolving Loans which is
accompanied by a permanent reduction to the Total Revolving Loan
Commitment (pursuant to Section 3.02(a) or as otherwise provided
herein) shall be applied (x) first, to prepay the principal of
outstanding Revolving Loans (it being understood that the Total
Revolving Loan Commitment shall be reduced by the amount of each
payment made pursuant to this clause (x)) and (y) second, to cash
collateralize Letter of Credit Outstandings by depositing cash or Cash
Equivalents in a cash collateral account to be established by the
Administrative Agent to be held as security for the Letter of Credit
Outstandings in an amount equal to the aggregate Letter of Credit
Outstandings at such time (it being understood that the Total
Revolving Loan Commitment shall be reduced by the amount of cash
deposited in the cash collateral account as required by this clause
(y)); and

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<PAGE> 38

(vi) each voluntary prepayment of any Tranche of Term Loans
pursuant to this Section 4.01(a) shall be applied (x) first, to the
extent any portion of any Scheduled Repayment of such Tranche of Term
Loans for the twelve months immediately following the date of such
prepayment remains unpaid, to reduce the then remaining Scheduled
Repayments of such Tranche of Term Loans to occur in such twelve month
period in direct order of maturity and (y) second, to the extent
remaining after the applications pursuant to the preceding clause (x),
to reduce the then remaining Scheduled Repayments of such Tranche of
Term Loans on a pro rata basis (based upon the then remaining
principal amount of each such Scheduled Repayment of the respective
Tranche of Term Loans after giving effect to all prior reductions
thereto).

(b) In the event of certain refusals by a Bank as
provided in Section 13.12(b) to consent to certain proposed changes, waivers,
discharges or terminations with respect to this Agreement which have been
approved by the Required Banks, the Company may, upon five Business Days'
written notice to the Administrative Agent at its Notice Office (which notice
the Administrative Agent shall promptly transmit to each of the Banks) repay
all Loans, together with accrued and unpaid interest, Fees, and other amounts
owing to such Bank (or owing to such Bank with respect to each Tranche which
gave rise to the need to obtain such Bank's individual consent) in accordance
with, and subject to the requirements of, said Section 13.12(b) so long as (A)
in the case of the repayment of Revolving Loans of any Bank pursuant to this
clause (b) the Revolving Loan Commitment of such Bank is terminated
concurrently with such repayment (at which time Schedule I shall be deemed
modified to reflect the changed Revolving Loan Commitments), (B) in the case of
the repayment of D Term Loans of any Bank pursuant to this clause (b) any D
Term Loan Commitment of such Bank is terminated concurrently with such
repayment (at which time Schedule I shall be deemed modified to reflect the
changed D Term Loan Commitments) and (C) in the case of the repayment of Loans
of any Bank the consents required by Section 13.12(b) in connection with the
repayment pursuant to this clause (b) have been obtained.

4.02 Mandatory Repayments.

(A) Requirements:

(a) If on any date the sum of the aggregate outstanding
principal amount of the Revolving Loans (after giving effect to all other
repayments thereof on such date) and the Letter of Credit Outstandings exceeds
the Total Available Revolving Loan Commitment as then in effect, the Company
shall prepay the principal of Revolving Loans in an amount equal to such
excess. If, after giving effect to the prepayment of all outstanding Revolving
Loans, the Letter of Credit Outstandings exceeds

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<PAGE> 39

the Total Available Revolving Loan Commitment as then in effect, the Company
shall pay to the Administrative Agent at its Payment Office on such date an
amount of cash or Cash Equivalents equal to the amount of such excess, such
cash or Cash Equivalents to be held as security for all Obligations of the
Company hereunder in a cash collateral account to be established by the
Administrative Agent.

(b) If any Borrowing Base Certificate shall disclose the
existence of a Borrowing Base Deficiency, the Company shall on the date of
delivery thereof in accordance with Section 8.01(k) repay the principal of
Revolving Loans in an aggregate amount equal to such Borrowing Base Deficiency.
To the extent the Borrowing Base Deficiency exceeds the outstanding principal
amount of Revolving Loans, the Company shall pay to the Administrative Agent at
the Payment Office on such date an amount of cash or Cash Equivalents equal to
the amount of such excess, such cash or Cash Equivalents to be held as security
for all Obligations of the Company hereunder in a cash collateral account to be
established by the Administrative Agent.

(c) On any day on which the amount of cash and Cash
Equivalents held by the Company exceeds the amounts permitted pursuant to
Section 9.06(ii), the Company shall prepay the principal of Revolving Loans in
an amount equal to such excess on the next succeeding Business Day.

(d) In addition to any other mandatory repayments pursuant to
this Section 4.02, on each date set forth below, the Company shall be required
to repay that principal amount of A Term Loans, to the extent then outstanding,
as is set forth opposite such date (each such repayment as the same may be
reduced in amount as provided in Sections 4.01 and 4.02(B)(a), an "A Term Loan
Scheduled Repayment," and each such date, an "A Term Loan Scheduled Repayment
Date"):

<TABLE>
<CAPTION>
A Term Loan
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
May 31, 1997 $1,250,000
August 31, 1997 $1,250,000

November 30, 1997 $1,250,000
February 28, 1998 $1,250,000
May 31, 1998 $1,250,000
August 31, 1998 $1,250,000
</TABLE>

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<PAGE> 40

November 30, 1998 $1,250,000
February 28, 1999 $1,250,000
May 31, 1999 $1,500,000
August 31, 1999 $1,500,000

November 30, 1999 $1,500,000

A Term Loan Maturity Date $1,500,000

(e) In addition to any other mandatory repayments
pursuant to this Section 4.02, on each date set forth below, the Company shall
be required to repay that principal amount of B Term Loans, to the extent then
outstanding, as is set forth opposite such date (each such repayment as the
same may be reduced in amount as provided in Sections 4.01 and 4.02(B)(a), a "B
Term Loan Scheduled Repayment," and each such date, a "B Term Loan Scheduled
Repayment Date"):

B Term Loan
Scheduled Repayment Date Amount
------------------------ ------

May 31, 1997 $50,000
August 31, 1997 $50,000

November 30, 1997 $50,000
February 28, 1998 $50,000
May 31, 1998 $50,000
August 31, 1998 $50,000

November 30, 1998 $50,000
February 28, 1999 $50,000
May 31, 1999 $50,000
August 31, 1999 $50,000

November 30, 1999 $50,000
February 28, 2000 $50,000
May 31, 2000 $2,100,000
August 31, 2000 $2,100,000

November 30, 2000 $2,500,000
February 28, 2001 $2,500,000
May 31, 2001 $2,500,000
August 31, 2001 $2,500,000

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<PAGE> 41

November 30, 2001 $2,500,000

B Term Loan Maturity Date $2,500,000

(f) In addition to any other mandatory repayments
pursuant to this Section 4.02, on each date set forth below, the Company shall
be required to repay that principal amount of C Term Loans, to the extent then
outstanding, as set forth opposite such date (each such repayment as the same
may be reduced in amount as provided in Sections 4.01 and 4.02(B)(a), a "C Term
Loan Scheduled Repayment," and each such date, a "C Term Loan Scheduled
Repayment Date"):

C Term Loan
Scheduled Repayment Date Amount
------------------------ ------

May 31, 1997 $137,500
August 31, 1997 $137,500

November 30, 1997 $137,500
February 28, 1998 $137,500
May 31, 1998 $137,500
August 31, 1998 $137,500

November 30, 1998 $137,500
February 28, 1999 $137,500
May 31, 1999 $137,500
August 31, 1999 $137,500

November 30, 1999 $137,500
February 28, 2000 $137,500
May 31, 2000 $137,500
August 31, 2000 $137,500

November 30, 2000 $137,500
February 28, 2001 $137,500
May 31, 2001 $137,500
August 31, 2001 $137,500

November 30, 2001 $137,500
February 28, 2002 $137,500
May 31, 2002 $5,837,500
August 31, 2002 $5,837,500

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<PAGE> 42

November 30, 2002 $5,837,500
February 28, 2003 $5,837,500
May 31, 2003 $7,087,500
August 31, 2003 $7,087,500

November 30, 2003 $7,087,500

C Term Loan Maturity $7,087,500

(g) In addition to any other mandatory repayments
pursuant to this Section 4.02, on each date set forth below, the Company shall
be required to repay that principal amount of D Term Loans, to the extent then
outstanding, as set forth opposite such date (each such repayment as the same
may be reduced in amount as provided in Sections 4.01 and 4.02(B)(a) and as
provided below, a "D Term Loan Scheduled Repayment," and each such date, a "D
Term Loan Scheduled Repayment Date"):

D Term Loan
Scheduled Repayment Date Amount
------------------------ ------

February 28, 1998 $112,500
May 31, 1998 $112,500
August 31, 1998 $112,500

November 30, 1998 $112,500
February 28, 1999 $112,500
May 31, 1999 $112,500
August 31, 1999 $112,500

November 30, 1999 $112,500
February 28, 2000 $112,500
May 31, 2000 $112,500
August 31, 2000 $112,500

November 30, 2000 $112,500
February 28, 2001 $112,500
May 31, 2001 $112,500
August 31, 2001 $112,500

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<PAGE> 43

November 30, 2001 $112,500
February 28, 2002 $112,500
May 31, 2002 $4,837,500
August 31, 2002 $4,837,500

November 30, 2002 $4,837,500
February 28, 2003 $4,837,500
May 31, 2003 $5,962,500
August 31, 2003 $5,962,500

November 30, 2003 $5,962,500

D Term Loan Maturity Date $5,962,500

; provided in the event that the aggregate principal amount of D Term Loans
incurred at or prior to the time that the D Term Loan Commitment is terminated
in accordance with Sections 3.02 and/or 3.03 is less than $45,000,000, the
amount of such deficiency shall be applied to reduce the then remaining D Term
Loan Scheduled Repayments on a pro rata basis (based upon the then remaining
principal amount of each such D Term Loan Scheduled Repayment after giving
effect to all prior reductions thereto).

(h) On each date after the Restatement Effective Date
upon which the Company or any of its Subsidiaries receives any proceeds from
any sale or issuance of equity (excluding proceeds of the Equity Financing and
the Supplemental Equity Contribution) and until such time as the sum of all Net
Cash Proceeds from sales or issuances of equity after the Restatement Effective
Date exceeds $50,000,000 (excluding proceeds of the Equity Financing), an
amount equal to 100% of the Net Cash Proceeds of the respective issuance shall
be applied as provided in Section 4.02(B) and on each date after the
Restatement Effective Date upon which the Company or any of its Subsidiaries
receives any proceeds from any sale or issuance of equity (excluding proceeds
of the Equity Financing) which, when added to the sum of the Net Cash Proceeds
from all other such issuances of equity after the Restatement Effective Date,
exceed $50,000,000 (excluding proceeds of the Equity Financing), an amount
equal to the sum of (x) 100% of that portion of such Net Cash Proceeds which is
less than or equal to the remainder of $50,000,000 less the sum of all other
Net Cash Proceeds from the sale or issuance of equity after the Restatement
Effective Date and (y) 50% of the remaining proceeds of such issuances shall be
applied as provided in Section 4.02(B); provided that repayments pursuant to
this Section 4.02(A)(h) based on the receipt of cash proceeds received by the
Company from the issuance of Common Stock as a result of the exercise of
options by employees or management of the Company ("Option Proceeds") shall not
be required to be made on the date of the receipt thereof

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<PAGE> 44

(unless such date of receipt is also a date specified below) but instead shall
be required to be made on each date on which the amount of such Option Proceeds
received during the period commencing on the later of (x) the Restatement
Effective Date and (y) the immediately preceding date on which a principal
repayment was made pursuant to this Section 4.02(A)(h) as a result of the
receipt of Option Proceeds and ending on the date of determination (the "Option
Proceeds Payment Period") equals or exceeds an amount equal to (I) $200,000
less (II) the amount of Option Proceeds received by the Company for the period
commencing on the Original Effective Date and ending on the Restatement
Effective Date, with the principal amount of the repayments required on each
such date to equal 50% of the aggregate amount of Option Proceeds received on
or before such date during the Option Proceeds Payment Period. Notwithstanding
anything to the contrary contained in the foregoing, the Company will not be
required to make any repayments with respect to the issuance of Common Stock as
compensation in lieu of cash, or upon the cashless exercise of employee
options.

(i) On each date after the Restatement Effective Date
upon which the Company or any of its Subsidiaries receives any proceeds from
any incurrence by the Company or any of its Subsidiaries of Indebtedness for
borrowed money (other than Indebtedness for borrowed money permitted by Section
9.05 as such Section is in effect on the Restatement Effective Date), an amount
equal to 100% of the cash proceeds of the respective incurrence (net of any
underwriting discounts and commissions and other reasonable costs associated
therewith) shall be applied as provided in Section 4.02(B).

(j) On each date after the Restatement Effective Date
upon which the Company or any of its Subsidiaries receives proceeds from any
sale of assets (including capital stock and securities other than capital stock
all or the requisite portion of the proceeds from the sale of which is
recaptured (or will be recaptured once the $200,000 threshold set forth in
Section 4.02(A)(h) is achieved) pursuant to Section 4.02(A)(h)), but excluding
(i) sales of inventory and Cash Equivalents in the ordinary course of business,
(ii) sales of equipment which, in the reasonable judgment of the Company have
become obsolete, worn out or uneconomic, in the ordinary course of business,
the proceeds of which are used to purchase other equipment used in the
Company's business within 180 days from the date of sale so long as the
aggregate amount of Net Sale Proceeds excluded pursuant to this clause (ii) in
any fiscal year does not exceed $250,000 and (iii) sales of receivables of the
Company, provided that such receivables were reflected on the balance sheet of
the Company on which the most recent Borrowing Base Certificate delivered
pursuant to Section 8.01(k) prior to the date of such sale was based and such
receivables were not included in such Borrowing Base Certificate as Eligible
Receivables and so long as the aggregate face value of all such receivables to
be excluded pursuant to this clause (iii) in any fiscal year does not exceed

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<PAGE> 45

$250,000), an amount equal to 100% of the Net Sale Proceeds therefrom shall be
applied as provided in Section 4.02(B).

(k) On or prior to each Excess Cash Payment Date, an
amount equal to 75% (or, if Consolidated EBITDA for the Company's fiscal year
ending in 1998 or 1999 exceeds $36,000,000, 50% for such fiscal year and each
fiscal year thereafter) of the Excess Cash Flow for the relevant Excess Cash
Flow Recapture Period shall be applied as provided in Section 4.02(B).

(B) Application:

(a)(i) Each mandatory repayment of Loans pursuant to Sections
4.02(A)(h) through 4.02(A)(k), inclusive, shall be applied to repay the
principal of outstanding A Term Loans, B Term Loans, C Term Loans and D Term
Loans pro rata based on the then applicable A Facility Percentage, B Facility
Percentage, C Facility Percentage and D Facility Percentage; (ii) each
mandatory repayment of any Tranche of Term Loans arising pursuant to Sections
4.02(A)(h) or (k) shall be applied (x) first, to the extent any portion of any
Scheduled Repayment of such Tranche of Term Loans for the twelve months
immediately following the date of such prepayment remains unpaid, to reduce the
then remaining Scheduled Repayments of such Tranche of Term Loans to occur in
such twelve month period in direct order of maturity and (y) second, to the
extent remaining after the applications pursuant to the preceding clause (x),
to reduce each of the then remaining Scheduled Repayments of such Tranche of
Term Loans on a pro rata basis (based upon the then remaining principal amount
of each such Scheduled Repayment of the respective Tranche of Term Loans after
giving effect to all prior reductions thereto) and (iii) each mandatory
repayment of any Tranche of Term Loans arising pursuant to Sections 4.02(A)(i)
or (j) shall be applied to reduce each of the then remaining Scheduled
Repayments of such Tranche of Term Loans on a pro rata basis (based upon the
then remaining principal amount of each such Scheduled Repayment of the
respective Tranche of Term Loans after giving effect to all prior reductions
thereto).

(b) With respect to each repayment of Loans required by
this Section 4.02, the Company may designate the Types of Loans which are to be
repaid and, in the case of Eurodollar Loans, the specific Borrowing or
Borrowings pursuant to which made, provided that: (i) repayments of Eurodollar
Loans pursuant to this Section 4.02 may only be made on the last day of an
Interest Period applicable thereto unless all Eurodollar Loans of the
respective Tranche with Interest Periods ending on such date of required
repayment and all Base Rate Loans of the respective Tranche have been paid in
full; (ii) if any repayment of Eurodollar Loans made pursuant to a single
Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such

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<PAGE> 46

Borrowing to an amount less than $1,000,000, such Borrowing shall immediately
be converted into Base Rate Loans; and (iii) each repayment of any Loans made
pursuant to a Borrowing shall be applied pro rata among such Loans. In the
absence of a designation by the Company as described in the preceding sentence,
the Administrative Agent shall, subject to the above, make such designation in
its sole discretion.

(c) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, (i) all then outstanding A Term Loans shall be
repaid in full on the A Term Loan Maturity Date, (ii) all then outstanding B
Term Loans shall be repaid in full on the B Term Loan Maturity Date, (iii) all
then outstanding C Term Loans shall be repaid in full on the C Term Loan
Maturity Date, (iv) all then outstanding D Term Loans shall be repaid in full
on the D Term Loan Maturity Date and (v) all then outstanding Revolving Loans
shall be repaid in full on the Revolving Loan Maturity Date.

4.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments made by the Company under this
Agreement or any Note shall be made to the Administrative Agent for the account
of the Bank or Banks entitled thereto not later than 12:00 Noon (New York time)
on the date when due and shall be made in Dollars in immediately available
funds at the Payment Office of the Administrative Agent. Whenever any payment
to be made hereunder or under any Note shall be stated to be due on a day which
is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
shall be payable at the applicable rate during such extension.

4.04 Net Payments. (a) All payments made by the Company
under this Agreement or under any Note will be made without setoff,
counterclaim or other defense. Except as provided in Section 4.04(b), all such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
or by any political subdivision or taxing authority thereof or therein with
respect to such payments (but excluding, except as provided in the second
succeeding sentence, any tax imposed on or measured by the net income or
profits of a Bank pursuant to the laws of the jurisdiction in which the
principal office or applicable lending office of such Bank is located or any
political subdivision or taxing authority thereof or therein) and all interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imports, duties, fees, assessments or other charges being
referred to collectively as "Taxes"). If any Taxes are so levied or imposed,
the Company agrees to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under this

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<PAGE> 47

Agreement or under any Note, after withholding or deduction for or on account
of any Taxes, will not be less than the amount provided for herein or in such
Note. If any amounts are payable in respect of Taxes pursuant to the preceding
sentence, then the Company agrees to reimburse each Bank, upon the written
request of such Bank, for taxes imposed on or measured by the net income or
profits of such Bank pursuant to the laws of the jurisdiction or any political
subdivision or taxing authority thereof or therein in which the principal
office or applicable lending office of such Bank is located and for any
withholding of income or similar taxes imposed by the United States of America
as such Bank shall determine are payable by such Bank in respect of such
additional amounts so paid to or on behalf of such Bank pursuant to the
preceding sentence and in respect of any amounts paid to or on behalf of such
Bank pursuant to this sentence. The Company will furnish to the Administrative
Agent within 45 days after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts evidencing such payment by the
Company. The Company agrees to indemnify and hold harmless each Bank, and
reimburse such Bank upon its written request, for the amount of any Taxes so
levied or imposed and paid by such Bank.

(b) Each Bank that is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) agrees to deliver to the
Company and the Administrative Agent on or prior to the Restatement Effective
Date, or in the case of a Bank that is an assignee or transferee of an interest
under this Agreement pursuant to Section 1.12 or 13.04 (unless the respective
Bank was already a Bank hereunder immediately prior to such assignment or
transfer), on the date of such assignment or transfer to such Bank, (i) two
accurate and complete original signed copies of Internal Revenue Service Form
4224 or 1001 (or successor forms) certifying to such Bank's entitlement to a
complete exemption from United States withholding tax with respect to payments
to be made under this Agreement and under any Note, or (ii) if the Bank is not
a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause
(i) above, (x) a certificate substantially in the form of Exhibit D (any such
certificate, a "Section 4.04(b)(ii) Certificate") and (y) two accurate and
complete original signed copies of Internal Revenue Service Form W-8 (or
successor form) certifying to such Bank's entitlement to a complete exemption
from United States withholding tax with respect to payments of interest to be
made under this Agreement and under any Note. In addition, each Bank agrees
that from time to time after the Restatement Effective Date, when a lapse in
time or change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Company and the
Administrative Agent two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section
4.04(b)(ii) Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Bank to a
continued exemption from or

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<PAGE> 48

reduction in United States withholding tax with respect to payments under this
Agreement and any Note, or it shall immediately notify the Company and the
Administrative Agent of its inability to deliver any such Form or Certificate,
in which case such Bank shall not be required to deliver any such form or
certificate pursuant to this Section 4.04(b). Notwithstanding anything to the
contrary contained in Section 4.04(a), but subject to Section 13.04(b) and the
immediately succeeding sentence, (x) the Company shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Bank which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal
income tax purposes to the extent that such Bank has not provided to the
Company U.S. Internal Revenue Service Forms that establish a complete exemption
from such deduction or withholding and (y) the Company shall not be obligated
pursuant to Section 4.04(a) hereof to gross-up payments to be made to a Bank in
respect of income or similar taxes imposed by the United States if (I) such
Bank has not provided to the Company the Internal Revenue Service Forms
required to be provided to the Company pursuant to this Section 4.04(b) or (II)
in the case of a payment, other than interest, to a Bank described in clause
(ii) above, to the extent that such Forms do not establish a complete exemption
from withholding of such taxes. Notwithstanding anything to the contrary
contained in the preceding sentence or elsewhere in this Section 4.04 and
except as set forth in Section 13.04(b), the Company agrees to pay additional
amounts and to indemnify each Bank in the manner set forth in Section 4.04(a)
(without regard to the identity of the jurisdiction requiring the deduction or
withholding) in respect of any amounts deducted or withheld by it as described
in the immediately preceding sentence as a result of any changes after the
Restatement Effective Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of income or similar Taxes.

Section 5. Conditions Precedent to the Restatement Effective
Date and to All Credit Events on the Restatement Effective Date. The
occurrence of the Restatement Effective Date pursuant to Section 13.10, the
obligation of each Bank to make Loans and the obligation of any Issuing Bank to
issue Letters of Credit, in each case, on the Restatement Effective Date is
subject, at the time of the making of such Loans or the issuance of such
Letters of Credit, to the satisfaction of the following conditions:

5.01 Execution of Agreement; Notes. On or prior to the
Restatement Effective Date (i) this Agreement shall have been executed and
delivered in accordance with clause (i) of the first sentence of Section 13.10,
and (ii) there shall have been delivered to the Administrative Agent for the
account of each of the Banks with a D

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<PAGE> 49

Term Loan Commitment and/or a Revolving Loan Commitment the appropriate D Term
Note and/or Revolving Note executed by the Company, in each case in the amount,
maturity and as otherwise provided herein.

5.02 Consummation of the Equity Financing. On the
Restatement Effective Date, (i) the Company shall have received Net Cash
Proceeds of at least $18,500,000 and the Equity Financing Notes in each case
from the issuance by the Company of common stock to existing holders of common
stock of the Company (the "Equity Financing"), (ii) the Banks shall have
received true and correct copies of all agreements governing, or relating to,
the Equity Financing (the "Equity Financing Documents") and (iii) all terms and
conditions of the Equity Financing and the Equity Financing Documents shall be
reasonably satisfactory to the Administrative Agent and the Required Banks.
The Company shall have utilized the proceeds from the Equity Financing to make
all payments then owing in connection with the Transaction and the
Administrative Agent and the Banks shall have received an officers' certificate
to such effect setting forth in reasonable detail the uses of such proceeds.
The Equity Financing shall have occurred in accordance with the terms and
conditions of the Equity Financing Documents and all applicable law.

5.03 Repayment of Certain Existing Loans; Payment of Fees;
etc. On or prior to the Restatement Effective Date or concurrently with the
initial Credit Event on the Restatement Effective Date, the Company shall have
(x) repaid in full (i) all outstanding Existing Revolving Loans, (ii) all
interest accrued to the Restatement Effective Date on all Existing Revolving
Loans, (iii) each of the A Term Loan Scheduled Repayments, B Term Loan
Scheduled Repayments and C Term Loan Scheduled Repayments (as each such term is
defined in the Existing Credit Agreement) which were (a) originally due and
payable under the terms of the Existing Credit Agreement as executed on
February 26, 1996 and (b) postponed until June 30, 1997, by the terms of the
Second Amendment to the Existing Credit Agreement (collectively, the "Deferred
Loans") and (iv) all interest accrued to the Restatement Effective Date on the
Deferred Loans, and (y) paid (I) all amounts contemplated by Sections 3.01(f)
and (g) of this Agreement to the extent then due and (II) all other costs, fees
and expenses owing to any of the Existing Banks and/or the Existing Agent,
respectively, under the Existing Credit Agreement, to the extent then due in
accordance with the terms of the Existing Credit Agreement. Except as provided
in Section 2.01(a), no Letters of Credit (as defined in the Existing Credit
Agreement) issued under the Existing Credit Agreement shall be outstanding and
all Unpaid Drawings (as defined in the Existing Credit Agreement) relating to
Letters of Credit (as defined in the Existing Credit Agreement) shall have been
paid in full, together with all interest, fees and other amounts applicable
thereto. After giving effect to the payments pursuant to this Section, no
Revolving Loans shall be outstanding on the Restatement Effective Date

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<PAGE> 50

after giving effect to the transactions contemplated hereby and there shall be
$16,000,000 of A Term Loans outstanding, $19,800,000 of B Term Loans
outstanding and $54,450,000 of C Term Loans outstanding.

5.04 Officer's Certificate. On the Restatement Effective
Date, the Administrative Agent shall have received a certificate dated the
Restatement Effective Date signed on behalf of the Company by the President or
any Vice President of the Company stating that all of the conditions in
Sections 5.02, 5.03, 5.12, 5.13, 5.18, 5.19, 6.01, 6.03 and 6.04 have been
satisfied on such date, provided the certificate shall not be required to
certify as to the acceptability of any items to the Administrative Agent and/or
the Required Banks or as to whether the Administrative Agent and/or the
Required Banks are satisfied with any of the matters described in said
Sections.

5.05 Opinion of Counsel. On the Restatement Effective Date,
the Administrative Agent shall have received from Sonnenschein Nath &
Rosenthal, special counsel to the Company, an opinion addressed to the
Administrative Agent and each of the Banks and dated the Restatement Effective
Date, which shall be in form and substance reasonably satisfactory to the
Administrative Agent and the Required Banks and which shall cover the matters
set forth in Exhibit E and such other matters incident to the transactions
contemplated herein as the Administrative Agent may reasonably request.

5.06 Corporate Documents; Proceedings. (a) On the
Restatement Effective Date, the Administrative Agent shall have received a
certificate, dated the Restatement Effective Date, signed by the President or
any Vice President of the Company, and attested to by the Secretary or any
Assistant Secretary of the Company, in the form of Exhibit F with appropriate
insertions, together with copies of the Certificate of Incorporation and
By-Laws of the Company and the resolutions of the Company referred to in such
certificate, and the foregoing shall be acceptable to the Administrative Agent
and the Required Banks in their sole discretion.

(b) All corporate and legal proceedings and all
instruments and agreements in connection with the transactions contemplated by
this Agreement and the other Documents shall be satisfactory in form and
substance to the Administrative Agent and the Required Banks, and the
Administrative Agent shall have received all information and copies of all
documents and papers, including records of corporate proceedings, governmental
approvals, good standing certificates and bring-down telegrams, if any, which
the Administrative Agent or the Required Banks reasonably may have requested in
connection therewith, such documents and papers where appropriate to be
certified by proper corporate or governmental authorities.

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<PAGE> 51

5.07 Employee Benefit Plans; Shareholders' Agreements;
Collective Bargaining Agreements; Tax Sharing Agreements; Debt Agreements; CPC
Contract. On or prior to the Restatement Effective Date, there shall have been
delivered to the Administrative Agent true and correct copies, certified as
true and complete by an appropriate officer of the Company, of (i) all employee
benefit plans or any other similar plans or arrangements for the benefit of
employees of the Company and any profit sharing plans and deferred compensation
plans of the Company (collectively, the "Employee Benefit Plans") other than
Stock Option Plans, (ii) all agreements entered into by the Company governing
the terms and relative rights of its capital stock and any agreements entered
into by shareholders relating to the Company with respect to their capital
stock (collectively, the "Shareholders' Agreements"), (iii) all collective
bargaining agreements applying or relating to any employee of the Company
(collectively, the "Collective Bargaining Agreements"), (iv) any tax sharing,
disaffiliation, tax allocation and other similar agreements entered into by the
Company (collectively, the "Tax Sharing Agreements"), (v) all agreements
evidencing or relating to the Existing Obligations of the Company
(collectively, the "Debt Agreements") and (vi) the CPC Contract; all of which
Employee Benefit Plans (other than Stock Option Plans), Shareholders'
Agreements, Collective Bargaining Agreements, Tax Sharing Agreements, Debt
Agreements and the CPC Contract, shall be in form and substance satisfactory to
the Administrative Agent and the Required Banks and shall be in full force and
effect on the Restatement Effective Date (it being understood that the CPC
Contract substantially in the form of the draft of February 27, 1997,
previously provided to the Administrative Agent, is satisfactory); provided,
however, that only those Employee Benefit Plans (other than Stock Option
Plans), Shareholders' Agreements, Collective Bargaining Agreements, Tax Sharing
Agreements and Debt Agreements which were not in existence on the Original
Effective Date or, if in existence on the Original Effective Date, which have
been changed in any material respect since such date, shall be required to be
delivered pursuant to this Section 5.07.

5.08 Capital Expenditure Plan. On or prior to the
Restatement Effective Date, there shall have been delivered to the Banks a
capital expenditure plan (the "Capital Expenditure Plan") to effect the
Permitted Capital Expenditures in order to create capacity to manufacture and
distribute pasta in the volumes contemplated as of the Restatement Effective
Date to be sold pursuant to the CPC Contract and to meet other projected
increases in manufacturing and distribution capacity requirements after the
Restatement Effective Date, which Capital Expenditure Plan (x) has been
approved by the Board of Directors of the Company, (y) sets forth in reasonable
detail the specific construction plan, timing and costs of the Permitted
Capital Expenditures and (z) demonstrates that the Permitted Capital
Expenditures will be sufficient to meet the production and delivery
requirements contemplated as of the Restatement Effective Date to be sold
pursuant to the CPC Contract and that the total cost of such Permitted

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<PAGE> 52

Capital Expenditures will not exceed $60,000,000. All of the above shall be
satisfactory to the Administrative Agent and the Required Banks.

5.09 Pledge Agreement. On the Restatement Effective Date,
the Company shall have duly authorized, executed and delivered an amended and
restated pledge agreement substantially in the form of Exhibit G hereto (as
modified, amended or supplemented from time to time in accordance with the
terms thereof and hereof, the "Pledge Agreement") and shall have delivered to
the Collateral Agent, as pledgee thereunder, all of the Pledged Securities, if
any, referred to in the Pledge Agreement and then owned by the Company, (x)
endorsed in blank in the case of promissory notes constituting Pledged
Securities and (y) together with executed and undated irrevocable stock powers
in the case of capital stock constituting Pledged Securities.

5.10 Security Agreement. On the Restatement Effective Date,
(i) the Company shall have duly authorized, executed and delivered an amended
and restated security agreement in substantially the form of Exhibit H hereto
(as modified, supplemented or amended from time to time in accordance with the
terms thereof and hereof, the "Security Agreement"), (ii) no filings,
recordings, registrations or other actions (other than those made, obtained or
taken on or prior to the Restatement Effective Date) shall be necessary or, in
the opinion of the Collateral Agent, desirable to maintain the perfection and
priority of the security interests granted pursuant to the Security Agreement
in the Security Agreement Collateral covered thereby, and (iii) the Banks shall
have received:

(a) proper financing statements (Form UCC-1 or such other
financing statements or similar notices as shall be required by local
law) fully executed for filing under the UCC or other appropriate
filing offices of each jurisdiction as may be necessary or, in the
opinion of the Collateral Agent, desirable to further perfect the
security interests purported to be created by the Security Agreement;

(b) certified copies of Requests for Information or
Copies (Form UCC-11), or equivalent reports, each of a recent date
listing all effective financing statements that name the Borrower or
any of its Subsidiaries as debtor and that are filed in the
jurisdictions referred to in clause (a) above, together with copies of
such financing statements that name the Company as debtor (none of
which shall cover the Collateral except (x) those with respect to
which appropriate termination statements executed by the secured
lender thereunder have been delivered to the Administrative Agent and
(y) to the extent evidencing Permitted Liens);

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<PAGE> 53

(c) evidence of the completion of all recordings and
filings of, or with respect to, the Security Agreement as may be
necessary or, in the opinion of the Collateral Agent, desirable to
perfect the security interests intended to be created by the Security
Agreement; and

(d) evidence that all other actions necessary or, in the
opinion of the Collateral Agent, desirable to perfect and protect the
security interests purported to be created by the Security Agreement
have been taken.

5.11 Mortgages; Title Insurance; Appraisal. (a) On the
Restatement Effective Date, the Collateral Agent shall have received:

(i) fully executed counterparts of the amendments (the
"Existing Mortgage Amendments") to the mortgage and deed of trust
delivered pursuant to the Original Credit Agreement and Existing
Credit Agreement as amended immediately prior to the Restatement
Effective Date (the "Existing Mortgages") in form and substance
reasonably satisfactory to the Administrative Agent, which Existing
Mortgages shall cover such of the Real Property owned by the Company
as shall be listed in Part A of Schedule III and designated as the
existing mortgaged properties (each an "Existing Mortgaged Property"
and collectively, the "Existing Mortgaged Properties"), together with
evidence that counterparts of the Existing Mortgage Amendments have
been delivered to the title insurance company insuring the Liens of
the Existing Mortgages for recording in all places to the extent
necessary or desirable, in the judgment of the Collateral Agent,
effectively to maintain valid and enforceable first priority mortgage
liens on the Existing Mortgaged Properties in favor of the Collateral
Agent (or such other trustee as may be required or desired under local
law) for the benefit of the Secured Creditors;

(ii) endorsements of the existing Mortgage Policies (the
"Endorsements") in a form and in amounts satisfactory to the
Administrative Agent and the Required Banks, assuring the Collateral
Agent that the Existing Mortgages, as amended by the Existing Mortgage
Amendments, are valid and enforceable first priority mortgage liens on
the Existing Mortgaged Properties, free and clear of all defects,
encumbrances and other Liens except Permitted Encumbrances, and such
Endorsements shall be in form and substance reasonably satisfactory to
the Administrative Agent and the Required Banks;

(iii) real estate appraisals, in form and substance
reasonably satisfactory to the Administrative Agent and the Required
Banks, in connection with the Existing Mortgaged Properties, dated a
recent date acceptable to the

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<PAGE> 54

Collateral Agent from appraisers reasonably satisfactory to the
Administrative Agent, which appraisals shall comply with all
applicable law, including the requirements set forth in 12 C.F.R.,
Part 34-Subpart C, or any successor or similar statute, rule,
regulation, guideline or order and which appraisals shall be certified
by the appraiser as complying with all such applicable law; and

(b) On the Restatement Effective Date, (i) the Existing
Mortgages shall remain in full force and effect, and (ii) no filings,
recordings, registrations or other actions (other than those made, obtained or
taken on or prior to the Restatement Effective Date referred to in the
preceding clause (a)) shall be necessary or, in the opinion of the Collateral
Agent, desirable to maintain the perfection and priority of the mortgage liens
on the Existing Mortgaged Properties granted pursuant to the Existing
Mortgages.

5.12 Adverse Change; Approvals; etc. (a) Since September
27, 1996, nothing shall have occurred (and the Banks shall have become aware of
no facts or conditions not previously known) which the Administrative Agent or
the Required Banks shall reasonably determine (i) has, or could have, a
material adverse effect on the rights or remedies of the Banks or the
Administrative Agent, or on the ability of the Company to perform its
obligations to the Administrative Agent and the Banks under this Agreement or
any other Credit Document, (ii) which has, or would reasonably be expected to
have, a Material Adverse Effect or (iii) indicates the inaccuracy in any
material respect of the information previously provided to the Administrative
Agent or the Banks (taken as a whole) or indicates that the information
previously provided omitted to disclose any material information.

(b) On or prior to the Restatement Effective Date, all
necessary governmental (domestic and foreign) and third party approvals in
connection with this Agreement and the Transaction and the transactions
contemplated by the Documents and otherwise referred to herein or therein shall
have been obtained and remain in effect, and all applicable waiting periods
shall have expired without any action being taken by any competent authority
which restrains, prevents or imposes materially adverse conditions upon the
consummation of all or any part of the Transaction or the other transactions
contemplated by the Documents and otherwise referred to herein or therein.
Additionally, there shall not exist any judgment, order, injunction or other
restraint issued or filed or a hearing seeking injunctive relief or other
restraint pending or notified prohibiting or imposing materially adverse
conditions upon all or any part of the Transaction, the transactions
contemplated by the Documents or otherwise referred to herein or therein or the
making of the Loans or the issuance of Letters of Credit.

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5.13 Litigation. On the Restatement Effective Date, no
litigation by any entity (private or governmental) shall be pending or, to the
best knowledge of the Company, threatened with respect to this Agreement, any
other Document or any documentation executed in connection herewith or the
transactions contemplated hereby (including, without limitation, the
Transaction), or with respect to any of the Existing Obligations or the
obligations being refinanced in connection with the consummation of the
Transaction or which the Administrative Agent or the Required Banks shall
determine could reasonably be expected to have a materially adverse effect on
the Transaction or the business, property, assets, nature of assets,
liabilities, condition (financial or otherwise) or prospects of the Company.

5.14 Fees; etc. On the Restatement Effective Date, the
Company shall have paid to the Administrative Agent and the Banks all
reasonable costs, fees and expenses (including, without limitation, all legal
fees and expenses) payable to the Administrative Agent and the Banks,
respectively, to the extent then due.

5.15 Asset Appraisal; Insurance; Solvency Certificate. On
the Restatement Effective Date, the Banks shall have received (i) an "in-use"
appraisal of the Company's Manufacturing Facilities which shall be from an
appraiser, and in form, scope and substance, reasonably satisfactory to the
Administrative Agent and the Required Banks, (ii) analyses and evidence
(including, without limitation, certificates with respect to each insurance
policy listed on Schedule IX) of insurance complying with the requirements of
Section 8.03 for the business and properties of the Company (including, without
limitation, business interruption insurance), in form, scope and substance
reasonably satisfactory to the Administrative Agent and the Required Banks and
naming the Collateral Agent and the Banks as an additional insured and the
Collateral Agent as loss payee and stating that such insurance shall not be
cancelled or revised without thirty days prior written notice by the insurer to
the Administrative Agent and (iii) a certificate in the form of Exhibit I
addressed to the Administrative Agent and each of the Banks and dated the
Restatement Effective Date, from the Chief Financial Officer of the Company,
providing the opinion of the Chief Financial Officer of the Company that, after
giving effect to the Transaction and the other transactions contemplated hereby
and the related financing thereof as contemplated hereby, the Company is not
insolvent and will not be rendered insolvent by the indebtedness incurred in
connection with the transactions contemplated hereby, will not be left with
unreasonably small capital with which to engage in its businesses and will not
have incurred debts beyond its ability to pay such debts as they mature and
become due.

5.16 Consent Letter. On the Restatement Effective Date, the
Administrative Agent shall have received a letter from CT Corporation System,
presently located at 1633 Broadway, New York, New York 10019, substantially in
the

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form of Exhibit J hereto, indicating its consent to its appointment by the
Company as its agent to receive service of process as specified in Section
13.08 of this Agreement.

5.17 Financial Statements. (a) On or prior to the
Restatement Effective Date, the Administrative Agent and each of the Banks
shall have received an unaudited pro forma balance sheet of the Company at
February 21, 1997 prepared in accordance with generally accepted accounting
principles (after giving effect to the Transaction and the related financings
thereof as contemplated hereby), which pro forma balance sheet (including,
without limitation, the amount of net worth of the Company at such date) shall
be in the form attached hereto as Exhibit K.

(b) On or prior to the Restatement Effective Date, the
Administrative Agent and the Banks shall have received the financial
projections (the "Projections") set forth on Exhibit L hereto, which
Projections shall include the making of the Capital Expenditures contemplated
by the Capital Expenditure Plan and the financing thereof in accordance with
the terms of this Agreement, for the five fiscal years of the Company ended
after the Restatement Effective Date, which Projections, and the supporting
assumptions and explanations thereto, shall be reasonably satisfactory in scope
and in form and substance to the Administrative Agent and the Required Banks.

5.18 Existing Indebtedness. On the Restatement Effective
Date and after giving effect to the Transaction and the other transactions
contemplated hereby that are to be consummated on the Restatement Effective
Date and the related financing therefor, the Company shall not have any
Indebtedness outstanding except for (i) the Loans, (ii) the Letters of Credit
and (iii) the Existing Obligations. The Existing Obligations shall not have
been incurred in connection with, or in contemplation of, the Transaction and
the other transactions contemplated hereby, and the terms and conditions of the
Existing Obligations shall be satisfactory to the Administrative Agent and the
Required Banks. All of the Existing Obligations shall remain outstanding after
the consummation of the Transaction and the other transactions contemplated
hereby that are to be consummated on the Restatement Effective Date and the
related financing therefor, without any default or events of default existing
thereunder or arising as a result of the consummation of such transactions
contemplated hereby. Except as may have been requested or approved by the
Administrative Agent and the Required Banks, there shall not be any amendments
or modifications to the agreements and instruments governing or evidencing the
Existing Obligations.

5.19 Subsidiaries. On the Restatement Effective Date, the
Company shall have no Subsidiaries.

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5.20 Borrowing Base Certificate. On the Restatement
Effective Date, the Company shall have delivered to the Administrative Agent
the Borrowing Base Certificate at March 28, 1997 meeting the requirements of
Section 8.01(k) herein.

Section 5A. Conditions Precedent to the Incurrence of D Term
Loans. The obligation of each Bank to make D Term Loans is subject, at the
time of the making of each D Term Loan, to the satisfaction of the following
conditions:

5A.01 Restatement Effective Date. All of the conditions to
the making of Loans on the Restatement Effective Date shall have been met in
accordance with Section 5.

5A.02 D Term Loan Certificate. The Administrative Agent
shall have received an officer's certificate in the form of Exhibit M, with
appropriate insertions and deletions (each, a "D Term Loan Certificate"), dated
the date of such Credit Event, signed on behalf of the Company by the President
or any Vice President of the Company (i) stating that all the conditions in
this Section 5A and Sections 6.01 and 6.03 have been satisfied on such date
both before and after giving effect to such Borrowing (provided the certificate
shall not be required to certify as to the acceptability of any items to the
Administrative Agent and/or the Required Banks or as to whether the
Administrative Agent and/or the Required Banks are satisfied with any of the
matters described in said Sections), (ii) certifying in reasonable detail the
Capital Expenditures for which the proceeds of the D Term Loans are to be used
and (iii) certifying that such Capital Expenditures constitute Permitted
Capital Expenditures and will be made in accordance with, and as contemplated
by, Section 9.08(b) and the Capital Expenditure Plan.

5A.03 Approvals. All necessary governmental (domestic and
foreign) and third party approvals required in connection with the respective
Borrowing of D Term Loans and related Permitted Capital Expenditures shall have
been obtained and remain in effect.

5A.04 Consummation of the Additional Equity Financing. The
Company shall have received additional Net Cash Proceeds from the Equity
Financing in an amount that, when added to the Net Cash Proceeds received by
the Company pursuant to Section 5.02, equals at least $20,750,000. The Company
shall have utilized the full amount of all proceeds received in connection with
the Equity Financing to make payments owing in connection with the Transaction
and Permitted Capital Expenditures and the Administrative Agent and the Banks
shall have received an officers' certificate to such effect setting forth in
reasonable detail the uses of such proceeds.

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Section 6. Conditions Precedent To the Restatement Effective
Date and To All Credit Events. The occurrence of the Restatement Effective
Date pursuant to Section 13.10, the obligation of each Bank to make Loans
(including Loans made on the Restatement Effective Date) and the obligation of
any Issuing Bank to issue any Letter of Credit, is subject, at the time of each
such Credit Event (except as hereinafter indicated), to the satisfaction of the
following conditions:

6.01 No Default; Representations and Warranties. On the
Restatement Effective Date and at the time of each Credit Event and also after
giving effect thereto (i) there shall exist no Default or Event of Default and
(ii) all representations and warranties contained herein and in the other
Credit Documents shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on the
Restatement Effective Date and/or the date of making of such Loans or the
issuance of such Letter of Credit, provided that any representation or warranty
which by its terms is made as of a specified date shall be required to be true
and correct at the time of each such Credit Event only as of such specified
date.

6.02 Notice of Borrowing; Letter of Credit Request. (a)
Prior to the making of each Loan, the Administrative Agent shall have received
a Notice of Borrowing meeting the requirements of Section 1.03.

(b) Prior to the issuance of each Letter of Credit (other
than an Existing Letter of Credit), the Administrative Agent and the respective
Issuing Bank shall have received a Letter of Credit Request meeting the
requirements of Section 2.03.

6.03 Adverse Change; etc. At the time of each such Credit
Event and also after giving effect thereto, nothing shall have occurred (and
the Banks shall have become aware of no facts or conditions not previously
known) which the Administrative Agent or the Required Banks shall reasonably
determine (i) has, or could have, a material adverse effect on the rights or
remedies of the Banks or the Administrative Agent, or on the ability of the
Company to perform its obligations to the Administrative Agent and the Banks
under this Agreement or any other Credit Document, (ii) has, or could
reasonably be expected to have, a Material Adverse Effect or (iii) indicates
the inaccuracy, at the time provided, in any material respect of the
information previously provided to the Administrative Agent or the Banks (taken
as a whole) or indicates, that the information previously provided, at the time
provided, omitted to disclose any material information.

6.04 Litigation. At the time of each such Credit Event and
also after giving effect thereto, no litigation by any entity (private or
governmental) shall be

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pending or, to the best knowledge of the Company, threatened with respect to
this Agreement, any other Document or any documentation executed in connection
herewith or the transactions contemplated hereby, or with respect to any
Existing Obligations or which the Administrative Agent or the Required Banks
shall determine could reasonably be expected to have a Material Adverse Effect.

6.05 Subsequent Legal Opinions. If, at the time of any
Credit Event subsequent to the Restatement Effective Date, the Administrative
Agent or the Required Banks shall have (i) reasonably determined that any
facts, circumstances or conditions might exist which could adversely affect
either (x) the ability of counsel to issue at such time the legal opinions
originally delivered pursuant to Section 5.05 or (y) the perfection or priority
of the security interest created pursuant to the Security Documents and (ii)
requested same, the Administrative Agent shall have received from counsel (who
shall be reasonably satisfactory to the Administrative Agent and the Required
Banks), an opinion or opinions in form and substance reasonably satisfactory to
the Administrative Agent and the Required Banks, addressed to the Banks and
dated the date of such Credit Event, covering such of the matters set forth in
the opinion of counsel theretofore required to be delivered pursuant to Section
5.05 as the Administrative Agent or the Required Banks, as the case may be,
shall specify or such other matters incident to the transactions contemplated
herein as the Administrative Agent or the Required Banks, as the case may be,
may reasonably request.

The occurrence of the Restatement Effective Date and the
acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Company to each of the Banks that all the
applicable conditions specified in Sections 5, 5A and 6 exist as of that time.
All of the Notes, certificates, legal opinions and other documents and papers
referred to in Sections 5, 5A and 6, unless otherwise specified, shall be
satisfactory in form and substance to the Administrative Agent and the Required
Banks and shall be delivered to the Administrative Agent at its Notice Office
for the account of each of the Banks and, except for the Notes, in sufficient
counterparts for each of the Banks.

Section 7. Representations, Warranties and Agreements. In
order to induce the Banks to enter into this Agreement and to make the Loans,
and issue (or participate in) the Letters of Credit as provided herein, the
Company makes the following representations, warranties and agreements as of
the Restatement Effective Date and as of the date of each subsequent Credit
Event, all of which shall survive the execution and delivery of this Agreement
and the Notes and the making of the Loans and issuance of the Letters of
Credit, with the occurrence of each Credit Event on or after the Restatement
Effective Date being deemed to constitute a representation and warranty that
the matters specified in this Section 7 are true and correct on and as of

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the Restatement Effective Date and on and as of the date of each such Credit
Event, provided that any representation or warranty which by its terms is made
as of a specified date shall be required to be true and correct on the date of
each Credit Event but only as of such specified date:

7.01 Corporate Status. Each of the Company and each of its
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
corporate power and authority to own its property and assets and to transact
the business in which it is engaged and presently proposes to engage in and
(iii) is duly qualified and is authorized to do business and is in good
standing in (x) Delaware, Missouri and South Carolina and (y) in each other
jurisdiction where the ownership, leasing or operation of property or the
conduct of its business requires such qualifications, except in the case of
clause (y) for such failures to be so qualified which, in the aggregate, would
not have a Material Adverse Effect.

7.02 Corporate Power and Authority. The Company has the
corporate power and authority to execute, deliver and perform the terms and
provisions of each of the Documents to which it is party and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of each of such Documents. The Company has duly executed and delivered
each of the Documents to which it is party, and each of such Documents
constitutes its legal, valid and binding obligation enforceable in accordance
with its terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).

7.03 No Violation. Neither the execution, delivery or
performance by the Company or any of its Subsidiaries of the Documents to which
it is a party (including, without limitation, the granting of Liens pursuant to
the Security Documents), nor compliance by it with the terms and provisions
thereof, nor the consummation of the transactions contemplated therein (i) will
contravene any provision of any law, statute, rule or regulation binding on or
applicable to the Company or any of its Subsidiaries or any order, writ,
injunction or decree of any court or governmental instrumentality binding on or
applicable to the Company or any of its Subsidiaries, (ii) will conflict with
or result in any breach of any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien (except pursuant
to the Security Documents) upon any of the property or assets of the Company or
any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed
of trust, credit agreement or loan agreement, or any other agreement, contract
or instrument, to which the

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Company or any of its Subsidiaries is a party or by which it or any of its
property or assets is bound or to which it may be subject or (iii) will violate
any provision of the Certificate of Incorporation or By-Laws of the Company or
any of its Subsidiaries.

7.04 Governmental Approvals. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with (except as have been obtained or made on or prior to the Restatement
Effective Date), or exemption by, any governmental or public body or authority,
or any subdivision thereof, is required to authorize, or is required in
connection with, (i) the execution, delivery and performance of any Document or
(ii) the legality, validity, binding effect or enforceability of any such
Document.

7.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections; etc. (a) (i) The balance sheet of the Company at
September 27, 1996 and the related statements of operations, cash flows and
shareholders' equity of the Company for the fiscal year or other period ended
on such date, as the case may be, and copies of which have hereto been
furnished to the Banks prior to the Restatement Effective Date which have been
examined by Ernst & Young, independent certified public accountants, who
delivered an unqualified opinion in respect thereto, and (ii) the pro forma
(after giving effect to the Transaction, the related financing thereof and the
other transactions contemplated hereby and thereby) balance sheet of the
Company at February 21, 1997, copies of which have heretofore been furnished to
the Banks prior to the Restatement Effective Date, present fairly the financial
condition of the Company at the date of such balance sheets and the results of
the operations and the cash flows and shareholders' equity of the Company for
such fiscal year or other period, as the case may be (or, in the case of the
pro forma balance sheet, presents a good faith estimate of the pro forma
financial condition of the Company (after giving effect to the Transaction, the
related financing thereof and the other transactions contemplated hereby and
thereby) at the date thereof). All such financial statements have been
prepared in accordance with generally accepted accounting principles and
practices consistently applied (except as may be indicated in the notes
thereto) subject to normal year-end adjustments. Since September 27, 1996,
there has been no material adverse change in the business, property, assets,
nature of assets, liabilities, condition (financial or otherwise) or prospects
of the Company or of the Company and its Subsidiaries taken as a whole.

(b) On and as of the Restatement Effective Date, after
giving effect to the Transaction and to all Indebtedness (including the Loans
and the Letters of Credit) being incurred, and to be incurred (and the use of
proceeds thereof), and Liens created, and to be created, by the Company in
connection with the transactions contemplated hereby, (i) the sum of the
assets, at a fair valuation, of the Company will

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exceed its debts; (ii) the Company has not incurred nor intends to, nor
believes that it will, incur debts beyond its ability to pay such debts as such
debts mature; and (iii) the Company will have sufficient capital with which to
conduct its business. For purposes of this Section 7.05(b) "debt" means any
liability on a claim, and "claim" means (x) right to payment, whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured or (y) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right
to an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.

(c) Except as fully reflected in the financial statements
and the notes related thereto delivered pursuant to Section 7.05(a) and on
Schedule IV, there were as of the Restatement Effective Date (and after giving
effect to the Transaction and the other transactions contemplated hereby) no
liabilities or obligations with respect to the Company of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not due)
which, either individually or in the aggregate, would be material to the
Company. As of the Restatement Effective Date (and after giving effect to the
Transaction and the other transactions contemplated hereby), the Company does
not know of any basis for the assertion against the Company of any liability or
obligation of any nature whatsoever that is not fully reflected in the
financial statements delivered pursuant to Section 7.05(a) and on Schedule IV
which, either individually or in the aggregate, could be material to the
Company.

(d) On and as of the Restatement Effective Date, the
Projections attached hereto as Exhibit L, which Projections shall include the
making of the Capital Expenditures contemplated by the Capital Expenditure Plan
and the financing thereof in accordance with the terms of this Agreement, have
been prepared on a basis consistent with the financial statements referred to
in Section 7.05(a)(i) and are based on good faith estimates and assumptions
made by the management of the Company, and there are no statements or
conclusions in any of the Projections which are based upon or include
information known to the Company to be misleading or which fail to take into
account material information regarding the matters reported therein. On the
Restatement Effective Date, the Company believed that the Projections were
reasonable and attainable, it being understood that uncertainty is inherent in
any forecasts or projections and that no assurance can be given that the
results set forth in the Projections will actually be obtained.

7.06 Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of the Company, threatened (i) with respect
to any Document,

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(ii) with respect to any Indebtedness or preferred stock of the Company or any
of its Subsidiaries or (iii) that are reasonably likely to have a Material
Adverse Effect.

7.07 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
the Company or any of its Subsidiaries in writing to any Bank (including,
without limitation, all information contained in the Documents) (other than the
Projections as to which Section 7.05(d) applies) for purposes of or in
connection with this Agreement or any transaction contemplated herein is, and
all other such factual information (taken as a whole) hereafter furnished by or
on behalf of the Company or any of its Subsidiaries in writing to any Bank for
purposes of or in connection with this Agreement or any transaction
contemplated herein will be, true and accurate in all material respects on the
date as of which such information is dated or certified and not incomplete by
omitting to state any fact necessary to make such information (taken as a
whole) not misleading in any material respect at such time in light of the
circumstances under which such information was provided.

7.08 Use of Proceeds; Margin Regulations. (a) All proceeds
of the D Term Loans incurred on or after the Restatement Effective Date shall
be used promptly by the Company to make Permitted Capital Expenditures.

(b) All proceeds of Revolving Loans shall be used by the
Company for working capital and general corporate purposes of the Company.

(c) No part of the proceeds of any Loan will be used to
purchase or carry any Margin Stock or to extend credit for the purpose of
purchasing or carrying any Margin Stock. Neither the making of any Loan nor
the use of the proceeds thereof nor the occurrence of any other Credit Event
will violate or be inconsistent with the provisions of Regulation G, T, U or X
of the Board of Governors of the Federal Reserve System.

7.09 Tax Returns and Payments. Each of the Company and each
of its Subsidiaries has timely filed or caused to be timely filed with the
appropriate taxing authority, all returns, statements, forms and reports for
taxes (the "Returns") required to be filed by or with respect to the income,
properties or operations of the Company and/or any of its Subsidiaries. The
Returns accurately reflect all liability for taxes of the Company and its
Subsidiaries for the periods covered thereby. Each of the Company and each of
its Subsidiaries has paid all taxes payable by it before they have become
delinquent other than those contested in good faith and for which adequate
reserves have been established. There is no action, suit, proceeding,
investigation, audit, or claim now pending or, to the knowledge of the Company,
threatened by any

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authority regarding any taxes relating to the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries has entered into
an agreement or waiver or been requested to enter into an agreement or waiver
extending any statute of limitations relating to the payment or collection of
taxes of the Company or any of its Subsidiaries, or is aware of any
circumstances that would cause the taxable years or other taxable periods of
the Company or any of its Subsidiaries not to be subject to the normally
applicable statute of limitations. Neither the Company nor any of its
Subsidiaries have provided, with respect to themselves or property held by
them, any consent under Section 341 of the Code. Neither the Company nor any
of its Subsidiaries has incurred, or will incur, any tax liability in
connection with the Transaction or the other transactions contemplated hereby.

7.10 Compliance with ERISA. Each Plan is in substantial
compliance with ERISA and the Code; no Reportable Event has occurred with
respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an
Unfunded Current Liability; no Plan has an accumulated or waived funding
deficiency, has permitted decreases in its funding standard account or has
applied for an extension of any amortization period within the meaning of
Section 412 of the Code; neither the Company nor any of its Subsidiaries nor
any ERISA Affiliate has incurred any material liability to or on account of a
Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or Section 4971, 4975 or 4980 of the Code or
expects to incur any liability under any of the foregoing Sections with respect
to any Plan; no proceedings have been instituted to terminate or appoint a
trustee to administer any Plan; no condition exists which presents a material
risk to the Company or any of its Subsidiaries or any ERISA Affiliate of
incurring a liability to or on account of a Plan pursuant to the foregoing
provisions of ERISA and the Code; using actuarial assumptions and computation
methods consistent with Part 1 of subtitle E of Title IV of ERISA, the Company
and its Subsidiaries and its ERISA Affiliates would not have any liability to
all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of
ERISA) in the event of a complete withdrawal therefrom, as of the close of the
most recent fiscal year of each such Plan ended prior to the date of any Credit
Event; no Lien imposed under the Code or ERISA on the assets of the Company or
any of its Subsidiaries or any ERISA Affiliate exists or is likely to arise on
account of any Plan; and the Company and its Subsidiaries do not maintain or
contribute to any employee welfare benefit plan (as defined in Section 3(1) of
ERISA) which provides benefits to retired employees (other than as required by
Section 601 of ERISA) or any employee pension benefit plan (as defined in
Section 3(2) of ERISA) the obligations with respect to which could reasonably
be expected to have a material adverse effect on the ability of the Company to
perform its obligations under this Agreement. For purposes of this Section
7.10, the term "ERISA Affiliate" shall not include any Person that would
otherwise be included within such term solely by reason of MSLEF II's

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ownership interest in such Person and the term Plan shall not include any Plan
which was ever maintained by any such ERISA Affiliate.

7.11 Security Documents. (a) The provisions of the Security
Agreement are effective to create in favor of the Collateral Agent for the
benefit of the Secured Creditors a legal, valid and enforceable security
interest in all right, title and interest of the Company in the Security
Agreement Collateral described therein, and the Security Agreement creates a
fully perfected first lien on, and security interest in, all right, title and
interest of the Company in all of the Security Agreement Collateral described
therein, subject to no other Liens other than Permitted Liens. The recordation
in the United States Patent and Trademark Office of assignments for security
made pursuant to the Security Agreement together with filings on Form UCC-1
made pursuant to the Security Agreement, was, and continues to be, effective
under Federal law to perfect the security interest granted to the Collateral
Agent in the trademarks and patents covered by the Security Agreement, and the
filing of an assignment for security made pursuant to the Security Agreement
with the United States Copyright Office, together with filings on Form UCC-1
made pursuant to the Security Agreement was, and continues to be, effective
under Federal law to perfect the security interest granted to the Collateral
Agent in the copyrights covered by the Security Agreement. The Company has
good and marketable title to all Security Agreement Collateral described in the
Security Agreement, free and clear of all Liens except those described above in
this clause (a).

(b) The security interests created in favor of the
Collateral Agent, as Pledgee for the benefit of the Secured Creditors under the
Pledge Agreement, constitute first perfected security interests in the Pledged
Securities, if any, subject to no security interests of any other Person. No
filings or recordings (including, without limitation, as a result of the
amendment and restatement of the Existing Credit Agreement pursuant to this
Agreement) are required in order to perfect the security interests created in
the Pledged Securities under the Pledge Agreement.

(c) The Existing Mortgages (as amended by the Existing
Mortgage Amendments), and, at all times after the execution and delivery
thereof, the Additional Mortgages, create, as security for the obligations
purported to be secured thereby, a valid and enforceable perfected security
interest in and Lien on all of the Existing Mortgaged Properties and Additional
Mortgaged Properties, as the case may be (including, without limitation, all
fixtures and improvements relating to any such Mortgaged Property), in favor of
the Collateral Agent (or such other trustee as may be named therein) for the
benefit of the Secured Creditors, superior to and prior to the rights of all
third Persons (except that the security interest created in the Existing
Mortgaged Properties and the Additional Mortgaged Properties may be subject to
the

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Permitted Encumbrances related thereto) and subject to no other Liens (other
than Liens permitted under Section 9.01). Schedule III contains a true and
complete list of each Real Property owned or leased by the Company on the
Restatement Effective Date and the type of interest therein held by the
Company. The Company has good and marketable title to the Existing Mortgaged
Properties and, at the time of grant thereof and at all times thereafter, all
Additional Mortgaged Properties, free and clear of all Liens except those
described in the first sentence of this subsection (c).

(d) No consents, filings or recordings are required as a
result of the amendment and restatement of the Existing Credit Agreement
pursuant to this Agreement to maintain the perfection and priority of the
security interests purported to be created by the Original Security Documents.

7.12 Representations and Warranties in Documents and in
Existing Credit Agreement. All representations and warranties set forth in the
other Documents were true and correct in all material respects at the time as
of which such representations and warranties were made or deemed made and shall
be true and correct in all material respects as of the Restatement Effective
Date as if such representations and warranties were made on and as of such
date. In addition, all representations and warranties set forth in the
Existing Credit Agreement were true and correct in all material respects as of
the time such representations and warranties were made or deemed made
thereunder.

7.13 Properties. Except as set forth in Schedule V, the
Company and each of its Subsidiaries have good and marketable title to all
properties owned by them including, without limitation, all property reflected
in the most recent balance sheet of the Company as referred to in Section
7.05(a)(i) and in the pro forma balance sheet referred to in Section
7.05(a)(ii) and in Section 5.17 (except as sold or otherwise disposed of since
the date of such balance sheet in the ordinary course of business or, in the
case of any sale or disposition after the Restatement Effective Date, as
otherwise permitted under this Agreement), free and clear of all Liens, other
than (i) as referred to in such balance sheet or in the notes thereto or in the
pro forma balance sheet or (ii) otherwise permitted by Section 9.01.

7.14 Capitalization. On the Restatement Effective Date and
after giving effect to the issuance of common stock on such date pursuant to
the Equity Financing, the authorized capital stock of the Company shall consist
of (i) 500,000 shares of Common Stock, of which 311,034 shares shall be issued
and outstanding and (ii) 1,536,042 shares of Class A Common Stock, of which
1,530,515 shares shall be issued and outstanding, 1,402,689 of which shall be
held by MSLEF II and 29,831 of which shall be held by CVC. Upon issuance
thereof, all such outstanding shares have been

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or shall be duly and validly issued, are or shall be fully paid and
nonassessable and, except as set forth in the Company's Certificate of
Incorporation, are or shall be free of preemptive rights. On the Restatement
Effective Date, except for the Stockholders Agreement and the Escrow Agreement
dated October 30, 1992 among MSLEF II, the Company, Richard C. Thompson, CVC,
Horst W. Schroeder, Timothy S. Webster and George K. Baum Group, Inc. (as
amended as of March 8, 1995, and further amended as of April 13, 1995), the
Company does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for
or to purchase, or any options for the purchase of, or any agreements providing
for the issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, its capital stock other than options to
purchase shares of Common Stock granted to management and employees of the
Company pursuant to the Employment Agreements or the Management Agreements or
the Stock Option Plans, the aggregate number of such shares subject to such
options not to exceed 200,000.

7.15 Compliance with Statutes; etc. Each of the Company and
its Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls), except such
noncompliances as would not, in the aggregate, have a Material Adverse Effect.

7.16 Investment Company Act. Neither the Company nor any of
its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.

7.17 Public Utility Holding Company Act. Neither the Company
nor any of its Subsidiaries is a "holding company," or a "subsidiary company"
of a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.

7.18 Environmental Matters. (a) The Company and each of its
Subsidiaries have complied in all material respects with, and on the
Restatement Effective Date and on the date of each Credit Event are in
compliance in all material respects with, all applicable Environmental Laws and
the requirements of any permits issued under such Environmental Laws. There
are no material past, pending and to the best knowledge of the Company,
threatened Environmental Claims against the Company or any of its Subsidiaries
or any Real Property owned or at any time operated by the Company or any of its
Subsidiaries. There are no facts, circumstances, conditions or

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occurrences on any Real Property owned or at any time operated by the Company
or any of its Subsidiaries or, to the best knowledge of the Company, on any
property adjoining any Real Property owned or operated by the Company and its
Subsidiaries that could reasonably be expected (i) to form the basis of an
Environmental Claim against the Company or any of its Subsidiaries or any such
Real Property, or (ii) to cause such Real Property to be subject to any
restrictions on the ownership, occupancy, use or transferability of such Real
Property under any Environmental Law.

(b) Hazardous Materials have not at any time been
generated, used, treated or stored on, or transported to or from, any Real
Property owned or at any time operated by the Company or any of its
Subsidiaries except in material compliance with Environmental Laws. Hazardous
Materials have not at any time been Released on or from any Real Property owned
or at any time operated by the Company or any of its Subsidiaries except in
material compliance with Environmental Laws. Except as disclosed on Schedule
VI, there are not now and never have been any underground storage tanks located
on any Real Property owned or at any time operated by the Company or any of its
Subsidiaries.

7.19 Labor Relations. Neither the Company nor any of its
Subsidiaries is engaged in any unfair labor practice that could have a material
adverse effect on the Company or on the Company and its Subsidiaries taken as a
whole. There is (i) no significant unfair labor practice complaint pending
against the Company or any of its Subsidiaries or, to the best knowledge of the
Company, threatened against any of them before the National Labor Relations
Board, and no significant grievance or significant arbitration proceeding
arising out of or under any collective bargaining agreement is so pending
against the Company or any of its Subsidiaries or, to the best knowledge of the
Company, threatened against any of them, (ii) no significant strike, labor
dispute, slowdown or stoppage is pending against the Company or any of its
Subsidiaries or, to the best knowledge of the Company, threatened against the
Company or any of its Subsidiaries and (iii) to the best knowledge of the
Company, no question concerning union representation exists with respect to the
employees of the Company or any of its Subsidiaries, except (with respect to
any matter specified in clause (i), (ii) or (iii) above, either individually or
in the aggregate) such as could not have a Material Adverse Effect.

7.20 Intellectual Property; Licenses; Franchises; Formulas.
Each of the Company and its Subsidiaries owns all the patents, patent
applications, trademarks, service marks, trademark and service mark
registrations and applications therefor, trade names, copyrights, copyright
registrations and applications therefor, trade secrets, proprietary
information, computer programs, data bases, licenses, permits, franchises and
formulas, or rights with respect to the foregoing (collectively, "Intellectual

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Property"), and has obtained assignments of all leases and other rights of
whatever nature, necessary for the present conduct of its business, without any
known conflict with the rights of others. Except as set forth on Schedule VII,
neither the Company nor any of its Subsidiaries has knowledge of any existing
or threatened claim by any Person contesting the validity, enforceability, use
or ownership of the Intellectual Property, or of any existing state of facts
that would support a claim that use by the Company or any of its Subsidiaries
of any such Intellectual Property has infringed or otherwise violated any
proprietary rights of any other Person.

7.21 Indebtedness. Schedule VIII sets forth a true and
complete list of all Indebtedness (other than the Loans and the Letters of
Credit) of the Company as of the Restatement Effective Date and which is to
remain outstanding after giving effect to the Transaction (the "Existing
Obligations"), in each case showing the aggregate principal amount thereof (and
the aggregate amount of any undrawn commitments with respect thereto) and the
name of the respective obligor and any other entity which directly or
indirectly guaranteed such debt. No Existing Obligation has been incurred in
connection with, or in contemplation of, the Transaction or the other
transactions contemplated hereby.

7.22 Restrictions on or Relating to Subsidiaries. There does
not exist any encumbrance or restriction on the ability of (a) any Subsidiary
of the Company to pay dividends or make any other distributions on its capital
stock or any other interest or participation in its profits owned by the
Company or any Subsidiary of the Company, or to pay any Indebtedness owed to
the Company or a Subsidiary of the Company, (b) any Subsidiary of the Company
to make loans or advances to the Company or any of the Company's Subsidiaries
or (c) the Company or any of its Subsidiaries to transfer any of its properties
or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (i) applicable law,
(ii) this Agreement or the other Credit Documents or (iii) customary provisions
restricting subletting or assignment of any lease governing a leasehold
interest of the Company or a Subsidiary of the Company.

7.23 Enterprise Zone. Pursuant to and in accordance with
City of Excelsior Springs Ordinance No. 87-1-4, the Company has been granted
enterprise zone tax abatements and exemptions by the City of Excelsior Springs,
Missouri and Clay County, Missouri with respect to substantially all of the
Real Property of the Company, together with the Missouri Facility and other
improvements thereon (including certain equipment which has been classified as
real property qualified for said abatements and exemptions), as follows:

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Such Real Property shall be one hundred percent (100%) exempt from all
taxes for a fifteen (15) year period, commencing January 1, 1988. For
the next ten (10) years there shall be a fifty percent (50%) abatement
of all taxes as to schools, county and any other funds except the
general fund, for which there shall be a one hundred percent (100%)
abatement of taxes. The one hundred percent (100%) abatement for the
general fund of the City of Excelsior Springs shall be for a period of
ten (10) years or until such time as One Hundred Eleven Thousand
($111,000.00) Dollars has been abated, whichever time shall occur
first.

The tax abatements and exemptions claimed as described above are and shall be
available to the Company as claimed with respect to any taxable period (or
portion thereof) ending on or before the close of business on the Restatement
Effective Date (whether for the Company's real property, improvements thereon
or equipment classified as real property are therefore qualified for said
exemptions and abatements). For taxable periods (or portions thereof) ending
after the Restatement Effective Date, such tax abatements and exemptions shall
be available to the Company with respect to substantially all of the Company's
real property, together with improvements thereon; provided, however, that for
taxable periods (or portions thereof) ending after the Restatement Effective
Date, the Company makes no representation or warranty that such tax abatements
and exemptions shall be available to the Company with respect to equipment
(including equipment which has previously been classified as real property
entitled to the benefit of such abatements and exemptions).

7.24 Purchase or Other Commitments and Outstanding Bids. No
material purchase or other commitment of the Company is in excess of the
normal, ordinary, and usual requirements of its business, or was made at any
price in excess of the then current market price, or contains terms and
conditions more onerous than those usual and customary in the applicable
industry. There is no outstanding bid, sales or promotional proposal,
contract, or unfilled order of the Company which (i) will, or could if
accepted, require the Company to supply goods or services at a cost to the
Company in excess of the revenues to be received therefor, or (ii) quotes
prices which do not include a markup over reasonably estimated costs consistent
with past markups on similar business or market conditions current at that
time.

7.25 Subsidiaries. The Company has no Subsidiaries other
than Subsidiaries created in accordance with Section 9.16.

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7.26 Employment Agreements and Management Agreements. On the
Restatement Effective Date, the Company has no agreements with members of, or
with respect to, the management of the Company or any employment agreements or
consulting agreements entered into by the Company or any form of such agreement
other than the Management Agreements and the Employment Agreements and other
than employment agreements that may be terminable at will by the Company
without payment thereunder (other than compensation accrued prior to the date
of termination).

Section 8. Affirmative Covenants. The Company covenants and
agrees that on and after the Restatement Effective Date and until the Total
Commitments and all Letters of Credit have terminated and the Loans, Notes and
Unpaid Drawings, together with interest, Fees and all other obligations
incurred hereunder and thereunder, are paid in full:

8.01 Information Covenants. The Company will furnish, or
cause to be furnished, to each Bank:

(a) Monthly Reports. Within thirty days after the end of
each fiscal month of the Company other than the last such month of any
fiscal quarter of the Company, the consolidated balance sheets of the
Company and its Subsidiaries as of the end of such month, the related
consolidated statements of operations, cash flows and shareholders'
equity for such month and for the elapsed portion of the fiscal year
ended with the last day of such month, in each case setting forth
comparative figures for the corresponding month in the prior fiscal
year, all of which shall be certified by the Chief Financial Officer
of the Company, subject to normal year-end adjustments.

(b) Quarterly Financial Statements. Within forty-five
days after the close of each of the first three quarterly accounting
periods in each fiscal year of the Company, the consolidated balance
sheets of the Company and its Subsidiaries as at the end of such
quarterly period, and the related consolidated statements of
operations, shareholders' equity and cash flows for such quarterly
period and the elapsed portion of the fiscal year ended with the last
day of such quarterly period, in each case setting forth comparative
figures for the related periods in the prior fiscal year and the
budgeted figures for such period as set forth in the respective budget
delivered pursuant to Section 8.01(e), all of which shall be certified
by the Chief Financial Officer of the Company, subject to normal
year-end audit adjustments.

(c) Annual Financial Statements. Within ninety days
after the close of each fiscal year of the Company, the consolidated
balance sheets of the

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Company and its Subsidiaries as at the end of such fiscal year and the
related consolidated statements of operations, shareholders' equity
and cash flows for such fiscal year, reported on by Ernst & Young or
other independent certified public accountants of recognized national
standing reasonably acceptable to the Administrative Agent and the
Required Banks and in each case setting forth comparative figures for
the preceding fiscal year, together with an unqualified opinion of
such accounting firm and a letter stating that in the course of its
regular audit of the financial statements of the Company and its
Subsidiaries, which audit was conducted in accordance with generally
accepted auditing standards, such accounting firm obtained no
knowledge of any Default or Event of Default arising under Sections
4.02(A)(k), 9.02, 9.04, 9.05, 9.06 or 9.08 through 9.11, inclusive,
insofar as such Sections relate to accounting matters or require
computations to be made which are ordinarily made by accountants which
has occurred and is continuing or, if in the opinion of such
accounting firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature and period of existence
thereof. The Company shall provide a comparison between the
consolidated balance sheets of the Company and its Subsidiaries and
the related consolidated statements of operations, shareholders'
equity and cash flows referred to above and the budgeted figures for
the relevant period as set forth in the respective budget delivered
pursuant to Section 8.01(e).

(d) Management Letters. Promptly after receipt thereof,
a copy of any "management letter" received by the Company or any of
its Subsidiaries from its certified public accountants.

(e) Budgets. As soon as available and in any event
within ninety days following the first day of each fiscal year of the
Company, a budget in form satisfactory to the Administrative Agent and
the Required Banks (including budgeted statements of operations, cash
flows and shareholders' equity and balance sheets) prepared by the
Company for each fiscal quarter of such fiscal year, in each case
prepared in reasonable detail, with appropriate presentation and
discussion of the principal assumptions upon which such budgets are
based, which shall be accompanied by the statement of the Chief
Financial Officer of the Company to the effect that, to the best of
his knowledge, such budget is a reasonable estimate for the period
covered thereby.

(f) Officer's Certificates. At the time of the delivery
of the financial statements provided for in Section 8.01(a), (b) and
(c), a certificate of the Chief Financial Officer of the Company to
the effect that no Default or Event of Default has occurred and is
continuing or, if any Default or Event of Default has

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occurred and is continuing, specifying the nature and extent thereof,
which certificate shall also set forth if delivered with the financial
statements required by Section 8.01(b) or (c), (i) the calculations
required to establish whether the Company was in compliance with the
provisions of Sections 3.03, 4.02, 9.02, 9.04, 9.05, 9.06 and 9.08
through 9.11, inclusive, and (ii) the amount of Excess Cash Flow for
the fiscal period covered by such financial statements.

(g) Notice of Default or Litigation, etc. Promptly, and
in any event within three Business Days after an officer of the
Company or any of its Subsidiaries obtains knowledge thereof, notice
of (i) the occurrence of any event which constitutes a Default or
Event of Default, (ii) any litigation or governmental investigation or
proceeding pending (x) against the Company or any of the Subsidiaries
which could materially and adversely affect the business, property,
assets, nature of assets, liabilities, condition (financial or
otherwise) or prospects of the Company or of the Company and its
Subsidiaries taken as a whole, (y) with respect to any material
Indebtedness or preferred stock of the Company or any of its
Subsidiaries or (z) with respect to any Document, (iii) any adverse
judgment rendered against the Company or any of its Subsidiaries,
which imposes punitive damages or otherwise providing for a recovery
which is, to the extent not covered by insurance, in excess of
$100,000, and (iv) any other event which could have a Material Adverse
Effect.

(h) Other Reports and Filings. Promptly, copies of all
financial information, proxy materials and other information and
reports, if any, which the Company or any of its Subsidiaries shall
file with the Securities and Exchange Commission or any successor
thereto (the "SEC") or deliver to holders of its Indebtedness pursuant
to the terms of the documentation governing such Indebtedness or (or
any trustee, agent or other representative therefor).

(i) Environmental Matters. Promptly upon, and in any
event within three Business Days after an officer of the Company or
any of its Subsidiaries obtains knowledge thereof, notice of one or
more of the following environmental matters: (i) any pending or
threatened material Environmental Claim against the Company or any of
its Subsidiaries or any Real Property owned or at any time operated by
the Company or any of its Subsidiaries; (ii) any condition or
occurrence on or arising from any Real Property owned or at any time
operated by the Company or any of its Subsidiaries that (a) results in
material noncompliance by the Company or any of its Subsidiaries with
any applicable Environmental Law, or (b) could reasonably be expected
to form the basis of a material Environmental Claim against the
Company or any of its Subsidiaries or any such Real Property; (iii)
any condition or occurrence on any Real

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Property owned or at any time operated by the Company or any of its
Subsidiaries that could reasonably be expected to cause such Real
Property to be subject to any material restrictions on the ownership,
occupancy, use or transferability of such Real Property under any
Environmental Law; and (iv) the taking of any material removal or
remedial action in response to the actual or alleged presence of any
Hazardous Material on any Real Property owned or at any time operated
by the Company or any of its Subsidiaries as required by any
Environmental Law or any governmental or other administrative agency.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial
action and the Company's or such Subsidiary's response thereto. In
addition, the Company will provide the Banks with copies of all
written communications with any government or governmental agency
relating to Environmental Laws, all communications with any Person
relating to Environmental Claims, and such detailed reports of any
Environmental Claim as may reasonably be requested by the Banks.

(j) Annual Meetings with Banks. Within 120 days after
the close of each fiscal year of the Company, the Company shall hold a
meeting with respect to which all of the Banks shall have received
notice at least fourteen (14) days in advance, and to which all the
Banks shall be invited to attend, at which meeting shall be reviewed
the financial results of the previous fiscal year and the financial
condition of the Company and its Subsidiaries and the budgets
presented for the current fiscal year of the Company and its
Subsidiaries.

(k) Borrowing Base Certificate. (i) On the Restatement
Effective Date and (ii) thereafter, not later than 12:00 Noon (New
York time) on the tenth Business Day after each fiscal month-end, a
borrowing base certificate substantially in the form of Exhibit N
(each, a "Borrowing Base Certificate"), with respect to the Eligible
Receivables and the Eligible Inventory of the Company and its
Subsidiaries as of (x) in the case of clause (i), March 28, 1997 and
(y) in the case of clause (ii), the last day of the immediately
preceding fiscal month, and in all such cases, certified by the Chief
Financial Officer of the Company.

(l) Sysco Contract Notices. Promptly, and in any event
within two Business Days after which the Company receives a notice
from Sysco pursuant to Section 5.2 of the Sysco Contract or any other
material notices delivered to the Company pursuant to the Sysco
Contract, copies of all such notices.

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(m) CPC Contract Notices. Promptly, and in any event
within two Business Days after which the Company delivers or receives
any material notice pursuant to the CPC Contract, copies of all such
notices.

(n) Other Information. From time to time, such other
information or documents (financial or otherwise) as the
Administrative Agent or the Required Banks may reasonably request.

8.02 Books, Records and Inspections. The Company will, and
will cause each of its Subsidiaries to, keep proper books of record and account
in which full, true and correct entries in conformity with United States
generally accepted accounting principles and all requirements of law shall be
made of all dealings and transactions in relation to its business and
activities. The Company will, and will cause each of its Subsidiaries to,
permit officers and designated representatives of the Administrative Agent or
any Bank to visit and inspect, under guidance of officers of the Company or
such Subsidiary, any of the properties of the Company or such Subsidiary, and
to examine the books of account of the Company or such Subsidiary and discuss
the affairs, finances and accounts of the Company or such Subsidiary with, and
be advised as to the same by, its and their officers, all at such reasonable
times and intervals, upon reasonable notice and to such reasonable extent as
the Administrative Agent or such Bank may request.

8.03 Maintenance of Property, Insurance. Schedule IX sets
forth a true and complete listing of all insurance maintained by the Company as
of the Restatement Effective Date. The Company will, and will cause each of
its Subsidiaries to, (i) keep all property useful and necessary in its business
in good working order and condition, (ii) maintain with financially sound and
reputable insurance companies insurance, including, but not limited to,
business interruption insurance, on all its assets and properties in at least
such amounts and against at least such risks as is consistent and in accordance
with industry practice for companies similarly situated, and (iii) furnish to
each Bank, on the Restatement Effective Date and on each anniversary thereof,
full information as to the insurance carried. At any time that insurance at
levels described in Schedule IX is not being maintained by the Company or any
Subsidiary of the Company, the Company will notify the Banks in writing within
two Business Days thereof and, if thereafter notified by the Administrative
Agent or the Required Banks to do so, the Company or any such Subsidiary, as
the case may be, shall obtain insurance at such levels at least equal to those
set forth on Schedule IX. It is understood and agreed that the Company may
provide self-insurance for workers' compensation claims in an amount not to
exceed $2,000,000 over any two year period. The provisions of this Section
8.03 shall be deemed to be supplemental to, but not

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duplicative of, the provisions of any of the Security Documents that require
the maintenance of insurance.

8.04 Corporate Franchises. The Company will, and will cause
each of its Subsidiaries to, do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence, and all material
rights, franchises, licenses and patents; provided, however, that nothing in
this Section 8.04 shall prevent the withdrawal by the Company or any of its
Subsidiaries of its qualification as a foreign corporation in any jurisdiction
where such withdrawal could not have a Material Adverse Effect.

8.05 Compliance with Statutes, etc. The Company will, and
will cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, except such noncompliances as could
not, individually or in the aggregate, have a Material Adverse Effect.

8.06 Compliance with Environmental Laws. (a) The Company
will, and will cause each of its Subsidiaries to, comply, in all material
respects with all Environmental Laws applicable to ownership or use of the Real
Property owned or operated by the Company or any of its Subsidiaries, will
promptly pay or cause to be paid all costs and expenses incurred in such
compliance and will keep or cause to be kept all such Real Properties free and
clear of any Liens imposed pursuant to such Environmental Laws. Neither the
Company nor any of its Subsidiaries will generate, use, treat, store, release
or dispose of, or permit the generation, use, treatment, storage, release or
disposal of, Hazardous Materials on any Real Property owned, leased or operated
by the Company or any of its Subsidiaries, or transport or permit the
transportation of Hazardous Materials to or from any such Real Property except
for limited quantities of Hazardous Materials generated, used, treated, stored,
released or disposed of at such Real Properties in material compliance with all
applicable Environmental Laws and required in connection with the normal
operation, use and maintenance of such Real Property. The Company and its
Subsidiaries shall not dispose of any Hazardous Materials off site except in
material compliance with all applicable Environmental Law.

(b) At the written request of the Administrative Agent or
the Required Banks, which request shall specify in reasonable detail the basis
therefor, at any time and from time to time, the Company will provide, at the
Company's sole cost and expense, an environmental site assessment report
concerning any Real Property, at the time of such request owned, operated or
leased by the Company or any of its

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Subsidiaries, prepared by an environmental consulting firm approved by the
Administrative Agent and the Required Banks, indicating the presence, Release
or absence of Hazardous Materials on or from any such Real Property and the
potential cost of any removal, remedial or corrective action in connection with
any such Hazardous Materials on such Real Property, provided, however, no such
request may be made unless (i) the Administrative Agent or the Required Banks
reasonably believes that the facts or circumstances evidence or suggest that
the Company or any of its Subsidiaries is in material non-compliance with any
Environmental Law, (ii) a Default or Event of Default is in existence and
continuing or (iii) upon the acquisition of any Real Property by the Company or
any of its Subsidiaries subsequent to the Original Effective Date, provided
that if any such newly acquired Real Property is not contiguous with any
Mortgaged Property, then such request shall be limited to such newly acquired
Real Property. If the Company fails to provide the same sixty (60) days after
such request was made, the Administrative Agent may order the same, and the
Company shall grant and hereby grants to the Administrative Agent and the Banks
and their agents access to such Real Property and specifically grants the
Administrative Agent and the Banks an irrevocable and non-exclusive license,
subject to the rights of tenants, to undertake such an assessment all at the
expense of the Company.

8.07 ERISA. As soon as possible and, in any event, within
ten Business Days after the Company or any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know of the occurrence of any of the
following, the Company will deliver to each of the Banks a certificate of the
Chief Financial Officer of the Company setting forth details as to such
occurrence and the action, if any, which the Company, such Subsidiary or such
ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Company, the
Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan
administrator with respect thereto: that a Reportable Event has occurred; that
a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
is subject to the advance reporting requirement of PBGC Regulation Section
4043.61 (without regard to subparagraph (b)(1) thereof), and an event described
in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section
4043 is reasonably expected to occur with respect to such Plan within the
following thirty days; that an accumulated funding deficiency has been incurred
or an application may be or has been made to the Secretary of the Treasury for
a waiver or modification of the minimum funding standard (including any
required installment payments) or an extension of any amortization period under
Section 412 of the Code with respect to a Plan; that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current Liability giving rise to a Lien
under ERISA or the Code; that proceedings may be or have been instituted to
terminate a Plan; that a proceeding has been instituted pursuant to Section 515
of ERISA to

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collect a delinquent contribution to a Plan; that the Company, any of its
Subsidiaries or any ERISA Affiliate will or may incur any liability (including
any contingent or secondary liability) to or on account of the termination of
or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or
4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or
4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA; or that the
Company or any Subsidiary may incur any material liability pursuant to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA) that
provides benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or any employee pension benefit plan (as
defined in Section 3(2) of ERISA). The Company will deliver to each of the
Banks a complete copy of the annual report (Form 5500) of each Plan required to
be filed with the Internal Revenue Service. In addition to any certificates or
notices delivered to the Banks pursuant to the first sentence hereof, copies of
annual reports and any notices received by the Company or any of its
Subsidiaries or any ERISA Affiliate with respect to any Plan, shall be
delivered to the Banks no later than ten (10) Business Days after the later of
the date such report or notice has been filed with the Internal Revenue Service
or received by the Company or the Subsidiary or the ERISA Affiliate. Except to
the extent set forth below, this Section 8.07 shall not apply with respect to
any Person that is an "ERISA Affiliate" solely by reason of MSLEF II's
ownership interest in such Person nor to any Plan maintained or contributed to
by any such Person and the Company shall have no obligation to provide the
information otherwise required by this Section 8.07 with respect to any such
Person or Plan unless the Company shall have actual knowledge of such
information; provided, however, it is expressly understood that the Company
shall have no obligation to inquire with respect to any such Person or Plan and
that MSLEF II's knowledge with respect to any such person or Plan shall not be
deemed to be knowledge of the Company nor shall cause the Company to have
reason to know of such information.

8.08 End of Fiscal Years; Fiscal Quarters. The Company will
cause (i) each of its, and each of its Subsidiaries', fiscal years and fourth
fiscal quarter to end within five Business Days prior to or after the last
Business Day of September 30, and (ii) each of its, and each of its
Subsidiaries', first three fiscal quarters to end within five Business Days
prior to or after the last Business Day of each December, March and June.

8.09 Performance of Obligations. The Company will, and will
cause each of its Subsidiaries to, perform all of its obligations under the
terms of each mortgage, indenture, security agreement and other debt instrument
by which it is bound and each other agreement or contract to which it is a
party, except such non-performances as could not in the aggregate have a
Material Adverse Effect.

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8.10 Payment of Taxes. The Company will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attached thereto, and all lawful claims which, if unpaid, might
become a lien or charge upon any properties of the Company or any of its
Subsidiaries; provided that neither the Company nor any of its Subsidiaries
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested in good faith and by proper proceedings or the taking of
other proper actions if it has maintained adequate reserves with respect
thereto in accordance with generally accepted accounting principles.

8.11 Interest Rate Protection. On or prior to the three
month anniversary of the Restatement Effective Date, the Company shall have
established and shall thereafter maintain arrangements which have the effect of
establishing a fixed or maximum interest rate acceptable to the Administrative
Agent and the Required Banks for at least $65,000,000 aggregate notional
principal amount of Indebtedness for a period ending no earlier than 24 months.

8.12 Use of Proceeds. All proceeds of the Loans shall be
used as provided in Section 7.08.

8.13 Additional Security; Further Assurances. (a) The
Company shall grant to the Collateral Agent, for the benefit of the Secured
Creditors, a security interest in any Real Property of the Company or any of
its Subsidiaries that is not covered by the Existing Mortgages, to the extent
acquired after the Restatement Effective Date, as may be requested from time to
time by the Administrative Agent or the Required Banks (each such Real
Property, an "Additional Mortgaged Property" and, collectively, the "Additional
Mortgaged Properties"), and shall take all actions requested by the
Administrative Agent or the Required Banks (including, without limitation, the
obtaining of Mortgage Policies, title surveys, environmental reports and real
estate appraisals satisfying the requirements of all applicable laws) in
connection with the granting of such security interest.

(b) The Company agrees to cause each Subsidiary
established or created in accordance with Section 9.16 to execute and deliver a
guaranty of all Obligations and all obligations under Interest Rate Protection
or other Hedging Agreements in form and substance satisfactory to the
Administrative Agent and the Required Banks.

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(c) The Company agrees to pledge all of the capital stock
of each new Subsidiary established or created to the Collateral Agent for the
benefit of the Secured Creditors pursuant to the Pledge Agreement.

(d) The Company will cause each Subsidiary established or
created in accordance with Section 9.16 to grant to the Collateral Agent a
first priority Lien on all property (tangible and intangible) of such
Subsidiary upon terms similar to those set forth in the Security Documents as
appropriate, and satisfactory in form and substance to the Administrative Agent
and Required Banks. The Company shall cause each Subsidiary, at its own
expense, to execute, acknowledge and deliver, or cause the execution,
acknowledgment and delivery of, and thereafter register, file or record in any
appropriate governmental office, any document or instrument reasonably deemed
by the Collateral Agent to be necessary or desirable for the creation and
perfection of the foregoing Liens. The Company will cause each of its
Subsidiaries to take all actions requested by the Administrative Agent
(including, without limitation, the filing of UCC-1's) in connection with the
granting of such security interests.

(e) The security interests required to be granted
pursuant to this Section 8.13 shall be granted pursuant to such security
documentation (which shall be substantially similar to the Security Documents
already executed and delivered by the Company) reasonably satisfactory in form
and substance to the Administrative Agent and the Required Banks and shall
constitute valid and enforceable perfected security interests prior to the
rights of all third Persons and subject to no other Liens except such Liens as
are permitted by Section 9.01. The Additional Security Documents and other
instruments related thereto shall be duly recorded or filed in such manner and
in such places and at such times as are required by law to establish, perfect,
preserve and protect the Liens, in favor of the Collateral Agent for the
benefit of the respective Secured Creditors, required to be granted pursuant to
the Additional Security Documents and all taxes, fees and other charges payable
in connection therewith shall be paid in full by the Company. The Company
shall, and shall cause each of its Subsidiaries to, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to the Collateral covered by any of the Additional Security
Documents as the Collateral Agent may reasonably require. At the time of the
execution and delivery of the Additional Security Documents, the Company shall
cause to be delivered to the Collateral Agent such opinions of counsel,
Mortgage Policies, title surveys, real estate appraisals, environmental reports
and other related documents as may be reasonably requested by the
Administrative Agent or the Required Banks to assure themselves that this
Section 8.13 has been complied with.

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(f) The Company agrees that each action required by
Section 8.13(a) with respect to any Additional Mortgage described therein and
the due recordation or filing of such Additional Mortgage shall be completed as
soon as possible, but in no event later than thirty days after such action is
requested to be taken by the Administrative Agent or the Required Banks. The
Company further agrees that each action required by Section 8.13(b), (c) or (d)
with respect to the Additional Collateral shall be completed contemporaneously
with the creation of such new Subsidiary.

8.14 Register. The Company hereby designates the
Administrative Agent to serve as the Company's agent, solely for purposes of
this Section 8.14, to maintain a register (the "Register") on which it will
record the Commitments from time to time of each of the Banks, the Loans made
by each of the Banks and each repayment in respect of the principal amount of
the Loans of each Bank. Failure to make any such recordation, or any error in
such recordation shall not affect the Company's obligations in respect of such
Loans. With respect to any Bank, the transfer of the Commitments of such Bank
and the rights to the principal of, and interest on, any Loan made pursuant to
such Commitments shall not be effective until such transfer is recorded on the
Register maintained by the Administrative Agent with respect to ownership of
such Commitments and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitments and Loans shall remain owing to
the transferor. The registration of assignment or transfer of all or part of
any Commitments and Loans shall be recorded by the Administrative Agent on the
Register only upon the acceptance by the Administrative Agent of a properly
executed and delivered assignment and assumption agreement pursuant to Section
13.04(b). Coincident with the delivery of such an assignment and assumption
agreement to the Administrative Agent for acceptance and registration of
assignment or transfer of all or part of a Loan, or as soon thereafter as
practicable, the assigning or transferor Bank shall surrender the Note
evidencing such Loan, and thereupon one or more new Notes in the same aggregate
principal amount shall be issued to the assigning or transferor Bank and/or the
new Bank. The Company agrees to indemnify the Administrative Agent from and
against any and all losses, claims, damages and liabilities of whatsoever
nature which may be imposed on, asserted against or incurred by the
Administrative Agent in performing its duties under this Section 8.14.

8.15 Capital Expenditure Confirmation. At the request of the
Administrative Agent or the Required Banks, the Company will provide to the
Administrative Agent and the Banks evidence, in form and substance reasonably
satisfactory to the Administrative Agent and the Required Banks, of the
Permitted Capital Expenditures actually made by the Company and that such
Permitted Capital Expenditures were made as contemplated by, and in accordance
with, Section 9.08(b). If the Company fails to provide such evidence within
ten Business Days after such

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request was made, the Company shall pay to the Administrative Agent cash or
Cash Equivalents in an amount equal to the aggregate of all such Permitted
Capital Expenditures for which the Company has failed within such ten Business
Day period to provide satisfactory evidence to the Administrative Agent and the
Required Banks for deposit into a cash collateral account to be established by
the Administrative Agent, to be held by the Administrative Agent and released
in whole or in part upon presentation of satisfactory evidence to the
Administrative Agent and the Required Banks of Permitted Capital Expenditures
actually made as contemplated by, and in accordance with, Section 9.08(b) with
respect to which no Permitted Capital Expenditure Financing was previously
incurred or issued and used.

Section 9. Negative Covenants. The Company hereby covenants
that on and after the Restatement Effective Date and until the Total
Commitments and all Letters of Credit have terminated and the Loan, Notes and
Unpaid Drawings, together with interest, Fees and all other Obligations
incurred hereunder and thereunder, are paid in full:

9.01 Liens. The Company will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets (real or personal, tangible or
intangible) of the Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such
property or assets (including sales of accounts receivable with recourse to the
Company or any of its Subsidiaries), or assign any right to receive income or
permit the filing of any financing statement under the UCC or any other similar
notice of Lien under any similar recording or notice statute; provided that the
provisions of this Section 9.01 shall not prevent the creation, incurrence,
assumption or existence of the following (liens described below are herein
referred to as "Permitted Liens"):

(i) inchoate Liens for taxes not yet due or Liens for
taxes being contested in good faith and by appropriate proceedings for
which adequate reserves have been established in accordance with
United States generally accepted accounting principles;

(ii) Liens in respect of property or assets of the Company
imposed by law, which were incurred in the ordinary course of business
and do not secure Indebtedness for borrowed money, such as carriers',
warehousemen's, materialmen's and mechanics' liens and other similar
Liens arising in the ordinary course of business, and (x) which do not
in the aggregate materially detract from the value of the Company's
property or assets or materially impair

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the use thereof in the operation of the business of the Company or (y)
which Liens or the obligations secured thereby are being contested in
good faith by appropriate proceedings, which proceedings have the
effect of preventing the forfeiture or sale of the property or assets
subject to any such Lien;

(iii) Liens of the Company in existence on the Restatement
Effective Date which are listed, and the property subject thereto
described, on Schedule X, without giving effect to any extensions or
renewals thereof except such extensions or renewals as are expressly
set forth on Schedule X as permitted, and only to the respective date,
if any, set forth on such Schedule X for the removal and termination
of any such Liens;

(iv) Permitted Encumbrances;

(v) Liens created pursuant to the Security Documents;

(vi) Liens placed upon equipment or machinery of the
Company used in the ordinary course of the business of the Company at
the time of acquisition thereof by the Company to secure Indebtedness
incurred to pay all or a portion of the purchase price thereof,
provided that (x) the aggregate principal amount of all Indebtedness
secured by Liens permitted by this clause (vi) is permitted to be
incurred pursuant to Section 9.05(v) and (y) in all events, the Lien
encumbering the equipment or machinery so acquired does not encumber
any other asset of the Company or any of its Subsidiaries;

(vii) Liens securing Indebtedness of the Company evidenced
by Capitalized Lease Obligations to the extent permitted by Section
9.05(v), provided that such Liens only serve to secure the payment of
Indebtedness arising under such Capitalized Lease Obligation and the
Lien encumbering the asset being leased pursuant to the Capitalized
Lease Obligation does not encumber any other asset of the Company or
any of its Subsidiaries;

(viii) Liens placed upon equipment or machinery of the
Company purchased as a Permitted Capital Expenditure with proceeds of
Permitted Capital Expenditure Indebtedness, provided that (x) the
aggregate principal amount of all Indebtedness secured by Liens
permitted by this clause (viii) is permitted to be incurred pursuant
to Section 9.05(vi) and (y) in all events, the Lien encumbering the
equipment or machinery so purchased does not encumber any other asset
of the Company or any of its Subsidiaries;

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(ix) easements, rights-of-way, restrictions, encroachments
and other similar charges or encumbrances arising in the ordinary
course of business and not materially interfering with the conduct of
the business of the Company or any of its Subsidiaries;

(x) Liens arising from precautionary UCC financing
statement filings regarding operating leases;

(xi) Liens placed on unutilized Real Property (and any
crops grown thereon) of the Company subject to the Existing Mortgages
which do not in the aggregate materially detract from the value of the
Company's property or assets or materially impair the use thereof in
the operation of the business of the Company;

(xii) the Permitted Filot Transaction; and

(xiii) Liens not otherwise permitted by the foregoing
clauses (i) through (xii), inclusive, to the extent attaching to
properties and assets with an aggregate fair value not in excess of,
and securing liabilities not in excess of, $100,000 in the aggregate
at any one time outstanding.

9.02 Consolidation; Merger; Purchase or Sale of Assets; etc.
The Company will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of all or any part
of its property or assets, or enter into any partnerships, joint ventures or
sale-leaseback transactions, or purchase or otherwise acquire (in one or a
series of related transactions) any part of the property or assets (other than
purchases or other acquisitions of inventory, materials and equipment in the
ordinary course of business) of any Person (or agree to do any of the foregoing
at any future time), except that:

(i) Capital Expenditures by the Company shall be
permitted to the extent not in violation of Section 9.08;

(ii) the Company may, in the ordinary course of business,
sell, lease or otherwise dispose of any assets which, in the
reasonable judgment of the Company, have become uneconomic, obsolete
or worn out so long as the aggregate amount of Net Sale Proceeds from
all such sales in any one fiscal year does not exceed $750,000;

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(iii) the Company may lease (as lessee) real or personal
property to the extent permitted by Section 9.04 (so long as such
lease does not create Capitalized Lease Obligations) and the Company
may lease (as lessor) Real Property in accordance with Section
9.01(xi);

(iv) the Company may make sales or other dispositions of
inventory and Cash Equivalents in the ordinary course of business and
the Company may otherwise dispose of inventory by providing samples to
potential customers, vendors and other parties in amounts and at times
and otherwise in the ordinary course of business and consistent with
past practice;

(v) investments may be made to the extent permitted by
Section 9.06;

(vi) sales of receivables as described in, and in
accordance with the provisions of, Section 4.02(A)(j)(iii) shall be
permitted;

(vii) the Company may transfer assets to newly created or
established Subsidiaries in accordance with Section 9.16; and

(viii) the Permitted Filot Transaction shall be permitted.

In the event the Required Banks waive the provisions of this Section 9.02 with
respect to the sale of any Collateral, or any Collateral is sold as permitted
by this Section 9.02, such Collateral shall be sold free and clear of the Liens
created by the Security Documents, and the Administrative Agent and Collateral
Agent shall be authorized to take any actions deemed appropriate in order to
effect the foregoing.

9.03 Dividends. The Company shall not, and shall not permit
any of its Subsidiaries to, authorize, declare or pay any Dividends with
respect to the Company or any of its Subsidiaries, except that (i) any
Subsidiary of the Company may pay Dividends to the Company or any Wholly-Owned
Subsidiary of the Company, and (ii) so long as there shall exist no Default or
Event of Default (both before and after giving effect to the payments thereof),
the Company may make payments with respect to stock option plans and stock
appreciation rights programs of the Company and repurchase options and Common
Stock upon the termination of employment, death, permanent disability or
retirement of its employees, management or consultants, provided, that the
aggregate amount expended by the Company pursuant to this clause (ii) during
the period commencing on the Original Effective Date and ending on the Final
Maturity Date shall not exceed $200,000.

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9.04 Leases. The Company will not permit the aggregate
payments (including, without limitation, any property taxes paid as additional
rent or lease payments) made by the Company and its Subsidiaries on a
consolidated basis under any agreement to rent or lease any real or personal
property (or any extension or renewal thereof) (excluding Capitalized Lease
Obligations) to exceed $500,000 in any fiscal year of the Company.
Notwithstanding anything to the contrary contained in the foregoing, the
payments to be made by the Company pursuant to the Lease Agreement shall not be
taken into account when determining compliance with this Section 9.04.

9.05 Indebtedness. The Company will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:

(i) Indebtedness incurred pursuant to this Agreement and
the other Credit Documents;

(ii) Indebtedness of the Company existing on the
Restatement Effective Date shall be permitted to the extent the same
is listed on Schedule VIII, provided that, no refinancings or renewals
of the Indebtedness except as expressly set forth on Schedule VIII
shall be permitted and, in any event, refinancings and renewals shall
not be in excess of the respective amounts set forth on Schedule VIII
and such refinancing or renewal shall be at customary and market terms
at the time of such refinancing;

(iii) accrued expenses and current trade accounts payable
by the Company and incurred in the ordinary course of business of the
Company;

(iv) Indebtedness of the Company constituting Contingent
Obligations arising pursuant to a guaranty of the obligations of any
employee of the Company, to the extent permitted by Section 9.06(iii);

(v) Indebtedness of the Company evidenced by Capitalized
Lease Obligations to the extent permitted pursuant to Section 9.08 and
Indebtedness secured by Liens permitted under Section 9.01(vi),
provided that (1) no such Indebtedness is incurred prior to the
Company's 1998 fiscal year and (2) for any fiscal year of the Company,
the sum of (a) the aggregate principal amount of such Capitalized
Lease Obligations permitted by this Section 9.05(v) incurred during
such fiscal year plus (b) the aggregate principal amount of all
Indebtedness secured by Liens permitted under Section 9.01(vi)
incurred during such fiscal year shall not exceed $1,500,000.

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(vi) Permitted Capital Expenditure Indebtedness incurred
on or prior to March 31, 1998, provided that in no event shall the
aggregate principal amount of Permitted Capital Expenditure
Indebtedness incurred by the Company on or after the Restatement
Effective Date exceed $10,000,000;

(vii) Indebtedness of the Company under Interest Rate
Protection or Other Hedging Agreements arising in the ordinary course
of business or to the extent required by Section 8.11;

(viii) Indebtedness of the Company arising in connection
with entering into futures or forward purchase contracts in accordance
with Section 9.06(v); and

(ix) Indebtedness of Subsidiaries of the Company to the
Company to the extent permitted by Section 9.06(vi).

9.06 Advances, Investments and Loans. The Company will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
lend money or credit or make advances to any Person, or purchase or acquire any
stock, obligations or securities of, or any other interest in, or make any
capital contribution to, any other Person, or purchase or own a futures
contract or otherwise become liable for the purchase or sale of currency or
other commodities at a future date in the nature of a futures contract or hold
any cash or Cash Equivalents, except that the following shall be permitted:

(i) the Company may acquire and hold accounts receivables
owing to it, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary terms;

(ii) the Company may acquire and hold cash and Cash
Equivalents, provided that during any time that Revolving Loans are
outstanding, the aggregate amount of cash and Cash Equivalents
permitted to be held by the Company shall not exceed $5,000,000 for
any period of five consecutive Business Days, and if at any time the
Company holds cash or Cash Equivalents which exceed $5,000,000 in the
aggregate for any period of five consecutive Business Days, such
excess shall be applied on the first Business Day following the fifth
such consecutive Business Day to repay Revolving Loans in accordance
with Section 4.02(A)(c);

(iii) the Company may (x) make or maintain advances to
employees of the Company in the ordinary course of business, and (y)
guaranty, in the

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ordinary course of business, loans and advances to employees of the
Company, provided that the aggregate principal amount of all such
advances and guaranteed obligations pursuant to this clause 9.06(iii)
shall not exceed $500,000 in the aggregate at any one time outstanding;

(iv) the Company may enter into Interest Rate Protection
or Other Hedging Agreements;

(v) the Company may enter into forward purchase contracts
with suppliers of durum wheat to meet its normal raw material supply
requirements in the ordinary course of business or futures contracts
entered into for delivery of durum wheat in the ordinary course of
business;

(vi) the Company may make loans or advances to, or
investments in, Subsidiaries created or established in accordance with
Section 9.16 so long as the fair market value of the assets loaned,
advanced to, or invested in, all such Subsidiaries, together with the
fair market value of all assets transferred to, all such Subsidiaries
does not exceed $100,000 at any time and provided further that all
such loans and advances shall be evidenced by a promissory note
pledged to the Collateral Agent for the benefit of the Banks pursuant
to the Pledge Agreement and all such investments shall be evidenced by
capital stock of the Subsidiary and shall be pledged to the Collateral
Agent for the benefit of the Banks pursuant to the Pledge Agreement;
and

(vii) the Company may acquire and hold the Equity Financing
Notes.

9.07 Transactions with Affiliates. The Company will not, and
will not permit any of its Subsidiaries to, enter into any transaction or
series of related transactions, whether or not in the ordinary course of
business, with any Affiliate of the Company other than on terms and conditions
substantially as favorable to the Company or such Subsidiary as would be
obtainable by the Company or such Subsidiary at that time in a comparable
arm's-length transaction with a Person other than an Affiliate; provided that
the following shall be permitted: (i) the payment of customary fees to members
of the Board of Directors of the Company, (ii) transactions expressly permitted
by Sections 9.03, 9.06(iii) and 9.06(vi), and (iii) the payment of fees to
Morgan Stanley Group Inc. or its Affiliates from time to time for financial,
consulting and underwriting services provided to the Company so long as such
fees do not exceed the then usual and customary fees of Morgan Stanley Group
Inc. or its Affiliates for similar services.

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9.08 Capital Expenditures. (a) The Company will not, and
will not permit any of its Subsidiaries to, make any Capital Expenditures,
except that the Company may make (x) Capital Expenditures that are Permitted
Capital Expenditures in accordance with Section 9.08(b) and (y) other Capital
Expenditures in aggregate amounts during the fiscal years set forth below, not
in excess of the respective amounts set forth opposite such fiscal year below:

Fiscal Year Amount Per Year
----------- ---------------
1997 $10,000,000
1998 $10,000,000
1999 and thereafter $5,000,000

In addition, if Consolidated EBITDA for any period of four consecutive fiscal
quarters of the Company beginning on or after the first day of the Company's
1998 fiscal year and ended on or prior to the last day of the Company's 1999
fiscal year exceeds $36,000,000, the aggregate amount of Capital Expenditures
(other than Permitted Capital Expenditures) permitted during the fiscal year of
the Company ending on or after the last day of such four fiscal quarter period
shall be increased by an amount equal to $6,500,000; provided, however, that
the maximum aggregate amount of additional Capital Expenditures permitted
pursuant to this sentence shall be $6,500,000. In addition, the amount of
Capital Expenditures permitted during any fiscal year set forth above may be
increased by an amount equal to (x) 25% of the amount of Excess Cash Flow
generated during the period commencing on the first day of the first fiscal
quarter of the Company ended after the Restatement Effective Date (or, if
Consolidated EBITDA for any period of four consecutive fiscal quarters of the
Company beginning on or after the Restatement Effective Date exceeds
$36,000,000, 50% of the amount of Excess Cash Flow generated during the period
commencing on the first day of the first fiscal quarter of such period in which
Consolidated EBITDA exceeded 36,000,000) and ending on the last day of the
fiscal quarter of the Company ended immediately preceding the date on which the
amount of permitted Capital Expenditures is being determined less (y) the
aggregate amount of Capital Expenditures (other than Permitted Capital
Expenditures) previously made in excess of the otherwise applicable permitted
amount as set forth above as a result of the application of this sentence. To
the extent that the amount of Capital Expenditures (other than Permitted
Capital Expenditures) made by the Company and its Subsidiaries during any
fiscal year of the Company is less than the amount permitted to be spent in
accordance with the preceding sentences of this Section 9.08(a), such
unutilized amount may be carried forward and utilized to make Capital
Expenditures (other than Permitted Capital Expenditures) in excess of the
amount permitted above in any subsequent fiscal year; provided that the total
amount carried forward to any fiscal year pursuant to this sentence may not
exceed

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$20,000,000. Notwithstanding anything to the contrary contained in this
Section 9.08(a), the aggregate amount of Capital Expenditures (other than
Permitted Capital Expenditures) made during any fiscal year shall not exceed
$25,000,000.

(b) The Company will not, and will not permit any of its
Subsidiaries to, make any Permitted Capital Expenditures, except that the
Company may make Permitted Capital Expenditures so long as the aggregate amount
of such Permitted Capital Expenditures shall not exceed $60,000,000.

9.09 Current Ratio. The Company will not permit the ratio of
Consolidated Current Assets to Consolidated Current Liabilities at the end of
any fiscal quarter ending after the Restatement Effective Date to be less than
1.75 to 1.0.

9.10 Cash Flow Coverage Ratio. The Company will not permit
the ratio of (i) Consolidated EBITDA to (ii) Consolidated Interest Expense, for
any Test Period ended on the last day of a fiscal quarter set forth below to be
less than the ratio set forth opposite such fiscal quarter:

Fiscal Quarter
Ended In Ratio
- -------------- -----

June 1997 1.70:1.00
September 1997 1.70:1.00

December 1997 1.70:1.00
March 1998 1.70:1.00
June 1998 1.85:1.00
September 1998 2.00:1.00

December 1998 2.50:1.00
March 1999 2.50:1.00
June 1999 2.50:1.00
September 1999 2.50:1.00

December 1999 2.75:1.00
March 2000 2.75:1.00
June 2000 2.75:1.00
September 2000 2.75:1.00

December 2000 3.00:1.00
and the last day of

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each fiscal quarter
thereafter

9.11 Minimum Consolidated Net Worth. The Company will not
permit its Consolidated Net Worth at any time during any fiscal quarter to be
less than an amount equal to the greater of (i) $35,500,000 and (ii) 85% of the
highest Consolidated Net Worth theretofore having existed during the period
from and including the Restatement Effective Date to and including the last day
of the fiscal month for which financial statements are required to have been
delivered in accordance with Section 8.01; provided, that in no event shall the
Company be required to have Consolidated Net Worth in excess of $75,000,000;
provided further that for the purposes of this Section, Consolidated Net Worth
shall be increased by the amount of the one-time non-cash write-off (not to
exceed $2,000,000) of (x) capitalized start-up costs associated with the
expansion of the South Carolina Facility and/or the Missouri Facility and (y)
fixed marketing amortization associated with capitalized slotting and marketing
costs.

9.12 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and
Certain Other Agreements; etc. The Company will not, and will not permit any
of its Subsidiaries to, (i) make (or give any notice in respect of) any
voluntary or optional payment or prepayment on or redemption (including
pursuant to any change of control provision) or acquisition for value of
(including, without limitation, by way of depositing with the trustee with
respect thereto money or securities before due for the purpose of paying when
due) any Existing Obligations or, after the incurrence thereof, any Permitted
Capital Expenditure Indebtedness, (ii) amend or modify, or permit the amendment
or modification of, any provision of the Existing Obligations (except as
provided in Section 9.05(ii)), the Equity Financing Notes, the Permitted
Capital Expenditure Indebtedness, any Permitted Filot Transaction Document or
any agreement (including, without limitation, any purchase agreement,
indenture, loan agreement or security agreement) relating to any of the
foregoing, (iii) amend, modify or change (x) its Certificate of Incorporation
(including, without limitation, by the filing or modification of any
certificate of designation) or By-Laws other than (A) any amendment increasing
the authorized number of shares of common equity which may be issued by such
Person, to the extent the issuance of such equity is permitted by this
Agreement and (B) any other amendment, modification, or change which does not
authorize redeemable common stock or any preferred stock and which would not
adversely affect any Bank, or (y) any agreement (other than any agreement with
respect to which amendments, modifications or changes are covered by clause
(vii) below) entered into by it with respect to its capital stock, or enter
into any new agreement with respect to its capital stock except agreements
which are not adverse to any Bank, do not violate or breach,

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and are not inconsistent with, any of the terms of this Agreement and which do
not, and will not, involve the payment by the Company of any amounts and do not
result in the Company incurring then or at any time in the future any liability
or monetary obligation, (iv) amend, modify or change, terminate or enter into
any new Shareholders' Agreement except amendments, modifications or changes
which are not adverse to any Bank, do not violate or breach, and are not
inconsistent with, any of the terms of this Agreement and which do not, and
will not, involve the payment by the Company of any amounts and do not result
in the Company incurring then or at any time in the future any liability or
monetary obligation, (v) enter into any Tax Sharing Agreement, (vi) amend,
modify, change or terminate any material provision of the CPC Contract or (vii)
enter into any new Employee Benefit Plan, Employment Agreement or Management
Agreement or amend, modify or change any Employee Benefit Plan, Employment
Agreement or Management Agreement, except in the case of this clause (vii) if
the aggregate costs to the Company and its Subsidiaries as a result of such
amendments, modifications, changes and/or new agreements are not reasonably
likely to have a Material Adverse Effect.

9.13 Limitation on Certain Restrictions on Subsidiaries. The
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Company or any Subsidiary
of the Company, or pay any Indebtedness owed to the Company or a Subsidiary of
the Company, (b) make loans or advances to the Company or any of the Company's
Subsidiaries or (c) transfer any of its properties or assets to the Company
(other than in the case of this clause (c) restrictions existing as a result of
Permitted Liens on such properties or assets), except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) this
Agreement and the other Credit Documents and (iii) customary provisions
restricting subletting or assignment of any lease governing a leasehold
interest of the Company or a Subsidiary of the Company.

9.14 Limitation on Issuance of Capital Stock. (a) The
Company shall not (except pursuant to Section 9.16) permit any of its
Subsidiaries to issue any capital stock (including by way of sales of treasury
stock) or any options or warrants to purchase, or securities convertible into,
capital stock, except (i) for transfers and replacements of then outstanding
shares of capital stock and (ii) for stock splits, stock dividends and similar
issuances which do not decrease the percentage ownership of the Company in any
class of the capital stock of such Subsidiary.

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(b) The Company shall not issue any capital stock, except for
issuances of Common Stock where after giving effect to such issuance, no Event
of Default will exist under Section 10.09.

9.15 Business. The Company will not engage (directly or
indirectly) in any business other than the business in which it is engaged on
the Restatement Effective Date and any other reasonably related businesses.

9.16 Limitation on Creation of Subsidiaries. The Company
shall not, and shall not permit any of its Subsidiaries to, establish, create
or acquire any Subsidiary, except the Company may establish or create
Subsidiaries and transfer assets to such newly established or created
Subsidiaries so long as (i) (x) the aggregate fair market value of all assets
transferred to all such Subsidiaries at the time of such transfer does not
exceed $100,000 and (y) the aggregate fair market value of all assets held by
all such Subsidiaries at any time does not exceed $100,000 and (ii) upon the
creation or establishment of any such new Subsidiary such Subsidiary executes
the Additional Security Documents and guaranty required to be executed by it in
accordance with Section 8.13.

Section 10. Events of Default. Upon the occurrence of any of
the following specified events (each an "Event of Default"):

10.01 Payments. The Company shall (i) default in the payment
when due of any principal of any Loan or any Note or any Unpaid Drawing, or
(ii) default, and such default shall continue unremedied for two or more
Business Days, in the payment when due of any interest on any Loan, Note or
Unpaid Drawing or of any Fee or of other amounts owing hereunder or under any
Credit Document; or

10.02 Representations; etc. Any representation, warranty or
statement made by the Company or any of its Subsidiaries herein or in any other
Credit Document or in any certificate delivered pursuant hereto or thereto
shall prove to be untrue in any material respect on the date as of which made
or deemed made; or

10.03 Covenants. The Company shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 8.01(g)(i), 8.08, 8.11, 8.13, 8.14, 8.15 or Section 9 or (ii) default
in the due performance or observance by it of any other term, covenant or
agreement contained in this Agreement and such default shall continue
unremedied for a period of thirty (30) days after written notice to the Company
by the Administrative Agent or any Bank; or

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10.04 Default Under Other Agreements. The Company or any
Subsidiary of the Company shall (i) default in any payment of any Indebtedness
(other than the Notes) beyond the period of grace (not to exceed thirty (30)
days), if any, provided in the instrument or agreement under which such
Indebtedness was created or (ii) default in the observance or performance of
any agreement or condition relating to any Indebtedness (other than the Notes
or contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause (determined without regard to whether any notice is
required), any such Indebtedness to become due prior to its stated maturity, or
(iii) any Indebtedness (other than the Notes) of the Company or any Subsidiary
of the Company shall be declared to be due and payable, or required by its
terms to be prepaid other than by a regularly scheduled required prepayment,
prior to the stated maturity thereof, provided that it shall not be a Default
or Event of Default under this Section 10.04 unless the aggregate principal
amount of all Indebtedness as described in preceding clauses (i) through (iii),
inclusive, is at least $500,000; or

10.05 Bankruptcy; etc. The Company or any Subsidiary of the
Company shall commence a voluntary case concerning itself under Title 11 of the
United States Code entitled "Bankruptcy," as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Company or any Subsidiary of the Company, and the petition is not
controverted within ten (10) days, or is not dismissed or discharged within
sixty (60) days, after commencement of the case; or a custodian (as defined in
the Bankruptcy Code) is appointed for, or takes charge of, all or substantially
all of the property of the Company or any Subsidiary of the Company, or the
Company or any Subsidiary of the Company commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company or any Subsidiary of
the Company, or there is commenced against the Company or any Subsidiary of the
Company any such proceeding which remains undismissed or undischarged for a
period of sixty (60) days, or the Company or any Subsidiary of the Company is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company or any
Subsidiary of the Company suffers any appointment of any custodian or the like
for it or any substantial part of its property to continue undischarged or
unstayed for a period of sixty (60) days; or the Company or any Subsidiary of
the Company makes a general assignment for the benefit of creditors; or any
corporate action is taken by the Company or any Subsidiary of the Company for
the purpose of effecting any of the foregoing; or

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10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof or a waiver of such
standard or extension of any amortization period is sought or granted under
Section 412 of the Code, any Plan is, shall have been or is likely to be
terminated or the subject of termination proceedings under ERISA, any Plan
shall have an Unfunded Current Liability, the Company or any Subsidiary of the
Company or any ERISA Affiliate has incurred or is likely to incur a liability
to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204, or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or
4980 of the Code, or the Company or any Subsidiary of the Company has incurred
or is likely to incur liabilities pursuant to one or more employee welfare
benefit plans (as defined in Section 3(1) of ERISA) which provide benefits to
retired employees (other than as required by Section 601 of ERISA) or employee
pension benefit plans (as defined in Section 3(2) of ERISA); (b) there shall
result from any such event or events the imposition of a lien, the granting of
a security interest, or a liability or a material risk of incurring a
liability; and (c) which lien, security interest or liability, in the opinion
of the Required Banks, will have a material adverse effect upon the business,
operations, condition (financial or otherwise) or prospects of the Company or
of any Subsidiary; or

10.07 Security Documents. At any time after the execution
and delivery thereof, any of the Security Documents shall cease to be in full
force and effect or shall cease to give the Collateral Agent for the benefit of
the Secured Creditors the Liens, rights, powers and privileges purported to be
created thereby (including, without limitation, a perfected security interest
in, and Lien on, all of the Collateral), in favor of the Collateral Agent,
superior to and prior to the rights of all third Persons (except as permitted
by Section 7.11), and subject to no other Liens (except as permitted by Section
7.11), or the Company shall default in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed pursuant to
any of the Security Documents and such default shall continue beyond any grace
period specifically applicable thereto pursuant to the terms of such Security
Document; or

10.08 Judgments. One or more judgments or decrees shall be
entered against the Company or any Subsidiary of the Company involving in the
aggregate for the Company and its Subsidiaries a liability (to the extent not
paid or covered by a reputable insurance company which has accepted liability
in writing) of $500,000 or more and all such judgments or decrees shall not be
vacated, discharged or stayed or bonded pending appeal for any period of thirty
(30) consecutive days; or

10.09 Change of Control. A Change of Control shall occur;

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then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Administrative Agent, upon the written
request of the Required Banks, shall by written notice to the Company, take any
or all of the following actions, without prejudice to the rights of the
Administrative Agent, the Collateral Agent, any Bank or the holder of any Note
to enforce its claims against the Company (provided, that, if an Event of
Default specified in Section 10.05 shall occur with respect to the Company, the
result which would occur upon the giving of written notice by the
Administrative Agent to the Company as specified in clauses (i) and (ii) below
shall occur automatically without the giving of any such notice): (i) declare
the Total Commitments terminated, whereupon all Commitments of each Bank shall
forthwith terminate immediately and any RL Commitment Commission, D Term Loan
Commitment Commission and other Fees shall forthwith become due and payable
without any other notice of any kind; (ii) declare the principal of and any
accrued interest in respect of all Loans and the Notes and all Obligations
owing hereunder and thereunder to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company; (iii) terminate any
Letter of Credit which may be terminated in accordance with its terms; (iv)
direct the Company to pay (and the Company agrees that upon receipt of such
notice, or upon the occurrence of an Event of Default specified in Section
10.05 with respect to the Company it will pay) to the Collateral Agent at the
Payment Office such additional amount of cash, to be held as security by the
Collateral Agent, as is equal to the aggregate Stated Amount of all Letters of
Credit issued for the account of the Company and then outstanding; and (v)
enforce, as Collateral Agent, all of the Liens and security interests created
pursuant to the Security Documents.

Section 11. Definitions and Accounting Terms.

11.01 Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

"A Facility Percentage" shall mean a fraction (expressed as a
percentage) the numerator of which is the A Facility Percentage Amount at such
time and the denominator of which is the sum of (w) the A Facility Percentage
Amount at such time plus (x) the B Facility Percentage Amount at such time plus
(y) the C Facility Percentage Amount at such time plus (z) the D Facility
Percentage Amount at such time.

"A Facility Percentage Amount" shall mean, at any time, the
aggregate principal amount of all outstanding A Term Loans at such time.

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"A Term Loan" shall have the meaning provided in Section
1.01(a).

"A Term Loan Commitment" shall mean, with respect to each
Bank, the amount set forth opposite such Bank's name in Schedule I hereto
directly below the column entitled "A Term Loan Commitment," as the same may be
(x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10
or (y) adjusted from time to time as a result of assignments to or from such
Bank pursuant to Section 1.12 and/or 13.04.

"A Term Loan Maturity Date" shall mean the last Business Day
occurring in February 2000.

"A Term Loan Scheduled Repayment" shall have the meaning
provided in Section 4.02(A)(d).

"A Term Loan Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(A)(d).

"A Term Note" shall have the meaning provided in Section
1.05(a).

"Additional Collateral" shall mean all property (whether real
or personal) in which security interests are granted (or purport to be granted)
(and continue to be in effect at the time of determination) pursuant to Section
8.13.

"Additional Mortgage" shall mean and include each of a
mortgage, deed of trust or similar security document with respect to Real
Property executed and delivered pursuant to Section 8.13.

"Additional Mortgaged Property" shall have the meaning
provided in Section 8.13.

"Additional Security Documents" shall mean all mortgages,
pledge agreements, security agreements and other security documents entered
into pursuant to Section 8.13 with respect to Additional Collateral.

"Adjusted Certificate of Deposit Rate" shall mean, on any day,
the sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by
dividing (x) the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market as
published in the most recent Federal Reserve System publication entitled
"Select Interest Rates," published weekly on Form H.15 as of the date hereof,
or if such publication or a substitute containing the

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foregoing rate information shall not be published by the Federal Reserve System
for any week, the weekly average offering rate determined by the Administrative
Agent on the basis of quotations for such certificates received by it from
three certificate of deposit dealers in New York of recognized standing or, if
such quotations are unavailable, then on the basis of other sources reasonably
selected by the Agent, by (y) a percentage equal to 100% minus the stated
maximum rate of all reserve requirements as specified in Regulation D
applicable on such day to a three-month certificate of deposit of a member bank
of the Federal Reserve System in excess of $100,000 (including, without
limitation, any marginal, emergency, supplemental, special or other reserves),
plus (2) the then daily net annual assessment rate as estimated by the
Administrative Agent for determining the current annual assessment payable by
the Administrative Agent to the Federal Deposit Insurance Corporation for
insuring three-month certificates of deposit.

"Adjusted Consolidated Net Income" for any period shall mean
Consolidated Net Income for such period (i) plus the sum of the amount of all
net non-cash charges (including, without limitation, depreciation, amortization
(including fixed marketing amortization associated with capitalized slotting
and marketing costs), deferred tax expense, non-cash interest expense and other
non-cash charges) included in arriving at Consolidated Net Income for such
period, (ii) less the sum of the amount of all net non-cash income, gains and
credits (exclusive of, in the case of all non-cash items, items reflected in
Adjusted Working Capital) included in arriving at Consolidated Net Income for
such period and (iii) less the amount of cash proceeds received from sales of
assets included in arriving at Consolidated Net Income for such period to the
extent that such proceeds were mandatorily applied to repay Loans or cash
collateralize Letters of Credit in accordance with Section 4.02(A)(a).

"Adjusted Working Capital" shall mean Consolidated Current
Assets (excluding cash and Cash Equivalents and excluding the Total Unutilized
Revolving Loan Commitment) minus Consolidated Current Liabilities.

"Administrative Agent" shall mean Bankers Trust Company, in
its capacity as Administrative Agent for the Banks hereunder, and shall include
any successor to the Administrative Agent appointed pursuant to Section 12.09.

"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with, such Person; provided, however, that for purposes
of Section 9.07, an Affiliate of the Company shall include any Person that
directly or indirectly owns more than 5% of any class of the capital stock of
the Company and any officer or director of the Company or any such Person. A
Person shall be deemed to control another Person if such

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Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise.

"Agent" shall mean, for the purposes of Section 13.12 only,
the Administrative Agent.

"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.

"Applicable Margin" shall mean a percentage per annum equal to
(A) in the case of (i) A Term Loans and Revolving Loans which are maintained as
Base Rate Loans, 2.00% and (ii) A Term Loans and Revolving Loans which are
maintained as Eurodollar Loans, 3.00%, (B) in the case of (i) B Term Loans
which are maintained as Base Rate Loans, 2.25% and (ii) B Term Loans which are
maintained as Eurodollar Loans, 3.25% and (C) in the case of (i) C Term Loans
and D Term Loans which are maintained as Base Rate Loans, 2.75% and (ii) C Term
Loans and D Term Loans which are maintained as Eurodollar Loans, 3.75%.

"Approved Fund" shall mean, with respect to any Bank that is a
fund that invests in bank loans (the "Relevant Bank"), any other fund that
invests in bank loans that is managed by the investment manager, or an
Affiliate of such manager, that manages the Relevant Bank.

"Available Revolving Loan Commitment" for any Bank shall mean,
at any time, the Revolving Loan Commitment of such Bank as then in effect less
such Bank's RL Percentage of the amount of the Blocked Commitment, if any, at
such time.

"B Facility Percentage" shall mean a fraction (expressed as a
percentage) the numerator of which is the B Facility Percentage Amount at such
time and the denominator of which is the sum of (w) the A Facility Percentage
Amount at such time plus (x) the B Facility Percentage Amount at such time plus
(y) the C Facility Percentage Amount at such time plus (z) the D Facility
Percentage Amount at such time.

"B Facility Percentage Amount" shall mean, at any time, the
aggregate principal amount of all outstanding B Term Loans at such time.

"B Term Loan" shall have the meaning provided in Section
1.01(b).

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"B Term Loan Commitment" shall mean, with respect to each
Bank, the amount set forth opposite such Bank's name in Schedule I hereto
directly below the column entitled "B Term Loan Commitment," as the same may be
(x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10
or (y) adjusted from time to time as a result of assignments to or from such
Bank pursuant to Section 1.12 and/or 13.04.

"B Term Loan Maturity Date" shall mean the last Business Day
occurring in February 2002.

"B Term Loan Scheduled Repayment" shall have the meaning
provided in Section 4.02(A)(e).

"B Term Loan Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(A)(e).

"B Term Note" shall have the meaning provided in Section
1.05(a).

"Bank" shall mean each financial institution listed on
Schedule I, as well as any institution which becomes a "Bank" hereunder
pursuant to Section 1.12 and/or 13.04.

"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing or (ii) a
Bank having notified in writing the Company and/or the Administrative Agent
that it does not intend to comply with its obligations under this Agreement, in
either case as a result of any takeover of such Bank by any regulatory
authority or agency.

"Bankruptcy Code" shall have the meaning provided in Section
10.05.

"Bankruptcy Default" shall mean any Default or Event of
Default existing with respect to the Company pursuant to Section 10.05.

"Base Rate" shall mean the higher of (i) 1/2 of 1% in excess
of the Adjusted Certificate of Deposit Rate and (ii) the Prime Lending Rate.

"Base Rate Loan" shall mean any Loan designated or deemed
designated as such by the Company at the time of the incurrence thereof or
conversion thereto.

"Blocked Commitment" shall mean (i) for the period from and
including the Restatement Effective Date through but not including the earlier
of (x) the date on

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which the condition contained in Section 5A.04 is satisfied and (y) the one
month anniversary of the Restatement Effective Date, $10 million and (ii) for
the period thereafter, $0.

"Borrowing" shall mean the borrowing of one Type of Loan of a
single Tranche from all the Banks having Commitments with respect to such
Tranche on a given date (or resulting from a conversion or conversions on such
date) having in the case of Eurodollar Loans the same Interest Period, provided
that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered
part of the related Borrowing of Eurodollar Loans.

"Borrowing Base" shall mean as at any date on which the amount
thereof is being determined, an amount equal to the sum of (i) 85% of Eligible
Receivables, plus (ii) an amount equal to the lesser of (A) (x) 75% of Eligible
Inventory which constitutes finished goods plus (y) 65% of Eligible Inventory
which constitutes raw materials plus (z) an amount equal to the lesser of (I)
50% of Eligible Inventory which constitutes unprocessed packaging materials and
(II) $1,500,000, and (B) the lesser of (1) $17,000,000 and (2) 10% of
Consolidated Revenue for the fiscal quarter then last ended multiplied by four,
each as determined from the Borrowing Base Certificate most recently delivered
pursuant to Section 8.01(k).

"Borrowing Base Certificate" shall have the meaning provided
in Section 8.01(k).

"Borrowing Base Deficiency" shall mean, at any time, the
amount, if any, by which the sum of the aggregate principal amount of
outstanding Revolving Loans and the Letter of Credit Outstandings at such time
exceeds the Borrowing Base then in effect.

"BTCo" shall mean Bankers Trust Company in its individual
capacity.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day which
shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (i) above and which is also a day
for trading by and between banks in the New York interbank Eurodollar market.

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"C Facility Percentage" shall mean a fraction (expressed as a
percentage) the numerator of which is the C Facility Percentage Amount at such
time and the denominator of which is the sum of (w) the A Facility Percentage
Amount at such time plus (x) the B Facility Percentage Amount at such time plus
(y) the C Facility Percentage Amount at such time plus (z) the D Facility
Percentage Amount at such time.

"C Facility Percentage Amount" shall mean, at any time, the
aggregate principal amount of all outstanding C Term Loans at such time.

"C Term Loan" shall have the meaning provided in Section
1.01(c).

"C Term Loan Commitment" shall mean, with respect to each
Bank, the amount set forth opposite such Bank's name in Schedule I hereto
directly below the column entitled "C Term Loan Commitment," as the same may be
(x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10
or (y) adjusted from time to time as a result of assignments to or from such
Bank pursuant to Section 1.12 and/or 13.04.

"C Term Loan Maturity Date" shall mean the last Business Day
occurring in February 2004.

"C Term Loan Scheduled Repayment" shall have the meaning
provided in Section 4.02(A)(f).

"C Term Loan Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(A)(f).

"C Term Note" shall have the meaning provided in Section
1.05(a).

"Capital Expenditure Plan" shall have the meaning provided in
Section 5.08.

"Capital Expenditures" shall mean, with respect to any Person,
all expenditures by such Person which should be capitalized in accordance with
generally accepted accounting principles, including all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with
generally accepted accounting principles) and amounts representing capitalized
slotting and other marketing costs (whether or not such amounts should be
capital expenditures in accordance with generally accepted accounting
principles) and, without duplication, the amount of

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Capitalized Lease Obligations incurred by such Person, provided that Capital
Expenditures shall not include interest capitalized in accordance with
generally accepted accounting principles.

"Capitalized Lease Obligations" of any Person shall mean all
rental obligations which, under generally accepted accounting principles, are
or will be required to be capitalized on the books of such Person, in each case
taken at the amount thereof accounted for as indebtedness in accordance with
such principles.

"Cash Equivalents" shall mean, as to any Person, (i)
securities issued or directly and fully guaranteed or insured by the United
States or any agency or instrumentality thereof (provided that the full faith
and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (ii) time
deposits and certificates of deposit of (x) any Bank or (y) any other
commercial bank having, or which is the principal banking subsidiary of a bank
holding company having, a long-term unsecured debt rating of at least "A" or
the equivalent thereof from Standard & Poor's Corporation ("S&P") or "A2" or
the equivalent thereof from Moody's Investors Service, Inc. ("Moody's") with
maturities of not more than six months from the date of acquisition by such
Person, (iii) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (ii) above,
(iv) commercial paper issued by any Person incorporated in the United States
rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the
equivalent thereof by Moody's and in each case maturing not more than six
months after the date of acquisition by such Person and (v) investments in
money market funds substantially all of whose assets are comprised of
securities of the types described in clauses (i) through (iv) above.

"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time
to time, 42 U.S.C. Section 9601 et seq.

"Change of Control" shall mean and include the occurrence of
either of the following events: MSLEF II shall cease to have record and
beneficial ownership of at least a majority of the Company's outstanding voting
stock or shall cease to have the power (whether or not exercised) to elect a
majority of the Company's Board of Directors.

"Class A Common Stock" shall mean the Class A Common Stock of
the Company, $0.01 par value per share.

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"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder. Section references to the Code are to the Code, as in
effect at the date of this Agreement, and to any subsequent provisions of the
Code, amendatory thereof, supplemental thereto or substituted therefor.

"Collateral" shall mean all property (whether real or
personal) with respect to which any security interests have been granted (or
purport to be granted) (and continue to be in effect at the time of
determination) pursuant to any Security Document, including, without
limitation, all Pledge Agreement Collateral, all Security Agreement Collateral,
the Mortgaged Properties, all Additional Collateral, the Additional Mortgaged
Properties and all cash and Cash Equivalents delivered at any time as
collateral pursuant to this Agreement or any other Credit Document.

"Collateral Agent" shall mean the Administrative Agent acting
as collateral agent (as well as any sub-agent or trustee appointed by the
Collateral Agent) for the Secured Creditors pursuant to the Security Documents.

"Collective Bargaining Agreements" shall have the meaning
provided in Section 5.07.

"Commitment" shall mean, with respect to each Bank, such
Bank's A Term Loan Commitment, B Term Loan Commitment, C Term Loan Commitment,
D Term Loan Commitment or Revolving Loan Commitment.

"Common Stock" shall mean the common stock of the Company, no
par value.

"Company" shall have the meaning provided in the first paragraph of this
Agreement.

"Consolidated Current Assets" shall mean, at any time, the
consolidated current assets of the Company and its Subsidiaries at such time
plus the Total Unutilized Revolving Loan Commitment.

"Consolidated Current Liabilities" shall mean, at any time,
the consolidated current liabilities of the Company and its Subsidiaries at
such time, but excluding the current portion of any long-term Indebtedness and
any Revolving Loans which would otherwise be included therein.

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"Consolidated EBITDA" shall mean, for any period, the
Consolidated Net Income of the Company and its Subsidiaries, before interest
income, Consolidated Interest Expense and provision for taxes and without
giving effect to (x) any extraordinary gains or gains from sales of assets
other than inventory sold in the ordinary course of business (determined after
taking into account losses from sales of such assets) and (y) the write-off of
deferred debt issuance costs (including, without limitation, all legal fees,
financing fees and all other costs and expenses incurred in connection with any
amendment to the Existing Credit Agreement and any amendment to this Agreement)
and adjusted by adding thereto the amount of all amortization of intangibles
and depreciation and other non-cash charges related to stock options and
similar employee benefit plans that were deducted in arriving at Consolidated
Net Income for such period.

"Consolidated Interest Expense" shall mean, for any period,
the total consolidated interest expense of the Company and its Subsidiaries for
such period (calculated without regard to any limitations on the payment
thereof but excluding amortization of all deferred debt issuance costs
(including, without limitation, all legal fees, financing fees and all other
costs and expenses incurred in connection with any amendment to the Existing
Credit Agreement and any amendment to this Agreement)), including, but not
limited to, interest capitalized in accordance with generally accepted
accounting principles, plus, without duplication, that portion of Capitalized
Lease Obligations of the Company and its Subsidiaries representing the interest
factor for such period.

"Consolidated Net Income" shall mean, for any period, the net
after-tax income of the Company and its Subsidiaries for such period determined
on a consolidated basis.

"Consolidated Net Worth" shall mean the net worth of the
Company and its Subsidiaries determined on a consolidated basis.

"Consolidated Revenue" shall mean, for any period, the net
revenue of the Company and its Subsidiaries determined on a consolidated basis.

"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of any such primary obligation

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or (y) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii)
to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (iv) otherwise to assure
or hold harmless the holder of such primary obligation against loss in respect
thereof; provided, however, that the term Contingent Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.

"CPC" shall mean CPC International Inc., a Delaware
corporation.

"CPC Contract" shall mean the Manufacturing and Distribution
Agreement dated April 15, 1997 between CPC and the Company.

"Credit Documents" shall mean this Agreement and, after the
execution and delivery thereof, each Note, each Notice of Borrowing, each
Notice of Conversion, each Letter of Credit, each Letter of Credit Request and
each Security Document.

"Credit Event" shall mean the making of any Loan and the
issuance of any Letter of Credit.

"CVC" shall mean Citicorp Venture Capital, Ltd., a New York
corporation.

"D Facility Percentage" shall mean a fraction (expressed as a
percentage) the numerator of which is the D Facility Percentage Amount at such
time and the denominator of which is the sum of (w) the A Facility Percentage
Amount at such time plus (x) the B Facility Percentage Amount at such time plus
(y) the C Facility Percentage Amount at such time plus (z) the D Facility
Percentage Amount at such time.

"D Facility Percentage Amount" shall mean, at any time, the
aggregate principal amount of all outstanding D Term Loans at such time.

"D Term Loan" shall have the meaning provided in Section
1.01(d).

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"D Term Loan Certificate" shall have the meaning provided in
Section 5A.02.

"D Term Loan Commitment" shall mean, with respect to each
Bank, the amount set forth opposite such Bank's name in Schedule I hereto
directly below the column entitled "D Term Loan Commitment," as the same may be
(x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10
or (y) adjusted from time to time as a result of assignments to or from such
Bank pursuant to Section 1.12 and/or 13.04.

"D Term Loan Commitment Commission" shall have the meaning
provided in Section 3.01(b).

"D Term Loan Maturity Date" shall mean the last Business Day
occurring in February 2004.

"D Term Loan Scheduled Repayment" shall have the meaning
provided in Section 4.02(A)(g).

"D Term Loan Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(A)(g).

"D Term Loan Termination Date" shall mean March 31, 1998.

"D Term Note" shall have the meaning provided in Section
1.05(a).

"Debt Agreements" shall have the meaning provided in Section
5.07.

"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.

"Deferred Loans" shall have the meaning provided in Section
5.03.

"Dividend" with respect to any Person shall mean that such
Person has declared or paid a dividend or returned any equity capital to its
stockholders or authorized or made any other distribution, payment or delivery
of property (other than common stock of such Person) or cash to its
stockholders as such, or redeemed, retired, purchased or otherwise acquired,
directly or indirectly, for a consideration any shares of any class of its
capital stock outstanding on or after the Restatement Effective Date (or any
options or warrants issued by such Person with respect to its capital stock),
or set aside any funds for any of the foregoing purposes, or shall have
permitted any of

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its Subsidiaries to purchase or otherwise acquire for a consideration any
shares of any class of the capital stock of such Person outstanding on or after
the Restatement Effective Date (or any options or warrants issued by such
Person with respect to its capital stock). Without limiting the foregoing,
"Dividends" with respect to any Person shall also include all payments made or
required to be made by such Person with respect to any stock appreciation
rights, plans, equity incentive or achievement plans or any similar plans or
setting aside of any funds for the foregoing purposes.

"Documents" shall mean the Credit Documents, the CPC Contract
and each of the other agreements, instruments and other documents executed and
delivered in connection with the transactions contemplated hereby on the
Restatement Effective Date.

"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.

"Drawing" shall have the meaning provided in Section 2.05(b).

"Eligible Inventory" shall mean the gross dollar value (valued
at the lower of cost or market value) of the inventory of the Company and its
Subsidiaries which conform to the representations and warranties contained in
the Security Agreement and which inventory is located in the United States and
constitutes raw materials, unprocessed packaging materials or finished goods
and which is not, in the Company's good faith opinion consistent with past
practices, excess, obsolete or unmerchantable, less (i) any supplies (other
than raw materials), spare parts, goods returned or rejected (except to the
extent that such returned or rejected goods continue to conform to the
representations and warranties contained in the Security Agreement and continue
to be acceptable to the Collateral Agent in its reasonable judgment) by
customers and goods returned to suppliers, (ii) any advance payments made by
customers with respect to inventory of the Company and its Subsidiaries, (iii)
inventory subject to any Lien other than the Liens created under the Security
Documents, (iv) any market reserves maintained by the Company and its
Subsidiaries and (v) any reserves required by the Collateral Agent in its
reasonable judgment for special orders of goods, market value declines and bill
and hold (deferred shipment) sales.

"Eligible Receivables" shall mean the total face amount of the
receivables of the Company and its Subsidiaries which conform to the
representations and warranties contained in the Security Agreement (including,
without limitation, that the Collateral Agent shall have and maintain a first
priority perfected security interest in all such receivables) less any returns,
discounts, claims, credit and allowances of any nature (whether issued, owing,
granted or outstanding) and less reserves for any other

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matter affecting the creditworthiness of account debtors owing the receivables
and excluding (i) bill and hold (deferred shipment) transactions, (ii)
contracts or sales to any Affiliate (except companies which are Affiliates of
the Company solely because MSLEF II has an ownership interest in such company
so long as such contracts or sales are on terms and conditions substantially as
favorable to the Company or any of its Subsidiaries as would be obtainable by
the Company or such Subsidiary at that time in a comparable arm's-length
transaction with a Person other than an Affiliate), (iii) all receivables which
have not been paid in full within 60 days of the due date thereof or which have
been disputed by the account debtor and (iv) sales to account debtors outside
the United States and Canada.

"Eligible Transferee" shall mean and include a commercial
bank, financial institution, other "accredited investor" (as defined in
Regulation D of the Securities Act) or a "qualified institutional buyer" as
defined in Rule 144A of the Securities Act or an Approved Fund.

"Employee Benefit Plans" shall have the meaning provided in
Section 5.07.

"Employment Agreements" means the Employment Agreement dated
as of October 30, 1995, between the Company and Timothy S. Webster, and the
Employment Agreement dated as of October 30, 1992 between the Company and
Norman F. Abreo.

"Endorsements" shall have the meaning provided in Section
5.11.

"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, directives, demand letters,
claims, liens, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law or any permit issued,
or any approval given, under any such Environmental Law (hereafter, "Claims"),
including, without limitation, (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and (b)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting
from Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.

"Environmental Law" means any federal, state or local statute,
law, rule, regulation, ordinance, code, guideline, written policy and rule of
common law now or hereafter in effect and in each case as amended, and any
judicial or administrative

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interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C.
Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300(f)
et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.;
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 et
seq., and any state and local counterparts or equivalents thereof.

"Equity Financing" shall have the meaning provided in Section
5.02.

"Equity Financing Documents" shall have the meaning provided
in Section 5.02.

"Equity Financing Notes" shall mean one or more promissory
notes in an aggregate principal amount of not less than $200,000 issued by
certain members of management of the Company to the Company as consideration
for common stock of the Company so long as all of the terms and conditions of
each such promissory note are in form and substance satisfactory to the
Administrative Agent.

"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement, and to any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or substituted therefor.

"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Company or any of its
Subsidiaries would be deemed to be a "single employer" within the meaning of
Section 414(b), (c), (m) or (o) of the Code.

"Eurodollar Loan" shall mean each Loan designated as such by
the Company at the time of the incurrence thereof or conversion thereto.

"Event of Default" shall have the meaning provided in Section
10.

"Excess Cash Flow" shall mean, for any period, the remainder
of (i) the sum of (a) Adjusted Consolidated Net Income, less interest
capitalized in accordance with generally accepted accounting principles, for
such period and (b) the decrease, if any, in Adjusted Working Capital from the
first day to the last day of such period, minus (ii) the sum of (a) the amount
of cash consideration paid by the Company and

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its Subsidiaries in respect of Capital Expenditures (to the extent not financed
with Indebtedness, but not in excess of the amounts permitted pursuant to
Section 9.08 and without deducting the Capital Expenditures made pursuant to
the third to last sentence of Section 9.08(a)) during such period, (b) the
amount of permanent principal payments of Indebtedness for borrowed money of
the Company or any of its Subsidiaries (other than (1) payments made in respect
of the Transaction and (2) repayments of Loans, provided that repayments of
Loans shall be deducted in determining Excess Cash Flow if such repayments were
required as a result of Scheduled Repayments required to be made during such
period or made as a voluntary prepayment with internally generated funds (but
in the case of a voluntary prepayment of Revolving Loans, only to the extent
accompanied by a voluntary reduction to the Total Revolving Loan Commitment))
during such period, (c) the increase, if any, in Adjusted Working Capital from
the first day to the last day of such period, (d) the amount of cash expended
by the Company in connection with debt financing costs, packaging design and
slotting fees during such period, which cash expended is capitalized and (e)
without duplication, an amount of cash expended by the Company to purchase
other assets in the ordinary course of business not in excess of $50,000 during
such period.

"Excess Cash Flow Recapture Period" shall mean with respect to
the repayment required on each Excess Cash Payment Date, the immediately
preceding fiscal year of the Company.

"Excess Cash Payment Date" shall mean the date occurring
ninety (90) days after the last day of each fiscal year of the Company.

"Existing A Term Loans" shall mean the "A Term Loans" under,
and as defined in, the Existing Credit Agreement.

"Existing Agent" shall mean BTCo as "Agent" under, and as
defined in, the Existing Credit Agreement.

"Existing B Term Loans" shall mean the "B Term Loans" under,
and as defined in, the Existing Credit Agreement.

"Existing Banks" shall mean each Person which was a "Bank"
under, and as defined in, the Existing Credit Agreement immediately prior to
the Restatement Effective Date.

"Existing C Term Loans" shall mean the "C Term Loans" under,
and as defined in, the Existing Credit Agreement.

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"Existing Credit Agreement" shall have the meaning provided in
the first Whereas clause of this Agreement.

"Existing Letters of Credit" shall mean (i) Existing Standby
Letters of Credit and (ii) Existing Trade Letters of Credit.

"Existing Loans" shall mean collectively, the Existing A Term
Loans, the Existing B Term Loans, the Existing C Term Loans and the Existing
Revolving Loans.

"Existing Mortgage Amendments" shall have the meaning provided
in Section 5.11.

"Existing Mortgaged Property" shall have the meaning provided
in Section 5.11.

"Existing Mortgages" shall mean (i) the Original Mortgage and
(ii) the South Carolina Mortgage, in each case as amended, modified or
supplemented from time to time.

"Existing Obligations" shall have the meaning provided in
Section 7.21.

"Existing Revolving Loans" shall mean all "Revolving Loans"
under, and as defined in, the Existing Credit Agreement.

"Existing Standby Letters of Credit" shall have the meaning
provided in Section 2.01(a).

"Existing Trade Letters of Credit" shall mean each of the
"Trade Letters of Credit" issued under, and as defined in, the Existing Credit
Agreement.

"Facing Fee" shall have the meaning provided in Section
3.01(d).

"Fees" shall mean all amounts payable pursuant to or referred
to in Section 3.01.

"Final Maturity Date" shall mean the last Business Day
occurring in February 2004.

"Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea

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formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous waste," "hazardous materials,"
"extremely hazardous substances," "restricted hazardous substances," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority.

"Indebtedness" shall mean, as to any Person, without
duplication, (i) all indebtedness (including principal, interest, fees and
charges) of such Person for borrowed money or for the deferred purchase price
of property or services (other than trade payables and construction trade
payables incurred in the ordinary course of business), (ii) the maximum amount
available to be drawn under all letters of credit issued for the account of
such Person and all unpaid drawings in respect of such letters of credit, (iii)
all Indebtedness of the types described in clause (i), (ii), (iv), (v), (vi) or
(vii) secured by any Lien on any property owned by such Person, whether or not
such Indebtedness has been assumed by such Person, (iv) all Capitalized Lease
Obligations of such Person, (v) all obligations of such Person to pay a
specified purchase price for goods or services, whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent
Obligations of such Person and (vii) all obligations under any Interest Rate
Protection or Other Hedging Agreement or under any similar type of agreement
entered into with a Person not a Bank.

"Indemnitee" shall have the meaning provided in Section 13.01.

"Initial D Term Loan Eurodollar Loan Borrowing Date" shall
mean the first date occurring at least three Business Days following the
Restatement Effective Date on which a Borrowing of D Term Loans which
constitute Eurodollar Loans occurs (including as a result of a conversion on
such date).

"Initial Revolving Loan Eurodollar Loan Borrowing Date" shall
mean the first date occurring at least three Business Days following the
Restatement Effective Date on which a Borrowing of Revolving Loans which
constitute Eurodollar Loans occurs (including as a result of a conversion on
such date).

"Intellectual Property" shall have the meaning provided in
Section 7.20.

"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.

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"Interest Period" shall have the meaning provided in Section
1.09.

"Interest Rate Protection or Other Hedging Agreements" shall
have the meaning provided in the Security Documents.

"Issuing Bank" shall mean (A) with respect to each Existing
Letter of Credit, the Issuing Bank set forth in Schedule II for such Letter of
Credit and (b) with respect to all other Letters of Credit, (x) BTCo and (y)
any other Bank with a Revolving Loan Commitment, to the extent such Bank agrees
in its sole discretion (and the Company and the Administrative Agent consent),
to become an Issuing Bank for the purpose of issuing Letters of Credit pursuant
to Section 2.

"L/C Supportable Indebtedness" shall mean (i) obligations of
the Company incurred in the ordinary course of business with respect to workers
compensation, surety bonds and other similar statutory obligations and (ii)
such other obligations of the Company as are reasonably acceptable to the
Issuing Bank and the Administrative Agent and otherwise permitted to exist
pursuant to the terms of this Agreement.

"Lease Agreement" shall mean the Lease Agreement, dated as of
December 29, 1995, between Richland County, South Carolina and the Company.

"Leaseholds" of any Person means all the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.

"Letter of Credit" shall have the meaning provided in Section
2.01(a).

"Letter of Credit Fee" shall have the meaning provided in
Section 3.01(c).

"Letter of Credit Outstandings" shall mean, at any time, the
sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit and
(ii) the amount of all Unpaid Drawings.

"Letter of Credit Request" shall have the meaning provided in
Section 2.03(a).

"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without

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limitation, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any other
similar recording or notice statute, and any lease having substantially the
same effect as any of the foregoing).

"Loan" shall mean each A Term Loan, each B Term Loan, each C
Term Loan, each D Term Loan and each Revolving Loan.

"Management Agreements" means the Consulting Agreement dated
as of October 30, 1992 by and among the Company, Horst W. Schroeder and HWS &
Associates.

"Manufacturing Facilities" shall mean the Missouri Facility
and the South Carolina Facility.

"Margin Stock" shall mean "Margin Stock" under, and as defined
in, Regulation G or Regulation U.

"Material Adverse Effect" shall mean a material adverse effect
on the business, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Company or the Company and its
Subsidiaries taken as a whole.

"Maturity Date" shall mean the date upon which the Loans
incurred under the respective Tranches and the Notes evidencing such Loans
mature, i.e., whether the A Term Loan Maturity Date, the B Term Loan Maturity
Date, the C Term Loan Maturity Date, the D Term Loan Maturity Date or the
Revolving Loan Maturity Date.

"Missouri Facility" shall mean the facility (including all
property, fixtures, plant and equipment) of the Company located on
approximately 88 acres of land at 1000 Italian Way, Excelsior Springs, Missouri
and which is used by the Company for the manufacture and distribution of pasta
products. The Missouri Facility includes, without limitation, the Company's
executive offices, durum wheat mill, pasta production facility and warehouses
and all land not yet used for production.

"Mortgage Policies" shall mean the mortgage title insurance
policies issued in respect of each of the Mortgaged Properties.

"Mortgaged Properties" shall mean the Existing Mortgaged
Properties and, after the execution and delivery of any other Additional
Mortgage, shall include the Additional Mortgaged Property with respect thereto.

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"MSLEF II" shall mean The Morgan Stanley Leveraged Equity Fund
II, L.P., a Delaware limited partnership.

"Net Cash Proceeds" shall mean with respect to any sale or
issuance of equity the cash proceeds thereof less underwriting discounts,
commissions and other reasonable costs associated therewith.

"Net Sale Proceeds" shall mean, from any sale of assets, the
gross cash proceeds (including any cash received by way of deferred payment
pursuant to a promissory note, receivable or otherwise, but only as and when
received) received from such sale of assets, net of (i) reasonable transaction
costs, (ii) the amount of such gross cash proceeds required to be used to repay
any Indebtedness (other than Indebtedness of the Secured Creditors secured
pursuant to the Security Documents) which is secured by the respective assets
which were sold, and (iii) the estimated marginal increase in income taxes
which will be payable by the Company's consolidated group with respect to the
fiscal year in which the sale occurs as a result of such sale.

"New Bank" shall mean each Bank on the Restatement Effective
Date which is not an Existing Bank.

"Note" shall mean each A Term Note, each B Term Note, each C
Term Note, each D Term Note and each Revolving Note.

"Notice of Borrowing" shall have the meaning provided in
Section 1.03.

"Notice of Conversion" shall have the meaning provided in
Section 1.06.

"Notice Office" shall mean the office of the Administrative
Agent located at 233 South Wacker Drive, Chicago, Illinois 60606, Attention:
John Moses, Managing Director or such other office as the Administrative Agent
may hereafter designate in writing as such to the other parties hereto.

"Obligations" shall mean all amounts owing to the Agent, the
Collateral Agent or any Bank pursuant to the terms of this Agreement or any
other Credit Document.

"Option Proceeds" shall have the meaning provided in Section
4.02(A)(h).

"Option Proceeds Payment Period" shall have the meaning
provided in Section 4.02(A)(h).

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"Original Agent" shall mean BTCo as "Agent" under, and as
defined in, the Original Credit Agreement.

"Original Credit Agreement" shall mean the Credit Agreement,
dated as of October 30, 1992, among the Company, the Banks party thereto and
the Original Agent.

"Original Effective Date" shall mean the "Effective Date"
under, and as defined in, the Original Credit Agreement.

"Original Mortgage" shall mean the "Mortgage" under, and as
defined in, the Original Credit Agreement.

"Original Restatement Effective Date" shall mean the
"Restatement Effective Date" under, and as defined in, the Existing Credit
Agreement.

"Original Security Documents" shall mean the "Security
Documents" delivered pursuant to, and as defined in, the Original Credit
Agreement.

"Participant" shall have the meaning provided in Section
2.04(a).

"Payment Office" shall mean the office of the Administrative
Agent located at One Bankers Trust Plaza, New York, New York 10006, or such
other office as the Administrative Agent may hereafter designate in writing as
such to the other parties hereto.

"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA or any successor thereto.

"Permitted Capital Expenditures" shall mean Capital
Expenditures made by the Company with the proceeds of Permitted Capital
Expenditure Financing and in accordance with and as contemplated by the Capital
Expenditure Plan, in each case related to (i) the expansion of the South
Carolina Facility (other than as set forth in clauses (ii) and (iii) below),
(ii) the increase in the capacity of the distribution center at the South
Carolina Facility (other than as set forth in clause (iii)), (iii) the purchase
of (a) packaging equipment and (b) palletizing or other distribution center
related equipment, in each case in connection with the increase in capacity of
the South Carolina Facility or the Missouri Facility, or (iv) the purchase of
equipment for the Missouri Facility, all of which Capital Expenditures shall be
on Real Property of the Company which is a Mortgaged Property on the date on
which the Permitted Capital Expenditure is made.

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"Permitted Capital Expenditure Financing" shall mean (x)
Equity Financing, (y) D Term Loans, and (z) Permitted Capital Expenditure
Indebtedness; provided that no Equity Financing or D Term Loans shall
constitute Permitted Capital Expenditure Financing for Permitted Capital
Expenditures of the type set forth in clauses (ii) and (iii) of the definition
thereof.

"Permitted Capital Expenditure Indebtedness" shall mean
Indebtedness of the Company the proceeds of which is used to finance Permitted
Capital Expenditures of the type set forth in clauses (ii) and/or (iii) of the
definition thereof; provided that all of the terms and conditions (including,
without limitation, the maturity) of any such Permitted Capital Expenditure
Indebtedness and the documentation therefor shall be in form and substance
satisfactory to the Administrative Agent.

"Permitted Encumbrance" shall mean, with respect to any
Mortgaged Property, such exceptions to title as are set forth in the title
insurance policy delivered with respect thereto, all of which exceptions must
be acceptable, on the date of the delivery of such title insurance policy, to
the Administrative Agent and the Required Banks in their sole discretion.

"Permitted Filot Transaction" shall mean the sale and the
subsequent leaseback of the South Carolina Facility to and from Richland
County, South Carolina and of the equipment and machinery used by the Company
located thereon pursuant to, and in accordance with the terms of, the Permitted
Filot Transaction Documents.

"Permitted Filot Transaction Documents" shall mean (i) the
Bill of Sale, dated as of December 29, 1995, between the Company and Richland
County, South Carolina, (ii) the Lease Agreement and (iii) the Deed, dated as
of December 29, 1995, between Richland County, South Carolina and the Company.

"Permitted Liens" shall have the meaning provided in Section
9.01.

"Person" shall mean any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or
instrumentality thereof.

"Plan" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA and which is subject to any of the
requirements of Title IV of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of), or at any time during the
five calendar years preceding the date of any

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Credit Event was maintained or contributed to by (or to which there was an
obligation to contribute of), the Company or any of its Subsidiaries or an
ERISA Affiliate.

"Pledge Agreement" shall have the meaning provided in Section
5.09.

"Pledge Agreement Collateral" shall mean all "Collateral" as
defined in the Pledge Agreement.

"Pledged Securities" shall have the meaning assigned that term
in the Pledge Agreement.

"Prime Lending Rate" shall mean the rate which the
Administrative Agent announces from time to time as its prime lending rate, the
Prime Lending Rate to change when and as such prime lending rate changes. The
Prime Lending Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. The Administrative Agent
may make commercial loans or other loans at rates of interest at, above or
below the Prime Lending Rate.

"Projections" shall have the meaning provided in Section 5.17.

"Quarterly Payment Date" shall mean the last Business Day of
each February, May, August and November occurring after the Restatement
Effective Date.

"Quoted Rate" shall mean (a) the offered quotation to
first-class banks in the New York interbank Eurodollar market by the
Administrative Agent for U.S. dollar deposits of amounts in immediately
available funds comparable to the outstanding principal amount of the
Eurodollar Loan of the Administrative Agent for which an interest rate is then
being determined with maturities comparable to the Interest Period to be
applicable to such Eurodollar Loan as determined as of 10:00 A.M. (New York
time) on the date which is two Business Days prior to the commencement of such
Interest Period, divided (and rounded off to the nearest 1/16 of 1%) by (b) a
percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves required by applicable law) applicable
to any member bank of the Federal Reserve System in respect of Eurocurrency
funding or liabilities as defined in Regulation D (or any successor category of
liabilities under Regulation D).

"RCRA" shall mean the Resources Conservation and Recovery Act,
as the same may be amended from time to time, 42 U.S.C. Section 6901 et seq.

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"Real Property" of any Person shall mean all the right, title
and interest of such Person in and to land, improvements and fixtures,
including Leaseholds.

"Register" shall have the meaning provided in Section 8.14.

"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.

"Regulation G" shall mean Regulation G of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or any portion thereof.

"Regulation T" shall mean Regulation T of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or any portion thereof.

"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.

"Regulation X" shall mean Regulation X of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or any portion thereof.

"Release" means disposing, discharging, injecting, spilling,
pumping, leaking, leaching, dumping, emitting, escaping, emptying, seeping,
placing, pouring and the like, into or upon any land or water or air, or
otherwise entering into the environment.

"Replaced Bank" shall have the meaning provided in Section
1.12.

"Replacement Bank" shall have the meaning provided in Section
1.12.

"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan as to which the thirty-day notice
requirement has not been waived by the PBGC.

"Required A Facility Banks" shall mean Banks, the sum of whose
outstanding A Term Loans represent an amount greater than 50% of all
outstanding A Term Loans made by all Banks.

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"Required B Facility Banks" shall mean Banks, the sum of whose
outstanding B Term Loans represent an amount greater than 50% of all
outstanding B Term Loans made by all Banks.

"Required Banks" shall mean Banks, the sum of whose
outstanding Term Loans, D Term Loan Commitments and Revolving Loan Commitments
(or if after the Total Revolving Loan Commitment has terminated, the sum of
outstanding Revolving Loans and RL Percentages of Letter of Credit
Outstandings) represent an amount greater than 50% of the sum of all
outstanding Term Loans, Total D Term Loan Commitment and Total Revolving Loan
Commitment (or after the termination thereof, the sum of the then total
outstanding Revolving Loans and Letter of Credit Outstandings).

"Required C Facility Banks" shall mean Banks, the sum of whose
outstanding C Term Loans represent an amount greater than 50% of all
outstanding C Term Loans made by all Banks.

"Required D Facility Banks" shall mean Banks, the sum of whose
outstanding D Term Loans and D Term Loan Commitments represent an amount
greater than 50% of all outstanding D Term Loans made by all Banks and the
Total D Term Loan Commitment.

"Restatement Effective Date" shall have the meaning provided
in Section 13.10.

"Returns" shall have the meaning provided in Section 7.09.

"Revolving Loan Commitment" shall mean, with respect to each
Bank, the amount set forth opposite such Bank's name in Schedule I hereto
directly below the column entitled "Revolving Loan Commitment," as the same may
be (x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or
10 or (y) adjusted from time to time as a result of assignments to or from such
Bank pursuant to Section 1.12 and/or 13.04.

"Revolving Loan Maturity Date" shall mean, with respect to
each Bank, the last Business Day occurring in February 2000.

"Revolving Loans" shall have the meaning provided in Section
1.01(e).

"Revolving Note" shall have the meaning provided in Section
1.05(a).

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"RL Commitment Commission" shall have the meaning provided in
Section 3.01(a).

"RL Percentage" shall mean, for any Bank with a Revolving Loan
Commitment, at any time, a fraction (expressed as a percentage) the numerator
of which is the Revolving Loan Commitment of such Bank at such time and the
denominator of which is the Total Revolving Loan Commitment at such time,
provided that if the RL Percentage of any Bank is to be determined after the
Total Revolving Loan Commitment has been terminated, then the RL Percentages of
such Banks shall be determined immediately prior (and without giving effect) to
such terminations.

"Scheduled Repayment" shall mean an A Term Loan Scheduled
Repayment, a B Term Loan Scheduled Repayment, a C Term Loan Scheduled
Repayment, or a D Term Loan Scheduled Repayment, as the case may be.

"SEC" shall have the meaning provided in Section 8.01(h).

"Second Amendment to Existing Credit Agreement" shall mean the
Second Amendment to Existing Credit Agreement, dated as of August 20, 1996,
among the Company, the banks then party to the Existing Credit Agreement and
BTCo as Existing Agent.

"Section 4.04(b)(ii) Certificate" shall have the meaning
provided in Section 4.04(b)(ii).

"Secured Creditors" shall mean the Banks, the Administrative
Agent, the Collateral Agent and any Bank (or subsequent assignee thereof) which
on the date hereof is, or subsequently becomes, party to any Interest Rate
Protection or Other Hedging Agreement.

"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.

"Security Agreement" shall have the meaning provided in
Section 5.10.

"Security Agreement Collateral" shall mean all "Collateral"
as defined in the Security Agreement.

"Security Documents" shall mean the Pledge Agreement, the
Security Agreement, the Existing Mortgages, the Additional Security Documents
and the other Additional Mortgages.

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"Shareholders' Agreements" shall have the meaning provided in
Section 5.07.

"South Carolina Facility" shall mean the facility (including
all leaseholds, property, fixtures, plant and equipment) of the Company located
on approximately 60 acres of land in Richland County, South Carolina and which
is used by the Company for the manufacture and distribution of pasta products.

"South Carolina Mortgage" shall mean the Open-End Mortgage,
Security Agreement, Assignment of Leases, Rents and Profits, Financing
Statement and Fixture Filing, dated as of October 3, 1994, between the Company
and the Collateral Agent.

"Standby Letter of Credit" shall have the meaning provided in
Section 2.01(a).

"Stated Amount" of each Letter of Credit shall, at any time,
mean the maximum amount available to be drawn thereunder at such time (in each
case determined without regard to whether any conditions to drawing could then
be met).

"Stock Option Plans" means the Nonqualified Stock Option
Agreement dated as of October 30, 1992 between the Company and Timothy S.
Webster, the Nonqualified Stock Option Agreement dated as of October 30, 1992
between the Company and Horst W. Schroeder, the Nonqualified Stock Option
Agreement dated as of October 30, 1992 between the Company and Kevin C.
Steingart, the Nonqualified Stock Option Agreement dated as of October 30, 1992
between the Company and Norman F. Abreo, the American Italian Pasta Company
1992 Stock Option Plan and the American Italian pasta Company 1993 Nonqualified
Stock Option Plan, and options under those plans granted to employees of the
Company.

"Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person and/or
one or more Subsidiaries of such Person and (ii) any partnership, association,
firm, joint venture or other entity or enterprise in which such Person and/or
one or more Subsidiaries of such Person has more than a 50% equity interest at
the time.

"Supplemental Equity Contribution" shall mean the issuance by
the Company of common stock to existing holders of common stock on or prior to
the 30th

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day following the Restatement Effective Date from which the Company receives
Net Cash Proceeds of not more than $2,500,000, all the terms and conditions of
which and all the documentation relating to which are in form and substance
satisfactory to the Administrative Agent.

"Syndication Agent" shall mean Bankers Trust Company, in its
capacity as Syndication Agent for the Banks hereunder.

"Syndication Termination Date" shall mean the date which is
the earlier of (i) the last day of the second month following the Restatement
Effective Date or (ii) a date on which the Administrative Agent, in its sole
discretion, determines (and notifies the Company) that the primary syndication
of the D Term Loans and the Total Revolving Loan Commitment (and the resultant
addition of institutions as Banks pursuant to Section 13.04) has been
completed.

"Sysco" shall mean Sysco Corporation, a Delaware corporation.

"Sysco Contract" shall mean the Supplier Agreement, dated as
of August 1, 1986, between the Company and Sysco as amended and extended on or
prior to the Original Effective Date.

"Tax Sharing Agreements" shall have the meaning provided in
Section 5.07.

"Taxes" shall have the meaning provided in Section 4.04.

"Term Loan Commitment" shall mean, for each Bank, such Bank's
A Term Loan Commitment, B Term Loan Commitment, C Term Loan Commitment and D
Term Loan Commitment.

"Term Loans" shall mean each of the A Term Loans, B Term
Loans, C Term Loans and D Term Loans.

"Test Period" shall mean for any determination under this
Agreement the four consecutive fiscal quarters of the Company ended on the date
of determination (or, if such date of determination is not the last day of a
fiscal quarter of the Company, the four consecutive fiscal quarters of the
Company last ended prior to such date of determination), taken as one
accounting period.

"Total A Term Loan Commitment" shall mean, at any time, the
sum of the A Term Loan Commitments of each of the Banks.

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"Total Additional Revolving Commitment" shall mean an
additional portion of the Total Revolving Loan Commitment under the Existing
Credit Agreement in the principal amount of $2,500,000 made available to the
Company pursuant to the Second Amendment to Existing Credit Agreement.

"Total Available Revolving Loan Commitment" shall mean, at any
time, the sum of the Available Revolving Loan Commitments of each of the Banks.

"Total B Term Loan Commitment" shall mean, at any time, the
sum of the B Term Loan Commitments of each of the Banks.

"Total C Term Loan Commitment" shall mean, at any time, the
sum of the C Term Loan Commitments of each of the Banks.

"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Banks.

"Total D Term Loan Commitment" shall mean, at any time, the
sum of the D Term Loan Commitments of each of the Banks.

"Total Revolving Loan Commitment" shall mean, at any time, the
sum of the Revolving Loan Commitments of each of the Banks.

"Total Unutilized Revolving Loan Commitment" shall mean, at
any time, an amount equal to the remainder of (i) the then Total Revolving Loan
Commitment less (ii) the sum of the aggregate principal amount of Revolving
Loans then outstanding at such time plus the Letter of Credit Outstandings at
such time.

"Trade Letter of Credit" shall have the meaning provided in
Section 2.01(a).

"Tranche" shall mean the respective facility and commitments
utilized in making Loans hereunder, with there being five separate Tranches,
i.e., A Term Loans, B Term Loans, C Term Loans, D Term Loans and Revolving
Loans.

"Transaction" shall mean and include each of (i) the Credit
Events occurring on the Restatement Effective Date, (ii) the making of the
payments required by Section 5.03 (including, without limitation, the repayment
in full of each of the Existing Revolving Loans and the Deferred Loans and all
accrued interest thereon on the Restatement Effective Date), (iii) the Equity
Financing, (iv) the entering into of the

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CPC Contract, (v) the payment of the Transaction Fees and Expenses and (vi) the
occurrence of the Restatement Effective Date.

"Transaction Fees and Expenses" shall mean all fees and
expenses incurred in connection with and arising out of the Transaction.

"Type" shall mean the type of Loan determined with regard to
the interest option applicable thereto, i.e., whether a Base Rate Loan or a
Eurodollar Loan.

"UCC" shall mean the Uniform Commercial Code as from time to
time in effect in the relevant jurisdiction.

"Unfunded Current Liability" of any Plan means the amount, if
any, by which the actuarial present value of the accumulated plan benefits
under the Plan as of the close of its most recent plan year, determined in
accordance with Statement of Executive Accounting Standards No. 87, based upon
the actuarial assumptions used by the Plan's actuary in the most recent annual
valuation of the Plan, exceeds the fair market value of the assets allocable
thereto, determined in accordance with Section 412 of the Code.

"United States" and "U.S." shall each mean the United States
of America.

"Unpaid Drawing" shall have the meaning provided for in
Section 2.05(a).

"Unutilized Revolving Loan Commitment" with respect to any
Bank at any time shall mean such Bank's Revolving Loan Commitment at such time
less the sum of (i) the aggregate outstanding principal amount of all Revolving
Loans made by such Bank and (ii) such Bank's RL Percentage of the Letter of
Credit Outstandings at such time.

"Wholly-Owned Subsidiary" shall mean, as to any Person, (i)
any corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest at such time.

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Section 12. The Administrative Agent.

12.01 Appointment. The Banks hereby designate BTCo as
Administrative Agent and Syndication Agent (for purposes of this Section 12,
the term "Administrative Agent" shall include BTCo in its capacity as
Administrative Agent and Syndication Agent and as Collateral Agent pursuant to
the Security Documents) to act as specified herein and in the other Credit
Documents. Each Bank hereby irrevocably authorizes, and each holder of any
Note by the acceptance of such Note shall be deemed irrevocably to authorize,
the Administrative Agent to take such action on its behalf under the provisions
of this Agreement, the other Credit Documents and any other instruments and
agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to
or required of the Administrative Agent by the terms hereof and thereof and
such other powers as are reasonably incidental thereto. The Administrative
Agent may perform any of its duties hereunder by or through its officers,
directors, agents, employees or affiliates.

12.02 Nature of Duties. The Administrative Agent shall have
no duties or responsibilities except those expressly set forth in this
Agreement and the Security Documents. Neither the Administrative Agent nor any
of its officers, directors, agents, employees or affiliates shall be liable for
any action taken or omitted by it or them hereunder or under any other Credit
Document or in connection herewith or therewith, unless caused by the gross
negligence or willful misconduct of the Administrative Agent. The duties of
the Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Credit Document a fiduciary relationship in respect of any Bank or the holder
of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Administrative Agent any obligations in respect of this Agreement or any
other Credit Document except as expressly set forth herein or therein.

12.03 Lack of Reliance on the Administrative Agent.
Independently and without reliance upon the Administrative Agent, each Bank and
the holder of each Note, to the extent it deems appropriate, has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of the Company and its Subsidiaries in connection with
the making and the continuance of the Loans and the participation in Letters of
Credit and the taking or not taking of any action in connection herewith and
(ii) its own appraisal of the creditworthiness of the Company and its
Subsidiaries and, except as expressly provided in this Agreement, the
Administrative Agent shall have no duty or responsibility, either initially or
on a con-

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tinuing basis, to provide any Bank or the holder of any Note with any credit or
other information with respect thereto, whether coming into its possession
before the making of the Loans or the participation in the Letters of Credit or
at any time or times thereafter. The Administrative Agent shall not be
responsible to any Bank or the holder of any Note for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith or for the
execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or any other Credit
Document or the financial condition of the Company or its Subsidiaries or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any other
Credit Document, or the financial condition of the Company or its Subsidiaries
or the existence or possible existence of any Default or Event of Default.

12.04 Certain Rights of the Administrative Agent. If the
Administrative Agent shall request instructions from the Required Banks with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Credit Document, the Administrative Agent shall be
entitled to refrain from such act or taking such action unless and until the
Administrative Agent shall have received instructions from the Required Banks;
and the Administrative Agent shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, no Bank and no holder of any
Note shall have any right of action whatsoever against the Administrative Agent
as a result of the Administrative Agent acting or refraining from acting
hereunder or under any other Credit Document in accordance with the
instructions of the Required Banks.

12.05 Reliance. The Administrative Agent shall be entitled
to rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or facsimile
message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by any Person that the Administrative Agent believed to be
the proper Person, and, with respect to all legal matters pertaining to this
Agreement and any other Credit Document and its duties hereunder and
thereunder, upon advice of counsel selected by it.

12.06 Indemnification. To the extent the Administrative
Agent is not reimbursed and indemnified by the Company the Banks will reimburse
and indemnify the Administrative Agent, in proportion to their respective
"percentages" as used in determining the Required Banks for and against any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses or disbursements of whatsoever kind or nature
which may be imposed on, asserted against

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or incurred by the Administrative Agent in performing its duties hereunder or
under any other Credit Document, in any way relating to or arising out of this
Agreement or any other Credit Document; provided that no Bank shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, suits, costs, expenses or disbursements resulting
from the Administrative Agent's gross negligence or willful misconduct.

12.07 The Administrative Agent in Its Individual Capacity.
With respect to its obligation to make Loans under this Agreement and to issue
or participate in Letters of Credit, the Administrative Agent shall have the
rights and powers specified herein for a "Bank" and may exercise the same
rights and powers as though it were not performing the duties specified herein;
and the term "Banks," "Required Banks," "holders of Notes" or any similar terms
shall, unless the context clearly otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent may
accept deposits from, lend money to, and generally engage in any kind of
banking, trust or other business with the Company or any Affiliate of the
Company as if it were not performing the duties specified herein, and may
accept fees and other consideration from the Company or any Affiliate of the
Company for services in connection with this Agreement and otherwise without
having to account for the same to the Banks.

12.08 Holders. The Administrative Agent may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment, transfer or endorsement thereof, as
the case may be, shall have been filed with the Administrative Agent. Any
request, authority or consent of any Person who, at the time of making such
request or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee, assignee or
indorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.

12.09 Resignation by the Administrative Agent. (a) The
Administrative Agent may resign from the performance of all its functions and
duties hereunder and/or under the other Credit Documents at any time by giving
15 Business Days' prior written notice to the Company and the Banks. Such
resignation shall take effect upon the appointment of a successor
Administrative Agent pursuant to clauses (b) and (c) below or as otherwise
provided below.

(b) Upon any such notice of resignation of the Administrative
Agent, the Banks shall appoint a successor Administrative Agent hereunder or
thereunder who shall

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be a commercial bank or trust company reasonably acceptable to the Company (it
being understood and agreed that any Bank is deemed to be acceptable to the
Company).

(c) If a successor Administrative Agent shall not have been
so appointed within such 15 Business Day period, the Administrative Agent, with
the consent of the Company, shall then appoint a successor Administrative Agent
who shall serve as the Administrative Agent hereunder or thereunder until such
time, if any, as the Banks appoint a successor Administrative Agent as provided
above.

(d) If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 20th Business Day after the date
such notice of resignation was given by the Administrative Agent, the
Administrative Agent's resignation shall become effective and the Banks shall
thereafter perform all the duties of the Administrative Agent hereunder and/or
under any other Credit Document until such time, if any, as the Banks appoint a
successor Administrative Agent as provided above.

12.10 Documentation Agent. The Documentation Agent, in its
capacity as such, shall not have any rights, duties or responsibilities
pursuant to this Agreement or any of the other Credit Documents.

Section 13. Miscellaneous.

13.01 Payment of Expenses; etc. The Company shall: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Administrative Agent
(including, without limitation, the reasonable fees and disbursements of White
& Case and of any local counsel) in connection with the preparation, execution
and delivery of this Agreement and the other Credit Documents and the documents
and instruments referred to herein and therein and any amendment, waiver or
consent relating hereto or thereto, of the Administrative Agent (including,
without limitation, the reasonable fees and disbursements of White & Case) in
connection with its syndication efforts with respect to this Agreement and of
the Administrative Agent and each of the Banks in connection with the
enforcement of this Agreement and the other Credit Documents and the documents
and instruments referred to herein and therein (including, without limitation,
the reasonable fees and disbursements of counsel for the Administrative Agent
and for each of the Banks); (ii) pay and hold each of the Banks harmless from
and against any and all present and future stamp, excise and other similar
taxes with respect to the foregoing matters and save each of the Banks harmless
from and against any and all liabilities with respect to or resulting from any
delay or omission (other than to the extent attributable to such Bank)

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to pay such taxes; and (iii) defend, protect, indemnify and hold harmless the
Administrative Agent, the Documentation Agent and each Bank, and each of their
respective officers, directors, employees, affiliates, representatives and
agents (each an "Indemnitee" and, collectively called the "Indemnities") from
and against any and all liabilities, obligations (including removal, remedial
or corrective actions), losses, damages, (including foreseeable and
unforeseeable consequential damages and punitive damages) penalties, claims,
actions, judgments, suits, costs, expenses and disbursements incurred by,
imposed on or assessed against any Indemnitee directly or indirectly based on,
as a result of, or arising out of, or in any way related to, or by reason of,
(a) any investigation, litigation or other proceeding or claim (whether or not
any Indemnitee is a party thereto) related to the entering into and/or
performance of this Agreement or any other Document or the use of any Letter of
Credit or the proceeds of any Loan hereunder or the consummation of any
transactions contemplated herein (including, without limitation, the
Transaction) or in any other Document or the exercise of any of their rights or
remedies provided herein or in the other Documents, or (b) the actual or
alleged presence of Hazardous Materials in the air, surface water or
groundwater or on the surface or subsurface of any Real Property owned or at
any time operated by the Company or any of its Subsidiaries, the generation,
storage, transportation, handling or disposal by or on behalf of the Company
and its Subsidiaries of Hazardous Materials at any location, whether or not
owned or operated by the Company or any of its Subsidiaries, the non-compliance
of any Real Property at any time owned or operated by the Company or any of its
Subsidiaries with federal, state and local laws, regulations, and ordinances
(including applicable permits thereunder) applicable to such Real Property, or
any Environmental Claim asserted against the Company, any of its Subsidiaries
or any Real Property at any time owned or operated by the Company or any of its
Subsidiaries, including, in each case, without limitation, the reasonable fees
and disbursements of counsel and other consultants incurred in connection with
any such investigation, litigation or other proceeding or claim (whether or not
any Indemnitee is a party thereto) (but excluding any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified).

13.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of an Event of Default, each
Bank is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Company or any
of its Subsidiaries or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and apply any and all deposits
(general or special) and any other Indebtedness at any time held or owing by
such Bank (including, without limitation, by branches and agencies of such Bank
wherever located)

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to or for the credit or the account of each of the Company and its Subsidiaries
against and on account of the Obligations and liabilities of such Person to
such Bank under this Agreement or under any of the other Credit Documents,
including, without limitation, all interests in Obligations purchased by such
Bank pursuant to Section 13.06(b), and all other claims of any nature or
description arising out of or in connection with this Agreement or any other
Credit Document, irrespective of whether or not such Bank shall have made any
demand hereunder and although said Obligations, liabilities or claims, or any
of them, shall be contingent or unmatured.

13.03 Notices. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered: if to the
Company, at its address specified opposite its signature below; if to any Bank,
at its address specified on Schedule XI attached hereto; and if to the
Administrative Agent, at its Notice Office; or, as to the Company or the
Administrative Agent, at such other address as shall be designated by such
party in a written notice to the other parties hereto and, as to each Bank, at
such other address as shall be designated by such Bank in a written notice to
the Company and the Administrative Agent. All such notices and communications
shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by
overnight courier, be effective when deposited in the mails, delivered to the
telegraph company, cable company or overnight courier, as the case may be, or
sent by telex or telecopier, except that notices and communications to the
Administrative Agent shall not be effective until received by the
Administrative Agent.

13.04 Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however, the Company
may not assign or transfer any of its rights, obligations or interest hereunder
or under any other Credit Document without the prior written consent of the
Banks and, provided further, that although any Bank may transfer, assign or
grant participations in its rights hereunder, such Bank shall remain a "Bank"
for all purposes hereunder (and may not transfer or assign all or any portion
of its Commitments hereunder except as provided in Section 13.04(b)) and the
transferee, assignee or participant, as the case may be, shall not constitute a
"Bank" hereunder and, provided further, that no Bank shall transfer or grant
any participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document except to
the extent such amendment or waiver would (i) extend the final maturity of any
Loan, Note or Letter of Credit (unless such Letter of Credit is not extended
beyond the Revolving Loan Maturity Date) in which such participant is
participating, or reduce the rate or extend the time of

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payment of interest or Fees thereon (except in connection with a waiver of
applicability of any post-default increase in interest rates) or reduce the
principal amount thereof, or increase the amount of the participant's
participation over the amount thereof then in effect (it being understood that
a waiver of any Default or Event of Default or of a mandatory Commitment
reduction or of a mandatory prepayment shall not constitute a change in the
terms of such participation, and that an increase in any Commitment or Loan
shall be permitted without the consent of any participant if the participant's
participation is not increased as a result thereof), (ii) consent to the
assignment or transfer by the Company of any of its rights and obligations
under this Agreement or (iii) release all or substantially all of the
Collateral under all of the Security Documents (except as expressly provided in
the Credit Documents) supporting the Loans hereunder in which such participant
is participating. In the case of any such participation, the participant shall
not have any rights under this Agreement or any of the other Credit Documents
(the participant's rights against such Bank in respect of such participation to
be those set forth in the agreement executed by such Bank in favor of the
participant relating thereto) and all amounts payable by the Company hereunder
shall be determined as if such Bank had not sold such participation.

(b) Notwithstanding the foregoing, any Bank (or any Bank
together with one or more other Banks) may (x) assign all or a portion of its
Revolving Loan Commitment and related outstanding Obligations and/or its D Term
Loan Commitment or outstanding Term Loans to one or more other Banks or to such
assigning Bank's parent company and/or any affiliate of such Bank which is at
least 50% owned by such Bank or its parent company or an Approved Fund or (y)
assign all or if less than all, a portion equal to at least $5,000,000 in the
aggregate for the assigning Bank of such Revolving Loan Commitment and related
outstanding Obligations and/or D Term Loan Commitment or outstanding principal
amount of Term Loans to one or more Eligible Transferee or Eligible
Transferees, each of which assignees shall become a party to this Agreement as
a Bank by execution of an assignment and assumption agreement substantially in
the form of Exhibit O (appropriately completed), provided that, (i) at such
time Schedule I shall be deemed modified to reflect the Commitments (and/or
outstanding Loans, as the case may be) of such new Bank and of the existing
Banks, (ii) new Notes will be issued at the Company's expense to such new Bank
and to the assigning Bank upon the request of such new Bank or assigning Bank,
such new Notes to be in conformity with the requirements of Section 1.05 to the
extent needed to reflect the revised Commitments (and/or outstanding Loans, as
the case may be), (iii) the consent of BTCo shall be required in connection
with any assignment, (iv) the consent of the Company shall be required in
connection with any assignment of Commitments to an assignee pursuant to clause
(y) above (which consent shall not be unreasonably withheld), (v) the consent
of each Issuing Bank shall be required in connection with any assignment of

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Revolving Loan Commitments and (vi) the Administrative Agent shall receive at
the time of each such assignment, the payment of a non-refundable assignment
fee of $3,500 and, provided further, that such transfer or assignment will not
be effective until recorded by the Administrative Agent on the Register
pursuant to Section 8.14 hereof. To the extent of any assignment pursuant to
this Section 13.04(b), the assigning Bank shall be relieved of its obligations
hereunder with respect to its assigned Commitments. At the time of each
assignment pursuant to this Section 13.04(b) to a Person which is not already a
Bank hereunder and which is not a United States person (as such term is defined
in Section 7701(a)(30) of the Code) for U.S. federal income tax purposes, the
respective assignee shall provide to the Company and the Administrative Agent,
the appropriate Internal Revenue Service Forms (and, if applicable, a Section
4.04(b)(ii) Certificate) described in Section 4.04(b).

(c) Nothing in this Agreement shall prevent or prohibit any
Bank from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank.

13.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Administrative Agent or any Bank or any holder of any Note in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Company and the Administrative
Agent or any Bank or the holder of any Note shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein or in any
other Credit Document expressly provided are cumulative and not exclusive of
any rights, powers or remedies which the Administrative Agent or any Bank or
the holder of any Note would otherwise have. No notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights
of the Administrative Agent or any Bank or the holder of any Note to any other
or further action in any circumstances without notice or demand.

13.06 Payments Pro Rata. (a) The Administrative Agent
agrees that promptly after its receipt of each payment from or on behalf of the
Company in respect of any Obligations hereunder, it shall distribute such
payment to the Banks (other than any Bank that has consented in writing to
waive its pro rata share of any such payment) pro rata based upon their
respective shares, if any, of the Obligations with respect to which such
payment was received.

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(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or regularly accruing Fees, of a sum which with
respect to the related sum or sums received by other Banks is in a greater
proportion than the total of such Obligation then owed and due to such Bank
bears to the total of such Obligation then owed and due to all of the Banks
immediately prior to such receipt, then such Bank receiving such excess payment
shall purchase for cash without recourse or warranty from the other Banks an
interest in the Obligations of the Company to such Banks in such amount as
shall result in a proportional participation by all the Banks in such amount;
provided that if all or any portion of such excess amount is thereafter
recovered from such Bank, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.

13.07 Calculations; Computations. (a) The financial
statements to be furnished to the Banks pursuant hereto shall be made and
prepared in accordance with generally accepted accounting principles in the
United States consistently applied throughout the periods involved (except, in
the case of the generally accepted accounting principles, as set forth in the
notes thereto or as otherwise disclosed in writing by the Company to the
Banks); provided that, except as otherwise specifically provided herein, all
computations of Excess Cash Flow and all computations determining compliance
with Section 9 shall utilize accounting principles and policies in conformity
with those used to prepare the historical financial statements for the fiscal
year ended September 27, 1996 delivered to the Banks pursuant to Section
7.05(a). References to a fiscal quarter ending in March, June, September or
December or a fiscal year ending in September shall as appropriate be deemed to
refer to the fiscal quarter and/or fiscal year, as applicable, ending in the
first week of the next succeeding April, July, October or January if there is
no fiscal quarter and/or fiscal year, as applicable, ending in the specified
month.

(b) All computations of interest and Fees hereunder shall be
made on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest or Fees are payable.

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13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL,
EXCEPT AS OTHERWISE PROVIDED IN THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CT
CORPORATION SYSTEMS, INC. WITH OFFICES ON THE DATE HEREOF AT 1633 BROADWAY, NEW
YORK, NEW YORK 10019 AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT
AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE
OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE
SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE,
APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, THE COMPANY
AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK CITY ON THE
TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THE ADMINISTRATIVE
AGENT UNDER THIS AGREEMENT. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE COMPANY, AT ITS ADDRESS SET FORTH OPPOSITE ITS
SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT
UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.

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(b) THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS IN NEW YORK REFERRED TO IN
CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY COURT OR JURISDICTION,
INCLUDING WITHOUT LIMITATION THOSE REFERRED TO IN CLAUSE (A) ABOVE, IN RESPECT
OF ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

13.09 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall be
lodged with the Company and the Administrative Agent.

13.10 Effectiveness. This Agreement shall become effective
on the date (the "Restatement Effective Date") on which (i) each of the
Company, the Required Banks (as defined in the Existing Credit Agreement and
determined immediately before the occurrence of the Restatement Effective Date)
and each New Bank shall have signed a copy hereof (whether the same or
different copies) and shall have delivered the same to the Administrative Agent
at its Notice Office or, in the case of the Required Banks and each New Bank,
shall have given to the Administrative Agent telephonic (confirmed in writing),
written or telex notice (actually received) at such office that the same has
been signed and mailed to it and (ii) the conditions contained in Sections 5
and 6 are met to the satisfaction of the Administrative Agent and the Required
Banks (determined immediately after giving effect to the Restatement Effective
Date). Unless the Administrative Agent has received actual notice from any
Bank that the conditions described in clause (ii) of the preceding sentence
have not been met to its satisfaction, upon the satisfaction of the condition
described in clause (i) of the immediately preceding sentence and upon the
Administrative Agent's determination that the

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conditions described in clause (ii) of the immediately preceding sentence have
been met and upon the payment of all amounts required to be paid on the
Restatement Effective Date pursuant to Section 5.03, then the Restatement
Effective Date shall be deemed to have occurred, regardless of any subsequent
determination that one or more of the conditions thereto have not been met
(although the occurrence of the Restatement Effective Date shall not release
the Company from any liability for failure to satisfy one or more of the
applicable conditions contained in Section 5 or 6).

13.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision of
this Agreement.

13.12 Amendment or Waiver. (a) Neither this Agreement nor
any other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the Company and the Required Banks,
provided that no such change, waiver, discharge or termination shall, without
the consent of each Bank (with Obligations being directly affected in the case
of following clause (i)): (i) extend the final scheduled maturity of any Loan
or Note or any portion thereof or extend the stated maturity of any Letter of
Credit beyond the Revolving Loan Maturity Date, or reduce the rate or extend
the time of payment of interest or Fees thereon, or reduce the principal amount
thereof (except to the extent repaid in cash), (ii) release all or
substantially all of the Collateral under all of the Security Documents (except
as expressly provided in the Credit Documents), (iii) amend, modify or waive
any provision of this Section 13.12, (iv) reduce the percentage specified in
the definition of Required Banks (it being understood that, with the consent of
the Required Banks, additional extensions of credit pursuant to this Agreement
may be included in the determination of the Required Banks on substantially the
same basis as the extensions of the Term Loans and Revolving Loan Commitments
are included on the Restatement Effective Date) or (v) consent to the
assignment or transfer by the Company of any of its rights and obligations
under this Agreement; provided further, that no such change, waiver, discharge
or termination shall (I) increase the Commitments of any Bank over the amount
thereof then in effect (it being understood that waivers or modifications of
conditions precedent, covenants, any Default or Event of Default or of a
mandatory Commitment reduction to the Total Commitment or of a mandatory
prepayment shall not constitute an increase of the Commitment of any Bank, and
that an increase in the available portion of any Commitment of any Bank shall
not constitute an increase in the Commitment of such Bank), without the consent
of such Bank, (II) without the consent of each Issuing Bank affected thereby,
amend, modify or waive any provision of Section 2 or alter its rights or
obligations with respect to Letters of Credit, (III) without

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the consent of the Agent, amend, modify or waive any provision of Section 12 or
any other provision relating to the rights or obligations of the Agent, (IV)
without the consent of the Collateral Agent, amend, modify or waive any
provision relating to the rights or obligations of the Collateral Agent, (V)
without the consent of the Required A Facility Banks (A) amend, modify or waive
any of the required applications of any prepayments or repayments, as between
the various Tranches of Term Loans, pursuant to Section 4.01 or Section
4.02(B)(a), (B) amend, modify or waive the requirements of Section 4.02(A)(d),
(e), (f) or (g) or (C) amend, modify or waive any part of the definition of
Required A Facility Banks in a manner adverse to the Banks with A Term Loans,
(VI) without the consent of the Required B Facility Banks (A) amend, modify or
waive any of the required applications of any prepayments or repayments, as
between the various Tranches of Term Loans, pursuant to Section 4.01 or Section
4.02(B)(a), (B) amend, modify or waive the requirements of Section 4.02(A)(d),
(e), (f) or (g) or (C) amend, modify or waive any part of the definition of
Required B Facility Banks in a manner adverse to the Banks with B Term Loans,
(VII) without the consent of the Required C Facility Banks (A) amend, modify or
waive any of the required applications of any prepayments or repayments, as
between the various Tranches of Term Loans, pursuant to Section 4.01 or Section
4.02(B)(a), (B) amend, modify or waive the requirements of Section 4.02(A)(d),
(e), (f) or (g) or (C) amend, modify or waive any part of the definition of
Required C Facility Banks in a manner adverse to the Banks with C Term Loans or
(VIII) without the consent of the Required D Facility Banks (A) amend, modify
or waive any of the required applications of any prepayments or repayments, as
between the various Tranches of Term Loans, pursuant to Section 4.01 or Section
4.02(B)(a), (B) amend, modify or waive the requirements of Section 4.02(A)(d),
(e), (f) or (g) or (C) amend, modify or waive any part of the definition of
Required D Facility Banks in a manner adverse to the Banks with D Term Loans or
D Term Loan Commitments; provided, however, that in any case the Required Banks
may waive, in whole or in part, any such prepayment, repayment or commitment
reduction, except pursuant to Section 4.02(A)(d), (e) or (f), so long as the
application, as amongst the various Tranches, of any such prepayment, repayment
or commitment reduction which is still required to be made is not altered.

(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clauses (i) through (v), inclusive, of the first proviso to
Section 13.12(a), the consent of the Required Banks is obtained but the consent
of one or more of such other Banks whose consent is required is not obtained,
then the Company shall have the right, so long as all non-consenting Banks
whose individual consent is required are treated as described in either clauses
(A) or (B) below, to either (A) replace each such non-consenting Bank or Banks
(or, at the option of the Company if the respective Bank's consent is required

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with respect to less than all Tranches of Loans, to replace only the respective
Tranche or Tranches of Loans of the respective non-consenting Bank which gave
rise to the need to obtain such Bank's individual consent) with one or more
Replacement Banks pursuant to Section 1.12 so long as at the time of such
replacement, each such Replacement Bank consents to the proposed change,
waiver, discharge or termination or (B) terminate such non-consenting Bank's
Revolving Loan Commitment (if such Bank's consent is required as a result of
its Revolving Loan Commitment) and/or repay in full its outstanding Loans, in
accordance with Sections 3.02(b) and/or 4.01(b), provided that, unless the
Commitments that are terminated, and Loans that are repaid, pursuant to the
preceding clause (B) are immediately replaced in full at such time through the
addition of new Banks or the increase of the Commitments and/or outstanding
Loans of existing Banks (who in each case must specifically consent thereto),
then in the case of any action pursuant to preceding clause (B) the Required
Banks (determined before giving effect to the proposed action) shall
specifically consent thereto and, provided further, that in any event the
Company shall not have the right to replace a Bank, terminate its Revolving
Loan Commitment or repay its Loans solely as a result of the exercise of such
Bank's rights (and the withholding of any required consent by such Bank)
pursuant to the second proviso to Section 13.12(a).

(c) Notwithstanding anything to the contrary contained above
in this Section 13.12, the Collateral Agent may enter into amendments to the
Security Documents for the purpose of adding Subsidiaries of the Company as
parties thereto and Additional Security Documents and guarantees may be entered
into to satisfy the requirements of Section 8.13, in each case without the
consent of the Required Banks.

13.13 Survival. All indemnities set forth herein including,
without limitation, in Sections 1.10, 1.11, 2.06, 4.04, 12.06 and 13.01 shall
survive the execution, delivery and termination of this Agreement and the Notes
and the making and repayment of the Loans.

13.14 Domicile of Loans. Each Bank may transfer and carry
its Loans at, to or for the account of any office, Subsidiary or Affiliate of
such Bank.

13.15 Confidentiality. Each Bank agrees that it will use its
reasonable best efforts not to disclose without the prior consent of the
Company (other than to its employees, auditors or counsel or to another Bank if
the Bank or such Bank's holding or parent company in its sole discretion
determines that any such party should have access to such information) any
information with respect to the Company or any of its Subsidiaries which is
furnished pursuant to this Agreement and which is designated by the Company to
the Banks in writing as confidential, provided that any Bank may

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disclose any such information (a) as has become generally available to the
public, (b) as may be required or appropriate in any report, statement or
testimony submitted to any municipal, state or Federal regulatory body having
or claiming to have jurisdiction over such Bank or to the Federal Reserve Board
or the Federal Deposit Insurance Corporation or similar organizations (whether
in the United States or elsewhere) or their successors, (c) as may be required
or appropriate in response to any summons or subpoena or in connection with any
litigation, (d) in order to comply with any law, order, regulation or ruling
applicable to such Bank and (e) to any prospective or actual transferee or
participant in connection with any contemplated transfer or participation of
any of any of the Notes or Commitments or any interest therein by such Bank,
provided that such prospective transferee agrees to maintain the
confidentiality contained in this Section.

13.16 Addition of New Banks; Original Notes. (a) On and as
of the occurrence of the Restatement Effective Date, in accordance with Section
13.10 hereof, each New Bank shall become a "Bank" under, and for all purposes
of, this Agreement and the other Credit Documents.

(b) On the Restatement Effective Date, immediately after
giving effect thereto, all outstanding Revolving Notes (as defined in the
Existing Credit Agreement) issued by the Company to the Existing Banks under
the Existing Credit Agreement shall be deemed cancelled.

13.17 Post Closing Actions. Notwithstanding anything to the
contrary contained in this Agreement or the other Credit Documents, the parties
hereto acknowledge and agree that:

(a) Real Estate Appraisals. The Company will deliver, or
cause to be delivered, within five Business Days after the Restatement
Effective Date to the Administrative Agent real estate appraisals, in
form and substance satisfactory to the Administrative Agent and the
Required Banks, in connection with the Existing Mortgaged Properties
from Cushman & Wakefield, Inc., which appraisals shall comply with the
requirements of Section 5.11(a)(iii).

(b) "In-Use" Appraisals. The Company will deliver, or cause
to be delivered, within five Business Days after the Restatement
Effective Date to the Administrative Agent an "in-use" appraisal of
the Company's Manufacturing Facilities from Cushman & Wakefield, Inc.,
in form, scope and substance satisfactory to the Administrative Agent
and the Required Banks, which "in-use" appraisal shall comply with the
requirements of Section 5.15(i).

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All conditions precedent and representations contained in this
Agreement and the other Credit Documents shall be deemed modified to the extent
necessary to effect the foregoing (and to permit the taking of the actions
described above within the time periods required above, rather than as
elsewhere provided in the Credit Documents); provided, that (x) to the extent
any representation and warranty would not be true because the foregoing actions
were not taken on the Restatement Effective Date, the respective representation
and warranty shall be required to be true and correct in all material respects
at the time the respective action is taken (or was required to be taken) in
accordance with the foregoing provisions of Section 13.17 and (y) all
representations and warranties relating to the Security Documents shall be
required to be true immediately after the actions required to be taken by
Section 13.17 have been taken (or were required to be taken). The acceptance
of the benefits of each Credit Event shall constitute a representation,
warranty and covenant by the Company to each of the Banks that the actions
required pursuant to this Section 13.17 will be taken within the relevant time
periods referred to in this Section 13.17 and that, at such time, all
representations and warranties contained in this Agreement and the other Credit
Documents shall then be true and correct without any modification pursuant to
this Section 13.17.

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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.

1000 Italian Way AMERICAN ITALIAN PASTA
Excelsior Springs, Missouri 64024 COMPANY
Telephone No.: (816) 630-6400
Telecopier No.: (816) 630-6416 By /s/ Timothy S. Webster
-------------------------
Attention: David Watson Name: Timothy S. Webster
Title: President

BANKERS TRUST COMPANY,
Individually, as
Administrative Agent and as
Syndication Agent

By /s/ Mary Jo Jolly
-----------------------
Name: Mary Jo Jolly
Title: Assistant Vice President

<PAGE> 144
MORGAN STANLEY SENIOR
FUNDING, INC.,
Individually and as
Documentation Agent

By /s/ Michael Hart
-----------------------
Name: Michael Hart
Title: Vice President

BANK OF SCOTLAND

By /s/ Annie Chin Tat
--------------------------
Name: Annie Chin Tat
Title: Assistant Vice President

BANK ONE, WISCONSIN

By /s/ Cindy L. Wavrunek
--------------------------
Name: Cindy L. Wavrunek
Title: Vice President

THE ING SENIOR SECURED HIGH
INCOME FUND, L.P.

By: ING CAPITAL ADVISORS, INC.

By /s/ Kathleen Lenarcie
-----------------------
Name: Kathleen Lenarcie
Title: Vice President and
Portfolio Manager

<PAGE> 145
MERCANTILE BANK

By /s/ Roger A. Lumley
---------------------
Name: Roger A. Lumley
Title: Senior Vice President

MERRILL LYNCH PRIME
RATE PORTFOLIO

By: MERRILL LYNCH ASSET
MANAGEMENT, L.P.,
as investment advisor

By /s/ Giles Marchand
----------------------
Name: Giles Marchand
Title: Authorized Signatory

MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.

By /s/ Giles Marchand
----------------------
Name: Giles Marchand
Title: Authorized Signatory

<PAGE> 146
MERRILL LYNCH SENIOR HIGH INCOME
PORTFOLIO

By /S/ Giles Marchand
--------------------
Name: Giles Marchand
Title: Authorized Signatory

NATIONSBANK, N.A. (Mid-West)

By /s/ Thomas J. Butkus
---------------------
Name: Thomas J. Butkus
Title: Vice President

PARIBAS CAPITAL FUNDING LLC

By /s/ Eric Green
----------------
Name: Eric Green
Title: Director

<PAGE> 147
PRIME INCOME TRUST

By /s/ Rafael Scolari
---------------------
Name: Rafael Scolari
Title: V.P. Portfolio Manager

PROTECTIVE ASSET
MANAGEMENT, L.L.C.

By /s/ James Dondero
---------------------
Name: James Dondero
Title: President

UMB BANK, N.A.

By /s/ David A. Proffit
----------------------
Name: David A. Proffit
Title: Senior Vice President

VAN KAMPEN AMERICAN
CAPITAL PRIME RATE
INCOME TRUST

By /s/ Jeffrey W. Maillet
------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President
and Director

<PAGE> 1
EXHIBIT 10.4

WAREHOUSE LEASE

Agreement of Warehouse Lease made the 23rd day of May, 1995, between LANTER
COMPANY, a Delaware corporation, having its principal office at 1600
Collinsville Avenue, Madison, Illinois 62060 (hereinafter referred to as
"Lessor") and AMERICAN ITALIAN PASTA COMPANY, (hereinafter referred to as
"Lessee".)

WITNESSETH

Lessee is the fee owner of the land described in EXHIBIT A attached
hereto and by this reference made a part hereof (the "Land"). Lessor and Lessee
do hereby enter into this Lease on the understanding and agreement that Lessee
shall transfer the Land to Lessor subsequent to the execution of this Lease.
The Lessor shall, and does hereby, demise and lease to the Lessee a building
(the "Building"), consisting of 80,834 square feet of warehouse space, together
with the Land on which the Building is located, together with all rights,
alleys, rights of way, easements and appurtenances belonging or appertaining to
the Building or the Land (the Building, Land, and all other improvements,
rights, easements and appurtenances relating thereto being hereinafter referred
to collectively as the "Premises"), upon the following terms, covenants and
conditions. The Building shall be constructed by Lanter, at Lanter's sole cost
and expense, in accordance with the Plans and Specifications dated March 3,
1995, prepared by ASI Incorporated for the "New Distribution Center for the
Lanter Company in Columbia, South Carolina," (the "Plans and Specifications").
The Building, when fully racked, shall have a net storage capacity of
approximately 10,000 pallet positions and a gross storage capacity of
approximately 13,300 pallet positions based on a seven-high stacking
configuration in a double-deep racking system.

1. TERM - The initial term of this Lease ("Initial Term") shall be for 15 years
commencing on the date of actual occupancy of the Premises by the Lessee, or on
the date which is thirty (30) days following the date of substantial completion
of the Building, whichever is first to occur (hereinafter referred to as the
"Commencement Date"). Lessor will use its best efforts to have the Building
substantially completed by June 19, 1995. Construction of the Premises shall not
be considered substantially complete until (i) it is substantially completed in
every respect in accordance with the Plans and Specifications, (ii) a
certificate of occupancy for the Building has been issued and delivered to
Lessee, and (iii) the Building is in such condition to allow proper storage of
Lessee's product therein.

2. RIGHT OF EXTENSION - Lessee is hereby granted three (3) separate options to
extend the term of this Lease, each option period to be for five (5) years.
Except as to Fixed Rental (hereinafter defined), and as otherwise provided
herein, Lessee's occupancy of the Premises during such period(s) shall be on and
subject to the same terms and conditions as the Initial Term hereof. This Lease
shall automatically renew for each of said extension periods unless Lessee
gives written notice to Lessor of its intention not to extend this Lease at
least six (6) months prior to the end of the then current term.

<PAGE> 2
3. RENT -
(a) Lessee hereby covenants and agrees to pay to Lessor at its office
or such other place as Lessor may from time to time designate, as rent for the
Premises during the term of this Lease, a rental as set forth below, payable
monthly in advance on the first day of each and every month, commencing on the
Commencement Date. If the Commencement Date hereunder is other than the first of
a month, rental for the partial month shall be prorated on a daily basis.

(b) INITIAL TERM. Rent for the Initial Term shall consist of:

1. FIXED RENTAL = $548,000.000 per year* for the Initial Term,
Payable $45,666.66 per month

*This rental amount assumes that the Building has been fully
racked to accommodate a gross storage capacity of 13,300 pallet
positions, but that Lessee does not need all of said pallet
positions for storage of its pasta and other food products
(sometimes referred to herein as Lessee's "product"). At such
time as Lessor and Lessee agree in writing that the gross pallet
positions needed by Lessee for the storage of Lessee's product
exceeds 10,000, Fixed Rental shall be increased to, and Lessee
shall pay Fixed Rental in the amount of $553,000 per year for
the Initial Term, which amount shall be payable in monthly
installments of $46,083.33. In the event that Lessor and Lessee
shall enter into a materials handling, operating and service
agreement pursuant to which Lessor operates the Premises and
provides services related to the storing, packing, loading, and
shipping of Lessee's product (sometimes referred to herein as
the "Materials Handling Service Agreement"), then Lessor shall
give Lessee written notice at such time that more than 10,000
gross pallet positions are needed for the storage of Lessee's
product.

2. VARIABLE RENTAL: Subject to SECTION 11 herein, Variable Rental
shall be equal to the sum of real estate taxes and assessments levied,
assessed or imposed upon the Premises from and after the Commencement
Date, and insurance and maintenance expenses incurred by Lessor for the
Premises from and after the Commencement Date and during the term of
this Lease (referred to collectively as the "Variable Rental Elements").
Utilities are to be paid directly by Lessee as hereinafter provided.
Maintenance expenses shall consist of all expenses necessary to maintain
all portions of the Premises in good repair, including the racks, the
heating and cooling system, docks and accessories, security system, fire
prevention equipment, routine housekeeping, rodent control, upkeep,
maintenance and repair of grounds, driveways, and parking areas and any
expenses necessary to maintain the compatibility of the Premises with
the storage of food products. Notwithstanding the foregoing, in no event
shall the Variable Rental Elements

<PAGE> 3

include, or Lessee be liable for or be required to pay, any of the
following: (i) repairs that are attributable to any latent defects
(latent defects as used herein shall mean a defect which is
a departure from the Plans and Specifications not apparent upon an
ordinary and reasonable inspection by a professional engineer
qualified to make such inspection); (ii) costs attributable to any
construction defects or to correct any work not in compliance with the
Plans and Specifications; (iii) costs covered by any warranty or
guaranty; (iv) costs related to casualties or liabilities which are
reimbursed by insurance; (v) costs attributable to Lessor's
negligence; (vi) debt service; (vii) the costs of capital improvements
to the Premises, unless Lessee has approved such costs in advance in
writing; or (viii) maintenance and repair costs in excess of $2,500,
unless Lessee has approved such costs in advance in writing.

Subject to SECTION 6 hereof, Lessor shall pay all real estate taxes
and insurance premiums for the Premises and forward copies of said
bills and evidence of payment thereof to Lessee. Lessee shall
reimburse Lessor for the amounts shown as paid on said bills within 15
days of Lessee's receipt of said bills. Lessor will provide an
itemized bill of its maintenance expenses for the Premises to Lessee
on a monthly basis. Lessee shall reimburse Lessor for said
maintenance expenses with 15 days of Lessee's receipt of said
statements.

(c) EXTENSION TERM. Rent for any extension term of this Lease shall
consist of (i) Fixed Rental in an amount to be negotiated in good faith by
Lessor and Lessee with the understanding and agreement that the Fixed Rental for
any extension term shall be significantly lower than the Fixed Rental for the
Initial Term; and (ii) Variable Rental as set forth in (b) above.

4. OPTION TO PURCHASE THE LEASED PREMISES -

(a) EXERCISE OF OPTION. Lessee shall have the right and option to
purchase the Premises at any time during the Initial Term or any extension term
of this Lease only upon the terms and conditions stated below. Lessee shall
exercise its aforesaid option by giving Lessor written notice of Lessee's
election to exercise its option and specifying the date, time and place of
closing, which date (the "Closing Date") shall be neither earlier than thirty
(30) days nor later than sixty (60) days after the notice is given.

(b) QUALITY OF TITLE. If said notice of election to purchase be given
as aforesaid, Lessor shall and covenants and agrees to sell and convey title to
the Premises to Lessee (said title to be subject to the same exceptions,
easements and other matters to which title was subject at the time title was
conveyed by Lessee to Lessor, except as hereinafter provided) on the Closing
Date free and clear of all liens and encumbrances whatsoever except (i) those
described on EXHIBIT B attached hereto, (ii) those to which the Leased Premises
became subject with Lessee's written consent, or which resulted from any failure
of Lessee to perform any of its agreements or obligations under this Lease, and
(iii) taxes and assessments, general and special, for the then

3
<PAGE> 4

current year, if any (the "Permitted Encumbrances"). Lessee's rights under this
SECTION 4 shall be prior to the lien of any mortgage (and collateral mortgage
documents) on the Premises, so long as, in connection with closing, Lessee
agrees that all or a designated portion of the Purchase Price be paid to such
mortgagee, as specified in writing by Lessor and such mortagee.

(c) OPTION TERMS AND PURCHASE PRICE. Lessee shall have the right to
purchase the Premises only upon the conditions set forth in this Section 4 and
for the price and sums (the "Purchase Price") as follows:

1. If (i) the stock ownership of Lessor by the Lanter Family,
as hereafter defined, falls below 50% of the total voting power of all
stock entitled to vote; (ii) Lessor sells, transfers or conveys the
Premises to a person or entity other than Lessee, a member of the Lanter
Family or an entity controlled by the Lanter Family; or (iii) Lessor is
unable or refuses to finance or construct an expansion of the Premises, as
requested by Lessee pursuant to SECTION 32 hereof (unless Lessor's refusal
is based upon (x) a material adverse change in the financial condition of
Lessee or (y) the failure of Lessor and Lessee to reach agreement, upon
good faith negotiations, as to the terms and conditions of the expansion),
then at Lessee's option, Lessee may purchase the Premises from the first
anniversary date of the Commencement Date of this Lease for the price set
forth below based upon the Closing Date of the purchase of the Premises:

(i) From the first anniversary date of the Commencement
Date of this Lease but before the second anniversary date of the
Commencement Date of this Lease the purchase price shall be
$3,855,000.00

(ii) From the second anniversary date but before the third
anniversary date $3,748,000.00

(iii) From the third anniversary date but before the fourth
anniversary date $3,629,000.00

(iv) From the fourth anniversary date but before the fifth
anniversary date $3,495,000.00

(v) From the fifth anniversary date but before the sixth
anniversary date $3,347,000.00

(vi) From the sixth anniversary date but before the seventh
anniversary date $3,181,000.00

(vii) From the seventh anniversary date but before the eighth
anniversary date $2,997,000.00

<PAGE> 5

(viii) From the eighth anniversary date but before the ninth
anniversary date $2,790,000.00.

(ix) From the ninth anniversary date but before the tenth
anniversary date $2,560,000.00.

(x) From the tenth anniversary date but before the eleventh
anniversary date $2,304,000.00.

(xi) From the eleventh anniversary date but before the twelfth
anniversary date $2,017,000.00.

(xii) From the twelfth anniversary date but before the
thirteenth anniversary date $1,698,000.00.

(xiii) From the thirteenth anniversary date but before the
fourteenth anniversary date $1,341,000.00.

(xiv) From the fourteenth anniversary date but before the
fifteenth date $943,000.00.

(xv) From the fifteenth anniversary date of the Commencement
Date of this Lease, if Lessee has exercised its option to extend the term
of this Lease as provided in SECTION 2 hereof, but before the Lease has
terminated, the purchase price shall be $800,000.00.

The Lanter Family is defined to be Wayne Lanter, Steve Lanter, Jeff Lanter,
David Lanter (collectively the "Lanters") and any spouse or child of the
Lanters, and any trust whose primary beneficiary is any of the aforementioned
persons, and the estate of any of the aforementioned persons during its
administration.

2. In addition, Lessee may purchase the Premises at any time from
and after the fifth anniversary date of the Commencement Date of this Lease for
the price determined below based upon the Closing Date of the purchase of the
Premises.

(i) From the fifth anniversary date of the Commencement Date
of this Lease but before the sixth anniversary date of the Commencement
Date of this Lease the purchase price shall be $3,847,000.00.

5
<PAGE> 6

(ii) From the sixth anniversary date of the Commencement
Date of this Lease but before the seventh anniversary date of the
Commencement Date of this Lease the purchase price shall be
$3,681,000.00.

(iii) From the seventh anniversary date of the
Commencement Date of this Lease but before the eighth anniversary date
of the Commencement Date of this Lease the purchase price shall be
$3,497,000.00.

(iv) From the eighth anniversary date of the Commencement
Date of this Lease but before the ninth anniversary date of the
Commencement Date of this Lease the purchase price shall be
$3,290,000.00.

(v) From the ninth anniversary date of the Commencement
Date of this Lease but before the tenth anniversary date of the
Commencement Date of this Lease the purchase price shall be
$3,060,000.00.

(vi) From the tenth anniversary date of the Commencement
Date of this Lease but before the eleventh anniversary date of the
Commencement Date of this Lease the purchase price shall be
$2,804,000.00.

(vii) From the eleventh anniversary date of the
Commencement Date of this Lease but before the the twelfth anniversary
date of the Commencement Date of this Lease the purchase price shall
be $2,517,000.00.

(viii) From the twelfth anniversary date of the
Commencement Date of this Lease but before the thirteenth
anniversary date of the Commencement Date of this Lease the purchase
price shall be $2,198,000.00.

(ix) From the thirteenth anniversary date of the
Commencement Date of this Lease but before the fourteenth anniversary
date of the Commencement Date of this Lease the purchase price shall
be $1,841,000.00.

6
<PAGE> 7

(x) From the fourteenth anniversary date of the
Commencement Date of this Lease but before the fifteenth anniversary
date of the Commencement Date of this Lease the purchase price shall
be $1,443,000.00.

(xi) From the fifteenth anniversary date of the
Commencement Date of this Lease if Lessee has exercised its option to
extend the term of this Lease as provided in SECTION 2 hereof but
before the Lease has terminated, the purchase price shall be
$1,000,000.00.

Lessee shall also pay any sums that are, pursuant to any provisions of this
Lease, due and owing from Lessee to Lessor on the Closing Date. The Purchase
Price shall be paid in cash or certified check on the Closing Date unless
otherwise agreed to by the parties.

Nothing in this SECTION 4 shall release or discharge Lessee from its duty
or obligation under this Lease to make any payment of any rent or other sums
which, in accordance with the terms of this Lease, become due and payable prior
to the Closing Date or its duty and obligation to fully perform and observe all
covenants and conditions herein stated to be performed and observed by Lessee
prior to the Closing Date.

(d) TITLE POLICY. Lessor shall deliver to Lessee, at Lessor's
expense, at or prior to the Closing Date, a title policy in the amount of the
total Purchase Price. The policy shall be issued by a nationally recognized
title insurance company. The title policy shall insure merchantable fee simple
title in Lessee, subject only to the Permitted Encumbrances and shall include
such reasonable endorsements as may be requested by Tenant.

(e) At or before the Closing Date, Lessor shall deliver to Lessee the
following:

(i) an affidavit in form and substance acceptable to Lessee that
Lessor is not a "foreign person" within the meaning of Section
1445(e)(3) of the Internal Revenue Code of 1986, as amended;

(ii) a closing statement in form and content acceptable to Lessor
and Lessee;

(iii) a warranty deed, properly executed and conveying the
Premises to Lessee free and clear of all liens and encumbrances
whatsoever except for the Permitted Encumbrances;

(iv) a Bill of Sale duly executed by Lessor conveying to Lessee
title to any personal property, if any, to be conveyed with the
Premises, which personal property shall be free and clear of any liens
and encumbrances with full warranties of title; and

7
<PAGE> 8

(v) any other documents and instruments, or agreements
as may be required in futherance of the purchase of the
Premises.

(f) On the Closing Date and upon delivery of the above
documents and instruments and satisfaction of any and all other conditions
herein set forth, Lessee shall pay the full purchase price for the Premises to
Lessor, whereupon, this Lease shall, ipso facto, terminate.

(g) Except as otherwise provided herein, closing costs shall
be apportioned between Lessor and Lessee as is customary where the Premises are
located.

(h) In addition, Lessor shall pay the sales, transfer and
documentary taxes and conveyance fees, if any, that might become due because of
the transfer of the Premises.

(i) If for any reason whatsoever the purchase of the Premises
by Lessee pursuant to valid notice of election to purchase given as aforesaid
is not effected on the Closing Date, this Lease shall be and remain in full
force and effect according to its terms the same as though no notice of
election to purchase had been given.

(j) The right of Lessee to exercise an option to purchase the
Premises under the provisions of this Section shall, at Lessee's option, remain
unimpaired notwithstanding any condemnation of title to, or the damage or
destruction by fire or other casualty of, all or any part of the Leased
Premises, and the provisions of SECTIONS 15 and 16 shall be construed in the
light of the effect of said option exercised by Lessee. If Lessee shall
exercise its said option and pay the full Purchase Price, then the condemnation
awards or insurance proceeds received by Lessor, whether received prior to or
after closing, shall belong and be paid to Lessee notwithstanding any other
provision in SECTIONS 15 or 16. Notwithstanding the foregoing, if after
exercise of this option but prior to the Closing Date any of the Premises are
destroyed or substantially damaged by fire or any other cause, or the Premises
or part thereof is taken by eminent domain (or is the subject of a pending or
contemplated taking which has not been consummated). Lessee shall also have
the right to cancel this option by written notice. If this option is
canceled, this Lease shall be and remain in full force and effect according to
its terms the same as though no election to purchase had been exercised.

5. FIRST MONTH'S RENT AND DEPOSIT - Lessee shall deposit upon execution of
this Lease $45,666.66 with Lessor as security for the payment of rent and the
compliance by Lessee with other terms of this Lease. This deposit shall be
applied to the first month's Fixed Rental under this Lease.

6. TAXES - Promptly upon receipt and prior to payment thereof, Lessor
shall provide a copy to Lessee of all bills for real estate taxes and
assessments levied, assessed or imposed upon the Premises during the term of
this Lease. Lessor agrees that Lessee shall have the right, in Lessee's or
Lessor's name, but at Lessee's sole cost and expense, to contest the amount or
validity of any tax or assessment by appropriate proceedings, timely
instituted, provided that (a) Lessee gives

<PAGE> 9
Lessor written notice of Lessee's intention to do so at least twenty (20) days
prior to the delinquency thereof and (b) Lessee diligently prosecutes any such
contest, at all times effectively stays or prevents any official or judicial
sale of the Premises, under execution or otherwise, pays any final judgment
enforcing any tax or assessment so contested, and promptly procures and records
satisfaction thereof. Lessor shall pay all real estate taxes and assessments
unless Lessee gives written notice to Lessor as set forth above and notifies
Lessor that payment thereof, or payment thereof under protest, would operate as
a bar to such contest or interfere materially with the prosecution thereof, in
which event Lessor shall, upon request by Lessee, postpone or defer payment of
such tax or assessment if (i) neither the Premises nor any portion thereof
would, by reason of such postponement or deferment, be in danger of being
forfeited or lost, and (ii) Lessee shall have deposited with Lessor cash, a
certificate of deposit payable to Lessor, bond or other security reasonably
acceptable to Lessor in the amount of the tax or assessment so contested and
unpaid. Lessor shall, if requested by Lessee, cooperate with Lessee in any such
proceedings; provided, however, that Lessor shall not be liable for any expenses
whatsoever in connection therewith.

7. SHORT FORM LEASE - This Lease shall not be recorded, but the parties
agree to execute a Short Form Lease setting forth the above option to purchase,
substantially in the form attached hereto as EXHIBIT C.

8. UTILITIES - Lessee agrees to promptly pay all electric, gas, water and
sewer services and other utilities used or consumed on the Premises.

9. COMPATIBILITY OF PREMISES - Lessor understands that the Premises must be
compatible with the storage of food products, as specified on EXHIBIT D attached
hereto and by this reference made a part hereof, and the Premises will be so
maintained. The expenses for such maintenance shall be included in the Variable
Rental Elements.

10. INSURANCE

(a) Property

(i) Lessor shall throughout the life of this Lease, keep the
Premises and all parts thereof constantly insured in an amount equal to the full
replacement value thereof, except for land and such parts as, in the opinion of
Lessor and Lessee, are not properly subject to insurance, in such insurance
company or companies authorized to do business in the State of South Carolina as
may be approved by Lessee. The form of the policy or policies and the risks
covered thereby, shall be as from time to time reasonably directed by Lessee,
and if no form is prescribed by Lessee, such insurance policy shall be
"all-risk" extended coverage insurance. The term "full replacement value," as
used herein, shall mean the full actual replacement cost. Concurrently with the
execution of this Lease and thereafter not less than thirty (30) days prior to
the expiration date of the expiring policy(ies) Lessor shall deliver to Lessee a
copy or certificate of the policy provided for in this Section.

9
<PAGE> 10
(ii) Lessor shall also provide a standard form Warehouseman's
Legal Liability Insurance in the event that a Materials Handling Service
Agreement, is entered into by and between Lessor and Lessee.

(iii) Lessee shall provide insurance covering Lessee's
inventory and personal property for its full replacement value. Lessor shall
not provide insurance protection for Lessee's personal property and inventory,
except Warehouseman's Legal Liability Insurance under the condition stated in
subparagraph (ii) above.

(b) INDEMNIFICATION - LIABILITY INSURANCE

(i) Lessor shall not be liable to Lessee for any loss or
damage to Lessee or to any other person or to the property of Lessee or of any
other person except to the extent that such loss or damage shall be caused by
the intentionally tortious or negligent act of Lessor, its agents, servants or
employees. Subject to SECTION 10(C) of this Lease, Lessee shall and does
hereby agree to indemnify and save harmless Lessor, its successors or assigns,
from all claims and demands of every kind (unless arising out of or resulting
from the negligent or intentional act or omission of Lessor), that may be
brought against Lessor, its successors or assigns or any of them for or on
account of any damage, loss or injury to persons or property in or about the
Premises or the Building and its appurtenances, including damage to the
Premises, (i) arising from or out of Lessee's use or occupancy thereof, or (ii)
occasioned wholly or in part by any act or omission of Lessee, its agents,
servants, contractors, employees or invitees, and from any and all costs and
expenses, reasonable counsel fees and other charges which may be imposed upon
Lessor, its successors and assigns, or which Lessor, its successor or assigns
may incur in consequence thereof. Subject to SECTION 10(C) of this Lease,
Lessor shall and does agree to indemnify and save harmless Lessee, its
successors or assigns, from all claims and demands of every kind, that may be
brought against Lessee, its successors or assigns or any of them, for or on
account of any damage, loss or injury to persons or property in or about the
Premises arising out of the negligent or intentional act or omission of
Lessor, its agent, servants, contractors, employees or invitees, and from any
and all costs and expenses, reasonable counsel fees and other charges which may
be imposed upon Lessee, its successors and assigns, or which Lessee, its
successors or assigns may incur in consequences thereof. The provisions of
this SUBSECTION 10(B) shall survive the termination of this Lease.

(ii) Lessee covenants and agrees that Lessee will, throughout
the term of this Lease, carry and pay for comprehensive commercial general
liability with contractual liability insurance coverage with a company
reasonably satisfactory to Lessor, with a minimum limit of $3,000,000.00
combined single limit per occurrence, and will furnish Lessor with an original
signed counterpart of the certificate evidencing such coverage. All insurance
maintained by Lessee under this Lease shall name Lessor and/or Lessor's
designee as additional insureds, and shall also contain a provision stating
that such policy or policies shall not be canceled or materially altered except
after 30 days' prior written notice to Lessor, and if applicable, Lessor's
designee. If at any time Lessee does not comply with the covenants made in
this subsection, in addition to any

10
<PAGE> 11

other remedies to which Lessor may be entitled, Lessor may, at Lessor's option,
cause insurance as aforesaid to be issued, and Lessee agrees to pay the premium
for such insurance within 10 days of Lessor's written demand, together with 15%
of such premium for reimbursement to Lessor for Lessor's ancillary
administrative expenses related thereto.

(c) SUBROGATION - Each party (the "Releasing Party") hereby releases
the other party (the "Released Party") from any and all liability or
responsibility (to the Releasing Party by way of subrogation or otherwise) which
the Released Party would, but for this Section 10(c) have had to the Releasing
Party during the term of this Lease, resulting from the occurrence of any
accident or occurrence or casualty (i) which is or would be covered by a fire
and extended coverage policy (with vandalism and malicious mischief endorsement
attached) (irrespective of whether such coverage is being carried by the
Releasing Party), or (ii) covered by any other casualty or property damage
insurance being carried by the Releasing Party at the time of such occurrence,
even if such casualty resulted in whole or in part from any act or neglect of
the Released Party, its partners, officers, agents or employees; provided,
however, that the releases herein contained shall not apply to any loss or
damage occasioned by the intentionally tortious act of the Released Party. Each
Party hereto shall obtain a waiver from any insurance carrier with which it
carries insurance covering the Premises or the contents thereof, releasing its
subrogation rights against the other party.

11. REPAIRS, MAINTENANCE, SECURITY, HOUSEKEEPING, SANITATION - In the event
that a Materials Handling Service Agreement is entered into by and between
Lessor and Lessee, Lessor shall maintain all portions of the Premises in good
repair and shall be responsible for all repairs to racks, heating, docks and
accessories, including security system and fire prevention equipment. Lessor
will also be responsible for and shall conduct throughout the term hereof: (a)
routine housekeeping operations to keep the Premises free from dirt and debris
and (b) insect and rodent control including trapping not only in the storage
area but also the dock area and building perimeter. Should said Materials
Handling Service Agreement not be entered into as hereinabove provided, or if
entered into, be terminated prior to the expiration of the term of this Lease,
Lessee shall assume responsibility subject to SECTION 10(C) hereof, for all
maintenance, security, housekeeping, and sanitation referred to in this Lease
including this SECTION 11 and SECTIONs 3 and 9, herein, and maintenance costs
shall be removed as a Variable Rental Element from the calculation of Variable
Rental. In the event that Lessee assumes responsibility for the maintenance of
the Building, it shall not be responsible for the cost or repair of latent
defects (as defined in SECTION 3(B)), construction defects, costs attributable
to correct any work not in compliance with the Plans and Specifications, or
costs attributable to Lessor's negligence, and such repairs shall be made by
Lessor at its sole cost and expense. In addition, Lessee, for purposes of its
maintenance obligations hereunder, shall have the benefit of all warranties and
guarantees which Lessor may have upon construction of the Building, to the
extent said warranties and guarantees are assignable, and Lessor shall assign to
Lessee all of said warranties and guarantees, to the extent assignable.

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<PAGE> 12

12. DEFAULT

A. EVENTS OF DEFAULT - The following events shall be deemed to be
events of default by Lessee under this Lease:

(1) Lessee shall fail to pay any installment of the rent herein
reserved when due, or any other payment or reimbursement to Lessor required
herein when due, and such failure shall continue for a period of ten (10)
days after written notice thereof to Lessee.

(2) Lessee shall become insolvent, or shall make a transfer in
fraud of creditors, or shall make an assignment for the benefit of
creditors.

(3) Lessee shall file a petition under any section or chapter of
the National Bankruptcy Code, as amended, or under any similar law or
statute of the United States or any State thereof; or an order for relief
shall be entered against Lessee in any proceedings filed against Lessee
thereunder.

(4) A receiver or trustee shall be appointed for all or
substantially all of the assets of Lessee.

(5) Lessee shall fail to discharge any lien placed upon the
Premises arising from a debt asserted against Lessee within twenty (20)
days after any such lien or encumbrance is filed against the Premises,
provided, however, the notwithstanding the foregoing, Lessee shall have
the right to contest any mechanics' or other similar lien if it notifies
Lessor in writing of its intention to do so, posts a bond with surety
sufficient to satisfy any and all mechanics' liens and similar liens and
all costs associated therewith, it diligently prosecutes such protest, and
at all times affectively stays or prevents any official or judicial sale of
the Premises, or any part thereof or interest therein, and pays or
otherwise satisfies any final judgment adjudging or enforcing such
contested lien claim and thereafter promptly procures record release or
satisfaction thereof.

(6) Lessee shall fail to comply with any term, provision or
covenant of this Lease other than the foregoing in this SECTION 12 and
shall not cure such failure within thirty (30) days after written notice
thereof to Lessee (or such longer period as required to cure the default,
if Lessee is diligently pursuing the cure of said default).

B. REMEDIES

(1) Upon the occurrence of any of such events of default described in
SECTION 12 hereof, Lessor shall have the option to pursue any one or
more of the following remedies without any notice or demand
whatsoever.

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(a) Terminate this Lease, in which event Lessee shall immediately
surrender the Premises to Lessor, and if Lessee fails so to do, Lessor
may, without prejudice to any other remedy which it may have for
possession or arrearage in rent, enter upon and take possession of the
Premises and expel or remove Lessee or any other person who may be
occupying the Premises or any part thereof, by force if necessary,
without being liable for prosecution or any claim of damages therefor.

(b) Enter upon and take possession of the Premises and expel or remove
Lessee and any other person who may be occupying such Premises or any
part thereof, without terminating this Lease and without being liable
for prosecution or any claim for damages therefor, and relet the
premises and receive the rent therefor.

(c) Enter upon the Premises, without terminating this Lease and without
being liable for prosecution or any claim for damages therefor, and do
whatever Lessee is obligated to do under the terms of this Lease; and
Lessee agrees to reimburse Lessor on demand for any expenses which
Lessor may incur in thus effecting compliance with Lessee's obligations
under this Lease, and Lessee further agrees that Lessor shall not be
liable for any damages resulting to the Lessee from such action, whether
caused by the negligence of Lessor or otherwise.

(d) Alter all locks and other security devices at the Premises without
terminating this Lease.

In the event Lessee fails to pay any installment of rent hereunder after
written notice to Lessee and within the cure period provided, to help defray
the additional cost to Lessor for processing such late payments Lessee shall
pay to Lessor on demand a late charge in an amount equal to five percent (5%)
of such installment; and the failure to pay such amount within ten (10) days
after demand therefor shall be an event of default hereunder. The provision for
such late charge shall be in addition to all of Lessor's other rights and
remedies hereunder or at law and shall not be construed as liquidated damages
or as limiting Lessor's remedies in any manner.

(2) Exercise by Lessor of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be in acceptance of surrender of the
premises by Lessee, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Lessor and Lessee. All claims for damages by reason of such re-entry and/or
repossession and/or alteration of locks or other security devices are hereby
waived, as are all claims for damages by reason of any distress warrant.

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<PAGE> 14
forcible detainer proceedings, sequestration proceedings or other legal process.
Lessee agrees that any re-entry by Lessor may be pursuant to judgment obtained
in forcible detainer proceedings or other legal proceedings and Lessor shall not
be liable in trespass or otherwise.

(3) In the event Lessor elects to terminate the Lease by reason of an event
of default, then notwithstanding such termination, Lessee shall be liable for
and shall pay to Lessor, at the address specified for notice to Lessor herein:
(a) the sum of all rental and other indebtedness accrued to date of such
termination; (b) plus, as damages, an amount equal to the difference between (i)
the total rental hereunder for the remaining portion of the Lease term (had such
term not been terminated by Lessor prior to the date of expiration stated in
Section 1) and (ii) the then present value of the then fair rental values of the
Premises for such period.

(4) In the event that Lessor elects to repossess the premises without
terminating the Lease, then Lessee shall be liable for and shall pay to Lessor,
at the address specified for notice to Lessor herein, all rental and other
indebtedness accrued to the date of such repossession, plus rental required to
be paid by Lessee to Lessor during the remainder of the Lease term until the
date of expiration of the term as stated in SECTION 1 diminished by any net sums
thereafter received by Lessor through reletting the premises during said period
(after deducting expenses incurred by Lessor as provided in subsection (5)
below). In no event shall Lessee be entitled to any excess of any rental
obtained by reletting over and above the rental herein reserved. Actions to
collect amounts due by Lessee to Lessor under this subsection may be brought
from time to time, on one or more occasions, without the necessity of Lessor's
waiting until expiration of the Lease term.

(5) In case of any event of default by Lessee, or threatened or anticipatory
default, Lessee shall also be liable for and shall pay to Lessor, at the address
specified for notice to Lessor herein, in addition to any sum provided to be
paid above, reasonable brokers' fees incurred by Lessor in connection with
reletting the whole or any part of the Premises, the costs of removing and
storing Lessee's property, the costs of repairing, altering, remodeling or
otherwise putting the Premises into condition acceptable to a new tenant or
tenants, and all reasonable expenses incurred by Lessor in enforcing or
defending Lessor's rights and/or remedies including reasonable attorney's fees,
which shall not be less than fifteen percent (15%) of all sums then owing by
Lessee to Lessor whether suit is actually filed or not.

(6) In the event of Lease termination or repossession of the Premises for an
event of default by Lessee, Lessor shall not have any obligation to relet or to
attempt to relet the Premises, or any portion thereof, or to collect rental
after reletting; and in the event of reletting, Lessor may relet the whole or
any portion of the Premises for any period to any tenant and for any use and
purpose.

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<PAGE> 15

(7) If Lessee should fail to make any payment or cure any default
hereunder within the time herein permitted, Lessor, without being under
any obligation to do so and without thereby waiving such default, may
make such payment and/or remedy such other default for the account of
Lessee (and enter the Premises for such purpose), and thereupon Lessee
shall pay Lessor, upon demand, all costs, expenses and disbursements
(including reasonable attorney's fees) reasonably incurred by Lessor in
taking such remedial action.

(8) In the event Lessor shall have taken possession of the Premises
pursuant to the authority herein granted then Lessor shall have the
right to keep in place and use all of the furniture, fixtures and
equipment at the Premises, including that which is owned by or leased to
Lessee at all times prior to any foreclosure thereon by Lessor or
repossession thereof by any lessor thereof or third party having a lien
thereon. Lessor shall also have the right to remove from the Premises
(without the necessity of obtaining a distress warrant, writ of
sequestration or other legal process) all or any portion of such
furniture, fixtures, equipment and other property located thereon and to
place same in storage at any premises within the County in which the
Premises is located; and in such event, Lessee shall be liable to Lessor
for costs incurred by Lessor in connection with such removal and
storage. Lessor shall also have the right to relinquish possession of
all or any portion of such furniture, fixtures, equipment and other
property to any person ("Claimant") claiming to be entitled to
possession thereof who presents to Lessor a copy of any instrument
represented to Lessor by Claimant to have been executed by Lessee (or
any predecessor of Lessee) granting Claimant the right under various
circumstances to take possession of such furniture, fixtures, equipment
or other property, without the necessity on the part of the Lessor to
inquire into the authenticity of said instrument's copy of Lessee's or
Lessee's predecessor's signature thereon and without the necessity of
Lessor making any nature of investigation or inquiry as to the validity
of the factual or legal basis upon which Claimant purports to act; and
Lessee agrees to indemnify and hold Lessor harmless from all cost,
expense, loss, damage and liability incident to Lessor's relinquishment
of possession of all or any portion of such furniture, fixtures,
equipment or other property to Claimant. The rights of Lessor herein
stated shall be in addition to any and all other rights which Lessor has
or may hereafter have at law or in equity; and Lessee stipulates and
agrees that the rights herein granted Lessor are commercially
reasonable.

(9) Nothing herein shall be construed to give rise to or create a
warehouseman's lien on or security interest in, any of Lessee's product
stored on the Premises.

13. ASSIGNMENT OR SUBLETTING - Lessee shall not sublet or assign the Lease
hereunder except with the written consent of Lessor which consent shall not be
unreasonably withheld. Such consent is not necessary if the Lease or assignment
is made to a subsidiary, affiliate or parent company of Lessee for storage of
the same products as stored by Lessee, but such consent and permission of
Lessor must be obtained for products which are not the same. Consent of the
Lessor will not be unreasonably withheld particularly if such products are
compatible and do not alter the physical character of the Building. Provided
the Lessee performs

<PAGE> 16
all its covenants, agreements, and obligations hereunder, the Lessee shall have
the peaceful and quiet enjoyment of the Premises without hindrance on the part
of Lessor and the Lessor will warrant and defend the Lessee in the peaceful and
quiet enjoyment of the Premises against the lawful claims of all persons
claiming by, through, or under Lessor.

14. ACCESS TO PREMISES -

(a) If a Materials Handling Service Agreement is in effect between
Lessor and Lessee regarding the Premises, Lessor and its representative
may, enter the Premises at all reasonable times for the purpose of: (1)
examining the same or to make any alterations or repairs to the Premises
that Lessor may deem necessary for safety or preservation of the facility;
(2) exhibiting the Premises for sale or mortgage financing; (3) during the
last six (6) months of the term of this Lease for exhibiting the Premises
and putting up the usual notice "to rent," which notice shall not be
removed, obliterated, or hidden by Lessee; and (4) performing under a
Materials Handling Service Agreement between Lessor and Lessee; provided,
however, that any such action by Lessor as aforesaid in this section shall
cause as little inconvenience to Lessee as reasonably practicable, and such
action shall not be deemed an eviction or disturbance of Lessee nor shall
Lessee be allowed any abatement of rent, or damage for an injury of
inconvenience occasioned thereby.

(b) If a Materials Handling Service Agreement is not in effect
between Lessor and Lessee, regarding the Premises, Lessor and its
representative may, upon notifying Lessee in writing at least twenty four
(24) hours in advance thereof, enter the Premises at all reasonable times
for the purpose of: (1) examining the same or to make any alterations or
repairs to the Premises that Lessor may deem necessary for safety or
preservation of the facility; (2) exhibiting the Premises for sale or
mortgage financing, and (3) during the last six (6) months of the term of
this Lease for exhibiting the Premises and putting up the usual notice "to
rent," which notice shall not be removed, obliterated, or hidden by Lessee,
provided, however, that any such action by Lessor as aforesaid in this
section shall cause as little inconvenience to Lessee as reasonably
practicable, and such action shall not be deemed an eviction or disturbance
of Lessee nor shall Lessee be allowed any abatement of rent, or damage for
an injury of inconvenience occasioned thereby.

15. DAMAGE OR DESTRUCTION

(a) If during the term of this Lease the Premises are damaged by fire or
other casualty, but not to the extent that Lessee is prevented from carrying on
business in the Premises, Lessor shall promptly cause the Premises and the
improvements thereon to be repaired or restored at its sole cost and risk to
substantially the condition in which they existed prior to such damage. If such
damage renders any portion of the Premises untenantable, the rent reserved
hereunder (except for variable rent) shall be reduced during the period of its
untenantability proportionately to the amount by which the area so rendered
untenantable bears to the entire area of the Premises, and such reduction shall
be apportioned from the date of the casualty to the date when the

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Premises is rendered fully tenantable. Provided, however, that if Lessor under
a Materials Handling Service Agreement then in existence between Lessor and
Lessee, can meet Lessee's service requirements for the Premises without
additional cost to Lessee, despite the damage to the Premises, then no
abatement of rent shall occur. Notwithstanding the foregoing, in the event
such fire or other casualty damages or destroys any of Lessee's leasehold
improvements, alterations, betterments, fixtures or equipment (exclusive of
any such leasehold improvements, alterations, betterments, fixtures or
equipment provided to Lessee by Lessor at Lessor's expense at the commencement
of this Lease, which shall be restored by Lessor), Lessee shall cause the same
to be repaired or restored at Lessee's sole expense (other than Lessee's
personal property or equipment, which Lessee may elect, in Lessee's sole
discretion, to repair or restore).

(b) If during the term of this Lease the Premises are rendered
wholly untenantable as a result of fire, the elements, or other casualty,
Lessor and Lessee shall cause such damage to be repaired in accordance with the
provisions of SUBSECTION 15(A). Such restoration shall be completed as
promptly as reasonably possible under the circumstances and the fixed rent
reserved hereunder shall abate until the Premises are again rendered
tenantable. Notwithstanding the foregoing, in the event that it is reasonably
determined by Lessor and Lessee that the Premises cannot be repaired by Lessor
within one hundred twenty (120) days, and if Lessor is unable to provide
alternative, comparable warehouse space sufficient to meet Lessee's service
requirements without additional cost to Lessee, then Lessee shall have the right
to terminate this Lease by written notice to Lessor within thirty (30) days
after the date of such casualty.

16. CONDEMNATION

(a) If during the term of this Lease all or a substantial part of
the Premises are taken by or under power of eminent domain, this Lease shall
terminate as of the date of such taking, and the rent (fixed and variable)
shall be apportioned to and abate from and after, the date of taking. Lessee
shall have no right to participate in any award or damages for such taking
and, subject to SECTION 16(D) below, hereby assigns all of its right, title and
interest therein to Lessor. For the purposes of this Section, "a substantial
part of the Premises" shall mean such part that the remainder thereof is
rendered inadequate for Lessee's business and that such remainder cannot
practicably be repaired and improved so as to be rendered adequate to permit
Lessee to carry on its business with substantially the same efficiency as
before the taking, as determined in Lessor's and Lessee's reasonable judgment.

(b) If during the term of this Lease less than a substantial part
of the Premises (as hereinabove defined) is taken by or under power of eminent
domain, this Lease shall remain in full force and effect according to its
terms, and Lessee shall not have the right to participate in any award or
damages for such taking and Lessee hereby assigns, subject to SECTION 16(D)
below, all of its right, title and interest in and to the award to Lessor. In
such event Lessor shall at its expense promptly make such repairs and
improvements as shall be necessary to make the remainder of the Premises
adequate to permit Lessee to carry on its business to substantially the same
extent and with substantially the same efficiency as before the taking. If as
a result of such

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taking any part of the Premises is rendered permanently unusable, the rent
reserved hereunder shall be reduced in such amount as may be fair and
reasonable, which amount shall not exceed the proportion which the area so taken
or made unusable bears to the total area which was usable by Lessee prior to
the taking. If the taking does not render any part of the Premises unusable,
there shall be no abatement of rent.

(c) For purposes of this Section "taking" shall include a negotiated
sale or lease and transfer of possession to a condemning authority under bona
fide threat of condemnation, and Lessor alone shall have the right to negotiate
with the condemning authority and conduct and settle all litigation connected
with the condemnation. As used herein, the words "award or damages" shall, in
the event of such sale or settlement, include the purchase or settlement price.

(d) Nothing herein shall be deemed to prevent Lessee from claiming and
receiving from the condemning authority, if legally payable, compensation for
the taking of Lessee's own tangible property and damages for Lessee's loss of
business, business interruption, or removal and relocation; provided such
compensation does not in any way decrease the amount of the award or damages to
which Lessor may be entitled by reason of such taking.

17. SUBORDINATION

(a) This Lease shall be subject to and subordinate at all times to the
lien of any mortgages and/or deeds of trust now or hereafter made on the
Premises and to all advances made or hereafter to be made thereunder (unless the
mortgagee or holder of the deed of trust elects to have Lessee's interest
hereunder superior to the interest of the mortgagee or holder of such deed of
trust) on and subject to the following conditions: (i) Lessee and the
respective mortgagee have entered into the Non-Disturbance Agreement
hereinafter described; (ii) the respective mortgagee shall agree in writing
that the lien of its mortgage shall be fully released upon exercise by Lessee of
its option to purchase hereunder and upon payment to said mortgagee of the
Purchase Price, or part thereof as is specified in writing by Lessor and said
mortgagee; and (iii) the mortgagee shall not interfere with, hinder or molest
Lessee's right of quiet enjoyment under this Lease, nor the right of Lessee to
continue to occupy the Premises, and all portions thereof, and to conduct its
business thereon and to be entitled to the rights, benefits and options
(including but not limited to options to renew and purchase) granted to Lessee
herein in accordance with the covenants, conditions, provisions, terms and
agreements of this Lease. Subject to the above conditions, Lessee agrees to
execute, within 10 days of Lessor's request therefor, any and all documents
which are desired to effect or confirm such subordination.

(b) As long as Lessee is paying the rent and observing and performing
all other terms as provided for in this Lease, the mortgagee, or if more than
one, mortgagees, shall not disturb Lessee's possession. To assure that Lessee's
quiet enjoyment of the Premises shall not be disturbed, Lessee and mortgagee
have entered, or in the case of mortgages filed after the date hereof, will
enter, into an agreement (the "Non-Disturbance Agreement") substantially in the
form attached hereto as EXHIBIT E and made a part hereof.

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(c) In the event that Lessor should at any time fail to pay any
installment or interest under any mortgage, or any other sum required to be
paid by Lessor, which failure constitutes a default under any mortgage so as
to permit a foreclosure thereof, Lessee, upon being notified by such mortgage of
Lessor's default, shall have the right, but not the obligation, to pay such
principle, interest or other sums of which Lessor is in default, and to deduct
the amount of such payment, along with the costs incurred by Lessee on account
of Lessor's default, from the successive installments of rent then due or
thereafter due, until Lessee is fully reimbursed for any and all such payments,
costs, expenses and interests.

18. RIGHT TO PERFORM COVENANTS - If Lessee shall fail to perform any
covenant or duty required of it by this Lease or by law or shall take any
action requiring Lessor's consent without having obtained such consent, Lessor
shall have the right (but not the obligation), after giving Lessee such notice
and right to cure as provided for herein, to perform such covenant or duty or
to take any action to terminate any acts of Lessee undertaken without Lessor's
consent, and if necessary to enter the Premises for such purposes without
notice. The cost thereof to Lessor shall be payable by Lessee, within 10 days
of Lessor's demand therefor, and Lessor shall have the same rights and remedies
with respect to such costs as for rent. If Lessor shall fail to perform any
covenant or duty required of it by this Lease or by law, Lessee shall have the
right (but not the obligation), upon thirty (30) days prior written notice to
Lessor, to perform such covenant. The cost thereof to Lessee shall be payable
by Lessor within ten (10) days after Lessee's demand therefor, and if Lessor
fails to so pay Lessee, Lessee shall have the right to offset such costs
against any and all rent due hereunder, or, in the event Lessee exercises the
option to purchase set forth in SECTION 4 of this Lease, to credit any and all
of said costs against the Purchase Price.

19. WATER AND OTHER DAMAGE - Unless caused by Lessor's intentionally
tortious act, Lessor shall not be liable for, and Lessor is hereby released and
relieved from, and Lessee hereby waives, all claims and demands of any kind by
reason of or resulting from, damage or injury to person or property of Lessee,
or any other party, directly or indirectly caused by (a) dampness, water, rain
or snow, in any part of the Premises or in any part of the building, the land,
or of any portion thereof leased to Lessee (whether attributable to roof
leakage or otherwise) and/or (b) any leak or break in any gas or electric line
in any part of the Premises, or any leak or break in any pipes, appliances or
plumbing, or from sewers, or from any other place or any part of the buildings,
Land, or any portion thereof leased to Lessee.

20. COVENANT OF QUIET ENJOYMENT - So long as the Lessee pays the rent, and
performs all of its obligations in this Lease, the Lessee's possession of the
Premises will not be disturbed by Lessor, or any party claiming by, through or
under Lessor.

21. LIMITATION ON TENANTS RECOURSE - The Lessee's sole recourse against the
Lessor, and any successor to the interest of the Lessor in the Premises, is to
the interest of the Lessor, and any such successor, in the Premises. The Lessee
will not have any right to satisfy any judgment which it may have against the
Lessor, or any such successor, from any other assets of

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<PAGE> 20
the Lessor, or any such successor. In this Section the terms "Lessor" and
"successor" include the shareholders, venturers, and partners of "Lessor" and
"successor" and the officers, directors, and employees of "Lessor" and
"successor". The provisions of this section are not intended to limit the
Lessee's right to seek injunctive relief or specific performance, or the
Lessee's right to claim the proceeds of insurance (if any) specifically
required to be maintained by the Lessor hereunder. This provision will not be
applicable to losses, damages or liabilities suffered by Lessee arising out of
any fraud or willful or intentional misrepresentation in this Lease by Lessor
or other intentionally tortious act of Lessor.

22. MISCELLANEOUS - ESTOPPEL CERTIFICATES - Within no more than thirty (30)
days after written request by Lessor, Lessee will execute, acknowledge, and
deliver to Lessor a certificate stating (a) that this Lease is unmodified and
in full force and effect, or, if the Lease is modified, the way in which it is
modified accompanied by a copy of the modification agreement, (b) the date to
which rental and other sums payable under this Lease have been paid, (c) that no
notice has been received by Lessee of any default which has not been cured, or,
if such a default has not been cured, what Lessee intends to do in order to
effect the cure, and when it will do so, (d) that Lessee has accepted and
occupied the Premises, (e) that Lessee has no claim or offset against Lessor,
or, if it does, stating the circumstances which gave rise to the claim or
offset, (f) that Lessee is not aware of any prior assignment of this Lease by
Lessor, or, if it is, stating the date of the assignment and assignee (if known
to Lessee), and (g) such other matters as may be reasonably requested by
Lessor. Any such certificate may be relied upon by any prospective purchaser of
the Premises and any prospective mortgagee or beneficiary under any deed of
trust or mortgage encumbering the Premises. If Lessor submits a completed
certificate to Lessee, and if Lessee fails to object to its contents within
thirty (30) days after its receipt of the completed certificate, the matters
stated in the certificate will conclusively be deemed to be correct.
Furthermore, Lessee irrevocably appoints Lessor as Lessee's attorney-in-fact to
execute and deliver on Lessee's behalf any completed certificate to which
Lessee does not object within thirty (30) days after its receipt.

23. HOLDING OVER - At the termination of this Lease by lapse of time,
Lessee shall forthwith surrender possession of the Premises or, failing to do
so, shall pay, at the election of Lessor, for each day possession is withheld,
double the Fixed Rental herein to be paid by Lessee hereunder. The provisions
of this Section shall not be held to be a waiver by Lessor of any right of
re-entry, nor shall the receipt of such double rent, or any other act in
apparent affirmance of the tenancy, operate to create a periodic tenancy or a
tenancy at will or as a waiver of the right to terminate this Lease at any time.

24. USE OF PROPERTY

(a) Manner of Use - Lessee shall not cause or permit the property
to be used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, or which constitutes a nuisance or waste.
Lessor shall obtain and pay a Certificate of Occupancy and Lessee shall obtain
and pay for all other permits, including floor tax or personal property tax.

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<PAGE> 21

required for or related to Lessee's occupancy of the property and shall promptly
take all actions necessary to comply with all applicable statutes, ordinances,
rules, regulations, orders and requirements regulating or required as a direct
result of, the Lessee's use of or activities conducted on the Premises,
including the Occupational Safety and Health Act, federal, state and local
environmental laws and regulations, and the Americans with Disabilities Act.

Lessee shall use the Premises as a warehouse for food products and
other products dealt in by Lessee or its affiliates so long as compatible with
the operation of the Premises as a food warehouse.

Lessee may not make material changes, alterations, or improvements to
the Premises without Lessor's written approval, which approval shall not be
unreasonably withheld.

(b) HAZARDOUS MATERIALS - As used in this Lease, the term
"Hazardous Materials" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state
or local laws or regulations, including without limitation petroleum-based
products, paints, solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia compounds and other chemical products, asbestos, PCBs and
similar compounds, and including any different products and materials which are
subsequently found to have adverse effects on the environment or the health and
safety of persons. Lessee shall not cause or permit any Hazardous Material
(other than insecticides, pesticides and other substances used in the ordinary
course of Lessee's business for pest control, if used in accordance with
government standards for a food warehouse) to be generated, produced, brought
upon, used, stored, treated or disposed of in or about the Premises by Lessee,
its agents, employees, contractors, sublessees or invitees without the prior
written consent of Lessor.

Lessee represents and warrants that Lessee shall defend, indemnify and
hold Lessor harmless from and against any and all claims, damages, demands,
actions, causes of action, costs and expenses, including fines, penalties and
reasonable attorney fees, on account of, or in any way relating to Hazardous
Materials introduced to or used upon the Premises by Lessee.

25. COMPATIBLE WAREHOUSE CUSTOMERS - Lessor hereby agrees that if and to
the extent Lessee does not need or use all of the Premises in connection with
the warehousing of its products, Lessor will use its best efforts to obtain
additional compatible warehouse customers for the Premises to utilize space not
needed by Lessee in connection with its use of the Premises. Such additional
warehouse customers and the length of their respective lease, storage or
warehouse agreement shall be subject to the prior written approval of Lessee.
All storage charges paid by such additional warehouse customers shall be
applied to reduce the amount of Fixed Rental and Variable Rental payable by
Lessee hereunder.

21
<PAGE> 22
26. ENTIRE AGREEMENT - This Lease contains the entire agreement between the
parties and any executory agreement hereafter made shall be ineffective to
change, modify or discharge the Lease in whole or in part unless such executory
agreement is in writing and signed by both of the parties hereto.

27. GOVERNING LAW - This Lease shall be interpreted and enforced in
accordance with and governed by the laws of the State of South Carolina, and
any litigation which may arise shall be litigated in the State of Missouri,
except that any litigation affecting possession of, or an estate in, the
Premises requiring enforcement in South Carolina shall be litigated in South
Carolina.

28. NOTICES - Notices and demands shall be given by Certified Mail at the
addresses below, or at such other address as either party may by notice
designate:

LESSEE: AMERICAN ITALIAN PASTA COMPANY
1000 Italian Way
Excelsior Springs, MO 64024

LESSOR: LANTER COMPANY
1600 COLLINSVILLE AVENUE
MADISON, IL 62060
ATTENTION: PRESIDENT

29. SURVIVAL OF OBLIGATIONS - All obligations of Lessee or Lessor which by
their nature involve performance, in any particular, after the end of the term,
or which cannot be ascertained to have been fully performed until after the
term of this Lease has expired or been terminated, and all representations,
warranties and indemnifications set forth herein, shall survive the expiration
or sooner termination of the term of this Lease.

30. REPRESENTATIONS AND WARRANTIES OF LESSOR -

(a) Lessor is a Delaware corporation, duly organized validly existing
and in good standing in the State of South Carolina. Lessor has full right and
authority to enter into this Lease for the full term hereof and has taken all
action necessary to authorize this Lease.

(b) All utilities necessary for the use and operation of the Premises
under this Lease are available at the Premises.

<PAGE> 23
(d) To the best of Lessor's knowledge, the Premises are in compliance with
all applicable statutes, ordinances, rules, regulations, orders and other
governmental requirements. The Premises shall be constructed by Lessor in
accordance with all applicable building codes, laws and regulations.

31. SIGNS. Lessee shall have the right to erect such signs on the Premises
as it desires.

32. EXPANSION OF PREMISES. Lessor acknowledges and agrees that it agreed to
construct the Building and to enter into this Lease with Lessee on the
understanding that Lessee may desire, during the Initial Term or any renewal
term of this Lease, that the Building described in this Lease be expanded to
accommodate the distribution and warehouse needs of Lessee. Lessor, upon written
notification by Lessee, agrees to finance and construct any such expansion of
the Building as desired by Lessee, and such expansion space (the "Expansion
Space") shall be deemed to be a part of the Premises and shall be leased to
Lessee on the same terms and conditions as set forth in this Lease, except for
(i) Fixed Rental, which shall be adjusted to reflect the cost to Lessor of
constructing the Expansion Space and shall be negotiated in good faith by Lessor
and Lessee, and (ii) the Purchase Price under SECTION 4 hereof, which also shall
be accordingly adjusted by agreement of the Lessor and Lessee. Upon completion
of the Expansion Space, Lessor and Lessee shall execute an addendum to this
Lease reflecting the correct legal description of the Premises, including the
Expansion Space, the revised Purchase Price under SECTION 4, and the revised
Fixed Rental, and shall also execute and record an amendment to the Memorandum
of Lease to reflect the foregoing.

33. ARBITRATION. Except for a dispute relating to a failure by Lessee to
pay Fixed Rental herein, in the event of any dispute between the parties
regarding any matter arising under this Lease, Lessor and Lessee will make a
sincere and earnest effort to resolve and settle such dispute by friendly and
good faith negotiation and discussion. If, despite such cooperative effort, any
such dispute cannot be resolved within thirty (30) days, the dispute shall
thereafter, upon ten (10) days' prior written notice from one party to the
other, be submitted and settled by arbitration. Such arbitration shall be
effected by arbitrators selected as provided below and shall be conducted in
accordance with the rules of the American Arbitration Association existing at
the time of submission and in accordance with the laws of the State of South
Carolina.

The dispute shall be submitted to three (3) arbitrators, one of whom
shall be selected by the Lessor, one of whom shall be selected by Lessee, and
the third of whom shall be selected by the two arbitrators so selected, or if
they cannot agree, such third arbitrator shall be selected by the American
American Arbitration Association. In the event either Lessor or Lessee, within
thirty (30) days after any notice of arbitration referred to above shall not
have selected its arbitrator and given notice thereof to the other party, such
arbitrator shall be selected by the American Arbitration Association. Any
necessary arbitration hearings shall be conducted, unless otherwise agreed by
all of the arbitrators in Columbia, South Carolina. The costs of arbitration
shall be assumed and paid one-half by Lessor and one-half by Lessee, but the
individual costs and expenses of each party (including attorneys' fees) shall
be assumed and paid by the party incurring the same.

23
<PAGE> 24

34. ADDENDUM TO LEASE - Upon execution by Lessor and Lessee of the easement
referenced on EXHIBIT A attached hereto, the parties shall execute an addendum
to this Lease amending EXHIBIT A to include the legal description of and
reference to said easement.

IN WITNESS WHEREOF, the parties hereto executed this document as of
the date above first written.

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.

WITNESSED BY: LESSOR: LANTER COMPANY

/s/ Illegible By Wayne E. Lanter
- -------------------------- ---------------------------
CEO
VP FINANCE
- --------------------------

WITNESSED BY: LESSEE: AMERICAN ITALIAN PASTA
COMPANY

/s/ David E. Watson By /s/ Timothy S. Webster
- -------------------------- ----------------------------
CEO
VP FINANCE
- --------------------------

<PAGE> 1

EXHIBIT 10.10

AMERICAN ITALIAN PASTA COMPANY
1992 STOCK OPTION PLAN

1. Purpose. The American Italian Pasta Company Stock Option Plan (the
"Plan") is intended to advance the interests of American Italian Pasta Company
(the "Company") and its shareholders by encouraging and enabling selected
officers and other key employees and consultants upon whose judgment,
initiative and effort the Company is largely dependent for the successful
conduct of its business, to acquire and retain a proprietary interest in the
Company by ownership of its Common Shares (as defined below). The Plan shall
become effective as of October 30, 1992 (the "Effective Date").

2. Definitions.

"Board" means the Board of Directors of the Company.

"Cause", with respect to any Optionee means, (i) cause as defined in
the employment or consulting agreement with the Company to which the Optionee
is a party or, if none, (ii) the occurrence of any of the following events:

(A) the willful and continued failure by such Optionee to
substantially perform his duties with the Company on a full-time basis
(other than any such failure resulting from total or partial incapacity
due to physical or mental illness) after a written demand for
substantial performance is delivered to such Optionee by the Board,
which demand identifies the manner in which the Board believes that he
has not substantially performed such duties;

(B) the willful engaging by such Optionee in conduct which is
significantly injurious to the Company, monetarily or otherwise, after
a written demand for cessation of such conduct is delivered to such
individual by the Board, which demand specifically identifies the
manner the Board believes that such individual has engaged in such
conduct and the injury to the Company resulting therefrom;

(D) the breach by such Optionee of one or more covenants, if
any, in any agreement to which the Optionee and the Company are
parties;

(E) such Optionee's use of illegal drugs, abuse of other
controlled substances or habitual intoxication; or

<PAGE> 2

(F) the commission by such Optionee of a significant act of
dishonesty, deceit or breach of fiduciary duty in the performance of
the Optionee's duties with the Company.

For purposes of clauses (A) and (B) of this definition, no act, or failure to
act, on the part of an Optionee shall be deemed to be willful unless knowingly
done, or omitted to be done, by such Optionee not in good faith and without a
reasonable belief that such action or omission was in the best interests of the
Company.

"Closing Option" an Initial Option having the terms specified in the
Option Agreement to which the Optionee is a party. The terms of Closing Options
may differ for different Optionees.

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

"Committee" means (i) a committee designated by the Board and delegated
the functions of the Committee under this Plan, which shall be comprised of
least two directors or (ii) if at any time such a committee has not been
designated, the Board.

"Common Shares" means the Common Stock, no par value, of the Company.

"Date of Grant" means, with respect to any Option, the date as of which
such Option is granted under the Plan.

"Disability", with respect to any Optionee, means (i) Disability as
defined in the employment or consulting agreement with the Company to which the
Optionee is a party or, if none or if not defined therein, (ii) physical or
mental incapacity resulting in such Optionee being unable to substantially
perform his duties for more than six (6) consecutive months or an aggregate of
six (6) months in any period of twelve (12) consecutive months as determined in
writing by a qualified independent physician mutually acceptable to the
Optionee and the Company.

"Effective Date" has the meaning set forth in Section 1 hereof.

"Employee" means any employee of the Company.

"Fair Market Value" (i) with respect to any Option or any portion
thereof at any time means (x) the value of one Common Share, determined as set
forth in clause (ii), minus (y) the respective exercise price(s) per share;
which amount shall be multiplied by (z) the number of Common Shares subject to
such Option or applicable portion thereof; and (ii) with respect to any Common
Shares, means (1) the "Section 4.2 Sales Price", the "Section 4.3 Sales Price"
or the "Common Stock Sale Price" (each as defined in the Shareholders
Agreement) whichever has been most recently determined for Common Shares
provided such determination

<PAGE> 3

has been made within the past year, and if none, (2) the Fair Market Value as
determined in good faith by the Committee.

"Follow-on Option" means an Initial Option having the terms specified
in the Option Agreement to which the Optionee is a party. The terms of
Follow-on Options may differ for different Optionees.

"Incentive Stock Option" means any Option that is intended to meet the
requirements of Section 422 of the Code and any successor provision thereto and
the regulations thereunder.

"Initial Options" has the meaning set forth in Section 4 hereof.

"Non-Qualified Stock Option" means any Option that is not an Incentive
Stock Option.

"Option" means a Initial Option or an Other Option granted under this
Plan.

"Option Agreement" means any agreement or other instrument pursuant to
which an Option is granted to an Optionee.

"Optionee" means a Person to whom an Option has been granted under the
Plan and who has rights therein under the Plan.

"Other Options" has the meaning set forth in Section 4 hereof.

"Payment Note" has the meaning set forth in Section 6(h) hereof.

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

"Public Offering" means any underwritten public offering of equity
securities (or securities convertible into equity securities) of the Company
pursuant to an effective registration statement under the Securities Act of
1933 other than pursuant to a registration statement on Form S-8 or any
successor or similar form.

"Realization Event" has the meaning set forth in the Shareholders
Agreement.

"Retirement" means, unless otherwise agreed by contract, with respect
to any Optionee, such Optionee's termination of employment with the Company (i)
pursuant to any arrangement of the Company providing for early retirement of
its Employees, (ii) at an age of not less than 65 years or (iii) otherwise
determined by the Committee to be a retirement.

"Seller" has the meaning set forth in Section 6(h)(iii) hereof.

<PAGE> 4

"Shareholders Agreement" means the Shareholders Agreement dated as of
October 30, 1992 among the Company, The Morgan Stanley Leveraged Equity Fund
II, L.P., a Delaware limited partnership, Richard C. Thompson, and Citicorp
Venture Capital, Ltd. and the other parties thereto, as in effect from time to
time.

"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect at least 50% of the members of
the board of directors or other persons performing similar functions are
directly or indirectly owned by the Company.

"Successor" means the legal representative of a deceased Optionee or
the person or persons who acquire the right to exercise an Option by bequest or
inheritance or by reason of the death or legal incapacity of any Optionee.

"Vested Portion" has the meaning set forth in Section 6(c) hereof.

"Vesting Schedule" has the meaning set forth in Section 6(d) hereof.

"Year End" means the last day of the one year period which begins, as
to each Option, on the day on which such Option was granted or an anniversary
of such date.

3. Administration of Plan. (a) The Plan shall be supervised and
administered by the Committee which shall have full and final authority in its
discretion, subject to the provisions of the 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 Common Shares covered by each Option; to determine
the terms of any Payment Note; to construe and interpret the Plan, any Option
Agreement and any Payment Note; and to make all other determinations and take
all other actions deemed necessary or advisable for the administration of the
Plan.

(b) Determinations Under the Plan. Unless otherwise expressly provided
in the Plan, all designations, determinations, interpretations and other
decisions under or with respect to the Plan or any Option shall be within the
sole discretion of the Committee, may be made at any time and shall be final,
conclusive and binding upon all persons, including the Company, any Optionee,
any Successor, any Seller, any shareholder and any Employee.

4. Common Shares Subject to Options. Subject to adjustment as
provided in Section 7, the aggregate number of Common Shares which may be
issued upon the exercise of Options granted under the Plan shall be 147,804. Of
such 147,804 Common Shares, there are reserved for issuance under the Plan (i)
an aggregate of 103,463 Common Shares in respect of Options granted as of the
Effective Date, (the "Initial Options") and (ii) an aggregate of 44,341 Common
Shares in respect of Common Options which may be granted after the Effective
Date ("Other Options"). Initial Options may be Closing Options or Follow-on
Options. The Common Shares to be issued upon the exercise of Options may
consist of authorized but unissued shares, treasury shares or other shares
issued and reacquired by the Company or shares otherwise acquired for the
purposes of the Plan. If any Option shall, for any reason, terminate or expire
or be surrendered without having been exercised in full or otherwise without
the delivery of

<PAGE> 5

Common Shares, the Common Shares subject to such Option but not purchased
thereunder shall again be available for new Options to be granted under the
Plan.

5. Grants to Participants. Options may be granted under the Plan to
any person who is or who agrees to become an officer or other key Employee
(including officers and Employees who are also directors) of, or a consultant
to, the Company or any of its present or future Subsidiaries. Subject to the
provisions of the Plan including Section 6 below, the Committee shall have the
sole and complete authority to determine the exercise price per share for an
Other Option and the terms of each Option Agreement, which may be different for
each Optionee. Other Options may be either Non-Qualified Stock Options or
Incentive Stock Options. In the case of Incentive Stock Options, the terms and
conditions of such grants shall be subject to and comply with such rules as may
be prescribed by Section 422 of the Code and any regulations promulgated
thereunder.

6. Terms and Conditions of Options. Any Option granted under the Plan
shall be evidenced by an Option Agreement executed by the Company and the
Optionee and shall contain terms and conditions not inconsistent with the
following limitations and conditions:

(a) Exercise Price. Each Option shall represent the right to purchase
one or more Common Shares at a purchase price per share set forth in the Option
Agreement.

(b) Period of Option. The term of each Option shall be 10 years from
the Date of Grant of such Option subject to earlier termination and expiration
as provided in Section 6(g), in the Option Agreement or in another agreement to
which the Optionee is a party.

(c) Exercise of Options in General. All or any part of the Vested
Portion of each Option shall be exercisable at such times, throughout a period
commencing on the date such Option becomes exercisable in accordance with its
terms ending upon the expiration or termination of such Option as determined in
the sole discretion of the Committee and set forth herein or in the applicable
Option Agreement. The Committee may impose in any Option Agreement such
conditions with respect to the exercise of each Option as it may deem necessary
or advisable. The Vested Portion of each Option shall be that portion which
shall have become exercisable and shall not have been previously exercised, as
determined in accordance with Subsection (d) below.

(d) Vesting Schedule. Unless and to the extent otherwise provided in
an Option Agreement and subject to clauses (ii) through (v) below and Section
6(g), the following schedule (the "Vesting Schedule") applies to all Options:

Years of Service
Since Date of Grant Vested Portion
------------------- --------------

1 20%
2 40%
3 60%

<PAGE> 6

4 80%
5 100%

(ii) Notwithstanding the Vesting Schedule above but subject to the
provisions of an Option Agreement, in the event of the Optionee's termination
of employment or consulting arrangement with the Company due to the Optionee's
death or Disability, each outstanding Option held by the Optionee shall become
exercisable in full with respect to all Common Shares covered thereby.

(iii) Notwithstanding the Vesting Schedule above but subject to the
provisions of an Option Agreement, in the event of the Optionee's Retirement or
termination of employment by the Company without Cause each outstanding Option
held by such Optionee shall become exercisable with respect to that number of
Common Shares which is obtained by multiplying the number of Common Shares
covered by the Option by a fraction, the numerator of which is the number of
months the Optionee has been employed with the Company following the Date of
Grant and the denominator of which is 60. The portion of such Option not
becoming vested and exercisable in accordance with the foregoing sentence shall
be cancelled upon any termination of employment.

(iv) Notwithstanding the Vesting Schedule above but subject to the
provisions of an Option Agreement, upon occurrence of a Realization Event, each
outstanding Option shall become exercisable in full with respect to all Common
Shares covered thereby as of a date immediately prior to the occurrence of such
Realization Event.

(v) No provision of this Section 6(d) shall impair the Committee's
authority to accelerate the exercisability of any outstanding Option at any
time, or to provide in any Option Agreement for provisions that differ from the
provisions set forth in this Section (d) relating to vesting upon termination
of employment or a Realization Event.

(e) Shareholder Rights. Each Optionee shall, if requested by the
Company on or after the Date of Grant, execute and become a party to the
Shareholders Agreement or a similar type of agreement with such provisions
regarding shareholder matters as the Company considers appropriate. An
Optionee shall not have any of the rights of a shareholder of the Company in
respect of the Common Shares subject to an Option until or unless certificates
evidencing the Common Shares purchased pursuant to the exercise of such Option
are properly delivered to such Optionee.

(f) Nontransferability. Except as otherwise provided in the Option
Agreement to which the Optionee is a party and notwithstanding any other
provision of this Plan or the Shareholders Agreement, no Option shall be
transferable or assignable by an Optionee, other than by will or the laws of
descent and distribution, and each such Option shall be exercisable, during the
Optionee's lifetime, only by such Optionee.

<PAGE> 7

(g) Certain Forfeitures and Repurchases of Options. (i) Unless
otherwise expressly provided in the Option Agreement or in another agreement
between the Company and the Optionee, upon the Company's termination of an
Optionee's employment for Cause, any Option (whether or not then exercisable)
held by such Optionee shall be deemed immediately forfeited and cancelled
without any payment or consideration being due from the Company.

(ii) Unless otherwise expressly provided in the Option Agreement or in
another agreement between the Company and the Optionee, upon termination of an
Optionee's employment with the Company other than by the Company for Cause, the
unvested portion of any Option held by such Optionee shall be deemed
immediately forfeited and cancelled and the Vested Portion of any Option held
by the Optionee shall, at the Company's election at any time after such
termination, be subject to purchase by the Company for an amount equal to the
Fair Market Value of such Vested Portion of such Option on the repurchase date.
In the event the Fair Market Value of the Vested Portion of any such Option
shall be zero or less, the repurchase of such Option shall be effected by the
delivery by the Company to the Optionee or his Successor, as appropriate, of a
written notice stating that the Fair Market Value is zero and that such option
is cancelled.

If the Company elects to purchase the Vested Portion of an Option
pursuant to this section 6(g), the Company shall deliver written notice (a
"Purchase Notice") to such Optionee or such Optionee's Successor, as
appropriate, to such effect. Upon receipt of any Purchase Notice each Option
subject to being purchased shall be deemed to be expired and cancelled
automatically upon receipt of the Purchase Notice and the purchase price.
Payment of the purchase price may be made in cash or by certified check.
Payment effected through a promissory note of the Company in accordance with
the provisions of Section 6(h)(iv) hereof shall be deemed payment in cash for
purposes of this Section 6(g).

(h) Certain Repurchases of Common Shares. (i) Notwithstanding any other
provision of this Plan or the Shareholders Agreement but subject to the
provisions of an Option Agreement, Upon the termination of an Optionee's
employment prior to an initial Public Offering by the company, the Company may
elect, at any time after such termination and prior to such Public Offering, to
require such Optionee or his Successor to sell to the Company, and such
Optionee or such Successor shall sell, all Common Shares acquired as a result
of the exercise of an option and owned by such Optionee and Successor in
accordance with this Section 6(h). The price at which such Surrendered Shares
(as defined in Section 6(h)(iii)) may be repurchased shall be determined as
follows: (1) in the case of a repurchase arising from a termination under the
circumstances set forth in Section 6(g)(i), an amount equal to the product of
(x) the lower of (A) the exercise price for the Option pursuant to which the
Common Shares were purchased and (B) the Fair Market Value of a Common Share as
of the date of such termination of employment multiplied by (y) the number of
Common Shares so repurchased, and (2) in the case of a repurchase arising from
a termination under the circumstances set forth in Section 6(g)(ii), an amount
equal to the product of Fair Market Value of a Common Share as of the
termination date multiplied by the number of Common Shares repurchased.

<PAGE> 8

(ii) If the Company elects to exercise its right to require any
Optionee or any Optionee's Successor to sell Common Shares pursuant to this
Section 6(h), the Company shall deliver written notice (a "Repurchase Notice")
to such Optionee or such Successor to such effect.

(iii) The Common Shares specified in the Repurchase Notice as being
subject to repurchase (collectively, "Surrendered Shares") shall be surrendered
for repurchase within (10) ten business days of the date of such receipt of
such notice (the "Repurchase Date"). On the Repurchase Date, the Optionee or
the Optionee's Successor selling such Surrendered Shares (the "Seller") shall
deliver to the Company the certificate or certificates representing the
Surrendered Shares owned by such Seller on such date against delivery by the
Company of the repurchase amount to such Seller, which may be paid at the
election of the Company, in cash or by certified check, or, in the event the
Company is prohibited from making payment with cash as a result of a credit
agreement or debt obligation binding upon the Company, by a promissory note
issued by the Company (a "Payment Note") payable to the order of the Seller.
All certificates for Surrendered Shares shall be duly endorsed in favor of the
Company by the Seller in whose name such certificate or certificates is
registered or accompanied by a duly executed stock or security assignment in
favor of the Company with the signature(s) thereon guaranteed by a commercial
bank or trust company or a member of a national securities exchange or the
National Association of Securities Dealers Inc. If any Seller shall fail to
deliver such certificate or certificates (or evidence) to the Company within
the time required, the Company shall cause its books and records to show that
the Surrendered Shares are bound by the provisions of this Section 6(h) of the
Plan and that the Surrendered Shares, until transferred to the Company, shall
not be entitled to any proxy, dividend or other rights from the date by which
such certificate or certificates should have been delivered to the Company.

(iv) Each Payment Note shall (A) be payable to the order of the
Seller, (B) be issued and dated the Repurchase Date, (C) be in a principal
amount equal to the repurchase price of such Surrendered Shares and (D) mature
on demand or at a stated maturity date. Each Payment Note shall bear interest
in respect of the unpaid principal amount of such Payment Note from the
Repurchase Date to the maturity date thereof at a rate per annum equal to the
then-current yield to maturity on United States treasury securities of
comparable maturity, as determined in good faith by the Company, plus 100 basis
points.

(v) The Company shall have the right to resell to any Person any
Surrendered Shares received from a Seller pursuant to this Section 6(h),
whether or not the applicable Repurchase Price has been paid to such Seller;
provided that any such sale or other disposition by the Company of Surrendered
Shares shall not relieve the Company of its obligation to pay the applicable
repurchase price for such Surrendered Shares.

(i) Other Provisions. The grant of any Option may also be subject to
such other provisions (whether or not applicable to any Option granted to any
other Optionee) as the Committee deems appropriate, including provisions to
assist the Optionee in financing the acquisition of Common Shares, provisions
for the forfeiture of, or restrictions on resale or other disposition of, share
acquired under any Option in addition to those provisions set forth in Section
8 hereof or in the Shareholders Agreement, provisions giving the Company the
right to purchase Options in circumstances other than those described in
Section 6(g) and to repurchase shares acquired under any Option in the event
the Optionee elects to dispose of such shares, provisions to comply with
federal and state securities laws, understandings or conditions as to the
Optionee's employment in addition to those specifically provided for under the
Plan and provisions accelerating the vesting of any Option upon the occurrence
of specified events or otherwise in the discretion of the Committee.

7. Adjustment Provisions. (a) If the Company shall at any time change
the number of issued Common Shares without new consideration to it (by stock
dividends, stock splits, or similar transactions), the total number of Common
Shares reserved for issuance under this Plan and the number of such shares
covered by each outstanding Option shall be adjusted so that the aggregate
consideration payable by the Optionee upon exercise, and the benefit intended
to be provided under each such Option immediately before and immediately after
such adjustment, shall be maintained.

(b) In the case of any merger, recapitalization, consolidation,
split-up, spin-off, repurchase, distribution or similar transaction affecting
the Common Shares, the Committee shall take such action as in its sole
discretion it deems appropriate to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under this Plan
and the Options granted hereunder.

(c) Notwithstanding any other provision of this Plan, and without
affecting the number of Common Shares reserved or available hereunder, the
Committee may authorize the issuance or assumption of Options or similar rights
in connection with any merger, consolidation, acquisition of property or stock,
or reorganization, whether or not the Company is a surviving or continuing
corporation, upon such terms and conditions as it may deem appropriate.

<PAGE> 9

of such Option, in consideration of the cancellation thereof, shall extinguish
any rights of the holder of such Option in connection therewith.

(e) In the event of the dissolution or liquidation of the Company, any
Option granted under the Plan shall terminate as of a date to be fixed by the
Committee, provided that not less than (30) thirty days' written notice of the
date so fixed shall be given to each Optionee and each such Optionee shall have
the right during such period to exercise his option as to all or any part of
the Common Shares covered thereby.

8. Restrictions on Common Shares Issued. The exercise of each Option
shall be subject to the condition that if at any time the Company shall
determine in its discretion that the satisfaction of withholding tax or other
withholding liabilities, or that the listing, registration, or qualification of
any Common Share otherwise deliverable upon such exercise upon any securities
exchange or under any state or federal law, or that the consent or approval of
any regulatory body, is necessary or desirable as a condition of, or in
connection with, such exercise or the delivery or purchase of Common Shares
pursuant thereto, then in any such event, such exercise shall not be effective
unless such withholding, listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company.

9. No Right to Continued Service. The granting of an Option to any
person does not alter in any way the rights of the Company to terminate such
Optionee's employment or consulting arrangement at any time for any reason nor
does it confer upon such person any rights or privileges to continue employment
or otherwise except as specifically provided for in the Plan.

10. Amendment, Suspension, and Termination of Plan. The Board may at
any time suspend or terminate the Plan or may amend it from time to time in
such respects as the Board may deem advisable, in the best interests of the
Company and in accordance with the purposes of the Plan; provided, however,
that without approval by the holders of a majority of the securities of the
Company entitled to vote, no such amendments shall (i) except as specified in
Section 7, increase the maximum number of Common Shares with respect to which
Options may be granted under the Plan, or (ii) change the provisions of the
second sentence of this Section 10 relating to the term of this Plan. Unless
the Plan shall theretofore have been terminated by the Board, the Plan shall
terminate 10 years after the Effective Date of the Plan. No Option may be
granted during any suspension or after the termination of the Plan. No
amendment, suspension, or termination of the Plan shall, without an Optionee's
consent, impair any of the rights or obligations under any Option theretofore
granted to such Optionee under the Plan.

11. Withholding. The Company may establish appropriate procedures to
provide for payment of such income and other taxes as may be required by law to
be paid or withheld in connection with the exercise of options, and to ensure
that the Company receives prompt advice concerning the occurrence of any event
that may create, or affect the timing or amount of, any obligation to pay or
withhold such taxes or that may make available to the Company any

<PAGE> 10

tax deduction resulting from such occurrence. Without limiting the generality
of the foregoing, an Optionee may be given the opportunity to elect to have
Common Shares withheld to satisfy withholding obligations.

<PAGE> 1
EXHIBIT 10.11

AMERICAN ITALIAN PASTA COMPANY
1993 NONQUALIFIED STOCK OPTION PLAN

1. PURPOSE. The American Italian Pasta Company 1993 Nonqualified Stock
Option Plan (the "Plan") is intended to advance the interests of American
Italian Pasta Company (the "Company") and its shareholders by encouraging and
enabling selected key employees upon whose judgment, initiative and effort the
Company is largely dependent for the successful conduct of its business, to
acquire and retain a proprietary interest in the Company by ownership of its
Common Shares (as defined below). The Plan shall become effective as of December
8, 1993 (the "Effective Date").

2. DEFINITIONS.

"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 stockholder of the Company shall be deemed an Affiliate of any
other stockholder 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.

"BOARD" means the Board of Directors of the Company.

"CHANGE IN CONTROL" means any event that results in (x) any person or group
(as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 as in
effect on September 1, 1992) other than Morgan Stanley Leveraged Equity Fund II,
L.P. ("MSLEF") or any of its Permitted Transferees or any group consisting
solely of such persons) having beneficial ownership in excess of 50% of the
outstanding Voting Stock or (y) any person or group (other than aforesaid)
acquiring all or substantially all of the assets of the Company.

"CODE" means the Internal Revenue Code of 1986, as amended, from time to
time.

"COMMITTEE" means (i) a committee designated by the Board and delegated the
functions of the Committee under this Plan, which shall be comprised of at least
two directors or (ii) if at any time such a committee has not been designated,
the Board.

"COMMON SHARES" means the Common Stock, no par value, of the Company.

<PAGE> 2

"COMMON STOCK" means the Common Stock, no par value, of the Company.

"DATE OF GRANT" means, with respect to any Option, the date as of which
such Option is granted under the Plan.

"DISABILITY", with respect to any Optionee, means physical or mental
incapacity resulting in such Optionee being unable to substantially perform his
duties for more than six (6) consecutive months or an aggregate of six (6)
months in any period of twelve (12) consecutive months as determined in writing
by a qualified independent physician mutually acceptable to the Optionee and the
Company.

"EFFECTIVE DATE" has the meaning set forth in Section 1 hereof.

"EMPLOYEE" means any employee of the Company.

"FAIR MARKET VALUE" (i) with respect to any Option or any portion thereof
at any time means (x) the value of one Common Share, determined as set forth in
clause (ii), minus (y) the respective exercise price(s) per share; which amount
shall be multiplied by (z) the number of Common Shares subject to such Option or
applicable portion thereof; and (ii) with respect to any Common Shares, means
fair market value of such Common Shares as determined in good faith by the
Committee.

"INITIAL OPTION" means the first Option granted to a particular Employee.

"OPTION" means any Option granted under this Plan and includes any Initial
Option. The terms of an Option may differ for different Optionees.

"OPTION AGREEMENT" means any agreement or other instrument pursuant to
which an Option is granted to an Optionee.

"OPTIONEE" means a Person to whom an Option has been granted under the Plan
and who has rights therein under the Plan.

"PAYMENT NOTE" has the meaning set forth in Section 6(i) hereof.

"PERMITTED TRANSFEREES" means (w) any general or limited partner of MSLEF
(a "MSLEF Partner"), and any corporation, partnership, Affiliated Employee
Benefit Trust or other entity which is an Affiliate of any MSLEF Partner
(collectively, the "MSLEF Affiliates"),(x) any managing director, general
partner, limited partner, director, officer or employee of MSLEF or a MSLEF
Affiliate (collectively, "MSLEF Associates"), (y) the heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of any MSLEF
Associate, and (z) a trust the beneficiaries of which, or a corporation, or
partnership, the stockholders or general or limited partners of which, include
on MSLEF, MSLEF Affiliates, MSLEF Associates, their spouses or their lineal
descendants.

<PAGE> 3

"PERSON" means any individual, corporation, partnership, joint stock
company, trust, joint venture, association, or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

"PUBLIC OFFERING" means any underwritten public offering of equity
securities (or securities convertible into equity securities) of the Company
pursuant to an effective registration statement under the Securities Act of 1933
other than pursuant to a registration statement of Form S-8 or any successor or
similar form.

"REALIZATION OF EVENT" means any sale of all or substantially all of the
assets of the Company, any sale of at least a majority of the Voting Stock on a
primary or secondary basis, or any recapitalization, reclassification, merger or
consolidation involving a Change of Control.

"RETIREMENT" means, unless otherwise agreed by contract, with respect to
any Optionee, such Optionee's termination of employment with the Company (i)
pursuant to any arrangement of the Company providing for early retirement of its
Employees, (ii) at an age of not less than 65 years or (iii) otherwise
determined by the Committee to be a retirement.

"SELLER" has the meaning set forth in Section 6 (i) (iii) hereof.

"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect at least 50% of the members of
the board of directors or other persons performing similar functions are
directly or indirectly owned by the Company.

"SUCCESSOR" means the legal representative of a deceased Optionee or the
person or persons who acquire the right to exercise an Option by bequest or
inheritance or by reason of the death or legal incapacity of any Optionee.

"VESTED OPTION" has the meaning set forth in Section 6(c) hereof.

"VESTING SCHEDULE" has the meaning set forth in Section 6(d) hereof.

"VOTING STOCK" means the Common Stock and the Class A Common Stock of the
Company.

3. ADMINISTRATION OF PLAN. (a) The Plan shall be supervised and
administered by the Committee which shall have full and final authority in its
discretion, subject to the provisions of the 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 Common Shares covered by each Option; to determine
the terms of any Payment Note; to construe and interpret the Plan, any Option
Agreement and any Payment Note; and to make all other determinations and take
all other actions deemed necessary or advisable for the administration of the
Plan.

3
<PAGE> 4

(b) DETERMINATIONS UNDER THE PLAN. Unless otherwise expressly provided in
the Plan, all designations, determinations, interpretations and other decisions
under or with respect to the Plan or any Option shall be within the sole
discretion of the Committee, may be made at any time and shall be final,
conclusive and binding upon all persons, including the Company, any Optionee,
any Successor, any Seller, any shareholder and any Employee.

4. COMMON SHARES SUBJECT TO OPTIONS. Subject to adjustment as provided in
Section 7, the aggregate number of Common Shares which may be issued upon the
exercise of Options granted under the Plan shall be 7,000. The Common Shares to
be issued upon the exercise of Options may consist of authorized but unissued
shares, treasury shares or other shares issued and reacquired by the Company or
shares otherwise acquired for the purposes of the Plan. If any Option shall, for
any reason, terminate or expire or be surrendered without having been exercised
in full or otherwise without the delivery of Common Shares, the Common Shares
subject to such Option but not purchased thereunder shall again be available for
new Options to be granted under the Plan.

5. GRANTS TO PARTICIPANTS. Options may be granted under the Plan to any
person who has been an employee of the Company or any of its present or future
Subsidiaries for a period of one (1) year or more; provided, however, that the
Committee may, in its sole discretion, grant one or more Options under the Plan
to any person who has been an Employee of the Company or of any of its present
or future Subsidiaries for a period of less than one (1) year. Subject to the
provisions of the Plan including Section 6 below, the Committee shall have the
sole and complete authority to determine the exercise price per share for an
Option and the terms of each Option Agreement, which may be different for each
Optionee.

6. TERMS AND CONDITIONS OF OPTIONS. Any Option granted under the Plan
shall be evidenced by an Option Agreement executed by the Company and the
Optionee and shall contain terms and conditions not inconsistent with the
following limitations and conditions:

(a) EXERCISE PRICE. Each Option shall represent the right to purchase one
or more Common Shares at a purchase price per share set forth in the Option
Agreement.

(b) PERIOD OF OPTION. The term of each Option shall be ten (10) years from
the Date of Grant of such Option subject to earlier termination and expiration
as provided in Section 6(h), in the Option Agreement or in another agreement to
which the Optionee is a party.

(c) VESTING OF OPTIONS IN GENERAL. An Option granted under the Plan shall
vest in accordance with Subsection (d) below. Any Option which shall have become
vested in accordance with said Subsection (d) and which shall not have been
previously exercised (a "Vested Option") shall become exercisable in accordance
with Section (e) below.

4
<PAGE> 5

(d) VESTING SCHEDULE. (i) Unless and to the extent otherwise provided in
the Option Agreement, and except as provided by Clause (ii) through Clause (iv)
and Subsection 6(h) below, the following schedule (the "Vesting Schedule") shall
apply to an Options:

Years of Service Since Date of Grant Vested Options

0 (On Date of Grant) 0%

3 100%

(ii) ACCELERATED VESTING FOR INITIAL OPTIONS. Notwithstanding the
Vesting Schedule above, but only if and to the extent provided by the
provisions of the applicable Option Agreement, an Initial Option granted
hereunder may vest upon the Date of Grant, or upon such other time or times
as provided under the provisions of the applicable Option Agreement.

(iii) ACCELERATED VESTING UPON OCCURRENCE OF REALIZATION EVENT.
Notwithstanding the Vesting Schedule above but subject to the provisions of
the applicable Option Agreement, upon occurrence of a Realization Event,
each outstanding Option (including any outstanding Initial Option) shall
become fully vested as of a date immediately prior to the occurrence of
such Realization Event. The Committee shall notify the Optionee of the
occurrence of a Realization Event within a reasonable period of time.

(iv) FULL DISCRETION IN COMMITTEE. No provision of this Section 6(d)
shall impair the Committee's authority to accelerate the vesting of any
outstanding Option at any time, or to provide in any Option Agreement for
provisions that differ from the provisions set forth in this Section (d)
relating to vesting of Options (including Initial Options) upon the
occurrence of a Realization Event.

(e) EXERCISE OF VESTED OPTIONS. Unless and to the extent otherwise
provided in the applicable Option Agreement and subject to Section 6(h) below,
each Vested Option shall be exercisable at such time or times throughout a
period commencing upon the earlier of [a] the occurrence of a Realization Event,
or [b] the expiration of five (5) years from the Date of Grant, and ending upon
the expiration or termination of such Option as set forth herein or as set forth
in the applicable Option Agreement; provided, however, that no provision of this
Section 6(e) shall impair the Committee's authority to accelerate the
exercisability of any outstanding Vested Option at any time, or to provide in
any Option Agreement for provisions that differ from the provisions set forth in
this Section (e) relating to exercisability upon the expiration of five (5)
years from the Date of Grant or upon the occurrence of a Realization Event. The
Committee may impose in any Option Agreement such conditions with respect to the
exercise of each Vested Option as it may deem necessary or advisable.

5
<PAGE> 6

(f) SHAREHOLDER RIGHTS. Each Optionee shall, if requested by the Company
on or after the Date of Grant, execute and become a party to a shareholders
agreement or a similar type of agreement with such provisions regarding
shareholder matters as the Company considers appropriate. An Optionee shall not
have any of the rights of a shareholder of the Company in respect of the Common
Shares subject to an Option until or unless certificates evidencing the Common
Shares purchased pursuant to the exercise of such Option are properly delivered
to such Optionee.

(g) NONTRANSFERABILITY. Except as otherwise provided in the Option
Agreement to which the Optionee is a party and notwithstanding any other
provision of this Plan or of any shareholders agreement to which the Optionee is
a party, no Option shall be transferable or assignable by an Optionee, other
than by will or the laws of descent and distribution, and each such Option shall
be exercisable, during the Optionee's lifetime, only by such Optionee.

(h) CERTAIN FORFEITURES AND REPURCHASES OF OPTIONS. (i) Unless otherwise
expressly provided in the Option Agreement or in another agreement between the
Company and the Optionee, upon the termination of an Optionee's employment for
any reason other than by reason of death of the Optionee, Disability or
Retirement, any Option (whether or not then a Vested Option and whether or not
then exercisable) held by such Optionee shall be deemed immediately forfeited
and cancelled without any payment or consideration being due from the Company.

(ii) Unless otherwise expressly provided in the Option Agreement or
in another agreement between the Company and the Optionee, upon termination
of an Optionee's employment with the Company by reason of death of the
Optionee, Disability or Retirement, any Option held by such Optionee which
is not a Vested Option shall be deemed immediately forfeited and cancelled
and any Vested Option held by the Optionee shall, at the Company's election
at any time after such termination, be subject to purchase by the Company
for an amount equal to the Fair Market Value of such Vested Option on the
repurchase date. In the event the Fair Market Value of a Vested Option
shall be zero or less, the repurchase of such Vested Option shall be
effected by the delivery by the Company to the Optionee or his Successor,
as appropriate, of a written notice stating that the Fair Market Value is
zero and that such Vested Option is cancelled.

If the Company elects to purchase a Vested Option pursuant to this
Section 6(h), the Company shall deliver written notice (a "Purchase
Notice") to such Optionee or such Optionee's Successor, as appropriate, to
such effect. Upon receipt of any Purchase Notice each Vested Option subject
to being purchased shall be deemed to be expired and cancelled
automatically upon receipt of the Purchase Notice and the purchase price.
Payment of the purchase price may be made in cash or by certified check.
Payment effected through a promissory note of the Company in accordance
with the provisions of Section 6(i)(iv) hereof shall be deemed payment in
cash for purposes of this Section 6(h).

(i) CERTAIN REPURCHASES OF COMMON SHARES. (i) Notwithstanding any
other provision of this Plan or any shareholders agreement to which the Optionee
is a party but subject to the provisions of any Option Agreement, upon the
termination of an Optionee's employment prior to

6
<PAGE> 7

an initial Public Offering by the Company, the Company may elect, at any time
after such termination and prior to such Public Offering, to require such
Optionee or his Successor to sell to the Company, and such Optionee or such
Successor shall sell, all Common Shares acquired as a result of the exercise of
an Option and owned by such Optionee and Successor in accordance with this
Section 6(i). The price at which such Surrendered Shares (as defined in Section
6(i)(iii)) may be repurchased shall be determined as follows: (1) in the case of
a repurchase arising from a termination under the circumstances set forth in
Section 6(h)(i), an amount equal to the product of (x) the lower of (A) the
exercise price for the Option pursuant to which the Common Shares were purchased
and (13) the Fair Market Value of a Common Share as of the date of such
termination of employment multiplied by (y) the number of Common Shares so
repurchased, and (2) in other cases, an amount equal to the product of Fair
Market Value of a Common Share as of the termination date multiplied by the
number of Common Shares repurchased.

(ii) If the Company elects to exercise its right to require any
Optionee or any Optionee's Successor to sell Common Shares pursuant to this
Section 6(i), the Company shall deliver written notice (a "Repurchase
Notice") to such Optionee or such Successor to such effect.

(iii) The Common Shares specified in the Repurchase Notice as being
subject to repurchase (collectively, "Surrendered Shares") shall be
surrendered for repurchase within ten (10) business days of the date of
such receipt of such notice (the "Repurchase Date"). On the Repurchase
Date, the Optionee or the Optionee's Successor selling such Surrendered
Shares (the "Seller") shall deliver to the Company the certificate or
certificates representing the Surrendered Shares owned by such Seller on
such date against delivery by the Company of the repurchase amount to such
Seller, which may be paid at the election of the Company, in cash or by
certified check, or, in the event the Company is prohibited from making
payment with cash as a result of a credit agreement or debt obligation
binding upon the Company, by a promissory note issued by the Company (a
"Payment Note") payable to the order of the Seller. All certificates for
Surrendered Shares shall be duly endorsed in favor of the Company by the
Seller in whose name such certificate or certificates is registered or
accompanied by a duly executed stock or security assignment in favor of the
Company with the signature(s) thereon guaranteed by a commercial bank or
trust company or a member of a national securities exchange or the National
Association of Securities Dealers, Inc. If any Seller shall fail to
deliver such certificate or certificates (or evidence) to the Company
within the time required, the Company shall cause its books and records to
show that the Surrendered Shares are bound by the provisions of this
Section 6(i) of the Plan and that the Surrendered Shares, until transferred
to the Company, shall not be entitled to any proxy, dividend or other
rights from the date by which such certificate or certificates should have
been delivered to the Company.

7
<PAGE> 8

Each Payment Note shall bear interest in respect of the unpaid principal
amount of such Payment Note from the Repurchase Date to the maturity date
thereof at a rate per annum equal to the then-current yield to maturity on
United States treasury securities of comparable maturity, as determined in
good faith by the Company, plus 100 basis points.

(v) The Company shall have the right to resell to any Person any
Surrendered Shares received from a Seller pursuant to this Section 6(i),
whether or not the applicable Repurchase Price has been paid to such
Seller; PROVIDED that any such sale or other disposition by the Company of
its obligation to pay the applicable repurchase price for such Surrendered
Shares.

(j) OTHER PROVISIONS. The grant of any Option may also be subject
to such other provisions (whether or not applicable to any Option granted to any
other Optionee) as the Committee deems appropriate, including provisions to
assist the Optionee in financing the acquisition of Common Shares, provisions
for the forfeiture of, or restrictions on resale or other disposition of, shares
acquired under any Option in addition to those provisions set forth in Section 8
hereof or in any shareholders agreement to which the Optionee is a party,
provisions giving the Company the right to purchase Options in circumstances
other than those described in Section 6(h) and to repurchase shares acquired
under any Option in the event the Optionee elects to dispose of such shares,
provisions to comply with federal and state securities laws, understandings or
conditions as to the Optionee's employment in addition to those specifically
provided for under the Plan and provisions accelerating the vesting of any
Option upon the occurrence of specified events or otherwise in the discretion of
the Committee.

7. ADJUSTMENT PROVISIONS. (a) If the Company shall at any time change the
number of issued Common Shares without new consideration to it (by stock
dividends, stock splits, or similar transactions), the total number of Common
Shares reserved for issuance under this Plan and the number of such shares
covered by each outstanding Option shall be adjusted so that the aggregate
consideration payable by the Optionee upon exercise, and the benefit intended to
be provided under each such Option immediately before and immediately after such
adjustment, shall be maintained.

(b) In the case of any merger, recapitalization, consolidation, split-up,
spin-off, repurchase, distribution or similar transaction affecting the Common
Shares, the Committee shall take such action as in its sole discretion it deems
appropriate to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under this Plan and the Options granted
hereunder.

(c) Notwithstanding any other provision of this Plan, and Without
affecting the number of Common Shares reserved or available hereunder, the
Committee may authorize the issuance or assumption of Options or similar rights
in connection with any merger, consolidation, acquisition of property or stock,
or reorganization, whether or not the Company is a surviving or continuing
corporation, upon such terms and conditions as it may deem appropriate.

8
<PAGE> 9

(d) Notwithstanding any other provision of this Plan, the payment to any
Optionee at any time of an amount equal to the excess, if any, of the Fair
Market Value at such time of the number of Common Shares subject to such Option
over the aggregate exercise price of such Option, in consideration of the
cancellation thereof, shall extinguish any rights of the holder of such Option
in connection therewith.

(e) Notwithstanding any other provision of this Plan, in the event of the
dissolution or liquidation of the Company, any Option granted under the Plan
shall terminate as of a date to be fixed by the Committee, provided that not
less than thirty (30) days' written notice of the date so fixed shall be given
to each Optionee, and each such Optionee shall have the right during such period
to exercise his Option as to all or any part of the Common Shares covered
thereby.

8. RESTRICTIONS ON COMMON SHARES ISSUED. The exercise of each Option shall
be subject to the condition that if at any time the Company shall determine in
its discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any Common
Share otherwise deliverable upon such exercise upon any securities exchange or
under any state or federal law, or that the consent or approval of any
regulatory body, is necessary or desirable as a condition of, or in connection
with, such exercise or the delivery or purchase of Common Shares pursuant
thereto, then in any such event, such exercise shall not be effective unless
such withholding, listing, registration, qualification, consent, or approval
shall have been effected or obtained free of any conditions not acceptable to
the Company.

9. NO RIGHT TO CONTINUED EMPLOYMENT. The granting of an Option to any
person does not alter in any way the rights of the Company to terminate such
Optionee's employment at any time for any reason nor does it confer upon such
person any rights or privileges to continue employment or otherwise except as
specifically provided for in the Plan.

10. AMENDMENT, SUSPENSION, AND TERMINATION OF PLAN. The Board may at any
time suspend or terminate the Plan or may amend it from time to time in such
respects as the Board may deem advisable, in the best interests of the Company
and in accordance with the purposes of the Plan; provided, however, that without
approval by the holders of a majority of the securities of the Company entitled
to vote, no such amendments shall (i) except as specified in Section 7, increase
the maximum number of Common Shares with respect to which Options may be granted
under the Plan, or (ii) change the provisions of the second sentence of this
Section 10 relating to the term of this Plan or (iii) change the class of
persons eligible to receive Options under the Plan. Unless the Plan shall
theretofore have been terminated by the Board, the Plan shall terminate 10 years
after the Effective Date of the Plan. No Option may be granted during any
suspension or after the termination of the Plan. No amendment, suspension, or
termination of the Plan shall, without an Optionee's consent, impair any of the
rights or obligations under any Option theretofore granted to such Optionee
under the Plan.

11. WITHHOLDING. The Company may establish appropriate procedures to
provide for payment of such income and other taxes as may be required by law to
be paid or withheld in

<PAGE> 10

connection with the exercise of Options, and to ensure that the Company
receives prompt advice concerning the occurrence of any event that may create,
or affect the timing or amount of, any obligation to pay or withhold such taxes
or that may make available to the Company any tax deduction resulting from such
occurrence. Without limiting the generality of the foregoing, an Optionee may
be given the opportunity to elect to have Common Shares withheld to satisfy
withholding obligations.

As adopted by the Board of Directors December 9, 1993, effective as of
December 8, 1993.

AMERICAN ITALIAN PASTA COMPANY

By: /s/ Kevin Steingart
--------------------------------------
Kevin Steingart, Senior Vice President

<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
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
August 4, 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> 143,157 146,110
<CURRENT-LIABILITIES> 32,435 14,985
<BONDS> 0 0
0 0
0 0
<COMMON> 10 15
<OTHER-SE> 17,428 41,610
<TOTAL-LIABILITY-AND-EQUITY> 143,157 146,110
<SALES> 92,074 93,616
<TOTAL-REVENUES> 92,074 93,616
<CGS> 68,555 67,821
<TOTAL-COSTS> 82,984 79,357
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,023 7,800
<INCOME-PRETAX> (1,738) 3,604
<INCOME-TAX> (656) 1,375
<INCOME-CONTINUING> (1,082) 2,229
<DISCONTINUED> 0 0
<EXTRAORDINARY> (1,647) 0
<CHANGES> 0 0
<NET-INCOME> (2,729) 2,229
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>