10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 000-16674

IMPERIAL SUGAR COMPANY

(Exact name of registrant as specified in its charter)

Texas	74-0704500
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Imperial Square, P.O. Box 9, Sugar Land, Texas 77487

(Address of principal executive offices, including Zip Code)

(281) 491-9181

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   þ     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer, see definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer   ¨                     Accelerated Filer   þ                     Non-accelerated filer   ¨

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.

Yes   ¨     No   þ

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes   þ     No   ¨

As of May 2, 2006 there were 11,305,225 shares of common stock, without par value, of the registrant outstanding.

IMPERIAL SUGAR COMPANY

Index

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Cash Flow	5
	Consolidated Statements of Changes in Shareholders’ Equity	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	18
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	19
Item 4.	Submission of Matters to a Vote of Security Holders	20
Item 6.	Exhibits	20

Forward-Looking Statements

Statements regarding future market prices and margins, future energy costs, future operating results, operating efficiencies, future government and legislative action, future outcomes of legal proceedings, future cost savings, future benefit costs, our liquidity and ability to finance our operations, and other statements that are not historical facts contained in this report on Form 10-Q are forward-looking statements. We identify forward-looking statements in this report by using the following words and similar expressions:

•     expect	•     project	•     estimate
•     believe	•     anticipate	•     likely
•     plan	•     intend	•     could
•     should	•     may	•     predict
•     budget	•     possible

Forward-looking statements involve risks, uncertainties and assumptions, including, without limitation, market factors, energy costs, the effect of weather and economic conditions, farm and trade policy, our ability to realize planned cost savings, the available supply of sugar, actual or threatened acts of terrorism or armed hostilities, legislative, administrative and judicial actions and other factors detailed elsewhere in this report and in our other filings with the SEC. Many of such factors are beyond our ability to control or predict. Management cautions against placing undue reliance on forward-looking statements or projecting any future results based on such statements or present or future earnings levels. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. All forward-looking statements in this Form 10-Q are qualified in their entirety by the cautionary statements contained in this section and elsewhere in this report and other SEC filings.

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PART I - FINANCIAL INFORMATION

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2006			September 30, 2005
	(In Thousands of Dollars)
ASSETS
Current Assets:
Cash and Temporary Investments	$	21,471		$	49,179
Marketable Securities		309			310
Accounts Receivable, Net		49,330			52,233
Inventories:
Finished Products		39,612			34,977
Raw and In-Process Materials		71,632			51,627
Supplies		10,677			9,043
Total Inventory		121,921			95,647
Prepaid Expenses		7,187			12,037
Assets Held for Sale		4,625			4,625
Total Current Assets		204,843			214,031
Other Investments		2,704			2,303
Property, Plant and Equipment, Net		91,651			96,818
Deferred Income Taxes, Net		34,195			40,338
Other Assets		6,411			6,301
Total	$	339,804		$	359,791
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable, Trade	$	52,393		$	69,142
Current Maturities of Long-Term Debt		2,512			2,346
Other Current Liabilities		24,196			23,386
Total Current Liabilities		79,101			94,874
Long-Term Debt, Net of Current Maturities		2,872			4,361
Deferred Employee Benefits and Other Liabilities		111,020			111,084
Commitments and Contingencies
Shareholders’ Equity:
Preferred Stock, Without Par Value, Issuable in Series; 5,000,000 Shares Authorized, None Issued		—			—
Common Stock, Without Par Value; 50,000,000 Shares Authorized; 11,305,225 and 10,561,017 Shares Issued and Outstanding at March 31, 2006 and September 30, 2005		116,876			110,450
Retained Earnings		72,205			80,693
Accumulated Other Comprehensive Loss		(42,270	)		(41,671	)
Total Shareholders’ Equity		146,811			149,472
Total	$	339,804		$	359,791

See notes to consolidated financial statements.

3

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,						Six Months Ended March 31,
	2006			2005			2006			2005
	(In Thousands of Dollars, Except per Share Amounts)
Net Sales	$	221,264		$	171,492		$	475,250		$	386,198
Cost of Sales		195,980			163,069			417,633			362,588
Selling, General and Administrative Expense		10,020			9,844			21,911			19,816
Depreciation and Amortization		4,003			3,136			7,313			6,184
Loss (Gain) on Operating Asset Dispositions		—			(446	)		116			(3,620	)
Total Costs and Expenses		210,003			175,603			446,973			384,968
Operating Income (Loss)		11,261			(4,111	)		28,277			1,230
Interest Expense		(541	)		(640	)		(1,113	)		(1,621	)
Gain on Non-Operating Asset Dispositions		—			—			—			1,854
Other Income, Net		862			687			1,538			1,289
Income (Loss) from Continuing Operations
Before Income Taxes		11,582			(4,064	)		28,702			2,752
Provision (Benefit) for Income Taxes		4,450			(1,530	)		10,519			1,286
Income (Loss) from Continuing Operations		7,132			(2,534	)		18,183			1,466
Income from Discontinued Operations		—			1,460			935			4,003
Net Income (Loss)	$	7,132		$	(1,074	)	$	19,118		$	5,469
Basic Earnings (Loss) per Share of Common Stock:
Income (Loss) from Continuing Operations	$	0.65		$	(0.24	)	$	1.69		$	0.14
Income from Discontinued Operations	$	—		$	0.14		$	0.09		$	0.38
Net Income (Loss)	$	0.65		$	(0.10	)	$	1.78		$	0.52
Diluted Earnings (Loss) per Share of Common Stock:
Income (Loss) from Continuing Operations	$	0.63		$	(0.24	)	$	1.64		$	0.14
Income from Discontinued Operations	$	—		$	0.14		$	0.08		$	0.36
Net Income (Loss)	$	0.63		$	(0.10	)	$	1.72		$	0.50
Weighted Average Shares Outstanding:
Basic		10,943,629			10,458,401			10,753,311			10,417,678
Diluted		11,326,287			10,458,401			11,093,521			11,035,338

See notes to consolidated financial statements.

4

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

	Six Months Ended March 31,
	2006			2005
	(In Thousands of Dollars)
Operating Activities:
Net Income	$	19,118		$	5,469
Adjustments to Reconcile Net Income To Net Cash Provided by Operating Activities:
Depreciation		7,313			6,184
Cash Settlements on Derivative Instruments		3,697			(552	)
Reclassification Adjustment from Accumulated Other Comprehensive (Income) Loss to Net Income		(4,616	)		(1,024	)
Loss (Gain) on Asset Dispositions		116			(5,511	)
Deferred Income Taxes		9,439			3,212
Income From Discontinued Operations		(935	)		(3,279	)
Gain on Disposal of Discontinued Operations		—			(724	)
Other		(131	)		446
Changes in Operating Assets and Liabilities (Excluding Operating Assets and Liabilities Sold in Dispositions):
Accounts Receivable		2,903			17,403
Inventories		(26,274	)		(7,438	)
Deferred Costs and Prepaid Expenses		4,850			(1,690	)
Accounts Payable—Trade		(16,749	)		(1,566	)
Other Liabilities		451			(4,186	)
Net Cash Provided by (Used In) Continuing Operations		(818	)		6,744
Net Cash Provided by Discontinued Operations		1,449			36,889
Net Cash Provided by (Used In) Operations		631			43,633
Investing Activities:
Capital Expenditures—Continuing Operations		(2,262	)		(4,641	)
Proceeds from Sale of Assets		—			6,164
Other		(306	)		(610	)
Net Cash Provided by (Used In) Continuing Operations		(2,568	)		913
Capital Expenditures—Discontinued Operations		—			(2,499	)
Proceeds from Collection of Escrow—Discontinued Operations		—			8,994
Net Cash Provided by (Used In) Discontinued Operations		—			6,495
Net Cash Provided by (Used In) Operations		(2,568	)		7,408
Financing Activities:
Repayment of Revolving Credit (Net)		—			(3,250	)
Repayment of Long-Term Debt		(1,149	)		(1,012	)
Issuance of Common Stock		2,902			504
Dividends		(27,524	)		(519	)
Financing Cash Flow—Continuing Operations		(25,771	)		(4,277	)
Increase (Decrease) in Cash and Temporary Investments		(27,708	)		46,764
Cash and Temporary Investments, Beginning of Period		49,179			2,514
Cash and Temporary Investments, End of Period	$	21,471		$	49,278
Supplemental Non-Cash Items:
Tax Effect of Deferred Gains (Losses)	$	(323	)	$	552

See notes to consolidated financial statements.

5

IMPERIAL SUGAR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Six Months Ended March 31, 2006

(Unaudited)

	Shares of Common Stock	Common Stock		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	(In Thousands of Dollars, Except Share Data)
Balance September 30, 2005	10,561,017	$	110,450	$	80,693			$(41,671	)	$	149,472
Comprehensive Income:
Net Income	—		—		19,118			—			19,118
Change in Unrealized Securities Gains (Net of Tax of $1)	—		—		—			(2	)		(2	)
Change in Derivative Fair Value (Net of Tax of $1,294)	—		—		—			2,403			2,403
Recognition of Deferred Gains in Net Income (Net of Tax of $1,616)	—		—		—			(3,000	)		(3,000	)
Total Comprehensive Income	—		—		—			—			18,519
Cash Dividends ($2.61 per share)	—		—		(27,606	)		—			(27,606	)
Stock Options Exercised and Restricted Stock Granted	744,208		6,426		—			—			6,426
Balance March 31, 2006	11,305,225	$	116,876	$	72,205			$(42,270	)	$	146,811

See notes to consolidated financial statements.

6

IMPERIAL SUGAR COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED MARCH 31, 2006 AND 2005

(unaudited)

1. ACCOUNTING POLICIES

Basis of Presentation

The unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and reflect, in the opinion of management, all adjustments, consisting only of normal recurring accruals, that are necessary for a fair presentation of financial position and results of operations for the interim periods presented. These financial statements include the accounts of Imperial Sugar Company and its majority owned subsidiaries (the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures required by accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The financial statements included herein should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2005. The Company operates its business as one domestic segment—the production and sale of refined sugar and related products.

Cost of Sales

The Company’s sugar inventories, which are accounted for on a LIFO basis, are periodically reduced at interim dates to levels below that of the beginning of the fiscal year. When such interim LIFO liquidations are expected to be restored prior to fiscal year-end, the estimated replacement cost of the liquidated layers is utilized as the basis of the cost of sugar sold from beginning of the year inventory. Accordingly, the cost of sugar utilized in the determination of cost of sales for interim periods includes estimates which may require adjustment in future fiscal periods.

Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board revised Financial Accounting Standard No. 123, Share-Based Payment (SFAS 123R). The revised statement requires the recording of compensation expense for the fair value of stock options and other equity-based compensation awards. The Company adopted this standard in fiscal 2006, using the modified prospective method and recorded the applicable expenses of $0.3 million and $0.4 million for the three and six months ended March 31, 2006, for stock options currently outstanding based on the methods and assumptions noted below.

7

Prior year results are presented using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” The Company’s reported net income and net income per share for the prior year would have been different had compensation cost been determined using the fair value method of accounting as shown in the pro forma amounts below (in thousands of dollars, except per share amounts):

	Three Months Ended March 31, 2005			Six Months Ended March 31, 2005
Net income (loss), as reported	$	(1,074	)	$	5,469
Deduct: Total stock-based employee compensation expense determined under fair value based method		(83	)		(135	)
Pro forma net income (loss)	$	(1,157	)	$	5,334
Net income (loss) per share, Basic:
As reported	$	(0.10	)	$	0.52
Pro forma	$	(0.11	)	$	0.51
Net income (loss) per share, Diluted:
As reported	$	(0.10	)	$	0.50
Pro forma	$	(0.11	)	$	0.48

For purposes of estimating the fair value of options on their date of grant, in fiscal 2005 the Company began using a binomial lattice option pricing model and used the Black-Scholes option-pricing model previously. The following assumptions were used in those models:

Expected stock price volatility	3.0 - 35%
Risk-free interest rate	2.5 - 4.2%
Expected life of options	5.0 years
Dividend yield	0 - 0.7%

2. LONG-TERM DEBT

Long-term debt was as follows (in thousands of dollars):

	March 31, 2006		September 30, 2005
Senior revolving credit facility	$	—	$	—
Industrial revenue bonds		1,500		1,500
Non-interest bearing notes		3,884		5,207
Total long-term debt		5,384		6,707
Less current maturities		2,512		2,346
Long-term debt, net	$	2,872	$	4,361

The senior revolving credit facility (“Revolver”), which provides for borrowings of up to $100 million (subject to a borrowing base), is used to finance various ongoing capital needs of the Company as well as for other general corporate purposes. The Revolver matures on December 31, 2008 and has no financial covenants so long as average total liquidity (defined as the average of the borrowing base including cash, less average actual borrowings and letters of credit) exceeds $20 million; otherwise a minimum level of earnings before interest, taxes, depreciation and amortization, as defined (“EBITDA”) test would apply. The Revolver limits the Company’s ability to pay dividends or repurchase stock, if average total liquidity, after adjustment on a pro forma basis for such payment, is less than $20 million.

8

The Revolver is secured by our cash and temporary investments, accounts receivable, inventory, certain investments and certain property, plant and equipment. All subsidiaries of the Company are borrowers or guarantors under the facility.

Although the final maturity of the Revolver is December 31, 2008, the Company classifies debt under the Revolver as current, pursuant to Emerging Issues Task Force Issue 95-22. The Revolver contains a subjective acceleration clause which can be exercised if, in the opinion of the lender, there is a material adverse effect, and provides the lenders direct access to our cash receipts.

3. CONTINGENCIES

The Company is party to litigation and claims which are normal in the course of its operations; while the results of such litigation and claims cannot be predicted with certainty, the Company believes the final outcome of such matters will not have a materially adverse effect on its consolidated results of operations, financial position, or cash flows.

In connection with the sale of a subsidiary in 2002, the buyer assumed $18.5 million of industrial revenue bonds, with final maturity in 2025. The Company remains contingently liable for repayment of the bonds under a guaranty arrangement and does not believe that a liability is probable. The Company has recorded a non-current liability for the fair value of the guarantee pursuant to Financial Interpretation No. 45.

In connection with the sales of certain businesses, the Company made customary representations and warranties, and undertook indemnification obligations with regard to certain of these representations and warranties including certain environmental matters and conduct of the businesses prior to the sale. These indemnification obligations are subject to certain deductibles, caps and expiration dates and, in some cases, may be deducted from the related escrow balance. In connection with the sale of the Company’s Holly Sugar Corporation subsidiary to Southern Minnesota Beet Sugar Cooperative (“SMBSC”) in September 2005, approximately $1.7 million of sales proceeds is being held in escrow or by the buyer pending the final settlement of post-closing working capital adjustment and $2.8 million of proceeds are in escrow for 18 months to secure the Company’s indemnity obligations. SMBSC objected to the Company’s working capital computations and has referred disputed items totaling $0.5 million to an accounting arbitration process. A receivable for the working capital post-closing adjustment is recorded in accounts receivable, net of an allowance for the disputed items. Additionally, SMBSC has alleged that the Company breached certain warranties and covenants in the sales agreement and has filed an arbitration claim before the American Arbitration Association (“AAA”) alleging damages in excess of $7 million. The Company has denied the claims and intends to vigorously defend its position. The Company does not believe that its liability, if any, pursuant to SMBSC’s claim will be material to the Company’s consolidated financial position, results of operations or cash flows.

In conjunction with the sale of Holly Sugar, the Company negotiated a five-year option to purchase up to 500,000 hundredweight of bulk, refined sugar per year from SMBSC at a formula price based on the traded domestic raw sugar futures market. SMBSC rejected the Company’s exercise of that option in February 2006, alleging that there had been an unspecified “material change” in the domestic raw sugar futures market, necessitating a renegotiation of the refined sugar price under the option. The Company filed a counterclaim against SMBSC in the AAA proceeding seeking specific performance of the Supply Option Agreement and damages for breach of contract.

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4. EARNINGS PER SHARE

The following table presents information necessary to calculate basic and diluted earnings per share (in thousands of dollars, except per share amounts):

	Three Months Ended March 31,					Six Months Ended March 31,
	2006		2005			2006		2005
	(In Thousands of Dollars, Except per Share Amounts)
Income (Loss) from Continuing Operations	$	7,132	$	(2,534	)	$	18,183	$	1,466
Average Shares Outstanding		10,943,629		10,458,401			10,753,311		10,417,678
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options Under the Treasury Stock Method (1)		382,658		—			340,210		617,660
Adjusted Average Shares		11,326,287		10,458,401			11,093,521		11,035,338
Diluted EPS - Continuing Operations	$	0.63	$	(0.24	)	$	1.64	$	0.14
Income from Discontinued Operations	$	—	$	1,460		$	935	$	4,003
Average Shares Outstanding		10,943,629		10,458,401			10,753,311		10,417,678
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options Under the Treasury Stock Method (1)		382,658		—			340,210		617,660
Adjusted Average Shares		11,326,287		10,458,401			11,093,521		11,035,338
Diluted EPS - Discontinued Operations	$	—	$	0.14		$	0.08	$	0.36
Net Income (Loss)	$	7,132	$	(1,074	)	$	19,118	$	5,469
Average Shares Outstanding		10,943,629		10,458,401			10,753,311		10,417,678
Effect of Incremental Shares Issuable from Assumed Exercise of Stock Options Under the Treasury Stock Method (1)		382,658		—			340,210		617,660
Adjusted Average Shares		11,326,287		10,458,401			11,093,521		11,035,338
Diluted EPS - Net Income (Loss)	$	0.63	$	(0.10	)	$	1.72	$	0.50

(1) No anti-dilutive stock options were excluded from the computation of diluted EPS for the three and six months ended March 31, 2006, that could potentially dilute EPS in the future. Options to purchase 221,567 shares were excluded for the six months ended March 31, 2005 as they were anti-dilutive. Warrants to purchase 1,111,111 shares issued August 28, 2001, were anti-dilutive for all periods and have been excluded from the computation.

After filing the Form 10-Q for the quarter ended December 31, 2005, the Company discovered an immaterial error in the calculation of diluted weighted average shares outstanding, which had the effect of overstating diluted earnings per share for the first quarter of fiscal 2006 by $0.02 per share. This error has been corrected in the diluted earnings per share calculation for the six months ended March 31, 2006.

During the six-month period ended March 31, 2006, the Company granted options to purchase 25,000 shares of common stock at a weighted average price of $13.725 per share (fair market value, date of grant) and granted 120,000 shares of restricted stock. The options vest over a three-year period and expire ten years after the date of grant. The restricted stock vests over a three or four-year period. Options to purchase 634,787 shares of common stock with an average strike price of $4.57 per share (fair market value, date of grant) were exercised during the six months ended March 31, 2006; additionally, 58,750 stock appreciation rights were exercised at a price of $1.35 per right during the same time period.

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5. PENSION AND OTHER POSTRETIREMENT BENEFITS

The components of net periodic benefit costs for the three and six months ended March 31, 2006 and 2005 were (in thousands):

	Three Months Ended March 31,						Six Months Ended March 31,
	2006			2005			2006			2005
Pension Plans
Service Cost	$	193		$	325		$	386		$	650
Interest Cost		2,820			3,639			5,640			7,278
Expected Return on Plan Assets		(3,039	)		(3,553	)		(6,078	)		(7,106	)
Amortization of Prior Service Cost		28			32			56			64
Recognized Actuarial Loss		396			161			792			322
Curtailment Loss		97			—			194			—
Total Net Periodic Benefit Costs	$	495		$	604		$	990		$	1,208
Postretirement Benefits Other than Pension Plans
Service Cost	$	(8	)	$	3		$	23		$	6
Interest Cost		(414	)		302			1,334			604
Amortization of Prior Service Cost		774			(265	)		(2,491	)		(530	)
Recognized Actuarial Loss		(403	)		175			1,298			350
Total Net Periodic Benefit Costs	$	(51	)	$	215		$	164		$	430

Pension plan contributions, which are based on regulatory requirements, totaled $0.4 million during the six months ended March 31, 2006 compared to $0.4 million for the six months ended March 31, 2005. Contributions during the remainder of fiscal 2006 are expected to be approximately $3.0 million.

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6. DISCONTINUED OPERATIONS

The financial statements reflect the operating results of the Holly Sugar subsidiary (“Holly”), which was sold in September 2005, as discontinued operations.

Summary operating results of discontinued operations are as follows (in thousands of dollars):

	Three Months Ended March 31,			Six Months Ended March 31,
	2005			2006			2005
Net Sales	$	33,833		$	—		$	77,261
Cost and Expenses		(30,682	)		1,449			(71,030	)
Depreciation		(788	)		—			(1,575	)
Gain on Sale of Assets		37			—			382
Operating Income from Discontinued Operation		2,400			1,449			5,038
Other Income		30			—			167
Provision for Income Taxes		(899	)		(514	)		(1,926	)
Income from Discontinued Operation Before Gain	$	1,531		$	935		$	3,279
Gain (Loss) on Disposal		(71	)		—			724
Income from Discontinued Operation	$	1,460		$	935		$	4,003

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with information contained in the Consolidated Financial Statements and the notes thereto and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2005.

Overview

We operate in a single domestic business segment, which produces and sells refined sugar and related products.

Our results of operations substantially depend on market factors, including the demand for and price of refined sugar, the price of raw cane sugar and the availability and price of energy and other resources. These market factors are influenced by a variety of external forces that we are unable to predict, including the number of domestic acres contracted to grow sugar cane and sugarbeets, prices of competing crops, domestic health and eating trends, competing sweeteners, weather conditions and United States farm and trade policy. The domestic sugar industry is subject to substantial influence by legislative and regulatory actions. The current farm bill limits the importation of raw cane sugar and the marketing of domestic refined beet and raw cane sugar, potentially affecting refined sugar sales prices and volumes as well as the supply and cost of raw material available to our cane refineries.

In September 2005, we sold our Holly Sugar subsidiary (“Holly”). Holly’s results are excluded from continuing operations discussed below and are shown separately as discontinued operations.

Results of Operations

Three and Six Months Ended March 31, 2006

Continuing Operations

In the second fiscal quarter ended March 31, 2006, we reported income from continuing operations of $7.1 million or $0.63 per diluted share, compared to a loss of ($2.5) million or ($0.24) per diluted share during the second fiscal quarter of the prior year. For the first six months of the current year, we reported income from continuing operations of $18.2 million or $1.64 per diluted share, compared to income of $1.5 million or $0.14 per diluted share last year. Our improved results were driven primarily by higher sales volumes and an improvement in gross margin resulting from higher sales prices, offset in part by higher raw sugar, energy, freight and manufacturing costs. We discuss these factors in more detail below.

Our results of operations primarily depend on our success in achieving appropriate spreads of sugar sales prices over raw material costs and our ability to control our manufacturing, distribution and administrative costs. Sugar sales comprise approximately 97% of our net sales.

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Sugar sales volumes and prices were:

	Three Months Ended March 31,						Six Months Ended March 31,
	2006			2005			2006			2005
	Volume	Price		Volume	Price		Volume	Price		Volume	Price
	(000 cwt)	(per cwt)		(000 cwt)	(per cwt)		(000 cwt)	(per cwt)		(000 cwt)	(per cwt)
Sugar Sales:
Industrial	3,331	$	31.84	2,890	$	27.61	6,756	$	30.65	6,048	$	27.69
Consumer	1,771		35.37	1,863		31.73	4,368		35.91	4,732		32.21
Foodservice	1,010		39.77	744		30.73	2,284		37.16	1,534		30.60
Domestic Sales	6,112	$	34.17	5,497	$	29.43	13,408	$	33.47	12,314	$	29.79
World/Toll Sales	566		12.16	415		11.35	1,127		12.47	718		12.16
Sugar Sales	6,678	$	32.31	5,912	$	28.16	14,535	$	31.84	13,032	$	28.82

Net sales increased 29.0% for the three months and 23.1% for the six months ended March 31, 2006, each compared to the same period in the prior year. Domestic sugar volumes increased 11.1% for the quarter and 8.9% for the six-month period, while domestic prices increased 16.1% and 12.4% for the same periods. Favorable domestic sugar market conditions were driven by a tight domestic supply caused by a smaller domestic sugarbeet crop and delays in the start of the harvest in some sugar beet areas, along with the impact of Gulf Coast hurricanes on the cane sugar industry. Hurricanes damaged standing sugar cane crops in both Florida and Louisiana and caused a competitor’s cane sugar refinery, which produces over 9% of domestic refined sugar, to close from the end of August until early December 2005, when it commenced limited production. Additionally, the active hurricane season caused significant disruption of rail and truck transportation service during the late summer and fall time periods. The USDA has attempted to compensate for these factors by increasing allowable imports of both raw and refined sugar several times during the year, most recently in February 2006, but overall domestic supplies remain tight. As a result of these factors, our volumes increased and prices rose. Lower promotional spending and logistical disruptions, as well as competition from private label consumer sugar produced in Mexico, were the primary reasons for the lower consumer volumes. A significant portion of our industrial sales are done under fixed price forward sales contracts for up to a year, many of which are on a calendar year basis. Fiscal 2006 industrial contracting with some customers commenced as early as late spring 2005, prior to the significant increases in market prices. As a result of these factors, industrial sales prices tend to lag market trends and the increase in industrial sales prices early in the fiscal year was not as robust as the increase in consumer and foodservice prices. The percentage of industrial volume in the second fiscal quarter that was derived from higher priced contracts booked in the post-Katrina period was higher than that same measure during the first fiscal quarter. This percentage is expected to increase further in the second half of the fiscal year. Consequently, we expect industrial sales prices during the balance of fiscal 2006 to be higher than the first six months. World and toll sales volumes both increased in the current year periods compared to the same periods of the prior year. Average world/toll prices reflected in the table above increased because of higher world sugar prices.

Gross margin as a percentage of sales for the three months ended March 31, 2006, increased to 11.4% from 4.9% in the prior year quarter and increased to 12.1% for the first six months compared to 6.1% in the prior year. The increase in our current year’s gross margin percentage is primarily due to increased sugar sales prices, partially offset by higher raw sugar, energy, freight and manufacturing costs. The increase in sales prices contributed 13.3% to the increase in gross margin in the second fiscal quarter and 10.5% in the first half of fiscal 2006. Our cost of raw cane sugar increased from $20.52 per cwt (on a raw market basis) for the quarter ended March 31, 2005 to $22.13 per cwt for the current quarter and from $20.54 per cwt for the first six months of last year to $21.47 per cwt for the first six months of this year. These higher raw sugar costs decreased our gross margin percentage by 4.5% for the three months and 2.6% for the six months ended March 31, 2006. Energy costs were $1.7 million and $4.5 million higher for the three and six months ended March 31, 2006, amounting to a reduction of gross margin percentage of 0.8% for the quarter and 0.9% for the six months. In addition, fuel costs have had an adverse effect on our transportation costs, which decreased our gross margin 0.5% for the quarter and 0.4% for the six months. Sugar manufacturing costs increased in the current fiscal year due primarily to increased costs for labor, fringe benefits and maintenance, in part due to the greater volume of activity during the quarter. Increased manufacturing costs (excluding energy) negatively impacted gross margin by approximately 0.6% for the three months and 0.4% for the six months ended March 31, 2006, compared to the same period in the prior year.

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Domestic raw sugar supplies are tight and there is a risk of undersupply later in the year. The damage to the Louisiana and Florida crops from three hurricanes may be more severe than current USDA estimates and the ability of some of the offshore quota holders to deliver their allowed quantities is uncertain. A portion of the currently allowed imports is in the form of refined sugar, principally from Mexico, which has proved difficult for some U.S. industrial and foodservice customers to utilize. The USDA may be required to further relax import restrictions later this year to satisfy projected domestic demand. Very high world sugar prices are attracting excess production from exporting countries into the world market, potentially making supplies available to the U.S. market more scarce later in the year, which may necessitate changes in the way the USDA manages the import program. Supply interruptions may develop if these conditions persist, absent timely USDA action. In addition, domestic raw sugar prices have risen in reaction to these factors, increasing our unhedged raw sugar cost. Further increases in domestic raw sugar prices are possible, and we may or may not be able to increase the price of refined sugar to our customers to offset such higher costs.

Energy costs have increased significantly over the past several years and we expect them to continue to be a larger part of our costs in the future. Our average cost of natural gas after applying gains and losses from hedging activity increased to $11.55 per mmbtu in the current quarter from $8.00 per mmbtu in the comparable prior year’s quarter. As of April 17, 2006 we had purchased or hedged 89% of our expected natural gas requirements for fiscal 2006. If the balance of our anticipated natural gas purchases were priced in the futures market on April 17, 2006, our full year fiscal 2006 natural gas costs would be approximately $7.0 million higher than in fiscal 2005. Additionally, other cost elements, such as freight costs, packaging material and chemicals, as well as secondary energy sources such as fuel oil and electricity have been adversely affected by the higher energy costs this year.

Selling, general and administrative expense increased $0.2 million for the three months and $2.1 million for the six months ended March 31, 2006, compared to the same periods in the prior year. Contributing to the increase in costs for the quarter was higher incentive compensation of $1.7 million, offset in part by lower salary costs ($0.7 million), lower severance cost ($0.3 million) and lower bad debt cost ($0.3 million). For the six month period, higher incentive compensation ($2.5 million), stock option expense ($0.4 million) and new product advertising cost ($0.8 million) were partially offset by $1.1 million lower salary costs as well as $0.3 million lower retiree medical costs.

In the first quarter of the prior year, we sold various assets, including land and a warehouse in Georgia for a gain of approximately $2.7 million and wastewater rights and emission reduction credits at closed factories for a gain of $0.9 million. We also sold a royalty interest in a coal seam methane gas project for a gain of approximately $1.9 million during the quarter ended December 31, 2004, which was categorized as a non-operating gain on asset sale. No significant asset sales have occurred in fiscal 2006.

The Company’s lower borrowing level in fiscal 2006, as well as reduced interest rates and fees related to the amendment of the bank agreement in December 2004, were the primary reasons for the decrease in interest expense for the three and six months periods ended March 31, 2006.

We recorded a deferred tax provision in the consolidated statement of operations, however we are not currently paying federal income taxes on our earnings as a result of net operating loss carry forwards from prior periods. If current earnings trends continue, we would be paying cash income tax by the end of fiscal 2006.

Discontinued Operations

Income from discontinued operations for the six months ended March 31, 2006 was primarily due to the resolution of a pre-disposal contingency.

Liquidity and Capital Resources

We fund our liquidity and capital requirements from cash generated from operations, supplemented as necessary with revolving credit borrowings under an agreement that provides for up to $100 million (subject to a borrowing base) of senior secured revolving credit loans (the “Revolver”). At March 31, 2006 we had no outstanding borrowings under the Revolver and had borrowing capacity of $80.8 million, after deducting outstanding letters of credit totaling $19.2 million.

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The Revolver, which expires in December 2008, is secured by our cash and temporary investments, accounts receivable, inventory, certain investments and certain property, plant and equipment. Each of our subsidiaries is either a borrower or a guarantor under the facility. The agreement contains covenants limiting our ability to, among other things:

• incur other indebtedness

• incur other liens

• undergo any fundamental changes

• engage in transactions with affiliates

• enter into sale and leaseback transactions

• change our fiscal periods

• enter into mergers or consolidations

• sell assets

• prepay other debt

In addition, in the event that our average total liquidity (defined as the average of the borrowing base including cash, less average actual borrowings and letters of credit) falls below $20 million, the Revolver requires that we comply with a quarterly covenant which establishes a minimum level of earnings before interest, taxes, depreciation and amortization. The Revolver limits our ability to pay dividends or repurchase stock if our average total liquidity, after adjustment on a pro forma basis for such transaction, is less than $20 million.

The Revolver also includes customary events of default, including a change of control. Borrowings are generally available subject to a borrowing base and to the accuracy of all representations and warranties, including the absence of a material adverse change and the absence of any default or event of default. Although the facility has a final maturity date of December 31, 2008, we classify debt under the Revolver as current, pursuant to Emerging Issues Task Force Issue 95-22 as the Revolver contains a subjective acceleration clause if in the opinion of the lenders there is a material adverse effect, and provides the lenders direct access to our cash receipts.

We increased our inventories by $26 million in the first six months of fiscal 2006, principally because of higher raw sugar levels we maintained in response to concerns about an increasingly tight raw sugar market, as well as somewhat higher finished goods inventory. This increase, along with a $17 million decrease in accounts payable related to the timing of the payment of raw sugar purchases and the payment of a special dividend to shareholders, are the primary reasons for the reduction in cash during the period. A detailed analysis of the sources and uses of cash is provided in the Consolidated Statements of Cash Flow.

Our capital expenditures for the six months ended March 31, 2006 were $2.3 million, primarily for normal replacement and productivity improvements. Capital expenditures in fiscal 2006 are expected to be approximately $10 million, of which slightly less than half will be related to productivity and packaging improvements, a similar amount related to normal replacement of factory equipment and a smaller amount to technology investments.

During the first quarter of fiscal 2006, we paid a special cash dividend of $2.50 per share in addition to the regular quarterly dividend of $0.05 per share. We increased the regular quarterly dividend rate to $0.06 per share in the second quarter of fiscal 2006.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimate methodologies since the filing of our Annual Report on Form 10-K for the year ended September 30, 2005.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We use raw sugar futures and options in our raw sugar purchasing programs and natural gas futures and options to hedge natural gas purchases used in our manufacturing operations. Our ability to effectively hedge raw sugar purchases is limited by the illiquidity in the domestic raw sugar futures market. Gains and losses on raw sugar futures and options are matched to inventory purchases and charged or credited to cost of sales as such inventory is sold. Gains and losses on natural gas futures are matched to the natural gas purchases and charged to cost of sales in the period of the purchase.

The information in the table below presents our domestic and world raw sugar futures positions outstanding as of March 31, 2006.

	Expected Maturity Fiscal 2006		Expected Maturity Fiscal 2007
Domestic Futures Contracts (long positions):
Contract Volumes (cwt.)		4,109,280		221,760
Weighted Average Contract Price (per cwt.)	$	23.16	$	22.68
Contract Amount	$	95,155,000	$	5,029,000
Weighted Average Fair Value (per cwt.)	$	23.93	$	22.47
Fair Value	$	98,326,000	$	4,984,000
	Expected Maturity Fiscal 2006		Expected Maturity Fiscal 2007
World Futures Contracts (net long (short) positions):
Contract Volumes (cwt.)		535,360		(433,440	)
Weighted Average Contract Price (per cwt.)	$	13.92	$	16.75
Contract Amount	$	7,451,000	$	(7,259,000	)
Weighted Average Fair Value (per cwt.)	$	17.89	$	17.87
Fair Value	$	9,578,000	$	(7,746,000	)

The above information does not include either our physical inventory or our fixed price purchase commitments for raw sugar. Short raw sugar futures positions may occur when suppliers deliver short futures pursuant to the pricing provisions of raw sugar supply agreements, creating an equal and offsetting long position in the physical supply agreement.

The information in the table below presents our natural gas futures positions outstanding as of March 31, 2006.

	Expected Maturity Fiscal 2006		Expected Maturity Fiscal 2007
Futures Contracts (long positions):
Contract Volumes (mmbtu)		1,010,000		180,000
Weighted Average Contract Price (per mmbtu)	$	9.31	$	9.61
Contract Amount	$	9,403,000	$	1,731,000
Weighted Average Fair Value (per mmbtu)	$	7.56	$	9.04
Fair Value	$	7,639,000	$	1,627,000

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Item 4. CONTROLS AND PROCEDURES

In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2006 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There has been no change in our internal control over financial reporting that occurred during the six months ended March 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In connection with the sales of certain businesses, the Company made customary representations and warranties, and undertook indemnification obligations with regard to certain of these representations and warranties including certain environmental matters and conduct of the businesses prior to the sale. These indemnification obligations are subject to certain deductibles, caps and expiration dates and, in some cases, may be deducted from the related escrow balance. In connection with the sale of the Company’s Holly Sugar Corporation subsidiary to Southern Minnesota Beet Sugar Cooperative (“SMBSC”) in September 2005, approximately $1.7 million of sales proceeds is being held in escrow or by the buyer pending the final settlement of post-closing working capital adjustment and $2.8 million of proceeds are in escrow for 18 months to secure the Company’s indemnity obligations. SMBSC objected to the Company’s working capital computations and has referred disputed items totaling $0.5 million to an accounting arbitration process. A receivable for the working capital post-closing adjustment is recorded in accounts receivable, net of an allowance for the disputed items. Additionally, SMBSC has alleged that the Company breached certain warranties and covenants in the sales agreement and has filed an arbitration claim before the American Arbitration Association (“AAA”) alleging damages in excess of $7 million. The Company has denied the claims and intends to vigorously defend its position. The Company does not believe that its liability, if any, pursuant to SMBSC’s claim will be material to the Company’s consolidated financial position, results of operations or cash flows.

In conjunction with the sale of Holly Sugar, the Company negotiated a five-year option to purchase up to 500,000 hundredweight of bulk, refined sugar per year from SMBSC at a formula price based on the traded domestic raw sugar futures market. SMBSC rejected the Company’s exercise of that option in February 2006, alleging that there had been an unspecified “material change” in the domestic raw sugar futures market, necessitating a renegotiation of the refined sugar price under the option. The Company filed a counterclaim against SMBSC in the AAA proceeding seeking specific performance of the Supply Option Agreement and damages for breach of contract.

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Item 4. Submission of Matters to a Vote of Security Holders

On January 31, 2006, the Company held its annual meeting of shareholders and voted on three proposals.

(1) Four directors were elected with votes cast as follows:

Nominee	Votes for	Votes withheld
Class I
Robert J. McLaughlin	6,715,066	2,589,621
Robert A. Peiser	7,091,183	2,213,504
John K. Sweeney	7,091,754	2,212,933
Class II
David C. Moran	7,092,251	2,212,436

(2) The shareholders ratified the appointment of Deloitte & Touche L.L.P. as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2006, with votes cast as follows:

Votes for	Votes against	Abstentions
9,245,102	51,016	8,569

(3) The shareholders rejected a shareholder proposal regarding compensation for the chief executive officer and certain other executive officers:

Votes for	Votes against	Abstentions	Broker Non-votes
1,766,421	5,917,015	83,189	1,538,062

Item 6. Exhibits

(a) Exhibits

4(b)(1)	Omnibus Amendment to Credit Agreement dated January 1, 2006 by and among Bank of America, N.A., as administrative agent, and Imperial Sugar Company and the other borrowers and obligated parties thereto.
4(b)(2)	Second Amendment to Credit Agreement dated March 15, 2006 by and among Bank of America, N.A., as administrative agent, and Imperial Sugar Company and the other borrowers and obligated parties thereto.
4(e)	Amendment to Registration Rights Agreement dated as of March 28, 2006, by and among Imperial Sugar Company and the parties listed on the signature page thereto.
31.1	Chief Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
31.2	Chief Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
32	Certifications required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	IMPERIAL SUGAR COMPANY (Registrant)
Dated: May 3, 2006	By:	/s/ H. P. Mechler
		H. P. Mechler
		Senior Vice President and
		Chief Financial Officer

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Exhibit Index

Exhibit No.	Document
4(b)(1)	Omnibus Amendment to Credit Agreement dated January 1, 2006 by and among Bank of America, N.A., as administrative agent, and Imperial Sugar Company and the other borrowers and obligated parties thereto.
4(b)(2)	Second Amendment to Credit Agreement dated March 15, 2006 by and among Bank of America, N.A., as administrative agent, and Imperial Sugar Company and the other borrowers and obligated parties thereto.
4(e)	Amendment to Registration Rights Agreement dated as of March 28, 2006, by and among Imperial Sugar Company and the parties listed on the signature page thereto.
31.1	Chief Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
31.2	Chief Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
32	Certifications required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

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EX-4.B1

Exhibit 4(b)(1)

OMNIBUS AMENDMENT

THIS OMNIBUS AMENDMENT (this “Amendments”), dated effective as of January 1, 2006, is executed by and among BANK OF AMERICA, N.A., in its capacity as administrative agent for the Lenders under the Credit Agreement referred to below (the “Agent”) and individually as a Lender, IMPERIAL SUGAR COMPANY, a Texas corporation (the “Parent” and one of the Borrowers), and the other Borrowers and Obligated Parties which are signatories hereto below.

R E C I T A L S:

A. The Parent and certain of its Subsidiaries, as Borrowers, and Bank of America, N.A., as the Agent and a Lender, are parties to that certain Amended and Restated Credit Agreement dated as of December 1, 2004 (as amended from time to time, the “Credit Agreement”) pursuant to which, among other things, the Lender has made a revolving credit facility available to the Borrowers.

B. The Parent previously sold all of its capital stock of Holly Sugar Corporation to a third party and, in connection with such sale and pursuant to a Consent and Agreement dated as of September 20, 2005, executed by the Agent, the Borrowers and the other Obligated Parties, Holly Sugar Corporation was released from all of its obligations under the Credit Agreement.

C. The parties hereto now desire to amend the Credit Agreement, the Borrower Security Agreement and each of the Guarantor Security Agreements to, among other things, provide for springing dominion of funds as opposed to full dominion of funds.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which arc hereby acknowledged, the parties hereto hereby agree as follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings therefor set forth in the Credit Agreement.

2. Amendments to the Credit Agreement. The Credit Agreement is hereby amended as follows.

(a) Section 5.2(d). The first sentence of Section 5.2(d) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“The Obligated Parties will furnish or cause to be furnished, with each of the annual audited Financial Statements delivered pursuant to Section 5.2(a), and with each of the unaudited Financial Statements delivered pursuant to Section 5.2(b), a certificate of the chief financial officer or chief accounting officer of the Parent in the form of Exhibit D (a “Compliance Certificate”) (i) setting forth in reasonable detail the calculations required to establish the Obligated Parties’ compliance with the covenant set forth in Section 7.22 during the period covered by such Financial Statements and as of the end thereof and (ii) except as explained in reasonable detail in such certificate, (A) stating that all of the representations and warranties of the Obligated Parties contained in this Agreement and the other Loan Documents are correct and complete in all material respects as at the date of such certificate as if made at such time, except for those that speak as of a particular data, (B) stating that the Obligated Parties are, at the date of such certificate, in compliance in all material respects with all of their respective covenants and agreements in this Agreement and the other Loan Documents, (C) stating that no Default or Event of Default then exists or existed during the period covered by such Financial Statements,

OMNIBUS AMENDMENT – Page 1

(D) describing and analyzing in reasonable detail all material trends, changes, and developments in each and all such Financial Statements, provided that the requirement in this clause (D) may be satisfied by delivery of the Parent’s report on Form 10-Q (as to quarterly Financial Statements) or Form 10-K (as to annual Financial Statements), and

(E) stating that (1) a Dominion Event did not occur during the period covered by such Financial Statements or, if such a Dominion Event did occur during such period, stating that a Dominion Event did occur during such period, describing such event and stating the initial date upon which such event occurred, and (2) if a Dominion Event did not occur during such period but did occur during a prior period and a Dominion Termination Event with respect to such Dominion Event did not occur during a prior period but occurred during the period covered by such Financial Statements, stating that a Dominion Termination Event did occur during such period, describing such event and stating the initial date upon which such event occurred.”

(b) Additional Definitions. Annex A to the Credit Agreement is hereby amended to add the following terms and definitions, which terms shall appear in alphabetical order in such Annex A:

“‘Dominion Event’ means (a) the occurrence of an Event of Default, (b) the occurrence of a Material Adverse Effect, or (c) the Availability at any time is less than $40,000,000.”

“‘Dominion Period’ means a period of time during which a Dominion Event has occurred and a Dominion Termination Event with respect to such Dominion Event has not occurred.”

“‘Dominion Termination Event’ means, with respect to each Dominion Event that has previously occurred, the initial date after the occurrence of such Dominion Event upon which (a) Availability equals or exceeds $50,000,000 for each day of a Fiscal Quarter commencing after the occurrence of such Dominion Event and (b) no Event of Default or Material Adverse Effect exists.”

(c) Compliance Certificate. Exhibit D to the Credit Agreement, the form of Compliance Certificate, is amended and restated in its entirety to read as set forth on Omnibus Amendment Exhibit D to this Amendment.

3. Amendment to the Borrower Security Agreement. Section 11 of the Borrower Security Agreement is hereby amended and restated in its entirety to read as follows:

“(a) The terms and provisions of this Section 11(a) shall apply at all times other than during a Dominion Period. The Grantors shall make collection of all Accounts and other Collateral and promptly deposit all such payments and receipts in their original form duly endorsed in blank into a Payment Account. Pursuant to this Section 11 (a), all collected funds in any deposit account shall be transferred on each Business Day to a Payment Account established for the account of the applicable Grantor at a Clearing Bank reasonably acceptable to the Agent and subject to a Blocked Account Agreement, in form and substance satisfactory to the Agent, which will provide for the Agent’s dominion and control over such Payment Account upon notice from the Agent to such Clearing Bank. The Agent agrees to assert its dominion and control over the Payment Accounts only during a Dominion Period.

OMNIBUS AMENDMENT – Page 2

(b) The terms and provisions of this Section 11(b) shall apply at all times during a Dominion Period. The Grantors shall establish and maintain in effect one or more lock-box services for collections of Accounts and payment intangibles at Clearing Banks acceptable to the Agent, subject to Blocked Account Agreements and other documentation acceptable to the Agent. The Grantors shall promptly and thereafter instruct all Account Debtors to make all payments directly to the address established for such service. If, notwithstanding such instructions, any Grantor receives any proceeds of Accounts and payment intangibles, it shall receive such payments as the Agent’s trustee, and shall immediately deliver such payments to the Agent in their original form duly endorsed in blank or deposit them into a Payment Account, as the Agent may direct. All collections of each Grantor received in any lock-box or Payment Account or directly by any Grantor or the Agent, and all funds in any such Payment Account or other account to which such collections are deposited shall be subject to the Agent’s sole control and withdrawals by any Grantor shall not be permitted. Notwithstanding anything to the contrary contained herein, as of Closing Date, the Grantors acknowledge and agree that the only Payment Accounts that are acceptable to the Agent for purposes of this Section 11(b) are account numbers 0584860 and 0091061 with Mellon Bank, N.A., in the name of Imperial Distributing, Inc. (the “Current Payment Accounts”) and, unless and until a Payment Account pursuant to a Blocked Account Agreement and other documentation acceptable to the Agent is established, any proceeds of any Grantor’s Accounts, payment intangibles or other Collateral of any kind will be deposited in the Current Payment Accounts. The Grantors agree that the Current Payment Accounts were previously established in the name of Imperial Distributing, Inc. by and at the direction of the Grantors (and not as a requirement of the Agent) in accordance with each such Grantor’s cash management procedures and protocols. The Agent or the Agent’s designee may, at any time after a Default or an Event of Default has occurred, notify each Grantor’s Account Debtors that such Grantor’s Accounts have been assigned to the Agent and of the Agent’s security interest therein, and may collect them directly and charge the collection costs and expenses to the Loan Account as a Revolving Loan. So long as an Event of Default exists, each Grantor, at the Agent’s request, shall execute and deliver to the Agent such documents as the Agent shall require to grant the Agent access to any post office box in which collections of any Grantor’s Accounts are received.

(c) At all times during a Dominion Period, if sales of Inventory are made or services are rendered for cash, each Grantor shall immediately deliver to the Agent or deposit into a Payment Account the cash which such Grantor receives.

(d) At all times during a Dominion Period, all payments including immediately available funds received by the Agent at a bank account designated by it, will be the Agent’s sole property for its benefit and the benefit of the Lenders and will be credited to the Loan Account (conditional upon final collection); provided, however, that such payments shall be deemed to be credited to the Loan Account immediately upon receipt for purposes of (i) determining Availability, and (ii) calculating the amount of interest accrued thereon solely for purposes of determining the amount of interest to be distributed by the Agent to the Lenders (but not the amount of interest payable by the Grantors).

(e) In the event the Grantors repay all of the Obligations upon the termination of the Credit Agreement or upon acceleration of the Obligations, other than through the Agent’s receipt of payments on account of the Grantors” Accounts or proceeds of the other Collateral, such payment will be credited (conditioned upon final

OMNIBUS AMENDMENT – Page 3

collection) to the Grantors’ Loan Account after the Agent’s receipt of immediately available funds.”

4. Amendments to Guarantor Security Agreements. Section 11 of each of the Guarantor Security Agreements is hereby amended and restated to read in its entirety as follows:

“(a) The terms and provisions of this Section 11(a) shall apply at all times other than during a Dominion Period. The Grantor shall make collection of all Accounts and other Collateral and promptly deposit all such payments and receipts in their original form duly endorsed in blank into a Payment Account. Pursuant to this Section 11(a), all collected funds in any deposit account shall be transferred on each Business Day to a Payment Account established for the account of the Grantor at a Clearing Bank reasonably acceptable to the Agent and subject to a Blocked Account Agreement, in form and substance satisfactory to the Agent, which will provide for the Agent’s dominion and control over such Payment Account upon notice from the Agent to such Clearing Bank. The Agent agrees to assert its dominion and control over the Payment Accounts only during a Dominion Period.

(b) The terms and provisions of this Section 11(b) shall apply at all times during a Dominion Period. The Grantor shall establish one or more lock-box services for collections of Accounts and payment intangibles at Clearing Banks acceptable to the Agent, subject to Blocked Account Agreements and other documentation acceptable to the Agent. The Grantor shall promptly and thereafter instruct all Account Debtors to make all payments directly to the address established for such service. If, notwithstanding such instructions, the Grantor receives any proceeds of Accounts and payment intangibles, it shall receive such payments as the Agent’s trustee, and shall immediately deliver such payments to the Agent in their original form duly endorsed in blank or deposit them into a Payment Account, as the Agent may direct. All collections of the Grantor received in any lock-box or Payment Account or directly by the Grantor or the Agent, and all funds in any such Payment Account or other account to which such collections are deposited shall be subject to the Agent’s sole control and withdrawals by any Grantor shall not be permitted. Notwithstanding anything to the contrary contained herein, as of Closing Date, the Grantor acknowledges and agrees that the only Payment Accounts that are acceptable to the Agent for purposes of this Section 11(b) are account numbers 0584860 and 0091061 with Mellon Bank, N.A., in the name of Imperial Distributing, Inc. (the “Current Payment Accounts”) and, unless and until a Payment Account pursuant to a Blocked Account Agreement and other documentation acceptable to the Agent is established, any proceeds of the Grantor’s Accounts, payment intangibles or other Collateral of any kind will be deposited in the Current Payment Accounts. The Grantor agrees that the Current Payment Accounts were previously established in the name of Imperial Distributing, Inc. by and at the direction of the Grantor (and not as a requirement of the Agent) in accordance with the Grantor’s cash management procedures and protocols. The Agent or the Agent’s designee may, at any time after a Default or an Event of Default has occurred, notify the Grantor’s Account Debtors that the Grantor’s Accounts have been assigned to the Agent and of the Agent’s security interest therein, and may collect them directly and charge the collection costs and expenses to the Loan Account as a Revolving Loan. So long as an Event of Default exists, the Grantor, at the Agent’s request, shall execute and deliver to the Agent such documents as the Agent shall require to grant the Agent access to any post office box in which collections of the Grantor’s Accounts are received.

OMNIBUS AMENDMENT – Page 4

(c) At all times during a Dominion Period, if sales of Inventory are made or services are rendered for cash, the Grantor shall immediately deliver to the Agent or deposit into a Payment Account the cash which the Grantor receives.

(d) At all times during a Dominion Period, all payments including immediately available funds received by the Agent at a bank account designated by it, will be the Agent’s sole property for its benefit and the benefit of the Lenders and will be credited to the Loan Account (conditional upon final collection); provided, however, that such payments shall be deemed to be credited to the Loan Account immediately upon receipt for purposes of (i) determining Availability, and (ii) calculating the amount of interest accrued thereon solely for purposes of determining the amount of interest to be distributed by the Agent to the Lenders (but not the amount of interest payable by the Grantor).

(e) In the event the Grantor repays all of the Obligations upon the termination of the Credit Agreement or upon acceleration of the Obligations, other than through the Agent’s receipt of payments on account of the Grantor’s Accounts or proceeds of the other Collateral, such payment will be credited (conditioned upon final collection) to the Grantor’s Loan Account after the Agent’s receipt of immediately available funds.”

5. Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of each of the following conditions precedent to the reasonable satisfaction of the Agent:

(a) the Agent shall have received certified resolutions of the board of directors or other appropriate governing body of each of the Obligated Parties which authorize the execution, delivery and performance of this Amendment; and

(b) the Agent shall have executed and delivered to Mellon Bank, N.A. and Mellon Financial Services Corporation #1, in accordance with paragraph 10 of the Blocked Account Agreement, written instructions in form and substance satisfactory to the Agent relating to springing dominion of funds.

6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES) AND APPLICABLE LAWS OF THE U.S.

7. Counterparts. This Amendment may be executed in any number of counterparts, all of which when taken together shall constitute one agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart.

8. Successors and Assigns. This Amendment shall inure to the benefit of the Agent and the Lenders and their respective successors and assigns and is binding upon the Borrowers and the other Obligated Parties and their successors and assigns; provided, however, that none of the Borrowers or other Obligated Parties may assign or transfer any of its obligations hereunder without the prior written consent of the Agent and the Lenders.

9. Headings. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

OMNIBUS AMENDMENT – Page 5

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers effective as of the day and year first above written

IMPERIAL SUGAR COMPANY
By:	/s/ H. P. Mechler
Name:	H. P. Mechler
Title:	Senior Vice President and Chief Financial Officer

FORT BEND UTILITIES COMPANY
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

HOLLY FINANCE COMPANY
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	Senior Vice President

IMPERIAL DIS1RIBUTING, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	Senior Vice President

IMPERIAL SWEETENER DISTRIBUTORS, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

OMNIBUS AMENDMENT – Page 6

IMPERIAL-SAVANNAH LP
By:	Savannah Molasses & Specialties Company
Title:	General Partner
	By:	/s/ William F. Schwer
	Name:	William F. Schwer
	Title:	President
RAGUS HOLDINGS, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH FOODS INDUSTRIAL, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
BIOMASS CORPORATION
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
DIXIE CRYSTALS FOODSERVICE, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
ICUBE, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

OMNIBUS AMENDMENT – Page 7

IMPERIAL HOLLY CORPORATION
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
MENU MAGIC FOODS, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH FOODS & INDUSTRIES, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH INVESTMENT COMPANY
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH MOLASSES & SPECIALTIES COMPANY
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH SUGAR REFINING CORPORATION
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

OMNIBUS AMENDMENT – Page 8

AGENT:
BANK OF AMERICA, N.A., as the Agent and sole Lender under the Credit Agreement
By:	/s/ Stephen J. King
Name:	Stephen J. King
Title:	Vice President

OMNIBUS AMENDMENT – Page 9

OMNIBUS AMENDMENT EXHIBIT D

FORM OF COMPLIANCE CERTIFICATE

COMPLIANCE CERTIFICATE – Page 1

COMPLIANCE CERTIFICATE

The undersigned, duly appointed and acting __________________ of Imperial Sugar Company (the “Parent”), solely in such capacity (and not in [his/her] individual capacity) being duly authorized, hereby delivers this Compliance Certificate to the Agent, pursuant to Section 5.2(d) of that certain Amended and Restated Credit Agreement, dated as of December 1, 2004 (as such agreement may be amended, restated or otherwise modified from time to time, the “Credit Agreement”), by and among certain financial institutions party thereto from time to time (collectively, the “Lenders”), Bank of America, N.A., in its capacity as administrative agent for the Lenders (the “Agent”), Imperial Sugar Company, Fort Bend Utilities Company, Holly Finance Company, Holly Sugar Corporation, Imperial Distributing, Inc., Imperial Sweetener Distributors, Inc., Imperial-Savannah LP, Ragus Holdings, Inc. and Savannah Foods Industrial, Inc. (the “Borrowers”), reference to which hereby is made. Terms defined in the Credit Agreement, wherever used herein, shall have the same meanings as are prescribed by the Credit Agreement

1. The Parent hereby delivers to the Agent [check as applicable]:

¨ the consolidated audited and consolidating unaudited Fiscal Year end Financial Statements of the Parent and its Subsidiaries and the accountant’s report required by Section 5.2(a) of the Credit Agreement and the certificate of such accountants required by Section 5.2(c) of the Credit Agreement, each dated as of             ,             ;

¨ the consolidated unaudited calendar month end Financial Statements of the Parent and its Subsidiaries required by Section 5.2(b)(i) of the Credit Agreement, dated as of             ,             ;

¨ the consolidated unaudited Fiscal Quarter end Financial Statements of the Parent and its Subsidiaries required by Section 5.2(b)(ii) of the Credit Agreement, dated as of             ,             ;

¨ the consolidated unaudited month end Financial Statements of the Parent and its Subsidiaries as of and for the end of the last month of the Fiscal Year required by Section 5.2(b)(iii) of the Credit Agreement, dated as of             ,             ;

Such Financial Statements are complete and correct in all material respects and have been prepared in accordance with GAAP (as applicable) applied consistently throughout the periods reflected therein.

2. The undersigned represents and warrants to the Agent that, except as may have been previously or concurrently disclosed to the Agent in writing by the Parent, the presentations and warranties contained in Article 6 of the Credit Agreement and in the other Loan Documents are correct and complete in all material respects on and as of the date of this Compliance Certificate as if made on and as of the date hereof (except to the extent that such representations and warranties are expressly by their terms made only as of the Closing Date or another specified date).

3. The undersigned represents and warrants to the Agent that as of the date of this Compliance Certificate, except as previously or concurrently disclosed to the Agent in writing by the Borrower, the Obligated Parties are in compliance in all respects with all of their respective covenants and agreements in the Credit Agreement and the other Loan Documents.

COMPLIANCE CERTIFICATE – Page 2

4. The undersigned hereby states that, to the best of [his/her] knowledge and based upon an examination sufficient to enable an informed statement [check as applicable]:

¨ No Default or Event of Default exists as of the date hereof or existed during the period covered by the Financial Statements referenced in paragraph 1 of this Compliance Certificate.

¨ One or more Defaults or Events of Default exist as of the date hereof or existed during the period covered by the Financial Statements referenced in paragraph 1 of this Compliance Certificate. Included within Exhibit A attached hereto is a written description specifying each such Default or Event of Default, its nature, when it occurred, whether it is continuing as of the date hereof and the steps taken or being taken by the Borrowers with respect thereto. Except as so specified, no Default or Event of Default exists as of the date hereof.

¨ A Dominion Event did not occur during the period covered by the Financial Statements referenced in paragraph 1 above.

¨ A Dominion Event did occur during the period covered by the Financial Statements referenced in paragraph 1 above, and included within Exhibit A attached hereto is a description of such Dominion Event and a statement of the initial date upon which such event occurred.

¨ A Dominion Termination Event, with respect to a Dominion Event that occurred during a prior period, initially occurred during the period covered by the Financial Statements referenced in paragraph 1 above, and included within Exhibit A attached hereto is a description of such Dominion Termination Event and a statement of the initial date upon which such event occurred.

5. Exhibit B attached hereto sets forth the calculations necessary to establish the status of compliance with the covenant contained in Section 7.22 (“EBITDA”) of the Credit Agreement as of the effective date of the Financial Statements referenced in paragraph 1 above.

6. Exhibit C attached hereto sets forth a description and analysis in reasonable detail of all material trends, changes and developments in each and all Financial Statements, as required by Section 5.2(d)(ii)(D).

[Remainder of page intentionally left blank.]

COMPLIANCE CERTIFICATE – Page 3

Date of execution of this Compliance Certificate _______________, ___.

IMPERIAL SUGAR COMPANY,

as Parent and a Borrower

By:

Name:

Title:

COMPLIANCE CERTIFICATE – Page 4

EXHIBIT A

to

COMPLIANCE CERTIFICATE

dated

_______________, 20__

The following is attached to and made a part of the above referenced Compliance Certificate.

[Specify Defaults, Events of Defaults, Dominion Events or Dominion Termination Events, as applicable.]

EXHIBIT A TO COMPLIANCE CERTIFICATE

EXHIBIT B

to

COMPLIANCE CERTIFICATE

dated

_______________, 20__

The following is attached to and made a part of the above referenced Compliance Certificate.

[Insert calculations.]

EXHIBIT B TO COMPLIANCE CERTIFICATE

EXHIBIT C

to

COMPLIANCE CERTIFICATE

dated

_______________, 20__

The following is attached to and made a part of the above referenced Compliance Certificate.

[Insert material trends, changes, and developments, as required by paragraph 6]

EXHIBIT B TO COMPLIANCE CERTIFICATE

EX-4.B2

Exhibit 4(b)(2)

SECOND AMENDMENT TO CREDIT AGREEMENT

THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of March 15, 2006, is executed by and among BANK OF AMERICA, N.A., in its capacity as administrative agent for the Lenders under the Credit Agreement referred to below (the “Agent”) and individually as a Lender, IMPERIAL SUGAR COMPANY, a Texas corporation (the “Parent” and one of the Borrowers), and the other Borrowers and Obligated Parties which are signatories hereto below.

R E C I T A L S:

A. The Parent and certain of its Subsidiaries, as Borrowers, and Bank of America, N.A., as the Agent and a Lender, are parties to that certain Amended and Restated Credit Agreement dated as of December 1, 2004 (as amended by that certain Omnibus Amendment dated effective as of January 1, 2006 among the Obligated Parties, the Agent, and Bank of America, N.A. as the sole Lender and as further amended or modified from time to time, the “Credit Agreement”) pursuant to which, among other things, the Lender has made a revolving credit facility available to the Borrowers.

B. The parties hereto now desire to amend the Credit Agreement to reduce the Maximum Revolver Amount.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings therefor set forth in the Credit Agreement.

2. Amendment to Annex A to the Credit Agreement. The definition of the term “Maximum Revolver Amount” contained in Annex A to the Credit Agreement is hereby amended to read in its entirety as follows:

“Maximum Revolver Amount” means $100,000,000.

3. Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement and the Loan Documents are ratified and confirmed and shall continue in full force and effect. Each of the Obligated Parties, the Agent, and Lenders agrees that the Credit Agreement as amended hereby and the Loan Documents shall continue to be legal, valid, binding, and enforceable in accordance with their respective terms.

4. Representations and Warranties. Each Obligated Party hereby represents and warrants to Agent and Lenders that, as of the date of and after giving effect to this Amendment, (a) the execution, delivery, and performance of this Amendment have been authorized by all requisite action on the part of such Obligated Party and will not violate such Obligated Party’s organizational or governing documents, (b) after giving effect to this Amendment, the representations and warranties contained in the Credit Agreement and in the Loan Documents are correct in all material respects on and as of the date hereof except for such representations and warranties limited by their terms to a specific date, and (c) after giving effect to this Amendment, no Default or Event of Default exists.

5. Survival of Representations and Warranties. All representations and warranties of the Obligated Parties made in this Amendment, the Credit Agreement, or any other Loan Document shall survive the execution and delivery of this Amendment, and no investigation by Agent or any Lender, or

SECOND AMENDMENT TO CREDIT AGREEMENT – Page 1

any closing, shall affect the representations and warranties or the right of Agent and Lenders to rely upon them.

6. Reference to Credit Agreement. The Credit Agreement and each of the Loan Documents, and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference in such agreements, documents, and instruments, whether direct or indirect, shall mean a reference to the Credit Agreement as amended hereby.

7. Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment, and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

8. Effect of Amendment. The effect of any waiver contained in the Credit Agreement as amended is expressly limited as provided therein, and, in order to induce Agent and Lenders to agree to any such waiver, each of the Obligated Parties agrees that such waiver shall not constitute or be deemed a waiver of any other Default or Event of Default, now existing or hereafter arising, or a waiver of any rights or remedies arising as a result of any such other Default or Event of Default. No consent or waiver, express or implied, by Agent or any Lender to or for any breach of or deviation from any covenant, condition, or duty by any Obligated Party shall be deemed a consent or waiver to or of any other breach of the same or any other covenant, condition, or duty.

9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES) AND APPLICABLE LAWS OF THE U.S.

10. Counterparts. This Amendment may be executed in any number of counterparts, all of which when taken together shall constitute one agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart.

11. Successors and Assigns. This Amendment shall inure to the benefit of the Agent and the Lenders and their respective successors and assigns and is binding upon the Borrowers and the other Obligated Parties and their successors and assigns; provided, however, that none of the Borrowers or other Obligated Parties may assign or transfer any of its obligations hereunder without the prior written consent of the Agent and the Lenders.

12. Headings. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

13. Entire Agreement. THIS AMENDMENT AND ALL OTHER INSTRUMENTS, DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER OF THIS AMENDMENT AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.

SECOND AMENDMENT TO CREDIT AGREEMENT – Page 2

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers effective as of the day and year first above written.

IMPERIAL SUGAR COMPANY
By:	/s/ H. P. Mechler
Name:	H. P. Mechler
Title:	Senior Vice President and Chief Financial Officer

FORT BEND UTILITIES COMPANY
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

HOLLY FINANCE COMPANY
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	Senior Vice President

IMPERIAL DISTRIBUTING, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	Senior Vice President

IMPERIAL SWEETENER DISTRIBUTORS, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

SECOND AMENDMENT TO CREDIT AGREEMENT – Page 3

IMPERIAL-SAVANNAH LP
By:	Savannah Molasses & Specialties Company
Title:	General Partner
	By:	/s/ William F. Schwer
	Name:	William F. Schwer
	Title:	President
RAGUS HOLDINGS, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH FOODS INDUSTRIAL, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
BIOMASS CORPORATION
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
DIXIE CRYSTALS FOODSERVICE, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
ICUBE, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

SECOND AMENDMENT TO CREDIT AGREEMENT – Page 4

IMPERIAL HOLLY CORPORATION
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

MENU MAGIC FOODS, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH FOODS & INDUSTRIES, INC.
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	Senior Vice President
SAVANNAH INVESTMENT COMPANY
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH MOLASSES & SPECIALTIES COMPANY
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President
SAVANNAH SUGAR REFINING CORPORATION
By:	/s/ William F. Schwer
Name:	William F. Schwer
Title:	President

SECOND AMENDMENT TO CREDIT AGREEMENT – Page 5

AGENT:
BANK OF AMERICA, N.A., as the Agent and sole Lender under the Credit Agreement
By:	/s/ Stephen J. King
Name:	Stephen J. King
Title:	Vice President

SECOND AMENDMENT TO CREDIT AGREEMENT – Page 6

EX-4.E

Exhibit 4(e)

Execution Version

AMENDMENT TO REGISTRATION RIGHTS AGREEMENT

AMENDMENT TO REGISTRATION RIGHTS AGREEMENT, dated as of March 28, 2006 (this “Amendment”), to the Registration Rights Agreement, dated as of August 28, 2001 (as amended, supplemented or otherwise modified from time to time, the “Registration Rights Agreement”), by and among Imperial Sugar Company, a Texas corporation (the “Company”), and the other parties listed on the signature pages thereto (together with their successors and assigns, the “Holders”).

WITNESSETH:

WHEREAS, the parties hereto desire that certain provisions of the Registration Rights Agreement be amended as set forth below.

NOW THEREFORE, the parties hereto hereby agree as follows:

SECTION 1. Definitions. Terms defined in the Registration Rights Agreement and used herein shall have the meanings given to them in the Registration Rights Agreement.

SECTION 2. Amendments to the Registration Rights Agreement.

(a) Amendments to Section 1. Section 1 of the Registration Rights Agreement is hereby amended by adding the following new defined terms in proper alphabetical order:

“Demand Party” has the meaning set forth in Section 2.1(a) of this Agreement.

“Registration Request” has the meaning set forth in Section 2.1(a) of this Agreement.

(b) Amendments to Section 2.1(a). Section 2.1(a) of the Registration Rights Agreement is hereby amended by deleting the first two sentences thereof and substituting in lieu thereof the following:

“Upon the written request of Lehman Brothers, Inc. (the “Demand Party”) at any time on or before December 31, 2007 requesting that the Company effect the registration under the Securities Act of the Demand Party’s Registrable Shares (the “Registration Request”), the Company shall, as soon as reasonably practicable, use commercially reasonable efforts to file with the Commission, at the Company’s expense, a “shelf” registration statement on any appropriate form pursuant to Rule 415 under the Securities Act covering all Registrable Shares requested to be included in the registration by the Demand Party in the Registration Request (the “Shelf Registration Statement”); provided that, in no event shall the Company be required to effect more than one registration pursuant to this Section 2.1. The Company shall use commercially reasonable efforts to have the Shelf Registration Statement initially declared effective within 90 days after the

date of the Registration Request and to keep the Shelf Registration Statement continuously effective until the earliest of (i) such time as all shares of Registrable Shares have been sold thereunder, (ii) three years following the date on which the Shelf Registration Statement is declared effective, or (iii) such time as all of the Registrable Shares can be sold by the Electing Holders thereof under Rule 144 of the Securities Act or any successor or similar rule or provision without regard to volume limitations (the “Shelf Registration Period”).”

(c) Amendments to Section 2.1(b). Section 2.1(b) of the Registration Rights Agreement is hereby amended as follows:

(i) by deleting the first sentence therein and substituting in lieu thereof the following:

“Any Holder, including the Demand Party, desiring to include Registrable Shares in the Shelf Registration Statement must return a completed Notice and Questionnaire to the Company no later than 30 days after the date of the Registration Request.”

(ii) by deleting the reference to “the date of this Agreement” in the last sentence therein and substituting in lieu thereof “the date of the Registration Request”.

(d) Amendments to the Notice and Questionnaire. The form of Notice of Registration Statement and Selling Securityholder Questionnaire contained in Exhibit A to the Registration Rights Agreement is hereby amended by deleting the references therein to “the date of the Registration Rights Agreement” and substituting in lieu thereof “the date of the Registration Request”.

SECTION 3. Continued Force and Effect. Except as expressly amended hereby, the Registration Rights Agreement remains unchanged, and as amended hereby the Registration Rights Agreement remains in full force and effect.

SECTION 4. Governing Law. This Amendment shall be construed and enforced in accordance with and governed by the laws of the State of Texas, without giving effect to the conflicts of law principles thereof.

SECTION 5. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written:

COMPANY:
IMPERIAL SUGAR COMPANY
By:	/s/ H.P. MECHLER
	Name:	H.P. Mechler
	Title:	Sr. Vice President & CFO
HOLDERS:
LEHMAN BROTHERS INC.
By:	/s/ ASHVIN RAO
	Name:	Ashvin Rao
	Title:	Vice President

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Robert A. Peiser, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Imperial Sugar Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2006	By:	/s/ Robert A. Peiser
		Robert A. Peiser
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, H. P. Mechler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Imperial Sugar Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2006	By:	/s/ H. P. Mechler
		H. P. Mechler
		Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,

United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), Robert A. Peiser, President and Chief Executive Officer, and H.P. Mechler, Senior Vice President and Chief Financial Officer, of Imperial Sugar Company, a Texas corporation (the “Company”), each hereby certifies that, to the best of his knowledge:

(1) the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 3, 2006	/s/ Robert A. Peiser
	Robert A. Peiser
	President and Chief Executive Officer
	/s/ H.P. Mechler
	H. P. Mechler
	Senior Vice President and Chief Financial Officer